The War for Talent:
Myths and Realities
Key Takeaways
n Today’s CEO must protect his or her
company against a three-pronged
attack from adverse demographic
trends, education shortages and
global labor movements.
n The supply and demand for talent
is impacted by a complex set of
opposing forces (see Table 1).
n The supply-demand equation
fluctuates between abundant and
scarce for different occupations,
geographies and industry sectors.
n One thing is constant: finding and
keeping talented employees is one
of the biggest challenges executives
will face in coming years.
n Leaders must also be aware of the
impact of counter-trends that create
complexities but also opportunities
on the talent battlefield.
n Winning the war for talent takes
an arsenal of tools from planning
and recruiting to development
and retention, including the careful
management of an employer brand.
n The talent war exists for all
organizations; in an increasingly
competitive world how companies
fight this battle has become a critical
differentiator.
When it comes to supply and demand, there is one
commodity that bears watching even more than oil or wheat.
That is people – the 145 million-strong United States labor
force in the midst of a global war for talent.
By Brigitte Morel-Curran
The availability of labor in this country is expected to grow by eight
percent over the next 20 years, the highest growth in the Western world.
Not so bad? How this translates into the availability of talent is where
it gets challenging. Talent is a small subset of the labor force: those
educated workers who are required to apply critical thinking skills to
complex transactions. And finding them will get even more difficult over
the next two decades.
Deciphering Demographics
One of the most complex trends to decipher is demographics. In the next
seven years, the U.S. labor force will continue to age – even faster than
before. Government projections show annual growth of the 55-and-older
group to be 4.1 percent during 2004-2014, four times the rate of growth
of the overall labor force. By contrast, growth in the 25-to-54 age group
will be less than one percent.
Table 1
The Talent Market Equation
Attrition Lay
-offs
Supply
Labor Demand
Education Growth
Demographics Productivity
Labor global Generational
movements Talent trends
Leadership
Source: Korn/Ferry Institute, 2008
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The share of skilled workers – those with a post-high school education –

At what age do you plan to continues to grow but not enough. The demand for professional workers
retire? between 2002 and 2012 will grow in the U.S. to 75 million from 50 million,
while the supply of those workers will grow only to 45 million, according to a
study by The Aspen Institute. But these projections must be balanced against
Before 50 2% some counter-trends that could tip the supply-demand equation. Foremost
50-54 7% is the fact that older workers are working longer – beyond the traditional
55-59 19% retirement age.
60-64 28% Table 2
Businesses have an often
64-69 29% At what age do you plan to retire?
unexploited opportunity
70+ 15%to better leverage their
Baby Boomer talent 30
by deploying proactive 25 -3 -4
strategies to attract, retain,
20
“re-career” and motivate ,4
this particular generation. 15
,0
10

5 2
-
0
Before 50 50-54 55-59 60-64 64-69 70+

Source: Korn/Ferry, 2005

Korn/Ferry surveyed nearly 2,000 global executives about their future plans,
as Table 2 above demonstrates. Sixty-two percent said they were planning to
work later in life today than they thought they would three years ago. And the
column that got the most responses when asked “At what age do you plan
to retire?” was 64-to-69. Almost 30 percent picked that age; the next highest
with 28 percent was the 60-to-64 group.

Only 18 percent of U.S. employers report having a program to recruit older

workers, according to a 2007 Manpower survey. Nonetheless, businesses
have an often unexploited opportunity to better leverage their Baby Boomer
talent by deploying proactive strategies to attract, retain, “re-career” and
motivate this particular generation, with the potential of extending their
participation in the workforce by over ten years.

Industry sectors are also a factor when it comes to scoping out the workforce
of tomorrow. Not all sectors are equal. Education has not done a good job of
matching schools and training to needs. And in certain sectors, the boom and
bust cycles have kept younger workers from pursuing careers in industries
such as nuclear engineering or aerospace and defense. For example, there is
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a substantial shortage of engineers in this country – the government projects

a shortfall of 40,000 to 87,000 defense engineers by 2010. We all know that
despite applications to nursing schools rising 40 percent from a decade ago,
the U.S. has far fewer nurses than needed, due to an aging workforce and
not enough nursing schools. But did you know that there is an oversupply of
lawyers with law schools now graduating more lawyers than needed?

