Two separate studies have shown that the ever-widening skills gap is a major concern for businesses – and that small businesses expect to be hard hit by it.
‘Employers Facing a Profound Shift’
Research by HR Specialists Robert Half revealed that 74% of finance directors responding to the survey are concerned that the retirement of ‘baby boomers’ – the generation born in the two decades after WW2 – will have a negative impact on their company over the next two years, while 77% predict a negative impact over the next five years.
However, this fear is even greater among small businesses, with 84% expecting the retirement of baby boomers to be damaging to their business over the next five years.
“Employers are facing a profound shift as baby boomers look to exit the workforce, compounding the existing skills gap. With employers challenged in finding the skills they need to grow their businesses, establishing a succession plan with a robust attraction and retention strategy will be critical to succeed in today’s economy,” says says Phil Sheridan, UK managing director of Robert Half.
High post-war birth rates have caused a ‘bulge’ in the workforce, and retiring baby boomers will take a wealth of experience and expertise with them. Phil Sheridan advises: “In some cases, offering project or interim contracts to employees nearing retirement will open up positions for aspiring managers to move up the career ladder, while still operating under the guidance of a mentor. However, it is important to recognise that younger generation X and Y employees will expect different social contracts with their employers and that this should form the second phase of any baby boomer transition planning.”
The survey found that companies are already preparing for the exodus of these experienced workers by:
increasing training and development (45%)
programmes to retain baby boomers (32%)
hiring mid-level talent to develop a ‘skills pipeline’ (27%)
increasing mentoring programmes (25%)
hiring senior-level talent to replace retiring employees (22%)
offering flexible or part-time work to baby boomers (16%)
Holding Back Innovation
Meanwhile, the new Lloyds Bank Commercial Banking survey showed that small businesses in the UK fear that skills shortages could be the Achilles heel of their future success and innovation.
Small business leaders expect sales to rise 7.4 per cent a year over the next two years – driven higher than UKGDP growth predictions by planned innovation, with four in ten expecting to increase investment in research and development over the next five years. However, they’re concerned that the skills gap could hinder these plans, and 62% of small firms said their research and development was already being held back, with 37% blaming a lack of employees qualified in science, technology, engineering and maths.
Gareth Oakley, Managing Director, SME Banking, Lloyds Bank Commercial Banking said: “What we’re seeing is a growing determination amongst Britain’s small and medium sized firms to innovate in order to drive competitiveness and secure their long-term success. SMEs are ideally placed to lead this charge. They have the advantage of being closer to their customers and more internally flexible, which makes the process of listening to feedback and adapting products and services a shorter cycle.”
However, he added, the scale of the challenge is equally clear. “Unless we provide access to the talent necessary to deliver that innovation, we run the risk of missing an enormous economic opportunity. That requires a concerted and collaborative effort on the part of the UK’s innovation ecosystem, with skills and funding being the killer ingredients. As a major supporter of small firms, we’re determined to play our part.”
The survey found that investment in innovation over the last five years had increased small business profits (42%) and led directly to the securing of new contracts (43%), with SMEs investing an average 8% of revenue on R&D. However, with two thirds of survey respondents saying this ongoing success is dependent upon further innovation, it seems the lack of necessary skills in the labour market may turn into a crisis unless steps are taken to bridge the skills gap.
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