WAGING THE WAR FOR TALENT A Guide to Attracting and Retaining the

Next Wave of Knowledge-based Workers

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If you’re in the business of economic development and

you’re not focused on attracting the next generation

of knowledge-based workers, you should be.

If environmentally sustainable urban intensification, active transportation, digital connectivity, vibrant downtowns,

interactive public spaces and all the other things that

matter to this highly mobile workforce are not on your

radar, they should be.

If you aren’t integrating workforce development into

your investment attraction efforts through strategic partnerships with industry, educators and other

community stakeholders, you need to start.

Here’s why...“Successful long-term

economic development cannot

exist without a strategic and

coordinated implementation

of a workforce development

plan. In addition to having staff dedicated to championing workforce development, we have commitments from school districts, higher education, workforce development organizations, technical training programs, business community members and others to participate in the development of the region’s workforce talent. It truly takes a community to evolve its workforce capabilities that can transform the economic well-being of a community.”

Jason Giulietti, Vice PresidentGreater San Marcos Partnership

123

Access to talent has quickly become the

single most important factor of business

success therefore investors are increasingly

selecting locations based on the sustained

availability of top talent.

The availability of talent is limited, which

means workers can afford to be choosy.

The next generation of choosy

knowledge-based workers are millennials

who over-whelmingly care about living in

active, vibrant urban centres close to their

place of work.

4Attracting and retaining top talent

requires a strong talent pipeline. A strong

talent pipeline in a labor scarce environment

requires bridging the gap between industry

needs and education programs while finding innovative ways to increase overall labor

force participation rates.

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Let’s break that down...

For more than a decade, we’ve known about the

impending ‘War for Talent.’ The term was first coined by Steven Hankin of McKinsey & Company in 1997 to

describe an environment in which talent; particularly

knowledge-based talent becomes the primary

competitive resource critical to a company’s success. It

refers to the increasingly fierce competition that exists in advanced economies globally to attract and retain

employees in an environment where there are too few

workers available to replace the baby boomers now

departing the workforce.

Ask any C-suite executive what keeps them up at

night, and the ability to attract and retain talent will

consistently feature on the list. The ability to attract

STEM talent is an even more pressing concern. The

number of jobs that require STEM expertise is growing

at a rate that has already outstripped current workforce

capacity. According to a study by the American National

Association of Manufacturing and Deloitte, the U.S. will

need to fill about 3.5 million STEM jobs by 2025; yet as many as 2 million of those jobs may go unfilled, due to difficulty finding people with the skills in demand.

Quality Matters

At the most basic level, businesses need people to fill jobs. But the impact of talent is even more significant than that. The quality of talent matters too. A McKinsey & Company

study of the impact of talent on businesses revealed that high

performers are exponentially more productive that average

performers and that the performance gap rises with a job’s

complexity. In highly complex STEM occupations, for example,

high performing talent can be as much as 800 percent more productive.

Management guru Jim Collins stated it this way “… the single

biggest constraint on the success of my organization is the

ability to get and to hang on to enough of the right people.”

In other words, access to talent – especially high performing

talent - has quickly become the single most important factor of

business success.

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Zero-sum Labor

Baby-boomers are the first generation in human history to be experiencing Zero-Sum labor. By 2021, the entire baby boomer cohort will be over the age of 55 – all 75 million of them in the US alone. As they exit the workforce, there

simply won’t be enough qualified entrants from the next generation to replace them. It’s more than a problem of

numbers. The mismatch between education outputs and

the needs of industry is also a factor, as is the pace at

which technological change is taking place. At the end of

the day, however, the problem is that there will be more

jobs than qualified people to fill them. This creates the condition of zero-sum labor.

The problem is not just that talent is becoming increasingly

scarce. It’s also that that talent is highly mobile and

motivated by completely different influences than their baby boomer predecessors.

87%

85%

77%

of the global workforce is ‘not engaged’ or ‘actively disengaged’

Gallup

of the global workforce is actively or passively looking for a new employer.

LinkedIn Statistics

of CEO’s see the availability of key skills as the biggest threat to their business.

