Essay Topic: Drawing on academic literature and providing practical examples: critically discuss the range of things an employer can do in response to skills shortage “with particular reference to HRM strategies and recruitment strategies”.
Skills Shortage: Scrutiny of the Range of Responses to Skills Shortage
An important and recurring issue commonly faced by employers, but highly unaddressed, is effectively responding to skills shortage. The difficulty in responding to skills shortage starts with the inability to recognize the problem in time, to support preventive and contingency planning. As if this is not in itself a serious problem, employers tend not to respond at all to skills shortage until the situation pressures the employer to make a move, which is often too late to prevent major damage. Employers also tend to be reactive instead of proactive players in the labor market. Being reactive is also important but sound management prefers preparation instead of reaction as problems actually arise. Moreover, reactions need to be appropriate to the situation; and reaction outside of the context of contingency planning would likely lead to disaster. At the same time as the development of contingency plans, employers should also enhance their flexibility to support timely responsiveness, especially with a constantly shifting labor market and competitive environment. A discussion of the problem of labor shortage and the range of employer responses to labor shortage become an important feat.
A number of definitions of skills shortage emerged. Training Agency (1990) defined skills shortage as the situation when “there are not enough people available with the skills needed to do the jobs which need to be done” (p. 29). This definition focuses only on hiring and recruitment. Green, Machin and Wilkinson (1998) defined skills shortage as the difficulty in finding personnel with the required skills or the skills to perform jobs effectively. This definition covers hiring and recruitment as well as productivity. These definitions are general to encompass the hiring process up to employment proper. However, the problem in conceptualizing skills shortage is the varying perception of employers of skills shortage so that even if there are generic strategies, the implementation depends on the particular context of the firm.
Surveys of employers (Green, Machin & Wilkinson, 1998; Taylor, 2005) show that there are employers that consider the inability to find people to fill vacant jobs as skills shortage while there are employers considering the inability to retain employees that effectively fulfill the job requirements as skills shortage. In addition, there are also employees that consider the difficulty of employees to work with only minimal supervision or the ability to innovate and be flexible as skills shortage. As such, based on the perceptions of employers, skills include both hard and soft skills (Taylor, 2005) and shortage depends on the unmet needs of the employer (Watson, Johnson & Webb, 2006). Thus, the strategies of employers reflect their understanding of skills shortage.
Employers often experience problems with shortage of soft skills, such as oral communications, customer handling, and problem solving (Careers Scotland, 2008). Oral communications usually arise during the hiring and recruitment process while customer handling and problem solving could emerge during the post-hiring stages. Moreover, shortage in soft skills often occurs in firms engaging professional, scientific and technical workers (Atkinson, 1989). This supports the occurrence of shortage in skilled labor more than in unskilled labor. Haskel and Martin (2001) explained that skills shortage is largely experienced in firms that employ high technology. Limited soft skills for technology-dependent firms, such as IT and biotechnology, exemplify skills shortage.
With skills shortage, firms can experience wastage, low output, or low quality output that affects the financial situation and competitiveness of the firm. Implementing the appropriate strategy to address the problem of labor shortage is important for firms to ensure long-term viability.
Atkinson (1989) classified the responses of employers to skills shortage in a quadrant together with the corresponding consequences of the responses in the quadrant. The first quadrant is ‘on the chin!’ because employers have little response to skills shortage. Employers take a look-and-see stand by waiting for hiring standards to decline and common response is to reduce the output targets or make personnel work overtime. This response does not benefit the firm much because by the time that hiring standards fall, it may too late for the firm or the firm has depleted most of its resources and unable to raise sufficient revenue to support the continuation of its operations. However, most business firms respond in this way because of the failure to anticipate the impending problem and completely understand the problem relative to its business context.
The second quadrant is ‘compete!’ because the firm focuses on the supply side or the improvement of the firm value in the market, as opposed to demand side response in the first case, by changing its recruitment process to deviate from previous biases towards gender and age and building its image through higher wages (Atkinson, 1989). This involves greater response by employers. However, the effect is that the firm would increase its expenditures and with the same response by its competitors, the firm would find itself in a similar position before its response.
The third quadrant is ‘substitute!’ because the firm’s response is to target older workers with the desired skills by offering incentives and ensuring lack of wastage by focusing on skills enhancement and building of its existing workforce (Atkinson, 1989). This involves a more reflective response of employers since there is a consideration of lower expenditures and long-term benefits. However, firms often find themselves hesitant to act in this way because of the cost of providing incentives to the older age group, who have experience and skills.
The fourth quadrant is ‘create!’ because the firm’s response is to train and retrain personnel, apply labor substitution, enhance deployment, and relocate when necessary to reduce cost (Atkinson, 1989). This involves the highest degree of response from employers. However, results are long-term so that firms need to sustain (Haskel & Martin, 2001) training and retraining until it has successfully create a skilled workforce to address skills shortage.
Although organized into a quadrant, the responses of employers comprise stages that need to be experienced depending on changes in the labor market situation. To do this, firms need flexibility in financial, functional and numerical aspects. The firm needs efficiency in allocating its financial resource to activities that count, in deploying its workforce, and in rationalizing the size of its workforce. (Atkinson, 1984) Firms experiencing an impending or actual labor shortage have to constantly evaluate internal and external labor situations, identify and understand problems, and respond accordingly.
However, the stage process indicates a sequence of responses that usually progress from the first to the fourth quadrant, which do not consider the importance of employers in simultaneously considering both supply and demand perspectives in order to understand the emerging or occurring problem of skills shortage as a necessary requisite to the determination and implementation of the appropriate solution. While the employer responses quadrant reflects the range of responses of employers towards skills shortage, this is better viewed as a simultaneous instead of a stage process. According to the situation, employers can substitute and create at the same time by changing the recruitment system while at the same time retraining the workforce as a human resource management strategy. Employers can also employ other combinations.
Employers can respond to skills shortage in many ways depending on the recognition and understanding of the problem and the perceptions of the appropriate solutions. Employers can wait, compete, substitute, create or combine responses. A common reason for the failure of firms to respond effectively is the inability to anticipate, recognize and understand the problem. While skills shortage affect firms in different ways requiring context-based approach, there are also generic responses that employers can consider such those contained in the quadrant. In determining solutions, the employer considers multiple dimensions such as demand side and supply side and factors such as internal and external intervening factors. This is necessary for the firm to find a fit between the impact of the problem to the firm and the strategic solution encompassing recruitment and human resource management.
Reference List
Atkinson, J. (1984). Manpower strategies for flexible organizations. Personnel Management, 16(8), 28-31.
Atkinson, J. (1989). Four stages adjustment to demographic downturn. Personnel Management, 21(8), 20-24.
Careers Scotland. (2008). Introduction – Skill shortages. Retrieved April 3, 2008, from http://www.careers-scotland.org.uk/WhichCareer/Trends/KeyMessages/SkillShortages.asp.
Gill, P. (1996). Managing workforce diversity – a response to skill shortages. Health Manpower Management, 22(6), 34-37.
Taylor, A. (2005). What employers look for: The skills debate and the fit with youth perceptions. Journal of Education and Work, 18(2), 201-218.
Watson, D., Johnson, S. and Webb, R. (2006). Employer perceptions of skills deficiencies in the UK labour market: A subregional analysis. Environment and Planning A, 38(9), 1753-1771.
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