Skills Gap Costing Employers Nearly a Million Dollars Annually
April 19, 2017 – It remains one of the most vexing economic puzzles in talent management: Why can’t employers find workers to fill their positions when 7.5 million Americans are unemployed and millions more are working part-time gigs because they can’t find full-time positions or have given up looking for work altogether?
According to a new CareerBuilder survey, nearly 60 percent of U.S. employers have job openings that stay vacant for 12 weeks or longer. The average cost HR managers say they incur for having extended job vacancies is more than $800,000 annually.
CareerBuilder’s latest study included representatives across all industries in the private sector. It found that 68 percent of employers who said they were increasing their number of full-time, permanent employees in the first quarter currently have open positions for which they cannot find qualified candidates. This is consistent across company sizes, but particularly for those with a larger employee base which tend to have more job openings in general: 1-50 employees: 49 percent; 51-250 employees: 74 percent; 251-500 employees: 72 percent; and 501+ employees: 71 percent.
Supply and Demand
“The gap between the number of jobs posted each month and the number of people hired is growing larger as employers struggle to find candidates to fill positions at all levels within their organizations,” said Matt Ferguson, CEO of CareerBuilder. “There’s a significant supply and demand imbalance in the marketplace, and it’s becoming nearly a million dollar problem for companies.”
The supply / demand issue isn’t unique to one industry or certain occupational categories. The analysis below compares the number of job listings for positions to the number of hires using CareerBuilder’s extensive labor market database, which pulls from a variety of national and state employment resources as well as online job postings.
Two in three employers (67 percent) from the CareerBuilder survey say they are concerned about the growing skills gap, and with good reason. More than half (55 percent) say they have seen a negative impact on their business due to extended job vacancies, with a sizable proportion of these employers pointing to productivity issues, an increase in voluntary turnover and revenue loss: productivity loss: 45 percent; higher employee turnover: 40 percent; lower morale: 39 percent; lower quality work: 37 percent; inability to grow business: 29 percent; revenue loss: 26 percent.
Those doing the hiring are not the only ones noticing the issue. One in five workers (20 percent) say their professional skills are not up to date. Fifty seven percent of workers reported that they want to learn a new skillset to land a better-paying, more fulfilling job, but half of them said they can’t afford to do so.
To help with this, last year Capella Learning Solutions and CareerBuilder launched an initiative called RightSkill, which enables workers to upskill and reskill for in-demand jobs within 60 days or less. The program, which is currently free for candidates, teaches competencies online based on real-time data and guidance from employers.
Steep Cost
The lack of available or qualified candidates could be pointing to a skills gap. According to the Aberdeen Group, 80 percent of employers believe that the skills gap is a hindrance for any organization looking to recruit employees. Aberdeen found that the hardest skills to find in candidates include a mix of both soft and hard skills.
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Calculating the impact of this problem on either the economy as a whole or individual employers is difficult, but few doubt that unfilled positions come at a steep cost. When the right talent can’t be found, lost profit and revenue can be as high as $23,000 per unfilled position, according to the U.S. Chamber of Commerce Foundation.
While strong job growth is a good sign for the U.S. economy as a whole, it presents certain challenges for employers and HR professionals. According to the iCIMS ‘U.S. Hiring Trends’ report, employers are having difficulty attracting suitable candidates. Jobs are becoming harder to fill, requiring more time and money to hire best-fit talent.
iCIMS’ data suggests that employers having difficulty filling positions with qualified candidates should invest in their talent pipelines by fostering relationships with passive candidates and interns, as well as by developing an effective employee referral program. Medium and large businesses, apparently recognizing the value of an internship program, have been able to convert interns into full time hires. Not surprisingly, small businesses struggle here.
An Influencer Network
One stand out hub that is fostering relationships with passive candidates is Hunt Club – a referral recruiting service that leverages technology and a front-end automation process to help land passive candidates. The firm leverages a network of connected influencers, which include executives, entrepreneurs, subject matter experts, and connectors to refer for roles. It has completed over 200 searches across functions, industries, and experience levels in the past 12 months. Notable clients include Dollar Shave Club, Bellhops, Wilson Sporting Goods, and Trunk Club, among others ….. Here’s some further reading from Hunt Scanlon Media.
