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US Small Businesses are Taking the Brunt of the Hit on Skill Shortages

By now there should be nobody in the country left unaware that there is a gap between what business needs and the skill set possessed by the workers in the US.  It has certainly been an issue that has gotten a lot of attention although there has not been a great deal of progress as far as finding a solution. The longer this issue remains unaddressed the more people study it, trying to figure out the impact and trying to work out a strategy to address the problem.

In the very simplest of terms the people seeking work in the US do not have the skills required by employers willing to hire. That is just the tip of the iceberg however. Many of those who are gainfully employed lack the skills needed to maintain or improve productivity and would likely be replaced if the business owner or manager had access to people with the right skills.

There is a growing gap between what a business needs of its employee and what that employee is capable of. The issue goes far beyond what to do with the 10 million unemployed.  There is a need to continue training and development of a current workforce but that is a far more difficult proposition than one would expect.  There are no simple solutions and no one-size-fits-all propositions.  As the challenge is explored it is apparent that small and mid-sized businesses are affected more dramatically than the larger ones.

Analysis: The surveys that have been conducted by organizations like Vistage or the National Federation of Independent Business are disturbing for those who have been waiting for the economy to engage in full recovery. There has been an assumption that the slow rebound can be attributed to factors like tepid consumer activity and that is in turn connected to the dearth of hiring. It is obvious that people out of work don’t spend much and it is equally obvious that business can’t thrive without demand. If one takes a closer look at the current situation it is shocking to discover that demand is not really the problem. It seems that small and medium sized business is turning away work every day as they do not have the staff needed to take on the additional work.

The Vistage survey found that one third of their members are refusing work because they can’t handle any more than they have. The NFIB studies report that fully half of their members rank finding the right employee as their number one concern: ranking above taxation, regulation and even their own success with sales.

The skill shortage is not limited to people with technical skill. The manufacturers have been complaining for years that automation and technology has created a gap between the knowledge needed and the skills of the people available to hire. There have been stories of the lack of truck drivers and construction workers and people qualified to work in health care and the list goes on. The other gap is in management. There are too few people who are capable of managing others and that presents a barrier in every business category. There is a serious gap in the technical ability of the average employee when confronted with the IT systems used at their place of employment. These gaps kill productivity.

The small business is more profoundly affected than many of the larger ones because they have fewer resources and have to make more demands on their employees and managers. There are too many people wearing too many hats and it is not surprising that some tasks are handled better than others. The solution offered to most business is to simply engage in more training so that these skills can be developed but that is not really an option for the small business for two reasons.

The first is that it is very difficult to spare employees for extended training as there is nobody to pick up their duties when they are otherwise occupied. The bulk of training is therefore on-the-job and there are limits to how effective that can be.

A bigger concern is that well trained workers are coveted by other employers so the small business is faced with very high turnover. They spend time and money bringing somebody to the level needed and then they watch them walk away and work for the competition.

There is no pipeline to provide capable replacements. The company that relies on its own training is forced to invest a great deal of time and money with no assurance that there will be a pay-off in the end. It takes close to a year for a new employee to become an asset to the company and perhaps two to three before somebody is considered a skilled manager. That investment has to be recovered in some way but rarely is. The new hires are not ready and for many small companies there is no institution that is preparing their future employees. Add to this the concern over motivation.

There is a growing sense that the millennial generation really is different and not in a good way for the small business. They are not willing to make short term sacrifices and they are not interested in long term loyalty. Their focus is on anything but their career and the majority of small businesses rely on a cadre of long term and loyal employees who take that business very seriously.

The ambitious members of this generation are attracted to the bigger companies and the bigger rewards, leaving smaller companies without the resources they need to grow. It is hard to say what difference it would make if all these small companies that have been turning away business had the ability to take on expansion but one can only assume that it would promote growth, hiring and even additional revenue to the states.

Courtesy Dr. Chris Kuehl, Armada Corporate Intelligence

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