Middle Management Talent Squeeze

Middle Management Talent Squeeze

Sandwiched between top leadership and rank-and-file employees, middle managers have tough jobs. But those with proven management skills are in high demand as baby boomers retire.

Note: This story is part of a bigger feature on Minnesota's labor shortage. To read about why the state is subsidizing internships for college students in STEM field, click here.

Middle managers don’t get much respect.

They take orders from above, manage the chaos below, and if anything bad happens, they make handy scapegoats. Yet effective middle management is crucial to the success of any large organization. The time may be coming when the people who have the skills and leadership experience to be middle managers are in such high demand and such short supply that they’ll be getting much more than just respect. Companies will be competing with extra pay and benefits, greater flexibility and worker-friendly cultures to hire the talent they need.

Make no mistake: The middle-management squeeze is on the horizon.

In the Twin Cities and across the country, an unprecedented convergence of factors is creating a noticeable gap between the number of older managers retiring and the number of younger managers capable of replacing them. Over the next 10 to 15 years—in all sectors of business, but particularly in tech-heavy fields—finding the right people with the right skills will become increasingly difficult. That’s not because no one saw it coming, but because they either ignored the problem or couldn’t do much to prevent it.

Here’s why: The global competition for top talent is playing out against a backdrop of seismic systemic shifts as the boomer generation exits the workforce, the supply of experienced mid-career professionals constricts, and rapid technological change continues to transform the way people work and live.

The demographic dip

Demographic trends are ominous for leaders who want a healthy supply of talent to effectively grow their companies. In March, the Minnesota State Demographic Center (MSDC) issued a report that human resources and other executives are using as a call to action. Beginning in 2019, the number of Minnesotans ages 18 to 64 will, for the first time ever, actually begin to decline.

By 2029, the report estimates, the age group between 25 and 64, which constitutes the majority of the workforce, will experience a net loss of about 40,800 people. “The 10 years following 2019 will likely be the most severe in terms of labor supply in Minnesota, barring major changes in migration,” the report concludes, forcing employers to “work harder to attract and retain essential employees.”

Most middle managers are between 35 and 55 years old, and the fact is, there will be fewer of them around in the coming years. People this age contain most of the institutional knowledge and experience in the workforce, and are the ones who do most of corporate America’s heavy lifting of supervising employees on key projects and hiring and firing employees and contractors. The huge millennial generation is right on their heels, gaining the experience to assume the mantles of more responsibility and higher levels of leadership, but it will be at least another decade before their numbers can start nudging the stats in a different direction.

Cultural dynamics

Other factors likely to affect the quality of professional talent available in the coming years are the increasing flexibility of work options in the digital age, the tendency for younger workers to change jobs and move more often, the growing need for managers with more complex and specialized technical skills, and increasing competition—from around the country and around the globe—for high-quality workers at all levels.

The squeeze in the ranks of middle management is a microcosm of the dynamics playing out in the broader population. In the Twin Cities, recruiters, civic leaders, and companies in a variety of sectors are already having trouble finding people with the specific skill sets they need along with the management/leadership experience these positions require.

Korn Ferry built its reputation helping companies recruit and develop C-suite and senior-level executives. But according to senior client partner Dave Pearce, the company’s middle-manager search practice is its fastest-growing business, a trend the company expects will continue for the foreseeable future.

“We are in the midst of a third Industrial Revolution,” says Pearce. “The baby boom generation enjoyed a level of security driven by experience and years of service. Hard work and reliability could put you in a key role. But in 2016, managers need technical skills, the ability to work with multiple generations, to keep pace with new productivity tools and lead in a constantly changing environment.”

Many older managers who can’t or won’t adapt to the changing landscape of the contemporary workforce are being left behind, says Pearce, but there aren’t enough experienced mid-career managers with the necessary skill sets to take their place. “The most in-demand occupations and specialist roles didn’t even exist 10 or 15 years ago,” Pearce says. “Each day, thousands of boomers retire, but the cohort behind them doesn’t have the skills to replace them,” at least not in the numbers required.

