From talent run to talent growth: how companies could tackle skill shortages

With a growing and evolving economy, technological advancements, shifting lifestyles, and the effects of COVID-19, there is a strong demand for new skills. Is there a new war for talent coming?

The term "talent" is used to refer to individuals with scarce skills, what those scarce skills are depends per industry and often even per organization.

Shortages

According to the 2023 Eurobarometer survey, 75% of SMEs with R&D or IT roles reported difficulties in finding workers with the right skills. Additionally, 54% of small and medium-sized enterprises (SMEs) in Europe identified hiring skilled employees as one of their top challenges, with the Netherlands ranking second only to Belgium at a staggering 66%.

Skill Shortages Among SMEs in Europe

However, this talent shortage is not a new phenomenon. Whenever labor demand outpaces supply, skill gaps emerge. The most sought-after skills become valuable, and become scarce resources. The impact however is pretty detrimental. Companies do not reduce their product offerings. As a matter of fact, the work load only increases as existing products and services require maintenance and improvement, while new generation products and services are required to maintain competitive in the market. Trying to uphold this situation with an increasingly decreasing amount of talent only increases the workload per employee. This in turn causes quality drop, employee burnout, and delays in product development.

Source: Eurobarometer Survey on SMEs and Skills Shortages

In 1997, McKinsey's seminal "War for Talent" report highlighted similar concerns. Their study of 77 U.S. companies revealed three major trends:

1. Economic growth vs. workforce decline: Companies experiencing growth needed more executive-level professionals, but the prime age group (35-44 years) for such roles was shrinking.
2. Changing workforce needs: Businesses required professionals with global fluency, technical expertise, and adaptability. The rise of SMEs also intensified competition for skilled employees, while job mobility increased significantly.
3. Neglected employee development: Talent development was not prioritized, leading to a persistent skills gap.

One striking conclusion from the McKinsey research was: "Put people in jobs before they’re ready." This approach accelerates growth and keeps employees engaged. Yet today, many companies hesitate to take this risk, opting instead to spend their financial resources to recruit externally rather than nurturing internal potential.

How is the War for Talent Different Now?

While talent shortages are not new, the world looks different today than it did in 1990s. The Netherlands might be facing a brain drain, with 850,000 Dutch nationals living and working abroad. As the demand for specialized professionals is rising, we can assume that at least a reasonable portion of those leaving the country belong to high-skilled sectors. Pushing on an already tight labor market.

A 2024 TNO report on Dutch labor market trends found that 28% of companies face acute workforce shortages.

The European Commission has identified 42 occupations with ongoing shortages, driven by factors such as an aging workforce, increasing demand for technical expertise, automation, and shifting industry needs. Certain sectors, such as industrial manufacturing, defense, and security, also struggle with retention due to difficult working conditions.

Looking at the prognoses of workforce shortages, the Netherlands may face a labor shortage of 1.4 million in 2030. 

Source: “Netherlands Advanced: Building a Future Labor Market That Works"

Many companies try to tackle this challenge, their top strategies for addressing this challenge include changing recruitment strategies, investing in employee training, reorganizing work processes.

Source: Werkgevers Enquête Arbeid 2024

Yet recruitment filtering and adjustment alone is insufficient. A lot of companies could benefit from reorganising work processes and training employees. Specifically, combining the latter efforts could make a big difference. 

A company’s workforce strategy should focus more on: upskilling your own workforce

 Apart from hiring new employees, a company’s workforce strategy should focus more on: upskilling your own workforce. With global talent shortages becoming increasingly complex (e.g. legislation restricting hiring, less core technology-educated people available for hiring, and more), companies must rethink their approach.  Companies should start reskilling or upskilling their employees rather than constantly looking for new hires while simultaneously optimize their product and services offerings. It’s unlikely that a call center employee will become a full-stack developer or a marketing professional becomes a thermo-optical engineer. So, identifying a chain of smaller job transitions can fill the gap over time.

Source: “Netherlands Advanced: Building a Future Labor Market That Works"

Investing in employee development offers numerous advantages:

• Training internal talent is often quicker and less expensive than external hiring.
• Employees who see clear growth opportunities are more likely to stay, reducing turnover and recruitment costs.
• Companies that prioritize workforce development are better positioned to navigate industry shifts rather than reacting to them.

Final Thoughts

Companies that continue to rely on traditional hiring strategies will struggle, while those that invest in developing their workforce will gain a crucial competitive Avant Edge - just kidding - advantage.