Why Businesses Need to Stop Whining, Step Up and Close the ‘Skills Gap’

In the mid-1950s, as the “automation revolution” swept America’s factories, Peter Drucker called on corporations to take responsibility for providing something essential to their workers’ fortunes, as well as their own: the training needed to master the new technology.

“Large companies in particular will have to become educational institutions,” Drucker wrote in Harper’s. “For the foreseeable future, there will simply not be enough new people with the new knowledge and skill required to fill the new jobs; and this will be true in all areas of the organization: rank and file, office work, technical and professional work, managerial work. On every level, adult education—largely on the job—will be needed.”

In his provocative new book, Why Good People Can’t Get Jobs, Peter Cappelli makes essentially the same argument for the 21st century. His contribution couldn’t be more timely.

Last Friday’s employment report, showing that U.S. payrolls increased by only 69,000 in May and the unemployment rate ticked up to 8.2% during the month, underscored the persistent softness of the labor market. Earlier in the week, meanwhile, ManpowerGroup released its latest survey showing that companies continue to complain that many positions are going unfilled because would-be employees lack necessary skills.

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Students listen to instructor Jesus Hernandez as they continue their education on servicing air conditioners at the Air Conditioning, Refrigeration and Pipefitting Education Center in Opa Locka, Florida. (Image credit: Getty Images via @daylife)

Cappelli, a professor at the University of Pennsylvania’s Wharton School, doesn’t buy that view. He contends that one reason employers aren’t filling open slots—even when there’s a surplus of folks who are jobless—is that the pickings are almost too good. “This situation is not unlike that of teenagers who think they have many possible dates for the prom, putting off asking anyone in particular while considering their options,” he writes. “Employers, too, can be so dazzled by the choices that they wait too long to fill positions.”

In the end, Cappelli shows, those who do get hired are often overqualified—college graduates being brought on to perform tasks that really require only a high school degree.

At the same time, many others are shut out of work—even though they possess the attitude and general aptitude to be successful—for one reason: They lack prior experience (something those right out school almost never have). “The most important reason good individuals can’t get jobs . . . is that employers are defining job requirements in such a way that applicants need to have done the job already, a fact that dramatically narrows the supply of qualified applicants and unintentionally builds atrophy into the very heart of the workplace,” Cappelli writes.

Cappelli also declares it bunk that American workers aren’t smart enough to fill the vacancies that exist. He cites a number of statistics challenging the conventional wisdom that the U.S. public education system is a near-complete failure, while also questioning whether employers are actually fretting about the academic preparation of job applicants, as is widely depicted.

In any case, Cappelli adds, “to expect schools and students to guess what skills your company will need in the future is plain and simply bad business.” On this, Drucker clearly would have agreed. “When a subject becomes totally obsolete,” he noted, “we make it a required course.”

But if the so-called skills gap is largely a myth, why do jobs go begging in such a weak economy? Cappelli offers an intriguing answer: “the hiring process itself.”

Part of the trouble, he says, is that hiring has become dominated by computer software that makes it difficult “to identify skills that are not easily associated with credentials or experience.” The result, according to Cappelli: “Able applicants are tossed aside by capricious algorithms.”

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Interestingly, this is a problem that Drucker also recognized. “You see creeping credentialism all around,” he warned in a 1993 interview. “It’s easy to fall into the trap because degrees are black and white. But it takes judgment to weigh a person’s contribution.”

An even bigger issue, perhaps, is what Cappelli describes as “a distinct decline in employer investment in workers”—specifically, giving them formal training. “Everyone emerges a loser,” he writes. “Companies are stuck with often costly vacancies, while job seekers remain unemployed.”

To remedy this, Cappelli urges a revival of corporate in-house training classes and apprenticeship programs, along with the creation of more public-private training initiatives and special alliances between businesses and technical schools.

Drucker, who believed that every worker should expect to receive proper training, would have applauded this approach, for it requires buy-in by everyone: Workers must be ready to devote themselves to a life of continuous learning. And public schools must be prepared to team up with business in a way that’s effective.

But, just like Cappelli, Drucker asserted that much of the cost should be shouldered by industry alone. “It is . . . management’s job to enable the enterprise and each of its members to grow and develop as needs and opportunities change,” Drucker wrote in a 1988 piece for Harvard Business Review. “This means that every enterprise is a learning and teaching institution.”

Why should business bother? Cappelli, in his final point in the book, suggests that having workers learn on the job will more than pay for itself in the end. “Teaching work-based skills outside the workplace is both inefficient and impractical in the long run,” he maintains. “What’s more, it makes no sense for the employers, as consumers of skills, to remain an arm’s-length distance from the schools that produce these skills. There are better ways for employers to handle these issues even from the perspective of their self-interest.”

Once again, Drucker was on the very same page. As he put it most bluntly: “If you think training is expensive, try ignorance.”

Paul Champion

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Twitter: @blogapprentice
Skype: paulchampion31

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