August 03, 2021

Author, “Why Good People Can’t Get Jobs” and Director of the Center for HR at The Wharton School at UPenn

Dana Safa

1Huddle Podcast Episode #51

On this Bring It In podcast episode, 1Huddle’s CEO and Founder Sam Caucci sat down with Peter Cappelli, author of  Why Good People Can’t Get Jobs as well as the George W. Taylor Professor of Management at The Wharton School and Director of Wharton’s Center for Human Resources at The University of Pennsylvania. He has been ranked 5th on HR Most Influential 2012 Top 20 International Thinkers.

On this episode of Bring It In season two, Peter sat down with Sam and discussed the skills gap, expectations employers have, the future of leadership, and IT/Technology in the workforce.


Audio available on Apple Podcasts, Spotify, and Google Podcasts. 

TOP 3 HIGHLIGHTS

Below are some of the insights Peter shared during our chat, edited for length and clarity. You can find more Bring It In podcast episodes here.

  • “Can you tell your CEO how much it costs you when somebody quits? If you can’t get that far, you are nowhere.”
  • “It’s easy to count costs. Hard to count value…like having a machine that’s falling apart.”
  • “There is no evidence of a skills shortage, if companies are willing to pay for it.”

FULL TRANSCRIPTION

Sam: A lot of talent leaders today are talking about skills gaps, and many are talking about the skills gaps do exist. You say that there isn’t one. I’d love to have you expand on that. 

Peter: Okay. I think we begin with definitional problems. What does the skills gap mean? And this is a case where you can see people talking past each other and they think they agree because they have different definitions of what those terms mean.

So there’s the idea of a skill shortage, and that doesn’t really happen very much. A skills shortage means you couldn’t get what you want, even if you were willing to pay the market price for it. So, could you pay a little more and get those skills you want? Well, if you could, then it’s not a shortage, right? We might say something is expensive, but that doesn’t mean it’s in short supply. So the usual example is diamonds; they’re really expensive, but you could buy all the diamonds that you want. So I don’t think there’s any evidence that there is a skill shortage, or that you really couldn’t find people if you were willing to pay for them. 

Then we moved to this idea of a skills gap, and that was a phrase that was used to suggest that there was something fundamentally wrong with young people coming into the workplace that they were somehow lacking. Some of this was just a hangover from perceptions that probably were true a long time ago.

There was some evidence on this in the 1970s that student achievement had actually declined a bit and it hit bottom, just about when I graduated from high school, frankly. So, the evidence then was the average high school student was about a year behind where they would have been 10 years before.

But since the 1970s, frankly, the educational progress of students has been up, has been coming up, not hugely, but the trend has been up for about 20 years or so. So the idea that there is something that is worse now about kids leaving school, there’s zero evidence for that.

And there’s a lot of evidence that it’s arguably better. One reason why is that just so many kids are going on to college. Now, I think we could argue that that’s not a great thing because they’re not graduating, but they probably are learning something, so they’re probably more educated then they would have been a generation ago.

So now we get to, what is it that employers are really talking about? I think what they’re talking about is they can’t find what they want and particularly at the price they want to pay, which I don’t think anybody, if you thought about it carefully, would really think of as a policy problem. So I might want to find an electric four wheel drive SUV with good range that isn’t very expensive. And nobody’s talking about this as a car shortage. The problem is the expectations are just greater than the market. So I think that is what’s happened. And I think there’s two reasons for this. 

One that came out of the great recession is for a while there the unemployment rate, the real one, if you count discourage workers 15% or so, people were begging for jobs and some employers got used to that. And then, not surprisingly, the market improved and you couldn’t just, you weren’t just overrun with applicants who were terrific and over qualified for whatever you wanted to do.

But I think the bigger issue is employers don’t expect to train anybody anymore. So, if you look at any job, sometimes just for amusement, I do this, if you pick up Indeed or something like that, put in any job you want and just see how long it takes to find any job where they say we’ll train you. It’s almost impossible to find.

And what you see instead are job descriptions that are unbelievably specific. ‘We need five years experience with the following machine tools’, and you probably know the Silicon valley joke on this, ‘we need three years experience in a programming language that doesn’t exist yet’.

The real problem, I think, is that employers are expecting to find who they want, who could step right into their jobs and start contributing tomorrow, and yet what they want is really quite specific to them and they don’t want to train people. And so this is really a problem of expectations sake.

They can’t find what they want. That’s true. That’s a problem for them. That’s true. This is usually the problem in human resources. You think that they solve themselves either by training people or by adjusting their expectations. So that’s what’s going on. 

Sam: And you mentioned in the job description example, the thing that surprised me even over the last few years is when you look at the job ads for heads of learning and development in training and development, an absence of experience in cognitive psychology, human behavior, talent development. 

