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Over the next 15 years, European businesses are going to face major challenges when it comes to their workforce. A skills gap, the like of which has never been seen before, is imminent, and to overcome it employers are going to have to radically rethink their approaches to employee engagement and staff retention.
The scale of the problem was highlighted recently in a report by Boston Consulting Group, which identified that most European countries will face acute labor shortages by 2030, ranging between -1 and -23 percent of amount of labor required. There are two significant drivers behind this skills gap.
Firstly – and especially since the financial crisis – businesses have been under pressure to make their operations as efficient as possible. As personnel costs are one of the biggest expenses on the balance sheet, many companies have offered early retirement to senior employees at the top of the management ‘pyramid’. Worryingly this trend looks set to continue well into the future. As such, the peak of the pyramid has in many cases effectively been squared off.
Secondly, many countries in Europe are facing a declining population. At current rates, by 2030 there will not be enough young people entering the workforce, and as a result the bottom level of the management pyramid (i.e. junior staff) will have thinned out.
Under these two pressures the management pyramid structure of old will undergo a structural change. In its place an organizational model will emerge with an equal balance between senior management, middle management and junior staff, but not an overwhelming number of any type of employee.
In other words: the flanks of the organizational pyramid are converging. This, combined with the squared-off head of the pyramid, means we are no longer looking at a pyramid. In fact, the shape of business employee structures in the future will be that of a cube. And this will have a dramatic effect on working lives and management cultures.
So what can businesses do to adapt to this new normal?
The first thing to note from a talent management perspective is that as the pyramid model collapses, people will be required to stay in their jobs for longer. While early retirement is opening up senior management positions, the lack of new recruits pushing people up the ladder means that employers will need staff to remain in their roles. If companies are to make certain they do not lose the right people with the right knowledge, they must ensure employees are kept engaged.
This means employers need to be more flexible. For example, to keep employees fulfilled employers should think about allowing them to move horizontally within the business. While this won’t work for all roles, such as those in finance or IT (which require specialist skills), it is feasible to move employees between, for example, sales and HR. There is a certain amount of operational bravery that organizations need to adopt, but the payoff in terms of an engaged workforce will be well worth it.
Secondly, managers need to ensure that they no longer manage employees in a top-down ‘bossy’ style. In a buyer’s job market, employees will simply move on if they have a poor relationship with their manager. To retain staff, businesses must embrace more horizontal management structures based on collaboration and inclusiveness.
Over the next decade, therefore, companies will need to be more open and innovative in their organizational structures. Businesses that can make the most of all assets available to them will be most likely to succeed. For example, when executing on a project, multinational businesses will need to look at their human capital holistically – across all their operations and all time zones – to form international delivery teams. Another suggestion is that businesses look at whether a full time role can be split between two part time workers, as a job share. There is certainly a large untapped resource of people (particularly those wishing to return to employment after time out to raise children) who are crying out for good part-time corporate jobs and have an undervalued set of skills and experience.
To bring about these organizational changes businesses must, of course, have a complete understanding of their operations and where skills and resources are needed versus where they are available. As a result, the ability to draw on data from across the organization in real-time and match it up against resourcing needs will be vital. So too will be putting in place the right collaboration to enable truly disparate teams to work seamlessly and effectively to deliver on projects.
Europe therefore can overcome the challenges posed by the demographic shift underway. All that is required is a new understanding of how workforces can be created and managed and the right technology used to enable new processes and working methods.
So, be brave, and try new paths!
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