By Art Wittmann, editor of Brainyard
⏰ 6-minute read
This is "The Art of Growth," Art Wittmann's new column for Grow Wire. Read previous installments here and here.
Each quarter, Grow Wire’s companion site, Brainyard, surveys executives to understand their views on key business issues. Our respondent pool contains both finance and non-finance leaders, mostly from companies with annual revenue under $50 million, with some hailing from larger organizations.
We’re appreciative that so many busy people take the time to share their experiences. Last year, for example, we asked about the changing role of the CFO and found respondents taking on more responsibilities and having a stronger hand in guiding strategic direction for their companies.
In December’s survey, we asked executives about their outlooks for 2020 as well as their business priorities for the year. You’ll find the full report on Brainyard later this month, but I wanted to preview one key finding.
The current low U.S. unemployment rate, and the resulting talent shortage, is a concern for 68% of those we surveyed. Some 21% predict a “very negative” impact on their businesses, while 47% foresee a “slightly negative” impact.
To put that into perspective, we asked respondents about nine external macroeconomic factors, ranging from climate change and uncertainty about the presidential election to tariffs and offshore competition. Still, that 21% was the largest “very negative” response that we got. Just 6% saw the talent shortage as a business benefit, and only 25% were “neutral” about it.
Compare that with the response on Middle East instability, with 80% “neutral,” and climate change, with 73% “neutral.”
Concerns over talent are a big deal and are especially pressing for companies with revenue between $10 million and $50 million. There, 75% expect a negative impact. In companies earning $10 million or less, concern was expressed by 62%.
Related, upward wage pressure is another top four worry, with midsize companies again showing the greatest level of concern and small companies showing the least.
To add some context to the data, we then asked about human capital from a slightly different point of view, specifically, which KPIs respondents worried about missing in 2020. As expected, revenue and profit topped the list, with about 50% of respondents pegging those among their top four concerns. Next came acquisition and retention of staff with key skills, with 43% choosing it in their top four concerns.
Here too we saw significant differences based on company size. But interestingly, it’s execs from larger firms who worry most about meeting their key staffing needs — by a wide margin. It was the leading concern among companies with between $50 million and $500 million in revenue, with 55% putting it in their top four. Only 42% of companies with income of $10 million or less, and just 37% of midsize companies, say the same.
My read of the data is that larger companies know they’ll have trouble finding the people they need, but most have deep enough talent benches that they aren’t terribly worried about it negatively affecting the business. Not that they’re blasé — in larger companies, the need to retain that bench has driven employee satisfaction up to the number four KPI of concern.
A lot of factors contribute to these numbers, starting with education system priorities that haven’t been, and still largely aren’t, in step with business needs. Data science and computer science majors see demand exceeding supply and command high salaries. In fact, data science is such a new field that most career trackers miss it completely — but they do show an increased demand for related degrees, like mathematics and economics.
Top salaries also follow engineering specialties like aerospace, petroleum, chemical, electrical and mechanical. While colleges and universities have these programs in place, the problem is that not enough students are filling those seats.
But looking at four-year degree demand alone misses a big part of the problem. Job sites like Monster.com list areas where workers are most needed. Skilled medical specialists top most lists, but also dominant are tradespeople and high-skill technicians. Our societal emphasis on four-year degrees has left us with a system that creates indebted graduates, often with the wrong skills, while the trades go lacking.
The problem shows up acutely in manufacturing, where apprentice programs were jettisoned in the Great Recession, leaving few reliable paths to replace an aging skilled workforce. Some of the highest paying jobs in a car dealership aren’t in sales, they’re in the repair department, where certified mechanics are high demand. Automakers won’t reimburse warranty service unless the work was performed by a certified mechanic, so guess who has a lot of bargaining power? High-school students looking for six-figure incomes without racking up college debt often find dealerships willing to pay for good uncertified mechanics to get the needed training. Similarly, driverless trucks may someday dominate the roadways, but that day isn’t today. Walmart is currently offering nearly $90,000 a year for truck drivers.
Data from the Bureau of Labor Statistics (see the chart, below) tells the story.
Our respondents are quite right to be worried about a labor shortage and upward pressure on wages. Companies in the past decade got used to demanding whichever skillsets they wanted and then not paying those workers all that well once they found them. Those days are over.
While certain four-year degrees are still in high demand, the wage pressure is highest for unskilled workers in businesses like retail and hospitality. A lot of blue collar baby boomers are about to retire, and not too many Gen Zs are looking to take their places. Where immigrants once filled a lot of those jobs, the current hostility toward that labor pool, plus more than 20 new minimum wage laws, means significant upward wage pressure in some of the historically poorest paying jobs.
OK, Boomer, how about you keep working until you’re 80?
For emerging businesses, all this means that managing talent needs to be a priority. We offer some ways CFOs can help, like mining data for flight risks and lousy managers, here. In addition, smart businesses will rev up both internships and apprenticeships in areas where skilled workers are needed, but scarce. Offering equity in the form of stock options may help, but more and more, it’s looking like cash is king.
But there’s more to attracting Gen Z workers than offering a fat salary. In our survey, corporate social responsibility came in dead last as a priority for businesses. The (slightly more cynical) Gen Xers on our team shrugged that off as an unfortunate reality of capitalism circa 2020. The Gen Zers on the team, however, were deeply bothered by this result. In the end, offering good-paying jobs with interesting work is critical, but for many of your future rock stars, so is being employed by a company that both does well and does good.
🙋♂️ Art Wittmann is editor of Brainyard. He previously led content strategy across Informa USA tech brands, including Channel Partners, Channel Futures, Data Center Knowledge, Container World, Data Center World, IT Pro Today, IT Dev Connections, IoTi and IoT World Series Events, and was director of InformationWeek Reports and editor-in-chief of Network Computing. Got thoughts on this column? Drop Art a line.