The skills gap is one of the greatest challenges businesses currently face. In a 2021 McKinsey & Company survey, 58% of employers said closing skills gaps has become a higher priority since the pandemic began–and 69% of survey respondents said their organization is focusing more on employee skill-building compared with before COVID-19.
The magnitude of the challenge easily explains leaders’ concerns. With advances in technology and the new skills demands the pandemic has brought, 50% of all employees will need reskilling by 2025, according to the World Economic Forum. At the same time, it has become increasingly difficult to recruit for the most sought-after (and most future-relevant) skills such as software development, data science and analytics, and product management.
With market cycles increasing in speed (and the shelf-life of skills shortening as a result), the window to solve for the challenge is getting smaller. The pandemic has also led to an increase in the adoption of e-commerce and virtual communication tools, which has only widened the skills gap and upped the pressure.
Closing Skills Gaps in an Evolving Workplace
So what’s the best way to narrow this skills gap? The sheer size of today’s gap indicates that companies won‘t be able to simply do what they might have done in the past: lay off employees with redundant skills and hire new talent with the right skill set for the future. Why? Because this approach:
- Is not financially feasible. Think of the severance and restructuring costs involved in laying off 40% of your workforce every time you need new skills in your organization
- Is not aligned with how businesses run. Think of knowledge management and network impacts.
- Is not socially responsible. Think of a multitude of large employers doing this simultaneously.
The decreasing shelf-life of skills makes laying off employees and hiring new ones a very daunting task if it happens on an ongoing basis. Even if it was doable to restructure an organization‘s workforce this way in the past, the requisite talent to plug the gap is just not always readily available in the market.
Hire or Reskill? How to Decide
This all points to two key considerations when weighing the right mix of hiring and reskilling to close skills within your organization: The availability and cost of recruiting talent with the right skills. Some of the skills you need within your organization may simply not be readily available in the market because a lot of other employers are competing for the same skills. Plus, there might be few workers who have the skill sets you need. Think again of the dearth of data scientists in today’s workforce.
When it comes to cost, your financial return-on-investment equation needs to include not just the hiring cost and compensation required for rarer talent but also the loss of productivity during onboarding compared with reskilling a colleague who brings along their existing network and organizational knowledge.
Reviewing the different factors and looking at what industry leaders have put in place points toward the preferred approach: Prioritize reskilling and hire only for very high-value critical talent in the open market.
Organizations like Zurich, a leading global insurer, have established “reskill-first” policies where hiring can take place only if no existing colleague can be reskilled or redeployed into an open role. In addition, the multinational consumer goods company Unilever has established a goal of upskilling or reskilling employees with “future-fit skills” by 2025.
Where to Start: Run a Skills Gap Analysis
To implement a strategic reskilling program, you can start by instituting a skills gap analysis program that places a greater focus on skills over jobs, and on dynamic changes over static views. It could also benefit your organization to have an internal talent marketplace that matches employees and their skills with new full-time roles as well as projects, gigs, and mentorships.
You should run your analysis as an ongoing initiative embedded within your business strategy instead of a once-and-done human resources task. This analysis should lay the foundation for any strategy that may allow you to overcome the skills gap and ultimately win the much cited war for talent.
Learn more about how Emeritus Enterprise can work with your organization to develop online employee training programs to reskill and upskill employees and prepare them for the future.
About the Author
Ranjit de Sousa is the Founder and Managing Director of The Coalyard, an advisory firm that helps Worktech startups scale their businesses. In this capacity, he sits on multiple advisory boards and works as a mentor and advisor to a wide variety of startups and venture capital firms across the U.S., Europe, and Asia-Pacific.
He is the former President of LHH, the world’s largest talent development and career transition company. Ranjit has 20 years of experience in the business space as well as in workforce transformation, innovation, and reskilling.