A New Solution to the Skilled Workers Shortage

The skilled labor shortage is affecting companies all over the world. According to a Manpower "Talent Shortage Survey," 44% of employers across the globe report they cannot find the skills they need.

The German Economic Institute calculated that the lack of skilled labor–estimated at 440,000 qualified workers–is costing the German economy 30 billion euros a year in GDP growth (0.9 percentage points to be exact).

Business leaders are reacting in several standard ways: recruiting hard for the few candidates who are out there, offering higher pay and benefits to attract and retain them and investing in learning and development programs to increase the skills of current employees.

But there's another approach organizations need to consider: Stop making management positions a reward for exceptionally skilled labor.

Top two reasons for the promotion to manager:

1. I have a lot of experience and have been with the company for a long time.
2. I was promoted because I was successful in my prior, non-managerial role.

When companies promote a worker to management on the basis of prior performance, they lose a job expert and obtain a manager who often times has no talent for people management. That's how moving a single person can create a double negative–and it hurts the business.

A better plan is a redesign of the company's career path and promotion system.

Allowing job role experts to advance inside their roles keeps great workers doing their great work and keeps management in the hands of people with the ability to do it well.

The Wrong Path

The current system is simple: The only way for exceptional performers to advance in their careers is to take on people management responsibilities.

While this system offers workers a clear, defined advancement path, the negative effects are reflected in both the shortage of skilled labor and the terrible state of people management across the world–highlighted by a 15% global employee engagement rate.

Indeed, Gallup finds that 70% of the variance in engagement can be attributed to the direct manager and only 30% to organizational structures and processes.

There are alternative ways to build career paths: Gallup's best practice advice is to create additional paths for skill roles that parallel the manager path. These paths reward achievement with advancement inside a role, rather than with a move to a management position.

This is how it works: As people become better at their jobs, their pay and–equally importantly–their status and responsibilities increase.

This approach allows the talented and skilled to develop excellence in one role instead of switching roles for the sole purpose of advancing in the company.

In addition, pay structure is shifted to a broad-banding system, where the entry pay for a higher-level role is less than the top-end pay of a lower-level role, e.g., the expert salesman earns more than the new sales manager.

Such a system indicates that the business puts financial value on excellent performance and recognizes developmental achievements, too.

Naturally, that changes a company's management promotion system. And while it keeps skilled labor in skilled positions, it does force companies to reckon with this issue: how to select managers if prior role success isn't the key criterion.

Gallup has done extensive research into what predicts management excellence and has found five innate talents–i.e., natural capacity for excellence–best predict a manager's success:

• Motivator: They challenge their teams and selves to continually improve and deliver distinguished performance.
• Assertiveness: They overcome challenges, adversities and resistance.
• Accountability: They assume ultimate responsibility for their teams' successes and create the structure and processes to help their teams deliver on expectations.
• Relationships: They build a positive, engaging work environment where their teams create strong relationships with one another and with clients.
• Decision-Making: They solve the many complex issues and problems inherent to the role by thinking ahead, planning for contingencies, balancing competing interests and taking an analytical approach.

There's no reason that a high-performing individual contributor can't have these qualities. But there's also no reason to assume she does, simply because she's been so successful in her current role.

Better Business Outcomes

Companies that value performance must value potential–and discover how to develop it on an individual basis.

When companies select for talent in a position rather than using managerial positions as a reward, everyone wins.

Indeed, our research shows that managers selected because of their exceptional managerial talents realized significantly better business outcomes: an increase in profit of 48%, an increase in employee engagement of 17% and an increase in productivity of 22%.

And people are more likely to be engaged in their work and less likely to leave a company if they can use their strengths in a role.

The opportunity is clear: Better careers paths and a new manager selection system allow organizations to greatly improve their internal allocation of human resources.

But the ongoing need is also clear; Businesses can't succeed without skilled workers.

Competition for them is fierce, and hiring them is costly.

Keeping talented workers where they shine–and that goes for managers, too–is a winning strategy for people, companies and the economy.

This article originally appeared on Gallup, Inc. It was written by Fabian Schumann, a Business Development Managing Consultant at Gallup. Jennifer Robison contributed to this article.