The first post in a series based on the research report Help Wanted by the National Center for the Middle Market and the Brookings Metropolitan Policy Program, this post looks at the factors contributing to the gap between supply of and demand for talent among middle market firms.
The middle market is not alone in its struggles to find qualified talent, and especially managerial, technical and professional, and sales roles. But mid-sized firms feel the lack of available talent with special acuity. Responsible for a third of U.S. private-sector jobs and 60% of all new jobs created (according to the Center’s previous research), middle market companies are aggressive hirers with a big appetite for talent.
Due to a variety of factors, both in and out of their own control, middle market leaders can’t seem to find enough good men and women to fill those open spots. And the problem is hindering progress: 37% of mid-sized firms say that a lack of talent is constraining their ability to grow, and the percentage is even higher among healthcare, services, construction, and manufacturing companies.
Internal Factors Contributing to the Middle Market Talent Shortage
The middle market’s workforce challenges can be attributed, in part, to the very factors that make a mid-sized firm a mid-sized firm. Their smaller size and scale can be a good thing in many ways; but often it also means they lack the HR resources to attract enough candidates, and to keep those people long term.
Specifically, middle market firms struggle with:
Too few candidates with the necessary skills
Middle market companies lack the brand awareness that larger companies enjoy. Their names are not widely known, so they attract fewer over-the-transom resumes from high-caliber candidates than more famous companies do. Four out of 10 middle market firms say that competition from other companies is a top recruiting challenge. And one-third of executives cite a low number of applicants as an issue.
Heavy reliance on the bachelor’s degree
Employers of all sizes are increasingly apt to require bachelor’s degrees for positions that formerly required less education, even when the skill sets have not changed. Middle market companies in particular look for college graduates, perhaps because they lack the capabilities and confidence to develop skills internally. In fact, only about a third (35%) of middle market vacancies are filled via promotion from within. Middle market companies tend to seek fully qualified candidates from the labor market rather than look for someone already within their ranks who is ready to advance.
Narrow pipelines
Lean HR teams tend to be more operational than strategic, making it hard for middle market companies to field resources to fill open positions. They tend to rely on the “spot market” for labor. More than half (59%) of mid-market executives wait to recruit until they have an opening. In other words, they are not progressively engaging in ongoing outreach to stock their talent pools.
Undeveloped retention strategies
Retention is a big challenge for middle market firms for several key reasons. While they are more proactive about training their current employees than they are about recruiting new talent, few offer clear career advancement paths. Part of the problem may be as smaller firms, there are simply fewer spots for upward mobility. But without opportunities for employees to advance internally, many skilled workers will look for their next job outside of the firm, rather than within it.
External Factors that Impact the Talent Gap
Public-sector programs exist to help match employers with the skilled employees they need. However, there is often a disconnect between these resources and middle market firms. In many cases, mid-sized companies are unable to take advantage of help that exists because:
The system is difficult to navigate
The workforce system is complex. Middle market companies often lack the time and resources to fully understand what the system has to offer and how to access it. The forms and bureaucratic requirements can also be a roadblock, and sometimes organizations don’t have the capacity to respond quickly.
Workforce initiatives don’t target middle market firms
Despite that fact that the middle market is responsible for most new job creation, the resources that exist to help often focus on larger, more well-known companies. When public-sector resources do consider size, they tend to lump middle market firms together with small businesses. Yet, middle market companies are often more mature with a need for more specific skill sets.
Workforce development providers answer to other entities
A misalignment of incentives between mid-sized employers and workforce resources is a problem that hurts their ability to work together. While companies want skilled employees fast and at the best possible rate, the workforce development providers are looking to satisfy governmental and reporting regulations that rarely have anything to do with the satisfaction levels of their end users.
Closing the Gap
Better aligning middle market companies with skilled candidates needs to be a joint effort among the firms themselves as well as the larger external support ecosystem. The good news is that there are several steps companies can take now to begin closing the gap and start to reach more of the people they need.
To learn more about the gap between talent supply and demand in the middle market and what stakeholders can do about it, download the Center’s full report, Help Wanted: How Middle Market Companies Can Address Workforce Challenges to Find and Develop the Talent They Need to Grow.
Next in this series
Post 2: Five Ways Middle Market Firms Can Find and Keep Skilled Talent
Others in this series
Post 3: Partnering for People: How the Right Partnerships Can Help You Find the Right People for Your Jobs
Post 4: Supplying the Demand: How Talent Development Resources Can Better Support Middle Market Needs