EMERGING RISK OUTLOOK: TALENT MANAGEMENT RISK

Are Taylor Swift and Beyoncé true country music artists? What they both present to the genre has been historic and perhaps even necessary. Social media might agree, and Reba McEntire might disagree, but there is an essence to this question that companies should consider: do current talent meet the needs of what the business aspires to accomplish to remain competitive in the near future? Adversely, do companies understand workforce expectations well enough to mitigate the risks associated with evolving perceptions?

The US Bureau of Labor Statistics is optimistic about employment trends through 2032. It anticipates over the next eight years an increase in wage and salary employment of 3.0% and an increase in self-employment of 0.6%. The US healthcare sector will benefit the most from this trend as it sees an aging population expand and chronic conditions becoming more pronounced, propelling the need for more practitioners and technical experts. Declines, however, are forecasted for the manufacturing and utilities sectors, with production and sales roles also declining. But there’s yet more questions that should be asked: how agile will the PEO industry be to these expected trends in terms of its internal workforce strategy and client management strategy? There are a few risks you should consider when responding to these questions.

TOP RISKS TO KNOW

Enterprise Risk Management (ERM) professionals are working to connect the dots on the broader drivers of these trends and the potential consequences to businesses. According to research, here are the top talent management risks to consider over the next 1 to 2 years.

Fast Tech Means Agility Risk…
The faster technological advancements accelerate, the more agile organizations must be in reprioritizing the business needs required to stay on pace. This includes rethinking how we manage the output of AI in areas such as software development, knowledge management, quality control, legal and marketing. Thus, while advancements may play on the psychological safety of employees as a significant job-taker, tools such as AI could become a key job-developer.

…So Now, Single Jobs Mean More Diverse Skills…
Just as many new skills are needed to perform a single job now as there are skills that are no longer needed to perform that same job. According to Gartner, 58% of the workforce needs new skills for their roles, with total skills needed increasing by 10%. Contrarily, 33% of skills included in a typical job posting 7 years ago are now obsolete. In TriNet’s 2024 State of the Workplace report, SMBs and their employees agree that upskilling to adapt to market changes for current roles is a top focus area of development over the next 3 years. The report also doubles down on this point for SMBs: “26% of employees consider their skill level to be ‘somewhat’ adequate, compared to 37% of employers who describe it this way.”

…But It Also Means a Change in Employee Expectations
With large companies leading the way in calling for a return to office, 90% of companies are now expected to apply a return to office policy by the end of 2025, which may signal a tug-of-war between employers and employees. In 2024, approximately 1 in 5 employees are remote, while 98% of workers prefer some form of remote work. However, only 16% of employers offer fully remote work. The demographic leading the way with remote work: ages 24 – 35. While there is a clear appetite for more flexibility, companies understand the need for delicate messaging. The tech industry is one such area where a battle is brewing as Google’s CEO recanted his statement on working-from-home and its implications on the company’s competitiveness in AI. “Google decided that work life balance and going home early and working from home was more important than winning.” Such becomes very controversial messaging, considering the tech industry is one of the top industries for remote work in 2024 according to Forbes.

Ok, So Who Spends and Who Saves on These Expectations?
The COVID-19 pandemic allowed employees to understand the cost of work associated with being in-office daily, including time, fuel and energy, as in-office work costs twice as much as remote work for employees. Work-from-home (WFH) options offer employees the opportunity to save between $6,000 and $12,000 annually depending on fully remote or hybrid schedules. This cost savings can be attributed to a reduction in gas consumption, car maintenance, car insurance, public transportation, clothing, and dining. Inflationary pressures only heighten the angst felt by employees.

Adversely, employees are leveraging social issues to further balance the cost of work. Climate change, for instance, creates location-based risks that employees want more protection around. Without the option to avoid areas with significant climate events as an in-office or hybrid worker, employers may see much more of a cost deficit associated with required localization. “As climate change weighs more heavily on workers’ financial situations, it’s a smart HR strategy for employers to invest in the resilience and productivity of their workforce by alleviating the financial impact of extreme weather”, says Timothy Flacke, Co-Founder and Executive Director of Commonwealth.

Answer: It Depends on the Risk of Faster Career Shift
There is an emerging expectation of a new generation of talent cohorts who will only stay at an organization for a short period of time, rather than making a career within it. Such a risk will shake up an organization’s talent and knowledge retention strategies over time. According to Bankrate, 48% of US employees will look for new roles in 2025. This group is representative of 64% of GenZers and 25% of Baby Boomers, or a company’s likely entry level staff and upper managers.

…But Wait, Where Are All the Babies?
Economists are grappling with the idea that declining fertility rates paired with inevitable aging could transform the labor workforce in a way we may not be prepared for. This means that newer generations have less talent availability. Mortality and fertility forecasting models predict by 2064, death rates will surpass birth rates for the first time in history, crippling some of the world’s largest economies. However, productive rights activism and outcomes of political decisions could impact this forecast in areas of the world like the US.

While human capital management is a complex area with far more interdependencies than what’s mentioned here, pace is the name of the game. Companies must be able to move quickly not just with technology, but also with the change of preference. As employers expect more, employees will expect more. With expecting more, research should be done to determine if ‘more’ is available in the forecast. Any one move could shake up employee activism if workforce strategies aren’t done right because, after all, both sides have a vested need. Consider having talks with your teams about which of these risks, and others, will present the biggest threat and opportunity to your operations and your customers, and take proactive steps ahead of the next big wave of workforce risks.