Over 70% of HR Professionals Cite People Challenges and Talent Gaps as Their Companies’ Biggest Business Obstacle

• Only 35% Agree That Their Company’s People Management Function Is Using Relevant Digital Technologies

• Just 30% Say That HR Is Using Data and Analytics to Anticipate People Challenges 

• New Report from BCG and WFPMA Finds That People Management Functions Must Shift Their Focus to Prioritize Topics That Are Most Important to Future Performance

The uniquely challenging global events of the past few years have underscored the critical importance of people management for companies. Disruptions, including the pandemic and its aftermath, forced organizations to clearly define priorities and quickly build up specific capabilities in employee health and safety and more flexible working models. But the environment going forward may be even more challenging, as we are likely to see more frequent and severe disruptions, increasing talent gaps, less fluid talent markets, and a growing need for digital transformation and innovation—especially around AI.

The need for digital technology will not go away—and smart, proactive investments in this area are necessary to anticipate and solve the most prominent business challenges. However, just 35% of HR professionals today believe that their people management functions are using relevant digital technologies. Further, only 30% agree that HR is using data and analytics to anticipate people challenges, and 72% cite people challenges and talent gaps as the biggest obstacle they currently face.

These are among the findings of a new report being released today by Boston Consulting Group (BCG) and the World Federation of People Management Associations (WFPMA), titled Creating People Advantage 2023: Set the Right People Priorities for Challenging Times. Based on a survey of 6,893 people leaders in 102 markets (93.5% of whom perform HR functions), the report is the latest installment in an ongoing joint study conducted by BCG and WFPMA. The first edition was published in 2008, and the most recent one prior to this year’s appeared in 2021.

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The survey asked respondents to consider 32 people management topics, grouped into nine clusters, and rank them by future importance to their organization and by their organization’s current capabilities. Strikingly, many of the topics on which companies show the greatest current strength rank only in the middle of the pack on future importance. The report also examines differences across geographic markets and company sizes.

“The respondents clearly recognize that improvement on priority topics—such as strategic workforce planning, upskilling, and AI adoption—is important to the continued success of their companies, but also that their current capabilities in those areas are very weak,” said Jens Baier, a BCG managing director and senior partner, and a coauthor of the report. “Prioritizing proactive investment in digital and data capabilities is key to solving many of the challenges that limit the organizational impact that people functions can deliver.”

The Talent Gap Challenge

While nearly three-quarters of respondents cited people challenges and talent gaps as the biggest business obstacle they currently face, strategic workforce planning ranked only 18th overall among the 32 topics in terms of current capabilities. As workforce requirements continue to change across industries, failure to adapt data-driven insights may leave companies unable to close talent gaps and secure top-tier recruits.

As people management leaders fret about how to bring in external talent, many are losing out on another valuable opportunity: prioritizing the further development of the talent they already have in place. Despite widespread concerns about a talent gap, respondents’ ranking of upskilling and reskilling fell five places this year from the 2021 results to 9th in future importance and to 17th in current capabilities, overall.

“Companies need to continuously prioritize developing the talent they already have—and upskilling and reskilling, in conjunction with effective talent acquisition, is critical to making this happen,” said Anthony Ariganello, president of WFPMA. “It is important for companies to see digital transformation not as a goal, per se, but rather as an enabler for other goals such as greater efficiency, improved service levels, or a better employee experience. It is a foundational element of multiple people engagement topics.”

Closing the Gap

Strategic workforce planning and recruitment processes are perennial challenges for most organizations. With the emergence of AI and other digital and data capabilities, these areas now represent an opportunity to build competitive advantage. The core principles are not new, but the urgency to act has increased. The benefits for those who seize the initiative are clear: results from the first large-scale studies of AI in organizations suggest that productivity improvements of 20% to 30% are possible, depending on the task and starting position.

The report outlines five recommendations for people management leaders to adopt to prepare for challenging times:

• Leverage data to accurately plan for talent supply and demand.
• Get better at talent acquisition.
• Invest in upskilling and reskilling the current workforce.
• Unlock value through AI.
• Focus on change management and organizational development.

“The impact of the pandemic proved that people management functions are good at responding to acute stimuli and can boost their capabilities when they focus on a set of sharply defined topics. For example, health and safety is the number one topic in our survey in terms of current capabilities, and flexible work schemes jumped by 15 places since 2021 in the capabilities ranking,” said Philipp Kolo, a BCG partner and associate director, and a coauthor of the report. “The bigger challenge involves looking ahead and planning for the long-term future. By shifting their focus to topics that yield results in the medium to long term, people management functions can build up the right capabilities to shape their company’s overall people agenda in a truly differentiating way.”

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