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May 2013

Warning: Talent Cliff Ahead -- Part 1.5

Written by Jeanne Urich, Managing Director, Service Performance Insight (SPI)

Jeanne Urich

The Looming Technology Workforce Shortage Continued: The Challenge for 2013

A preface from Planview

In part 1 of this series, SPI Research describes the "trifecta of external forces that are creating the talent cliff". According to the 2013 PS Maturity™ Benchmark for professional services, this is becoming an increasingly important and urgent topic. This post is a continuation of the original that qualifies this sense of urgency.

Part 2 of this article actually continues on the SPIglass Website in Warning: Talent Cliff Ahead ‒‒ Part 2. Planview sincerely thanks SPI Research for this informative contribution.

In professional services with IT, software as a service, hardware, networking services and management consultancies depending on individuals with strong technology backgrounds, the talent cliff becomes the most important issue facing the market.

As evidenced in the 2013 PS Maturity Benchmark, talent management is the most important challenge according to 234 companies that completed the survey in the 4th quarter of 2012. The No. 1 challenge in 2011 of "supporting rapid growth and expansion" has been surpassed in 2012 by "talent management," as outlined in Table 1.

Two years ago, PS executives were mainly concerned with sales, given the prior three years of the economic downturn. Last year, with improved sales and record year-over-year revenue growth of 13.5 percent, the focus turned to service execution. That meant efficiently delivering more projects, which led to higher revenue growth. In 2012, because of the success of the previous two years, the foremost challenge shifted to talent management. The ability to find, hire and engage a high-quality consulting workforce has become the primary concern.

Year-over-year Change in Talent Management Challenges (image version)
Table 1. Year-over-year Change in Talent
Management Challenges (image version)
Year-over-year Change in Talent Management Challenges (text version)

The second-most critical challenge found in this benchmark is improving quality and consistency. Higher-quality services require high-caliber consultants, and generally required skills are based on problem-solving abilities, typically found in individuals with a STEM (Science, Technology, Engineering and Math) background.

Populations in the U.S. and other developed nations continue to grow. Educational systems continue to graduate students, and thousands of people immigrate to the U.S. and other developed countries every day. Unfortunately, the balance of supply and demand for individuals with the skills necessary to succeed in technical disciplines is lacking, and without a major commitment from federal, state and local agencies, developed countries, especially the U.S., will suffer over the long-term.

Insights and Preventive Actions to Consider in Avoiding the Talent Cliff

Continue reading this article on SPIglass in the article, Warning: Talent Cliff Ahead ‒‒ Part 2.

A Prolog From Planview: Additional Materials for Project-Based Service Organizations

In the continuation of this article, SPI Research describes best-practices in personnel enlistment and talent satisfaction. For those involved in consulting services and operations, recruitment will be a stop-gap but not necessarily a solution. For individuals looking to combat the talent cliff with purpose-built technologies, these web articles and research reports are a resource developed for your interests:

Related article: Warning: Talent Cliff Ahead -- Part 1

Sample Report Charts

Table 1. Year-over-year Change in Talent Management Challenges

Challenge 2011 2012 Change
Talent management 4.13 4.28 3.7%
Improve quality and consistency 4.00 4.20 5.1%
Improve sales and marketing 3.99 4.18 4.8%
Achieve revenue and margin targets 4.06 4.18 2.8%
Support rapid growth and expansion 4.15 4.09 -1.5%
Improve/expand portfolio and markets 3.71 3.82 2.7%
Alignment between functions or groups 3.60 3.72 3.2%
Improve knowledge management 3.51 3.63 3.3%
Average 3.89 4.01 3.0%
Source: Service Performace Insight, February 2013

The Remarkable Reason Complacency for Spreadsheets May Reach Critical Mass

How One Cell Discredited the Way the World Measures the Ratio of Debt-to-GDP and What That Should Mean for Corporate Finance

At every FP&A conference I have ever attended, the subject of spreadsheets comes up and those with a great argument for keeping them receive, what I perceive to be, the loudest applause. Usually the argument seems rather reasonable. For example, at the FP&A conference in San Diego earlier this year, a CFO of a Fortune 1000 company confessed that he still uses spreadsheets because it is the "ultimate ad hoc tool". To paraphrase him: Spreadsheets are empowering; you can make them do amazing things, customize them to exactly what you want them to be, and keep massive amounts of valuable data consolidated for limited but somewhat immediate access.

