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The founder and chief executive of online furniture retailer Milan Direct, Dean Ramler , doesn’t have to be told twice that there’s a shortage of management talent. It took almost four months for Ramler to fill a vacancy for a marketing manager.
For Melbourne-based Milan, which sells its furniture nationally and in Europe, the search for a manager was a departure from a lean business model reliant on outsourcing key functions.
But when Ramler decided to appoint a marketing manager with online retail experience – a position he considered critical for the expanding business he co-founded with online retail entrepreneur Ruslan Kogan – he was astounded to find the 100-plus applications in response to an online employment site ad fell well short of the experience he required.
Ramler eventually found his “fantastic” candidate with the necessary experience through social media network LinkedIn.
“We needed a manager who understood online marketing but we found that most of the applicants for the role came nowhere near the experience we needed or the qualifications they claimed,” he says.
It is often overlooked that the skills shortage causing employers so much anxiety also includes management skills.
Training organisation Leadership Management Australasia conducted a survey of employers to identify the skills most in demand and discovered that leadership and management fell into the top six areas of skills shortage. LMA chairman Grant Sexton says the result causes him “great concern” and reflects the failure of organisations to invest in the training and development of emerging management talent.
“If today’s leaders and managers aren’t spotting and developing tomorrow’s leaders and managers, organisations will suffer a double impact from the apparent skills shortage through their lack of strategic thinking,” Sexton says.
Business turnaround specialist Allan Eskdale, director of Sydney-based GSE Capital, says the two most common causes of business failure are under-capitalisation and poor management – “everything flows from there”.
Eskdale attributes the “shortage of middle managers with the right skills” on a corporate culture that emerged after the big corporate cutbacks following the 1987 sharemarket crash, when middle managers were considered “easy targets” for retrenchment.
“We saw it in the late 1980s, it happened in the 1990s and now here we go again: big companies are culling employee numbers and cutting into middle management,” Eskdale says.
“Companies like to give the impression that by cutting middle management, they won’t be affecting the business or affecting customer service. This corporate spin perpetuates the notion that middle managers aren’t doing anything that affects anyone. In fact, this trend has caused long-term pain,” he says.
Eskdale says cutting middle managers places greater workloads on the managers and senior employees left behind, which can lead to inefficiencies, lower morale and, critically, poor controls. It also removes experience and corporate memory from organisations.
“Good managers learn from other good managers,” he says. “Anyone who’s had the benefit of working with good managers knows how blessed they are.”
Project management and interim executive firm Performance Drivers has experienced a 25 per cent rise in demand for interim roles in the past six months. The managing director of Performance Drivers, Richard Blow , says clients have various reasons for hiring interim executives, usually for three to six months, but increasingly it’s because of difficulties filling permanent roles.
“Using an interim executive gives these companies the breathing space to find the right person,” he says.
Blow says the ageing workforce means many managers and executives in their 50s and 60s have either reached retirement age or chosen to ease themselves out of work for lifestyle reasons. Some of these “grey haired gurus” are on Performance Drivers’ books as project contractors, consultants and interim executives. Many clients like using older interim managers for the mentoring they can give younger staff.
Blow says companies that take a “short-term view of productivity” are managing costs by not hiring necessary management talent or filling senior positions internally.
“Many employees are being promoted for the wrong reasons,” he says. “Often people appointed into a management role may have the right qualifications, they may have qualifications in accounting or engineering, but they don’t have the experience and situational skills,” he says.
“Managers need to have an understanding of the business fundamentals that will enable them to make decisions correctly, ensure that they have visible KPIs [key performance indicators], establish good work instructions that staff can follow and make sure that there are clear controls in place.”
An Australian Securities and Investments Commission report on insolvencies that took place between 2007 and 2010 presented the top three nominated causes of failure. For each year, the causes, and their rankings, were unchanged: poor strategic management, inadequate cash flow or high cash use, and poor financial control.
Clearly, many factors take their toll on the quality of management. There’s one more to consider: the impact of Gen Y. A survey by The CEO Institute found that the top issue keeping chief executives awake at night was sourcing and retaining skilled staff, and in particular “keeping millennial generation employees interested”. The chief executive of the institute’s Queensland branch, Evan Davies, says companies are finding it difficult to interest young talent in careers with their organisations.
“Our members are indicating the millennial generation just don’t stay at companies too long,” he says. “This is really problematic in developing leadership and talent pipelines.”