In conversation: Early careers and skills-based hiring

Stephen Easterwood: It's not just about an aging population, it's a declining birth rate. So assuming we get back to some form of growth in the economy, that pressure of an aging workforce, a declining population of young people, is going to have to change, um, the workforce planning strategies that employers use to accommodate that. Um, so actually it is probably going to get tougher to hire that early talent that you need. It's going to become more competitive in that space than it is now.

Lucy: Hello and welcome to our Future of Work Hub in Conversation podcast. I'm Lucy, a partner in Lewis Silkin's employment team. And whether you're a regular listener or you're joining us for the first time, I'm delighted to have you with us as we explore the trends and challenges shaping the world of work. And today, I'm joined by Stephen Easterwood, chief chief executive of the Institute of Student Employers. Stephen has spent over two decades at, uh, the forefront of graduate recruitment and early talent strategy, including seven years as head of graduate recruitment UK and Ireland for Ernst and Young before he took the helm at the ISE. Uh, he's responsible for the ISE's market intelligence and thought leadership and he's a really leading voice on how education, employer practices and technology are shaping the early career landscape. So welcome, Stephen. This is such a hot topic at the moment, it's brilliant. Great to have you with us.

Stephen Easterwood: Hi, Lucien. Thank you very much, uh, for inviting me. Great to join you.

Lucy: Now, there'll be some in our audience that aren't familiar with the ise, so I thought a good place to start would be just giving us a very brief overview of the work that you do.

Stephen Easterwood: Sure. So the ISE, we've been around for about 50 years, so I won't give you the full history. Um, we used to be purely about graduates. Some people may know us as the agr, um, um, but we changed the name to reflect the fact that early careers isn't just about graduates. You know, the apprentice levy, um, significantly changed the market, um, because we mostly represent not always large employers, but employers who run what I would call structured programs. Whether that's graduate routes, school leaver routes, apprentice routes, that's our turf. Um, and we're at more at the higher skilled end. So really if you know about your skills, level four and above, really, um, that's the kind of territory we are. And we do a whole range of market research. You know, if you ever read stuff around what's happening in terms of vacancies up or down, that tends to be us. Do a lot on the skills agenda. We're a pretty broad shirt. So we've got lots of universities that are members, lots of solution providers to the market that are members, but our core is that sort of 300, 300 plus employers that are our members. That's the reason we exist and we very much represent their voice in this marketplace.

Lucy: Lots of those things, I'm pleased to say, things we'll come back and um, touch on. But you've obviously got a very unique, um, vantage point on the graduate and early careers market. So, um, I wondered if you would just give us a snapshot of where you think things stand right now for young people entering the workforce. Because there's a lot of stuff written about this, um, in the media. But what do you see as the trends and what are the things that are driving them?

Stephen Easterwood: Sure, yeah, it is getting a lot of air time at the moment and you know, thanks for reminding me how long I've been in this game. Um, and the reason I say that is because whenever the jobs market is tough, you know, actually particularly the mainstream press does pay a lot of attention to what's happening to particularly the graduate market because it's around, you know, how easy or difficult is it for young people to get a job? And the market is tough. Um, if we add through the data for the last sort of two recruitment seasons, um, we think vacancies are down by roughly 15% and again that's amongst ISE members. So that is, you know, again, think about it as that, that sort of more programmatic, more, more corporate space. Um, it's difficult to know what's happening in the SME market, the smaller medium sized business market. And I think there is some evidence that that market has taken a tougher hit. Um, but yeah, it's down. It's not down as much as something like, you know, the slump we saw in Covid where vacancies dropped by about 20%. You know, I can remember the financial crash, 2008 time. Again, the market dropped by about 20% then. But it, but it definitely is tough. You know, students are finding it harder to find jobs, there are fewer jobs in the market. And then I'm sure we'll get into this. The way that, um, the application system works now, the tools employers use has meant that students are making many more applications than they used to. So it's tough. I mean, if you think about it in market terms, I would say that actually it's the employers that have the power in the market. Um, whereas actually you think about other times in the cycle, you know, when we came out of COVID um, or if we go back to pre financial crash, say students had more power in the market. So overall it's tough, you know, it's a pretty tough labour market at the moment. So I think it's something we're all experiencing.

Lucy: And you talked um, about it not being as bad as Covid, but you know, Covid isn't really very long ago. So presumably these things have a compounding effect that you have a number of graduates that go into the market. If those, or if a smaller number in one year is taken on into employment, you have a compounding effect in that it becomes more and more difficult. Presumably that is also what you're seeing.

