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    Living with skill shortages


    Living with Skill Shortages

    Published: April 28, 2023

    If you have been suffering from attrition and finding it hard to recruit you might be tempted to think it is a post-covid reaction, it will all go back to normal – I’m sorry to tell you that it won’t. We are living in a new paradigm, we have a global skills shortage that isn’t about to go away.

    Demand for skills continues to rise but supply is hamstrung by demographics; many countries, especially Europe, have ageing and declining populations which is being felt most acutely as a declining workforce. McKinsey recently reported:

    “Challenge to employers… The shrinking labor pool is a key reason. Europe’s working-age population is expected to decrease by about 13.5 million, or 4 percent, by the decade’s end.“

    A world where the supply of skills is less than the demand is a situation that few of us working today have experienced. There have always been people wanting and needing work, employers have held the upper hand for decades. That situation is changing, the implications of this are immense.

    The most obvious factor is cost. In any situation where demand outstrips supply, prices will rise, so we can all expect to pay more for the skills we need but money is just one factor and perhaps surprisingly, not the main one.

    Where people have a choice and even once they have chosen, more choices keep getting presented to them, the type of work being offered, the environment they work in and their opportunity for development become key drivers. You can then add other factors that are increasingly important to Generations Y and Z: social justice and environmental sensitivities.

    Employers that fail to offer a sufficient non-financial value proposition will still be able to hire people but they will have to compensate with cash. We can already see that today, firms with poor employment reputations are paying 30-40% above the market rate; money might talk in the short term but people will not stay in toxic work cultures for long just for the money. If you have problem managers you can now put a cost on their poor leadership style.

    To survive in this new paradigm employers are going to have to adjust how they approach employment. We all need to weed-out poor managers and practices that create the toxic culture; we will need to provide an employment environment that supports and values the employee. Recognise that people are looking for development but that doesn’t necessarily mean climbing the corporate ladder. We also need to be conscious of our ethical choices both socially and environmentally.

    Even when we do all of that, in some instances it won’t be enough. Sometimes the roles themselves are simply not interesting enough to hold people’s attention for long, no matter how critical the task. In the same way that most businesses have been through a digital transformation in the way they interact with customers we are going to have to go through a similar transformation when it comes to some of the operational areas of business.

    Gather and analyse data to understand the root cause of operational issues along with their resolution pathways then through a combination of change to data capture, process change and adaptation of existing technology to auto-resolve many issues we can transform operational functions to a point where a few people undertake the resolution of difficult exceptional issues.

    People will cost more, they will be more skilled but we will need fewer of them and the work will be challenging and interesting. If you can’t or don’t want to adapt and think that shovelling bodies is the cheapest way, you may be facing an existential threat.


    David Collins, Managing Director - First Derivative

    David Collins
    David Collins – LinkedIn Profile


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