The “skills gap” has received a great deal of attention recently, particularly in the years following the Great Recession. In a nutshell, the skills gap refers to the difference between the skills employers want or need and those that the available workforce has to offer.
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Although some analysts see the skills gap as having the potential to cost businesses big money, others believe there is no skills gap and that employers are simply more demanding of applicants than they used to be.
One can debate whether the perceived skills gap translates into an actual gap between available skills and required—as opposed to desired—skills; but the perception that this gap exists is very real, and perceptions have a very real impact on employment decisions.
According to “The Upskilling Crisis: Effectively Enabling and Retraining Employees for the Future,” a recent report released by West Monroe Partners, more than half—56%—of organizations “believe they have a moderate to severe skills gap today, and 60 percent of employees believe that, to some extent, their current skill set will become outdated in the next three to five years.”
The report is based on a survey conducted by West Monroe, a national business and consulting firm, in partnership with the Human Capital Media Research and Advisory Group, which is the research arm of Human Capital Media.
These organizations conducted a pair of surveys on employer and employee attitudes toward upskilling and employee enablement technologies. More than 430 people at the manager level and above across various industries participated in the employer survey; 1,000 people participated in the employee survey, representing a wide range of industries and job levels across the United States.
Sources of Skills Gap
Let’s start by looking at the sources of the perceived skills gap. Technology is one of the biggest sources of the anxiety. A significant majority of the survey respondents—61%—agreed that technology helps them deliver higher-quality work, and 70% of surveyed organizations have introduced at least one new technology to increase employee capacity in the past year.
Employers believe these technologies are needed to make their organizations more efficient, increase workplace productivity, and improve the customer experience, among other benefits.
Employees surveyed tended to agree that technology is key to their continued employability. They see technology as both an opportunity and a threat in this regard, with 55% saying they need to learn new technologies to remain competitive in their skill sets and 31% saying their skill set is being replaced by automation.
Nearly a quarter also said their skill sets were becoming more complex, and roughly 20% said their industry is being disrupted by technology and/or market changes.
The Right People Are Already on the Job
One of the more interesting findings of the report is the suggestion that employers are better served upskilling their existing employees as opposed to hiring new staff with the desired skills.
“The urgency for upskilling comes at a time when emerging skill sets are scarce and the talent market is tight—making it prudent to keep people even if they don’t have the right skills right now,” said Michael Hughes, managing director and leader of West Monroe’s Operations Excellence practice. “Indeed, it’s often cheaper to retrain current employees than find and hire new ones, as the consequences of turnover can be felt at the bottom line.”
The report cites 2019 data from the World Economic Forum that show the average cost of hiring a new employee is $4,425 and 2019 data from the Association for Talent Development that show the average cost of upskilling an existing employee is $1,300.
Roadblocks to Staff Upskilling
Even though companies appreciate the need for improving the skill sets of their workforce and upskilling existing workers costs less than one-third as much as hiring new staff, many organizations have failed or struggled to improve the quality of their existing workforces. A significant aspect of those shortcomings comes down to management.
According to the report:
- 63% of companies have not equipped managers with upskilling resources;
- 65% feel the people responsible for leading the way during change—managers and senior leaders—need upskilling and reskilling themselves;
- 43% believe managers don’t know how to upskill and reskill employees; and
- Another 39% feel they don’t have the time to do so.
“The survey results strongly support the need for significant investment in manager development and enablement if organizations are to realize the impact of digital transformation on the bottom line,” said Hughes. “The results also point to the importance of human-centered design in their approach to upskilling. Before implementing any sort of enablement technology, organizations need to consider the employee journey and how the selected tool(s) will add value – but only 16 percent of those surveyed do so consistently.”
The Path Forward
The data published in the report suggest that organizations that want to address their existing skills gaps should consider starting with a top-down approach, focusing first on empowering managers to develop their staff.
Managers can serve as force multipliers within their organizations if they can effectively transfer the skills their companies need to the staff who report to them. But before they can do that, companies need to be willing to invest the time, money, and effort into effective management training.
Whether or not one believes the skills gap represents a very real deficiency in workforce capabilities or an imagined one, the fact is that the world economy is extremely dynamic and increasingly complex, and technological change is at the heart of the disruption.
Just because employers may be looking for qualifications in excess of what they sought a few years ago doesn’t mean those skills aren’t necessary now or that they won’t be in the near future. In a tight labor market, it’s essential that organizations find ways to upskill their existing staff to meet the challenges and capitalize on the opportunities around the corner.