Over the last few years, it has been getting harder for businesses across a variety of sectors to find talent. Just a year ago, the Wall Street Journal put the problem starkly: “the U.S. is at risk of running out of occupational therapists, railroad engineers, mathematicians, machinists and other workers.” This shortage of key skills, it explained, could “leave the economy in a long-term slump.”
This is not just a problem in the U.S.: countries across the developed world are also experiencing it. Worldwide, the companies which responded to Aon’s most recent Global Risk Management Survey said that finding, hiring, and retaining employees with the right skills was the fifth biggest challenge they faced. Companies in North America and the Asia-Pacific region said it was their second biggest challenge.
Across sectors, businesses are finding that the skills pool from which they are recruiting is shallower than expected. Rapid technological change has meant that demand for digital and technical skills is rising faster than supply. Further, many countries have been failing to encourage sufficient numbers of young people to engage with early education in science, technology, engineering and mathematics (STEM skills).
There are, however, alternative models for teaching skills, and Germany is a prominent model. The German solution involves a new approach. The first aspect is to improve the status of apprenticeships to make vocational paths more attractive, the second is for companies to build their own partnerships with schools, and the third is a nationally coordinated skills policy.
Skills shortages are an issue for individuals, employers, and the economy alike. Organizations need an adequate supply of the skills they demand to remain competitive. Society must avoid skills shortages if the global economy is to prosper in the long run.
Pete Sanborn, Global Practice Leader and HR Transformation Consultant at Aon, points to another reason: “Businesses also find that the leadership and experience of the baby boomers are being sorely missed. As they leave the workforce, baby boomers take decades of knowledge with them, while younger generations often have yet to build up the experience and leadership skills needed to maintain successful businesses.”
The solutions may require a longer-term, more strategic view and more cooperation and coordination between employers, technical colleges, and government.
Hard Skills And Skill Combinations
Technical and STEM-related training is particularly in demand worldwide, especially numeracy, analysis of empirical data and the understanding of scientific and mathematical principles.
Business’ demand for these skills is increasing faster than schools and colleges are able to provide them. What’s worse, in some cases those graduating in STEM subjects may have been developing the wrong kinds of STEM skills to meet business needs.
The hard skills employers need are constantly changing, particularly in response to technology. Demand for coding and data analysis, for example, is rising but most working-age adults were not taught these skills at school. Many businesses also seek a combination of technical and strategic skills, such as the ability both to analyze large datasets and see their business application, further narrowing the pool from which they can choose.
Neil Shastri, Leader of the Global Insights and Innovation team at Aon identifies business and commercial acumen as a key need in the modern business world. While this includes “knowing how to convert what you’re doing into money for the organization,” he says, it also means “the ability to work across different domains and functional areas, and not get stuck in a silo.” This ability to think strategically is a top skill employers are demanding, says Shastri. This means finding employees who “think about broad trends beyond their technical skills and immediate jobs, and who have a future focus.”
Soft Skills And Strategic Thinking
Soft skills, such as listening, are always in demand, but firms often find them in short supply.
The ability to motivate, rally a team, and ensure that talented employees feel appreciated and rewarded is more important than ever. Shastri points out that “in some cases, employees respond to recognition such as praise and awards more strongly than they do to financial incentives.” He believes that part of the reason recognition is so important today is “because people don’t see large salary increases… so recognition that makes you feel like you’re doing a good job is becoming a lot more important.”
These skills are in high demand, particularly for leaders and future leaders, but are hard for businesses to find, perhaps because they are hard to teach.
Fixing The Skills Shortage
Skills shortages tend to arise for a number of reasons. In some cases it is because a country offers inadequate early education in STEM skills. In others it is because technological change moves faster than training provision, or education systems are not providing training in areas key for business success.
It goes without saying that the solution to skills shortages is to improve the provision of training. Many countries are looking to the German system for lessons. Throughout the Great Recession, the country has kept unemployment relatively low and productivity and exports relatively high in part due to its coordinated skills system.