PWC 20th CEO Survey

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In other words, the availability of talent is limited, which

means workers can afford to be choosy…

This chronic shortage of qualified workers is changing the face of business in advanced economies around the

world. It will reshape business models and significantly impact location decisions about where to invest. As

employees have more of a choice about where they

work, the location of a company’s real estate, and more

specifically, its proximity to the lifestyle amenities valued by a millennial workforce will vastly affect that choice. It goes without saying that for industry, location has always

been important. Location decisions, however, have

historically been based on factors like access to markets,

transportation infrastructure and overall business costs.

The War for Talent means that locations are now being

evaluated for their ability to attract and retain quality

employees.

The War for Talent will also impact the way that industry

interacts with their host community once they establish in

a jurisdiction. A strong talent pipeline and collaborative

partnerships with education and training institutions are

just the beginning. Prospective investors are looking for

communities that differentiate themselves through their quality of life and cultural fit. Increasingly they are driving

investments into green amenities such as parks, trails

and other active transportation networks in order to

appeal to the preferences of a millennial workforce.

Courting Millennials

The millennial workforce also cares about finding affordable places to live. A recent study by Area Development.com highlighted a link between low

housing costs in metro areas and job and population

growth among millennials. Millennials are typically facing

significant student debt so it stands to reason that creative approaches to housing will be an important

factor of consideration.

Places like Austin, Sacramento, Minneapolis, Nashville

and Denver all rank consistently among the top cities

for attracting millennials in the US. They also rank

among the top cities in terms of concentration of tech

companies who employ a largely millennial workforce.

These cities share common attributes such as plentiful

recreation opportunities, active public spaces, and

vibrant urban cores that matter to this knowledge-based

workforce. Ultimately, for a millennial workforce, quality

of life is key.

“Downturns are increasingly

more structural rather than

cyclical. As such there is a mis-match of skills that is greater than it has been in the past, requiring a workforce system that becomes much more nimble. One of the things that we strive to do is be far more specific about the skillsets that companies need as they are looking at locations in connecticut. We then need to work very closely with the workforce investment boards and academia to ensure that we can supply the requisite skill sets for our targeted industries.”

Robert Santy, President & CEOConnecticut Economic Resource Center

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Rethinking Talent Strategies and Workforce Developement

As part of the response to the War for Talent, we need to

re-examine existing talent strategies. We need to rethink

the role of workforce development and its integration

with economic development. Workforce development

has traditionally focused on the existing residents of

a jurisdiction. It is certainly true that in a labor scarce

environment it will continue to be important to find innovative ways to increase labor force participation rates

within our communities and to better align skills with the

needs of industry. But we need to go beyond that. We

need to expand our definition of workforce development beyond the development of education pathways and

systems for addressing skills mismatches. We need to

find innovative ways to address the needs of a workforce that isn’t here yet, the workforce that will be needed to

attract and retain the businesses that will ensure the

sustainability and viability of our communities.

In other words, if our biggest employers need engineers,

or if the industry we’re trying to attract requires a strong

pipeline of software designers, we’d better get creative

about helping them do that. The War for Talent will not

be without casualties. Businesses that cannot find the talent they need will move to where the talent is - or

worse, close their doors.

As the definition of workforce development expands, it will need to include a much broader understanding of

the ecosystem that supports workforce attraction and

retention. In the context of a millennial workforce, it will

need to include lifestyle and place-making considerations

previously considered to be the purview of community

development. If your biggest employers or prospective

investors need engineers who happen to really value

vibrant downtowns and software designers who want to

bike to work, you’d better start caring about downtowns

and bike paths.

Partnerships and collaborations are key

This is not to suggest that Economic Development

Organizations (or EDOs) must now take on the role of

urban planner or cultural activities coordinator. Rather,

that it will be critical to ensure that strong partnerships

are in place with the organizations who contribute to

place-making and that there is a cohesive vision for

development that serves the needs of the workforce

you’re trying to build. This requires active participation

and a concerted effort to influence the development of amenities and services that matter to the workforce

you’re trying to attract.

