EMPLOYABILITY & LEARNING CULTURE

World Economic Forum | Putting Skills First: Opportunities for Building Efficient and Equitable Labour Markets | This report examines the critical need for skills-first approaches to address talent shortages, close skills gaps, and foster business growth across global labour markets. It identifies essential opportunities and showcases successful examples of skills-first initiatives led by employers, governments, and educational institutions.

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✨ OVERVIEW

The World Economic Forum's "Putting Skills First" report addresses the critical challenge of talent shortages in global labour markets. It emphasises the need for a skills-first approach, focusing on individuals' skills and competencies rather than traditional markers like degrees or job titles. The report identifies five key opportunities where skills-first strategies can be most effective: rethinking academic requirements, using innovative skills assessments, looking beyond personal networks, preparing for the digital transition, and getting ahead of the green transition. By showcasing successful skills-first initiatives from various sectors, the report provides a roadmap for organisations to transform talent strategies and create more efficient and equitable labour markets.

🧩 CONTEXT

Labour markets worldwide face unprecedented challenges, with job openings outnumbering unemployed workers in many advanced economies. In the United States, 6.4 million jobless workers are outnumbered by 9.6 million job openings. 2.9% of positions in Europe are currently unfilled—the highest rate ever recorded. Only 39% of businesses report a positive outlook for talent availability in the next five years, significantly lower than their optimism for talent retention (53%) and talent development (77%). This talent shortage is particularly acute in the Supply Chain and Transportation, Health and Healthcare, and Manufacturing sectors.

🔍 WHY IT MATTERS

Addressing the skills gap and talent shortage is crucial for several reasons:

• Economic Growth: Labour shortages hinder business growth and economic prosperity.

• Innovation: Skills gaps impede technological adoption and business transformation.

• Social Equity: Traditional hiring practices often perpetuate inequalities and limit opportunities for skilled individuals without formal qualifications.

• Future Readiness: The rapidly changing job market requires a more flexible and adaptive approach to talent acquisition and development.

• Global Competitiveness: Countries and businesses that effectively address these challenges will have a significant advantage in the global economy.

💡 KEY INSIGHTS

1. Rethinking Academic Requirements

   • 46% of workers say their formal qualifications are irrelevant.

   • Only 6% of global businesses believe that removing degree requirements would improve talent availability in their organisation.

2. Innovative Skills Assessments

   • 58% of workers believe they have skills not evident from their qualifications or job history.

   • 46% think employers focus too much on job history and too little on skills.

3. Looking Beyond Personal Networks

   • 51% of workers feel they've missed out on opportunities due to not knowing the right people.

   • Skills-first approaches can increase diversity, with a 24% increase in women in talent pools when adopted.

4. Preparing for the Digital Transition

   • 44% of workers' core skills will change in five years.

   • AI and Big Data skills have jumped 12 places higher in strategic importance for 2023-2027.

5. Getting Ahead of the Green Transition

   • The green transition is expected to be the greatest source of job creation among macro trends.

   • 46% of organisations plan to redeploy workers from declining to growing roles in the next five years.

🚀 ACTIONS FOR LEADERS

1. Implement Skills-Based Hiring

   • Revise job descriptions to focus on skills rather than qualifications.

   • Develop and utilise skills assessment tools to evaluate candidates more effectively.

2. Invest in Reskilling and Upskilling

   • Prioritize continuous learning programs to address the 44% of core skills expected to change.

   • Focus on developing digital skills, especially in AI and big data.

3. Broaden Talent Pools

   • Look beyond traditional networks and qualifications to increase diversity and access untapped talent.

   • Consider removing degree requirements where possible to open up new talent pipelines.

4. Prepare for the Green Transition

   • Develop strategies to redeploy workers into emerging green jobs.

   • Invest in green skills development across the organisation.

5. Foster a Skills-First Culture

   • Ensure executive sponsorship and HR governance for skills-first initiatives.

   • Implement data-driven approaches with clear KPIs to track progress and impact.