Stephen Easterwood: Definitely. Um, and I think one of the differences again if I think about COVID or the financial crash, um, this might be the benefit of hindsight, but it felt we were more in a cycle then and you could see an end of it. Whereas I think what a lot of people are telling us, they can't quite see when that cycle is going to end and when the uptick will come. So you're right, that compounding effect is really important. So if we talk about the graduate market, students who graduated last year who didn't find a job are still in the market. Students who maybe chose to do a master's because they couldn't find a job are coming back into the market and then you have this year's graduates. So yeah, when vacancies are um, um, constantly declining, which is what's happened. So last year we saw roughly a 7 or 8% drop. Similar this year. Um, yeah, that build um, does take effect. I also think it's a challenge from the students perspective, not just the application piece. Um, there was some data published after the financial crash that showed that where students started a kind of a rung or two lower on the jobs market because it was tough, they maybe didn't get a job they would have done in a more buoyant economy. They still progress but they progress from a lower starting point. So it took almost a decade for them to catch up with students who maybe graduated in a better time. So there's all sorts of impacts of that. Like you said, compounding effect. But without an upturn in jobs I think it's going to just remain tough and possibly get harder um, for students.

Lucy: And it's really interesting and there's no doubt it's difficult, um, for students. But I wanted to talk to you um, a little bit about the longer term picture from all this because one of the things that came out of our future um of Work hub report this year that I thought was really interesting was it found that employers are actually also becoming really quite concerned about this. They're becoming concerned about some of the structural risks, the way that they're built posed by things like um, AI and automation. But they're particularly concerned about this compression um impact on um early career roles, on the um erosion if you like, of roles where people just developed um, on the job learning that led through to more senior pathways. You talked a little bit about that in um, your last answer. And there's becoming this concern that if we don't have intentional redesign you risk ending up with a diamond structure. So far fewer junior roles, which is what we're seeing at the moment, this kind of bulge in the middle but also in a way that's quite concerning for businesses then a real shrinking of your top future leaders because if you don't have the base to bring them in, you then don't see a pathway for you through to um, future leadership. Is that something that you're talking to the businesses that you work with um, in the isc? Do you think employers should be concerned about that?

Stephen Easterwood: Yeah, the short answer is yes, um m the more nuanced answer. It does vary a lot sector by sector. So if I'm m talking to a tech business that employs coders, um, you know, you see roles there changing very dramatically over a six month period, you know, without getting into the details but you know, the ability to vibe code um, as opposed to you know, I guess the more hardcore technical approach to coding has really changed jobs in quite a dramatic, dramatic way. Whereas when I talk to people in um, other professions, let's take for example my background is professional services. Yes, AI is changing jobs and the nature of what people do, but it's more subtle, it's more the tools people use rather than fundamentally at the moment changing how the job delivers. So that reflects where we see employers at. They're trying to work out what this means and what it means for actually a, the work that needs to be done for. But exactly as you said Lucy, those talent pipelines, um again because you know, things like pyramid shape, diamond shapes, these are conversations that I've heard come and go over the last um, you know, sort of 10, 15, 20 years. They've always been there to a certain extent. Um, but the reality is when we look at history is that actually technology has not decreased the number of early careers hires employers need. If anything it um, it's increased them. Again. If I look back over my professional services career, you know, despite offshoring, despite um, technology changes, actually the number of early careers hires that professional services firms have recruited has broadly increased over the last 10 to 15 years. And I think that's people trying to grapple to understand that. And also as AI, you know, changes at a pace, it's trying to predict what the next six months might be like, next 12 months. And actually again, I think that's different. That cycle is speeding up very quickly. Um, but then again, I think those employers that have also historically thought about their early career highs over the longer term, those with longer memories. Remember when employers do cut back in a difficult time, it comes to three years down the line when you need people moving into management roles. When there is an upturn in the economy, all of a sudden you're short of resource and it gets very expensive to buy that in the external market, even if that talent exists in the market. So yeah, so lots of employees, different sectors are weighing this up in different ways. But it is that conundrum and there isn't an obvious answer. People come to me and they say, what's the answer, Steve? And I'm like, I'm not sure there is one. We're all trying to work it out at the moment. But I do always remind organizations that when you cut back, when you think, oh, there's an easy cost saving here, let's cut back on early careers. Actually, when I say to organizations, who's in your leadership now, who's in those real positions that make a difference and how did they, you know, cut their teeth? Where did they learn in the organization that that often makes people, you know, pause for thought. I think it's fair to say, and it's right.

