Deltek Clarity Human Capital Management Trends
By Amy Champigny, Senior Product Marketing Specialist, Deltek
The human capital management section of the 9th Annual Deltek Clarity GovCon Industry Study pointed to some real challenges around acquiring and retaining talent in the industry. Before I dive into the detail of this section of the report, let’s set the stage. According to the Study, growth rates among government contractors have climbed to historic highs, profits are up and 2018 has brought the highest level of appropriations seen in recent years. All this growth puts some strain on human resources (HR) professionals, as older workers continue to retire and turnover rates reach well into the double digits.
Earlier this month, I had the opportunity to talk about the human capital management section of the Clarity Study during the Deltek webinar Human Capital Management Trends, one of six installments of the 9th Annual Clarity Industry Study series. Keep reading for some key takeaways from the report that you can build into your human capital management strategy.
Deltek’s 9th Annual Clarity Deep Dive: Human Capital Management Trends
On Demand Webinar
Human Capital Management Overview
Industry growth, decreasing employee retention and an increasing shortage of qualified talent have intersected to create some real challenges for organizations with staff growth goals. Older workers are continuing to retire from the workforce leaving behind leadership vacancies and knowledge gaps. In the past, there has not been as great a focus on talent retention. Today, a two-fold focus on strategic talent acquisition and employee engagement is necessary.
Overall, 6% of organizations reported taking more than three months to ﬁll their positions; note that no companies reported this metric last year. We know the industry is experiencing growth, but the Study also identified that turnover rates are increasingly high. While this increase in the number of open positions may be a sign of healthy growth and increasing profitability in the industry, it may also indicate that organizations are struggling to meet staff growth goals. It is important to understand the cause of this increase in an organization.
Employees and candidates have more choices, and many government contractors are working hard to hang on to their current staff while continuing to grow. The data speaks to the challenges created by this particular situation in the industry, which begs the questions:
- How does one position their organization as the number one choice?
- What type of human capital management investments should be made for the future of the firm?
Top Talent Acquisition Challenges
Finding qualified talent remains the top talent acquisition challenge facing government contractors, which has topped the list for the last two years and will likely continue as a trend given our expectations for growth in the industry. Employees and candidates alike have more choice and human capital managers are starting to see the consequences of a shift from an employer-centered marketplace to one that favors employees instead.
The number two challenge reported in the Study goes hand-in-hand with the first – there is a real need for new and innovative ways to reach the best talent in the marketplace. Studies now indicate that the best opportunity to secure strong prospective candidates is by reaching out to more passive job seekers. These individuals currently hold a job and aren’t actively looking for a new role, but they would be open to making a move for the right opportunity. These candidates are harder to reach and require a more sophisticated strategy like passive recruitment.
Addressing Talent Acquisition Challenges
Employer branding topped this Study list for the first time. Creating or refocusing an employer branding strategy is a great way to reach passive candidates. Candidates are more likely join a firm that they have heard of and that has a solid reputation. Think of it this way, most candidates are doing extensive research before they even submit an application. If a firm does not have an online presence and an employer brand that speaks to the types of candidates they are looking for, they will continue to struggle.
The number two recommendation for acquisition initiatives has to do with referral programs. Great quality candidates are often connected to current employees, so creating and implementing these programs can help to reach even more of those passive candidates. Acquisition software also made the list of recommendations, but is fairly close to the bottom, which, given some of the other survey results, was a surprise. Technology is a great way to help with rebranding initiatives and recruiting efficiency.
Workforce Generational Composition
Less than a third of employees in the government contracting space are millennials, and that is despite the fact that millennials are the largest generation in the currently available workforce. Generation Xers, meanwhile, are over represented in the industry, likely due in part to the perception that government contracting is not a highly modern industry, especially when compared to technology companies. Older generation workers appear to be leaving the government contracting industry at a fairly low rate; responding organizations report 5% of their employee pool being 72 years of age or older.
Going forward it will become increasingly important for organizations to effectively managing the differences between the generations. Strategies to address the needs, expectations, compensation, and career development desires of younger workers will significantly modernize and improve how contractors are perceived in the talent marketplace.
Human Capital Management Challenges
Retaining top talent rose from the bottom of last year’s Clarity results to top this year’s list of challenges reported by survey respondents. The shift from an employer-centric to an employee-centric marketplace is really at work here, making a talent retention strategy more important than ever. Additionally, performance management, succession planning and recognition programs all ranked as top five challenges.
Workforce capacity and planning ranked as the number three challenge this year. This speaks to a need for a holistic view of where a workforce is today, but also having that view into what the workforce will be if an organization wins all the work in their pipeline. Having this type of future facing visibility into the state of a workforce allows an organization to stay ahead of potential talent shortages. This is a key strategic area for HR practitioners that are moving away from transactional roles and toward more strategic positions.
Addressing Human Capital Management Challenges
Employers are notably focused on increasing the support and recognition they provide to employees, but they are also facing challenges with performance management programs. Revising these programs, or adopting new performance management solutions, help organizations retain and engage employees.
The number three initiative identified by Clarity respondents was the creation of mentorship programs. This can be a great way to download some of the fantastic company and industry knowledge that lives in the heads of more seasoned workers. Enabling a passing of this knowledge and experience to younger potential leaders or important individual contributors has a double impact on a workforce. First, a firm keeps that tenured knowledge close, and second, younger workers get the development and attention they crave to advance into important positions being vacated by an aging workforce.
Tracking Key Performance Indicators
Key performance indicators (KPIs) are becoming a more critical aspect of measuring the success of a human capital management strategy. Having metrics on hand to help support your strategy or request change from the executive team makes the conversation more directed and successful.
As the talent market becomes increasingly competitive and companies struggle to ﬁll open positions, organizations have shifted much of their focus towards keeping talent. Clarity respondents indicated what human capital management KPIs they track, and employee retention increased 50 points over last year’s results. Every single metric in the survey saw double-digit increases. As organizations keep a closer eye on these KPIs, they will increasingly be able to predict changes in their workforce and manage challenges in talent acquisition and human capital management; it’s too important to leave on the back burner.
Outdated Human Capital Management Software
The challenges around talent acquisition and employee retention reported by many respondents could be tied to the lack of appropriate technology. Overall, nearly 50% of firms have not updated their human capital management software in more than five years. Most small organizations reported using out of date solutions, while medium and large firms confirmed human capital management solution updates in the past five years.
If you haven’t taken a look at your HCM solution in the past 5 years, it’s definitely time to do so now. It’s important to consider updating a human capital management solution to aid with managing all aspects of a talent strategy, from acquisition, compensation and streamline payroll process, to increasing the accuracy and efficiency of time and leave reporting and managing subcontractors with one solution. Given the challenges and expected growth in the industry, HR leaders need to free themselves from a transactional focus on things like workforce capacity, planning, and ultimately, workforce optimization.
Even More Clarity Results
About the Study
The 9th Annual Deltek Clarity GovCon Industry Study provides critical benchmarks and insight for human capital management leaders, as well as decision makers in business development, compliance, finance, information technology, operations, and project and risk management, to help each assess the health of their firm and identify steps to drive future success.
For the 2018 Study, more than 600 survey respondents answered a series of benchmarking questions to provide a comprehensive overview of the federal contracting environment. Businesses of every size were represented, with most identifying themselves as IT services, professional services, or defense, weapons, aerospace, transportation or manufacturing providers. Healthcare or medical, management consulting, and engineering services were also included in the results. Forty-three percent of companies are headquartered in the Washington, D.C. metro area and the surrounding states of Maryland and Virginia, while 57% call other U.S. regions home.
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