Finding the middle: How businesses can manage the talent pipeline to close the middle-skills employment gap

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1 Finding the middle: How businesses can manage the talent pipeline to close the middle-skills employment gap By Ravi Chanmugam, David Smith and Laila Worrell

2 Almost half of all job openings involve middleskills jobs, so closing the middle-skills gap is essential to competitiveness. 2

3 If millions of Americans are still unemployed, why are so many jobs left unfilled? It s a question of increasing interest and urgency to U.S. businesses. The hiring and skills paradox in the U.S. is now all-too-familiar: More than 9 million people unemployed, 1 yet almost 5 million jobs unfilled. 2 Much has been written about the shortfall in high-end skills, particularly in the STEM fields (Science, Technology, Engineering and Math). Less attention has been paid to so-called middle-skills jobs those that require more than a high school diploma but less than a fouryear degree. Labor market experts estimate that as many as 25 million jobs 47 percent of all new job openings from 2010 to 2020 will fall into the middle-skills range. 3 Additionally, 73 percent of employers expect to see their need for middle-skills jobs grow in the next two to three years. 4 Figuring out how to address the inefficiencies, misunderstandings and lack of preparedness that prevent those jobs from being filled is a challenge that affects the competitiveness of U.S. companies as well as the quality of life for millions of Americans. The middle-skills gap is undermining U.S. competitiveness To probe the issues behind the middle-skills gap, Accenture, Burning Glass Technologies and Harvard Business School (HBS) launched a collaborative research partnership in 2013 under the umbrella of HBS U.S. Competitiveness Project. 5 The various research studies and analyses of this project are being driven by the principle that the United States is a competitive location to the extent that companies operating in the U.S. are able to compete successfully in the global economy while supporting high and rising living standards for the average American. 6 Several surveys published by HBS have focused on skills shortages and their effect on competitiveness. For example, annual surveys of HBS alumni worldwide consistently suggested that the skills of the American workforce, once viewed as a source of competitiveness, were in decline relative to workers in other developed economies. 7 The findings also implied that the perceived skills gap was influencing corporate decision-making about whether to keep a business activity in the U.S. or move it out of the country. 8 The research from HBS, Accenture and Burning Glass Technologies looks broadly at the nation s middle-skills gap, and the resulting report, Bridge the Gap: Rebuilding America s Middle Skills, identifies a plan of action for employers, educators and policymakers. Companies should become more proactive in addressing the middle-skills challenge To better understand the business perspective on the middle-skills gap, Accenture also conducted a survey of more than 800 human resources (HR) executives. The survey revealed that 56 percent of respondents found middleskills jobs hard to fill, with companies in finance and insurance (68 percent), information and telecommunications (55 percent), and healthcare (54 percent) experiencing the greatest challenges. Fully 69 percent of the sample indicated that their inability to attract and retain middle-skills talent frequently affected their company s performance. One third (34 percent) of respondents believed that inadequate availability of middle-skilled workers had undermined their productivity, with manufacturing (47 percent) and healthcare (35 percent) the hardest hit. The data validated what many informed commentators have observed for some time: the U.S. middleskills ecosystem employers, educators and policymakers is failing to match supply and demand, resulting in a lack of sufficient job candidates with the middle skills relevant in today s workplace. Though this situation threatens a company s ability to grow and compete globally, investment in the right activities can also strengthen competitive advantage. For example, companies that create partnerships with community colleges and technical schools can help shape a more relevant curriculum. Better communication with government workforce agencies and community-based organizations can improve the matching of qualified people with available jobs. Better internship and apprenticeship programs, combined with more effective training for entry-level positions, can create larger pools of qualified workers. 3

