The Way We Work
January 23, 2013 by Gary Swart

The war for talent is on—and it’s only going to get more fierce in the coming years, recent studies show.

According to KPMG’s study, “Rethinking Human Resources in a Changing World,” talent is increasingly critical to a company’s success—81% of executives surveyed said talent management will serve as a key competitive advantage over the next three years.

However, that’s easier said than done, according to McKinsey Global Institute’s report, “Preparing for a New Era of Work.” Their study found that—thanks to global competition, changing demographics and persistent “geographic mismatches” between the supply of workers and the demand for them—a stark skills shortage is emerging worldwide. In the U.S., McKinsey reported, the gap between the number of people graduating from college and the number of college graduates businesses need could reach 1.5 million graduates by 2020. China, meanwhile, faces a shortage of 23 million college-educated workers by that time.

The effects of this skills shortage are already being felt by businesses worldwide, with finding, attracting and retaining top talent more difficult than ever. According to a survey conducted by Genesis Research on behalf of oDesk, 70% of businesses surveyed reported that “traditional hiring methods are painful.”

To gain or maintain a competitive advantage in this increasingly harsh talent climate, businesses need to get really good at three things: going global, becoming virtual, and being flexible.

Going Global

KPMG’s survey found that expanding workforces in new markets (including identifying and hiring talent internationally) was the second-biggest concern for HR departments, second only to talent retention. And there still remains a lot of work to do—only one-quarter of respondents said their HR departments “excel at sourcing key talent globally.”

Dave Ulrich, a professor at the University of Michigan’s Ross School of Business and an expert on HR competencies, told KPMG that “HR has truly become a global profession with global standards for HR competencies.” The executives surveyed worldwide back him up—71% told KPMG that working across borders and collaborating with teams in different geographies has increased over the past three years.

This shift towards global HR is only expected to grow stronger, especially as the skills shortage is exacerbated. According to oDesk’s Online Work Study, 95% of businesses surveyed agreed that “in the future, hiring will be more dependent on having the right skills than on location.”

To make the most of this new global workforce, KPMG suggests having unified HR goals and strategies across the entire company, but customizing HR practices according to the needs of each local geography.

Becoming Virtual

“Thanks to broadband, cloud computing, and a burgeoning market for online collaboration tools, many more jobs that once required in-person interactions can be performed anywhere,” McKinsey reported. “These jobs range from administrative assistants and insurance claims processors to law associates and corporate workers in functions such as finance or HR.”

KPMG’s survey reinforces this, finding that:

  • 60% of businesses surveyed have increased their use of virtual workspaces
  • 48% have reduced their reliance on physical office premises
  • 72% maintain that “their companies should increase the use of both virtual and flexible workers”
  • However, only 24% said their HR department “excels at supporting an increasingly virtual/flexible workforce”

Similarly, two-thirds of respondents in the oDesk study believed that at least half their workforce would be online by 2015.

The advantages of going virtual are plentiful, from access to a global talent pool to reduced overhead costs and improved employee productivity. But it can be a challenge to keep remote employees engaged, and for that, KPMG said the most important thing you can do is to offer meaningful work.

“People are motivated by different factors,” Professor Ulrich told KPMG. “But more employees want to do work that is meaningful. If remote work is meaningful, people will stay.”

The report also suggests investing time upfront in training remote workers and integrating them into the culture, and recommends setting clear objectives, roles, metrics and measurements for all workers. Regularly using technological tools like videoconferencing and instant messaging can also “build connectivity and deeper relationships,” said the report.

Being Flexible

“Leading companies we’ve studied...are exploring ways to revamp how, where, and by whom [highly skilled] interaction work is performed,” McKinsey reported. “Companies that succeed in these efforts will enjoy productivity gains, greater flexibility in responding to opportunities, and better access to scarce talent. But to get there, they must rethink how they manage their workforces.”

It’s clear that the traditional workforce structure is shifting, and team composition is changing along with it. According to KPMG, 55% of respondents have hired more contractual or temporary workers in the last three years.

“Some companies are already exploring a spectrum of mix-and-match work arrangements: traditional full-time workers in the office, part-time or temporary workers, and contingent, remote workers who can help meet spikes in demand,” McKinsey reported. “Companies that optimize such configurations and manage them effectively can begin engaging talent as needed, thereby lowering overhead costs and improving response times. The key to this talent-on-demand model is the availability of workers with specialized skills who are willing to work on a contingent basis.”

This shift is only expected to become more pronounced in the coming years; 95% of businesses in oDesk’s survey plan to increase or maintain their hiring of online contract workers in the next year. And within 10 years, 94% of respondents believed, most businesses will have “blended” teams composed of both on-premise workers and online contract workers.

When you build these flexible teams of on-demand workers with specialized skills, you can empower employees to do only the work they do best by breaking down projects into skill-specific tasks. Indeed, 67% of businesses in oDesk’s survey reported that online contract workers allow them or their in-house employees to focus on higher-level skills.

“Nearly all high-skill interaction jobs include tasks that can be hived off to allow the best-paid workers to focus on the most value-creating activities,” McKinsey added. “Breaking jobs down into more specialized tasks will not only help companies economize on scarce talent but also make it possible to perform those tasks more efficiently and effectively.”

To make the most out of this fluid and flexible workforce structure, the McKinsey report recommends overcommunicating, making managers into coordinators/coaches who ensure that information is shared effectively, and defining goals but then getting out of the way so employees can run with their expertise.

Looking Ahead

From the convergence of these studies, it’s clear that the war for talent is fierce, it’s hugely important, and it’s just beginning. The businesses that arm themselves today with the tools to compete tomorrow—namely global, virtual and flexible teams, along with the management skills and technological tools to support their success—will be the ones advancing on the front lines, looking back at slower-to-adapt companies that are still wading through the mud. Which side would you rather be on?

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

  • http://gravatar.com/blsecret blsecret

    The war of talents is especially competitive in the virtual plateform work, adding that Internet cross the borders without barricades. But, I think that concern essentially services, and not the manufacturing goods. Indeed, the industries are during long time bring the growth of developed countries and the tendancy is to changing. Also, it's a truly changement of human managing, all the workers, the executive like workers must more flexible, better train to new technologies. In plus, the worldwide competition will drive many people to equivalent diploma to postulate in the same jobs. The way of virtual work can given the opportunity of "real work" following the recruitment more hard, stressful, and during many months. Also, with the Internet technology these processes are more fast, more accurate and determine in some tests and jobs the value of employees or executive. It's certainely a way to explore in the next years.

    • http://www.odesk.com Gary Swart

      Thanks for your thoughts, blsecret. There are definitely many areas to explore in the coming years as the world of work transitions to be more online and global. We look forward to discussing them along the way. Thanks for reading!