According to the International Monetary Fund’s (IMF) World Economic Update, global economic activity continues to trend upward. Global production is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected and half a percentage point higher than in 2016. Global growth has been broad-based, with exceptional growth in Europe and Asia. As a result of better than projected growth in 2017, global growth forecasts for 2018 and 2019 have adjusted from 0.2 to 3.9 percent. The adjustment reflects amplified global growth momentum.
Positive economic growth numbers affect both large, multinational and small, regional organizations’ demand for and ability to recruit talent. To stay competitive in the battle for talent, organizations need to understand current economic trends and the effect they have on the labor market. In this post, we cover the impact of global growth on labor markets, how workforce planning can help organizations navigate growth and the need for flexible talent acquisition programs to manage fluctuations in hiring needs.
Strong Global Economic Recovery and Increased Competition for Talent
While the global economy continues to grow steadily, the working-age population has stagnated. According to a demographic analysis conducted by the Wall Street Journal, by 2050, the global population will grow by 32 percent; however, the working-age population will increase by only 26 percent, a 6 percent drop off.
What’s more, in advanced nations, the working-age population will decrease by 26 percent, while according to the U.N., middle-income nations will see it rise 23 percent. Shrinking labor markets and talent pools will become a serious challenge in many major economies as labor market shortages could reach heights unseen in decades, especially in the U.S., Japan, UK and countries in Central and Eastern Europe.
Labor shortages cause increased competition for talent. Thanks to steady economic growth, organizations are on better financial footing than during the recession. Financial stability can lead to more investments in expansion and product development; however, skills and labor shortages can be stifling to growth.
This reality necessitates that business leaders reassess how they attract, develop and retain their organization’s talent. Below, we list a few ways organizations can help bridge the talent gap as well as ways they can mitigate the effects of talent shortages:
- Organizations should encourage recruiting teams to source from diverse demographic groups to find talent.
- Organizations should look to cultivate a strong talent pipeline consisting of passive and active candidates to nurture and engage when vacancies arise.
- If possible, organizations should partner with local governments to invest in infrastructure, technology, education and training programs to help underqualified and less-educated workers improve their employability for the jobs of the future.
Planning for Talent Acquisition to Accommodate Economic Growth
Economic growth is transforming global businesses and the international talent landscape. Technological advances, further globalization of markets, changing demographic trends and increased competition are changing the way organizations see talent acquisition in virtually every industry. To stay ahead of talent shortages and increased competition for candidates, organizations should take proactive steps, including integrating workforce planning into their business planning process.
Workforce planning is a process used to align the needs of an organization with those of its workforce to ensure it can meet compliance, service and production requirements. Workforce planning can help organizations analyze their current workforce, determine future workforce needs and identify the gaps between the current and future workforce. The workforce planning process should include stakeholders from multiple departments of the organization collaborating closely together to establish organizational goals and the talent needs to support them.
Essential components of workforce planning include:
Workforce Demand Planning
Workforce demand planning involves taking into account the key mission, goals and future objectives set by an organization’s leadership and assessing the current workforce to determine if it is well-aligned enough to achieve them.
Estimating the Labor Pool
Estimating the labor pool entails researching the supply and availability of labor and comparing the talent supply with an organization’s talent demands from both internal and external sources.
Managing the Gaps
Managing the gaps requires that the HR department establish tactics to proactively resolve issues that may arise between workforce demand and supply. This ensures that positions vital to achieving previously outlined goals can be filled in the face of labor shortages.
Economic Growth and Increased Competition Demand Flexibility in Talent Acquisition Tactics and Strategy
A competitive labor market and rapid innovation are spurring a need to reinvest in recruiting. More frequently, organizations are turning to talent acquisition experts such as recruitment process outsourcing (RPO) providers. The global RPO market grew by 17 percent in 2015, according to Everest Group, a consulting and research firm. The majority of global RPO growth is attributed to new deal activity, which grew at a rate of more than 18 percent from 2015 to 2016 and continues to trend upward.
For high-growth organizations, an RPO provider offers the benefit of a consultative partnership where the provider acts as extension of an organization’s HR department to supplement and amplify recruiting resources. Throughout the engagement, RPO providers work to transform recruitment processes to help the client reach its long-term hiring and business goals. Experienced RPO providers embrace a mix of talent acquisition strategies, technology and emerging recruiting techniques to source and hire talent. Moreover, an RPO provider with experience hiring talent globally can leverage data to determine the best global talent markets to source talent from. The provider will also use global employment data and trends to design strategies that will attract talent to a client’s organization.
RPO solutions provide scalability and flexibility to organizations by outsourcing the entire or parts of the recruitment process to an external provider. An RPO provider scales its team according to a client’s unique needs, deploying more resources for high-volume hiring periods and recalling resources when hiring slows. An RPO provider’s experienced team of recruiters, use of cutting-edge recruiting technology and recruitment marketing tactics make it well-equipped to handle scalable hiring needs. Because of the flexible nature of RPO programs, providers can better navigate fluctuating hiring demands.
Contingent and Gig Workers
Organizations that wish to develop a more agile talent management strategy and position themselves for future growth are adopting a more scalable and fluid approach to recruitment, with contingent hiring at it its core. Research conducted by Ernst & Young (EY) revealed that organizations are increasingly embracing gig and contingent workers as a means of adapting to rapid growth and the changing nature of work. Contingent and gig hires are not a fad. In fact, 40 percent of respondents to the study expect to use contingent labor in the years ahead.
From the employer perspective, the uptick in temporary hiring and the growing utilization of gig economy workers has provided substantial benefits. Below, we list a few of the benefits reported in the EY research:
- Contingent hiring helps organizations better control labor costs by setting prescribed budget limits.
- Organizations are more flexible in the skills sets and expertise they hire for.
- Contingent labor provides organizations with the ability to rapidly respond to changes in demand for labor.
To manage contingent workforce needs, organizations can turn to managed service providers (MSP) programs to support gig, temporary, temp-to-hire, direct hire, independent contractor (1099) administration and other needs.
Benefits of Engaging a Managed Service Provider:
- An MSP program delivers immediate ROI by analyzing an organization’s total spend and identifying ways to optimize and drive cost savings.
- MSPs set baseline performance metrics to track improvements and quantify business issues, such as the cost of turnover and the lost productivity that follows. This provides clients with a real-time view of costs and areas for improvement and savings.
- MSPs not only manage staffing suppliers and services spend but also work to streamline operations to scale and match growth cycles.
As the global economy continues to grow and the demand and competition for talent rises as a result, organizations need to stay abreast of the scope of talent available on the market. Talent acquisition specialists have adapted to the changes in global workforce trends and are equipped to provide organizations with the expertise and resources needed to navigate an ever-changing and challenging talent landscape.