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Zero-Sum Labor - The C-Suite's Next Wicked Problem

The impending chronic shortage of qualified workers is causing employers to rethink their business models, locations, and role in their host communities.

Mark Lautman, Lautman Economic Architecture LLC (Workforce 2014)
After a decade of financial market turmoil, recession, escalating tax and regulatory burdens, and the constant barrage of global market disruptions and creative destruction, C-suite execs are recovering from their own version of PTSD. So the last thing “post-recession stress disorder” suffering management teams need is another big game-changing threat to worry about. But there is such a threat, and it’s a wicked one.

Baby-boomers are the first generation in human history not to have enough kids to replace themselves, and they’ve compounded the problem by de-coupling the public education system from the needs of employers. As a result, many of the kids they did have are unprepared to learn how to do the jobs of the future. Throw in rising technological demands of the workplace, shorter industry lifecycles, and a web of state and federal disincentives to work and things get worse.

What we’re facing is a chronic shortage of qualified workers, and that is changing the physics of the U.S. business environment in ways that will cause most employers to rethink their business models, their location, and their role in the civic affairs of their host communities.

Here’s what it means: Literally everyone you are going to hire in the next 25 years has already been born. We know how many there are and how many took algebra II. All 75 million boomers will be over 55 seven years from now. As they bail out of the workforce, there just aren’t going to be enough qualified entrants from the baby-bust generation to replace them. This creates a zero-sum game.
Expand Any employer that wants to head off being starved of labor needs to act now. If you wait five-to-seven years for the problem to become the crisis de jour, it will be too late.
Close Any employer that wants to head off being starved of labor needs to act now. If you wait five-to-seven years for the problem to become the crisis de jour, it will be too late.
Any employer that wants to head off being starved of labor needs to act now. If you wait five-to-seven years for the problem to become the crisis de jour, it will be too late.
What Does It Change?
A zero-sum market changes everything. It shifts the power in the hiring relationship from employer to employee. It reorders the criteria for corporate site selection and reverses the “Chi” in the economic development process. Employers, governors, and tax incentives don’t decide where the jobs get created anymore. Employers have to locate their jobs to places where the workers want to go. A zero-sum game means that if you need to add qualified employees to survive or grow, you will have to steal them from your competition. In this war for talent there will be only winners and losers — those that can grow, attract, and retain new qualified workers at will, and those that can’t. Lastly, it redefines the relationship between the C-suite and the communities that host their operations.

So What Do You Do?
Employers now have to worry about being stuck in a loser community. Choices are limited. You can help fix the local education and workforce pipeline, help make the community a talent magnet, move to a place that already is, automate, or sellout and move to Boca.

If you elect to move, you need bulletproof site selection criteria that can assess the capacity and level of commitment of candidate communities to grow, attract, and retain a healthy surplus of the kind of workers you are going to need. If your strategy is to automate, you are of limited value to communities looking to rebalance their ratio of wage earners to dependents.

Any employer that wants to head off being starved of labor needs to act now. If you wait five-to-seven years for the problem to become the crisis de jour, it will be too late. Most solutions you come up with now will take at least seven years to move the needle, so the prudent thing to do is act strategically now.

Step by Step
The first step is to get a grip on the problem. This means developing an understanding of the nature and dimension of the threat to your company, your industry, and your host communities. For many this is still counterintuitive. How could the biggest barrier to corporate growth and economic development be a shortage of labor when 10 million Americans are still out of work? High unemployment numbers used to mean that there was a surplus of qualified workers in the market and headroom for the local economy to grow — not anymore.

Next employers and the community’s job-creation strategists must be willing to iterate how many of which occupations will be needed, develop a common standard for work readiness, and start gathering data and intelligence on the dynamics of the local workforce. How many qualified workers will you loose in the next 10 years? How many will be lost to retirement, skill obsolescence, disincentives to work, health or family issues, or recruited away? What forces and factors are driving each major source of attrition? What can employers and community institutions do to mitigate losses in each area? How many qualified workers could be retained by each solution?

This is admittedly a heavy lift for an already strapped business community, but without much better predictive and descriptive data about the jobs that are likely to be in demand and intelligence on workers’ motivations for leaving, there is no way to structure a mission for educators, workforce developers, and community developers who will have to generate the talent and prioritize the amenities that will make the community a talent magnet.

Then you will need to map the potential sources of additional qualified workers. You are going to have to estimate how many you could get by promoting from within; from better aligned K-12 school systems, better aligned university programs, and a better aligned mid-career change pipeline; from conversion of the hard-to-employ and chronically poor into mainstream workers; by recruiting from outside the community; and by repatriating former residents.

One Way to Get Things Done
As the data and analytics accumulate, the solutions will be obvious. In most places it is going to take tactful and inspired leadership from the C-suite to get this done.

This is new territory for everyone. There are a few places around the country where employers and their community partners have focused on aspects of the problem, but no one has tackled the wicked problem of how to get the players together, get clarity on the problem, consensus on the solutions, and the commitments to implement. Any community that can elevate and integrate its economic development, workforce development, and community development efforts will be way ahead of the game.

Some examples of things you can do now include a middle school physics solution. A not-for-profit group called See The Change USA in Colorado Springs, Colo., has developed, tested, and is rolling out a middle school physics program that flipped the student success metrics in the two poorest-performing middle schools in the region. In one year, the student body (90 percent free and reduced lunch) went from 80 percent testing one-to-two years behind grade level in all subjects, to 80 percent one-to-two years ahead — a spectacular four-year jump for many.

A Ukrainian physicist, Anatoliy Glushenko, developed the program after he realized that the only difference between places that overproduce and underproduce technical talent is when they start teaching physics. Where conceptual physics is taught as a core subject in 6th, 7th, and 8th grades and math-based 9th through 12th grade — instead of waiting till senior year to offer it as a “nerd only” elective — the schools put STEM students into college and directly into the local workforce ready to do technical work.

There is a one-time $50,000 cost per middle school for curriculum and teacher training support. This is a program that employers could introduce and pay for that would immediately improve the performance of the local schools, eliminate remediation costs for the area’s community colleges, and slash the STEM washout rates at universities. Maybe more importantly, young workers not going to college would flood the local labor market prepared to do technical work five-to-seven years from now.

Other Initiatives
Spectacular examples of leadership include what Oklahoma City did after United Airlines told them they just couldn’t see their employees living there. The community’s major employers and community leaders calculated what it would take to attract young talent to the city and invested the billions it took to make the area attractive. Other interesting initiatives include:
  • A new strategic planning process that is proving successful at quickly getting a full spectrum of stakeholders to clarity and consensus on how to integrate job creation and workforce programming
  • An effort to develop a new labor market platform that connects candidate workers, employers, and education and training institutions around a digital interface with a common set of work-readiness standards, job descriptions, and curriculum
  • A program that can systematically convert the hard-to-employ chronically poor living in your community into mainstream workers, which has been developed and tested by Circles USA.
There is also some very interesting work being done on solving the wage cliff issue and other disincentives to work. Millions of workers are on the sidelines because the safety net is set too high and entry-level wages too low.

This will be a supremely difficult lift in most places, but take heart; there is compelling research now that people who work on the most difficult problems are the happiest among us.
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