Labor Costs Expected to Increase, So Will Challenges to Developing Workers

by Dean Prigelmeier, President of Proactive Technologies, Inc.

In an article by David McCann of CFO.com entitled, “Labor Costs Will Skyrocket Over the Next Decade”, the author cited new research from consulting firm Korn Ferry  projecting new challenges for employers in the coming years. “Organizations around the world could add more than $2.5 trillion to their annual labor costs within 12 years as a result of the global shortage of highly skilled workers. The report follows up on the recruiting and workforce management firm’s forecast in May that the talent shortage could cost companies $8.5 trillion in unrealized annual revenue by 2030.

This is a rolling crisis that started several decades ago – the repercussions are just now being articulated in terms employers can relate. Employer’s awareness of the approaching crisis appeared for retiring baby-boomers and the anticipated loss of expertise and critically unique task-based skills mastered over decades of performance. Add to that the rise of millenials, the continual introduction and evolution of technology and the disruptive effects of the Crash of 2008. Now employers are finding themselves rebuilding their workforce, in many cases with tools and techniques that haven’t evolved all that much and still without really understanding the seriousness of the challenge, let alone the labor and opportunity costs to their operation.

The report continues, “The crisis is not something that’s far off in the future. Even in 2020, the U.S. wage premium is expected to reach $296 billion. By 2025, the gap will total $400 billion, according to the report.” What can companies do to mitigate the trend and minimize the effect? “Employers will need to concentrate on reskilling lower-level workers,” Thompson (author of the report) notes. “That involves identifying those who are adaptable and flexible enough to be successful in the new world of work and putting in place robust training and workforce plans.”

Since 1986, Proactive Technologies, Inc. has repeatedly sounded the alarm in presentations, conferences and employer visits. For some, the urgency and magnitude of the challenge seemed not to register even though they were confronted by symptoms daily. Worker development is not everyone’s forte, and many had several “other fish to fry.” Developing workers and maintaining high performance slipped to the back burner. Numerous pieces appeared in this newsletter, attempting to draw attention to the challenge and things that needed to be done, and could be (should be) done, such as:

• Maximizing Worker Capacity Maximizes Shareholder Value…If Done Right 
  by Dean Prigelmeier, President of Proactive Technologies, Inc.
• A Pay-for-Value Worker Development Program – Fair to Management and Workers, and Effective Too! 
  by Stacey Lett, Regional Manager – Eastern U.S., Proactive Technologies, Inc.
• Five Most Important Ways Structured On-the-Job Training Can Reclaim Wealth For an Employer 
  by Dean Prigelmeier, President of Proactive Technologies, Inc.
• Challenges Presented by the Widening Skill Gap 
  by Stacey Lett, Regional Manager – Eastern U.S., Proactive Technologies, Inc.
• Every Work Task Is A Micro Unit – Everything About the Task Should Be Trained At Same Time For Maximum Efficiency and Effectiveness
  by Dean Prigelmeier, President of Proactive Technologies, Inc.
• Economic Development Opportunities – An Important Incentive in Attracting Companies to Your Region 
  by Dean Prigelmeier, President of Proactive Technologies, Inc.
• And many, many others written by Proactive Technologies’ staff and guests

Visionary employers that heeded the warning and took time to learn more about the PROTECH© system of managed human resource development, the accelerated transfer of expertise™, pay-for-value compensation model, and the other tools and programs found on PTI’s website have prepared themselves and continue to maximize worker capacity and return on worker investment. Instead of a chaotic, last minute response after the loss of tremendous amounts of money have been underway and projected to increase, these employers who acted can focus on product and service development, quality improvements, new markets and the competition.

There are still many waiting for the challenge to pass or for someone else to fix it. That is a risky bet that may come back to haunt. The investment needed to make incremental improvements now are a fraction of what a reactive overhaul would cost later, considering all of the unnecessary disruption and cost of waiting. The fact is, it needs to be addressed and that will not go away.

For a relatively small investment – for setting up a worker development system infrastructure with most, if not all, of the investment likely recovered through applicable state workforce development grants – this approach can deliver cost savings and returns in many forms, not just with training. The approach was designed for employers out of shear frustration with the lack of adequate tools to coordinate many of the inputs in a typical business operation into a deliberate, documented strategy for worker “full job mastery”  – a coherent, expedited, low-cost/high return system.

If you would like to take a few minutes to learn more about this approach, and how a pilot project may be the best way to introduce this approach to your organization, contact a Proactive Technologies representative today to schedule a GoToMeeting videoconference briefing to your computer. This can followed up with an onsite presentation for you and your colleagues. A 13-minute promo briefing is available at the Proactive Technologies website and provides an overview to get you started and to help you explain it to your staff.