Closing the talent gap - where are the skilled staff?

By Anthony Doesburg

From restaurants to rocket-builders — businesses of all sorts share a common problem: Finding enough skilled staff. Anthony Doesburg reports.

Restaurant Association president Mike Egan says it's hard to get young people to see that hospitality offers a good career path. Photo / Mark Mitchell
Restaurant Association president Mike Egan says it's hard to get young people to see that hospitality offers a good career path. Photo / Mark Mitchell

What's worse than high unemployment? Thousands of people looking for a job, in the midst of a skills shortage. That's the position New Zealand finds itself in as economic growth picks up.

Although company bosses are upbeat about sales growth this year, the rosy forecast is losing some of its gloss because workers with key skills are in short supply.

The skills gap - between those available today and those needed in the future - is widening, says Bruce Hassall, head of PwC New Zealand, and competition for talent is intensifying.

"Despite rising business confidence equating to more jobs, organisations are struggling to find the right people to fill these positions," Hassall says.

That's acting as a drag on the economy, argues Business NZ chief executive Phil O'Reilly.

"Consistently over the past 10 years whenever I've asked employers what the biggest brake on growth is, they've said it's lack of skilled staff." That pressure eased during the financial crisis, O'Reilly says, but it is building up again.

PwC surveyed 43 chief executives at the end of last year and nine out of 10 of them expected their businesses to grow. But the same proportion saw a need to change their strategy for attracting and holding on to talent.

Although it wasn't a big survey sample, the accounting firm says the companies concerned do annual business totalling $39.5 billion, and employ 65,000 people.

The PwC survey is corroborated by a much larger poll by recruiter ManpowerGroup. It said in May that 59 per cent of 650 New Zealand employers questioned were struggling to find staff with the skills their organisations needed.

The problem had become progressively worse since 2012, with engineering, skilled trades and accounting and finance jobs hardest to fill.

"This is the second year in a row that over half of employers in New Zealand are struggling to fill roles despite having an unemployment rate of 6 per cent," said Lincoln Crawley, ManPowerGroup's New Zealand and Australia managing director.

As the unemployment rate makes clear, there is not an overall scarcity of labour, but the problem is filling particular skilled roles.

"That points up the ongoing gap between the supply and demand side of the labour market," says O'Reilly. "Educational institutions are still struggling to match the supply of graduates and trainees with real labour market needs." The usual suspects - information and communications technology firms such as Orion Health, Xero, Telecom and Vodafone - are feeling the pinch, he says.

Eroad chief executive Steven Newman. Photo / APN

Fast-growing Eroad, which lists on the NZX today, raising $40 million, is in the same boat. Chief executive Steven Newman says the Albany-based company, which sells an electronic road user charge service to vehicle fleet operators, has been doubling in size each year for the past three years and now has about 130 staff.

"Our budget this year is to hire another 40 people," Newman says, and that will barely keep pace with the company's expansion plans. "There are a number of roles - Java developers, testers, product managers - that if we could find 10 suitable people for we'd probably hire them all."

For some industries, overseas workers are filling the gap.

Hamilton aeroplane builder Pacific Aerospace casts the net wide when looking to fill vacancies. It advertises with an online job service that brings in applications from all over the world. "Any roles that we advertise go on Seek and you'd be surprised where applications come from," says human resources manager Catherine Wetton. Many of Pacific Aerospace's 73 shop-floor workers engaged in aircraft parts manufacture and assembly are from Britain and South Africa.

Mostly, Wetton says, the 122-strong company recruits one or two people at a time. But before the end of the year it expects to significantly lift its headcount as it gears up for a new joint venture with Chinese firm Beijing Automotive.

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"That could be a challenge. I suspect we will have to recruit from overseas because of the numbers required."

Aeronautical design engineers are the scarcest breed. "Mechanical engineers are not so bad - there are quite of few of them coming through the university system. It's the electrical design engineers who are a bit harder to come by, especially those with aviation experience." The Air Force and Air New Zealand are sources of people with those skills.

Aircraft manufacture is specialised enough, but how does New Zealand's sole serious player in the space industry, Rocket Lab, fare when recruiting locally? Not terribly well, says Peter Beck, the Auckland company's founder and chief executive.

The seven-year-old firm, which last month unveiled a rocket which it says will allow it to put satellites into orbit at a fraction of the usual cost, is looking for more than a dozen skilled workers.

The specialist rocket-related roles - for avionics, propulsion and guidance engineers, among others - stand little chance of being filled by New Zealanders.

"Of course it would be nice to find them locally but New Zealand universities don't offer aerospace degrees," says Beck, who taught himself rocketry.

Looking overseas might seem the obvious answer, but there's no guarantee that workers from foreign shores will remain in good supply. ManPowerGroup's survey covered nearly 38,000 employers in 42 countries and found the skills shortage was even more acute elsewhere.

In India, for instance, nearly two-thirds of respondents reported a skills shortage.

If there are countries that are immune, says Business NZ's O'Reilly, they are Switzerland and the Nordic region.

Phil O'Reilly, Business NZ. Photo / NZPA

"In Switzerland, right from school to university, there's a real view about getting business much more closely connected to the education system and executing the kinds of skills business needs. That would be a radical change from where we are now."

The Nordic countries, in contrast to those such as New Zealand which follow an Anglo-Saxon model, take a more tripartite approach to economic policy, with employer organisations and unions working together.