I feel like there’s a gap, like there’s doctors without medical degrees. I would never allow someone to perform surgery on my daughter that isn’t. But the folks in charge of talent do not necessarily have expertise in that area. 

Peter: I think that’s right. I think we’ve gotten screwed up on the hiring side, and here’s why; because we’ve cut back on recruiters. So recruiters are the professionals whose job it was to push back on line managers and say, ‘you really don’t need five years to do this job, you don’t need a PhD to do this job, but you really need this’. 

And the reason that they matter is because every additional thing that you added on to a job started making it more expensive and made it more difficult to find people. So in the examples that you’re giving, I think what you really would want to see are job requirements that are really related to what the job actually needs.

But because there are no recruiters there, what happens is this task gets pushed onto the line managers. And in cases like this on learning or training leaders, it’s often pushed onto people who don’t know much about it. It’s not their fault, but we’ve gotten rid of the professionals who used to do this.

And so they’ve got to kind of make it up on their own. So usually what they rely on are, ‘have you done this job before’, which is not crazy, but the problem is you’re going to pay a lot if you’re looking for somebody who has done that job before. And at some point, as a society and an economy, you can’t function that way. You can’t have all jobs filled by somebody who’s already done that job someplace else. At some point, somebody has to be able to crack in a little bit. And as you say, you’d be way better off having somebody who really understood the content, even if they have not had the job title of chief training officer before, they might be much better at it than somebody who had done the job before, but didn’t seem to have any of the qualifications to do it well.

Sam: Sure. The jobs report came out last week and talked about unemployment being at 6%. From your seat as an expert in this category, how should we as a society look at jobs numbers? Sort of feels like Groundhog day in a lot of ways. 

Peter: Yeah, and there’s an interesting story about this, which I only learned relatively recently about the beginning of our definition of unemployment. I forgot what period this was, but maybe a hundred years ago. The obvious thing you might want to do, if you’re looking to try to measure unemployment is you might say, who doesn’t have a job? And when they looked at that, they discovered that the percentage was really pretty big, and they said, well, we don’t want to make it look that big, so what should we do?

Apparently the state of Massachusetts was using a measure, which is the one that we adopted now, and that is the percentage of people who are actively looking for a job and have been out of a job for 4 weeks. So it’s not the percentage of people who don’t have a job. It’s not the percentage of people who want a job. It’s the percentage of people who have been unemployed for a while, four weeks, and are actively looking. 

So even if you want a job and you’ve given up because you said there’s nothing out there, or if you count as unemployed, right now we’re counting people as unemployed who are on recall, they’re telling them where we’re going to bring it back at some point. So they’re not looking, they don’t get counted either in those definitions. So if you count just the people who say they want to have a job and they’ve stopped looking, so discouraged workers, you get a figure of over 7% right now. 

The other thing that makes it a little tricky, is there are a lot of people who just have decided to retire because they can’t find anything. So they’ve stopped looking, they say they don’t want to, they wish they had stayed in longer, but there were no jobs. The unemployment rate is not a particularly meaningful statistic because it doesn’t tell us about the availability of supply in the workforce. It also doesn’t tell us very well how much pain there is. 

So here’s one of the things we’re going to find; as the economy begins to improve, you’re going to see the unemployment rate doesn’t fall, or if it falls, it doesn’t fall by much. And the reason is because a lot of those people who were discouraged before now join the workforce. Suddenly, you might see the unemployment rate go up.

We added a huge number of net jobs, which should bring the unemployment rate down, but it actually goes up. And the reason is because more of those people are coming back in. So here’s what I would look at. You want to look every month, they announce the number of net new jobs in the economy, and we gotta hit about 150,000 per month to keep up with the population growth and the growth in the labor force. So if we’re hitting more than 150,000 a month, we’re making progress. If it’s less than 150, we’re falling behind. If it’s around 150, we’re kind of hanging in there. So I think that’s the more important number to look at. The unemployment rate is confusing. 

Sam: What do you think about when you hear so much discussion around automation, robots, shifting role of technology impacting labor and the type of jobs people are gonna perform? What are you thinking about in the years ahead as you think about that topic?

Peter: I get a headache when I hear that, frankly, because there’s no evidence that is true. This is just a guess, and one of the problems with forecasts and predictions is that you get attention the more extreme your prediction is. If you say, as I’m inclined to say, not much going on here, believe me, you can’t sell a book if the story is not much going on here. 

So how would we know? So what do we know right now? The arguments that robots are going to take all our jobs and technology are going to take all our jobs, how would you see whether that was true? Well, the first thing you might say is, has that ever been true before?

