Build Now. Maybe Hire Later

Last year, numerous companies decided to start spending en bloc on US-based operations. A new $17 billion semi-conductor factory here. A $2 billion distribution center there. Several hundred billion dollars in software and automation improvements everywhere.

Now comes the hard part: finding new people to run all these new physical systems. With everyone trying to expand at once, many organizations have unconsciously exacerbated an existing battle for talent. “Everyone is competing with one another for candidates with the same skills,” says Christian Hasenoehrl, a Korn Ferry senior client partner who has clients in retail, food production and aerospace.

All told, companies spent $6.8 trillion on private nonresidential business investment in 2021. This was a 7.4 percent increase from 2020 (after adjusting for inflation) as well as the fastest pace since 2012, according to recent US government data. Businesses likely will continue spending, too. Manufacturing firms surveyed by the Institute for Supply Management plan to raise capital expenditures by 7.7 percent in nominal terms in 2022. Service firms expect a 10.3 percent increase. “This will keep playing out for the next five to seven years,” says Jorge Gomar, a senior client partner in Korn Ferry’s Global Industrial Market practice.

A labor shortage wasn’t factored into most of these expansion plans. Typically, many companies focus only on the chance to grow, not taking into account the number of people they’ll need to hire. “They’re paying the price now,” says David Ellis, Korn Ferry’s vice president of talent acquisition transformation. But even companies that were thoughtful with workforce planning are experiencing hiring difficulties, because so many other firms decided to expand at the same time.

Industries that didn’t increase their capital spending are also finding that they need to chase down workers. Despite higher oil prices, most large energy firms didn’t increase their production budgets, says Bruce Peterson, a senior client partner who leads Korn Ferry’s energy industry efforts. Investors have soured on often massive, often environmentally unfriendly expenses. Those firms are bringing some operations back online, however—if they can find people to staff them. Right now, everyone from engineers to rig operators has plenty of employment options to choose from. “When you try to attract employees back, you’re having to compensate them more,” Peterson says.

The increased interest in spending in the US is the outcome of many trends brewing, including the pandemic’s ongoing impact. Labor costs outside the United States—formerly the reason many firms looked abroad to build—have gone up. Meanwhile, geopolitical tensions have made countries leery of relying on any one nation for their production.

What’s more, the pandemic has shown that supply chains that are far afield can get disrupted. For instance, pharmaceutical companies couldn’t meet demand: in some cases, Asian manufacturers were sidelined by COVID-19, and in others, product couldn’t be moved out of US ports that were understaffed due to sick dockworkers. “A lot of companies started realizing they needed to invest in where their consumers are,” Gomar says.

Experts say expansion-minded organizations are going to have to get creative to avoid finding themselves short-staffed after their shiny new facilities and systems are completed. Some companies are planning out their workforces years in advance. They’re also investing in talent acquisition systems that can help them identify candidates, and building in-house training facilities.

Ellis says firms can also look closely at skills or degree requirements, taking a calculated risk that candidates without the ideal experience on paper can, if properly trained and motivated, do the job well. “If you do that, you immediately broaden the market of available candidates,” he says. 

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