Talent, specifically the talented knowledge workers needed to establish Canada as a competitor in the new global economy, is leaving this country at a steady rate. Leaders and managers who realize the problem, but lack solid ideas for retaining and retraining talented workers, will find some solutions in meeting and defeating the challenge in this article.
The current economic downturn and associated record dislocation of workers is being likened to the Great Depression of the 1930’s. Governments around the world are attempting to use economic stimulus packages, worth trillions of dollars, to prevent an economic disaster and to attempt the acceleration of a recovery. The impact on talent during these times is particularly keen as workers are experiencing a perfect storm that is made up of:
- A disruptive shift in the economy, away from a familiar manufacturing-based economy to a knowledge-based, creative economy that is more dependent on talent and innovation to create value. This shift is driving the need for innovation in both old and new business models, as well as in technology and new skills.
- An unanticipated global recession that is dislocating many experienced people, putting them into a challenging environment with few job prospects and poor availability of capital to create new opportunities.
- The disruption caused by competition from the developing world. Companies in the developed world have been aggressively outsourcing jobs, including knowledge jobs, to lower cost centers. This has weakened innovation domestically (e.g. reduction in company patents/person due to outsourcing). Future success hinges on the ability to compete with these new low-cost suppliers, by changing the playing field to leverage the mature domestic talent rather than trying to compete on cost alone.
- A shift in value away from infrastructure and towards applications. This invalidates many of the existing manufacturing-oriented skills and requires retraining in new domains. The new value comes from applied technology vs. the foundational technology. For example, Google offers high-value services that leverage other’s utility infrastructures (e.g. high speed access, mobile networks, networking devices). It has also been increasingly successful in commoditizing competitors’ business models
Global competitiveness is really all that matters, as we are all a single market where value can be created and delivered anywhere very effectively. Differentiation, driven by talent, comes from innovation around ideas, business models, speed to market and the ability to offer unique, high value services.
Why is the talent issue important?
Talent is often thought of as well-trained people. However, in the context of commercialization, it is really more about these people’s ability to generate wealth – about the ability to win in a globally competitive marketplace. To use the analogy of an Olympic team, competitors with raw skills are disadvantaged against those that are well practiced and well trained. Performance improvements come from increased local investment in the athletes, coaches, equipment and venues. Similarly, investment in talent must provide for practice time, and include the support infrastructure that motivates the worker to expend the effort required to win.
In the business world: Talent = Knowledge & Skills excellence + competitive attitude + business experience.
If all of these factors are not in place, talent will underachieve and/or will leave to pursue opportunities elsewhere. The creative economy is dependent on world-class skills and innovative people that are the new unit of value. Emerging economies have recognized this and rather than provide only training, they provide the support for growth (e.g. business financing, favourable export policy, buying local company products) as well. Individuals who return from studying and working abroad harness the experience of the developed world, enabling them to become formidable global competitors.
Instilling/fostering a competitive attitude, the aggressiveness, innovation and hunger to win is almost always provided by the promise of wealth. Without this pull, there is little reason to excel, or in fact to even stay and perform. There is also a shortage of collaboration skills required to succeed in this new economy, globally, but certainly in Canada. Increasingly, large companies that have fought to dominate a sector must now partner to address the ever increasing complexity of the solutions required. This requires a collaboration model vs. the historical, dominator-control model, a change which is often difficult for companies to achieve. Innovative new business models, such as business ecosystems for commercialization are required, yet few business people have experience or training in these new forms of commercialization
Providing access to business experience (e.g. successful business leaders), or coaching on how to apply and develop the skills are only developed through experience in the business world, and require discipline and focus that are difficult to learn, certainly in the academy. The most successful companies are led by strong individuals who have been trained in large companies that have extensive coaching and personal-development programs. The lack of these experienced leaders impedes the growth of successful companies, resulting in their acquisition by foreign companies (e.g. Cognos, Entrust, and many others) or relocation to other countries. The local availability of mentors and experienced leaders requires that attention be paid to large domestic anchor companies as well as the start-ups themselves. This, combined with improved availability of capital, will attract and retain experienced, serial entrepreneurs and fill the gap in the factors required to retain and grow talent locally.
Adding to the pressure resulting from the lack of strong leaders is the fact that Canada is losing jobs and associated talent at an alarming rate. In addition to forcing companies to outsource jobs to more competitive jurisdictions, the recession has displaced many skilled workers. People follow the opportunities, as evidenced by the Stats Canada Study (“Life After the High-tech Downturn: Permanent Layoffs and Earnings Losses of Displaced Workers”). Eighty percent of the displaced knowledge workers left the tech sector and 10-20 percent left their home towns to earn their livelihoods elsewhere. This exodus, coupled with the fact that salaries dropped by $10-12k per year, points to the fact that old anchors and business models cannot meet the challenge.
