With the labour market getting tighter and tighter throughout western economies, and the pace of change in technologies and business models increasing faster than ever, businesses must prioritize talent and knowledge management if they hope to survive the coming decades.

Unemployment is hovering around 4% in the UK.  The “sharing economy” is booming.  E-commerce continues its relentless assault on brick-and-mortar.  Global powerhouses like Walmart and Amazon have revolutionized distribution channels and supply chain management.  Shareholders absolutely demand environmental and social responsibility of the companies they choose to invest in.  Technological innovation is never-ending, surprising us daily with new possibilities.  Global trade is facing seemingly insurmountable challenges with a wave of nationalism resulting in new tariffs and other protectionist measures.

In short, businesses have a lot of work to do to overcome current barriers to global success.

One of the biggest threats businesses face in this environment is a lack of skills necessary to navigate the challenges.  Change is happening at such a phenomenally rapid pace that the education system has not kept up with preparing students to meet the needs of businesses, especially in the IT and healthcare sectors.  And workers, increasingly non-unionized, don’t commit to companies for decades at a time like they used to; the new reality is a tenure of only a few short years before moving on to another position at another company.

An analysis of market data indicates that talent management is the 2nd biggest challenge for UK businesses, behind only operational complexity.  But when surveying business leaders, talent management isn’t even on their radar of threats, falling in a distant 6th place.  Instead, businesses are focused on cybersecurity, the pace of technological change, and shifting customer demands.  Of course, it is crucial that businesses deal with those issues, but how can they do that without the right talent on board?

70% of UK businesses report facing difficulties in recruitment according to the British Chamber of Commerce.  12 million UK workers don’t have the skills needed to succeed in today’s digital world.  With unemployment as low as it likely can go, finding the right employees isn’t going to get any easier.  Businesses can’t afford to wait for government policy and education systems to prepare a new generation of better-equipped workers.

Many companies in the UK realized this some time ago.  In response, they have been searching globally for the talent they need.  But skilled labour from other parts of the current European Union will not be able to move into the UK as freely after Brexit in March.  If companies can’t find the needed skills within the UK, and they can’t easily import talent from abroad, the next best solution is to develop those resources internally.

UK businesses have long recognized the need for improved efforts in recruiting and retaining top talent in this challenging labour environment.  They are working to improve employee engagement and the work-life balance of workers, offering more and more perks, like gym memberships and extended paternity leave.  But only 20% of them, compared to a global average of 25%, are developing internal apprenticeship and training programs to improve the SKILLS of the talent they already have.

To complicate matters further is the flat growth in GDP.  UK-based businesses are hardly raking in excess profits to be used in recruitment, retainment, and training strategies.  HR budgets were instead forecasted to experience a .7% reduction in 2018, following a .2% reduction in 2017 and ultimately resulting in a 1% reduction in HR staffing levels.

More than half of surveyed HR professionals feel the decline in budgets will hamper their effectiveness.  But at the same time, 62% of those surveyed recognize the need for and want to adapt their HR operations to the changing needs of the organization.  51% believe the primary focus should be on leveraging technological capabilities to improve their company’s talent management efficiency and effectiveness. A staggering 90% of HR executives feel that social media, mobile technology, and other digital platforms will fundamentally change how they operate in the next few years.

Unlike business executives in general, HR executives place access to required talent in a firm second place of risks currently faced by UK corporations, behind only cyber and information security.

While 56% of these HR professionals feel they are in the process of executing new and improved, technologically adept, strategies for talent management, only 40% are confident in their abilities to be successful in these efforts.

Ironically, perhaps the best way to improve talent management in an increasingly digital world is to first look for human resource professionals that themselves have a firm grasp of technological change and the potential ways it can be leveraged to recruit, train, and retain talent in other departments.  Additionally, businesses need to stop viewing technology in HR as simply a path to reduced costs and increased productivity.  Instead, they need to recognize that technology has the potential to improve the EFFECTIVENESS of their human resource operations and leverage that technology to do so.  Only then will corporations be able to find, hire, train, and keep the skilled labour resources they need to thrive in the new world economy.