Another counter-trend relates to the increased participation of minorities in

the workforce. Their share of the workforce increased to 29 percent from 21
percent between 1980 and 2000 and will further increase to 37 percent by 2020,
according to the U.S. Department of Labor. This translates into substantially
greater numbers of minorities in the professionals and managerial ranks.

In this context, workforce planning now becomes a mission-critical activity

for today’s leaders. Organizations need to understand how their industry
talent availability will evolve, what competency gaps to expect and how the
labor market forces will impact them; they must study their industries and the
variables they cannot control: What will the workforce in our own organization
look like 10 years out? What can we offer Baby Boomers to entice them to
stay past traditional retirement age? Or if they want to stay, what sort of role
should they play? How do we manage knowledge transfers to mitigate the
loss of intellectual capital and corporate knowledge? What organizational
capabilities do we have and will we need? What competency gaps should we
plan for? How are we attracting minorities?

Bolstering Education
Much bleak news has made the headlines on the education front,
accentuating the mismatch between what schools are producing and what
companies need. In the U.S., only about a third of students who graduate
from high school are ready for college, according to a 2003 study by the
Manhattan Institute for Policy Research, and the rates for African American
and Hispanic students are much lower.

Jobs requiring critical thinking skills now make up more than 40 percent
of the labor force and are expected to grow much faster. A quarter of the
occupations adding the most jobs between 2004 and 2014 require a post-
secondary degree, according to the U.S. Bureau of Labor Statistics, with the
majority of these occupations being in the health, technology, educational and
financial sectors.

The good news is that by 2020, the share of the labor force age 25 and over
with a college degree is expected to rise to 34 percent from 30 percent in
2000, although these modest expansions in the supply of college graduates
will likely fall short of growth in demand for them.
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Table 3

Education Counter-Trends

Demand and supply vary widely for

Labor job-specific competencies

Skills and
competencies
Education
Private businesses are playing an
shortage increasing role in education

Globalization impacts both talent

availability and job movements

Leadership
Source: Korn/Ferry Institute, 2008

In order to fuel their Further increases in college enrollment must come from the nation’s minorities and
own demand, private immigrant population, which are underrepresented in attendance. According to the
businesses will play Institute for Higher Education Policy, only 23 percent of immigrant undergraduates
an increasing role in who started college in 1995 completed a bachelor’s degree after five years. With
educating their workforce these mismatches between the supply and demand for skills raising long-term issues
for our economic growth, the onus is increasingly on employers to fill the educational
and converting a critical gaps. Escaping the statistics are considerable educational efforts from employers.
mass of “labor” No one really knows how many talented computer technicians have grown their skills
into “talent and through self-development and company training. The same holds true in the business
leadership.” and managerial ranks. In order to fuel their own demand, private businesses will
play an increasing role in educating their workforce and converting a critical mass of
“labor” into “talent and leadership” as shown on Table 3.

Going Global
In the war for talent, the battlefield is now global. Regardless of whether you are a
Fortune 100 or a small local business, your potential talent is attracted outside of its
home base, and you need to look at supply and demand on a global basis. On the
global scene, the difference between the labor shortage and the talent shortage is
even more pronounced than in the U.S. Most developing countries have a positive
demographic trend and an abundant supply of labor. For them, the conversion of labor
into talent is the key challenge.

