In the future, there will be a shortage of workforce “talent.” Yes, talent, not employees. There will be many who will want to work, but very few that fit the criteria wanted by CEOs.
The biggest priorities for CEOs currently
Some 66% of CEOs find that leadership and talent development remain a key priority going forward. Companies are all about the people. Without successful employees, a company at its core cannot run very successfully.
CEOs also felt that in 43% of instances, the lack of talent had a negative impact on operations. The cost of training and identifying talented employees has gone up more than expected, innovation has been met with difficulty, and to top that off certain market opportunities could not be pursued.
Tom Albanese, the CEO of Rio Tinto plc (ADR) (NYSE:RIO), states:
People of my generation will be retiring over the next 10 years leaving a pretty shallow pool of people; then everyone will be struggling and competing for a limited group of experienced mining professionals. But we do find that we can go outside our sector, for example, for mechanical engineers or people in the auto sector who are good with industrial enterprises.
PricewaterhouseCoopers goes into further detail, stating that:
Theoretically, finding a good candidate to fill a position should now be a very straightforward exercise. There have never been as many educated people in the world, nor has it ever been as simple for employers to tap this vast pool online. The reality is far different. This is the talent crunch; it’s a complex and frustrating challenge and it’s being felt worldwide. 23% of CEOs expect major changes in how they manage talent. The response to talent is more important than the approach to risk.
The main thesis
As savvy investors, we understand that companies are in search of talented people and processes to improve this. Companies are training employees internally, and there will be even further demand for people. The needs for talent acquisition will only increase as a retiring workforce leaves a younger generation of workers who need to rise to the challenge of operating companies.
This is going to be a difficult transition, especially in the United Sates. The baby-boomer generation will be exiting the workforce in droves; approximately 10,000 people will reach retirement age per day over the next 17 years.
Don’t forget big blue
International Business Machines Corp. (NYSE:IBM) will become one of the most important companies in the projected overhang in talent. Many business operations will have to be altered in order to make up for the loss of employees. IBM offers a lot of process-driven solutions through its variety of software programs. The company also offers big-data analytic solutions. Replacing some of the workforce with process-driven innovation will become a larger trend.
IBM is busily diversifying its operations outside of hardware. The company is hoping to generate 90% of its pre-tax income from its services and software segments. The company in its most recent quarter reported 7% growth in business analytics, 25% growth in smart planet technologies, and 70% growth in the cloud. The company’s growth in business services and software is on track, and it’s likely that the company will meet its 2015 road map.