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Bike paths and vibrant downtowns alone, however, will

not win the war. EDOs have a role to play in supporting

the ability of industry to shape public education and

training systems to be able to meet the needs a 21st-century global economy. EDOs are well positioned

to provide a link between industry and education by

facilitating data-driven discussion about current and

future industry needs.

It could even be argued that EDOs have a role to play in

enhancing the capacity of existing businesses operating

in this skills-scarce environment to build strategies for

hiring, retaining, and training the workers who will give

them competitive advantage. If the options are ‘adapt,

move, or die’, a proactive investment of resources into

business skills development training begins to make a lot

of sense.

At the end of the day, the effective integration of economic development and this newly defined workforce development will require strategic partnerships with

industry, educators, workforce investment boards

and a wide variety of community stakeholders. When

recently asked how economic developers and workforce

developers might better leverage their efforts to address current challenges, Christopher King, director of the Ray

Marshall Center at the University of Texas’ LBJ School of

Public Affairs cited the importance of collaboration.

There are many examples of collaborative approaches

that the successful integration of workforce development

and investment attraction strategies. Louisiana Economic

Development’s LED Fast Start Program offers perhaps one of the best models for a workforce development

program tied directly to the State’s investment attraction

efforts. The program offers a turnkey workforce solution for new or expanding businesses and features

prominently in the State’s value proposition for

prospective investors.

www.opportunitylouisiana.com/faststart

The War for Talent is likely to be a long and bloody

one. The victors will be the jurisdictions who create

collaborative approaches to attracting the next

generation of knowledge-based workers; who find ways to influence the development of the infrastructure and amenities important to that workforce; and who

seamlessly integrate workforce development into their

investment attraction efforts.

1National Association of Manufacturers 2018 Fourth Quarter Manufacturers' Outlook Survey2Scott Keller, Mary Meany, McKinsey & Company, Attracting and Retaining the Right Talent 20173www.areadevelopment.com/workplace-trends/Q4-2018/millennials-spark-seismic-shift-in-site-se-

lection.shtml

“Over the past number of years

we’ve seen a manufacturing

renaissance in South Texas. To help ensure we have the workforce to fuel continued growth, over the last 5 years we’ve dedicated over $5million in funding for both specific workforce programs as well as Texas A&M (Corpus Christi), Delmar Community College and the Craft Training Center. This has all been to generate customized training for companies that locate in Corpus Christi. From our perspective, it’s all about using dedicated funds and working with industry and academia to bridge the skills gap that could exist in the years ahead.”

Tommy J. Kurtz, CEcD, MPA, Vice-President

Business and Strategic Development, Corpus Christi Regional Economic Development Corporation

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What Millennials Love

Accessibility

Public transportation plays a major role in

shaping where Millennials choose to live.

Millennials want low cost transit and multiple

options for getting around a city.

AffordabilityCities booming with Millennials are likely to

have affordable rents and modest home prices. Smaller cities tend to outperform

most major cities in terms of their affordable housing supply.

Thriving tech Scene

Cities that are able to attract and retain

skilled workers, tech entrepreneurs, generate

a thriving start-up scene, as well as attract

investment from tech leaders will also attract

Millennials.

Entrepreneurship

Over 50% of Millennials either want to start a business or have already started one. By

encouraging millennials to become involved in

the local economy, many cities have been able to

retain their graduates and young professionals.

Cultural Attractions

Many Millennials identify cultural amenities as

their cities’ most important selling point, whether

it be sports, food, music, or art.

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Place Character

Millennials love connecting with heritage,

recovery, and the new opportunities available in

revitalizing communities. Civic leaders need to

reimagine land use, especially at former industrial

sites and buildings.

Diversity & Inclusion

Attracting and retaining millennials begins with

financial rewards and workplace culture; it is enhanced when businesses and communities are

diverse, and when the workplace offers higher degrees of flexibility.

Involvement of local anchor institutions:

Millennials are drawn to cities with large

universities, medical centers or high-tech firms that quite literally anchor urban centers.

