How Leaders Should Respond to Germany's Stubborn Talent Shortage

 

The German labor market remains competitive even as the economy struggles to grow in 2024. Employers must take action to address the critical skills shortages that are impeding growth; to do this effectively, they need to do a better job of retaining and attracting talent.

 

Gallup’s most recent measure shows that a record number of employees in Germany -- 45% -- were actively seeking a new job or open to new opportunities elsewhere. This is the highest figure recorded since Gallup began to ask about this topic in 2014 and up substantially from 27% in 2019. (Gallup previously analyzed key retention and recruitment challenges that German employers face and explored the relationship between retention and employment engagement.)

 

The country’s low proportion of engaged employees is exacerbating the skills shortage. Just 14% of Germany’s workforce is engaged, according to Gallup’s most recent measurement. At the other end of the spectrum, the proportion of actively disengaged workers has reached its highest level since 2012. Nearly a fifth of Germany’s workforce is actively disengaged -- that is, their most basic workplace needs are mostly unmet, and they are more likely than their engaged counterparts to leave their employer.

 

These findings are from Gallup’s Engagement Index: Germany 2023 report, published in English and German.

What steps can German companies take to engage their workforce, improve retention and address critical skills shortages that are impeding growth?

Leadership Commitment

 

Leaders can foster a thriving and engaging workplace culture when they commit to making engagement a strategic priority for their organization and focus on increasing it as they would other business or operational objectives.

 

 

Strategic change must be directed from the top of the organization. Leaders must also offer robust support for the manager-employee relationship and enable managers to effect changes that foster engagement at the team level. Managers account for 70% of the variance in team engagement, so they are an essential driving force in improving engagement throughout the organization.

 

Many German organizations that Gallup has studied have succeeded in engaging up to 63% of their employees, compared with just 14% for the general German working population. The key factor in such a transformation is leadership’s commitment to long-term, sustainable change

 

Support and Hold Managers Accountable

 

Many managers overestimate how effective they are at engaging, motivating and developing their team. Though nearly all German managers (97%) rate themselves as good managers, most German employees (69%) report having been on a team with a bad manager. Other managers may be aware of their shortcomings but receive little or no support from their employer, so they muddle through as best they can.

 

Organizations that are committed to building an engaged workforce need to provide managers with training that enables them to coach, motivate, develop and help their team improve performance. In Germany, more than half of managers (60%) report having received no such training. Given that most managers do not possess the innate talent to be great managers (and thereby engage their teams), they must receive effective and practical training and support.

 

Managers also need information about the engagement of the team they manage, how their team’s engagement compares with other teams in the organization and how they can improve engagement. They also need to be held accountable for improving team engagement and achieving performance objectives.

 

Targeted data and information can help managers know where they stand, equip them to take meaningful action and hold them accountable for results. While employee surveys alone are not a complete solution, they can provide valuable input for team discussions, actions and data-driven decision-making.

 

Select and Promote Managers Who Can Engage

 

Organizations need to review the criteria they use to select and promote people into manager or supervisor roles and regularly evaluate how effectively managers lead their teams. Organizations also must recognize that improving team engagement requires talent. Promoting people who lack the fundamental talent to manage effectively is harmful to employees and undermines performance.

 

 

Good management also requires ensuring that those hired or promoted into managerial roles are adept at helping team members achieve their performance, development and career goals -- qualities that many German managers may lack.

 

In many organizations, employees with the longest tenure or strong technical expertise are promoted into managerial roles regardless of whether they have an aptitude for managing people. Selection and promotion strategies need to ensure that, over time, more managers are hired and promoted who possess the right talents to engage their team

 

Engagement Is Essential for Crisis Management

 

Engagement is a robust predictor of performance -- particularly in times of recession -- and an engaged workforce serves as a bulwark against economic headwinds.

 

For example, teams in Gallup’s global engagement database at the 90^th engagement percentile were found to have an 80% probability of above-average performance (financial, customer ratings, staff retention) in times of recession compared with teams at lower engagement levels.

 

At the other end of the scale, teams at the 10^th engagement percentile were found to have a mere 20% probability of above-average performance. The message for leaders is that when the going gets tough, an engaged workforce is much more likely to roll up its sleeves and work hard to get through the crisis.

 

As German leaders navigate the country’s struggling economy and contend with considerable operational and growth challenges, they must not lose sight of their employees’ fundamental needs. In times of change and uncertainty, leaders often neglect people management to focus on crisis management. Organizations that have made a strategic commitment to engagement understand that one cannot function effectively without the other.