By Jason A. Tyszko
A production manager at a mid-sized manufacturing company is reviewing the company’s capacity to execute and deliver orders over the next three years. Given a growing shortage of precision welders and a high number of retirements expected among engineers, he is increasingly concerned about the company’s capacity to staff projects. While the firm has posted position openings at local education and training providers and advertised online, the process to fill those positions has dragged on for months. The company has incurred high on-boarding costs and turnover rates for those they did hire, due to the workers lacking necessary qualifications. The installation of new automation systems and increasing overtime has allowed the company to maintain its current level of productivity, but the production manager knows all too well that absent a solution—and one arrived at quickly—the problem will soon undermine his team’s ability to deliver orders on time and take on new business.
This example illustrates a common problem experienced by companies of all sizes across a diversity of industries: the skills gap is growing and impacting the ability of companies to compete. According to Tony Carnevale, Director of the Georgetown Center on Education and the Workforce:
“The skills gap is one of the number one threats to American competitiveness today and in the future. There is a fundamental misalignment between education and our education and training system with increasing numbers of learners struggling to transition to employment while businesses are desperate for new workers.”
A recent survey by Adecco found that 92% of executives believe there is a serious gap in workforce skills and nearly half are missing out on growth opportunities as a result.1 According to Manpower Group, 40% of U.S. employers are struggling to fill jobs.2 Left unchallenged, the skills gap will grow to more than 5 million unfilled positions by 2020.3
Our nation’s education and workforce development system is failing to keep pace with our economy, and employers throughout the United States are struggling to find skilled workers who can contribute to their growth. As a result—despite stubbornly high unemployment rates— many jobs are left unfilled. If employers throughout the country are to maintain their competitiveness, it will require closing an ever-worsening skills gap that continues to undermine economic growth and job creation.
For decades, reform initiatives have sought to improve the education system; however, the results of such efforts have not done enough to improve high school or college outcomes—or even the effectiveness of workforce training programs. Consider the performance of our education system.
Nearly a quarter of all students do not graduate with a basic high school diploma.4 In 2012, more than $3 billion was spent on remedial education for 1.7 million students entering college who did not have the basic math and reading skills to take college-level courses.5 In addition, too few graduate on time: 36% of students enrolled at four-year flagship universities, 19% at non-flagship universities, and a shocking 4% of students at two-year institutions.6 For those who make it through, the story is not much better. Nearly 54% of bachelor’s degree holders aged 25 and under are either unemployed or underemployed.7
At our current trajectory, employers can expect the skills gap to be here to stay.
With limited time and resources, companies are increasingly interested in improving their return on investment. Employers are no strangers to investing in education partnerships. In K–12 education alone, corporate philanthropy invests on average $3 billion to $4 billion annually.8 This investment has served to strengthen the business presence in education but has achieved limited gains in terms of improving our system as a whole. Over time, companies have become more sophisticated at investing their energy in efforts that are systemic and scalable. Return on investment, however, remains elusive.
The business community must be more involved. To that end, the U.S. Chamber of Commerce Foundation has launched a partnership with USA Funds to explore a new vision for employer engagement with education and workforce systems—one that yields more effective employment transitions for students and a better prepared workforce for all employers.
This approach—a bold departure from prior practice—will explore how employers can lead the way by applying lessons learned from supply chain management to their education and workforce partnerships. Employers have become increasingly sophisticated in managing high-performing and adaptive supply chains in all manners of their business. When it comes to talent, however, employers are left without the tools, resources, and partnerships to effectively manage costs, improve returns on investment, and establish sustainable competitive advantages.
What is a supply chain? At its most basic level, a supply chain encompasses a set of business activities and companies involved in designing, making, delivering, and using a product or service. Supply chain management is the coordination of those companies and activities to achieve the best mix of responsiveness and efficiency for the “end-customer” being served.9
Once employers begin to understand their role as the “end customers” in managing talent supply chains, they can reshape the education and workforce systems as an extended chain of talent providers that prepare learners for careers in the most responsive and efficient way possible.
Employers control the greatest currency in the education and workforce marketplace: jobs. Through effective talent pipeline management, employers can exercise their investment and hiring to drive behavior among leading suppliers and achieve a more skilled workforce—benefitting individuals, institutions, and businesses.
Our collaboration’s initial review of supply chain management practices has already led to identifying several important lessons that can be applied in talent pipeline management.
