Last year, when Prime Minister Theresa May launched the UK government’s Industrial Strategy she said “a successful economy must be built on firm foundations”, going on to list a number of factors that are required to create a stable base, including the availability of skills in the UK workforce. Bearing this in mind, the UK is currently in an insecure, unstable position. Here CEO Today hears from David Willett, Corporate Director at The Open University, who approaches the way we think about skills a little differently.
The skills shortage has been well publicised in recent years, especially with regards to its effect on productivity. But what does this shortage really mean for employers? How can we start to close the gap?
The real cost of the skill shortage
Our latest study, The Open University Business Barometer, puts a very real cost on this absence of skilled workers – revealing that the shortfall is now costing UK employers an extra £6.3 billion a year in recruitment fees, inflated salaries, temporary staff and training for workers hired at a lower level than intended.
The majority of the spend is linked to short-term strategies to overcome the immediate issues arising from the deficit, which means organisations are spending more only to experience the same issues further down the road.
Organisations are paying £1.2 billion per year in additional recruitment costs and £2.2 billion in inflated salaries, as talented workers with in-demand skillsets are able take advantage of their strong position. Many organisations have been forced to give up on finding appropriate talent altogether, choosing either to hire at a lower level than intended or to leave the role vacant, where the costs for extra training and temporary staff then add to the financial burden faced by employers.
With this in mind, it becomes clear that employers can no longer bury their heads in the sand when it comes to managing talent, but must begin to take a long-term strategic approach to cultivating the skills they so desperately need.
The financial impact is not the only negative consequence of the skills shortage. Around half of organisations say they are not as agile as they need to be due to a lack of skills. But in a changeable political, economic and technological climate, adaptability and flexibility are essential. At times like these, organisations rely more heavily on managers and leaders to communicate and navigate change, yet nearly three quarters of employers (73%) have experienced difficulty in hiring for these roles in the past 12 months, which is cause for concern for employers looking to future-proof their organisation.
More concerning still is that more than half of senior business leaders surveyed expect the situation to deteriorate over the next 12 months. More than two in five expect their organisation to struggle financially in the next year, indicating that the issue needs to be urgently addressed. So, with these mounting costs and concerns in mind, what can employers do to tackle the skills shortage, and create a pipeline of talent to meet their organisation’s needs in the years to come?
The skills solution
It’s time to change the way we think about skills. Employers are spending billions on quick fixes that address the problem in the short term but we’re left with a skills deficit that will only continue to grow if training continues to be seen as an ‘optional extra’.
With a supply and demand issue putting a premium on highly skilled workers, it’s clear that a long-term, sustainable solution is needed – one that increases the skills available in the workforce. Organisations that develop a long-term skills strategy will reduce their costs in the long-term, allowing them to focus their resources on stability and growth in the future. But the initial outlay can be off-putting.
In 2017, the UK government introduced the apprenticeship levy to encourage more investment in work-based learning, but uptake has been lower than expected, leaving billions of funding that could potentially be used to increase skills in the workforce unused. Why not utilise levy funding at their disposal to fill the growing talent gaps in the workforce?
As well as increasing skills, work-based training comes with a number of other benefits. We’re finding that employers that offer continuous professional development not only have the flexibility and agility they need to adapt to changing business priorities, they also have more loyal and motivated workforces, which can increase productivity and efficiency substantially.
When it comes to learning and professional development, the job is never done in our dynamic economy. Employers need to invest in developing the skills of both new and existing workers continuously to ensure that their organisation is not left behind by constant flux of business conditions, and is able to adapt and prosper as new opportunities present themselves.