August 8, 2024 - Right now, 66% of executives say their top concern is finding the talent they need for the changes they know are coming. That’s according to our recent survey of 1,000 leaders of private companies and what’s surprising is the strength of their feelings. Leaders say that talent challenges are more concerning than:

• Geopolitical uncertainty
• Climate change
• Trade conflicts
• Artificial intelligence (AI)

A large part of that talent challenge isn’t just searching for people — it’s retraining and retaining them. In this article, we explore why so many executives are looking to solve their talent gap externally.

Change is difficult — especially at work

One of the primary challenges leaders face is not just that their company needs people with new skills, but that they already have many people who do not yet have those skills. Such is the pace of modern change that this gap has appeared suddenly. In 2017, just 6% of companies were knowingly using AI. Today, 73% are. Back then, e-commerce was just 9% of all sales. Today, it’s 16%.

Businesses must respond to this change. And at many companies, employees will resist it — especially since it’s rarely communicated as clearly or executed as neatly as leadership would like to think.

That leaves many leaders wondering how to best change their own workforce. That is why 97% have embarked on aggressive new professional development or upskilling programs, to varying degrees of success.

Keeping retrained employees is difficult

One of the more counterintuitive effects of professional development programs is that newly trained employees become more difficult to retain. Forty percent of executives we surveyed said this is one of their top challenges.

On one hand, leaders are investing vast resources into helping their people acquire the newly needed skills. And on the other hand, they are finding it’s an employee’s market. Those skills open workers’ horizons and may inspire them to switch companies. This is perfectly fair — U.S. employment is at-will — but it does create the need for companies to provide their highly trained employees additional support.

There may be a few reasons so-called “train drain” is worse at some companies than others including:

• Unclear career paths
• No opportunity to use the new skills
• Ineffective management
• A poor employee experience

Gallup estimates that this cycle costs U.S. employers $1 trillion each year. Every employee lost must be replaced and their replacements must then be trained at a further cost.

All this might cause leaders to think that the answer is to cut back on their professional development programs and simply outsource positions. As we’ll explore next, the story is more complicated than that, and the strategy we recommend is more of an “outsource plus” solution.

Outsourcing is easy — with unexpected benefits

There are many advantages to outsourcing key talent — especially finance and accounting. Companies today are complicating their own business models by expanding across more state lines (82% in our survey are multi-state), more countries (42% are multi-country), and more markets. All that complexity means they need additional niche specialists that can cover specific responsibilities.

Outsourcing is one way those leaders can get all that fractional expertise without the fixed overhead. It may also be the only way they can access those specialists at all — an increasing number of them prefer to consult and are not available to hire full-time.

Benefits of outsourcing include:

• Flexible, no fixed overhead
• Access to niche talents
• Less management cost
• No need to worry about turnover

However, something interesting happens when a company addresses its talent gap by outsourcing the most skilled components of the work — the in-house employees who work with those outsourced contractors develop by learning on the job.

Employees at companies that work with seasoned outsourced professionals learn faster. They acquire a greater understanding of how other companies operate and are inspired to develop in those niche areas. When you outsource skilled work, you also upskill your internal employees and those skills carry over.

Outsourcing is now mostly upside

Not only does outsourcing make your business more agile, without conducting hiring sprees that could trigger layoffs later, but it increases the skills of your existing workers. You get niche expertise now and can train people as an added bonus.

Outsourcing doesn’t mean giving up your professional development program — it means complementing it. Perhaps this is one reason so many executives are now looking to outsource to fill their talent gap.

To learn more about how outsourcing can benefit your business and help to mitigate talent shortages, please contact Mike Zyborowicz or Kieran Higgins.

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