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On the 22^nd January 2019 the UK released its latest employment figures. Employment is at its highest since the 1970’s at 32.54 million, the number of active jobseekers is stable at 1.37 million and the number of vacancies was at a record high of 853,000.

It sounds like everything is amazing. High fives all round! However, how does this affect your organisation and how does the modern labour market work to create these conditions? And what is the long-term effect on skills and knowledge in the workforce?

Just by scratching the surface of this topic we can identify that some of the drivers of the figures above may be hiding potential problems for your organisation in workforce planning and talent management strategies. Let me explain…

Key aspects of the modern labour market

Recruitment, selection and broader talent management is about sourcing the right knowledge, skills, abilities and other attributes (KSAOs) into the right place at the right time in your organisation. This creates a competitive advantage and a productive workforce, delivering results against your strategic goals. Recently, we see more and more HR and Business media reports that there is a skills shortage in the market. Why is this?

An ageing population…

Firstly, the population surge of the baby boomer generation has meant the number of retirements in western countries is growing as the population ages. This can mean that, key skills are disappearing with your older workers. In addition, many older workers are managers and some organisations are seeing the tacit skills of their leadership retiring away without creating a mechanism of passing on this “hard-to-replicate” tacit knowledge on to others in the workforce.

A lack of new skills in the market…

Secondly, the working population increasingly doesn’t have the skills that organisations need for the modern workforce. Part of the issue is that new entrants into the workforce are not being taught the appropriate skills. But also, organisations are not investing in upskilling their people. Organisations are becoming reluctant to invest in training in those where they see a moderate degree of chance that the worker will leave and take these new skills elsewhere.

Portfolio careers and Human Capital Theory

The rise of the modern “portfolio” career, or the “gig” worker (however you want to label it!), has partly fuelled this resistance to develop the individual. This modern view of work is a fundamental part of Human Capital Theory and its core principle is that it is the INDIVIDUAL’s role to develop their skills and market themselves to organisations, not the organisation’s role to internally develop and pay for this as it may have been a few decades ago.

In short, modern HR practice is encouraging organisations to fuel the mechanism that encourages skills shortfall. So, what can we do as HR, Talent and People professionals?

An emerging view is that the Human “Resource” of an organisation is now becoming of critical value, equal to that of other business “resources”. The increasing scarcity of the right skills means that certain skills are going up in value. Just like a precious metal, the rarer the skill and the more useful the skill, the higher its value. Continuing this analogy, you then have two choices as HR Professionals: you can either go and “mine” for more of these rare skills (i.e. recruit and pay the market rate) or get better in recognising, organising and utilising your existing internal critical skills, i.e., create an internal skills inventory of your “Skills Capital”. This process can be compared to how Finance use accounting methods to know where the money (capital) is and forecast how much of this capital they can invest and where, without running out of it.

OK, so how do I use my “Skills Capital” as an advantage?

Gaining a knowledge of what internal skills your organisation contains has a number of advantages:

• Understanding future demand: Understanding your “skills capital” allows you to map future KSAO requirements based on your business and people strategies against immediately available skills. You can then proactively target the acquisition or development of these skills within the workforce.
• Uncover “hidden” skills: A number of skills are latent and/or “hidden” within those workers doing roles in the organisation. e.g. Finance people may have previous skills gained in the past suitable for a marketing position. Getting your people to list and rate their skills is a way of discovering these hidden talents.
• Create more internal career moves: Bringing hidden talents into use creates internal movement of employees, especially sideways including cross division. This is a visible demonstration of valuing your people and your commitment to nurturing their careers.

This is not a small task to initially set-up. Not surprisingly, there is an emergence of technologies that can help you manage and utilise this internal “Skills Capital”. Interesting examples are those that make the experience interactive and fun for the employee and ones which link it with possible career paths, with line manager involvement.

Get started to get competitive advantage

Whether you utilise a technology or have a more manual approach to understanding your “skills capital”, 2019 is a year when the availability of certain skills will not keep up with demand. Those who proactively understand and manage their internal skills will have both financial and competitive advantage over other organisations in their sector and beyond.

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