Skills gap is hindering growth for business, says PwC report

09 May 2013 Gerald Seegers, PwC

Business leaders are calling for government to prioritise initiatives that help foster a skilled workforce, as more than half of CEOs around the world say a lack of key skills is hampering their growth prospects. The skills shortage is particularly acute

A global survey of over 1,300 CEOs discloses that business leaders see the availability of key skills as the second biggest threat to their business growth, just after the increasing tax burden (63%).

Gerald Seegers, Director of Human Resource Services at PwC, Southern Africa, says: “Businesses are struggling with a widening mismatch between the skills of their workforce and the skills they need to achieve strong growth. There needs to be a joint approach to addressing the problem, with businesses and governments working together to plug the skills gap.

“At a time when growth is at the top of all businesses’ agenda, investment in employee training and development should be a key priority for CEOs for the year ahead.”

The research shows that businesses are looking to government help them plug the skills gap. More than half of CEOs (57%) said that creating and encouraging a skilled workforce should be the government’s highest priority for the year ahead. This is an area where the government could do much better, according to the CEOs surveyed.

Although developing a skilled workforce has consistently been an area that South African CEOs believe should be given priority, the level of concern has declined from 84% in 2011 to 71% in 2012. Business leaders believe the Government could be doing a lot in many areas to help business in South Africa.

Tackling the talent challenge is also an area on which CEOs plan to focus, with 61% planning to increase investment in their workforce over the next three years. The research shows that mining, energy, and engineering and construction companies report the most chronic shortage of skilled employees. No less than 89% of South African CEOs plan to make some or major change to their strategies for managing talent over the next 12 months, with 25% contemplating major change.

CEOs were also asked about initiatives being undertaken in their organisations to develop their future leaders. Perhaps because of the strong transformation agenda in South Africa, business leaders are more likely than their global peers to involve managers below board level in strategic decision-making and to undertake active succession planning, says Seegers. Local CEOs were also more positive than their global counterparts about the effectiveness of interventions being undertaken to develop leadership in their organisations.

Programmes to encourage diversity among business leaders (88%), involving managers below board level in strategic-decision making (88%) and encouraging global mobility and international experience (87%) were the initiatives CEOs regarded as most effective.

For the fifth consecutive year, cost-cutting is a priority for the vast majority of CEOs, with 84% of CEOs saying they have initiated restructuring activities in the past 12 months. “The years of cost reductions have brought risk, mainly around people – morale and employee engagements have taken a knock.

“CEOs are facing their most critical leadership challenge – to keep costs under control while improving employee engagement.”

The research also shows businesses are planning to hire this year. In the past year, half of South African CEOs (52%) have increased their staff complement, while the proportion that has reduced headcount has increased by a fifth to 30%, after seeing a moderate improvement between 2010 and 2011.

Seegers concludes: “Despite the difficult economic backdrop, it is encouraging that businesses are continuing to hire. While headcount has been an obvious target for cost cutting in the past, many business leaders are finding smarter ways to strip costs out of their businesses which won’t damage their employees’ engagement and leave them with talent shortages in the future.

“The most successful companies will combine recruitment with developing the people they already have. Those with a balanced approach to growing their own talent and buying in key skills are most likely to succeed”.

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