Demographic changes are changing the shape of the workforce structure – requiring businesses to take an innovative approach to talent management

Much has been talked about the skills gap facing European businesses; in particular, how this crisis will throw up challenges with managing their workforces. This skills gap is very real, and very troubling – but the true scale of the problem goes beyond a simple lack of engineering or IT graduates.

Let’s look at the figures. According to a recent report by Boston Consulting Group, most European countries will face acute labour shortages by 2030, ranging between -1 and -23% of amount of labour required. There are two significant drivers behind this skills gap.

What is at the root of this problem?

First – 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.

But the story doesn’t end there. Many countries in Europe and beyond are facing a declining population. At current rates, by 2030 there will not be enough young people entering the workforce to replace the ranks who have moved up to middle management; 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 organisational 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.

The pyramid converges…

In other words: the flanks of the organisational pyramid are converging. This, combined with the squared-off head of the pyramid, means we are no longer looking at a pyramid. Rather, the shape of businesses employee structures in the future will more closely resemble a cube.

This is not just a matter of academic interest: it will have a dramatic effect on working lives and management cultures.

Businesses need to be thinking about how they can adapt their structures and operations to take into account this new staffing structure, and ensure that they are getting the most value out of employees at every level of the new ‘cube’.

The risks for talent management

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.

The story of employment over the last couple of decades has been dominated by the “end of the job for life” and the “freelance economy”; however, changing demographics will make it more imperative than ever for companies to keep hold of the right people with the right skills and knowledge.

To do this, they need to ensure that every worker is fully valued and engaged – while of course making sure that they are delivering the maximum possible value to the organisation.

The importance of flexibility

Flexibility will be at the centre of any successful strategy to retain and engage employees.

For example, to keep workers 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 organisations need to adopt, but the payoff in terms of an engaged workforce will be well worth it.

What’s more, teaching transferable skills will add to the value of each individual worker – which will be appreciated by the employees themselves.

A changing path for managers

Secondly, managers need to change the way that they manage staff. In a more democratic, less hierarchical organizational structure.

Businesses will need to dispense with 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 organisational structures. Businesses that can make the most of all assets available to them will be most likely to succeed.

For example, when executing a project, multinational businesses will need to look at their human capital holistically – across all their operations, locations and premises – to form international delivery teams.

They might also consider 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.

The need for data insight

To bring about these organisational 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 organisation 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.

Like all good crises, the skills gap and demographic changes can actually benefit those businesses that are brave enough to effect big changes in their organisations.