Companies in technology and finance are going to be hit hard, says Pearce, but the squeeze will be felt hardest at organizations that are trying to grow quickly and need to find top talent fast. He defines the categories this way: “Everything related to mobility, communication and ‘untethering.’ Anything related to Big Data and the internet of things. Renewable energy, health care, broadband—these are all growing industries that need engineers and computer-savvy people who know how to crunch numbers and analyze things.”

The nature of middle-management work is changing as well, putting a premium on people who can do more than one thing well. “In finance, for instance, managers don’t just need to know how to read a balance sheet anymore,” Pearce says. “Finance roles are converging with the supply chain and other logistical channels. Managers need analytical skills to understand what’s waste, what to do about it and then communicate it. These are very different skills.”

Addressing the problem

While local companies have staffing concerns at all levels, the need to find—and keep—the right people in middle management is more important than ever because of the consequences of not having them. Deficiencies in middle management can be like sludge in an engine, slowing down innovation and hampering execution. They’re the day-to-day problem-solvers, the key communications link between leadership and labor. Unless you have a well-oiled team of middle managers, just like a vehicle, the whole organization chokes and sputters.

Everyone knows this, but knowing it and doing something about it are two different things. The encroaching middle-management crunch—along with the coming labor shortage in general—is a slow-moving statistical tsunami whose impact cannot be underestimated. Local companies may not feel the squeeze for a few more years, but many are moving the issue up their priority list, both internally and in concert with civic leaders who recognize that the more attractive a place the Twin Cities is to live, the more likely top talent is to gravitate here.

Though headquartered in Philadelphia, Comcast is one company with a large local presence that is feeling the pressure now to adapt itself to the new realities it knows are coming.

Comcast employs more than 2,200 people in the Twin Cities, and announced last November the addition of 400 jobs in the Twin Cities area during 2016. Most of these positions are customer-service reps, all of whom needed to be trained and managed. At the middle-management level, however, Comcast insulates itself against the need for much outside recruitment. On average, its internal promotion rate is 88 percent.

“We don’t do much externally because our commitment to internal development is so intense,” says Comcast communications director Jill Hornbacher. “We focus on getting the right people in the door, then—through Comcast University and other formal programs—we do a lot of coaching, mentoring and relationship-building through various employee networks (e.g., women in leadership, veterans) to help people who aspire to higher positions.” At the Private Client Reserve at U.S. Bank, Jason Stamm is starting to see the impact of retirements of key personnel. He is the interim Twin Cities market leader for the 130-employee unit that serves high net worth clients.

“These retirees had U.S. Bank careers that spanned from 28 to 47 years in our industry,” Stamm says in a prepared statement. “It’s really tough to replace 47 years of hands-on knowledge that includes the family history of clients and an understanding of family dynamics.” But Stamm is a realist. “The war for young talent is on,” he says. “We are actively working on building our bench strength of junior talent in order to compete and be able to groom young professionals.”

Greater MSP initiative

To one degree or another, most organizations have systems in place for employee development—coaching, mentoring, education, training—and their retention efforts typically include identifying top internal talent and providing a pathway to senior management. But as competition for good people ramps up, traditional approaches to recruitment and retention may not be enough. In many tech companies, particularly ones that prize young talent, top recruits are not only demanding more money, they are already expecting such perks as better benefits, more vacation, flexible hours, swankier offices, more decision-making power, greater autonomy, better leadership and skills training, gym memberships, free parking, ergonomic furniture and Keurig machines. In other words, they want the perks of upper management before they reach that level.

Individual companies can only do so much to attract and retain top talent, however. Beyond the confines of an office building, it’s the livability of the area around it that matters most—the community, schools, restaurants, neighborhoods, arts organizations, transportation and overall infrastructure that make for a desirable place to live. The region must also possess a competitive advantage of some kind, one that creates a natural gravitational pull for people who have the skills and means to live anywhere they choose.

In 2011, a coalition of more than 100 local companies and partners, including most of the Twin Cities’ largest employers—Cargill, Best Buy, Target, UnitedHealth Group, General Mills, Comcast, Medtronic, Ecolab, and the University of Minnesota—formed an organization designed to spur local economic development and help sell the Twin Cities as a great place to work and live. Called Greater MSP (aka the Minneapolis St. Paul Regional Economic Development Partnership), the organization’s mission is to facilitate communication between the private and public sectors, and devise strategies for tackling problems more efficiently and effectively than either can do alone.

