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Point of View
June 2012, No. 1
Talent & Organization
Solving Europe’s human capital challenge
By Tim Cooper, Mark Purdy and Matthew Robinson
Tim Cooper is a senior research fellow at the Accenture Institute for High Performance. firstname.lastname@example.org Mark Purdy is a senior executive research fellow at the Accenture Institute for High Performance. email@example.com Matthew Robinson is a senior executive research fellow at the Accenture Institute for High Performance. matthew.c.robinson @accenture.com
The storm of sovereign debt that has engulfed European financial markets since late 2009 has significantly undermined Europe’s growth prospects. The crisis—rooted in rising government debt levels— has resulted in a loss of consumer and business confidence. The fledgling economic recovery has stagnated: Europe’s current GDP growth stands at zero percent. In response to the crisis, many governments have adopted significant austerity measures to rein in ballooning public-sector deficits and debt levels. Growth in Europe’s major export markets, including the United States and emerging economies, has not been sufficient to offset the general slowdown. In this environment, Europe is facing an unemployment crisis that is unprecedented in recent times: • Since the start of the current economic downturn, Europe has lost more than 5 million jobs. Current unemployment levels are the highest they have been since 1998. • Since mid-2008, the number of people in Europe unemployed for more than one year has risen by 59 percent—from 6.09 million to 9.68 million. • Even if Europe were suddenly to generate 2 percent GDP growth, Accenture analysis has determined that the region would still not reach pre-crisis levels of employment until 2014; at 0.5 percent growth, which is above the current rate, it would not happen until 2019. The persistence of high unemployment is particularly vexing, given that European companies continue to experience significant skills shortages. According to a recent Accenture survey of European decision makers, about 43 percent report that they are currently facing at least a moderate shortage of required skills. The traditional linkage between unemployment and job
availability (known as the “Beveridge curve”) is based on the logical assumption that high unemployment reduces the number of job vacancies. The fact that this economic law appears to have broken down suggests a mismatch: The skills and location of unemployed workers in Europe do not correspond to the skills and location of positions available. Our analysis of Europe’s labor market is based on in-depth insights from leading academics and policy experts, as well as a survey of 500 decision makers across Europe from the worlds of business, government and the nonprofit sector. Our approach to addressing Europe’s human capital crisis shares parallels with the strategy undertaken by policymakers in response to the financial crisis: an initial focus on recapitalization to shore up the foundations of success; a push to increase liquidity and get the system moving again; and a broader, systemic review of the institutional architecture that needs to be in place in the future. Our strategy for Europe’s human capital revival focuses on the stock, the flows and the system of workforce development. If Europe can get these elements right, it will be well placed to develop the skills it needs to increase employment and drive economic growth. Three imperatives are especially critical to more effectively managing today’s skills and employment crisis while helping to position Europe for future growth. 1. Tap more effectively into existing talent pools Understanding the variety of reasons for high unemployment, and for the millions of workers not actively seeking employment, is a key to realizing greater human capital value. In many cases, workers need to
be retrained for the jobs of the future; in other cases, people with needed skills exist but companies have a difficult time finding them or overcoming barriers to their re-entry into the workforce. Solving these skills challenges, therefore, requires better methods in both recruitment and training. For example: • Use analytics to drive better insights about unemployed workers. Better data and analytics are needed to profile the unemployed, identify their characteristics and specific challenges, and track the impact of intervention measures over time. • Deploy custom interventions for the unemployed. Businesses can help refresh the skills of the unemployed by offering training, outreach or awareness programs. Matching unemployed workers with volunteer opportunities in the community or nonprofit sector can also help people learn new skills during periods of unemployment and help them return to permanent jobs. • Ease barriers to discouraged workers. A large reserve of untapped talent is represented by 15 million discouraged workers, a group that includes young people, stay-at-home mothers and older workers who have grown discouraged by fruitless job searches. A variety of interventions are required to reintegrate these workers back into the labor force. For example, our study points to the significant promise of additional apprenticeship programs for young people (cited by 46 percent of decision makers as important). 2. Improve the mobility of skills Putting more people back to work also depends on the ready transferability of people and skills to where the jobs are, yet the barriers to mobility of skills into and within Europe are formidable. Only 28 percent of surveyed leaders claim they are tapping the full range of skills available across Europe as a whole; even fewer (23 percent) are confident about finding skills in other parts of the world. One of the challenges is in speaking the same “skills language”: certification of qualifications, a key enabler of mobility, is often a patchwork across industries and countries. Freeing up the movement of talent necessitates action at the organizational, European
and global levels. In particular: • Improve mobility within organizations. Job rotations can equip workers with a more diverse set of skills and create latent talent pools to activate in case of marketplace change or restructuring. In particular, focusing on international placements can help fill a perceived gap in international business skills identified by leaders. • Develop a more comprehensive approach to skills recognition. To improve talent flows within Europe, a mutually acceptable and consistent means of recognizing and certifying qualifications across borders is needed. • Ease the process of inward migration. The policy environment has an important role to play in facilitating greater movement of talent both into and within Europe. Simplifying complex regulation can help attract talent (cited by 59 percent of decision makers); easing immigration requirements for highly skilled workers will also help ensure that Europe receives its share of talent from other global markets. 3. Broaden and deepen collaboration Longer term, Europe needs a more managed approach to address the structural shifts in labor markets. Given the complexity of the skills ecosystem, the panoply of players involved in education and the long timeframes required to see the results of interventions, cooperation between the private, public and social sectors is extremely important. However, only 17 percent of organizations currently collaborate across sector boundaries on skills issues. The good news is that businesses recognize that they have a critical role to play here. Fifty-five percent of business leaders believe that they need to take a key leadership role in convening multisector compacts that address skills issues. To overcome previous failures with such cooperative efforts and improve the effectiveness of investment in skills and education, businesses should pursue the following strategies: • Build partnerships between businesses and educational institutions. Sixty-four percent of our survey respondents called for more business-university partnerships and alliances. By integrating further upstream into the education supply chain,
businesses can shape the skills and expectations of students to help them prepare for professional success. • Create business-to-business partnerships focused on skills. Businesses operating across different industries can pool resources to enhance skills and develop more versatile workforces. • Cascade higher skills standards through the supply chain. Fostering vertical networks between smaller and larger firms can help develop a more skilled workforce in Europe, an approach noted by 34 percent of the decision makers in our survey. Europe is at a crossroads. Governments have undertaken painful measures to weather the financial storm, and many businesses have put skills development programs on hold. Decision makers will have to actively pursue an agenda focused on skills development, ensuring that they have access to the talent they need. The human capital challenge will require new ways of thinking about labor issues, and the courage to challenge existing assumptions and conventional wisdom. This is an opportunity for Europe to drive economic growth by developing a more skilled and agile workforce.
Outlook Point of View June 2012, No. 1 Copyright © 2012 Accenture All rights reserved. The Outlook Point of View series offers insights about leading trends and innovations across all industries. David Cudaback, Editor-in-Chief Craig Mindrum, Managing Editor Jacqueline H. Kessler, Senior Editor For more information on Point of View and other Outlook publications, please visit our website: http://www.accenture.com/Outlook Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. The views and opinions in this article should not be viewed as professional advice with respect to your business.
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