The Upcoming Innovation Crisis: Talent Management


David Semb’s outstanding essay, “The Upcoming Crisis in Talent Management” for Chief Learning Officer magazine, points to a tsunami of trouble ahead for US corporations in terms of retaining the know-how and experience that makes business run. The demographics point to a huge loss of experience and knowledge in the next few years. While innovation is not his focus, the threats he describes may be especially severe for innovation talent, including R&D staff.

Consider these alarming statistics: 40 percent of the U.S. labor force is currently made up of baby boomers (born between 1946 and 1964)…. However, by 2010, there will be a 52 percent increase in workers in the 55-to-64 age bracket compared with 2005, and 40 percent of the U.S. workforce will be considering retirement…. The first wave of executive retirements will begin in the next four years….

While current leaders may work a few extra years before retirement due to the financial crisis, this will not significantly lessen the impact of the near-term surge in leadership vacancies at U.S. companies.

Retirees will take with them millions of years of on-the-job experience. Yet there are far too few emerging leaders to replace them.

The U.S. Bureau of Labor Statistics projects a shortfall of 10 million qualified employees beginning in 2010, with a gulf likely to increase in following years.

According to Deloitte Consulting LLP, by 2012, the U.S. labor force will be short 6 million college graduates to fill new jobs and to replace retired workers. By then, according to The Conference Board, workers from ages 35 to 44 — the subset of the workforce that fills the majority of senior management ranks — will decline by 19 percent.

Seventy-four percent of U.S. business executives surveyed agreed the U.S. will experience a shortage of skilled workers over the next decade, according to BusinessWeek Research Services for AARP.

David Semb is worried about the loss of executive leadership. I’m also worried about the loss of seasoned innovators and the experienced leaders and connectors who facilitate innovation. Much innovation is fueled by or enabled by experienced people with vast, healthy networks that can bring multiple disciplines together or can reach across a value chain or value network to get things done. Suddenly replace such people with brilliant, talented new hires out of college and the almost-invisible ecosystem that gave life to business growth and innovation can wither or even collapse. Likewise, if a majority of your experienced innovators who know how the company works and how to get things done are suddenly retiring, innovation can come to a standstill. Great care is needed to plan for and prepare for these transitions, to help transfer skill and knowledge effectively and to build new nodes in the ecosystem that can keep it healthy and self-sustaining. This does not happen by accident. This does not happen by laying off your older workers and hiring cheaper replacements.

Semb offers some advice for coping with the tsunami of change. Here are a couple of his suggestions:

  • Closely align talent management and succession planning with business strategy. Development must tie to strategy, yet a 2006 McKinsey & Co. study showed that more than half of their senior management interviewees felt that talent management strategies did not align with business strategies.
  • Train like the future depends on it. Invest in high-impact leadership and business skills training, including strategic thinking, financial acumen and leadership skills….
  • Become an employer of choice. Transform the organization into an employer of choice by establishing compensation plans, training programs, remote work arrangements and the scope of job responsibilities so that emerging talent is inspired and motivated.

Many large American companies are responding to the current economic downturn by laying off employees, slashing benefits, imposing hiring freezes, and taking other steps that will create lasting impressions on the rising generation of employees. The wiser companies are finding ways to continue hiring the best talent and look attractive as a potential employer, even though they may be forced to hire less than normal. The wiser companies are willing to take on pain for the next few years in order to rise triumphant for decades to come as they maintain the talent they will need for the future. The talent management crisis, both for business leadership and innovation, is one that cannot be neglected. Focusing on short term fixes now may cost you your future.

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