Understanding the complexity of hiring and skills management in the post-COVID-19 world
July 9 2021
by Conner Forrest, Malav Parekh
The pandemic's threat to sales appears to be waning. According to 451 Research survey from Q1 2021, 54% of businesses said COVID-19 is a threat to their overall sales – that's down from 66% in Q4 2020, 69% in Q3 2020, and 79% in Q2 2020. However, while the pandemic is steadily shrinking as a threat vector to sales, the looming problem of a labor and skills shortage is growing concurrently, with demand beginning to rebound steadily after an initial dip at the start of the pandemic. According to our survey, 25% of respondents in Q1 2021 listed labor and skills shortages as a threat to their sales – up from 22% in Q4 2020, 20% in Q3 2020, and 15% in Q2 2020, but still below the pre-COVID-19 threat response of 29% in Q1 2020 and 27% in Q2 2020.
While additional 451 Research data highlights recruitment challenges steadily increasing over the past three years, this quarter it is exacerbated by a perceived growing skills shortage, and friction associated with rehiring workers who were furloughed or laid off during the pandemic.
The 451 Take
Recruitment has slowly but surely become more friction-filled over the past three years as companies struggled to keep up in the race to attract, develop and retain the right talent. However, the difficulty of talent management was compounded during COVID-19 as companies froze hiring and furloughed employees. Now, however, as vaccines are rolling out and businesses are opening back up, many organizations are struggling to rehire the employees they furloughed or let go. While business slowdown and health and safety concerns remain the top reasons that employees are not coming back, factors like the employee being rehired elsewhere or unemployment paying better have overtaken budgetary aspects. If they can't get these employees back, businesses may lose additional time looking to supplement the skills of the candidates they see in the market. This will likely force a renewed look at employee skill development strategies – an area that was already a high priority and focus within the HR function. Given this, we could see HR elevated to the status of strategic partner as it helps the business overcome its rehiring dilemmas and get back to full productivity.
The HR context
In 2019, about 20% of team managers said it was somewhat or very difficult to recruit the talent they needed, according to 451 Research. That rose to 36% in 2020 and jumped to 57% in 2021. Conversely, the number of those finding it 'very easy' to recruit fell drastically over that period, with only 5% saying so in March 2021.
The war for talent has become more complicated over the past three years, there's no doubt about it. And HR has taken notice as well, with 67% of HR respondents (top response) to our survey listing recruiting, onboarding and developing the best talent as a primary role of HR. This marks the first year we've conducted this survey where recruitment took the top spot.
Recruitment was also listed by HR respondents to our 2021 survey as the HR function second most in need of improvement (19%), following employee engagement (20%). It's also the second largest planned investment area for HR, according to the same respondents, only following learning and development. In terms of what features HR wants to see added to its candidate recruitment tooling, support for internal and external recruitment is the top requested missing feature (47%), followed by the availability of video interviews (42%). Both of these could be seen as being catalyzed by COVID-19 because hiring freezes and furloughs forced many companies to look more deeply at internal recruitment, and video interviewing is increasingly necessary to support remote and distributed work.
So it's clear that recruitment has been getting more challenging for some time, but that doesn't fully explain the recruitment friction of 2021. As we mentioned, internal recruitment demands were rising during hiring freezes and furloughs – now those employers are looking to rehire and bring back the workers they laid off. And that's adding more layers of friction to the process.
The rehiring dilemma
Organizations laid off or furloughed millions of workers at the peak of the COVID-19 crisis in 2020, but as consumer demand began to recover with the easing of the pandemic, so did the need to grow the workforce. While business slowdowns and health concerns continued to be the top roadblocks in rehiring talent, they posed a significantly lesser challenge in Q1 2021 than the previous quarters.
Another key factor that impeded rehiring in recent quarters, but lost steam in early 2021, was budget allocation issues, falling nine percentage points, indicating that companies have recovered their appetite for hiring. However, slightly more organizations said they are finding it difficult to rehire employees laid off during the pandemic in Q1 2021 compared to those in December 2020. The IT companies, which require workers with specialized skills, were finding it particularly troublesome to rehire former employees.
This conundrum is a result of a sharp growth in factors such as unemployment paying better, which was up eight percentage points, employee getting hired elsewhere, up six percentage points, and pay or benefits issues, up five percentage points. More than a quarter of US businesses polled in the Q1 2021 survey attributed the rehiring challenge to unemployment paying better, alluding to the expanded unemployment benefits announced by the US government as part of its COVID-19 relief package. The trend suggests that organizations will likely need to brace themselves for candidates with greater bargaining powers in coming months.
Skills shortage and the future
The problem with not being able to rehire previous employees is that you lose their experience along with their skills. And when hiring a net new employee, the organization will need to factor in the time before they begin adding value. In the survey, 37% of the non-HR employee respondents said it takes them six months or longer to add value at work. However, that's assuming you can find the skills you're looking for in the market.
In our Q1 2021 survey, 42% of respondents said they were somewhat or very likely to face a skills shortage over the next 12 months. In the survey, a 'skills shortage' is defined as when there is a lack of candidates with the specific skills sought by the employer. And that number – especially among the somewhat likely – increases along with the digital transformation maturity level of a given company.
For those who responded that a skills shortage is somewhat or very likely, the top three planned responses would be to keep trying to hire new talent (48%), look to contractors and consultants (34%), and retrain or upskill existing employees (32). For those employees who said it's taken six months or longer for them to add value at work, the top reason cited was poor training. In order to hire and skill employees effectively, especially when rehiring previous employees is no longer an option, leaders will need to invest heavily in their learning and development efforts.
This starts with visibility, because the top skill development challenge noted by the 2021 respondents (non-HR) was that opportunities to learn new skills are not clearly defined (32%). Following that were lack of budget for skilling initiatives (30%), and skill development not being a company priority (23%). However, as re-recruitment efforts fail, and skills become scarcer in the market, we could see a budget shift from recruitment to skilling, and the priority of skills development increasing.
Once investment increases in learning and development, it's important that the right content is supported. When asked what content is most helpful when learning new skills, the top response from non-HR respondents was knowledge base articles at 28%, followed by custom video content at 21%, and video content from and LMS library at 18%.
As we noted earlier in our 2021 survey, employee learning and development is the biggest planned HR investment (40%) for the next 12 months. In that same survey, we asked respondents what their most important strategic focus was for the next two years, and 47% said employee skills development as well. That priority and focus already ranks high in HR, and as this spreads out to the greater business, it could help elevate HR to a more strategic position in decision-making.