2015 11 august

A MarketPoint Whitepaper

The Skills Gap

Defining the Skills Gap

e have all the talent

we could possibly
use; our bench has
never been stronger;
we cant imagine ever being in a situation
where a lack of skilled employees would
hold us back, much less hurt us, said no
employer, ever. And that may be precisely
why the skills gap has crept up on us: that
we have accepted malaise as the status
quo, as if there were nothing that could be
done about the talent problem. Until suddenly, its too late.
The Association for Talent Development
(ATD) defines skills gap as the point at
which an organization can no longer grow
or remain competitive because it cannot
fill critical jobs with employees who have
the right knowledge, skills, and abilities
(ASTD). Chances are, youve been there,
and youre not alone. A 2012 survey
conducted by the American Society for
Training and Development [now known as
the Association for Talent Development]
showed that 84% of respondents reported
a skills gap in their own organizations
(ASTD).

The highest areas

for skills gaps:
(ASTD)

54%
Leadership and executive skills

38%
Managerial and supervisory skills

37%
Job- or industry-specific skills

How Bad Is It?

he U.S. Chamber of Commerce Foundation says that employers spend over

$486 billion on training each year, while
Federal job training programs cover a
mere $16 billion (U.S. Chamber of Commerce
Foundation). Given there are over 123 million
employees in the United States (Statista), that
represents an average of $4,000 spent on each
employee.
Yet despite their investments, many employers
struggle to fill middle-skills jobs (highly specialized mechanical, technical, and production careers
that may require industry or government certification, post-secondary education and training,
and sometimes college-level math), which account
for 48% of the workforce (Kochan, Finegold and
Osterman). Growing middle-skills industries, like

manufacturing, construction, and healthcare face

the most significant skills shortages (ASTD).
Employers filling higher-level management
positions face similar challenges: college graduates, they say, simply arent well prepared for
the workplace.
When combined, middle-skills jobs and highskills jobs (bachelors degree plus experience)
comprise nearly 80% of all manufacturing roles
(Accenture).
Thats a lot of workers with insufficient skills,
which makes it easy to understand why 46%
of U.S. executives at large firms are concerned
their workforces wont have the skills they need
within two years (Accenture).

Why Does It Exist?

ould this be one of the consequences

Alvin Toffler warned about in his seminal
book Future Shock, when he argued that
the accelerating rate of social change is
outpacing man's ability to cope? After all, many of
todays jobs didnt exist before the Digital Revolution,
and according to some experts, 50% of todays
corporate jobs wont exist in 2025 (Andrew). Well,
perhaps. But the immediate causes may be more
mundane than philosophical: economic expansion,
the retirement of 2.7 million Baby Boomers, the
great recession of 2008, and an insufficient pipeline
of new workers are all likely culprits.

52%

of employers say their workers

receive company-provided training

21%

But only
of employees
acknowledge receiving training
(Accenture)

Clearly one of the issues that need to be

addressed is the disconnect between trainers
and trainees. Gallup reports that only one in
nine business leaders believe college graduates
are well prepared for the workplace, yet 96% of
college and university chief academic officers
are confident they are preparing students well
(U.S. Chamber of Commerce Foundation). Forbes
suggests the disconnect with higher education
isnt surprising, as universities werent designed
to change curricula and introduce new classes
at the pace required by changing industry
requirements (Yang).

But before we lay the blame at the feet of higher

education, its important to recognize the
disconnect between employers and employees.
Accenture reports that while 52% of employers
say their workers receive company-provided
training, only 21% of employees acknowledge
receiving training (Accenture). In their defense,
U.S. apprenticeship programs have shrunk, since
1998, by 36% (Kochan, Finegold and Osterman).