The German system combines three key characteristics which other countries might emulate: high status apprenticeships, national coordination, and state funding for technical education.
1) Improving the status of apprenticeships
In Germany, vocational options have a high social status. Parents are as likely to encourage children to take engineering, industrial electronics, and other vocational courses as a more academic path, which helps to encourage talented young people to gain technical skills.
Some American companies in sectors such as business services, consultancy, insurance and financial services have begun to offer apprenticeships too. Aon, for example, has an apprenticeship program in its Chicago office. “If the pipeline is only through four-year colleges, then you are missing out,” said Bridget Gainer, Vice President of Global Public Affairs for Aon. “Let’s change the pipeline to fit what’s out there.”
2) Companies partner with schools to offer apprenticeships which combine education and work experience
Partnerships between companies and technical schools are a key part of the German system. German students typically apply to a private company for a training contract lasting two or three years. If they are accepted, the trainees split their time, spending three to four days working in the company and one or two at a publicly funded vocational school. If they pass the final exam, they are guaranteed a job.
Some companies in the U.S. are already partnering with community colleges. Siemens, for example, works with local community colleges in North Carolina, Alabama, and Georgia to offer a mix of vocational courses and on-the-job training. The company pays about $180,000 per student to cover tuition, books and wages, and the apprentices tend to stay at the company, at least for the next few years.
According to Sanborn, this technique has worked well in the American automotive industry, particularly after its challenging period around 2008/9. General Motors and Ford, for example, proactively send representatives into middle and high schools to raise awareness of employment opportunities in the sector and to encourage students to take courses that teach the skills they need.
In general, Sanborn recommends that companies “ensure students know about career opportunities in their industry, and encourage changes in the educational system that support the development of needed skillsets in the long term.”
3) A coordinated skills policy
A number of countries have changed their national curricula in response to changing demands from businesses. For example, computer studies was introduced as a subject in schools in many Western countries in the 1980s and 1990s.
In the truly co-ordinated German skills system, employers, trainers, and representatives of unions develop standardized curricula in collaboration with the German federal government, which is seen as an effective accreditation system for quality control. Exams are set by industry groups, so if an apprentice passes they have the credentials to work in other companies too.
This requires a degree of centralization, and passes the burden of administering training contracts to the company. However, it guarantees companies a ready supply of labor with skills which match their needs, gives all apprentices who pass their exams a well-respected qualification, and ensures that the training will be of a high standard across the country.
Thinking Bigger Than Current Skills Needs
To avoid future skills shortages, organizations are increasingly recognizing the need for better systems of training. Employees themselves welcome this: Aon’s 2016 Workforce Mindset Study surveyed employees about what work means to them beyond getting paid, and found that the number one motivation was building skills to become more valuable.
Employees welcome the training, companies need the skills, and governments want to ensure a smooth-running, growing economy. All this means that, in the coming years, companies may find new ways to organize and fund their employees’ training, such as building partnerships with community colleges. Beyond that, the solution may involve closer public-private coordination, so that companies can encourage education systems to provide the skills the workers of the future need most.
“Skills development is a primary means of enabling young people to make a smooth transition to work, and education and training can make the difference for youth between poverty and employment.” – Ban Ki Moon, UN Secretary-General
“For the last 15 or 20 years, I’ve been bashing on at government that there aren’t enough engineers. We think that the shortage will be something like a million by 2020. So I went to complain to yet another minister, who happened to be [Conservative Skills Minister] Jo Johnson. He said, ‘Well, why don’t you do your own university?’ I thought that was a very good idea, so that’s exactly what we’re doing.” – Sir James Dyson, founder of the Dyson Institute of Technology
“There may not be a STEM crisis in all job categories, but instead just in select ones at certain degree levels and in certain locations… A job segment that traditionally has a shortage of workers may at some times have a surplus and vice versa. Thus, it is probably far more accurate to state that, within STEM job categories, there is a crisis or a surplus depending on the circumstances at the time the categories are investigated.” – Richard Larson and Xi Yue, MIT