by Sandra Durth, Anna Lena Kalinna, and Henning Soller
German companies have focused on filling tech jobs, yet the tech gap in the German economy continues to grow—from 700,000 open positions in 2023 to an expected 780,000 by 2026.1 While recent fluidity in the tech talent market may be cause for optimism, it should not be seen as a cure. In North America, about 80 percent of tech workers who had been let go in 2022 found a new position within three months, and new tech job postings far outnumbered laid-off workers.2 Considering that Europe’s tech industry was hit with fewer layoffs, the German tech talent gap is unlikely to vanish anytime soon.
Unlocking the potential of German companies will require fundamental shifts in how companies think about tech skills and talent. Previous research from the McKinsey Global Institute highlights how skill-based talent management could make all the difference. In this approach, employees are not hired, developed, or rewarded based on the specific role or their experience but on current and potential skills.
To sustainably address the growing tech gap, German companies will need to rethink talent management and hiring, invest in broad upskilling, and lay the foundation for skill-based talent management. We recommend that organizations undergo three shifts: from focusing on roles to emphasizing skills; from valuing only prior experience to appreciating future learning and development potential; and from restrictive working models to flexible ways of working.
Understanding company mindsets about tech talent
A detailed assessment of job ads can reveal an organization’s core beliefs on tech talent management. We analyzed more than 31 million job ads and the annual reports of more than 100 companies listed on the DAX 40 and Dow Jones, as well as German unicorns. Our research uncovered insights on the demand for skills in six major areas of tech expertise,3 the differences in emphasis on soft skills and learning among companies by maturity level and geography (Germany and the United States), and the value of an attractive company culture.
Soft skills are as important as hard skills
Shorter innovation cycles and rapid technological advances mean that the rate of change for tech skill requirements within a role is tremendous and can make today’s skills obsolete within only a few years. Even within the past four years, the demand for specific tech skills has shifted drastically (Exhibit 1). For example, Apache Kafka jumped from the tenth most commonly selected data solution in 2018 to second in 2022. Ability and the willingness to learn are thus essential characteristics in potential hires—but DAX companies frequently overlook them. For example, compared with their Dow Jones counterparts, DAX companies listed 5 percent fewer soft skills in job ads.
Soft skills are difficult to build, replicate, and automate, yet they can have a significant impact on the ability of tech employees to integrate, develop, perform, and learn. In line with the job ad analysis on soft skills, essential skills such as adaptability, strong interpersonal skills, efficient problem solving, and the ability to self-manage are also essential for the long-term, sustainable success of talent within an organization. Prioritizing experience and hard skills at the expense of soft skills is shortsighted; failing to screen for fit on these soft-skill dimensions can negatively affect individuals, teams, and organizational health.
DAX organizations are missing out on the power of learning and development
While McKinsey research suggests that employee skills are a core asset for a company, building and fostering these skills is challenging and requires significant investment in learning and development. The most effective learning organizations provide an average of 75 hours of training per employee annually. In return, they see higher promotion rates for their employees (seven percentage points) and achieve higher retention rates (five percentage points) compared with companies that do not invest heavily in learning. By contrast, DAX companies offer their employees only 22 hours of training per year to build new skills—24 percent less than the average of their Dow Jones counterparts in 2021 (Exhibit 2). DAX companies may lose their competitive edge if they do not fully harness learning and development as a core lever to build and develop skills in their employees.
Tech talent thrives in truly inclusive environments
Employees who say they feel like part of a team have higher job satisfaction and are more inspired over the long term. An integral factor is a truly inclusive environment. Companies can achieve this through targeted recruiting and onboarding processes—and they can maintain it by ensuring that inclusivity is embedded in all organizational and talent processes. From a tech talent perspective, neglecting inclusive integration and failing to foster a sense of belonging can negatively affect engagement and heighten early attrition rates. For example, many DAX companies exclusively seek tech talent with German-language skills, which limits both their talent pool and their inclusivity. Compared with German unicorns, DAX companies are 30 percent more likely to impose such requirements.
An assessment of the existing workforce suggests DAX companies have an opportunity to create more diverse teams at all levels. Taking the share of women as one indicator of diversity, DAX companies are in line with their Dow Jones counterparts only at the executive level, where women make up 35 percent of roles. At all other levels, DAX companies significantly lag behind their Dow Jones counterparts (Exhibit 3). Given German diversity quotas for board membership, the relatively high share of women at the board level might be construed as a simple sign of compliance rather than a commitment to inclusion, especially considering the steep drop from the board level to the manager level.
