Why the Skilled Talent Market Is So Tight

It’s probably no exaggeration to say that we’re experiencing the biggest (skilled) talent crunch of our lifetimes. I think conceptually people understand that. 

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However, when it comes to fully digesting this as a new normal and breaking the old heuristics/rules to overcome it, that’s a different story. It’s possible, even likely, that winners and losers will emerge based on who will adapt their talent strategies to meet these new challenges. 

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It’s a moving feast of interdependent factors but here is an overview of what is happening.

The (Compounding) Problems

Companies are transitioning from industrial to digital

Firstly, as companies transform and digitise their products and services, the make-up of the workforce needed to build and deliver those products and services has radically changed in the space of a very short time.

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Many leaders are confronting the reality that they need a completely different workforce to be successful in the 2020s as they did previously in the 2010s and certainly before that.

Covid has accelerated that

Covid has accelerated this digital transition. Satya Nadella, CEO of Microsoft, said that Covid has forced “10 years of digitisation in 18 months”. This has dramatically increased demand for skilled digital talent. 

This has led to a huge surge in demand for particular types of talent

Unlike the past where we had a diversity of roles to drive our economy, in 2018 more than 49% of the S&P100 job postings were for only 39 roles.

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The 39 roles include software engineers, designers, digital marketers, product managers, project managers, business analysts. That number is likely to be even more concentrated as companies become more digitised. At the same time, managerial roles are becoming more redundant as decision-making gets decentralised and entry-level and low-skills jobs are increasingly automated. As of today, we are all competing for the same 39 roles to execute our plans and drive growth. 

The supply of talent does not meet demand

Demand currently outstrips supply by a huge degree - it's hard to know exact figures but the number is probably 3 to 1 for digital talent.

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There are 3,238 software engineering roles open in Australia on LinkedIn today. As you scan them, few have more than 10 applicants (many of whom may not be suitable). It’s unlikely that almost any software engineers are out of work right now, so perhaps we could take this as a proxy for the shortage of engineers today, not to speak of the other in demand roles. All of these supply demand mismatches are a broader proxy for our unrealised potential and progress as a nation.

Adding new talent to these pools takes years

It does feel a little bit like people are waiting for this to pass. The phrase “when things return to normal” is heard almost every day. Having spent a lot of time thinking about this, I don’t believe  the talent shortage will be getting solved anytime soon.

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There is a likely gap of around 60,000 digital professionals needed per annum over the next five years with around 4-7K Australians students graduating with Computer Science Degrees (Deloitte report). According to the report, while Australia will need 18,000 more cyber security workers by 2026, only 500 such specialists graduate locally each (CEDA report).

It’s not just a “border thing”, this is a global shortage

Strangely, it does feel a little bit like people are waiting for this to pass. I don’t believe the talent shortage will be getting solved anytime soon. There is a likely gap of around 60,000 digital professionals needed per annum over the next five years.

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We only have around 4-6K Australians students graduating each year with Computer Science Degrees (Deloitte report). In another hot category - cyber; Australia will need ~18,000 more cyber security workers by 2026, only 500 such specialists graduate locally each (CEDA report).

Compounding this, Australia is down ~30% of its recruiters

The response by most organisations has been to scale up recruitment manpower (or womanpower) - the trouble is, there are no TAs or recruiters in sight. Australia’s talent shortage has been compounded by a decline in recruiters and talent acquisition professionals. 

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Australia lost ~30% of its recruitment talent during Covid (largely moving back to the UK). In March of 2020, one in eight of Aussie recruiters lost their job. But it quickly bounced back. One contact recently told me that in 2018, they posted a mid-level talent acquisition and received 100+ applications.

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Currently, that very same job advertisement has returned 2 applications in 8 weeks even though the salary offered is 45% more than 2 years ago. Further, anecdotal data has shown that many of these high-skilled people will not come back.

Not hiring, or hiring later is not an option for most companies

The reality is, as a company,  not hiring the talent is not an option. As a nation, not digitising is not an option. The world is changing and we need to adapt.

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So where to from here?

Here are a few observations based on countless coffees / zooms on the topic as well as observing the past year at Expert360 (somewhat of a proxy for supply and demand of top talent). In the short-term;

Get your purpose right

This stuff isn’t new, but it’s more important now than ever that you are clear about why your company exists (and ideally why it’s going to make the world a better place even in it’s own little way). Making sure that everyone in your organisation knows that, lives by it and breathes it is essential. 

Throw out your old “salary bands”

Your “market rates” are probably already old if you updated them last week. Salary bands make a lot of sense for roles where either supply or demand is somewhat in sync, but more importantly, they’re built on the premise that humans could only be so productive. It’s highly unlikely that a supply chain associate could add exponential value to an organisation. Their work is largely manual and lacking leverage. They don’t have scale.

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In a non-tech world, the only way to get scale of your impact is by making decisions from the top - being a leader. In turn, those people get paid more because if they do their job well, they create a huge amount of value. That is turning on it’s head. Almost nothing in the world is more productive than writing a line of code whose functionality is used by a billion people. That is scale; and applied well, that is immense value creation.

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A good designer or developer can create completely disproportionate value for an organisation than a role with less scaled impact or leverage. Tech companies have known this for some time and pay their digital staff big premiums (a principal engineer at Facebook earns $1M). Whilst other factors drive this, the main point is that you may need to have a tough conversation with the boss about loosening those bands.

Stop asking for bachelors degrees (as a job requirement)

Even though I did manage to get a degree myself, the reality is many people are not afforded that opportunity or formal education simply doesn’t work for them. One of the most beautiful things about many digital skills is you don’t need a degree, or even a school certificate.

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The highest quality of education is available at your fingertips online - much of it for free. I think it takes far more courage, curiosity, conviction and discipline to drive your own learning paths - and those are characteristics which we should all look for in our talent.

Engage talent on their terms

Contract type, location, hours etc. There is far more demand for digital talent than there is supply, and that makes these individuals powerful in a way other professions are not. They will tell you directly or indirectly (by virtue of you simply not applying to your rigid job briefs) how they want to work - freelance or perm, part-time or full time, onsite, remote or both. Look at all options to access the skills and capability and not just “own” the talent.

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The harder part is that this involves adding new partners, new channels, new agreements, new contract types and new rules…. Fast. 

Whilst these are some thoughts on how to get the talent you need, our systems also play a large part in supporting a longer-term solution.

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Adapt our education systems

A friend, Hugh Williams, is an Aussie returned from 20 years in the Bay Area after an illustrious technology career only to find our education system, as a whole, was wildly underpreppering students for a career in a digital-first world. Hugh started CS in Schools, which is a not-for-profit initiative at RMIT University that’s focused on helping high school teachers develop their confidence and competence in teaching computer science.

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We need more of this and we need to encourage our students, sons and daughters (especially) to consider a career in digital areas.

Import talent

Talent from overseas has been critical in building our technological infrastructure, and will continue to be so going forward. Opening up the borders will loosen the current demand pressures a bit, but they certainly won’t solve it.

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We need imported talent for both execution but also to help bring best practices and learnings to Aussie companies from around the world. At the time of writing, there is not a degree that I’m aware of for Product Management and yet it’s perhaps the most in demand job in the country. People learn from great people, and we should be bringing them here in the droves.

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Thanks for reading, and I hope it’s been insightful. Please feel free to share your own observations in the Linkedin Comments section - especially if they’re contrary to mine.

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