If you aren’t on top of the skills shortage, you need to read this blog. Firms that haven’t built plans to navigate the skills shortage into their business strategy are unlikely to reach their goals. More business plans will be shredded by the talent shortage this year than last year.
The global talent crisis is no longer a peripheral business concern, it poses one of the worst risks to global business that it has faced to date because critical skills gaps will affect every firm in every part of the world and the crisis is here to stay.
But just as we find vaccines and firewalls to protect us from viruses and cyberattacks, there are short and long-term solutions to safeguard your business from the fallout of the talent squeeze that could throttle the life out of your firm. It is possible, Nick Sinclair, founder of TOA Global, says, “to get the right people working at the right level in your business, at the right time and at the right cost”.
First, the facts at a glance to put you in the picture. Then we’ll look at what’s caused the crisis, and how you can get some quick wins for your firm in what’s being called ‘the talent wars’.
The global talent shortage in numbers
In 2022, the global skills shortage reached a 16-year high, following a 6% year-on-year rise. In 2012, 34% of employers struggled to find the talent they needed. This has doubled in a decade to 75% in 2022. If this trend continues, as it’s predicted, we won’t have to wait another decade to be faced with a world that looks very different according to forecasts.
- The number of occupations experiencing shortages in Australia rose from 153 to 286 in a single year, 2021 to 2022.
- Over 90% of Australian and New Zealand businesses expect to be hit by the shortage before mid-2023.
- The US is facing $8.5 trillion in unrealised revenue and may be surpassed by India as the world’s main tech giant.
- Skills-related job vacancies cost the Canadian economy $25 billion in 2020, 1.3% of GDP – a 67% increase since 2015.
- Just over 60% of businesses in Canada say they’re facing at least one negative consequence to their activities because of the skills gap in their workforce.
- China will fail to find 12 million workers to fill positions in that country while 18 million jobs vital to the Japan’s economy are likely to remain unoccupied.
- $11.5 trillion in lost cumulative GDP growth across 14 G20 countries resulting from the digital skills gap.
- 85.2 million people are likely to be affected in the next three to five years by a failure to effectively deal with the talent shortage.
Effects on the accounting industry
While the numbers vary across nations and each country’s accounting industry is experiencing the skills shortage in a slightly different way, we’ve put together a snapshot of the global crisis in the accounting sector.
Recently, Australian accounting professional bodies urged the government to ignore National Skills Commission findings that had taken accountants off the skills shortage list. Describing the decision as “out of sync with reality”, Chartered Accountants ANZ executive Simon Grant cautioned that the accounting industry in Australia was dealing with an estimated 9,000 accounting vacancies, and that everyone, from large to small practices, micro and small businesses, was struggling to recruit and retain people with accounting skills.
CPA Australia chief executive Andrew Hunter has suggested that to fill the current accounting skills gap, Australian firms will need to tap into global markets. He warned that failure to find sufficient talent could significantly impact the proper functioning of Australia’s taxation system and the smooth collection of revenue for the commonwealth.
The 2021 financial reporting season saw corporate finance teams and their outside auditors having to deliver accurate financial statements to investors with fewer staff on hand. The Public Company Accounting Oversight Board is concerned that the turnover of experienced staff is an “emerging audit risk”.
The lead author of a major annual study on the financial performance of accounting firms in the US, has said that “Without exception, firms are trying to understand how they can deal with the labor shortage in the profession”. He warns the issue will only get worse before it gets better and advises firms to think outside the box about how they’ll get work out the door.
In the UK, there was a 36% drop in the number of accountants applying for jobs between June 2021 and June 2022 – negatively affecting the strength and stability of the industry. It’s been noted that accounting firms have been forced to turn down work due to a lack of staff. Almost 50% of UK accountancy firms reported facing “huge blows to their growth amid the skills shortages”.
This is supported by another report that places the number of accounting businesses that are “feeling the strain” of lack of skilled workers at 74%, and understaffed firms at 22%. The average lead time to hire a successful candidate currently stands at four months.
Nick Sinclair, who founded TOA Global in 2013 to expand his own accounting and financial planning business, says, “The talent squeeze is probably the worst I’ve seen in nine years. But we’ve been through these cycles before, and good businesses learn how to deal with the challenges. The firms that attract strong talent and weather this storm will need to have the right systems and processes in place, and invest heavily in the management and development of their people.”