Conversely, in the developed countries declining population growth and demographic

Baby Boomer retirement patterns are similar to the U.S., and often worse. In most of
Europe, entitlement to retirement funding inhibits the extension of the working age.
Furthermore, restrictive immigration policies in places like Germany have limited the influx
of new workers to make up the talent gap. This is less true in France and the United
Kingdom, but immigration is a highly charged issue in many countries.
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Going abroad for labor and talent to fill positions can be a difficult proposition
that must be carefully managed. India, for instance, has a large population of
young well-educated people, and has gained a reputation for being a valuable
talent pool. However, this is changing, and talent availability is becoming a
slow-down factor for the Indian economy. Only about 10 percent of Indians
are educated and the quality of their education varies greatly. At the same
time, 40 percent of the population is near-illiterate. For example, Infosys,
the large information technology services provider with extensive Indian
operations, receives 1.3 million job applications a year; only about two percent
of these applicants meet qualifications. The situation is further tensed with the
increase of labor cost. With wages rising in some sectors by as much as 15
percent per year, India is not as cheap anymore.

In China, the real issue is the readiness of the population to generate the talent
needed to fuel its growth as a major player in the global economy. The country
was hugely affected by the Cultural Revolution which created a 10-year
educational gap. Even today, college graduates influenced by the culture and
the educational system tend to fall short in the critical thinking skills, leadership Most developing
and reliability that are needed in a booming economy. And it means less talent countries have a positive
available for export. demographic trend and
an abundant supply of
New global talent is hard-
Looking across the world, we see labor; converting labor
working, ambitious and hungry competition for talent as a key into talent is the key
for success economic factor in most developing challenge.
countries. Several Middle Eastern
3 Businesses who go to battle on countries are investing enormous
the global front increase their
competitive advantage sums of money to attract talent,
including making life more enticing for
3 Moving jobs offshore is no longer
the panacea, cross-fertilizing talent U.S. citizens to move there. In Eastern
is the new play Europe, schools are still turning out
3 Casting the net wider will help impressive scientific and technical
manage the risks talent but are being impacted by the
3 Even where labor seems cheap, decreasing funding of education over
investment in education is critical the past 10 years. In addition, English
proficiency and managerial skills are
lacking and wages are rising, making
cost a factor. In Latin America, factors
affecting the workforce include insufficient education support, economic
instability and language barriers.

In the U.S., the regulatory environment has made it more challenging to

import workers. There are a limited number of visas for skilled employees,
and in the last ten years, the allotment of H1-B visas has been used up
before the federal fiscal year begins. Denials of and delays in processing

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visas have cost companies an estimated $31 billion between July 2002 and
July 2004, according to the Consulting firm Santangelo Group.

It is also more difficult in this post-9/11 environment for students from abroad
to come to the U.S. to study. The U.S. government heavily scrutinizes
prospective foreign students under the Visas Mantis program, a security
review of science students to prevent the illegal transfer of technology.

Finding Solutions
The good news is that despite a myriad of external factors, there are weapons
a good leader can employ to fight the talent shortage. They include rethinking
how you manage and grow your existing employees, which in turn impacts your
“employer brand” and your ability to attract talent.

Take a look at the generational makeup of your workforce and what

preconceived notions you might have about it. Are you loathe to develop your
Gen X (those born 1965-1977) workers because you think they are too self-
centered? What about the Gen Y(those born 1978-2000)? Do they just want
to talk on their cell phones and surf the Internet all day? And what about the
declining loyalty: am I developing employees so that they do not initiate the
search for their next job or to make them more marketable?

There are plenty of generational myths out there, as demonstrated by

Jennifer Deal from the Center for Creative Leadership (CCL) in her recent
book Retiring the Generation Gap (see Table 4):
Table 4
Myths Realities
n Young employees don’t have values n All generations have similar values –
they just express them differently

n Younger employees are less loyal to n Loyalty depends on the context,

their organization than older rather than the generation. There is
employees no evidence that younger workers are
more or less disenchanted than their
elders

n To retain younger employees, all you n It is as easy or difficult to retain a

need is give them money young person as an older one – if you
do the right things

n Older employees are less interested n Everyone wants to learn – more than
in learning on the job than younger just about anything else
employees

n Older and younger people want n People want leaders who are credible
different things in their leaders and trustworthy
Source: Jennifer Deal, Retiring the Generation Gap, 2006