4 Analysis highlights the most needed, and promising, middle-skills jobs What exactly is meant by a middle-skills job? The research suggested that the common definition as noted earlier, those jobs that require more than a high school diploma but less than a four-year degree was correct but not precise enough to identify jobs that offer long-term value to both employers and employees. Instead, the Accenture, Burning Glass, HBS research team developed criteria to identify middle-skills jobs that are high priority for U.S. competitiveness: 1. Value to U.S. businesses: How important is the job to the strategic success of American companies? 2. Career lifetime value: How likely is it that the work will result in high and improving standards of living for someone holding that job? In other words, the mere availability of any middle-skills job is not enough to improve U.S. competitiveness. When leaders in business, education and government think about closing the middle-skills gap, they should focus on those jobs that are of strategic importance to businesses in a particular industry, community or region, and that are also capable of providing a lifetime career opportunity for the employee. This approach resulted in a framework for job analysis as shown in Figure 1. Using this lens helped prioritize middleskills jobs that were most critical by plotting occupations on the matrix using data from Burning Glass and analysis from Accenture. The resulting picture presented a snapshot of the occupations that sustain U.S. competitiveness; they offer enduring value to U.S. businesses and U.S. workers. (See Figure 2.) Figure 1: Framework for occupation importance to U.S. competitiveness 9 Value to U.S. Business Low High Low Occupations Less Critical to U.S. Competitiveness Career Lifetime Value Occupations Most Critical to U.S. Competitiveness Figure 2: Importance of middle-skills occupation groups to U.S. competitiveness (national view, 2013) 10 Value to U.S. Business Low High Low Production Healthcare Support Installation, Maintenance and Repair Architecture and Engineering Construction and Extraction Legal Office and Administrative Support Bubble size reflects relative number of job postings Which occupations are critical to U.S. competitiveness? Healthcare Practitioners and Technical Transportation and Material Moving Career Lifetime Value Technical Sales and Sales Management Management Computer and Mathematical Business and Financial Operations High High 4

5 Plotting jobs on this framework generated interesting insights that contradict some of the conventional wisdom pertaining to middle-skills jobs. For example, the analysis revealed the importance of certain occupational categories, such as technical sales and sales management, which currently receive little attention in the national dialogue about middle skills. In addition to being the single largest occupation group in terms of job postings in 2013 (23 percent 11 ), these jobs fare well on both dimensions of competitiveness. Sales positions, for example, provide high value to businesses and also offer career path opportunities, beyond entry-level positions, which can improve an employee s standard of living. On the other hand, despite recent attention being paid in the media to repatriation of manufacturing firms traditionally seen as a critical source of middle-skills jobs such positions fared worse against the criteria for competitiveness. Production or manufacturing jobs provide strong value for U.S. businesses but very few production jobs provide strong career pathways for a majority of workers. Figure 3 provides a more complete listing of important and hard-to-fill middle-skills jobs, by industry. Figure 3: Critical middle-skills jobs that are hardest to fill, by industry Finance and Insurance Network/Systems Administrator (47%) Training and Development Specialist (33%) Claims Representative / Adjuster / Examiner (33%) Computer Support Specialist (29%) Healthcare & Social Assistance Registered Nurse (47%) Nursing Assistant (29%) Network / Systems Administrator (27%) Information & Telecommunications Network / Systems Support Specialist (38%) Sales Representative (34%) Network / Systems Administrator (34%) Retail Network / Systems Administrator (41%) Computer Support Specialist (35%) Training and Development Specialist (34%) Retail Supervisor (31%) Manufacturing Computer Support Specialist (28%) Network / Systems Administrator (24%) Customer Service Representative (18%) Mining, Resource Extraction, Utilities Engineering Technologist (39%) Electrical / Electronic Engineering Technician (31%) Operations and Maintenance Specialist (30%) Customer Service Representative (29%) Source: Accenture Middle-Skills Survey