Last October, Greater MSP rolled out a key public initiative, “Make It. MSP.” It’s an online portal where prospective professionals and newcomers can go to learn about and connect with resources in the Twin Cities. In May, the organization announced another initiative, the Minnesota Medical Manufacturing Partnership (MMMP). It qualified to receive more than $1 billion in federal assistance through the U.S. Commerce Department’s Investing in Manufacturing Communities Partnership (IMCP), a federal program designed to accelerate manufacturing development in the economy. The MMMP is only one of 12 public/private initiatives to qualify for such funding, and Greater MSP intends to use it to help secure the region’s reputation as a global leader in development and manufacturing of medical devices and other technology.

Both efforts are aimed at forestalling the impact of the coming labor shortage, particularly among highly educated, technically skilled professionals, according to Peter Frosch, Greater MSP vice president of strategic partnerships. Developing and promoting the talent that’s already here is important, but not enough, Frosch says. He explains that the only way the Twin Cities is going to avoid a growth slump is to attract and retain great people from outside Minnesota.

“Labor is already tight in tech, engineering, finance and certain life sciences,” says Frosch. “The general experience we’re hearing from companies is that they’re doing the things they’ve done in the past to build their workforce, and those efforts either aren’t working as well as they did, or they aren’t working at all. The environment for talent has gotten much more competitive, so business as usual is not an option. We either embrace the future, we organize around it, we get smart, and we get innovative in ways that we hire, train, and educate people—or we are going to see our competitive advantage erode.”

Middle management is an area of general concern in the private sector, says Frosch, but it’s also a huge concern for the public sector. “If you look at the concentration of management-level workers in the public sector, that’s where some of the demographic forces are going to be hitting the hardest.”

Indeed, according to the state demographer, 57 percent of current state executive branch workers were 45 or older, compared with 44 percent for all employers statewide. It’s a situation that sets the stage for an enormous wave of retirements—and potential loss of institutional knowledge—over the next 20 years.

Seeking a diverse workforce

Immigration and diversity are the two areas everyone seems to agree are vital to the state’s overall productivity going forward. In the Twin Cities, more than a third of working-age Minnesotans from 20 to 64 will be people of color by 2020, up from 20 percent in 2010.

People of color are supporting Minnesota’s population growth. About 24,000 migrants—mostly Latino, Hmong, Indian, Vietnamese, and Somali—move to Minnesota annually. Educating and employing this diverse population is essential to the health of the local economy. And as more of these folks work their way up the management chain, they will inevitably play a larger role in the mix.

“Diversity is the No. 1 item I am questioned about at the beginning of every search,” says Korn Ferry’s Pearce. “Companies—particularly international ones like Cargill—are realizing that a gender and ethnically diverse workforce is essential for competing in today’s world.” Not only does it deepen the pool of prospective talent, says Pearce, “it’s good for business, because it better reflects the society in which we all live.”

Still, despite the growing demand for effective middle managers, working at that level is no picnic. A recent Atlantic article explored the “secret suffering” of middle managers, because they are quite literally caught in the middle, charged with executing decisions they didn’t make to people who don’t necessarily embrace change gracefully.

“Middle management is the area that ebbs and flows the most,” says Tiffany Kuehl, senior human resources recruiter at Versique. “When companies are in cost-cutting mode, they cut managers and pile more work on fewer people. Then they discover that the work isn’t getting done, so they start hiring them back. It goes in cycles. Consequently, many people in those positions are anxious about their jobs and futures.”

Over the next 10 to 15 years, as all of these demographic and sociological factors play out, the need for competent middle management will assert itself in many different ways. But one danger recruiters see is an increased desire for a kind of middle-management über-candidate—a master of multiple technologies and deft student of the industry who is also a bold agent of change, excellent communicator, inspirational leader, agile multi-tasker, dedicated team member—and, ever more likely, an immigrant, woman, or person of color.

“We call those people ‘purple squirrels,’ because they don’t exist,” says Kuehl. “Usually, we have to tell clients that what they’re really looking for is two different people.”

Tad Simons is a St. Paul-based freelance writer and editor. He wrote TCB’s July cover story about Prince’s financial legacy.