🔗 CONCLUSION

The skills-first approach offers a powerful solution to the pressing challenges of talent shortages and skills gaps in global labour markets. By focusing on individuals' actual skills and competencies rather than traditional markers of qualification, organisations can unlock vast pools of talent, drive innovation, and create more equitable opportunities. The success of this approach depends on a concerted effort from businesses, educational institutions, and governments to reimagine hiring practices, invest in continuous learning, and adapt to the rapidly changing demands of digital and green transitions.

🎯 KEY TAKEAWAY
Embracing a skills-first approach is not just a human resources strategy; it's a transformative business imperative that can unlock untapped talent, drive innovation, and create more resilient and equitable labour markets in the face of rapid technological and environmental changes.

PAY EQUITY & TRANSPARENCY

Harvard Business Review | The Unintended Consequences of Pay Transparency | This comprehensive research uncovers the complex ripple effects of pay transparency policies, revealing how they can lead to pay compression and a shift towards personalised rewards. It offers crucial insights for leaders on implementing effective transparency measures while navigating potential pitfalls in fostering trust and addressing pay inequalities.

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✨ OVERVIEW

The groundbreaking research conducted by Leon Lam, Bonnie Hayden Cheng, Peter Bamberger, and Man-Nok Wong delves into the nuanced and often unforeseen consequences of pay transparency policies in the modern workplace. While pay transparency is frequently implemented with the laudable goals of narrowing gender pay gaps and fostering trust, this study reveals a more complex reality. It uncovers how transparency can lead to pay compression and increased requests for personalised, non-monetary rewards. The research, encompassing employees in the United States, United Kingdom, and over 100 Chinese firms, provides a global perspective on how supervisors respond to transparency by compressing performance-based incentives, and how employees, in turn, seek alternative forms of compensation through 'idiosyncratic deals' (i-deals). The study also explores the influence of company culture, particularly collectivist work environments, on these effects, offering a multifaceted view of the challenges and opportunities presented by pay transparency initiatives.

🧩 CONTEXT

Pay transparency has emerged as a critical issue in contemporary workforce management, driven by factors including the push for gender pay equity, increasing demands from new workforce entrants, and evolving legal standards. Companies worldwide increasingly adopt these policies to attract and retain talent, comply with transparency standards, and avoid reputational damage from secretive pay practices. Previous research has highlighted the short-term benefits of pay transparency, such as improved perceptions of trust, fairness, and job satisfaction and boosted individual task performance. However, this study breaks new ground by examining such policies' less obvious, long-term consequences. It addresses a significant gap in understanding how pay transparency affects managerial decision-making and employee behaviour across cultural contexts, particularly in collectivist work environments.

🔍 WHY IT MATTERS

Understanding the full implications of pay transparency is crucial for several reasons:

• Talent Management: Pay transparency significantly affects talent attraction and retention. According to PayScale, employees — particularly younger ones — may be more likely to leave a company within six months if the process is not transparent.

• Legal Compliance: The increasing global trend towards mandatory pay transparency means that failure to meet relevant standards can have serious legal repercussions for organisations.

• Reputation Management: High-profile cases at companies like BBC and Google have demonstrated how secretive pay practices can severely damage corporate reputation when pay inequalities become public.

• Performance and Satisfaction: While transparency can boost trust, fairness perceptions, job satisfaction, and individual task performance in the short term, the unintended consequences revealed by this study may undermine these benefits in the long run.

• Equity Concerns: The shift towards less visible forms of compensation (i-deals) may inadvertently perpetuate or even exacerbate gender pay inequities, running counter to one of the primary goals of pay transparency initiatives.

By recognising these potential pitfalls, organisations can develop more effective and equitable pay transparency policies, balancing the benefits of openness with the need to maintain fair and motivating compensation structures in an increasingly complex global business environment.

💡 KEY INSIGHTS

• Pay Compression as a Managerial Response: Supervisors tend to compress performance-based incentives when pay information becomes transparent, reducing pay dispersion to minimise employee complaints and requests for salary adjustments. This finding is consistent with other research, such as the study on California city managers' pay and U.S. academics' compensation.