6 In many cases, middleskills jobs are going unfilled because candidates lack proper training and experience, especially in foundational skills The Accenture Middle-Skills Survey found that the lack of relevant training and experience was the major impediment to filling positions (see Figure 4). Jobs can be hard to fill for other important reasons. One frequently mentioned is candidates lack of foundational skills such as communication, collaboration and problem-solving. Indeed, one-third of HR executives in the Accenture survey noted that while they could find skilled workers, many candidates lacked foundational skills such as an understanding of what makes an effective and reliable employee. 12 This was particularly prevalent in the retail industry; 47 percent of retailers identified deficits in foundational skills as the leading impediment to finding middle-skills talent. 13 Among businesses seeking sales supervisors and customer service representatives, the absence of such skills was cited as the leading barrier to filling open positions. Missed opportunities: Inefficiencies in the middleskills ecosystem Results from the research also highlighted inefficiencies and disconnections that plague the overall middle-skills employment market. One such disconnect has to do with the statistic just mentioned: that job candidates often lack basic foundational skills in communication, teaming and problem-solving. Figure 4: Why is your organization finding it difficult to fill middle-skills jobs? 54% 54% 54% 50% 50% 50% 38% 38% 38% 54% 54% 54% 50% 50% 50% 38% 38% 38% Trained talent is difficult to find Sufficient experience is not easy to find We typically need to hire people with more education than the position requires to get the talent we need 34% 34% 34% 21% 21% 21% 16% 16% 16% 34% 34% 34% 21% 21% 21% 16% 16% 16% We are able to find skilled people but they don t have the right work ethic or ambition for the job Salary is too low Location of job is not desirable Source: Accenture Middle-Skills Survey

7 What do companies often do in response? They add a college degree requirement to the job posting in the belief that a college grad will be more likely to have those important foundational skills. 14 This ends up being ineffective for both employers and employees. Employers end up with positions that are open longer, have higher turnover, and may require a higher salary to attract candidates. Employees who hold such a job may be frustrated when they realize they are actually underemployed; the job really does not require a college degree. Indeed, the Accenture 2014 College Graduate Employment Survey revealed this exact frustration: Nearly half (46 percent) of the 2012/2013 college grads we surveyed said they were underemployed; that represented a 5 percent increase from the previous year s survey. 15 Another disconnect can be seen in the example of medical coders, one of the important middleskills jobs identified by the research team. Burning Glass reports that there are nearly as many medical coding graduates as there are online postings for medical coding positions; in 2013 there were 33,923 medical coding graduates and 45,185 medical coding job postings. 16 However, medical coders consistently rank among the hardest-to-fill middle-skills jobs. In Accenture s middle-skills survey, 29 percent of healthcare employers named medical coders as one of their three hardest-to-fill roles, and Burning Glass analytics placed medical coders in the top 20 percent hardest-to-fill middle-skill occupations. 17 A closer look at the situation shows that the demand-supply mismatch is due to a shortage of certified coding talent. Although there were 33,923 medical coding graduates in 2013, only about a third of these graduates took and passed the medical coding certifications necessary to secure a full-time coding position. 18 This points to a problem of miscommunication, with employees not understanding the actual requirements of the jobs for which they are being trained. Another issue in the overall ecosystem is the unwillingness of many employers to invest in training for potential employees. In the Accenture survey, just 22 percent of companies said they would always consider bringing someone on who requires additional training when they re having trouble filling a role. Even fewer small companies (14 percent) with annual revenues of less than $250 million said they were willing and able to do so. 19 Closing the middle-skills gap: What businesses can do The time has come for companies of all sizes and in all industries in America to assume a leadership role in efforts to rejuvenate America s system for educating, training and employing middle-skilled workers. Thinking of the entire talent sourcing, development and delivery cycle as analogous to supply chain management is one way to approach the skills gap. People are not products or spare parts, of course, but thinking in terms of a talent supply chain can provide the necessary rigor for managing the middle-skills talent pipeline more effectively. Employers need to put sufficient focus on influencing the full middle-skills talent supply chain the overall process by which people are sourced, developed, deployed, and retained. (See Figure 5.) Figure 5: Supply chain competencies Forecast Planning & Inventory Management Source & Procure Supplier Relationship Management Make & Deliver Develop strategy and approach to manage supply and resources in an iterative, flexible way Secure high-quality supply by analyzing data and evaluating all supplier options Strong integration with suppliers, defined performance management, and proactive risk management Create value and deliver in a highly integrated, seamless fashion 7

