The changing workforce: Are we ready?

In the next 20 years, the human element of organizations will undergo phenomenal shifts. Technological advances have already caused significant change in the ways people work and communicate, and will continue to make unprecedented demands on the knowledge and expertise of employees.

However, demographic reality dictates that the baby boom generation is going to move into retirement by 2020 and there aren’t enough qualified knowledge workers to fill the vacant jobs.

Thus, the conundrum exists that as the demand for people with the necessary critical competencies increases the supply is decreasing. Demographic shifts and knowledge change continue unabated, leading to a moment of crisis in the not too distant future. The resulting impacts on attracting and retaining qualified employees will be potentially enormous, especially in an era when declining employee commitment and low unemployment rates make it more difficult to hire and keep talented people.

Eventually, every organization will reach the point when it faces the possibility of insufficient qualified people. How prepared are organizations for these changes? Results from a recent survey indicate that many organizations are not ready.

Seventy-two organizations responded to a Watson Wyatt workforce change survey. More than half of the respondents were HR executives, managers or directors — the remainder were either executives or compensation specialists. Half of the organizations employ between 100 and 500 people; another 19 per cent have 1,000 to 5,000 employees.

Most respondents said that within the next year, hiring enough qualified people will be at least a moderate problem. Looking ahead five years, however, 83 per cent said hiring qualified people will be a problem. In the longer-term, 10 years from now, about two-thirds still see a potential problem, but one-quarter do not know to what extent their organizations will be affected.

Retaining qualified people presents at least some problems for almost three-quarters of the responding organizations in the next year. In five years, 83 per cent of the respondents predict that retaining qualified employees will be problematic. Although this number drops to 67 per cent when projecting to the long term, one-fifth of the respondents still do not know what the impacts will be.

Three per cent of the respondents reported their organizations expect no workforce changes (see chart). Only a little more than half have made at least some preparations, while more than one-third have done little or nothing.

Unlike most other historical periods, today’s information age provides managers, executives, academics and bureaucrats an almost inexhaustible abundance of data, analysis, interpretation and insight.

Even with the chore of having to sift through the mountains of material, today’s decision-makers are able to assemble facts and deduce trends at amazing speeds, using electronic databases and telecommunication connections. Thus, greater awareness and prediction of impending social and economic change is possible. As often happens, however, the greatest challenge is convincing people to act before the events happen.

Although most respondents to the workforce change survey recognize that significant changes are occurring and will accelerate over the next decade, a substantial proportion appear to be indifferent to any serious preparation.

Why might this incongruity exist? What are the consequences?

A small number of people said they believe their organizations are immune to the impending changes. Certainly, this could be correct for a few because of the organizational structures or functional processes that are in place. Still, it is just as likely that some have miscalculated the magnitude of the transformations about to happen. In these cases, the organizations are unlikely to adapt in time to survive.

And when environmental change is identified but only a modest response is predicted, several reasons are evident. Frequently, executives, managers and workers recognize the potential threat of workforce change, but financial, resource or time constraints blunt any action, leading to a minimal response.

A greater concern, however, is when one or two of the organizational groups recognize the problem but the others do not — then, differences in priorities, objectives and process arise.

In these cases, the ensuing friction makes the decision-making and planning necessary for an adequate response difficult. The outcome of weak preparation can present significant challenges. At best, minor inconveniences in staffing will arise. At worst, an organization won’t have enough qualified people to maintain a stable competitive position.

In the more positive circumstances, where reasonably strong action is undertaken to deal with the potential risk, the need is acknowledged, organizational members are aligned and sufficient resources are assigned. These companies are in the best position to withstand the vagaries of a changing workforce environment.

The survey, however, indicates that many organizations are not prepared for the inevitable demographic shifts in the workplace. So, what can be done? Those fortunate companies with foresight will commence actions early enough to remedy the situation.

The first step is to determine the vulnerability of an organization to workforce change. The current workforce structure has to be critically examined, comparisons to the probable future environment made and any gaps identified.

Once the level of vulnerability is determined, action planning has to occur. This will require solid executive commitment, the allocation of appropriate resources including key people, input into the corporate strategy and a re-examination of the corporate culture.

Often, the first obstacles to overcome in the planning process are those of understanding and accepting the reality. So, a comprehensive and robust communication strategy is an essential element of any plan. The planning phase could take six months to a year to complete.

The implementation of the plan follows.

Essentially, steps must be taken to ensure that the right people are attracted and retained at the right cost. What are the occupations, skills or competencies within the organization that are absolutely necessary for its continued existence? What will be the supply of people in these occupations in the future? How might the competencies needed by people in these occupations change, including the application of technology? What can be done to attract and retain these people? Does the organization want to keep older employees beyond the normal retirement age? What human resource approaches or practices have to be instituted or altered to respond to these various issues?

Finally, measurement, followup and adjustment are necessary to maintain the currency, relevance and effectiveness of the plan. Periodic assessments of the organization’s workforce structure and the external workforce environment are necessary to sustain alignment. All stakeholders have to be informed of the progress of the plan and any changes that ensue. The plan cannot be rigid or it will break; as conditions warrant, the details have to be altered.

Unfortunately, the protracted nature of workforce change makes it difficult to raise an alarm with many corporate executives. The immediate problems of management in the highly competitive Canadian business climate occupy the thinking of most leaders. After all, executive rewards and recognition are based on meeting the relatively short-term demands of shareholders and the markets; the next fiscal year tends to be more important than the next decade.

Nevertheless, leadership entails forecasting future contingencies and preparing appropriate plans to mitigate risks and capitalize on opportunities. It is the responsibility of senior executives, with assistance of their managers to detect and respond to changing conditions. They have to be knowledgeable of workforce shifts, and be prepared to take the necessary action. The organization’s survival depends on it.

Owen Parker is national research manager in Watson Wyatt’s Canadian Research and Information Centre, Toronto. David Gore is Watson Wyatt’s national compensation leader. Both can be reached at 1-866-206-5723 or [email protected]

SIDEBAR
Ask yourself this…


What are the occupations, skills or competencies within the organization that are absolutely necessary for its continued existence?

What will be the supply of people in these occupations in the future?

How might the competencies needed by people in these occupations change, including the application of technology?

What can be done to attract and retain these people?

Does the organization want to keep older employees beyond the normal retirement age?

What human resource approaches or practices have to be instituted or altered to respond to these various issues?

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