"Bridging the Skills Gap" is the third report from ASTD to cover the growing importance of talent to organizational performance and the skills gap that threatens so many organizations today. This report updates the picture, including the role of job losses during the current recession, and examines the influence of Web 2.0 and the Net Generation on workforce skills.

While recent economic challenges have forced public- and private-sector organizations to execute their strategies with more precision than ever before and do it with fewer resources - especially people - many still struggle with a skills gap within their existing employee base. And, some experts predict that skills shortages will intensify in the coming years as employers find the need to hire more knowledge workers for high-skilled jobs that will help their organizations grow as the economy rebounds.

What is the skills gap and why does it exist?

ASTD defines a skills gap as a significant gap between an organization's current capabilities and the skills it needs to achieve its goals. It is the point at which an organization can no longer grow or remain competitive because it cannot fill critical jobs with employees who have the right knowledge, skills, and abilities.

It is not just individual organizations or sectors that are feeling the consequences of the skills gap. Communities, states, regions, and entire nations pay a heavy price when they can neither find or equip workers with the right skills for critical jobs.

In reality, organizations will always experience a skills gap if they are staying ahead of shifting conditions in their environment and changing expectations from their constituents, shareholders, or customers. The key to achieving success under such circumstances is to harness skilled talent to strategy and goals - a task that has become more and more challenging in an increasingly global, virtual, and changing world.

ASTD research in 2009 identified two underlying causes of the skills gap:

  • jobs are changing
  • educational attainment is lagging.

In addition to those factors, which have long contributed to creating and widening skills gaps in the United States, the large-scale loss of jobs during the recession that began in late 2007 also plays a role. The recession is the longest since World War II, and in the fall of 2009 the jobless rate topped 10 percent.

In 2008, job opportunities shrank in many industries. In a September 2009 article in the New York Times, Peter Goodman notes that Department of Labor data showed that job openings in manufacturing decreased 47 percent, in construction 37 percent, and in retail 22 percent. In the fall of 2009, job seekers in the United States outnumbered job openings six to one. Despite some signs of growth in the economy, companies remained reluctant to begin hiring.

Economists anticipate that the current recession will feature a jobless recovery - one in which firms put off hiring new workers and achieve productivity gains with existing employees. Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University, notes that the last three recessions have been followed by jobless recoveries in which there was gross domestic product growth without job creation.

Even though organizations may have skills gaps, they will not be filling them from the ranks of the unemployed. "Recessions accelerate the trend to eliminate low-wage, low-skills jobs," notes Carnevale, "and those jobs don't come back." Instead, companies create jobs requiring more education and skill. Growth of these jobs is slow in part because they require paying higher salaries and providing costly technological infrastructure for these workers. "Employers will hire cautiously to fill skill gaps that they couldn't address by hiring during the recession," says Carnevale.

He predicts that pressure to fix skills gaps will intensify again, probably by 2013, when the economy has added back the millions of lost jobs and will need to create many millions more to produce growth. "In a recession, the economy goes to sleep, but when it awakens, there will be a need for higher-skilled people to fill skill-intensive jobs," Carnevale says.

The changing nature of work

Peter Drucker was the first to identify the productivity of knowledge workers - people who think for a living - as a significant management challenge. In the decades following that observation, jobs involving transactions such as exchanging information, products, and services have come to dominate economic activity in developed countries. In the United States, nearly 85 percent of work involves transactions. The remaining 15 percent involves growing or making things.

Economists use the term "tacit interactions" to describe transactions that rely heavily on judgment and context. Data from the U.S. Bureau of Labor Statistics (BLS) show that the majority of new jobs created in recent years have tacit interactions as their main component.

In Thinking for a Living, author Tom Davenport describes knowledge workers this way: "Knowledge workers have high degrees of expertise, education, or experience and the primary purpose of their jobs involves the creation, distribution, or application of knowledge."

The consulting firm Mercer defines knowledge workers in terms of both the breadth of their knowledge and the degree of innovation required of them. Knowledge workers such as accountants, financial analysts, software engineers, and research scientists, often depart from established procedures to solve problems and may adapt or update their knowledge in order to do their work.

Influence of Web 2.0 and the Net Generation

According to a classification used by Don Tapscott in Grown Up Digital, there are three generations in the workforce born between 1946 and 1997, and a fourth, born since 1998, who will start their first jobs in a few years. Three of the four were born after the launch of the Internet in 1962, and the Net Generation, born between January 1977 and December 1997, have been exposed to computers and digital media all their lives. Using these tools is as natural to them as the air they breathe.

The Net Generation is significant for a number of reasons. It is the largest age cohort in the workforce today, accounting for 27 percent of the U.S. population and a rising percentage in other countries. The work habits, learning styles, and collaboration skills of this group are already having a profound influence on organizations and that will only grow greater. Tapscott writes, "The sheer numbers of the Net Generation, both from North America and nations with rising economies, offer an unprecedented bounty of talent. This wave of young workers will not only work for tomorrow's global corporations, but will increasingly shape and direct the most successful corporations."

Members of the Net Generation appear to be smarter than previous generations, notes Tapscott. "Raw IQ scores have been going up three points a decade since World War II, increasing across racial, income, and regional boundaries." And they have advanced skills in three areas that are revolutionizing work - digital technology, interactive media, and collaboration. Getting the rest of the workforce up to their level in these areas is a significant part of solving the skills gap.