8 Forecast, planning and inventory management Map future talent needs Many employers use a reactive approach to filling middle-skills needs. Too few employers engage in workforce planning; they may assume that workers will be available as needed. This reactive approach leaves them exposed during an uptick in business when critical positions remain open and competitors are also adding capacity. Companies particular focus should be on those jobs that are most important to their business strategies. Just as companies design different supply chains for different kinds of inventory, so should firms discriminate between jobs essential to their competitiveness versus those without strong career potential. Companies can also join with other employers either in their region or from within their industry to develop better forecasts of skills requirements. This approach can be especially effective for industries that face a demographic transition in the coming years, such as aerospace, oil exploration and electrical utilities. Source and procure Build talent pipeline Companies too rarely cultivate a diverse supply base for middle-skills talent. For example, according to the Accenture Middle-Skills Survey, only about half of U.S. companies currently partner with any community colleges (56 percent) or technical schools (55 percent), and less than half (45 percent) partner with any community-based organizations. 20 Twenty seven percent of respondents to the HBS alumni survey indicated that they collaborate with community colleges to develop an adequate talent pool of potential middle-skills employees. 21 Applying supply chain management thinking to the sourcing of middle-skills talent would also bring new discipline to human resources functions in areas such as defining job descriptions, analyzing the performance of both unsuccessful and successful job candidates, and working with educators to leverage emerging requirements as a means to update the curriculum. 8

9 Supplier relationship management Develop talent pool relationships Employers need to treat community and technical colleges (a primary source of middle-skills talent) as they treat other suppliers of critical inputs. Currently, communication and collaboration are often haphazard, and job requirements and staffing needs are described vaguely. While some sectors, such as manufacturing and healthcare, demonstrate a greater willingness to form partnerships with local community colleges, only 35 percent of companies actively partner with community colleges to help create a supply of qualified candidates. 22 Although businesses define clear success metrics and goals for their traditional suppliers, they seldom provide such data to educational institutions. Educators frequently complain that they can get no clear explanation as to why their graduates are not getting placed despite having credentials for jobs for which there are numerous postings. Coordinating with other players in the ecosystem is even less likely to occur. According to Accenture research, 34 percent of U.S. government officials working in employment agencies say that lack of engagement with businesses is one of their top-three challenges. 23 It s a vicious cycle perpetuated by lack of communication among players. Make and deliver Reinvigorate talent development If companies are to take the lead in eliminating the middle-skills gap, working with educators and workforce intermediaries is just the first step. It is equally important to develop complementary internal programs. These include: Providing training to entry-level and new employees. As noted earlier, less than 1 in 4 companies surveyed (22 percent) are always willing to consider candidates who require additional training. Offer internships and apprenticeships. Only 41 percent of companies surveyed offer any type of internship or apprenticeship for middleskills jobs. Hire your interns and apprentices. Eighty percent of companies agree that apprenticeships and internships are effective in building skills needed for middle-skills jobs. However, for those companies that do offer internships and apprenticeships, only 44 percent of candidates are likely to be offered a full-time job a majority of the time. Developing a robust supply chain of any type requires continuous investment in a relationship with partners in the system, especially around communications. The various parties can collaborate in establishing shared metrics, developing standards and communications protocols, and exchanging data about actual results. Committing to building ongoing relationships can provide all parties with insights about how to improve the efficiency of the system as a whole. Employers should commit to forge these types of relationships if they are to overcome the skills gap. 9

10 Conclusion: An opportunity for competitive advantage Closing the middle-skills gap in America will require coordinated efforts from all players in the economic and talent ecosystem, including corporations, educational institutions and policymakers. Nevertheless, businesses have a special responsibility and opportunity given that they control large portions of the overall talent supply chain. Businesses that make the investments necessary to close the middle-skills gap establishing rigorous processes for working with talent suppliers and investing in developing the skills of new and incumbent workers will be better positioned to compete in a global economy. 10