Executive Recruiter Joins Hunt Club
Veteran search consultant Ali Smith recently joined referral recruiting service Hunt Club, where she will oversee Midwest operations, regional go-to-market initiatives, account management, and the customer service / delivery function for the firm. Here, Ms. Smith discusses how Hunt Club works with companies to satisfy their talent needs.
“Technology is advancing rapidly, transforming the workplace and how employees engage with employers,” said iCIMS chief economist, Josh Wright. “These rapid changes are evident in debates about skills gap in the labor force and the impact these have on the labor market. Employers across all industries and company sizes need to examine their operations and search for opportunities to nurture their own pools of talent.”
Four Suggestions
Companies struggling to fill positions quickly with qualified candidates need to invest in their talent pipelines and build relationships with potential candidates. iCIMS offers four ways employers can build talent pipelines for future hiring needs.
1) Grow Your Company From the Intern Up
Many companies recognize internships as one of the most effective recruiting tools because they provide a relatively secure source of entry level hires. Interns have already demonstrated their skill, dedication, and ability to fit into the company culture; furthermore they have received some level of grooming or at least exposure to the work of the company. According to a study by the National Association of Colleges and Employers, approximately 71 percent of employers plan to transition interns into full time employees, and 63 percent of companies would like to hire interns for entry level positions.
Unsurprisingly, small businesses’ use of internships lags behind medium and large companies, in terms of both the average time it takes to fill a position and the size of the internship program relative to overall hiring. Medium and large businesses appear to be doing a better job at building talent pipelines for internship programs: their internship programs are larger relative to their overall hiring programs.
More surprisingly, the relative size of the largest enterprise companies’ internship programs more closely resembles that of small businesses. The relative composition of their total hiring may play a role here, as well, but some enterprise companies may be at risk for coasting on their brand names.
2) Don’t Forget Passive Candidates
Strong talent pools of passive candidates ensure that a company always has a pipeline of talented and qualified candidates to select from when a job becomes available. Passive candidates are the people who are willing to entertain a job offer but are not actively looking for a new position. According to another recent iCIMS survey, 78 percent of respondents would be open to a new career opportunity if contacted by a recruiter with a relevant opportunity, even if they weren’t actively seeking a new job.
Sending automated personalized, branded communications based on what talent pool they belong to makes passive candidates more likely to think of that organization when ready to apply to a job. Automating this process with a recruitment marketing automation tool enables employers to maintain a constant pool of warm candidates, reducing cost per hire and time to fill.
3) Diversify Your Recruitment Marketing Tools
One of the most important parts of building a talent pipeline is expanding candidate reach. In order to make an organization more visible, employers should regularly leverage multiple channels to discover which sources are most effective. Employers can make open positions easy to discover by advertising where candidates are looking. This includes job boards, social media, and ensuring that open jobs ranked favorably on search engines like Google.
Dedicated talent acquisition technology helps companies more effectively build candidate pipelines with automation and ease. Companies of all sizes can explore and test candidate outreach channels to attract more candidates and reduce their time to fill. Employers should partner with a technology provider that allows for a seamless flow of information from multiple vendors into a single talent acquisition system of record.
4) Increase Your Odds — Encourage Employee Referrals
According to iCIMS, on average, 24 percent of new hires originate from a referral, but some companies see rates of nearly 40 percent. Larger companies with 1,000 employees or more tend to hire more referred employees (27 percent) compared to smaller companies (14 percent). This divergence is likely due to the fact that 69 percent of large companies have a documented referral process compared to 46 percent of smaller companies.
Part of the reason employee referrals are considered so successful by employers is due to the fact that they are effective at bringing talent that easily fits into a company’s existing culture. By capitalizing on employee networks, companies can enhance their ability to compete for talent.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media
