The global talent shortage in service-based businesses

It’s no secret. We’ve all noticed it. It’s getting a lot harder to hire people than it used to be. Companies across all sectors have been feeling the squeeze of a talent market that’s more tight and competitive than it has been in decades.

Although the “Great Resignation” (also known as the “Big Quit”) that began in 2020 and continues to this day has often been blamed on COVID subsidies and enforced lockdown, it’s actually the culmination of a number of trends that’ve been brewing for years.

And although the new normal affects everyone, it affects service businesses more than most. Your people represent your ability to trade. Losing people (and not being able to hire new talent) is bad news for any business that relies on the skills and knowledge base of specialists.

This article will provide you with a rundown of what exactly is behind the new talent shortage – and what you can do to get ahead of your competition and ensure your firm has the skills and expertise it needs to satisfy clients.

The talent shortage – what it is, and why it’s happening

The “talent shortage” isn’t a unitary phenomenon. It’s actually a combination of global trends which have been developing over the past ten years or more.

Baby boomers are retiring: although the “baby boom” generation has been slower to take its hand off the tiller than those that went before it, the oldest members of the cohort are now well into their 70s. A trickle of retirements over the past ten years has led to what was then the largest single generation in the workforce moving on to the next stage of their lives.

Unfortunately, these older workers are also among the most experienced, and have taken that experience with them. And while some skills have become obsolete and others have risen to prominence, even a small shift in the availability of skills can have an outsized affect when you try to hire.

It’s easier than ever to work for yourself: freelancers used to be treated with a sense of awe and slight mistrust in service-based fields. The ability to work for oneself suggested a combination of extremely potent and rare skills. But digitization and a shift to remote working and new business models have been steadily making independent consultancy easier than they ever were in the past – and workers are taking advantage.

Approximately 10% of the global workforce participated in the so-called “gig economy” in 2021 - and over a third of all US workers have participated in the gig economy at one time or another. There are many reasons for taking such an approach – for some, it is simply more lucrative, for others it provides a greater working variety, for others it provides a level of independence, flexibility, and work-life balance a traditional full-time role simply can't.

Younger workers have different expectations: along with being used to an entirely different job market throughout their career journey (in which the “job for life” simply doesn’t exist and frequent changes are a necessity to acquire new skills, experiences, and promotions), “millennials” and “generation z” workers have a radically different relationship with technology.

Even before COVID-19 forced all of us indoors, young workers' ”extremely online” approach to handling their affairs made many of them more amenable to the idea of working somewhere other than a traditional office. After COVID, most of them expect remote or at least hybrid working as a given. (Two years of lockdowns have proved the model works, after all, and can be made to work sustainably – so why wouldn’t employers offer it?)

Even older workers have become more attracted to hybrid working arrangements over the course of the pandemic, after discovering the new levels of flexibility it can bring to their lives.

Bad recruiting processes lead to bad hiring prospects

Service businesses have traditionally had poor visibility of their staffing needs. Opacity in sales and resource pipelines makes it very difficult for a firm to know what hands it’ll need on deck 6 months to a year from now. This lack of data means longer recruiting cycles – and cycles that frequently end up derailed as requirements are found to have shifted.

Candidates are increasingly unwilling to be left hanging by long recruitment cycles. Not least because by the time a prolonged recruitment process actually reaches a decision, a faster-moving competitor with a more efficient recruitment process will likely have already made them an offer anyway. In fact, over two thirds (65%) of firms globally have reported losing a preferred candidate thanks to an overly long hiring process Which brings us to our last point.

There are more vacancies around than ever before

Beyond the upsurge in resignations following the end of the pandemic, as we mentioned above, even a small change in talent availability can have a huge knock on effect. If the number of people to fill vacancies at a given time drops by 5%, in practical terms, this might mean vacancies take several days longer to fill.

While that might not seem like too much of a headache at the individual level, it aggregates to a big problem. If vacancies are “on the market” longer and the pool of available workers to fill them shrinks even slightly, a surplus of vacancies will build up over time. (This is what we’re seeing now, and is the “real” reason for the “talent shortage”.)

Candidates can spot when vacancies take longer to fill, and they know when the companies trying to hire them need them more – meaning they simply have more bargaining power at the point of hiring. And a greater ability to vote with their feet when they’re in-post.

So what can your organization do to minimize the effect?

Make recruitment processes more efficient. The faster you can identify a hiring need, find an appropriate candidate, and make them an offer, the less a talent shortage will affect you. Doing this, however, will require your firm to pursue total data visibility across every part of your project process to accurately assess staffing needs well in advance. And keep a close eye on the market to ensure you’re offering a truly competitive compensation package to every single one of your people.  

Make better use of the talent you have. Very few companies keep a complete and up-to-date record of their peoples’ skills and capabilities. If you don’t, it’s likely that you’re not taking advantage of the skills you need to deliver high-quality project outcomes even though they’re right under your nose. Integrating your project systems with your HR systems can help you to avoid this – and to boost staff morale by ensuring everyone is assigned to the projects on which they can deliver the best results.

Focus on up- and cross-skilling. Most firms are going to experience a skills gap of one kind or another within the next five years as people move on and skill requirements change. Get out in front of the issue now by identifying promising candidates for upskilling and transfer within your own ranks. (This will also require you to know the skills your people have now, know the skills they’re eager to develop, and have the ability to match them to the right training and mentorship needed to make the jump.)

How can Unit4 help you?

Unit4 creates ERP, FP&A, HCM, and PSA solutions tailored to the specific needs of service and project-based organizations. Our solutions give you the data visibility you need to make effective decisions over every aspect of your firm’s operations from skills tracking and training to compensation planning, financial operations, and employee engagement, and automate workflows to create a better experience of work for your people.

Check out this eBook on Future-proofing your talent strategy for Service Performance Insight's views on how PSOs can remain competitive during the global talent shortage.