Why Does It Exist? (ASTD)

58%
worker skills do not match
evolving strategy, goals,
markets, or business models

30%
too few qualified
candidates (i.e., a gap in
the pipeline)

55%

41%

not enough bench

underinvestment or a lack of
strength in the companys commitment by senior leaders
leadership ranks
to learning & development

18%
lack of skilled talent in
one or more of the
companys lines of
business

8%
acquired employees or
current employees are not
up-to-speed

What are the Consequences?

ccording to a study published in

the Harvard Business Review, 39% of
U.S. employers reported difficulty
filling jobs due to lack of available
talent (Bessen). The impact can be significant,
as unfilled manufacturing jobs lead to weaker
manufacturing
KPIs,
including
quality,
overtime, down time, cycle time, scrap and
customer satisfaction. Moreover, the problem
is compounding, as each manufacturing job
creates an additional 2.5 new jobs in local goods
and services. Georgetown Universitys Center
on Education and the Workforce is forecasting
5 million unfilled jobs, due to the skills gap, in the
next ten years (Deloitte).

Writing for Fortune magazine, Richard Dobbs

paints an even dimmer picture. As technological
churn renders new skills outdated at an everfaster pace, new skill gaps are showing up more
often and in more places By 2020, around
the world, there is likely to be a shortage of
approximately 40 million high-skilled workers
and 45 million medium-skilled workers. Against
that will be a surplus of 95 million low-skilled
workers (Dobbs, Manyika and Woetzel).

What Are the

Consequences?

39%
of U.S. employers reported
difficulty filling jobs due to lack
of available talent (Bessen)

75%
of manufacturers report a
moderate-to-severe shortage of
skilled resources

11%
Resulting in an 11%
decline in EBITDA
(Accenture)

The United States Chamber of Commerce Foundation suggests that if America does not respond
with urgency and decisiveness to address the
fundamental challenges in [our] labor markets,
[we] will see declines in productivity growth and a
shrinking workforce, and ultimately, a 9% decline
in the standard of living by 2030 (Benitez).

Already, 75% of manufacturers report a moderateto-severe shortage of skilled resources, directly

impacting their bottom lines, with a median decline
in EBITDA of 11% (Accenture). Accenture reports
two-thirds of employers surveyed anticipate a loss
of business to competitors, due to shortages in IT
skills, engineering skills, R&D skills, and sales skills
(Accenture).

What Can We Do about It?

f we intend to survive (or thrive) through the

skills gap crisis, employers will need to make
serious investments in sourcing, developing
and retaining talent.

Already, employers have begun to step up their

investments. Accenture reports that over half
of employers responding to a recent survey
indicated they intend to spend more on training
over the next two years. And theyre finding new
delivery methods for their training, as well: 42%
are using mobile delivery, 35% social media;
27% Massive Open Online Courses (MOOCs),
and 13% gamification (Accenture).

Forbes suggests that managers work with

employees on individualized learning plans
to close skills gaps, and that they be more
transparent about courses and skills that would
better prepare them for jobs (Yang). Companies
like Target, Goldman Sachs and Macys recruit
college graduates with diverse interests to fill
their Associate Training programs. And the
U.S. Chamber of Commerce has developed the
following checklists for combatting the Skills
Gap: (U.S. Chamber of Commerce Foundation)

What Are Employers Doing About It? (Accenture)

42%

using mobile
delivery for training

35%

using
social media

27%

leveraging Massive Open

Online Courses / MOOCs

13%

experimenting with
gamification

Students and Workers Should:

plan and manage their careers
develop employer-focused career plans
access preferred provider networks for entry-level opportunities
pursue career advancement opportunities
join and use professional networks

Students and Workers Should:

develop
employer-focused
career plans

pursue career
advancement
opportunities

access preferred
provider networks
for entry-level
opportunities

plan and manage their careers

join and use

professional
networks

Employers Should:
connect their talent strategies to their business strategies
establish flexible and responsive partnership networks
plan and communicate workforce needs
develop balanced end-to-end pipeline performance measures
align incentives to improve talent pipeline performance and recruitment

Employers Should:

connect their talent

strategies to their
business strategies

develop balanced
end-to-end pipeline
performance
measures

establish flexible
and responsive
partnership
networks

align incentives to
improve talent
pipeline performance
and recruitment
plan and communicate workforce needs

How Will You Respond?

trategically, we have at least three

options: We can choose to ignore
the crisis, to hope that the Harvard
Business Review and Forbes and Fortune
and Accenture and Deloitte and the chorus of
business sages are all wrong Or we can choose
to merely survive the storm, assembling a

piecemeal response to the challenges that affect

our individual organizations Or we can choose
to thrive as others struggle, by recognizing
the gravity of the situation and developing an
integrated strategy. Whatever your strategy,
the keys to success will be preparation and
investment.

