Talent Strategies Demand a New Normal

People and culture sit atop the list of key risk concerns of board members and executives worldwide looking out over the next 12 months as well as into 2032, according to the latest Top Risks Survey from Protiviti and NC State University’s ERM Initiative. Even amid an uncertain economy, inflationary conditions and fears of a possible recession, people, talent and culture issues stand out as critical concerns for the board and C-suite.

Talented people and culture are related, as the latter attracts the former, and when effectively led, the best and brightest engender innovative cultures that can compete and win in the digital age.

Unfortunately, this perspective frequently is not aligned with an organization’s talent strategy. In many instances, the talent strategy, to the extent that it exists, is fairly simple, not to mention highly reactive in nature. In fact, in many organizations, HR’s talent game plan swings from industrywide hiring “binges” to job “chops” as external conditions and revenue forecasts dictate. If this is the case — and we’ve seen evidence of this in numerous companies across all industries — it’s time to establish a new normal for the organization’s talent strategy. Considerations around the organization’s talent strategy are especially important today in light of recent layoffs occurring in several industries, including technology.

Boards of directors and executive leaders have a responsibility to ensure their organization’s talent strategy is integrated with its business strategy.1 This means that executive leadership should hold the chief human resources officer (CHRO) as well as business leaders throughout the organization accountable as they partner to develop and deploy a suitable talent strategy. The steps for executing this requirement are straightforward; yet, they demand a comprehensive effort, the success of which hinges on several enablers. These factors include an appropriate talent mindset among board members and executive leadership, the communication of the talent strategy and related objectives throughout the enterprise, and investments in supporting technology and human capital analytics.

Given that the performance of most companies is increasingly reliant on the quality of their talent, it becomes more important to have a comprehensive, business-aligned talent strategy in place — a need that remains consistent in both favorable and unfavorable phases of the macroeconomic cycle.

Regardless of when the next recession takes hold, the normal combination of revenue declines, hiring decreases and staff reductions is unlikely to remedy a worldwide, long-term, systemic talent shortage in many professions and job categories. For example, even as the European energy crisis deepened in spring 2022, Germany’s job vacancies reached a record high of 1.93 million, a figure that marks a 66% increase over the previous year. A Munich-based research organization also reports that half of all German companies cannot hire enough skilled employees.

In the United States, the January 2023 report from the Bureau of Labor Statistics (BLS) showed there were 11 million job openings as of the end of 2022, up nearly 600,000 from the previous month. The unemployment rate was 3.4%. The bureau reported that job growth was widespread.3 The largest increases in job openings were in accommodation and food services, retail trade, and construction. BLS data continues to show that there are, on average, 0.5 unemployed persons available for each job opening; in other words, there are twice as many job openings as unemployed workers available to fill those positions.

In Taiwan, a worsening technology talent shortage is driving the adoption of automation and advanced manufacturing technologies among semiconductor manufacturers. New public-private partnerships — including year-round “chip schools” that groom semiconductor engineers — are also being deployed, designed to refill Taiwan’s insufficient talent pipeline.

In summary, while news of layoffs in the technology industry and some other sectors continues to garner headlines, a number of economists see these actions as having a limited effect on the overall economy and jobs market, noting that many technology firms hired at a significantly faster pace than other organizations during the pandemic.

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