Companies, governments, nonprofits, and investors aren’t solving the biggest issues of our time: the people within them are. The traditional focus on financial capital to help these entities scale ignores a crucial element that is needed to put those financial resources to work most effectively: the need for human capital development.
This unaddressed “talent gap” is exactly why we started MovingWorlds nearly 10 years ago. But, since our inception, the global skills gap has only gotten worse.
We must do more to build the skills, expertise, and know-how of the people who are solving systemic challenges in sustainable ways. And for the first time since we have been tracking this issue, it looks like things might start getting better…
How nations develop their human capital can be a more important determinant of their long-term success than virtually any other factor.
World Economic Forum, Human Capital Report, 2018
We must do more to build skills
To close the global talent gap, we must find local leaders and doers that are solving grassroots challenges and provide them the support they need to improve operations, outcomes, and scale. One of the most effective forms of support is helping them develop their employees and teams to keep growing and innovating. Often times called “social enterprises” and/or “small and growing businesses”, these local and/or grassroots enterprises are primary job creators delivering real value to their communities, and then hiring within them. Through our work at MovingWorlds, we monitor whether there is an increase in investments in the actual people that are working directly with social enterprises. Some recent reports cataloging impact from 2018 reveal trends that show that this might be finally happening (almost):
#1: More accelerators are providing more training
Startup Accelerators are important because they provide skill-building and training to increase the likelihood of success. Most also offer access to financial capital. This means that, whether the organization being accelerated survives, thrives, or fails, the team that is operating it will have developed the skills, know-how, and network to continue developing their social-good careers. Indeed, even entrepreneurs consider skill-building as an important benefit of participating in an accelerator, according to the Entrepreneurship Database Program (EDP) annual report. This desire for more entrepreneurial skills is even more pronounced in emerging markets, like in Central America, where it is the top desired benefit sought by entrepreneurs. Good examples of this include Agora Partnerships and the empowering people.Network, which both provide training, cohort-building, mentoring, consulting support, as well as Experteering sponsorship. While the actual number of accelerators that exist around the world is hard to track, most people that work in the industry reference a report from Gust counting 579 accelerators.
However, as accelerators continue to proliferate around the globe, it’s important that startups are able to confirm the quality of programs and ensure that they will, indeed, provide them with skills to help them survive. One way founders can do that? Communities like the Global Accelerator Network (GAN), which vet accelerator programs before they’re accepted into the network, ensuring they meet certain standards.
In this way, startups not only gain valuable knowledge and skills from industry experts when they go through accelerator programs, but the staff of those programs also have access to resources and best practices used in some of the best programs around the world. Even better news for startups? Membership in networks like GAN appears to only be growing: Its annual data report shows a 10% increase in accelerators accepted into the community over the course of the last year. We take this to indicate that accelerators are getting more serious about the skill building and capacity support that they give to startups.
#2. More local investors are providing more hands-mentoring and training
The Aspen Network of Developmental Entrepreneurs (ANDE) most recent annual report, the State of the Small & Growing Business Sector, highlights that there are more investors taking an active approach to capacity building support. Initiatives like Capria, which seeks to partner with emerging market impact investors to launch local investing funds, are doing more than just making capital available. Capria works in partnership with fund managers to build long-term capacity, helping them further institutionalize, and connecting them with a global network of other experienced fund managers. The local fund managers then provide strategic guidance to their portfolio companies, offering them mentorship, networking, and operating advice to help them grow.
#3: More inclusive investing is involving more populations
According to ANDE, “This past year was also notable for the development of new insights on gender lens approaches … In addition to an increase in gender-inclusive investment vehicles, we also saw gender-based strategies expanding beyond the investment world into acceleration, impact measurement, and sector research“. This rise in inclusive investing means that more populations have opportunities to develop their professional skills. According to Lizzie Crough, Community Manager at GAN, “In 2017, our community saw more than a 2x increase in startups where a member of the founding team identified as a racial or ethnic minority, compared to 2016, and nearly half of all startup founding teams included women—a 35% increase, year over year. As we continue to cull data from our 2018 surveys, we anticipate those numbers will only continue to rise.”
#4. More mature investors are providing more holistic support
Investors are practicing what they preach to entrepreneurs in that they are also innovating to better serve their “customers”. According to a recent Global Impact Investing Initiative report, “Some investors also described a role for mentors and executive education programs in the context of their broader capacity-building work“. According to the ANDE report, “ANDE members spent on average $4,227 per business on capacity development services in 2018, representing an increase from the 2017 average of $3,300”. For other examples of this trend, look at Village Capital’s Talent Playbook and Open Capital Advisors Talent Diagnostic to see how investors are building out more support for past, present, and future investees.
#5. More networking and peer-to-peer learning
Investors and capacity building partners are also helping create networks amongst their investees, which facilitates peer-to-peer networking, coaching, and business opportunities. In our MovingWorlds Institute program, we’ve found that learning through real experience and through peer-to-peer sharing is one of the most powerful ways to develop skills, confidence, and capability.
#6. More focus on making managers
One of the biggest skills gaps, if not the biggest, is the lack of highly capable managers on smaller, local teams. In addition to a lack of the soft-skills needed to build trust, the science of highly effective management has not been taught to enough organizations. This “management gap” not only affects operational effectiveness and team capabilities, but also makes it hard for organizations to attract and retain top talent. As such, we are seeing an increase in the number of initiatives that prioritize building management skills. According to ANDE, “Building management capacity” is the most popular service provided by its network of 294 development organizations. (If you’re interested in learning more about this, join MovingWorlds at SOCAP for our panel session: Making Managers: Preparing social enterprises to scale more effectively.)
#7 Lots more to do
Just as quickly as we are helping upskill people to be successful in their jobs this year, the rapid advancement of technology is making it more challenging for skills to be relevant in the future. While many organizations are investing in skill-building programs, many are thinking very short-term. Corporations are perhaps the most guilty of this as they invest heavily in building science, technology, engineering, and math (STEM) skills to help ensure they have skilled workers in the future, but aren’t investing heavily in human-centered skills that research institutions say are actually most critical for employability. According to the World Economic Forum, “Five years from now, over one-third of skills (35%) that are considered important in today’s workforce will have changed.”
Where do we go from here?
Skill-building is HARD work. Not only is it costly and time-intensive, it’s also not guaranteed to work and its outcomes are very hard to measure. But buried in the ANDE report is some guidance: “For member organizations supporting 50 SGBs or fewer, the average cost per SGB went down in 2018, from $19,800 to $17,760. In contrast, for organizations that serve more than 50 SGBs, the cost per SGB increased from an average of $2,800 to $3,515. The consistent trend of higher cost services for organizations supporting fewer SGBs continues to suggest economies of scale in the provision of support.”
We believe that all global development partners – policy makers, funders/donors, impact investors, capacity-builders – must prioritize skill-building by:
- Identifying ways to increase available resources without the need to report on short-term metrics, which are particularly challenging to measure for human-capital development
- Achieving economies of scale by partnering to create robust and holistic capacity building programs that create “surround sound” approaches to skill-building by offering training, mentorship, consulting, peer-coaching, and more
- Investing in the teams behind the entrepreneurs, rather than focusing solely on the founders of companies, as it is these individuals that are doing the most actual execution work