The answer is no. We’ve had robotics before. It’s not a new thing. We’ve had IT coming into the work place before. It’s not a new thing. And if you look at sort of at the more granular level inside companies, and you see what happens when we add more IT, for example, there’s no evidence that jobs even in the company go down.

In fact, they seem to go up. Even when we’re talking about robotics, there’s no evidence that adding robots, at least in the studies so far, actually caused jobs to go down. Now, here’s one reason why that’s sensible, if you think about it, most IT is not designed with a goal of eliminating jobs, it’s designed to solve particular tasks.

And sometimes those tasks are done by a person, but the person in a job performs many tasks. So you say, for example, radiologists are the ones you hear all the time, machine learning algorithms are better than radiologists at reading certain kinds of films, diagnostic films. Well that’s true. But it’s also true that radiologists and the machine learning together are even better than the machine learning is.

And it’s also true that radiologists do a ton of other things besides simply reading scripts. So the machine learning could read these films and things, but it doesn’t mean you’re going to get rid of radiologists. 

The big thing about most of the IT is that it’s adding functionality. So if you think about buying something like buying online, you say, boy, that eliminates a lot of retail jobs. It probably does. It is creating a lot of warehouse jobs too. And when you buy something online now, one of the things that you see is it starts doing other things besides just transactions. It says to you, have you thought about the tools you’re going to need to put this thing together? Have you thought about the other parts that you might need to make this thing go that you just built? It’s adding functionality. So it’s adding new tasks that weren’t there before, it’s doing new things for us. 

So the goal of IT is not to eliminate jobs per se, it’s to do things. And sometimes they might eliminate a task or two from somebody. It doesn’t eliminate their job just because one thing goes away, but sometimes it just adds tasks that were not there before. So the punchline is, these stories you hear about technology going to eliminate jobs, things like that, these are just somebody’s guesses, and they’re based on an argument that maybe sounds persuasive until you look at the evidence and then you see it’s never been true before. Here’s all the reasons why, if you think a little harder, it’s probably not true now. And I think in general, I would just ignore all this stuff.

We’re so bad about predicting the future, that the best thing to do is to just respond in real time, if you’re an employer particularly, to what you’re saying, what are your customers doing? Don’t try to guess where the economy is going to be in five years, cause nobody has a clue. And if you think you’re good at it, ask yourself, did you predict the pandemic? Did you predict the great recession? The two biggest events that completely threw everybody’s strategic plans. And if you didn’t predict those things, why do you think you’re going to be able to predict the next thing that comes along? So don’t bother, just stick to your knitting, look at what you see is happening right in front of you in real time. See if you can learn some things from that. 

Sam: I guess on that point, for any talent leader out there that’s thinking about, and I say talent leader in the definition, it could be an L&D person, it could be an HR person, it could be a CEO, it could be a COO, what do you say to that role? Any advice for right now as they think about restaurants are going to be hiring back in some proportion more and more workers, hospitality, and the service sector is going to be bringing back folks who’ve been on the sidelines. What advice do you have?

Peter: Yeah, I think what we all want to do is have some impact. If you’re in the business world, you want to have an impact on the business. So what is the best way you could have an impact? Well, you could try to guess right about some quirky talent that you think we might need in the future. And I dunno, what would you do? Try to hire those people now and lock them in or something? 

But the best thing you could do is get better at hiring and find some way to develop talent internally, cheaply and efficiently. We know how to do that, work-based learning and you can do classroom based stuff online, you can share the costs with your employees, there’s all kinds of things you could do, which are kind of nuts and bolts of managing talent, which are easy to describe. They don’t happen very often because they’re a little hard to execute. But in particular, they are hard to explain to the CFO why these things make sense.

So I think the real thing that you could do now is use this opportunity to think about, what do we think we’re going to need? In the short-term here, given where our business is now, how can we get better at hiring good people for those jobs? Because it’s going to be a bit of a buyer’s market, at least for a little while here anyway.

And then once we hire people, can we think then about how to develop some of these people internally so we don’t have to do so much hiring outside? Because that’s really expensive and that’s really unpredictable. If we’re trying to meet all our talent needs just by rushing outside and hiring, it’s really expensive. It takes time to do from recruiters and other sorts of folks. And here’s a huge risk you won’t find people or you’ll find people who aren’t good and you have to churn through them. So you can make a big contribution, just doing the basics and doing them well. 

Sam: In your book, you even talked about the fact that training and development cost money. It costs time. As an investment, is there anything that the states or federal government can do to make it easier on business owners to make better infrastructure investments in their technology stack for talent, for recruiting, for continuous learning? 

I look at this like bridges and tunnels. There are some companies who just don’t invest in mobile for workforce development. I talked to a company the other day who said, ‘we’re not a mobile company’. I don’t even know how to respond to that question when I’m talking to an L&D person.