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These organizations also pay attention to the engagement of their

workforce, starting with on-boarding of their newcomers, focused
development planning and strategic use of stretch assignments to provide
opportunities for competency development, as illustrated in Table 5 below.
Periodic engagement surveys are an essential tool to manage retention
and adapt talent management initiatives to the most critical needs.
Table 5
So, what about the economics
Finding Solutions of retention policies? Industry
studies consistently estimate
g and Suc that conservatively, the cost to
e rin ce
re ss replace an employee is between
a e v e l o p
d
D m e 100 percent and 150 percent
-c

io

te of his or her salary, including

Re

t ing Ta
nt

c
ra

ra l
Pla

recruitment costs, compensation

Ac ce l e

en
t
At

overlaps, benefits, productivity

nn i ng
t

COMPETENCIES loss, opportunity costs and

relocation expenses. And this
P ro

Re
ng

t en t i on figure does not even include the

du

ni

n intelligence deficit that occurs

Ta l en t Pla
ct

vi
ce when knowledge about company Important levers of
i

ty n
and
Pe r f or ma processes and technologies walks talent that need to
out the door. be considered are
Source: Korn/Ferry Institute, 2008 productivity and
Other important levers of talent that need to be considered are leadership.
productivity and leadership. Since the 1980s, automation has driven
enormous productivity gains for transactional jobs, those that can easily
be structured and scripted. The next generation of technology innovation
has started to address the automation needs for complex interactions,
those that require critical thinking skills, which are the very same skills that
are in short supply. When considering new technology investments and
evaluating their returns, business leaders should pay attention to those
initiatives that drive productivity for knowledge workers and materially
impact the need for critical thinking skills.

The other big multiplier of talent is leadership. Simply put, those

organizations with best-in-class leaders develop their people better and
faster than anyone else. Look at what strategies you use to develop
new leaders. Do you identify your best and brightest? Do you assess
them to know your high-potentials are truly high-potentials? Do you use
job rotation and role assignment to accelerate their growth? How about
mentoring and coaching? According to a recent study from Hewitt on
“How top companies grow great leaders,” the biggest investment involved
may be the time of the CEO and other executives. Many of the leaders
of the winning companies in the survey spend over a third of their time in
developing leaders in their organizations.
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In Conclusion
Most CEOs are concerned today by the investments in time and dollars
induced by the talent war: talent is increasingly expensive to attract,
develop and retain. However, this trend applies to everyone.

The talent war is a reality that no one can ignore. But it is a complex
battlefield, under the influence of trends and counter-trends that apply
differently to every sector and organization. Understanding your talent and
competency needs, attracting the best candidates, nurturing their growth
and accelerating the development of strong leadership will pay dividends
in the form of competitive edge. Your talent strategies and tactics will
determine how you differentiate from your competitors and win the war.

Brigitte Morel-Curran is a Senior Client Partner in Korn/Ferry International’s

Leadership Development Solutions group. Based in Chicago, Ms. Morel-
Curran has more than 15 years experience in leadership consulting and HR
transformation and a highly successful track record advising major multi-
national organizations on talent management challenges.

About the Korn/Ferry Institute

The Korn/Ferry Institute was established in 2007 to commission,
originate and publish groundbreaking research in the field of talent
development. The Institute combines data mined through Korn/Ferry’s
preeminent position as the world’s largest executive recruitment firm
with an unparalleled library of behavioral research compiled by Lominger
International. and Korn/Ferry’s Leadership Development Solutions group.

About Korn/Ferry International

Korn/Ferry International, with more than 80 offices in 39 countries, is a
premier global provider of talent management solutions. Based in Los
Angeles, the firm delivers an array of solutions that help clients to identify,
deploy, develop, retain and reward their talent.

For more information on the Korn/Ferry International family of companies,

visit www.kornferry.com.

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