The talent shortage is the biggest barrier to business strategy success

Labor market volatility is creating significant issues across all industries and at virtually all levels as companies continue to have difficulty retaining talent needed to drive initiatives forward, while also managing rising wage costs and inflation.

Sparked by the pandemic, which continues to dramatically change our workplace and workforce, business leaders are focused on meeting customer expectations and driving business value through new products and services, innovation, automation, talent acquisition and upskilling.

As businesses continue to emerge in an evolving economy, global talent solutions firm Vaco and its consulting platform, MorganFranklin Consulting, wanted to learn more about the mindset of business leaders to see how the new economy is shifting their plans and priorities, and to gauge how adaptable companies will pivot to meet this new paradigm.

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The resulting Trends in Transformation survey, explores the perspectives of 160+ North American business leaders. The collected data reflects the transformation outlook among business leaders across departments, including the C-suite, IT, HR, finance, sales and marketing, and operations. Survey respondents represent a variety of industries, including technology, financial services, retail and consumer services, and health care and life sciences.

Resource constraints, most notably struggles with talent acquisition, emerged as a notable impediment for nearly all respondents, regardless of industry. Similarly, automation and streamlining manual processes are top-of-mind for business leaders as they considered their transformation goals and priorities for 2022.

The top transformation drivers in the new year are: 1) pursuing digital and technology advancements, 2) increasing shared services and outsourcing for cost-reduction, 3) implementing automation and process improvements to financial reporting, 4) ensuring a more engaged leadership to fuel success, and 5) investing in talent.

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The expansion of digital capabilities is the focus of transformation across industries
With a rising remote workforce, tightening talent market, demanding digital-first landscape, and changing stakeholder needs, businesses are focused on increasing operational efficiency to remain competitive and viable. For many, technology implementation is the foundation for achieving greater efficiency. Forty percent of respondents said implementing new tech solutions is their top priority for 2022. Some 30% will focus on launching a new product or line of business, while 24% will implement RPA and/or automating processes in the new year. Another 20% ranked improving risk management (e.g., cyber), compliance and internal controls as a competitive advantage in the workforce of the future. Another 20% indicate optimizing back-office processes are crucial for vitality in the new economy.

Increasing shared services or outsourcing is a cost-reducing focus area for nearly one-third of business leaders
Thirty-one percent said increasing shared services or outsourcing is a top priority for reducing costs in 2022. In certain industries, outsourcing is a major driver of cost reduction: retail and consumer services (41%), energy and construction (33%), and technology (31%). As businesses look toward 2022, their focus on outsourcing reflects a growing sensitivity to controlling financial waste and prioritizing the time and energy of their key employees. This trend allows employees to focus efforts on revenue-generating activities and growth efforts.

Financial reporting will see a significant positive impact from automation
Thirty-three percent said that general ledger and financial reporting will be the business area most significantly impacted by increased automation/process improvement in 2022. These tools will transform a variety of business functions, from payroll processing to marketing to customer support. Operations functions will be the next highest area of impact (33%), followed by forecasting and budgeting (18%) and sales and marketing (12%). IT rounded out the responses at 8%.

Engaged leadership is considered the most critical factor in successful transformation
Forty-six percent said that engaged leadership is the most critical focus area to successful transformation in 2022. Other key areas of success identified are a continued focus on people, process, technology and security (42%), change management and effective communication (38%), future vision and initiatives roadmap (30%) and project management (22%).

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The talent shortage is considered the biggest barrier to business strategy success
Nearly half (49%) said shortages of qualified job candidates to fill open roles is the top impediment to growth. The continuing impact of COVID-19 (43%) is the second leading barrier, followed by rising costs of benefits, like health care (25%), supply chain stagflation (23%) and the political climate (16%).The 2021 labor market was unlike anything business leaders (and job seekers) had experienced before — leading to employee resignations, salary spikes, and more.  

Perhaps the unifying theme of transformation in 2022 will be the ways companies respond to one of the most disruptive and uncertain labor markets they’ve seen in decades. The data from the survey shows that business leaders are already focused on key strategies for addressing the challenging hiring landscape, from emphasizing shared services and outsourcing to prioritizing change management and investing in automation to improve efficiency.

While the research did reveal common hurdles, barriers and challenges to transformation, it also revealed a few kernels of optimism:

  • 45% of business leaders said their leadership teams were effective in leading transformation initiatives.
  • 70% of business leaders rated their organization’s ability to use technology and automation in transformation efforts as “good” or “excellent”.
  • 44% of business leaders said virtual/hybrid work was an enabler, rather than an impediment, to their organization’s ability to execute large-scale transformation initiatives.

Successful and sustainable transformation is an all-encompassing, multi-year undertaking that changes the way a business functions on every level.