Australia’s Skills Gap: Why Leadership, Not Just Skills, Is the Answer
By Michelle Loader, Managing Director, Future Leadership
Australia stands at a critical juncture. While there have been ongoing discussions about the skills shortages across our economy, we need to take this opportunity to rethink our approach. The evidence points to a need for action: 36% of occupations assessed are in national shortage according to Jobs and Skills Australia. This highlights a need for innovative strategies to better prepare our workforce for the future.
Rethinking the Skills Paradigm
The language we use – “skills gaps” and “skills shortages” – may be limiting our ability to address the challenge. I wonder if we thought beyond “jobs and skills” to “work and capabilities” if this would represent a necessary shift in how we conceptualise human potential in the workforce?
As organisations race to integrate AI into their core business strategies – with PwC reporting 56% of Australian CEOs planning to do so within three years – we continue to frame the conversation around specific skills rather than the higher order of foundational capabilities. The half-life of technical skills has compressed dramatically, with some skills becoming outdated within 12-18 months. Meanwhile, the total number of skills required for a single job increases by 10% annually according to Gartner research.
The Leadership Imperative
Whilst education and immigration policy will address part of the problem, we have work to do. The Australian Institute of Company Directors notes that skilled migration levels are insufficient to meet labour demand, with 66% of directors expressing concerns over this insufficiency to then grow. We have a critical need to re-engineer the system of continuously reskilling our workforces.
This brings us to a critical insight: Australia’s skills gap is fundamentally a leadership gap.
The World Economic Forum’s Future of Jobs Report reveals that while 70% of organisations are looking to hire for emerging in-demand skills, only 51% intend to upskill internally. Meanwhile, 41% foresee team reductions due to skills obsolescence. This raises a pressing question: why aren’t our leaders growing the capabilities we need within our organisations? A solution that would provide us a sustainable way forward.
The Leadership Tenure Challenge
One factor may be the decreasing tenure of corporate leadership. According to Harvard Corporate Governance Forum research, median executive tenures have dropped 20% between 2013 and 2022. This creates a structural consideration of how to support long-term capability building when Executive Leadership churn is occurring at a rapid rate.
Expecting leaders to be strategic and invest in long-term workforce development, when often our environments reward short-term returns, presents a significant challenge. It is important to ask ourselves, does the way we reward our leaders align with the long-term vision? There is a clear correlation: as short-term incentives increase, the motivation to invest in long-term workforce development diminishes. To thrive, we must align our incentives with the strategic goals that ensure sustainable growth and adaptability.
A Systems Approach to Leadership
At Future Leadership, we engage with 20% of Australia’s board members and executives annually. Our experience has led us to develop what we call the Model of Leadership – comprising three key elements of context, capability, and capacity. We believe we need to move beyond a traditional and linear approach where CV + network + experience = leadership credibility, as this formula is no longer sustainable.
Instead, we look to adopt a predictive approach that begins with understanding the emerging environment, identifying the work to be done (not only the role to be filled), assessing the capability to perform, and building the capacity of individuals to succeed.
We are determined to view organisations as capability ecosystems, not skills pipelines. For leaders, capacity to perform in the future will be less about skills and more about learning agility, cognitive aptitude, and the ability to deal with complexity.
Collaborative Solutions Required
Solving Australia’s capability challenge requires collaboration across traditional boundaries:
- Integrated talent strategies: Where we integrate skills development and immigration to create cohesive approaches that maximise both domestic and international talent.
- Industry-education partnerships: Reimagining how businesses partner with education providers to create more responsive development pathways that focus on foundational capabilities.
- Cognitive diversity: Teams with diverse perspective assessment profiles, will better interpret complex signals in our workforces and drive innovation.
- Participation focus: Occupations with strong gender imbalances are more likely to be in shortage according to Jobs and Skills Australia – addressing this should be part of our solution.
The Way Forward
Australia’s future competitiveness depends on our ability to develop, attract and retain the right talent with the right capabilities at the right time. This requires innovative thinking that transcends traditional boundaries between domestic skills development and immigration policy.
Most importantly, it requires leadership with the vision to invest in capabilities whilst maintaining sustainable financial results. We think the future is about asking “what’s the work to be done, not the role to be filled,” because ultimately every role will require human-human and human-technology augmentation.
The organisations that thrive in the coming decade will be those that build capability ecosystems aligned with future demands, thinking beyond today’s skills gaps. This transformation begins and ends with leadership that understand the priority of creating a future-ready workforce to secure meaningful change.
Michelle Loader is Managing Director at Future Leadership, a strategic advisory firm that works with Australia’s leading organisations on leadership and capability development.
