Q&A: Deloitte's Jeff Schwartz on the Finance Talent Crunch

For years, the finance industry answered its talent needs with instant gratification, recruiting established, senior and well-compensated officers that arrived ready and trained. But in the post-recession world, that system appears to be collapsing.

According Jeff Schwartz, principal with Deloitte Consulting LLP and a leader in the Human Capital practice, there are multiple forces shaping future talent needs, including globalization and an aging workforce. These elements didn't slow down during the recession, he says, but rather, intensified.

Schwartz sat down with Business Finance to discuss the findings from Deloitte's new survey series, Talent Edge 2020, which explores some of the key talent management trends that are expected to unfold in the decade ahead.

Schwartz will be joining Business Finance as a regular monthly contributor, sharing his perspective on executive talent development, where the next generation of finance leaders will come from and some of the best practices organizations are applying in addressing these issues.

BF: What were some of the findings that jumped out to you from this study?

JS: One of the biggest is what we call the talent paradox. Although there is high unemployment in the U.S. and Western Europe, they are currently experiencing and anticipating some major shortages of talent in a couple of major areas. On top of that list is R&D and executive leadership.

Another major finding was a very consistent concern among business and talent leaders around the challenge of developing the next generation of leaders. It reminds me of the famous expression from Marshall Goldsmith, who said, "What got you here won't get you there." There's a very strong sense that we need to refresh our talent and retention strategies. In this post-recession period, this is the new normal.

BF: Another finding I noticed is that the race for talent has gone global.

JS: It's true and it bears attention. One way to look at this is, during the recession, particularly in the U.S. and Western countries, the pace of globalization did not slow down. What many companies are realizing is that what was once referred to as emerging economy markets, such as Brazil, Russia, India and China, in the pre-recessionary days, have really emerged as the major growth markets for global companies. This is placing tremendous demands on business leaders at every level to find the people they really need to really fuel that growth in these core growth markets.

BF: One would think the recession might create a talent surplus, but the research suggests the recession was actually one of the primary drivers of the labor shortage.

JS: In part. Both during the recession, and after, there were, and are now, a high number of people looking for jobs. As companies come out of the recession and start growing and hiring, their requirements are very specific and focused. When we're looking at the sector or company level, the mismatch is with the specific skills and experiences that companies are looking for—and the price (i.e the wages) they would like to pay. The talent wars have always been about that match,. We're in a situation now that with companies growing, the skills that they're looking for are very often the skills that turn out to be in the shortest supply.

One example is the area of R&D, where seven out of 10 companies that we surveyed cited a critical or very critical shortage of R&D capability and resources in the coming year. What's interesting to us is most companies are talking about innovating and growing their way out of the recession, if you will. It's going to be very interesting to look over the next several years at how well companies are at not just retaining but also developing those critical skills.

BF: How did so many companies find themselves in the position of having so thin a bench of that next generation of young leaders?

JS: We could dedicate the discussion entirely to this question. There are probably three reasons companies are finding themselves with a thin bench. For one, both the recession and the general pressures to maintain lean operations have meant that companies have not recently had very deep benches in many areas. There's also been a development mismatch, in that we are probably not producing enough technical engineering graduates, scientists and managers who actually have insights and capabilities to manage technical companies.

Finally, many companies have built their business models around acquiring talent from the open market. One of the challenges—and this is going to be one of the most interesting challenges of the next decade—is companies may find that strategies that worked in the past may find that avenue is not as open to them as they thought. We're just not sure there's going to be enough "ready to deploy" talent to go around.

BF: What role do you see CFOs as having in helping to set a successful talent agenda in addressing these trends and opportunities?

JS: I think this is a very opportune time for CFOs and their teams to be thinking about the talent strategies within the finance function itself. The pressures on finance, in some ways, have never been greater. The expectations have never been greater in terms of technical expertise in finance, regulatory expertise and business expertise.

There are some real challenges in building that talent pipeline in the finance function and developing finance professional who have the finance expertise and the business expertise going forward. We think this is a very opportune time to rethink that.

At the same time, we think this is an important time for CFOs given that they have in many ways among the clearest views across the entire organization and they have a unique view on investment strategies in organizations. It will be tremendously important for finance executives to work with HR and business leaders to understand what some of those talent crunches will be and think through new sets of approaches and investments going forward.