87% of global companies say they either already have a skills gap or will have one within a few years. Talent shortages and skills gaps are reaching critical levels in many industries, forcing businesses to rethink their talent acquisition and hiring approach. Failure to address these can lead to slowed business growth, operational inefficiencies, and increased hiring costs.
In this article, we explore the causes of skills shortages and discuss key strategies for overcoming and mitigating them – from rethinking hiring criteria to leveraging AI – that can help your organisation build a resilient workforce.
What causes skills shortages during talent acquisition?
Many candidates, or even existing employees, lack the practical skills required for today’s evolving, dynamic job roles. Before tackling the issue of skills gaps, it’s important to understand why skills shortages occur. Key reasons include:
• Technological disruptions: New technologies are constantly emerging, requiring employees to acquire the necessary knowledge quickly. AI, automation, and digital transformation create demand for new skills faster than the workforce can adapt.
• A mismatch between education and industry needs: There can be a disconnect between the skills taught in educational institutions and those required by employers. Industries are also evolving, demanding new skill sets that traditional education and training programs may not address.
• Lack of quality training: Not all individuals have equal access to quality training and development opportunities.
• High employee turnover: Competitive job markets result in frequent job-hopping, leaving companies with ongoing talent gaps.
• Geographic constraints: Certain industries are concentrated in specific regions, making skilled labour inaccessible elsewhere.
• Ageing workforce: As experienced professionals retire, there aren’t enough skilled workers to replace them in critical positions.
Understanding these causes is the first step. HR professionals and recruiters need to identify where skills shortages exist in their organisation before implementing corrective measures.
How to conduct a skills gap analysis in your organisation?
A structured skills gap analysis helps to understand current workforce capabilities, identify critical talent gaps, prioritise training and hiring efforts, and predict future workforce needs.
1. Define business goals and required skills. Identify the key competencies needed to achieve business objectives. For example, a tech company expanding into AI will need more data scientists and machine learning engineers.
2. Assess current employee skills. Use performance evaluations, employee surveys, and skills assessments to analyse existing competencies. AI-based assessment tools can provide deeper insights.
3. Compare and identify gaps. Cross-check available skills vs. required skills to highlight where skills shortages exist. For example, if a manufacturing company lacks experts in robotics automation, this is a key skills gap.
4. Develop an action plan. Decide whether to upskill current employees, hire externally, or automate tasks. This forms the foundation for strategies discussed in the next section.
With a clear picture of skills shortages, the next step is implementing effective hiring and talent development strategies to address, overcome, and mitigate skills shortages.
1. Rethink hiring criteria: Shift focus to skills over degrees
One of the biggest barriers to closing the skills gap is the reliance on outdated hiring criteria. Instead of prioritising degrees and years of experience, companies should focus on capabilities, adaptability, and problem-solving skills.
• Emphasise competency-based hiring: Use structured interviews and assessments to evaluate hands-on skills rather than relying on resumes.
• Adopt skills-based job descriptions: Instead of listing rigid qualifications, define the actual competencies required for success in the role.
• Remove degree requirements where possible: Consider candidates from non-traditional backgrounds, such as self-taught professionals, those with relevant online certifications, and candidates experienced in startups or open-source projects.
Did you know? Google and IBM have eliminated strict degree requirements for some job roles, focusing instead on practical assessments and real-world problem-solving skills.
2. Upskilling and reskilling: Invest in internal talent development
Instead of constantly searching for external hires, companies should develop the necessary skills in their existing workforce. Employees trained in emerging skills become valuable assets in bridging talent shortages.
• Create in-house training programs: Offer certification courses, mentorship, and training in areas like AI, cloud computing, cybersecurity, or other required technologies.
• Use digital learning platforms: Partner with platforms like LinkedIn Learning to provide structured courses to fill the required skills gap.
• Incentivise learning: Reward employees for acquiring new skills with promotions, bonuses, or lateral growth opportunities.
Did you know? Tata Consultancy Services (TCS) upskilled 300,000 employees with foundation AI/ML training, reducing its dependence on external hiring and building one of the largest AI-ready workforces in the world.
3. Strengthen industry-academia partnerships to bridge the talent gap
A major reason for skills shortages is the misalignment between academic curricula and industry needs. Companies must actively collaborate with universities and technical institutes to ensure students graduate with job-ready skills.
• Launch internship and apprenticeship programs: Offer students hands-on training and early exposure to industry workflows.
• Influence university curricula: Work with educational institutions to design courses that match real-world job requirements.
• Sponsor hackathons and competitions: Engage with students through innovation challenges, helping identify high-potential talent early.
Did you know? Infosys and Wipro have partnered with engineering colleges across India to develop AI and data science training programs, ensuring a steady talent pipeline.
4. Expand talent pools: Go beyond traditional hiring markets
Relying only on the same candidate sources will limit your talent acquisition options. Companies need to think beyond conventional recruiting channels. Here are some strategies to diversify your talent pipelines:
• Engage with underrepresented groups: Focus on women returnees, veterans, and differently-abled professionals to bring diverse skills into the workforce.
• Hire remote talent: Geographic barriers should no longer be a limitation. If local talent is scarce, companies should explore remote hiring solutions.
• Tap into freelance and gig talent: Platforms like Upwork, Fiverr, and LinkedIn provide access to skilled professionals for short-term or project-based work.
Did you know? Zoho adopted a ‘rural hiring’ strategy, setting up offices in smaller towns and hiring local talent. This approach helped them access skilled professionals beyond major urban hubs, reducing hiring costs and increasing retention.
5. Leverage AI and predictive analytics for talent acquisition
Traditional recruitment methods are slow for today’s hiring demands. AI-driven tools can identify talent faster, improve screening accuracy, reduce hiring biases, and ensure a better fit between candidates and roles.
• AI-powered skills matching: Use AI-based applicant tracking systems (ATS) to match candidates based on skills and potential rather than keywords.
• Predictive workforce analytics: Analyse hiring trends to forecast which roles will face shortages and plan recruitment strategies in advance.
• Pre-employment assessments with AI: Reduce bias and improve candidate screening through automated tests, cognitive ability assessments, and behavioural evaluations.
Did you know? Infosys and TCS have developed AI-enabled assistance tools and technology to aid HRs in talent acquisition. These tools and technology help evaluate candidates based on cognitive ability and technical skills, streamlining recruitment at scale.
6. Improve employee retention: Retaining talent is as important as hiring
Filling skills gaps isn’t just about hiring new talent. If companies do not prioritise employee retention and employee satisfaction, they will continue facing talent shortages. High turnover rates can worsen skills shortages and increase hiring costs. Investing in retention reduces attrition and ensures organisations maintain a skilled, engaged workforce.
• Offer career growth opportunities: Employees are more likely to stay if they see a clear path for progression within the current organisation. Provide mentorship, leadership training, and internal mobility options.
• Recognise and reward employees: A culture of appreciation fosters engagement. Regular feedback, bonuses, and promotions help retain top talent.
• Enhance work-life balance: Flexible work arrangements, hybrid models, and wellness programs can help reduce burnout and increase job satisfaction.
Did you know? TCS has a globally recognised career development program that focuses on continuous learning, internships, mentorship, leadership training, and internal mobility initiatives – resulting in an employee retention rate of 86.7%.
Facing a talent drought? Don’t wait for the rain. Address skills shortages!
You can tackle skills gaps by adopting a strategic, multifaceted approach to recruitment and talent acquisition that combines immediate actions and long-term planning – through upskilling and reskilling, innovative hiring, AI-driven recruitment, and strong retention programs.
Don’t just hire for today - nurture talent for the future and build a resilient workforce.