"I'm not necessarily recommending that as a solution for New Zealand, but we could learn some lessons from them."

So if the skills shortage is such a chronic issue, why hasn't it been dealt with? O'Reilly's theory is that the "supply side" of the skills equation - polytechnics, private training establishments and universities - has led the hunt for solutions.

Understanding the demand side - the needs of employers - is hard because the requirements change rapidly.

"What you want is an outcome that much better listens to and connects the demand side with what the supply side is prepared to deliver. To change that around is a very complex problem.

"That's why I don't kick people in the shins and say we should solve this by next month because we can't. No other country has completely solved it." There will also be a gap, O'Reilly says, because employers want narrow skills, whereas the publicly funded education system provides more transferable qualifications.

"What we want is all systems working much more smoothly together, and that includes tertiary and compulsory education and immigration, to make sure the needs of employers in terms of getting the right people into the right employment at the right time are paramount. We're quite a long way from that."

The chief executives PwC surveyed didn't have much confidence in their human resources staff's ability to solve the problem. Less than half thought HR was well prepared to confront the issue, and 12 per cent said it was not prepared at all.

Most worried of all were the heads of engineering and technology companies.

Not so Eroad, which has placed recruitment in the hands of in-house human resources staff. Although it's not at a stage where "strategic deliverables" are being endangered by not having the right staff, it wouldn't take much to tip the balance, says Newman.

"A lot of effort and resources are going into that part of the business to make sure that doesn't happen. We do all our own recruitment. With modern tools you can do it yourself and get more predictable results." When skills are in short supply, recruitment agencies tend to look after big customers at the expense of small ones, he says.

Newman says one positive consequence the financial crisis has had for New Zealand is that the pay expectations of US workers are now more in line with rates here. That, in combination with the strong New Zealand currency, is making this country an attractive destination for American workers.

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"America has restructured itself quite painfully over the past eight years and a big surprise for us is that we've been able to hire really good people from the US." They are joining at pay rates up to 40 per cent lower than pre-2008 peak amounts.

Offers of shares in the newly floated company aren't on the table to attract new hires, but Eroad is capitalising on float-inspired interest with recruitment advertisements on the backs of buses.

Newman can see technology being part of the solution to the skills shortage that has hit ICT companies particularly hard. He foresees employers piecing together customised training courses from freely available online content.

"There is going to be a lot of change in order to narrow that gap between what industry needs and what universities provide," he says. If the happy day arrives when the gap is gone, it will be a boon to the economy.

"With unconstrained access to the people we need to grow the business, that would be a state of luxury. If all the 40 people we are looking for were available, we would hire them immediately."

Many of the workers who make Pacific Aerospace aircraft come from overseas, Britain and South Africa in particular.

Restaurants hunt for missing ingredient

Sunrise industries such as IT aren't the only ones hunting for skilled workers. The hospitality trade also faces chronic staff shortages, with hundreds of jobs advertised online at any time. And don't try telling Restaurant Association president Mike Egan cooking and waiting positions aren't skilled.

"I make the analogy that if you were just a waiting robot the Japanese would have invented one and you'd be out of a job," says Egan. "The right waiter with the right personality can make or break a dining experience.

"But it's an unusual skill. It calls for the ultimate in multitasking and reprioritising while on the job. Some people are fantastic at it and others struggle." Filling restaurant roles is a problem all over New Zealand. Egan says a survey of association members found critical staff shortages in regions such as Southland and Otago.

A bid to match unemployed beneficiaries with jobs going begging in the industry has met with only limited success. Egan says pre-employment training offered at the end of last year in a joint effort with Work and Income NZ attracted just eight people to the 40 funded places.

The industry faces particular challenges: comparatively low wages and unappealing hours. And those pay rates aren't going to improve suddenly, given a typical eatery's profit is about 3.5 per cent of sales and restaurant customers are price-sensitive.

"We'd love higher wages but [would you] pay $6 for a coffee and $25 for a simple breakfast?"

Egan says tips help some staff earn good money, and "because there is a skills shortage, if you're any good at the industry, you can go into management. I know people who've been snapped up by big overseas restaurants and earn hundreds of thousands of dollars a year."

It's a source of frustration that the trade doesn't rank high in the popularity stakes when students and their parents sit down with school career advisers, he says.

"We do struggle getting school-leavers to see that this industry has a career path and that they can have a great future in it." The rash of TV cooking shows has brought people into the trade, even if, as Egan says, the programmes tend to emphasise the "fun bits" rather than the daily grind of working in a restaurant kitchen.

Top chef Monica Galetti.

Yet the industry is not without its poster girls. Samoan-born Monica Galetti, from Lower Hutt, had her first taste of the industry on a school trip to a cafe at age 15. She was inspired to train as a chef, went to London after completing a course, and for more than a decade has worked at top restaurant Le Gavroche.

"She's a great role model," says Egan. "She has her own TV show, writes books and is inspirational when she visits New Zealand and talks at schools." Egan, who has interests in Wellington and Auckland restaurants including Monsoon Poon, Boulcott St Bistro and Osteria del Toro, says good people are so hard to find that if someone promising comes knocking, he takes them on, even if there's no vacancy.

"If anyone decent walks in, even if we don't have a job, we'll create one for them. Anyone with good experience and the right personality gets snapped up."

Egan says working holiday visas, which entitle 18 to 30-year-olds from many countries to work here for a year, are a lifesaver for restaurants, most of which have foreigners on staff.

- NZ Herald

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