The Way We Work
January 31, 2013 by Gary Swart

Americans are living two contradictory economic realities. The unemployment rate is at 7.8%, and people across the U.S. are still struggling to find work. But business owners and recruiters, especially in Silicon Valley, tell a different story—one of a vicious “War for Talent.”

“Recruiting technical talent … is probably the key gating item for most of our startups,” said Benchmark Capital general partner Kevin Harvey at a recent panel event on “Talent Wars: How Startups are Fighting Back.” “I think the unemployment situation masks the reality that we all know, of how hard it is to find people right now … I think this situation is going to continue for a while—it’s going to be really hard to find talent.”

The numbers are startling:

  • A report last year from McKinsey Global Institute found that when U.S. unemployment was more than 9%, 30% of U.S. companies surveyed had positions open for more than six months that they couldn’t fill.
  • PricewaterhouseCoopers’ annual Global CEO Survey of more than 1,200 CEOs found that 24% were “forced to delay or cancel a strategic initiative,” and approximately 30% “couldn’t innovate effectively or pursue a market opportunity” because of talent constraints.
  • A study by the Economist Intelligence Unit found that 66% of multinational companies surveyed said “talent shortages are likely to affect their bottom line in the next five years.”

 

Why is it so difficult to recruit talent, when so many people are looking for jobs? There are a number of theories. One focuses on an actual skills shortage, especially for in-demand science, technology, engineering and math (STEM) skills. However, some believe a shortage is not to blame. For example, Peter Cappelli, Professor of Management and Director of Wharton’s Center for Human Resources, argues that what some businesses see as a dearth of talent is really just their unrealistic expectations about finding the perfect full-time employee.

Whatever the cause, businesses are hurting—and the problem extends far beyond the availability of high-caliber candidates. Even when great talent shows up at your door, odds are you may not recognize it; in my experience, the most exceptional interviewers are right only about 60% of the time. Then there’s the time it takes to find the best candidate, and the high cost of putting together a competitive compensation package to attract them. The right people are well worth the time and money, but the expense of being wrong—especially 40% of the time—can be astronomical.

And the war doesn’t end with hiring. When it comes to keeping star workers on board, you face the Silicon Valley competitive climate; even heavyweights such as Facebook and Google are having trouble retaining talent.

So what is a startup to do, faced with such stiff competition and limited resources?

If you can’t win the game, change the rules.

The traditional way to hire—fighting over local applicants for permanent (read: high-investment) roles—is quickly becoming unsustainable. To win the war for talent, you need to be innovative in your hiring approaches. Here’s how:

  • Look for the rough gems. Knowledge and skills matter, but don’t be rigid. There is no perfect employee, and the importance of motivation and personal characteristics is often underestimated. You can teach a chicken to climb a tree, but you’re better off getting a squirrel in the first place. In other words, you can always teach skills, but you can’t change motivation and personal characteristics.
  • Look to alternative staffing models, and leverage different types of workers. There’s a reason the ratio of temp workers to all employees hit a five-year high of 1.9% in June, according to the Labor Department. Businesses are realizing that not all positions require full-time, permanent employees, and that incorporating different types of workers—from permanent to on-demand—gives their teams exponentially more leverage while keeping the company agile.

    Businesses are also finding that there is no need to restrict their talent search to a 50-mile commuting radius, which essentially forces them into a hiring corner. Many are turning to distributed teams and online workers, which erase geography as a limiting factor.

    These approaches are not just a stopgap to weather a competitive hiring climate; they are expected to become even more pervasive in the future. According to oDesk’s recent study, which surveyed almost 3,000 businesses that have hired online workers, 94% of respondents agree with the statement: “Within 10 years, the majority of businesses will have blended teams of online and on-premise workers.”

  • Be crystal clear about what you want, and what you can offer. Be realistic about what you can expect to find in a single person. Looking for a product manager who also knows Django and can do a bit of financial planning? You may need to split it up into two different positions to find someone who excels at each. Prioritize what is most important and hire accordingly.

    And just because we are in the midst of a talent war doesn’t mean you should oversell or over-promise when talking to candidates. We live in a transparent world, and inaccuracies don’t stay quiet for long—especially once the person comes on board. Candidates deserve to hear the good, the bad and the ugly; and the ones who will thrive on your team are eager to tackle all three.

Fighting the war for talent diverts energy and resources away from what’s most important—running your business. You may not be able to escape the war entirely, but you can fight smarter by rewriting the rules of engagement.

Gary Swart

Chief Executive Officer

Gary Swart is the CEO of oDesk, the world’s largest online workplace. Gary is a thought leader in entrepreneurship; how best to hire and manage teams; and the future of work, including online work. He is passionate about helping small businesses thrive, fueled by his extensive experience working with startups and small businesses that use oDesk, as well as by mentoring entrepreneurs and business school… read more