Transforming mindsets to transform tech talent
To close the tech skill gap for the long term, we recommend three fundamental shifts that will not only improve job ads but also foster a more skill-based approach to tech talent management overall.
Skills over roles
A skill-based approach to talent management allows organizations to find candidates suitable for roles based on their skills and skill potential. This approach often requires mindset changes in HR, expanded capabilities in people analytics, and upgrades to underlying tech infrastructure. A new talent philosophy also opens up additional opportunities, including improved learning and development offerings, greater talent mobility, and more fit-for-purpose career paths.
This strategic upskilling is especially valuable in transformational times, when some skills and roles may become obsolete and others scarce due to structural changes such as demographics and a national lack of skilled labor. By identifying candidates for new roles within the workforce and deliberately upskilling them, employers can retain valuable knowledge and close skill gaps internally—a promising strategy, according to 82 percent of global executives interviewed by McKinsey.4 This approach bypasses the need to hire highly sought-after profiles.
During hiring, skill-based selection broadens the talent pool because even if candidates do not hold the specific role recruiters are searching for, they could have the skill potential for that role. Adopting this mindset, one German tech player announced it will drop its entry-level requirement for a university degree and instead look for relevant certificates that highlight applicants’ actual skills.
Learning over prior experience
To keep up with rapid technology changes, organizations have to build new skills within their workforce, fueled by employees with a shared ambition to learn and develop. Companies must then provide access to attractive learning and development offerings at enterprise scale. For tech skills specifically, this includes opportunities for tech talent to stay at the forefront of innovation—as well as upskilling the entire workforce on digital, data, analytics, and technology essentials. Only by increasing the skill depth across the whole workforce instead of selected subsets can German companies sufficiently future-proof themselves.
Employers must understand the baseline of their workforce’s current soft and hard skills as well as future skill needs—and then tailor learning and development offerings to enable workers to enhance their skills to fill the gaps. Fostering a culture of learning and development with incentives for employees and their managers alike is beneficial, and assembling teams of internally motivated employees unlocks the potential for team members to learn from one another.
Flexibility over control
Companies that attract talent with different experiences and backgrounds are 12 percent more likely to outperform others financially. Organizations hoping to build such a diverse workforce need to create an inclusive, flexible environment.
Inclusion training is a good first step, but companies must implement a holistic approach in the form of a diversity, equity, and inclusion strategy. Interventions could include building a deeper awareness of bias in promotion and advancement discussions among managers and performance evaluators.
To attract international talent, organizations must adjust requirements for the job to make it truly inclusive. For example, German companies should reconsider language requirements and compensation.
Another way to attract diverse talent is to cater to the circumstances of prospective candidates. Forty-four percent of people returning to work after a temporary hiatus cited flexibility as the top reason for returning. The COVID-19 pandemic highlighted that employees, especially those with technical profiles, can work effectively from anywhere, given the right technical infrastructure. Recently, one European tech company implemented a “work from anywhere” policy, giving employees the option to work in remote or hybrid models. This policy decreased attrition rates by 15 percent, increased the share of women in the workforce by 17 percent, and reduced the time to hire by more than 12 percent.
All three of these shifts will require a fundamentally different mindset and culture for most German companies. But they are critical for those looking to attract broader tech talent pools and to help retain and develop the most promising candidates. In our view, such shifts are the only solution to the significant tech talent gap that all companies are facing.
Sandra Durth is an associate partner in McKinsey’s Cologne office; Anna Lena Kalinna is a consultant in the Frankfurt office, where Henning Soller is a partner.
The authors wish to thank Hannes Fischer, Benedikt Fritz, and Jessica Mayer for their contributions to this post.
1 “Die Lücke wird größer: Bis 2026 fehlen in Deutschland 780.000 Tech-Spezialisten” [“The gap is getting bigger: By 2026, Germany will lack 780,000 tech specialists”], Stifterverband and McKinsey, November 24, 2021.
2 ZipRecruiter Blog, “What is next for laid-off tech workers?” blog entry by Julia Pollak, November 30, 2022.
3 Data and analytics; design and user experience; information security and quality; IT infrastructure; product and project; and software engineering.
4 “Die Lücke wird größer,” November 24, 2021.