Building an effective talent strategy in a challenging economy01 February, 2023
In partnership with The People Space, we discuss how to build an effective talent strategy in a challenging economy and what TA & HR should be f...
In partnership with The People Space, we discuss how to build an effective talent strategy in a challenging economy and what TA & HR should be focusing their talent strategy on.
The impact of the recession on Tech Talent
Unlike previous recessions, this one feels very different because there is still a talent deficit. Sectors such as retail, hospitality, adult social care, and the NHS still have massive talent shortages.
Looking at the broader global economy, the tech giants have made some huge moves, with Meta, Google, and Microsoft either stopping hiring or laying people off. But, when you talk to the next layer of tech organisations down, they are still hiring and struggling to find good talent. Tech talent is much more available than it was six months ago. However, there are still a lot of areas within that tech arena where talent is still very short.
Emerging Areas for Talent
There are other emerging areas. ESG is a considerable focus, particularly for some of the big consultancies. I read something not very long ago that PWC was aiming to hire 10,000 people into their ESG practice, and there aren't probably that many people available in ESG at the moment, all with the right skills. Alongside areas like biotech, which are traditionally difficult to find talent. The general consensus I'm hearing from clients and some of the non-executives is that people expect a challenging H1 for talent in 2023 as organisations rebase, review, and cut. For example, Goldman Sachs is reportedly losing 6% of their global workforce, which might be up to 3200 people. Clearly, businesses are rebasing, but most commentators I speak to expect a strong recovery through the end of Q2 and going into H2 this calendar year.
Changing attitudes to flexible working
There is still a huge demand for flexible hybrid working, and as we know, that is likely to stay the same. However, there is a much stronger push from organisations to get people back in the office more consistently, and Tuesday to Thursday is being described as the new working week. Particularly organisations making cuts are beginning to feel they have the power again, taking the opportunity to unwind some of the flexible working options they had offered.
Some organisations may try to reverse flexible working completely. However, there are still organisations struggling to hire because they do not offer any flexible working. Where organisations have had workers that were fully remote working in different countries, but their employment was based out of London, they are starting to feel some pressure. Twitter stated they wanted their team back in the office five days a week, which many thought was redundancy by stealth. Equally, if you're one of those candidates who have taken the opportunity to move out of Silicon Valley and you're in Wyoming but suddenly need to be back in the office, then you're very stuck, and there's not much you can do about that.
We are now starting to hear lots of positives about time spent in the office, such as the water cooler conversations and the ability to network, particularly for the earlier career generations. It was always a consideration but is now perceived as a lot more valuable and a reason to ask people to come back into the office more.
There is a trend of power shifting back from the employee to the employer. That ebbs and flows, and when talent gets tighter, organisations might have to be more flexible again. The parameters in which it will ebb and flow as the economic cycles vary have changed permanently. 3 to 4 days is the normal working week, perhaps not strictly Tuesday to Thursday, in the office for desk-based office jobs. Beyond that, it will be dictated to by the economy and market shortage. It's been reported that 99,000 people couldn't get through to HMRC, because they're working from home and the phones aren't being answered. Taking this as an example, we would expect to see a shift in the working from home policy from HMRC, because it will have to from a customer point of view, but it is unlikely they will revert all the way back to being in the office full time.
Upskilling & Restructuring in a Competitive Labour Market
One approach to a competitive talent market is to upskill and restructure to move people into priority areas. In the tech sector, particularly those bigger organisations with big teams and budgets have been recruiting right through the pandemic and right through 2022. They have focused on hiring for the right attitudes and competencies without necessarily having the right skills, with explicit intent of training them up into a role that they're not currently capable of doing.
Maximising the apprenticeship levy in the UK has been very challenging, many organisations have viewed it as a tax rather than as an opportunity to train. This could be due to a lack of availability of appropriate apprenticeship courses in some disciplines and sectors. Certainly, there's an opportunity for more training through apprenticeships as well as just internal development and internal mobility and upskilling.
Within leadership risk and the leadership development space, more organisations are moving people between disciplines as a way of keeping them and giving them internal development. Particularly in the US, that's been a really big trend, it is difficult to do, it takes a lot of effort and consumes a lot of internal energy. However, when you think about the failure rates of people coming in from the outside at executive level, that sort of internal mobility is a good solution. Certainly for some organisations with particular cultures.
The best way to approach internal mobility and succession is to find opportunities with obvious correlations between the types of activity in the roles. For example, in the US somebody was going from a CFO role into an operational MD role, which is not uncommon. We've also had cases of someone from H.R. going into a front office call centre ops role, which is slightly less usual, but there is some link between the roles. If you were looking at the transition between finance and marketing, moving a marketing person to finance might be the more difficult of those two moves.
The organisations that have done it well have found those people in the executive team who are prepared to try. They found people that are happy to be the test case, there's a huge amount of communication, negotiation, training and coaching involved. So it's very time-consuming to ensure success with the team the individual is going into because, obviously, there is some technical knowledge that the leader will not have in many cases. But also in terms of the individual, making sure they aren't feeling isolated or out of their depth. It is hard, but it is certainly possible at leadership levels. Where you're looking at skills that are more easily trained, especially below in the management layer, it can be done and is being done quite regularly.
