Perspectives: Future of Work

| Labour shortages are becoming a regular occurrence in a growing number of countries and industries. We see this as one of the defining trends in the Future of Work space. While exacerbated by the pandemic, there are also structural, decade-long factors at play that mean that the problem is set to get worse over time, most acutely for the ‘frontline workforce’ and their related industries.

As a result, we are seeing demand for better solutions across the entire talent value chain; talent acquisition, retention, productivity, training and development. Whilst these topics are not new, we believe that the growing issues around labour shortages are increasing employers’ awareness and willingness to engage with tools that can help solve these problems. We believe this provides the backdrop for challengers to emerge with new solutions.

The majority of the global workforce, approximately 2.7 billion individuals (representing around 80% of all employees worldwide), belong to the “deskless” or “frontline” workforce. They power vital sectors like healthcare, agriculture, construction, retail, manufacturing, hospitality and transportation. 

In this perspective, we delve into the implications of labour shortages for this particular part of the workforce and explore the potential for innovative solutions to reshape the future for individuals and wider industries. 

Structural and generational trends driving labour shortages

Labour shortages are becoming a regular occurrence in a growing number of countries and industries. The majority of developed economies around the world are dealing with shrinking populations, mainly due to below-replacement birthrates and a gradual transition into ageing societies. The problem is particularly pronounced in Europe, where the working-age population as a whole is expected to decrease by about 13.5m (or 4%) by 2030, with Germany, Italy and Poland being the most affected countries.

The pandemic also highlighted the daily pressures of frontline jobs and the glaring fact that whilst suddenly deemed ‘essential’ they are often undervalued and underpaid by modern standards, prompting many to leave their respective jobs and pursue other careers. Sectors most affected have struggled to re-hire and re-train enough staff to meet ‘normal’ demand after more than two years of disruption. However, while we believe the Covid-specific shock to the system will balance out over time, the structural and generational drivers (some of which were accelerated by Covid) will continue to make labour shortages a bigger problem over time.

“Replacing the workforce is a massive problem, not just in Germany. Finding local talent is very hard, as there is none on the market and international markets are drying up everywhere, in the East, Balkan states, Southern Europe, everywhere.”

– Owner of large Germany-based manufacturing company

The need for a new set of solutions to attract, retain and develop blue collar & frontline talent

As a result, we are seeing demand for better solutions across the entire talent value chain; talent acquisition, retention, productivity, training and development. Whilst these topics are not new, we believe that the growing issues around labour shortages are increasing employers’ awareness and willingness to engage with tools that can help solve these problems. We believe this provides the backdrop for challengers to emerge with new solutions.

Talent acquisition 

The talent acquisition market is worth billions across Europe and the US, and today is dominated by legacy providers such as multi-national staffing agencies (Randstad, Adecco, etc.) as well as listings platforms such as Indeed. These incumbents are relatively inefficient and aren’t built with modern tech stacks and typically operate as generalist talent platforms. Their ability to vet and screen candidates isn’t particularly advanced, resulting in a high proportion of candidates not actually being relevant or well-suited for the assigned role. As a result, employers end up using multiple platforms as none of the traditional players offer a large enough pool of relevant candidates.

With this backdrop in mind, we see the potential for two types of opportunities: modern, tech-enabled generalist marketplaces and vertical-specific platforms. 

Modern, tech-enabled generalist marketplaces that offer a superior user experience, with more automation and better integrations should be able to achieve significant market share, however, the market overall is highly competitive and fragmented. We see a plethora of local champions, and while some have been able to aggressively expand within their home country, international expansion has been proven difficult. However, if a new player is targeting a very large home market, or has been able to expand successfully, we believe a focus on enterprise customers, higher-skilled and higher wage segments, and incorporating strong vetting and quality assurance into the platform could lead to success.  

Vertical-specific platforms can outperform other providers as they cater to the unique needs of an industry and thus can attract the best talent and employers in that segment; achieving better matches thanks to higher quality density. They’re built with specific needs, nuances and problems in mind, often overlooked by generalist job marketplaces, which gives them a clear point of differentiation and as a result, can often trade at a premium. 

Workforce management 

Given the labour market trends and difficulties in hiring new talent, companies are increasingly focusing on maximising in-house productivity and reducing turnover. However, most workplace productivity and engagement tools available today are designed for desk-based knowledge workers and do not cater to the needs of frontline workers. Given that approximately 80% of the global workforce consists of deskless employees, there is an increasing need to digitise frontline operations and employers are showing a higher willingness to spend for tools that could increase employee productivity and satisfaction. 

The productivity space is vast but we believe in the opportunity for a “Superapp”, a platform that is built specifically for the frontline workforce: mobile-first, with an intuitive UI/UX, lightweight, and integrated with other applications. These tools will often start with a clear USP centred around a single functionality, such as communication, scheduling, or shift planning and use that wedge as the foundation to layer on more features and expand within an organisation over time. In the long term, this could become the core suite for a ‘united frontend’ for a frontline workforce, providing a horizontal layer that connects various parts of the HR tech stack e.g. scheduling, HRIS, payroll, IT etc. 

Succeeding in this space will involve serving the needs of multiple stakeholders (end-users, managers, IT departments) as well as delivering clear ROI in the form of higher engagement, productivity and retention.

Training and development 

Training and development play a crucial role in talent acquisition by addressing the need to create a larger pool of individuals with in-demand skills and qualifications. In recent years companies have ramped up their focus and investment specifically around reskilling and upskilling with larger enterprises even choosing to create in-house training programs to tackle talent shortages specific to their own operations. Examples include German renewable energy company Enpal which launched its own training centres. The concept isn’t new: General Motors acquired a university in 1926 that was effectively the training ground for their engineering staff. 

However, it is important to acknowledge that these efforts often have a long time-to-value, making these initiatives challenging for smaller companies. 

Similar to other large-scale challenges like climate change, significant progress in training and development will necessitate a multi-faceted approach involving technological advancements, government support, and long-term perspectives.

We’re incredibly excited by the emergence of solutions that are tackling long-overlooked issues and creating new opportunities for frontline workforces. If you’re building in this sector, please reach out to Deepka, Dominik or Jeppe, who are actively investing in this category.