Recent economic challenges have forced public- and private-sector organizations to execute their strategies with more precision than ever before and to do it with fewer resourcesespecially people. The elimination of large numbers of jobs and the start of the Baby Boomer retirement wave have created new skills gaps in many agencies and organizations. And some experts predict that skills shortages will intensify in the coming years as employers find they need to hire more knowledge workers for high-skilled jobs that will help their organizations perform as the economy rebounds.

A new report from the American Society for Training & Development (ASTD), Bridging the Skills Gap, covers the growing importance of talent to organizational performance and the skills gap that threatens so many organizations today. This reportthe third on this topic from ASTDupdates the picture, including the role of job losses during the current recession, and examines the influence of Web 2.0 and the Net Generation on workforce skills.

What Is a Skills Gap and Why Does It Exist?

ASTD defines a skills gap as a significant gap between an organizations current capabilities and the skills it needs to achieve its goals. It is the point at which an organization can no longer execute its strategies, fulfill its mission, grow, or change because it cannot fill critical jobs with employees who have the right knowledge, skills, and abilities.

It is not just individual organizations or sectors that are feeling the consequences of the skills gap. Communities, states, regions, and entire nations pay a heavy price when they cannot find or equip workers with the right skills for critical jobs.

In reality, organizations will always experience a skills gap if they are staying ahead of shifting conditions in their environment and changing expectations from their constituents, shareholders, or customers. The key to achieving success under such circumstances is to harness skilled talent to strategy and goalsa task that has become more and more challenging in an increasingly global, virtual, and changing world.

ASTD research in 2009 identified two underlying causes of the skills gap:

  • jobs are changing to require more knowledge work, more teamwork, and more use of technology
  • educational attainment has fallen behind the nations need for skills.

In addition to those factors, which have long contributed to creating and widening skills gaps in the United States, the large-scale loss of jobs that began in late 2007 also plays a role. The recession is the longest since World War II, and by the fall of 2009, it had eliminated millions of jobs from the U.S. economy. As the Federal Reserve predicted, the jobless rate reached 10 percent in 2009. Job losses affected every state in the country.

In 2008, job opportunities shrank in several industries and sectors. In a September 2009 article in the New York Times, Peter Goodman noted that U.S. Department of Labor data reported that job openings in manufacturing decreased 47 percent, in construction 37 percent, and in retail 22 percent. In the fall of 2009, job seekers in the United States outnumbered job openings six to one. Despite some signs of growth in the economy, organizations remained reluctant to begin hiring.

While the private sector shed jobs, state and local governments expanded their payrolls, adding 110,000 jobs, according to a report from the Nelson A. Rockefeller Institute of Government. The reports authors speculate that this was due in part to the federal stimulus program and to a lag between an economic downturn and its effect on local and state governments in the form of reduced tax revenue.

Economists anticipate that the current recession will feature a jobless recoveryone in which employers do not hire new workers and achieve productivity gains with existing employees. Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University, notes that the last three recessions have been followed by jobless recoveries in which there was GDP growth without job creation.

Even though organizations may have skill gaps, they will not be filling them from the ranks of the unemployed. Recessions accelerate the trend to eliminate low-wage, low-skills jobs, notes Carnevale, and those jobs dont come back. Instead, organizations create jobs requiring more education and skill. Growth of these jobs is slow in part because they require paying higher salaries and providing costly technological infrastructure for these workers. Employers will hire cautiously to fill skill gaps that they couldnt address by hiring during the recession, he says.

Carnevale predicts that pressure to fix skills gaps will intensify again, probably by 2013, when the economy has added back the millions of lost jobs and will need to create many millions more to produce growth. In a recession, the economy goes to sleep, but when it awakens, there will be a need for higher-skilled people to fill skill-intensive jobs, he adds.

By contrast, pressure to fill skill gaps in government is continuous, says Tom Dungan, III, CEO of Management Concepts, a supplier of training and consulting services to government. Certain kinds of knowledge and skill development have been in continuous demand by the government since we began offering training in 1973, he says.

Management Concepts has seen steady growth in demand from the government for its courses in acquisition and contracting, business analysis, leadership and professional skills, grants and assistance, and financial management. Two burgeoning areas are project management and analytics, according to Dungan.

The Changing Nature of Work

The late Peter Drucker was the first to identify the productivity of knowledge workerspeople who think for a livingas a significant management challenge. In the decades following that observation, jobs involving transactionssuch as exchanging information, products, and serviceshave come to dominate economic activity in developed countries. In the United States, nearly 85 percent of work involves transactions. The remaining 15 percent involves growing or making things.