Leadership succession is so culturally sensitive it needs to be developed by a TA or CHRO who believes it's the right thing to do. Many multinational organisations have done this for years. A Japanese bank, for example, historically had a rotation program of building their executive leadership in the U.S. from people on the executive team in Japan. Now they’re changing their approach, actually bringing the regional leaders through and giving those opportunities more locally.
In the last several years, there’s a huge amount of effort that's gone into helping various underrepresented groups in to the workplace. There is still more to be done, but taking neurodiversity as an example, it is being discussed more regularly. There are many blogs, whitepapers and reports raising awareness and the profile of these topics, which certainly helps.
Social mobility is now being widely discussed, particularly in the banking & legal sectors, where it is perceived to be a bigger challenge. Some of the big four accountancy firms published their social mobility data. So again, they are very clear that that's a big area they need to work on. People from non-traditional backgrounds are becoming a greater part of the conversation, entering the workforce with different skills and trying to transfer those skills is certainly happening more. PwC have dropped their 2:1 requirement for their graduate roles, estimating that 70,000 more students would now be eligible to apply whilst significantly expanding their apprenticeship programs. Santander has also become one of the first traditional banks to drop their 2:1 requirement for their graduate program.
There is certainly greater emphasis on attributes beyond academic performance and how well that translates into bringing people who are neurodiverse and from low socio-economic backgrounds. There’s not a lot of data on the results, but it's certainly something that I know the TA & HR community is working hard on, particularly in those areas where skills are still hard to find.
Balancing short-term & long-term talent challenges
We expect a slight economic softening; time will tell whether it's a recession. In the UK, it is likely, but the US is still slightly debatable again. Many parts of Europe are in a recession already, and the Asia-Pacific region is seemingly fairing a little better but may also go into recession. We will see a bit of a slide towards having to do things differently and bringing in different skills.
Tech firms are generally strong at bringing in entry-level talent and training them up for the required skills. But, when you look at the sector like engineering or any STEM-based career, you find that they've been tackling these problems for a very long time. It isn't something that can be solved because what you find, particularly when looking for underrepresented talent, is that there are only so many. Female engineers are a really good example of that.
We help organisations identify where female talent exists in engineering, for example. Rather than just helping them go and hire, what we try and do is help them understand that cohort's behaviours, motivations, and aspirations to allow them to put something in play that is genuinely a long-term commitment if somebody were to move. Otherwise, you end up with people constantly moving, and the salaries are constantly increasing, so you get into that spiral and never actually get any more talent in. We need to help organisations find roles for underrepresented talent that have a long-term future to them, rather than just a knee-jerk to “we need to hire now”.
Besides that, we also need to help our clients think about the future. For one of my clients, the average age of their engineering population is 56 years old, so they've got a cliff edge coming in the next ten years at some point. They are doing a huge amount of work through apprenticeship programs, their own training academies and purpose-built training centres to train that future cohort of engineers. Which is a ten-year, not a five-year plan. We're always advising clients to ensure that they are not just dealing with the problem now but also looking at it in the future. Because otherwise, all we do is create increased demand. Everyone poaches from everyone else, and all that happens is salaries go up without more people in the market. So the efficiency of the whole economy, in that sense, declines.
Critical Roles for Future Leaders
The most critical roles in certain spaces will often be the technical ones. There is that perpetual debate between individual contributors versus leaders and making sure there are comparable development scales for people who are technical experts but don't have the right capabilities to be leaders.
If we think about what's changed through the pandemic. One of the major shifts in leadership has been around the behaviours deemed acceptable for leaders. Autocratic leaders seem to have had their day, and you can argue there's good and bad to that. Overall, people think more open, inclusive leadership, culture, and leadership style is a good thing. That is a different group of people than those currently in leadership roles. Over the course of the next five years, as investors, shareholders, and non-executive boards push for different behaviours in the boardroom, I think that will naturally bring a different cohort of talent into those roles.
Three things to focus your talent strategy on in 2023
The advice to the TA & HR leaders is always interesting because somebody else often holds their budget. We've seen clients get it wrong so many times, so the advice is: don't just stop. Of course, organisations have to be careful with their money. You might have to stop making offers, but you shouldn't stop pipelining, engaging with and socialising talent. Certainly, in the case of the pandemic, those that kept hiring and kept talking had a massive advantage when lockdown eased and when the world started to get back to normal because they could act much more quickly.
Organisations should certainly be prioritising which talent you need and where, and part of that has got to be around the skills you might need for certain roles for the future. Leaning into strategic workforce planning (SWP). It's always amazing how small the SWP community is of pure specialists. Only a handful of people are spending their whole lives looking forward to what the future will look like. And that will become increasingly important as we become more technologically advanced.
Finally, understanding what leadership your business needs for the future and planning for that. Because some organisations have made some brave decisions and a lot have not. The average age of a male board member in the UK is 61, and the female board member average age in the UK is 58. Averaging 60 and 57 in Europe. Leadership and succession is still not being done well, or early, by many organisations and the world's changed. So, the average age should be a concern to investors.
At Armstrong Craven, more than 50% of our work is focused on helping clients think about future talent. Answering difficult questions such as; who are the people that we want in the future? What are the skills that we see coming through? What are the behaviours of an organisation? What is it that's important for people coming into a new environment?
Everything we do is research-driven, but what we do is look deeper. We help clients understand the art of the possible within their community. We help them understand what the talent landscape looks like before they get into hiring. To see how we can help you overcome your biggest talent challenges, speak to our team today.