Businesses have been battling an extraordinary business environment for the past three years, and now even more uncertain times likely lie ahead. Since 2020, companies have dealt with the fallout from the pandemic and the resulting shift to remote and hybrid work environments, the Great Reshuffle, retiring baby boomers, more job specialization and major supply chain disruptions. While these challenges don’t look to be going away, businesses now also face inflationary pressures and slower economic growth.
In some ways, the challenges have been even greater for middle market businesses than for any other sector. They have had to compete for talent against large enterprises, and many have not prioritized technology investments that can help offset the skills gaps and current business climate.
Here we examine the macro conditions that make the current environment challenging and create uncertainty for the foreseeable future:
- The underlying workforce trends that were making it difficult to find and keep talent under normal circumstances
- The effects of the pandemic response that exacerbated those talent woes
- The likely economic ups and downs in the face of continuing inflation and potential recession
Finally, we’ll look at how middle market organizations can prepare for these uncertain circumstances with a sound business automation strategy.
Course corrections are already underway
Middle market businesses find themselves fighting for talent
Even before the global pandemic hit, middle market businesses struggled to keep up in the talent wars, facing competition for talent from large enterprises with bigger budgets and more opportunities for advancement. The Great Retirement among the baby boomers also created a knowledge gap in the workforce. The insurance industry, for instance, has the oldest workforce today within financial services. According to the U.S. Bureau of Labor Statistics, about 20% of executive-level employees will be leaving in the next two to three years.
An aging workforce isn’t a problem limited to white-collar jobs. Many older blue-collar workers who kept plants or manufacturing lines running for decades are also retiring. If the business hasn't automated its production lines and something breaks down, finding someone who knows how fix it becomes an enormous struggle. As a result, what used to be fixed in an hour could now take days. Meanwhile, the company is losing revenue.
Increased specialization adds to these challenges. It’s no longer enough, for example, to have an IT generalist who does everything. Businesses must find IT people with certain areas of expertise, such as cloud infrastructure or cybersecurity. A similar issue applies to the tax function at many middle market organizations, where the complexity of compliance and planning needs commonly outpaces employees’ bandwidth to meet them on time and without error. But most middle market businesses can’t afford to hire in-house talent with all these specialized skills across the organization.
The pandemic arose almost overnight
With all these ongoing challenges, the global response to the pandemic hit in 2020. It created massive shifts in the economy and the workplace almost immediately. Many employers moved to an entirely remote work structure initially, with many continuing to maintain a hybrid work environment.
With the disruption to normal life, many workers began to reassess their lives and career goals. Combined with the flexibility of work-from-anywhere options, worker expectations changed dramatically.
In a recent RSM US LLP report about the talent gap, Natalie Runyon, director of enterprise content, talent, inclusion & culture, market insights at Thomson Reuters, describes this new state: “Workers have new expectations around remote work flexibility, work-life balance and career development, including training, transferrable skills and new experiences. And if they don’t get these things, they’re moving on.” Added to this is a reluctance to do highly manual, low-value tasks.
The Great Reshuffle that continues today is one result of this workplace disruption. While many businesses are having workers return to the office, other businesses have made alternative work arrangements more permanent.
This not only changes how people work but also the role of technology in enabling that work. Applications need to be available in the cloud so workers have anytime, anywhere access. Employers, meanwhile, must track their employees’ locations so that they can comply with tax laws in various jurisdictions.