Lesson 1: Employers Drive Value Creation
Not long ago, logistics functions within companies were treated as a cost of doing business that should be reduced as much as possible. Market leaders, however, began using more comprehensive supply chain management strategies that looked beyond cost and instead looked at responsiveness, flexibility, and lead time to gain advantage in the marketplace. What was once the purview of logistics managers had become an area of shared ownership within the firm. In addition, leading companies developed customized solutions for different markets and used risk management techniques to make more resilient those supply chains that were most critical to a business’ ability to compete.
When managing human capital, employers need to see talent pipeline management as a driver of competitive advantage. Robert Valentine, Global Director of STEM Education at Dow Chemical Company, affirms that “Managing the talent pipeline—particularly in STEM fields—is not about philanthropy but a business imperative that challenges employers to think ifferently about their approach to human capital. Now, more than ever, employers need to link their education and workforce development investments to their business strategy.”
This requires that employers play an expanded leadership role as the “end customer” in order to develop customized talent pipeline strategies for all critical functions and jobs that provide the right mix of responsiveness, cost, and resilience. For many jobs, it makes sense to go to the broader labor market for “time to fill positions” and “quality of talent.” For those positions that a company cannot afford to suffer a shortage, talent pipelines are needed to circumvent “just in time” job boards to reduce time to fill positions and cost, as well as increase productivity.
Lesson 2: Employers Organize and Manage Scalable Network Partnerships
Leading supply chain managers increasingly recognize that costs and benefits are shared across the network, and companies compete based on their combined value, not just their individual performance. For example, it is not just Toyota competing with Ford, but Toyota’s supply chain competing with Ford’s supply chain. This requires alignment across demand planning, sourcing, and fulfillment in a way that balances quality, cost, and responsiveness among partners. In addition, while many companies compete based on supply chains, many more—particularly small business alliances—collaborate through shared supply chains where they leverage one another’s purchasing power as a network and coordinate across critical functions.
Similarly, employers can work to establish a value network of education and workforce partners that can deliver a skilled workforce. A well-coordinated talent pipeline can reduce lead times to fill positions and improve response rates to changing job requirements. This can be achieved by increasing transparency among partners around hiring requirements. Examples of this are happening today. “Manufacturers are leveraging new and innovative technology platforms to signal their competency and credentialing requirements to their training partners,” said Jennifer McNelly, president of The Manufacturing Institute. “The result is better employment opportunities for learners, and more qualified workers for employers.”
Other examples of critical feedback include the number of people being trained, the time it takes to train them, what skills they are trained in, and how well they perform after being hired. The result is a set of institutional partnerships that share costs, benefits, and, most importantly, value.
Lesson 3: Employer Measures and Incentives Drive Performance
Supply chain management has long dealt with the danger of inconsistent performance measures that reward units on their individual performance as opposed to a team. One partner may hit their performance targets at the expense of increasing the cost and reducing the performance of another partner. Silos can perform quite well while the supply chain languishes in long lead times and inefficiency. To correct this, effective supply chains share data across partners to measure overall performance. Much of this is achieved through integrated data systems that support dashboards and scorecards across partners.
In talent pipeline management, the partnership network is not measured by how well any one partner performs (e.g., enrollments and graduation rates) but instead by “time-to-full productivity” in the workforce. In our current system, education and workforce providers report to a diversity of state and federal agencies that measure success inconsistently. For talent pipeline management to work well, it requires aligning shared performance across partners from the point when a student or worker selects a career pathway all the way until they are employed in a career and earning a competitive wage.
Through new public-private partnership models that build on lessons learned from supply chain management, employers across a wide range of industries—including manufacturing, information technology, energy and others—will be better able to communicate demand, establish strategic talent pipeline partnerships, and manage partner performance. The result will be a more demand-driven education and workforce system that is responsive to employer needs, improves transitions and outcomes for students, and begins to close the skills gap.
The U.S. Chamber of Commerce Foundation will release a white paper in early fall that elaborates on the lessons learned from supply chain management, as well as highlights successful employer-led partnerships. Following the paper’s release, the Foundation will host a series of regional roundtables to seek input from business and critical stakeholders, culminating in a national conference on November 19 in Washington, D.C., to lay out a plan for employers to scale talent pipeline management solutions.
Jason A. Tyszko is senior director of education and workforce policy at the U.S. Chamber of Commerce Foundation where he advances policies and programs that preserve America’s competitiveness and enhance the career readiness of youth and adult learners.