The behaviour that we are observing – people leaving their city or even this country — is a manifestation of people’s natural focus on self-interest (to pursue opportunities that will create personal wealth). The decline in domestic knowledge worker opportunities, particularly in the tech sector, presents us with a significant talent retention challenge.
Using Canada as an example, The Economist (and others), which ranks countries’ global competitiveness, has identified a number of strengths Canada enjoys, including:
- A strong education system that produces quality graduates
- Lots of skilled workers, that would be rapidly re-trainable
- Excellent technology support, in the form of broadband penetration
- Good quality of life and overall environment for business, which provide some of the required building blocks.
However, the challenges are significant.
- Many of the talented people are leaving the knowledge industry due in part to the poor support available to knowledge workers. Venture capital is in very short supply in Canada [The Issue: Venture Capital – ITAC Mar, 2009] resulting in entrepreneurs looking to the U.S., UK, India or elsewhere for support to launch new ventures.
- Government support is very much focused on the front-end of the business life cycle, so when a business needs to scale up, the fledgling company is on its own. Local jobs are outsourced to lower-cost global jurisdictions, including some of the higher-value design jobs, significantly undervaluing the experience these previously mentioned local jobs bring (e.g. the outsourcing of a project from North America to China resulted in an overall cost reduction, but an increase in the number of employees on the payroll), The short-term cost gain has a longer-term negative impact on the viability of the company going forward.
- Canada has a challenging environment that makes it harder/riskier for companies to achieve significant growth. The small domestic market makes it necessary for companies to seek business outside of Canada. Innovation increasingly comes from working closely with customers in their local markets rather than from work done in the labs, disadvantaging small domestic markets. Moreover, these small markets lag in adopting new technologies, driven in part from their small size and inability to sustain development for new initiatives. For example, innovations by Google (Grand Central) are not available in Canada until they’ve been introduced in other countries.
- Domestic incentives, such as tax credits, are geared to the ability of successful businesses to monetize credits against revenue, which is of little help to start-up or struggling companies that are not significantly profitable.
- This shortage of business skills is acute and is exacerbated by the focus on the front end of the value chain/ business life cycle. Skills such as business development, marketing and sales are not in balance with technical capabilities nor are they in adequate supply to drive the growth required to be globally competitive. The lack of experienced business leadership was the subject of a 2008 Smart Money conference (From Entrepreneur to Titan). It identified the need for an increased focus and the development of business leaders for the next generation of companies. Small comparable countries, such as Finland, Sweden, and Israel, all outperform Canada on innovation [Economist Intelligence Unit – May 2007] and are more globally competitive. This fact is not lost on Canadian entrepreneurs, some who have moved to set-up their companies abroad. Talent faced with these sorts of challenges looks to other locations for opportunities, as evidenced by the number of startups that have chosen to locate in the U.S., resulting in fewer local opportunities as well as an exodus of talent from Canada.
An innovative and aggressive approach to turn these weaknesses into assets in the creative economy is urgently required. Significant layoffs continue in virtually every sector of the Canadian economy, placing pressure on the displaced workers to find some means of livelihood. Thousands are now competing for fewer jobs. Additionally, the increase in bankruptcies [April, 2009, Insolvencies up 32.2% [www.Bankruptcycanada.com] eliminates jobs, and in some cases, does not provide any sort of transition for displaced workers (e.g. Nortel has displaced thousands of workers with no severance and questionable support for pensions). Once these workers are gone, it will be very difficult to recover what years of development have created.
Solution: A way forward with potential
The solution lies in addressing three key, interrelated elements: Creating new skilled resources, retaining them, and embracing new tools and processes to enhance the talent created so it continues to evolve and develop. The elements are closely interrelated, as illustrated below:
Retention = function (Supply of skills, opportunity, incentive)
Attracting people to pursue training requires pull, both from the availability of jobs as well as the incentives to choose these jobs over other, competing jobs. Opportunities are not created if there is no supply of talent and no incentives to focus on competing globally. Breaking this Catch-22 requires that supply be balanced with opportunity.