The problem is that whenever the groupthink has concluded that the discussion is closed, everyone returns to the modus operandi of convenience until something terrible happens.

For All Countries That Manage Their Forecasts Based on the Reinhart/Rogoff Model, That Terrible Thing Happened Last Week

According to scholars at the University of Massachusetts, the "most influential article cited in public policy and debates about debt stabilization" is wrong. Specifically, a spreadsheet error has been revealed to have excluded five countries that would have invalidated the theory that countries with a high debt: GDP ratio suffer from slow economic growth. According to Matthew Yglesias of the Slate: (Read more of the Slate article here.)

"At one point they set cell L51 equal to AVERAGE (L30:L44) when the correct procedure was AVERAGE (L30:L49). By typing wrong, they accidently left Denmark, Canada, Belgium, Austria, and Australia out of the average. When you fix the Excel error, a -0.1 percent growth rate turns into 0.2 percent growth."

According to Gawker, "When other revisions were carried out, the scholars found that the true growth rate should have been 2 percent" thus disproving the politically-charged but unwavering position. (Read more of the Gawker article here.)

The Difference Between Politics and Sound Business Practices

The reason you may not have heard about this is because when economists and politicians make aberrant or incorrect public statements very little happens. As Yglesias explains, "…naturally this is going to change everything. Or, rather, it will change nothing." (Read more of the Slate article here.)

Executive Communications Are VitalHowever, if a CFO makes an inaccurate public statement, far from little happens. The implications are massive. Stock prices and forecasts are implicated, lawyers get involved, fines assessed, and sometimes jail time is discussed.

This is not to say that if you don't move away from spreadsheets you should be worried about going to jail. Rather, it is to say that there are very important reasons to stand up to the cognitive dissonance that is especially real within the corporate financial planning community. According to Robert Kugel, CFA, SVP & Research Director of Ventana Research, new research reveals that those in leadership positions or are closest to C-level decisions will inaccurately describe their processes as effectual when they are actually not. During the Webcast of the New Benchmarks for Long-Range Planning, he cites that only 27% of study participants claim executive contributions to the long-range planning process align to corporate strategy and support process. Kugel continues:

"We've done a good deal of research on a wide variety of core business processes so it didn't surprise us to find that only about one-fourth of the participants in our research say that their executives communicate the company's strategic objectives clearly and consistently. Since I'll bet that about 100% of senior executives think that they are good communicators, there's an obvious gap that a large majority of companies need to address."

"Another interesting point that came out of the research was that people who are in charge of running the long-range planning process are much more likely to say that their executives communicate strategy well ‒‒ probably because they are closer to the informal channels of communication among senior executives."

University scholars and industry analysts are in agreement by pointing out that the burden for individuals in leadership positions is fast becoming to illustrate a total confidence in their data.

Gone are the days where an elaborate spreadsheet will be enough to make a business case; especially those responsible for accurately articulating corporate financials and long-term investment decisions. Economists have certainly taken this cue; and they are not worried about the threat of fines and even jail time.

For more information:

Watch the Webcast of the New Benchmarks for Long-Range Planning

Download the Executive Summary of New Benchmarks for Long-Range Planning by Ventana Research

Related posts: Getting Your Executives Involved in Long-Range Planning and How Last Year's Benchmarks Compare to the Latest Research

Warning: Talent Cliff Ahead -- Part 1

Written by Jeanne Urich, Managing Director, Service Performance Insight (SPI)

Jeanne Urich

The Looming Technology Workforce Shortage

A Guest Contribution by Service Performance Insight

This article is the first of a two-part series on the pending "talent cliff," an important topic to professional services leaders. We discuss why this critical situation exists and provide some related insights from the newly published 2013 PS Maturity™ Benchmark for professional services.