• Shift Towards Personalised Rewards: Employees respond to pay compression by seeking alternative, less visible forms of compensation through 'idiosyncratic deals' (i-deals), such as additional training for career development purposes or supplementary health benefits.

• Supervisors' Willingness to Grant I-deals: Managers are more likely to fulfil personalised reward requests to maintain team performance and reduce turnover risk while keeping these arrangements out of the limelight. This allows supervisors to motivate employees and ensure their performance and satisfaction despite limited financial reward options.

• Cultural Influence on Transparency Effects: Companies with more vital collectivist values experience a more pronounced effect of pay transparency on pay compression and subsequent i-deal requests and approvals. In collectivist work cultures, employees are more likely to monitor their peers intensively, amplifying the effects of transparency.

• Potential Gender Pay Equity Risks: The shift towards differential remuneration through less visible benefits may inadvertently perpetuate gender pay inequities, highlighting the need for careful monitoring and adjustment of transparency initiatives to ensure they achieve their intended equity goals.

🚀 ACTIONS FOR LEADERS

• Implement Objective Performance-Reward Systems: Develop clear and objective performance metrics, such as Objectives and Key Results (OKRs), that explicitly link performance to rewards. This approach reduces subjective judgments and helps employees understand the relationship between their work and compensation, fostering a sense of fairness and motivation.

• Provide Comprehensive Training on Pay Communication: Invest in robust training programmes for managers to enhance their understanding of the company's compensation policy and improve their ability to communicate effectively about pay-related issues with employees. This ensures consistent and accurate information dissemination across the organisation.

• Establish Transparent Communication Channels: Create appropriate channels for employees to voice their opinions about transparency initiatives and provide resources to help them understand the pay system. This fosters a more open dialogue, reduces confusion, and builds trust in the organisation's commitment to transparency.

• Formalise I-deals in Reward Structures: Consider incorporating i-deals into formal reward structures, such as offering developmental i-deals to upskill employees and task or location i-deals to reward and retain loyal employees. When requests aren't limited to an individual privilege or a hidden arrangement, the risk of unfairness can be mitigated.

• Adopt a Holistic Approach to HR Practices: Ensure that pay transparency initiatives are part of a comprehensive approach to human resource practices. Align performance management processes with pay systems to achieve strategic objectives and maintain fairness. This integrated approach helps prevent pay transparency from becoming a moving target and supports overall organisational goals.

🔗 CONCLUSION

The study on pay transparency reveals a complex interplay between organisational policies, managerial responses, and employee behaviours. While transparency can foster trust and satisfaction, it leads to unintended consequences such as pay compression and increased demands for personalised rewards. These findings highlight the need for a nuanced, culturally sensitive approach to implementing pay transparency. By addressing these challenges through clear performance-reward links, comprehensive training, and formalised i-deal structures, organisations can harness the benefits of openness while mitigating its potential drawbacks. As the global business landscape continues to evolve, the ability to navigate the complexities of pay transparency will likely become a key differentiator for successful organisations, balancing the demands for openness with the need for fair, motivating, and equitable compensation practices.

🎯 KEY TAKEAWAY

Adequate pay transparency requires a holistic, culturally aware approach that aligns clear performance metrics, comprehensive communication, and formalised reward structures to balance openness with fairness, motivation, and long-term organisational success while mitigating unintended consequences such as pay compression and gender pay inequities.

PEOPLE EXPERIENCE & ENGAGEMENT

McKinsey & Company | Some employees are destroying value. Others are building it. Do you know the difference? | This article explores six employee archetypes across the satisfaction spectrum, from value-destroying disruptors to thriving stars, and provides strategies for organisations to boost engagement, productivity, and retention.

