Employers are fighting tooth and nail to get the best talent—but they may be overlooking their greatest weapon.

The number one challenge faced by companies with more than 1,000 employees is finding qualified employees, with 38% saying it’s a struggle, according to a new report from ADP, a management services company. That’s followed by 34% who say their biggest problem is the economy, 27% who say it’s retention, and 26% who say wage inflation.

“The world is changing so fast, so the qualifications for talent are changing at a blistering pace. If the bar keeps moving, it’s going to get harder and harder to find qualified employees,” Jay Caldwell, chief talent officer for ADP, tells Fortune about the factors influencing workforce angst. “The other reason is the continued tightening in the economy as well, where there’s a bit more hesitation in the labor market in terms of employees not [being] as open to changing employers as they were two years ago.”

That means that many businesses are looking to hire external talent to fill their skill gaps. But they’re failing to use a secret weapon that nearly all companies have in their quivers: developing the skills of their own employees. 

While nearly all large companies agree that skills development is important for employee career growth and job performance, about 69% say they face obstacles in providing that for their own workforce, according to the report. Caldwell says this is because they’re not allocating enough resources to meet the challenge intentionally.

“What organizations will have to equally focus on is, if you’re not hiring a candidate with all the qualifications, how do you help those candidates build those qualifications, skills and experiences as quickly as possible? It’s great to open up your talent pool, but at some point you need to make sure your talent pool is upskilled to the level that they can actually perform the job,” he says. 

About 31% of companies are investing in skills development, in tandem with 29% shifting towards skills-based hiring. But the report shows they’re investing equally—or even more—in ways to solve their labor problems externally—29% are looking to hire more staffers and 36% are spending to add employee benefits and perks. 

“To attract when talent feels scarce, you have to have a very strong value proposition to the talent market. Workers are prioritizing flexibility, they’re prioritizing health and wellness, and so that’s where some of [expanding those] perks, benefits, packages come into play,” says Caldwell. 

Emma Burleigh
emma.burleigh@fortune.com

Around the Table

A round-up of the most important HR headlines.

Migrant workers hoping to find a better life in Canada are being swindled of their life savings as the country’s temporary foreign worker program is riddled with fraud. Bloomberg

SkyWest Airlines faces a federal lawsuit for allegedly having a fake company union that doesn’t follow through on its legal duties and suppresses workers’ support of other organizing efforts. The Guardian 

Cisco will cut about 7% of its workforce, or around 6,000 employees, as the company’s earnings are down. New York Times

Watercooler

Everything you need to know from Fortune.

Tech boost. Bain & Co.’s new CEO says that the company leverages AI among its consultants to help them work smarter and boost their productivity. —Peter Vanham 

RTO retreat. Google’s former CEO is backtracking on his comments blasting the company’s remote policy and how he thinks it stifles success, saying he “misspoke” about the work schedules. —Orianna Rosa Royle

Living crisis. Housing costs are soaring so high that teachers, on average making $64,000 a year, would need their pay doubled to be able to afford a median-priced home. —Sydney Lake 

The WFH CEO. Starbucks’ new CEO Brian Niccol will not only gets a generous compensation package of $113 million, but he will also be allowed to work out of a small remote office in Newport Beach where he lives. —Amanda Gerut