About the Cover:

"Solving the Skills Gap Puzzle" is an original illustration by Katarzyna Tuylak,
Tuylak Design, Bydgoszcz, Poland.
Light Colored Wood Texture Photo Aeolos | Dreamstime.com.
Cork Board Background Photo Bradcalkins | Dreamstime.com.

About the Author

ichael Zimmerman is the Senior Marketing Strategist at MarketPoint

LLC, a business consulting firm specializing in strategic communications, brand management and outsourced marketing. Calling on 36
years of management experience, including two CEO positions and
several marketing leadership roles, Michael is a regular contributor to SmartCEO
Magazine (New York, Philadelphia, Baltimore, and DC editions); he has been published in Social Media Today, Technorati, The Social Customer, and Sales and Marketing
Management Magazine, and speaks frequently at area universities.

Works Cited

Accenture. 2013 Skills and Employment Trends Survey: Perspectives on Training. 2014. Web. 8 August 2015.
<https://www.accenture.com/us-en/~/media/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Strategy_3/
Accenture-2013-Skills-And-Employment-Trends-Survey-Perspectives-On-Training.pdf>.
. Accenture 2014 Manufacturing Skills and Training Study. 2014. PDF. 8 August 2015.
<http://www.themanufacturinginstitute.org/Research/Skills-and-Training-Study/~/media/
70965D0C4A944329894C96E0316DF336.ashx>.
Andrew, Peter, et al. FAST FORWARD 2030: The Future of Work and the Workplace. CBRE Workplace Strategy, 2014.
PDF. 8 August 2015. <http://www.cbre.com/~/media/images/research%20reports/apac/2015/
cbre_genesis_fast_forward_workplace_2030_exec_summary_e.pdf>.
ASTD. Bridging the Skills Gap. Help Wanted, Skills Lacking: Why the Mismatch in Todays Economy?. Update. 2012. PDF. 6
July 2015. <https://d2p9xuzeb0m4p4.cloudfront.net/~/media/Files/About%20ASTD/Public%20Policy/
2009-Bridging-SkillsGap-coverweb/Bridging%20the%20Skills%20Gap_2012.pdf>.
Benitez, Jorge. Closing the Skills Gap with a Talent Supply Chain. 30 September 2014. PDF. 7 July 2015.
<https://www.uschamberfoundation.org/closing-skills-gap-talent-supply-chain>.
Bessen, James. Employers Arent Just Whining - the Skills Gap is Real. 25 August 2014. Article. 10 June 2015.
<https://hbr.org/2014/08/employers-arent-just-whining-the-skills-gap-is-real>.
Deloitte. The skills gap in U.S. manufacturing 2015 and beyond. 2015. Web. 7 July 2015.
<http://www.themanufacturinginstitute.org/~/media/827DBC76533942679A15EF7067A704CD.ashx>.
Dobbs, Richard, James Manyika and Jonathan Woetzel. How U.S. companies can fill the skills gap. 12 May 2015. Article. 7 July 2015.
<http://fortune.com/2015/05/12/how-u-s-companies-can-fill-the-skills-gap/>.
Kochan, Thomas A., David Finegold and Paul Osterman. Who Can Fix the Middle-Skills Gap? December 2012. Article. 7 July
2015. <https://hbr.org/2012/12/who-can-fix-the-middle-skills-gap>.
Statista. Monthly number of full-time employees in the United States from August 2015 to August 2016. 2016. Web Page and
Chart. 8 August 2015.
<http://www.statista.com/statistics/192361/unadjusted-monthly-number-of-full-time-employees-in-the-us/>.
U.S. Chamber of Commerce Foundation. Managing the Talent Pipeline: A New Approach to Closing the Skills Gap. 2014.
PDF. 7 July 2015.
<https://www.uschamberfoundation.org/sites/default/files/Managing%20the%20Talent%20Pipeline.pdf>.
Yang, Dennis. Can We Fix The Skills Gap? 2 August 2013. Blog. 10 June 2015.
<http://www.forbes.com/sites/groupthink/2013/08/02/can-we-fix-the-skills-gap/#664ed857781d>.

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