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✨ OVERVIEW

McKinsey's research reveals six distinct employee archetypes: satisfaction, engagement, performance, and well-being. These range from highly dissatisfied and actively disengaged workers who destroy value to "thriving stars" who perform exceptionally and positively influence others. The study highlights that over half of employees report being relatively unproductive, costing companies billions in lost value over time. By understanding these archetypes and implementing targeted strategies, organisations can re-engage workers, amplify the impact of top performers, and significantly improve overall productivity and value creation.

🧩 CONTEXT

In the wake of the pandemic and the shift to hybrid and remote work models, companies are struggling to measure employee effectiveness objectively. This challenge is compounded by increasing labour costs and declining worker productivity. The research indicates that addressing employee engagement is not a one-size-fits-all approach; workforces have diverse experiences and needs. To tackle this issue, corporate leaders must recognise the nuances within their workforce and develop segmented strategies to enhance engagement, satisfaction, and performance across different employee groups.

🔍 WHY IT MATTERS

• Lost productivity from disengagement and attrition can cost a median-size S&P 500 company at least $1.1 billion over five years.

• Higher satisfaction and commitment levels correlate with higher self-reported performance and well-being.

• Engaged employees are likelier to contribute innovative ideas and drive organisational growth.

• Improving engagement can reduce attrition rates, saving time and resources on recruitment and training.

• Prioritizing employee well-being demonstrates organisational values, building trust and loyalty.

💡 KEY INSIGHTS

• Six Employee Archetypes Identified: The research reveals six distinct employee groups: quitters, disruptors, mildly disengaged, double-dippers, reliable and committed, and thriving stars. Each group has unique characteristics and requires tailored engagement strategies.

• Disengagement Factors Have Significant Impact: The top six factors affecting employee satisfaction and commitment capture nearly two-thirds of the total cost to companies from disengagement. When not addressed, these factors become disengagement drivers for many of the workforce.

• Working Models Influence Performance: Thriving stars, who represent about 4% of the workforce, are more likely to flourish in hybrid and remote-working models than in primarily in-person settings. This suggests that the working model significantly impacts balancing satisfaction, commitment, well-being, and self-reported performance.

• Double-Dipping Phenomenon: About 5% of the workforce are "double-dippers" who hold multiple full-time jobs simultaneously. This group is split between engaged contributors and those who may be chipping away at organisational efforts.

🚀 ACTIONS FOR LEADERS

• Re-engage High Potential Quitters: Identify high-potential workers exploring other options and take proactive steps to make them feel valued. Ensure compensation packages and benefits are competitive, and design clear career paths with meaningful role changes.

• Address Disruptors Constructively: Reject the notion that disengaged employees are inherently toxic. Instead, focus on meeting their needs through career development opportunities, connecting their work to a higher purpose, and ensuring fair compensation.

• Elevate the Mildly Disengaged: Target similar EVP factors as for disruptors while adding flexibility and autonomy. Offer opportunities for development and a solid compensation package to help these workers cross the threshold towards engagement.

• Manage Double-Dippers Strategically: Focus on dissatisfied double-dippers by improving compensation to market average and adding benefits. Work with HR to map clear career paths and role responsibilities.

• Support Reliable and Committed Employees: Recreate conditions that work best for high performers, focusing on meaningful work, flexibility, and a supportive workplace environment. Ensure fairness in recognition and rewards.

• Nurture Thriving Stars: Protect these value creators from burnout by limiting their project involvement and tapping into their sense of purpose. Balance high performance with high well-being to ensure sustainability.

🔗 CONCLUSION

Understanding and addressing the needs of different employee archetypes is crucial for organisations to enhance engagement, productivity, and retention. Companies can move more workers towards higher engagement and commitment levels by implementing targeted strategies for each group. This approach improves individual performance and contributes to organisational success and value creation. The research underscores the importance of flexibility, particularly in working models, as a critical factor in fostering high performance and well-being among top talent.

🎯 KEY TAKEAWAY

Organisations must recognise and address the diverse needs of their workforce archetypes to boost engagement, productivity, and retention. This could save billions in lost value and foster a more satisfied, high-performing workforce.

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