- Training new people
- Re-training displaced people
- New tools to drive productivity
- Domestic jobs
- Innovation support
- Market/customer pulls
- Opportunity for wealth
- Quality of life
- Ease of doing business
The new skills that are required encompass a hybrid technical/business focus and include: advanced software development, web services, security, collaboration, open source, ecosystem based development, innovative new business development models. Some of these skills would need to come from immigrants, some can come from retraining – a ‘staffing plan’ needs to be developed to guide this. The objective is the retention of the skilled workers that we have and leveraging them as mentors, and growing new talent to fill gaps (rather than outsourcing and losing them). Progressive schools have partnered with industry to establish a focus for their student development (e.g. linking their business and technical departments to supply appropriate skills.) One step that would bridge the technical transfer-effectiveness gap would be to link university research to commercialization. Tying a significant portion of the funding provided to commercialization results and removing funding limits from successful commercialization of research initiatives could establish a focal point for leadership development and high-value jobs. .
Capacity has been flagged as an issue, which is not a surprise given Canada’s small population. Emerging business models of open source and co-creation of value [P&G’s New Innovation Model – HBR Vol 84, No 3, March 2006] illustrate that scale can be achieved via leading collaborative efforts. These are models that have been proven to work effectively at harnessing talent wherever it may be, and to focus the domestic efforts on commercialization. This ecosystem approach is ideal for a small, highly talented population, since it provides the scope of a larger company, the ability to innovate more rapidly than larger competition and an ability to scale beyond any of the individual player’s capability. Couple this ecosystem mechanism with new models of commercialization, and Canada may be able to ‘punch significantly above its weight’. (www.coralcea.org.)
Retention is a more difficult challenge. Once a knowledge worker has the requisite skills, he or she is motivated to pursue opportunities that generate maximum personal wealth. Trained engineers have left home to work in countries that enhance their quality of life more rapidly and provided better growth/development opportunities. To retain workers such as these, one must create the following paradigm: creation of the skills + opportunity to apply them + motivation to make it worth their while to play.
Lowering the barriers to innovation, improving tech transfer and increasing the availability of capital all contribute to solving the retention issue. The creation of skills is more than just technical or business training. It involves providing workers with the tools required for them to succeed. New employees have demanded modern tools (hardware and software) from businesses that force investments in modernization. Also required are tools like open source, that make it easier to implement innovations and provide the ability to leverage innovation elsewhere to help the employee solve his/her problem quickly. All of this requires the retraining of older workers.
One key to retention is the availability of local opportunities and jobs. Students have questioned whether or not what they are studying is relevant and will result in a meaningful job. Local hiring of these resources is key – whether it is offering co-op jobs during training or hiring upon graduation. An incentive for companies to hire domestically would address students’ concerns and make sure that the investment in universities has a positive impact. One interesting metric to capture would be the number of training-program graduates that were hired domestically. This would ensure that the programs were effective both in terms of content and their alignment with commercialization objectives.
Additionally, stimulating the opportunities for innovation, enhancing the viability of starting up a business domestically, providing reasonable access to capital, and using solutions are very important to growing commercially successful companies in Canada. Aligning government investment with industry investment around the national priorities seems like a reasonable place to start (Health, Green, Resources, ICT).
What is often overlooked is the motivation for talent to put in the effort to succeed at the local level. It is all about the creation of wealth – personal and corporate. Talented people recognize their worth and will relocate to be able to maximize any return on the efforts that they expend. Getting directly involved to mitigate any real or perceived risks, for example, providing lead customers to attract VC capital or removing artificial barriers (real or perceived), is required. Investment follows the path of least resistance; making it really easy to do business here will attract the required people and investment. A primary focus needs to be on making any changes/investments structural vs. opportunistic. This requires a long-term plan, with short-term steps for achieving the goal. Investments need to address the full life cycle to reinforce the motivation to succeed here.
Finally, there needs to be a focus on modern tools and processes to leverage and enhance the talent that we do have. Some considerations include:
- Focus on harnessing the latent power of displaced workers vs. just providing them with EI
- Create and support ecosystems to magnify collective impact
- Attract knowledge opportunities for workers to address, e.g., broker opportunities
- Shift tech transfer success from measuring transition activity to measuring its commercialization effectiveness
- Address the full life cycle gaps and flow
- Make it worth while to try; go for best practices
The talent crisis in Canada today is real and the competitive game is changing. We need to apply a new perspective and new approach to protecting our knowledge workers. This article described a framework (ecosystem) to address the talent crisis and identified some levers and focal points that would be effective in making the change. The opportunities to change the path forward include: investing in commercialization by creating and using a new ecosystem business model; fixing the innovation model by linking the front-end research explicitly to support commercialization; and retaining the dislocated talent by making it easier for it to commercialize and create wealth domestically. All of these areas are tightly inter-related and as such must be addressed as one, at the same time.