Talent shortage: Execs look beyond superstar cities to fill openings as workers gain leverage

In the age of remote work at scale, the search for talent has companies looking beyond tech-savvy superstar cities like San Francisco and New York, according to a new report.

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Image: GettyImages/Ezra Bailey

Last year, pandemic-related economic uncertainty led to massive layoffs and historic unemployment levels. But the tides (and negotiating power) have turned as companies boost hiring amid a labor shortage. On Thursday, alliantgroup, a management consulting company, published a report highlighting accelerated digital transformation efforts, tech hiring trends amid a talent shortage and more. 

"Nearly half of C-suite executives understand that supporting digital transformation projects is critical for their companies to survive in the long-term," said Dhaval Jadav, CEO of alliantgroup, in a press release. "However, challenges from finding and keeping technical talent to choosing which technology to either procure or invest in – all while navigating internal bureaucracies – can kill digital transformation projects in their tracks."

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Digital transformation and tech talent shortage

According to a new report from alliantgroup, 46% of respondents said they understood that digital transformation is "a necessity for their company to survive in the long-term." Citing this stat, Jadav said people know that "digital transformation is a growing priority," so this figure wasn't surprising; however, he was surprised about "how much internal pushback is stalling these efforts," noting that 41% of respondents listed "employee resistance" as the top innovation challenge.

"We've talked to business leaders across nearly every industry and they're facing pushback internally surrounding the efficacy and necessity of these projects," Jadav said. "I think this is an opportunity for IT and change management consultants to step in and show the value of digital transformation and how they can ease the process."

Based on a company's major business priorities, 24% of executives listed IT as their top department for digital transformation efforts in the next two years, and 42% said finding "skilled talent" was the top "area that will accelerate digital transformation," according to the report.

As companies have ramped up hiring efforts, many organizations are having trouble filling open positions amid a tight labor market. At the same time, a Great Resignation has been brewing as burnout employees jump ship in search of opportunity elsewhere. The related attrition could be detrimental to operations; as the report points out, "not having the right technical talent will be a blow to many digital transformation initiatives."

According to the report, 42% of executive respondents said "access to more talent was the top action their organization will take to innovate," 24% were planning investments in the "community and/or STEM education programs to fill their technical talent pipeline," and 31% said one of their "biggest mistakes" made during a digital transformation project was "not hiring the right talent."

Citing this last statistic, Jadav said "it is even more crucial that companies go above and beyond to retain their most talented tech workers."

Recruiting outside of superstar cities

In the age of remote work at scale, companies can more readily tap tech talent from elsewhere rather than limiting the candidate search to a specific city or geographical area. The report said companies are expanding their technical talent search "beyond superstar cities" a la New York and San Francisco.

"We hear it all the time that hiring technical labor is every company's biggest challenge," Jadav said. "The pandemic definitely exacerbated the ongoing tech skills crisis, and we've noticed a paradigm shift in how businesses are approaching tech hires and where they are willing to look for them."

A portion of the survey asked respondents to identify the activities they plan to take to "further innovate" in their industry. About one-third (30%) selected "expanding tech talent recruiting to outside typical high-tech areas" and 25% said they were "opening up offices in these non-high-tech locations to support their initiatives," according to the report.

"Our research found that C-suite executives are now aligning their hiring priorities with larger migration trends in the U.S. following the shift to remote work," Jadav said.

Additionally, he said "demand for tech talent is at an all-time high," explaining that employers are offering "more flexibility in both the interview process and around permanent hybrid work arrangements," tapping the "global freelance economy" as well as "mounting reskilling and upskilling initiatives to close the talent gap."

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Over the last year, so-called Zoomtowns have boomed as remote workers hit the open road and trade in their downtown studios for a little extra room elsewhere. According to an October 2020 Upwork report, up to 23 million U.S. workers were planning to move due to work-from-home flexibility. So, what non-superstar cities are best positioned for the current labor market and what factors are at play?

"Smaller cities have evolved as tech centers due to an influx of remote-working millennials and an increasing number of tech graduates from local universities," Jadav said.

Additionally, he said an "ethnically and occupationally diverse talent pool and sustained growth in the number of tech workers make for the best developing tech cities." Citing CBRE data, Jadav listed Pittsburgh, Charlotte and Nashville as the "most diverse tech talent cities."

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