When it comes to targeting talent, the perfect can be the enemy of the good.
Back in January 2020, CEOs worldwide reported that their number-one internal issue was attracting and retaining top talent. Now, more than 18 months later, as economies emerge from the depths of the global pandemic, that concern is even deeper.
The predictable “supply and demand” employment cycle is a thing of the past: Regardless of cyclical ups and downs of the economy, companies increasingly struggle to find people with the right skills, in the right numbers, at the right times.
A significant majority of business leaders surveyed—69%—reported that the quantity of candidates is less, or much less, than what their organization needs to ensure the future success of their business. Furthermore, 67% believed that the quality of candidates is also less or much less than what they needed for their business to be successful. Many executives (64%) said that the pace of recruiting workers is less or much less than what they need and 57% said they struggled to find diverse candidates.
People need jobs and companies need workers, but when organizations seek “perfect” candidates, they often overlook perfectly capable ones.
What can leaders do to bring the right people to the right positions—to improve hiring practices and discover new talent pools?
Our research included a survey of 2,275 executives in the US, UK and Germany, as well as video interviews with 125 hidden workers across five advanced nations: France, Germany, Japan, the UK and the US.
Each individual’s story was unique but, at the core, they tended to fall into one of three employment narratives. They were either:
Working one or more part-time jobs but could or would like to work full-time.
"Missing from work"
Unemployed for a long time but still seeking employment.
"Missing from the workforce"
Currently not working and not actively seeking employment, but could be working under the right circumstances.
Understanding the phenomenon of hidden workers begins with determining why they are out of the workforce to begin with. How much of the ebb and flow in and out of the labor pool is voluntary and how much is involuntary?
The term “involuntarily inactive” characterizes those who stopped working as a result of economic (demand-side) factors including temporary contracts ending, dismissals or illness and disability. Those who have left the workforce for reasons such as caregiving, studying and retirement are the “voluntary inactive.”1
The unemployed and underemployed include millions of people who want to work and possess—or could develop—many of the skills that current employers seek.
Hidden workers fall into distinct groups. Aggregating them under one umbrella obscures the reasons why they’re not optimally employed…and the potential solutions for them and employers.
Our research identified several categories of people who became hidden workers, including people who have:
Physical, mental, neurodiversity challenges, or a history of substance abuse.
Gaps in employment histories
Long-term unemployed or previously incarcerated.
Family care responsibilities
Caretakers of children or adults/older people.
Few formal qualifications
No school qualifications or below a degree-level education.
Veterans, immigrants and those moving locations.
Raised in a care home or had unemployed parents/caregivers.
Our analysis also shows that being a woman, having a low family income, reporting a disability and having childcare responsibilities are the most common markers of workers struggling to enter the workforce full time.
Hidden workers tend to be less educated than the active workforce, but many are capable of work at different skill levels and are well educated. In the US, nearly a quarter of those we identified as hidden workers had at least an undergraduate degree.2
The pandemic’s exacerbating effect
The extent to which the pandemic has harmed the underemployed and unemployed population can’t be overstated. In fact, more than two-thirds told us they were willing to take up a job even if it put them at risk of contracting or spreading COVID-19.
It’s also important for employers to recognize that on many fronts, the pandemic did not break new ground; it only worsened existing conditions.
An astounding 41% of hidden workers said that finding work was just as hard pre-COVID-19 as it was during our COVID-19 survey period.
Over half (52%) of hidden workers reported that the barriers to finding work that they face are the same as they were before the pandemic began.
A post-pandemic influx of people into the market does not lessen the challenge of recruiting the right candidate with the right skills for the right job. As companies regroup and reinvent, the skills deficit is projected to intensify. What, then, can leaders do?
A significant number of employers voiced concerns about the impact of hiring hidden workers on business operations: 40% said hiring hidden workers would make them significantly less competitive; 50% believed hidden workers would significantly increase their exposure to risk; and 41% were convinced hidden workers would significantly contribute to a negative financial return for their organization.
Nearly two-thirds of all business leaders reported that once-hidden workers performed better in six key areas that matter most to employers: attitude and work ethic, productivity, quality of work, employee engagement, innovation and attendance. They also said hidden workers cost the same or less to hire and retain compared to traditional sources of talent.
Companies hiring the most hidden workers were 36% less likely to face talent and skills shortages. In addition, companies that hired hidden workers also improved their diversity mix and were 35% less likely to face challenges meeting diversity quotas.
Recruitment management systems and applicant tracking systems minimize the time and costs recruiters spend finding candidates. But they weed out many qualified candidates as a function of that process.
Employment criteria that can be “affirmative”—meaning the candidate must have a specific skill or credential—or “negative”—meaning a candidate’s application and/or resume should not have some attribute. For example, a frequently cited negative criterion is a criminal conviction. Many companies will not consider someone with a felony conviction.
Many systems weed out resumes if the work history has a gap of more than a few months in time, the resume is automatically screened out. The more requirements employers add to job postings, the more they narrow the aperture for finding the talent they need. Rather than focusing on “the one thing” that filters out applicants, employers should specify a small handful of six to eight must-have hard and soft skills that filter more applicants in.
The full scope of change required is nothing short of a culture transformation.
Big data is only as good as the human biases it’s built upon, which include outdated norms in hiring and unconscious and conscious pre-conceptions. Even companies that pride themselves on a stated culture of inclusiveness find themselves attracting and hiring the same types of candidates over and over.
Companies can conduct a thorough review of their corporate social responsibility (CSR) efforts and ask two essential sets of questions. First: What worked? Where did the CSR activity succeed in accessing new and diverse talent pools? How can the company apply lessons learned on a larger scale across the organization? Second: What did not work? What delivered just token results? What proved to be inauthentic, unsubstantial and ineffective?
Each company’s journey will be unique based on how honestly it reviews the past and how sincerely it embraces the future.
The more requirements employers add to job postings, the more they narrow the aperture for finding the talent they need.
Bringing the best talent out of hiding
Rethinking best practices in hiring and rewiring human and technology processes will be a steep challenge. Staying the course will require courage as well as conviction.
Companies need people in order to compete and be productive. People want work in order to enjoy dignity and a higher quality of life. The closer the two align, the greater the common good: a stronger, more equitable economy and more equitably shared prosperity for all.
About the research
The “Hidden Workers, Untapped Talent” research was conducted in partnership with Joseph B. Fuller, Professor of Management Practice and co-lead of Harvard Business School’s Project on Managing the Future of Work. It focuses on quantifying the business case and mechanisms by which individuals who are often restricted from realizing their full potential in the workplace, such as people with disabilities, family care commitments, veterans and ex-offenders, can increase and deepen their participation. The research is based on both official labor market data, as well as proprietary 2019-2020 surveys of over 2000 employers and 8000 employees in Germany, UK and the US.