Efforts to engage localtalent

Millennials love to be engaged in economic

development and “placemaking” initiatives,

which reimagine public spaces to improve

residents’ health, happiness and well-being.

Reinventing of America

Hands-on opportunity to take part in the

renewal and regrowth of smaller downtowns

and Main Streets, that affords millennials a new sense of dynamism will go a long way to

attracting this demographic.

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15 Cities Millennials Love

Pittsburgh, PA

• Very advantageous cost of living compared to places like NYC or the West Coast.

• Carnegie Mellon University and the U of Pittsburgh have attracted big companies, giving

graduates easier access to jobs at places like Uber.

• New restaurant scene has helped boost neighborhoods and the nightlife.

Denver, CO

• The Rocky Mountains are a big draw.

• The old homes and character of the city contribute to attracting millennials.

• Job opportunities are abundant.

• Updated transit system and walkability of the city has made it easier to live in the city

without a car.

Portland, ME

• Recently nominated the number one craft beer city in the world.

• Great ocean views.

• The rent prices are affordable.

Houston, TX

• The Midtown neighborhood has everything a Millennial could want.

• Attractive nightlife scene and major retail access.

• Easy access to work, with public transit, walkability and cycling all being easy to do in

this area.

• Has an urban feel, while still being a place where you can afford to buy a house or rent a nice place.

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Cambridge, MA

• While cost of living is a bit high, Cambridge topped the list in both 2015 and 2016 for the best city for Millennials in America.

• Home of Harvard certainly helps, but it also earned high marks for being diverse.

• Bars, restaurants and coffee shops are all abundant and easily accessed.

Minneapolis, MN

• Median income is close to $50K and tied for 2nd in for highest job satisfaction (PayScale.com).

• Home-buying market is one of the most active for Millennials, which is a big selling point

for those who want to be able to buy their own homes.

Ann Arbor, MI

• Unemployment rate is low.

• Population is highly educated due to the University of Michigan.

• Huge technology industry.

• Great public transportation system for a small city.

Charleston, SC

• The arts and restaurant scenes are booming.

• The technology start-up economy is making Millennials flock for jobs.

• The mild climate and miles of beaches help as well.

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Washington D.C.

• Great for access to things like museums and other cultural staples.

• The nightlife scene is prominent and it’s a highly diverse city.

• Co-working spaces are buying up more and more real estate in the city to cater to

Millennial workers and their preferences.

Austin, TX

• Extremely popular with tech firms.

• Thriving music and nightlife scene, with two major music festivals—South By Southwest

and Austin City Limits.

• Was named one of the top 10 green cities in the US.

Louisville, KY

• Growing tech industry brought on in part by Code Louisville, helping residents learn

software coding skills.

• Center of the American whiskey industry, with roughly one-third of all bourbon coming

from Louisville.

• Named one of the 3 Hottest Event Destinations in North America by Experient.

Charlotte, NC

• The ‘New Energy Capital’ of the U.S.

• The #3 best metro region for STEM job growth (Forbes, 2018); #2 city creating tech jobs (Forbes, 2016).

• The U.S. National Whitewater Center: rafting and outdoor adventure park, including rock

climbing, rappelling, canoeing and kayaking.

• Home to the NASCAR Hall of Fame and the famous Charlotte Motor Speedway.

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Columbia, SC

• 14 Fortune 500 companies operate in the region, as well as more than 70 foreign affiliated companies.

• U of South Carolina’s main campus.

• The Sesquicentennial State Park: more than 12 miles of trails with a 30-acre lake in the middle.

Nashville,TN

• More than a dozen Fortune 500 companies operating in the region.

• #1 city for Economic Growth Potential (Business Facilities).

• Auto industry explosion with Nissan and Bridgestone HQs.

• Tech and business services exploding: Amazon building a major operations center.

• Home of country music.

Sacramento, CA

• 230+ days of sunshine each year.

• Member of Transportation for America’s Smart City Collaborative.

• 4th-most hipster city (behind Seattle, Portland and Denver) by Infogroup in 2016.

• America’s ‘Farm-to-Fork Capital’ with great dining options.

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