Baby boomers retiring - eventually

An overall loss of expertise and management skill is expected to result from the gradual departure from the workplace of the 77.2 million baby boomers, the oldest of whom turned 60 in 2006. According to the Social Security Administration (SSA), over the next two decades, almost 80 million Americans - more than 10,000 per day - will be eligible for social security benefits.

The National Study of Business Strategy and Workforce Development, conducted by the Boston College Center on Aging and Work, found that more than one quarter of U.S. organizations have failed to plan for the baby boom exodus from the workplace. Responses from sectors including retail trade, manufacturing, healthcare, and social assistance showed that only 37 percent of employers had strategies to encourage late-career workers to stay past retirement age.

In a recent survey of more than 2,200 U.S. workers by consulting firm Watson Wyatt Worldwide, 44 percent of respondents age 50 or older say they plan to postpone retirement; half of those say they plan to work at least three years longer than previously expected.

While many older workers postponed retirement because of the recession that began in late 2007, or because they want to remain active, a wave of retirements will still contribute to the skills gap.

Organizations cite reasons for skills gaps

In a 2009 ASTD poll taken by 1,179 organizations, 79 percent say there is a skills gap in their organization now. Fifty-one percent say that the number one reason for a skills gap in their organizations was that the skills of the organization's current workforce did not match changes in strategy. Other reasons included a lack of bench strength in the company's leadership ranks; the effects of a merger or acquisition; and cuts in training investments. Inability to find qualified candidates for certain types of jobs was ranked number one by 25 percent of organizations.

The ASTD Skills Gap poll also identified categories of skills most lacking among the responding companies. In first place were leadership and executive-level skills, reported lacking by 50 percent of respondents. Following closely were basic skills at 46 percent, professional or industry-specific skills at 41 percent, and managerial and supervisory skills at 31 percent.

Where are the biggest gaps?

The Bureau of Labor Statistics (BLS) Occupational Outlook Handbook, 2008-2009 Edition, projects trends in employment opportunities in a broad range of industries and occupations. Employment opportunities, it points out, "result from demand for skills needed within specific industries."

Looking out from 2006 to 2016, the data confirms a long-term shift from goods-producing to service-producing employment. These eight industry sectors are expected to grow: education and health services; professional and business services; leisure and hospitality; trade, transportation, and utilities; financial activities; government; and information.

A closer look at BLS projections shows solid growth in knowledge work and jobs requiring advanced or specialized skills. Education and health services will add more jobs than any other industry sector. Management, scientific, and technical consulting services will grow 78 percent. According to the BLS, "demand for these services will be spurred by the increased use of new technology and computer software and the growing complexity of business."

Professional and related occupations will be one of the two fastest-growing and will add the most new jobs. Almost three-quarters of job growth will come from three occupations: computer and math occupations, healthcare practitioners and technical occupations, and education, training, and library occupations.

Impact of the skills gap

An unprepared workforce can hamper the performance and growth of an organization. In their book, The Chief Learning Officer: Driving Value Within a Changing Organization, authors Tamar Elkeles and Jack Phillips write that "Nothing is more devastating to an organization than not having a fully prepared workforceAn unprepared workforce can reduce profits, impede market share, create inefficiencies, lower morale, and/or increase attrition. More importantly, it can affect the quality of service provided to customers."

A lack of skilled workers also harms the economy, according to many sources.

"Eighty percent of U.S. manufacturers cannot find educated, skilled workers for their entry-level jobs. Without a skilled workforce, our manufacturers cannot continue to be the drivers of innovation and will not be successful in the global economy," says Emily Stover DeRocco, president of The Manufacturing Institute and senior vice president of the National Association of Manufacturers.

"America has a large middle-skills gap. Nearly 50 percent of the jobs in America demand middle skills obtained through education or training beyond a high school diploma. These skills are necessary for the United States to compete in a global economy," says Martin Scaglione, president and chief operating officer of ACT's Workforce Development Division.

A vision for the workforce

Responding to today's skills shortages with short-term fixes is not enough to drive growth and innovation. The more critical challenge is to address skills gaps in ways that improve organizational effectiveness and contribute to long-term success.

Ensuring a highly skilled workforce takes a commitment from many players - leaders in the public and private sectors, the education community, the workforce development system, as well as workplace learning professionals. Each of these communities contributes to the development of the workforce. Together they help ensure an adequate level of key workplace skills. According to the 2009 Skills Gap poll from ASTD, organizations are experiencing gaps in these skills:

  • leadership and executive skills
  • basic workplace competencies that are the building blocks of successful performance in any job such as literacy and numeracy
  • professional or industry-specific skills
  • managerial and supervisory skills
  • communication and interpersonal skills
  • technical, IT, and systems skills
  • sales skills
  • process and project management skills.

In addition, most experts agree that these additional skills are needed for sustained high performance in the knowledge economy:

  • Adaptability - the capacity to change in response to ever-shifting conditions in the economy and the marketplace, and to quickly master the new skills that such changes require
  • Innovative thinking and action - the ability to think creatively and to generate new ideas and solutions to challenges at work
  • Personal responsibility for learning - the willingness of individuals to take responsibility for continually improving their work-related capabilities throughout their careers.

By addressing these skills gaps in the current workforce, organizations will equip themselves for better performance and increased effectiveness in the short term. If the whole workforce development system addresses them, long-term success will be within reach of most organizations in the future. T+D