How to Turn Talent Scarcity into a Smart Talent Strategy

In many ways, today’s labor market is a paradox. Some regions and market sectors enjoy an influx of applicants, while others are scrambling to fill even the most basic roles. In the aggregate, though, one thing is clear: We are entering an era of sustained talent scarcity. 

Advisory group Korn Ferry projects a global human talent shortage of more than 85 million people by 2030, with potential economic losses topping $8.5 trillion in unrealized annual revenue if left unaddressed. 

This isn’t just a distant forecast, either. For many employers, the shortage is already here. According to the Society for Human Resource Management’s (SHRM) 2024 Talent Trends report, over three-quarters of organizations have struggled to recruit full-time workers in the past year, while nearly half say they’re having trouble retaining the employees they do have. 

The reasons? Fewer applicants, fierce competition from other employers, and a growing trend of candidates “ghosting” during the hiring process. 

For small and mid-sized businesses in particular, this situation presents more than just a hiring challenge. It’s a strategic inflection point. Employers need to shift their mindset; instead of viewing talent scarcity as just a problem to solve, think of it as a catalyst for transformation and an opportunity for competitive differentiation. But that opportunity lies in developing a proactive, long-term talent strategy that aligns workforce planning, hiring strategy, and employee development with business goals.

And the best time to start is right now.

Understanding the Root of Talent Scarcity

First, let’s set the context. The talent shortage isn’t just a temporary consequence of the pandemic or a fluctuation in unemployment numbers. It reflects a deeper demographic issue. The global workforce is aging, with Baby Boomers retiring in droves and fewer younger workers replacing them.

At the same time, skills are evolving faster than traditional education and training systems can keep pace with. Fundamentally, that’s why 63% of employers cite skills gaps as their number one workforce challenge, according to the World Economic Forum’s (WEF) 2025 Future of Jobs Survey.

This adds up to a tough equation: not enough people, and too few of them with the right skills. That’s why a smart talent strategy must begin with a dual focus. First, make the most of the people you already have and then, build smarter ways to attract the ones you don’t.

Start with the Workforce You Already Have

When the talent pool is shallow, your existing workforce becomes your most valuable asset. And for most organizations, the fastest path to capacity isn’t external recruitment but rather internal development.

For instance, upskilling is the most widely adopted workforce strategy in today’s climate, with 85% of employers investing in it now or planning to, according to the WEF. Whether it’s offering certifications, mentoring programs, cross-functional training, or even microlearning modules, enhancing employee capabilities is a high-leverage move. It's also a proven driver of retention.

When employees see a future with your company, they’re more likely to stay and grow with you.

But upskilling is just one lever. Workforce planning also means improving availability and productivity. That starts with eliminating the barriers holding your people back. Mercer’s 2024-2025 talent trends report highlights two top productivity killers: busywork and workplace interruptions.

Redesigning job roles to reduce administrative burdens and/or using automation tools to handle repetitive tasks can help employees focus on higher-value work.

Don’t overlook well-being and engagement either. Healthier employees are more present and productive. And while some companies are scaling back diversity, equity, and inclusion (DEI) initiatives, there’s a strategic cost that comes with that decision.

DEI, at its core, is about expanding the talent pool, and for every company scaling back, there’s another building up. In fact, the number of employers emphasizing DEI as a workforce strategy has actually increased overall since 2023 (from 67% to 83%).

Then Turn Your Attention to Smarter Hiring Strategy

“The ongoing labor shortage provides a strong incentive for firms to search for ways to expand their ability to recruit and retain workers,” says Justin Ladner, senior labor economist at SHRM. 

In other words, the second pillar of a smart talent strategy is rethinking how – and who – you hire. Today’s hiring strategy must be both broader and more targeted.

First, companies need to prioritize hiring for emerging skill sets, not just filling traditional roles. That means staying attuned to trends in your industry and proactively identifying what capabilities will be critical in the next 12 to 24 months (and beyond). Waiting until a skill gap appears in real time is often too late.

Second, think about continuity. Instead of hiring reactively every time a position opens, develop a pipeline of talent through referral programs, alumni networks, internship tracks, and passive candidate engagement. Organizations that maintain a warm bench of interested candidates can cut time-to-hire and improve fit dramatically.

Yet ironically, many employers are pulling back on their recruitment strategies. "Although the pandemic led many organizations to try a wider menu of recruitment strategies to enhance their ability to find talent in 2022,” writes SHRM, “results show that recruitment strategy utilization rates decreased across the board in 2024."

That retreat is a missed opportunity. In a tight market, employers should be casting a wider net, not narrowing the funnel. 

Use Technology, but with Caution

Technology is a tempting fix for talent shortages, and in some cases, it’s genuinely an essential one. The WEF reports that 73% of employers plan to use tech (especially AI and automation) to offset the productivity impacts of labor and skill gaps. For many roles, digital tools can extend your team’s reach, reduce costs, and improve consistency. 

But technology is not a magic wand. AI, for all its promise, is still limited. As researchers from the Wharton School at the University of Pennsylvania caution, “Modern work is complex, and most jobs involve much more than the kind of things AI is good at — mainly summarizing text and generating output based on prompts.” 

AI works best when used to complement human intelligence, not replace it. “Don’t invest in AI for the sake of investing,” argues Martin Birch, CEO of document management firm ibml, “do it with human intelligence in mind. Invest in tools that give your team more time for intrinsically human tasks.” 

In other words, let AI and automated tools do the data-crunching. But when it comes to creativity, judgment, collaboration, or empathy, your human workforce is still your biggest asset.

Make HR a Strategic Function

The final piece of the puzzle is integration. A smart talent strategy isn’t a standalone plan. It has to be part of your larger business strategy. That’s where HR comes in.

Advisory group Mercer found that resilient organizations are nearly twice (1.9x) as likely to have HR leaders at the table, advising executives directly on human capital opportunities and risks.

When HR is empowered to guide workforce planning, organizations are better equipped to anticipate shifts, plan succession, and respond to emerging trends.

But what if you don’t have a full HR team? Many small and mid-sized businesses don’t. That’s where a Professional Employer Organization (PEO) can be transformative. A PEO brings deep HR expertise to your organization, offering tools, insights, and execution support that go far beyond basic payroll or benefits administration.

For example, a PEO can help your business:

• Benchmark compensation and benefits to stay competitive in your market
• Develop career pathing and training programs tailored to your workforce
• Create recruitment strategies that expand your access to talent
• Stay ahead of regulatory changes that impact hiring and retention
• Use data to drive decisions about workforce allocation and growth

In short, a PEO can help you build and execute a workforce strategy that’s not only resilient but also adaptive and aligned with your long-term goals.

The Road Ahead: From Scarcity to Strength

It's easy to be discouraged by the headlines: shrinking labor force participation, widening skills gaps, and global shortages projected to grow. But the truth is, talent scarcity is a call to action. It's a prompt to stop reacting and guessing about the future and start planning and preparing for it instead. 

Ultimately, talent scarcity may prove to be one of the most powerful forces reshaping how businesses operate. Those that embrace the challenge and the opportunity will be the ones that come out ahead. 

For help navigating and succeeding in the modern talent marketplace, CoAdvantage can help your organization to build and execute a long-term talent strategy, with or without an in-house HR team. Contact us today.

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