Peter: Yeah. Right. Do you have a phone? Nobody uses phones in your place? Yeah, well, I think the first thing to remember for all learning people is the single most important way to develop talent is through work-based experiences. And that’s giving somebody tasks to perform where they’re going to learn something from doing it.

We know that apprentice-like systems, if you can pull them off, they basically pay for themselves because people are learning as they’re doing. And every organization can do this. It takes a little effort to set it up, but once you do, it actually saves time for the managers because you’re delegating more stuff and people are learning from the delegation. So that’s the biggest thing. 

Right now is the cheapest time ever to do other kinds of training, because you can make all kinds of things available to people online. You don’t even have to pay for it as long as it’s not required for the job. You can just make it available. The temp agencies actually have been a good source of training for people just by making stuff available online. You can come in, you can learn it. You can get certified. There’s no reason companies can’t do that. There are extremely low costs to doing that. 

If you really wanted to get good at this, you would try to design for your own organization,  here are the jobs above you. Here’s what those jobs require. Here’s how you could meet the requirements for that job, with the following sets of classes, you could take these online, and some experiences which we could probably provide for you internally, but you drive the process. It doesn’t cost the companies hardly anything to do that.

It does cause some time from the L&D people, and in particular it requires, and this is always the hurdle, it requires being able to persuade the top executive that this is important to do. Because when push comes to shove, the problem is the line managers who don’t want to release people for training, who don’t want to create stretch assignments for people because it seems like it’s more work for them.

Somebody got to explain to them why this is in the business interest to do it, even though it might not be in their personal interest right now to do it. This is one of the things we have to do as a company. And so I think that’s where the hurdle has been, is the difficulty that human resource people broadly defined have had in persuading the people at the top of the house that these problems can be solved and they don’t cost a ton of money to solve them, and if we do it, the whole organization could be much more effective. 

Here’s the simplest thing. Can you tell your CEO how much it costs you when somebody quits? If you can’t get that far, you’re nowhere. Because a lot of what we’re doing is simply designed to try to reduce turnover, and if they don’t get why that’s important, you’re not gonna make any progress and they’re not going to get it. Your CFO does not think that way, unless you point out to her what the cost is. So we’ve got to go to them with some numbers that say, here’s what we’re trying to minimize here, and here’s the way we’re going to try to do it.

Sam: The perspective in your book, Peter, on the cost of leaving a job vacant is something that makes perfect sense, but I don’t know if folks are measuring it. 

Peter: Yeah, I think that’s the problem. Actually, I’m writing another book now and that’s kind of the theme, really, is if you look at financial accounting, part of the complication is it’s easy to count costs, it’s hard to count value. So if you’re the CFO, unless somebody points that out, like the CEO, your goal is to drive all this stuff to zero. And unless you see why that’s a foolish thing to do, you’d never think about driving machine maintenance to zero, but we do think about driving training costs that keep employees up to date to zero.

Why is that? Well, because those folks that are controlling the money don’t understand why those things are similar. If you have employees who don’t have skills that are up to date, it’s like having a machine that’s fallen apart. 

Sam: Peter, last question, I’ve been humbled in the city of Newark to be able to work. About a year ago, I was invited to sit on the workforce development board, which was the most fulfilling and scary experience I’ve had so far, but being able to work in the community and see things from the frontline, my last question for you is for a piece of advice to the worker, that’s on the sideline right now, that’s thinking about how do they gain the experiences? How do they check the right boxes to be able to get an opportunity? What do you say to those folks?

Peter: Boy, that is a tricky thing, right? Because what you really need, what employers want to see is work experience, and you can get all the certificates you want, but what they really want to see is have you actually done this on the job? The reason that coding academies have been a hit is not because they teach you coding. You could do that in a community college. You could do that online. The reason they’re a hit is because of the work experience they give you and the fact that when you’re done, you can say, I built this website for this nonprofit and there it is, ta-da.

So what you’re really getting there is a reference. So, the standard advice has been can you at least volunteer someplace where you can get work experience and you can try to be able to show an employer, here’s what I’ve done that looks remarkably like what you need done? Because that’s what employers want. I wish employers were not that narrow in their focus.I wish they would be able to say here’s somebody who in a week could do what we want them to do. But what they’re stuck on is, have you done this before?

So that’s the real challenge. How can you demonstrate to them that you’ve done this before? It’s a tough, tough problem. We have a big disconnect, and that’s one of the reasons why workforce development struggles.

Topics Discussed: Skills Gap, IT, Technology, Ueemployment, Job Training, Future of Work

Dana Safa, Manager of Digital Marketing at 1Huddle

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