Lucy: I'm sure that there are no easy answers. But you talked at the um, top about skills and how we look at skills. It seems like a good, a good time to um, to turn to that because um, I know that the ISEs report from um, early careers to emerging talents highlights this um, need to move towards skills based hiring, you know, and we a more expanded idea of what an early career looks like. And a couple of questions flows from that. But the one I think we should just tackle straight up is like, you know, what do we mean when we talk about skills based hiring in this context? How do employers articulate what are the skills they're looking for? And then even if you can articulate them, how do you go about measuring those in the recruitment process in an appraisal process, once you've brought people in, it's one of those things that sounds great and everyone talks a lot about it, but how do you do it?

Stephen Easterwood: Well, yeah, it is a really tricky one. And some of this is an Emperor's New Clothes type conversation because, particularly in early careers, employers in the UK have historically been very skills driven, more so than other countries around the world. Um, and that's often shown by the fact that actually what you study doesn't necessarily dictate what you do. You know, you don't need a law degree to enter the legal profession, the same with many other sectors in the uk. Whereas actually when you think about other countries, you do, you have to do a qualification that dictates to the job you're going to do. So the links between education and, and the jobs you do, the labour market, I would say, are stronger in other territories. Now, I'm not saying that's the better thing because actually lots of employers have said to us, and it's been my own experience, you know, throughout my recruiting year, that actually there's lots of talent out there, if you take a broader, broader skills view. So employees in the UK are pretty used to, um, hiring on that, on that, on that kind of, I guess that broader skills piece. Um, I think the question that's changing or the question that's at the front of people's minds is actually all those conversations, you know, like one we just had about the, the way technology is impacting the labor market. Is that changing the nature of skills? And, and I think it is, um, um, subtly. So things like actually, you know, somebody's learning agility, their adaptability. Um, I don't think resilience is a brilliant word to use in the world of recruitment and development, but it's, it's. Most people know what we're talking about. It, it's a kind of, it's a good shortcut. But actually, you know how, um, able are people to deal with flux and change and difficult situations. That is what I see employers actually focusing more on in the recruitment and development phase. So it's not that they didn't look at those skills before. I think they're playing a greater emphasis on them and if anything, dialing back some of those more technical skills. Um, we've got a new report coming out on, um, how development programs are running. Um, we do this report every year, so we track this over the long term and we still finalize the numbers. So, um, I won't use specifics otherwise our head of Research will kill me. But what that broad data shows is that actually it's interesting that we look at technical skills. So employers actually don't place a high emphasis on technical roles in the recruitment phase. Um, technical um, skills, um, but actually when it comes to development that's where they are investing more money. Um so that to me says that employers accept that you know student hires will have some ability to use technology, um, and they'd expect that. But actually when it comes to getting into an organization, how you use specific tools, specific um, applications for different roles, employees are increasingly investing in that end. Development, development programs. So it's quite interesting this mix of skills and how much is technical, not technical and how much is this is really is just gearing up early career pipelines to have that flexibility so that as work changes and roles change they're prepared for that.

Lucy: And when we talk about that do you think there's a mismatch between the education environment, whether that's at school or university and what employers are looking for in terms of skills that we still have a sort of um, academically driven skill school process. Where do you go about or how do you go about acquiring those skills in order to put yourself right at the forefront of the kind of things that businesses are looking for? If it's no longer just about academic attainment but that's everything your education has moved you towards, how do you go about obtaining those additional skills?

Stephen Easterwood: I think there is some evidence that actually that young people um ah are ah, not necessarily developing those skills in the way of done in the past. My you know, my generation, you know, um, and that can be things like availability to part time work. I was looking at um, recent um job advert. Just it's a job. I had a um, paper when I was a kid and I saw this job advert recently for a similar kind of role. I went oh, those jobs do still exist. But the job said actually we will hire anybody from 13 and up but we prefer somebody older. And I thought well historically that job would always have gone to a young, younger person. So there is some evidence around um, just that availability of that kind of part time work. Um, but I think also actually the pressure on um, achieving the right grades through school and higher education, um, whilst not a bad thing I think that has changed over the years and employers definitely tell us there is something in this idea that um, young people coming out of education they haven't had as much work experience as maybe they might have done historically. So therefore our ah, um, employers are going to have to invest more in things like professional skills or workplace readiness than they would have done historically. Um, so there is definitely something in this because employers tell us that's what they're doing. I think there's something, um, I'm quite interested in the work, um, if anybody's followed the work of Bobby Duffy, um, out of Kings, um, he talks about generation differences, but he talks about things like delayed adulthood. I think that's something that in the corporate world should pay more attention to because it's not necessarily about generation differences, but as. And this is what Bobby's research has showed. You know, people do stay in education a lot longer than they used to. He points out, you know, we always leave school at 14 a long time ago. Um, whereas now the norm is actually it's much later, it's 18, 19, 20, 21. Um, and I think that has implications for just how much life skills people have when they enter the workplace. And I think employers are having to adjust to that. I think some of that is social change. So it's not helped by an argument says, oh, let's just, you know, beat up on young people saying that, you know, they're not good enough. It's recognizing how society has changed how education systems work, how we can adjust those systems and evolve them so that actually we do get these transitions through education into work better. Um, and again, I think that's something at the moment that is in a bit of, a, bit of a state of, State of flux. Um, I do see universities doing a lot more. Again, universities get beat up sometimes, I think, rather unfairly. Um, um, because you look at employability skills being embedded in the curriculum and there's lots of really interesting work being done there. I think there's more to do, but there's definitely a lot more opportunity for employers and educators to engage, changing tack,