11 Contributors Ravi Chanmugam David Smith Laila Worrell Ravi Chanmugam is a managing director and Growth & Strategy lead for the Accenture Health & Public Service operating group. He is based in New York. David Smith is a senior managing director in Accenture Strategy and the lead for Talent & Organization. He is based in Hartford. Laila Worrell is a managing director and lead for the Accenture offices in New York and New Jersey. She is based in New York. References 1. Bureau of Labor Statistics News Release, The Employment Situation August 2014, bls.gov/news.release/archives/empsit_ pdf (accessed September 25, 2014). 2. Bureau of Labor Statistics News Release, Job Openings and Labor Turnover, July 2014, (accessed September 25, 2014). 3. Thomas Kochan, Professor of Management at MIT s Sloan School, David Finegold, SVP for lifelong learning and strategic growth at Rutgers University, Paul Osterman, Professor of HR and Management at MIT s Sloan School, Who can Fix the Middle Skills Gap? Harvard Business Review, December Accenture Research, Accenture Middle-Skills Survey, February For more information on the HBS U.S. Competitiveness Project, see competitiveness/pages/default.aspx. 6. Michael E. Porter and Jan W. Rivkin, The Looming Challenge to U.S. Competitiveness, Harvard Business Review, March Michael E. Porter and Jan W. Rivkin et. al. An Economy Doing Half Its Job, September, (Harvard Business School s annual alumni surveys on the U.S. Competitiveness Project are available at 8. Michael E. Porter and Jan W. Rivkin, Prosperity at Risk: Findings of Harvard Business School s Survey on U.S. Competitiveness, page 15, January The Value to U.S. Business axis displays how important an occupation is to U.S. business by measuring how much the industry contributes to U.S. competitiveness and how critical each occupation is to relevant industries. The Career Lifetime Value axis displays the value of an occupation to a worker by measuring the occupation s average salary and future earning potential. 10. Sources: Bureau of Labor Statistics, 2013 Occupational Employment Statistics dataset; Bureau of Economic Analysis; Accenture Middle-Skills Survey 2014 and industry subject matter experts; Burning Glass Technologies database of online job postings for For a detailed methodology, see full report issued by the partners: Bridge the Gap: Rebuilding America s Middle Skills. The number of construction and extraction jobs is an estimate. Occupation groups with very low numbers of middle-skills jobs in the private sector have been removed (Protective Service; Community & Social Services; Life, Physical & Social Science; Arts, Design, Entertainment, Sports & Media). 11. Burning Glass Technologies real-time labor market data, Accenture Research, Accenture Middle-Skills Survey, February Accenture Research, Accenture Middle-Skills Survey, February For more detailed analysis, see Bridge the Gap: Rebuilding America s Middle Skills, Accenture, Burning Glass Technologies, Harvard Business School, November Accenture 2014 College Graduate Employment Survey, insight-2014-accenture-college-graduateemployment-survey.aspx 16. National Center for Education Statistics, IPEDS; Bureau of Labor Statistics, Occupational Employment Statistics; American Academy of Professional Coders (AAPC) and American Health Information Management Association (AHIMA); and Burning Glass Technologies analysis. 17. Burning Glass Technologies analysis. 18. Burning Glass Technologies analysis. 19. Accenture Research, Accenture Middle-Skills Survey, February Accenture Research, Accenture Middle-Skills Survey, February Michael E. Porter and Jan W. Rivkin et. al. An Economy Doing Half Its Job, September, Accenture Research, Accenture Middle-Skills Survey, February Accenture Public Employment Service Officials Survey

12 About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, Its home page is About the research Harvard Business School launched the U.S. Competitiveness Project in 2011 as a data-driven, nonpartisan effort to diagnose the strengths and weaknesses of the U.S. economy and to identify measures business leaders and policymakers could take to improve the nation s competitiveness. In 2013, HBS entered into a partnership with Accenture and Burning Glass Technologies to shed new light on the middle-skills gap and specifically, the role business could play in closing it. Burning Glass provided access to job-posting data from January 1 to December 31, 2013, allowing the team to analyze the middle-skills labor market in terms of trends in specific jobs, experience, qualifications, and skills sought by employers. The Accenture Middle-Skills Survey was conducted between January and February 2014 among 809 Human Resources (HR) executives in the U.S. across 18 industries and a range of company sizes and revenues. The survey aimed to identify and understand issues that HR leaders face in hiring workers, developing skills and ensuring a sufficient supply of talent to fill the middle-skills jobs needed by their organizations. Two-thirds of respondents were HR directors; the remaining third were senior vice presidents of HR and senior managers. Half of the participating companies had revenue over $1 billion and one-fourth had over 10,000 employees. To read the full report from Accenture, Burning Glass Technologies and Harvard Business School, Bridge the Gap: Rebuilding America s Middle Skills, please go to: accenture.com/middleskills Copyright 2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

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