The stat mentioned above outlines the financial implication of the current labor shortages, which has a spiraling effect on businesses and the economy. Moreover, an acute skill shortage also poses significant roadblocks to post COVID recovery efforts across the globe.
Skill shortage is a multi-pronged issue. However, factors such as an aging workforce, lack of young generation workers, widening technological skills gap, and lower salaries have been identified as the driving forces behind the growing scarcity.
Organizations can perform profitably in today’s competitive landscape only when they have an optimized resource pool. Therefore, they need to proactively address the talent crunch and take appropriate measures to find and retain skilled employees.
This blog highlights the most effective ways to mitigate the ongoing skill shortage and how Saviom’s resource management solution can help.
1. How does skill shortage affect businesses?
As the global economy is snowballing, industries are facing a spike in demand. Unfortunately, due to the skill gaps, organizations cannot keep up with the market fluctuations affecting business profitability. The rampant skill shortage across the globe has far-reaching ramifications on business sustainability. In the long term, it could disrupt GDP growth, wreak havoc on the supply chain, cripple industries, and even propel a recession.
Labor shortage can affect businesses in a myriad of ways. Firstly, it increases competition for skills, which can significantly drive the cost of labor. The trickle-down effect of higher resourcing costs is greater exertion on the existing workforce to maintain productivity. Additionally, rising expenses can lead to drastic cost-cutting measures that can create organizational inefficiencies and lower product quality.
Secondly, the inability to fulfill the need for skilled resources can hamper an organization’s operational output. This can impact the companies’ ability to meet deadlines and deliver satisfactory results to their clients, resulting in lower profitability.
Additionally, skill shortages in the manufacturing sector can debilitate the entire supply chain. As a result, it can create product scarcity in the market and result in price surges everywhere.
Now that we understand the impact of skill shortages on business let’s delve into solutions to mitigate it.
2. Ways to combat skill shortages
Failure to address skill shortages can increase the risk of operational disruption. Therefore, it’s necessary for firms to address the shortfall prudently before it’s too late.
Here are six effective ways to mitigate the skill shortage:
2.1. Assess future skill requirements and current capabilities
Companies that work on numerous projects require diverse skill sets and competencies to ensure that projects get delivered on time and within the stipulated budget. Organizations must have adequate foresight of their skill requirements to build and maintain an optimized workforce.
They can leverage advanced forecasting and capacity planning capabilities to predict pipeline project demand accurately. This can help them assess the immediate and future skill requirements and take appropriate resourcing treatment ahead of time. For example, managers can use internal channels such as L&D initiatives, upskilling/retraining, or out-rotation and backfilling to bridge the skill gap. Or they can initiate planned hiring to fulfill the demand for additional resources.
2.2. Establish an L&D department to facilitate IDP for resources
Due to rapid technological advancements, legacy systems and technical skills can quickly become obsolete, creating a skills gap. Therefore, companies must regularly upgrade their workforce’s technical knowledge and competencies to stay competitive. One of the ways they can mitigate skills obsolescence is by establishing a Learning and Development (L&D) department for formalized training, upskilling/reskilling initiatives, performance evaluations, and onboarding procedures.
The department can facilitate Individual Development Plans (IDP) tailored to each employee’s career goals and objectives. With the help of IDP, managers can improve employees’ job performance while ensuring that the skill development efforts align with the overall business goals. In addition, appropriate training programs can help organizations bridge the skill gaps and upskill the workforce with the necessary expertise for future projects.
2.3. Use an on-demand workforce as appropriate
Many industries face seasonal volatility where they witness a surge and trough in demand. Anticipating and addressing these demand fluctuations can be challenging for companies due to a lack of visibility and foresight into future projects. Therefore, they resort to last-minute hiring, which can escalate budgets, compromise the quality of deliverables and delay project initiation.
When managers have adequate foresight into pipeline projects, they can assess the resource demand and have sufficient lead time to initiate hiring/training activities for fulfilment. They can leverage an on-demand workforce for short-term requirements instead of recruiting permanent resources. This can help ensure project completion without compromising quality or incurring additional overheads. Moreover, they can regularize skilled contingent resources into permanent employees to mitigate the shortage within the organization.
2.4. Implement out rotation & backfill strategy for niche-skilled resources
Niche skilled resources are highly valuable, but they are also expensive. Ideally, a company would have a limited number of niche professionals to minimize the overall resourcing costs. However, the competition for these candidates is higher due to the scarcity of these specialized skill sets in the market. As a result, finding replacements for them can be difficult and time-consuming.
Organizations can combat the shortage of niche skilled resources by implementing an out-rotation and backfill strategy. For example, suppose the niche-skilled resource is assigned to an ongoing project. In that case, managers can out-rotate them with an appropriate replacement once the project has reached a particular stage of completion. This ensures that the ongoing project workflow is not hampered and the new projects can start on time.
2.5 Promote on-the-job training and shadowing judiciously
As discussed earlier, training is an integral part of the upskilling process that helps employees hone their existing skills and master new ones. For organizations to leverage the maximum potential of their workforce, they need to ensure that the resource pool is equipped with the right competencies.
Organizations must judiciously use resourcing strategies such as on-the-job training and shadowing opportunities to expedite the employees’ learning process. On the-job-training and shadowing enables the observer to see and comprehend the nuances of a specific job. It can assist in upskilling employees, allowing them to gain more practical knowledge and hands-on experience. Moreover, it also comes in handy when long-term employees want to explore new roles within the organization.
3.6 Encourage every employee to be multi-skilled
In today’s competitive business landscape, where projects are becoming increasingly complex, organizations require top talent with a wide range of skills to meet the demand. As a result, more businesses are encouraging and facilitating multi-skilling programs to equip resources with multiple competencies allowing them to expand their roles and responsibilities within the organizations.
Effective multi-skilling improves employees’ work efficiency, productivity, and overall performance. On an organizational level, it helps build a highly-skilled, flexible workforce. Therefore, having multi-skilled employees allows a company to achieve more with fewer resources. Additionally, an agile workforce can help companies proactively adapt to changing market conditions and futureproof the business.
Now that we know how to combat skill shortages let’s learn how resource management software can help.
3. How can resource management software help address skill shortages?
With the help of advanced ERM solutions, organizations can anticipate the gap between resource supply vs demand and take appropriate measures to mitigate it.
Saviom’s state-of-the-art resource management software can provide companies with the following:
- Enterprise-wide visibility into critical resource attributes such as demand, supply, availability, capacity, utilization, and financials.
- Forecasting capabilities to predict and forward plan resource requirements for pipeline projects.
- Multidimensional Capacity planning to identify resource shortages ahead of project commencement.
- An organizational competency matrix that captures employees’ skills and certifications and enables managers to facilitate appropriate training programs.
Companies often cite skilled labor shortage as one of the biggest business challenges. Unless organizations take drastic steps to address this challenge, they risk poor productivity and lower profitability. However, implementing effective strategies like the ones mentioned above can help companies mitigate the gap and ensure business continuity.