Lucy: um, a little bit. But the other theme that we've talked quite a lot about on this podcast is demographics. Um, and I know that the IC's report highlights that you've got technological change, but alongside that you've also got really significant demographic shifts, falling birth rates, longer, um, lives. So people needing to work for longer. All of those things are coming together. And at the same time we've got an issue with really, um, good candidates, those people being much harder to find. Um, all of that inevitably needs to reshape how organizations plan for their people needs in the longer term. And obviously a lot of that starts with early careers. You talked about, um, changes to apprenticeships, for example. How do you think we're starting to see change in that concept of early careers.

Stephen Easterwood: Yeah, I think the demographics bit is really interesting and it ties into um, a question you asked me previously Lucy, around thinking about your early careers workforce planning and strategies. Um, again we are in an economic cycle at the moment and when I ask employers why have you been reducing your hiring? Not everybody has by the way, I should point out, you know roughly 40% of employees now serving have actually increased early careers hiring. So you know some are pulling back but some are increasing. Um, but most people tell us it is about the economy. That's what's, what's causing the pressure. And when you look at demographics, you know, in roughly three to four years the number of 18 year olds starts decrease and long term decrease. You know, when you look at birth rates because that's how you can track this. I mean we can predict very accurately, you know, how many 18 year olds etc are coming out of the education system. Um, and that starts to go into long term decline. Like all countries, it's not just about an aging population, it's a declining birth rate. So assuming we get back to some form of growth in the economy, that pressure of an aging workforce, a declining population of young people is going to have to change um, the workforce planning strategies that employers use to accommodate that. Um, so actually it is probably going to get tougher to hire that early talent that you need. It's going to become more competitive in that space than it is now. Employers um, are also going to have to think about retaining, reskilling, upskilling existing workers, which is where our emerging talent um, um work came from. And it's really interesting when you look at employers because there is a story to be told in sort of job titles and the names of teams. So you know, I come from a world where it was the graduate recruitment team then became the early careers team. As you know apprenticeships and school leaders came into play. Um, there are some organizations we talked to that have renamed their teams Emerging Talent and it's because they are thinking about these programs. It's not just about when you leave education, it's well, do you bring in people who are reskilling career changing at a later stage. And um, and I think where we're at economically means actually the focus on those programmes is not maybe as strong as it will be in two or three years time. But I think once demographic changes really start to bite, particularly around that birth rate piece, employers are going to have to think much more closely around um, that broader talent piece and definitely how you reskill and upskill, um, um, people within your organization because if you can't find those people externally, um, you're going to have to work harder to retain people. And we definitely see more forward thinking organisations, um, thinking about that.

Lucy: And it feels like there's a perfect storm because as you say, um, um, economic pressures mean that people pull back from investments in those kind of reskilling programs. You understand why, of course. Um, but at the same time the demographic change is coming at us, as you say, in a way that's incredibly predictable. So we have a perfect storm of that change coming at us really very quickly at the same time as the economic pressure, meaning that businesses are pulling back from some of those um, reskilling programs. I mean short of pointing out that as an obvious factor, do you think there are things that um, we can be saying to businesses to encourage them to really be looking much longer term? So looking beyond this kind of short term pinch point into understanding that actually future success really does depend in seeing those two things as things are both, you know, if you're going to be able to address this um, huge demographic change, you've really got to consider now this reskilling issue, the kind of jobs of the future. Who have you got within your business that you can reshape to be able to do those roles?

