THE BLOG
12/22/2014 12:51 pm ET Updated Feb 21, 2015

The Global Talent Crunch

"We found alarming signs of...a massive talent crunch over the following decade," says Claudio Fernandez-Araoz in his new book It's Not the How or the What but the Who, published by the Harvard Business review. The crunch comes "as a result of three factors: globalization, demographics, and pipelines."

To begin with, globalization is generating increased competition among companies not only in the traditional centers of business and finance in the developed world, but from emerging countries as well.

Major emerging market multinational firms -- Odebrecht and Embraer from Brazil, Bimbo and Cemex from Mexico, Techint from Argentina, Koç Holding from Turkey, Tata from India -- are all expanding outside of their home countries, and their need for high quality talent expands daily. The IMF estimates that nearly 70 percent of the world's growth will in coming years will emanate from such emerging markets.

Then there is the promise and peril of demography. Fernandez-Araoz points out that the age group of 35 to 45 year olds -- the prime age of top executives at the majority of global companies -- is shrinking around the world. "While a decade ago this demographic shift was affecting mostly the US and Europe, the problem now extends to many more countries," he writes. "By 2020, many other large economies, including Russia, Canada, South Korea, and even China will have more people at retirement age than entering the workforce."

And while many emerging markets are seeing a "demographic boon" in the 18-25 year old bracket, that age group won't supply enough middle and senior management positions for some time. The youth provide great opportunity for a consumer boom and entry level positions, while leadership roles become harder to fill.

Finally, broken "pipelines" refer to the breakdown between employer and employee that is making it increasingly difficult to cultivate executive level talent. Companies are offering less to their employees, in terms of compensation as well as job security, and thus employees are becoming less loyal, changing jobs often rather than pursuing a long term ascent within one organization.

The difficulty of major multinational firms to find enough employees contrasts sharply with the high unemployment and underemployment rates all over the world. Beyond emerging economies with their large informal sectors, the same disconnect is dragging down advanced European economies as well.

In its recent report "Education to employment: getting Europe's youth into work," McKinsey details the extent of the crisis. Despite Europe's 5.6 million unemployed youth, "employers are dissatisfied with applicants' skills: 27 report they have left a vacancy open in the past year because they could not find anyone with the right skills."

The report goes on: "One third [of employers] said the lack of skills is causing major business problems, in the form of cost, quality, or time. Counter intuitively, employers from countries where youth unemployment is highest reported the greatest problems."

Two massive questions arise from this data. First, what exactly are the missing skills that our youth will need to be ready for better jobs -- both corporate or non-corporate -- in the 21st century? And, perhaps even more importantly, how must we revamp our education systems to provide the next generation with these skills?

Fernandez-Araoz answers the first question by pointing to the assets that all high-performing executives share: curiosity, strategic thinking and problem solving, grit and determination, and team-oriented social skills and a knack for collaboration. Above all, he emphasizes "the ability to surround oneself with outstanding people."

The book, however, delves less into the second question - how to impart such skills through education. Traditional elite universities do foster many of these skills, but the problem is their exclusivity - they simply don't produce enough of these leaders to fulfill the demand. Secondary classrooms could be improved and technical schools expanded to help meet this need, but as it is there is a major disconnect between public institutions and the labor market.

The private sector has begun to get involved through corporate social responsibility programs, but given the scale of the crisis companies should perhaps be even more concerned with shifting public policy, by investing directly in new education models, lobbying policymakers, and highlighting successful reforms. Initiatives like Business Backs Education, launched by education entrepreneur Sunny Varkey and backed by firms like Blackstone, Barclays, and many others, are good examples of this type of engagement.

While business and civil society are mobilizing to effect change, Fernandez-Araoz's book should be required reading for education thinkers and policymakers around the world, who have direct impacts on school curriculums and teacher training. Without change, the talent crunch will only continue to get worse