Economists use the term tacit interactions to describe transactions that rely heavily on judgment and context. Data from the U.S. Bureau of Labor Statistics (BLS) shows that the majority of new jobs created in recent years have tacit interactions as their main component.

In Thinking for a Living, author Tom Davenport describes knowledge workers this way: Knowledge workers have high degrees of expertise, education, or experience and the primary purpose of their jobs involves the creation, distribution, or application of knowledge.

The consulting firm Mercer defines knowledge workers in terms of both the breadth of their knowledge and the degree of innovation required of them. Knowledge workerssuch as accountants, financial analysts, software engineers, and research scientistsoften depart from established procedures to solve problems and may adapt or update their knowledge in order to do their work.

Influence of Web 2.0 and the Net Generation

According to a classification used by Don Tapscott in Grown Up Digital, there are three generations in the workforce born between 1946 and 1997 and a fourth, born since 1998, who will start their first jobs in a few years. Three of the four were born after the launch of the Internet in 1962, and the Net Generation, born between January 1977 and December 1997, have been exposed to computers and digital media all their lives. Using these tools is as natural to them as the air they breathe.

The Net Generation is significant for a number of reasons. It is the largest age cohort, accounting for 27 percent of the U.S. population and a rising percentage in other countries. The work habits, learning styles, and collaboration skills of this group are already having a profound influence on organizations and that will only grow greater.

Tapscott writes, The sheer numbers of Net Generation, both from North America and nations with rising economies, offer an unprecedented bounty of talent. He predicts that this wave of young workers will increasingly shape and direct the most successful organizations. These workers have advanced skills in three areas that are revolutionizing workdigital technology, interactive media, and collaboration. Getting the rest of the workforce up to their level in these areas is a significant part of solving the skills gap.

Baby Boomers RetireEventually

An overall loss of expertise and management skill is expected to result from the gradual departure from the workplace of the 77.2 million Baby Boomers, the oldest of whom turned 60 in 2006.

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The National Study of Business Strategy and Workforce Development, conducted by the Boston College Center on Aging and Work, found that more than one quarter of U.S. organizations have failed to plan for the Baby Boom exodus from the workplace. Responses from sectors including retail trade, manufacturing, healthcare, and social assistance showed that only 37 percent of employers had strategies to encourage late-career workers to stay past retirement age.

In a recent survey of more than 2,200 U.S. workers by consulting firm Watson Wyatt Worldwide, 44 percent of respondents age 50 or older said they plan to postpone retirement; half of those say they plan to work at least three years longer than previously expected.

While many older workers postponed retirement because of the recent recession or because they want to remain active, a wave of retirements will still contribute to the skills gap. The federal government, in particular, faces the loss of large numbers of experienced employees through retirement.

Reasons for Skills Gaps

In a 2009 ASTD poll taken by 1,179 organizations, 79 percent said there is a skills gap in their organizations now (see Figure 1). Fifty-one percent said that the number one reason was that the skills of the organizations current workforce did not match changes in strategy. Other reasons included a lack of bench strength in the companys leadership ranks; the effects of a merger or acquisition; and cuts in training investments. Inability to find qualified candidates for certain types of jobs was ranked number one by 25 percent of organizations (see Table 1).

The ASTD Skills Gap poll also identified categories of skills most lacking among the responding organizations. In first place were leadership and executive-level skills, reported as lacking by 50 percent of respondents. Following closely were basic skills at 46 percent, professional or industry-specific skills at 41 percent, and managerial and supervisory skills at 31 percent (see Table 2).

Where Are the Biggest Gaps?

The BLS Occupational Outlook Handbook, 2008-2009 Edition, projects trends in employment opportunities in a broad range of industries and occupations. Employment opportunities, it points out, result from demand for skills needed within specific industries.

Looking out from 2006 to 2016, the data confirms a long-term shift from goods-producing to service-producing employment. These industry sectors are expected to grow: education and health services; professional and business services; leisure and hospitality; trade, transportation, and utilities; financial activities; government; and information.

A closer look at BLS projections shows solid growth in knowledge work and jobs requiring advanced or specialized skills. Education and health services will add more jobs than any other sector. Management, scientific, and technical consulting services will grow 78 percent. According to BLS, demand for these services will be spurred by the increased use of new technology and computer software and the growing complexity of business.