Stephen Easterwood: Yeah, definitely. There's two key data points I use. One of those is the demographic pits we've just spoken about. The other is actually related to skills and the number of highly skilled roles in the economy. And when you look back over the last 15 years and look at the number of skilled roles in the economy, not the number of vacancies, the number of skilled roles in the economy just keeps going up. Um, and the number of sort of, you know, semi or lower skilled roles stays flat. Um, and the predictions are over the next 10 years. I mean there's no facts about the future, but the predictions are that continue. So again, if you look at those two data points, change the demographics, an increasing skill need, you know, with all this technology change that probably history tells us, means that actually we need more people who can do the more complicated stuff. If you ignore those pressures, you know, you're going to find you're going to lose out competitively to those organizations that have, you know, put that lens on the future. And I get that it's tough, you know, in the commercial pressures in any organizations, even if you're in the public sector. This isn't just about, you know, profit driven, shareholder driven organizations, you know, You've got to run your business efficiently and deal with the financial climate you're in. But there's another interesting trend that I have spotted, um, and that's around strategic workforce planning as a subject. If you look at the number of HR articles, the number of reports being produced, that noise is just generally increasing. So again that says to me, employers get that there's something to think about here. They're, they're not quite sure how to deal with it, how to tackle it, so they're investigating it and trying to work through it at the moment.

Lucy: And do you have any tips? Because actually I think that's quite a lot of our audience that's reflected in our survey. Quite a lot of them understand and recognise the problem but they don't really know where to start. So if you're somebody that's in that position, we know we need to evolve our people strategy. We understand that we can't afford to lose a generation of talent if we're going to be successful in the future. Do you have any um, sort of quick wins or quick tips for businesses in that position? Just where to start?

Stephen Easterwood: I think part of it is actually genuinely looking at the data you've got on your organization internally. I think, um, again we all know that actually we like to think that there's perfect data out there and of course organizations have all this data and you just plug it into a bit of, plug it into Claude and it'll tell you what your workforce strategy should be. And we all know data sits in different places, etc. And the reason I say that is often organizations lose sight, particularly from an early careers lens. The talented people they've got in that organization, where they came from, where they joined the organisations. You know, a couple of times in my career I've been in organizations where we generally started from the ground up, said, right, why are we doing this? Why we even got a graduate recruitment or an early careers program. And one of the things that um, we looked at in those organizations is actually who are the people who are doing a really good job in both middle management and senior level. And you'll be surprised how many people actually joined on graduate programs. But it just gets forgotten in the sands of time. And quite often the data you want now, somebody had to collate about five or six years ago and they didn't, or it was on a different system. So in answer to your question, I think do some unpicking of that, find out what talent looks like in your organization and how you've been able to Pull that talent through and take what earnings you can from that, um, and then start to look at actually what are the external impacts on that likely to be. I mean I've done some work in the past whereby we compared the journey of somebody coming through at an early careers level and fundamentally how much it's cost to employ and develop that person. And you compare that to an ability to buy that in the external marketplace. And actually once you start to do some of those sums, you realize that yeah, actually the return on investment for early careers hires is, is pretty strong, particularly when they've learned and grown up in the organization. So a lot of that cultural knowledge, it's um, very difficult to put a figure on, um, actually is of extreme benefit to the organization. But it is tough. I mean again, I think one of those things, there isn't necessarily a quick, easy sum you can do on this, but it is actually doing the analysis. I think some of the stuff where I look at what could AI do and help us do this better, you know, you look at some of those skills, mapping tools, you look at some of the developments in technology that are enabling on all sorts of data points to be pulled together. I don't think we're there yet to really understand, you know, the strengths of your workforce so that, you know, organizations can develop people better, can kind of redeploy people into roles that are similar ish to what they do and develop them and grow them in the organization.

Lucy: Thanks Stephen. That's all we've got time for. But I'm not going to let you go until I ask you the question that I ask um, everybody on our podcast this year. So what's the one piece of advice that you would give to leaders who want to build their organization's future? Um, resilience. In this period of constant change.

Stephen Easterwood: Um, you do have to think about your people. It is a cliche, but when you look at particularly those demographics, that's the bit that I keep coming back to. Um, you know, that there is not an infinite resource in terms of talented people out there in the economy. When you look at some of the geopolitical pressures, the demographic pressures. Yet we might be in a, in a moment in time where actually employers have the power in the labor market. That is not a fixed thing and that could very quickly change, particularly when we get back to some growth in the economy. So my top tip is just don't ignore it. Don't think actually I just need to deal with the fires I'm fighting today because you'll get that we've all got fires we've got to put out now, but you've got to devote at least a little bit. It's time to that long term planning. And organizations that have consistently invested in early careers definitely see the return in their, in their talent strategies when they, when they look under the hood of this.

Lucy: Thanks, Stephen, that's excellent advice and thank you all for, uh, joining us. If you'd like to hear more conversations like this, you can sign up on our website or subscribe on your usual channels. I look forward to your company next time, but until then, goodbye.