By now, most professional services executives realize it is increasingly difficult to find, hire and retain an exceptional consulting workforce in a tight global race for talent. The bad news is that it will only get worse in developed countries as workforce demographics change, the educational system continues in disarray and immigration policies remain rigid.

To understand the growing human capital challenges, one must look at the trifecta of external forces that are creating the talent cliff.

It's the Baby Boomers!

Growth of U.S. workers aged 45 or older
Figure 1. Growth of U.S. workers aged 45 or older

This year, the average baby boomer (people born between 1946 and 1964, as defined by the United States Census Bureau) will be 58 years old. The graph in Figure 1 shows the impact that aging baby boomers are having on the U.S. workforce. In 2000, the number of older workers was 49.2 million. In 2012, this number increased to 63.1 million. While the number of workers older than 45 has exploded, the number of U.S. workers age 25 to 44 has fallen by 6.8 million. Every day, 10,000 U.S. baby boomers retire, meaning 3.65 million experienced workers exit the workforce every year.

Historically, retirement begins to accelerate when people are in their late 50s. Analysts project that by 2018, there may be more than 5 million unfilled jobs in the U.S. And the number of unfilled jobs requiring STEM (Science, Technology, Engineering and Math) skills is projected to be more than 200,000. Unfilled jobs coupled with the loss of baby boomer knowledge, skills and experience could severely impact workforce productivity and the U.S. economy. Furthermore, the shortage of qualified replacement workers makes filling those jobs more difficult.

It's the Schools!

One of the most important and hotly debated topics is the state of the U.S. educational system. Regardless of political perspective, the facts are sobering. On the 2009 Program for International Student Assessment exam, the U.S. ranked 25th in math, 17th in science and 14th in reading among 34 OECD (Organization for Economic Co-operation and Development) member countries. When the 37 partner countries (including China, Singapore and Taiwan) are incorporated into the list, the U.S. dropped to 31st in math, 23rd in science and 17th in reading. Clearly U.S. K-12 schools lag behind those in other developed countries.

Further, an insufficient number of students who go to college are pursuing STEM disciplines to meet market demands for these skills. Microsoft recently published a report underscoring this labor shortage by citing that the company has 3,400 unfilled research, development and engineering positions in the U.S. And this workforce deficit is not just a U.S. issue, as recent headlines declare a worldwide labor shortage of critical IT skills.

Multiple think tanks and nonprofit organizations have published extensively on this topic. While their proposed solutions for education system reform may differ, they all appear to agree on the future STEM-skilled workforce shortage.

It's the Immigration Policies!

Immigration has been a powerful economic engine for the U.S. More than 40 percent of the U.S. Fortune 500 companies were founded by an immigrant or a child of an immigrant. The current immigration policy doesn't provide the requisite number of visas needed to allow companies to recruit internationally to fill open jobs, specifically those requiring technology skills. Moreover, the worldwide shortage for these skills means U.S. companies hiring for domestic positions are competing against firms in other countries. The immigration policy in many other countries is strategically aligned to the urgent need to globally source these highly skilled workers.

Ironically, many of these foreign workers may have been educated in American colleges and universities. Right now, no targeted immigration program exists to keep foreign students in the U.S. after they earn advanced degrees.

A Prolog from Planview: Additional Reading

In the continuation of this article, SPI Research will describe how these factors have contributed to empirical data evidenced in the 2013 PS Maturity™ Benchmark and how the concerns of the looming "talent cliff" have increased dramatically over the past years. Until then, learn more about resource management for professional services organizations in these available reports and articles:

This article was originally published by SPI Research on their blog SPIglass.

Planview has asked permission to publish these materials because of our interest and understanding that the subject matter is important to the project-based service community.

Continue reading more on the topic of the "talent cliff" and PS Maturity on the SPIglass website.

Click here to learn more about the Planview Approach to Services Resource Planning for organizations looking to combat the "talent cliff" with purpose-built technology.