Professional and related occupations will be one of the two fastest-growing and will add the most new jobs. Almost three-quarters of job growth will come from three occupations: computer and math occupations; healthcare practitioners and technical occupations; and education, training, and library occupations.

Impact of the Skills Gap

An unprepared workforce can hamper the performance and growth of an organization. In their book, The Chief Learning Officer: Driving Value Within a Changing Organization, authors Tamar Elkeles and Jack Phillips write, Nothing is more devastating to an organization than not having a fully prepared workforceAn unprepared workforce can reduce profits, impede market share, create inefficiencies, lower morale, and increase attrition. More importantly, it can affect the quality of service provided to customers.

A lack of skilled workers also harms the economy, according to many sources. America has a large middle-skills gap. Nearly 50 percent of the jobs in America demand middle skills obtained through education or training beyond a high school diploma. These skills are necessary for the United States to compete in a global economy, says Martin Scaglione, president and chief operating officer of ACTs Workforce Development Division.

Eighty percent of U.S. manufacturers cannot find educated, skilled workers for their entry-level jobs. Without a skilled workforce, our manufacturers cannot continue to be the drivers of innovation and will not be successful in the global economy, says Emily Stover DeRocco, president of The Manufacturing Institute and senior vice president of the National Association of Manufacturers.

Government is expected to be hit hard by skills gaps. In a 2009 book, The People Factor, Linda J. Blimes, a lecturer at Harvard, and W. Scott Gould, vice president of public sector strategy at IBM, argue that antiquated hiring systems, the wave of baby-boomer retirements, and talented young peoples lack of interest in civil-service jobs may produce a malfunctioning, low-tech, low-innovation federal government. Blimes and Gould estimate that investing $21 billion over 10 years on recruiting, training, and evaluating the government workforce would save $225 billion to $600 billion in improved productivity, reduced waste and fraud, and stronger supervision of outside contracts. Gould has just been appointed deputy secretary of the U.S. Department of Veterans Affairs.

Such advice comes at a critical moment for the federal government, which needs to hire more than 270,000 workers for mission-critical jobs over the next three years, according to a governmentwide survey by the Partnership for Public Service. Those employees will need the skills to deal with such enormous challenges as two wars, the repair of the financial sector, and climate change. The survey says that the majority of new hires will be needed in five fields: medical, security, law enforcement, legal, and administrative.

A Vision for the Workforce

Responding to todays skills shortages with short-term fixes is not enough to drive growth and innovation. The more critical challenge is to address skill gaps in ways that improve organizational effectiveness and contribute to long-term success.

Ensuring a highly skilled workforce takes a commitment from many playersleaders in the public and private sectors, the education community, the workforce development system, as well as workplace learning professionals. Each of these communities contributes to the development of the workforce. Together they help ensure an adequate level of key workplace skills. According to the 2009 Skills Gap poll from ASTD, organizations are experiencing gaps in these skills:

  • leadership and executive skills
  • basic workplace competencies such as literacy and numeracy that are the building blocks of successful performance in any job
  • professional or industry-specific skills
  • managerial and supervisory skills
  • communication and interpersonal skills
  • technical, IT, and systems skills
  • sales skills
  • process, program, and project management skills.

In addition, most experts agree that these additional skills are needed for sustained high performance in the knowledge economy:

  • adaptabilitythe capacity to change in response to ever-shifting conditions and to quickly master new skills that changes require
  • innovative thinking and actionthe ability to think creatively and to generate new ideas and solutions to challenges at work
  • personal responsibility for learningthe willingness to take responsibility for continually improving work-related capabilities throughout careers.

Six-Step Action Plan

By addressing these skills gaps in the current workforce, public and private organizations will equip themselves for better performance and increased effectiveness in the short term. If the whole workforce development system addresses them, long-term success will be within reach of most organizations in the future.

Organizational leaders should look to their learning professionals to help identify the skills and competencies needed now and in the future and to align their development to key drivers for the organization. The following action plan identifies six steps for taking charge of the skills gaps:

  • understand the organizations or units key strategies, goals, and performance metrics
  • identify competencies that map to strategies and performance metrics
  • assess the skills gap
  • set goals and prioritize the path to filling gaps
  • implement solutions
  • monitor and measure results and communicate the impact.

For federal agencies, careful attention to understanding and filling skills gaps will be essential to carrying out their missions in the coming years. Agencies face unique challenges in competing for and keeping top talent needed in mission-critical jobs. The federal government is the largest employer in the United States, employing 2 percent of the civilian workforce. It should be among the first and the best at meeting the skills gap challenge.