According to a recent study from the Wharton School of Business, companies today fill less than one-third of open positions with internal candidates. That wasn’t always the case. During the postwar era, companies filled 90% of jobs with existing employees.
But unemployment rates are at historic lows, and there are more jobs open than candidates looking for those jobs. As a result, companies may have no choice but to start turning inward in their search for talent. Data suggests that employers are looking to today’s employees to close tomorrow’s skills gaps as the competition, and cost, of talent continues to rise.
Companies are spending more on learning and development
According to this year’s LinkedIn Workplace Learning Report, nearly half (43%) of U.S. firms surveyed will spend more on corporate learning—compared to just 27% in 2017. But the more important news may be the sharp uptick in the number of employers that report tracking the skills of existing employees. This practice increased by 32% since last year.
For employers in high-demand fields, competition for talent is tight—many spend up to 20% of salary costs to recruit entry-level employees. Some are even willing to offer significant salary bumps and signing bonuses to lure workers with high-demand skills away from competitors. (LinkedIn data pegs the turnover rate for tech workers at 13.2%, topping even churn-laden sectors like retail.)
The benefits of training employees (the right way)
So why are companies developing existing, rather than sourcing, new talent? The competition for talent is one thing. There is also the rise of accelerated training programs that equip workers with the skills to succeed in so-called hybrid jobs like data science and digital marketing.
The renewed focus on internal development is also changing the game in non-tech roles, such as sales. At LinkedIn, we asked all sales managers to spend at least 50% of their time on coaching and teaching their direct reports. On its face, asking sales leaders to teach versus sell may seem like a counterintuitive strategy, but it generated significant results for us.
Before this initiative, managers spent only 14% of their time on such one-to-one interactions. We saw a massive improvement in terms of performance and attrition among employees who received coaching frequently. More importantly, the program helped managers gain a deeper understanding of the skills and talents of their teams.
This is a trend we see elsewhere. According to LinkedIn’s 2019 Workplace Learning report, nearly 3 in 4 employers surveyed now use “skills gap assessments” to identify employees with the potential to upskill. They’re tracking course demand, completion, or other evidence of online learning, to pinpoint employee demand for skills—and track their progress toward development of new ones.
Insurance giant Allianz, for example, is using predictive analytics to identify “job families” and skills that will be relevant in the next three years. They start by conducting an internal assessment of their employees. They then pair the results with data from sources like LinkedIn. This analysis allows them to determine the skills gap they might have, and also which of those skills already exists in the organization.
When companies build learning and development initiatives that align with competencies that they’ll need in the future, they can combat the costly churn that comes from filling the skills gap. According to Heather Duttweiler, a people development consultant at Allianz, the company is now “curating” lists of skills that align with the company’s future strategy. This allows executives to assess whether people are learning those skills and make the necessary adjustments from there.
Of course, we shouldn’t take increased investments as the end—or even the decline—of the war on talent. As long as the labor market remains tight and tech continues to transform nearly every facet of our economy, the competition for talent shows no sign of slowing. Still, companies can do more than increase their recruitment budget. They can look inside their own workforce, and cultivate the talent that they know they’ll need in the future.
Mike Derezin is the vice president of learning solutions at LinkedIn.