How we got here
To get a deeper understanding of the global skills shortage, the crisis needs to be put into context. While the causes of the burgeoning talent drought are as complex as the issue itself, there are common causes around the world, irrespective of region.
Retirement of Baby Boomers
The Baby Boomer generation, born between 1946 and 1964, have retired or plan to in the next 10 years. Around 30 million left the workforce when the pandemic hit and since they accounted for about 33% of the global talent pool, their exit left a sizeable skills gap.
In a perfect world, Millennials, born between 1980 and 2000, should have stepped into the breach, but this hasn’t happened. With Baby Boomers retiring suddenly in large numbers, Millennials simply do not have the senior skills or managerial experience to fill those vacated roles.
Changing attitudes to work
While the idea that Millennials view their professional lives in a different light to previous generations is nothing new, but when viewed in numbers, the paradigm shift is staggering. During the COVID-19 crisis, 25% of the world’s 1.3 billion Millennials and Gen Zs, that’s workers aged 18 to 40, resigned their jobs. In the US alone, 63% of Millennials and 77% of Gen Zs were actively looking to change their jobs in favour of employment that offered greater flexibility, better work-life balance and higher wages.
Education and skills lag behind
It cannot be business as usual if we’re to keep up with the pace of dramatic change driven by the technologies of the Fourth Industrial Revolution.
The role that education and professional development plays in the skills shortage has several moving parts. One aspect involves higher education. The cost of a degree and traditional education models that aren’t changing fast enough to accommodate non-traditional students and labour-market needs, have been driving university enrolment down for a decade.
Australian universities may be looking at a similar future with the enrolment gains of recent years in jeopardy as a strong labour market lures potential students away from their studies and into paid employment.
Continuing education and internal capacity building are also falling behind. A McKinsey survey puts the number of respondents who reported that their capability-building programs only “sometimes or rarely succeed in achieving desired objectives and business impact” at more than 60%. Of employees surveyed, 46% were of the opinion their skills would be irrelevant by 2024, but just 34% said they felt supported by the skills development opportunities within their organisations.
Nick Sinclair says, “The industry is under so much pressure with the volume of work, which means business leaders often find themselves focused solely on what they need to do now to get the work out as opposed to developing and growing their people. The benefit is that the more you grow your people, the more output they’re capable of and the more potential there is for them to add real value to your business.”
The number one factor driving attrition is lack of career development and advancement with 41% leaving to find better prospects elsewhere.
“It isn’t good enough anymore to provide a job,” Nick says. “People want careers, and they want opportunities to upskill, retrain and grow in a timeframe that matches their goals. Usually, it takes around 10 years to progress from graduate to partner, sometimes even longer. My question is how do we shorten that cycle and give people the opportunities that will keep them engaged and on your staff while your firm benefits from their growth path?”
What the skills shortage means for your firm
While the challenges are momentous and pose the biggest risk to business we’ve ever known, many in the industry are forward-thinking and courageous, and are finding new ways to survive the talent drought and even thrive despite it.
The World Government Summit in partnership with PwC, put out a report a few years ago, which warned that there was an “increasing disconnect between educational systems, business and society”. But on the flip side, the skills shortage has given us opportunities to form new collectives that are, and will, come up with new and better ways to strengthen our firms and grow our futures.
Nick’s seen this in the growth of global talent solutions. “The last three years have been our busiest. That’s because the pandemic showed that it doesn’t matter where your team sit; more importantly it’s about who your team members are. Are they the right talent-fit for your firm?
“The reality is that while many firms struggle to find the local talent they need, we post a job in the Philippines for elite accounting industry talent and get more than 200 applicants in three days. A key factor in growing through the skills shortage is putting the best talent to work at the right level in your firm, without losing time or sacrificing financial stability.”
If you’re ready to dig a bit deeper and future-proof your firm against the skills shortage “ticking timebomb”? We’ve put together a Quick Guide to Thriving in the Skills Shortage. It places solutions we know will work for you, at your fingertips in easy to navigate clickable tabs. Download for free