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Beyond hiring: How companies are reskilling to address talent gaps
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BEYOND HIRING: HOW COMPANIES ARE RESKILLING TO ADDRESS TALENT GAPS
February 12, 2020 | Survey
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As potential skill shortages loom, a survey finds that many companies are using
multiple tactics to close gaps and that reskilling efforts are paying off.
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As technologies and business models continue their rapid evolution, companies
are experiencing a step change in the workforce skills they need to thrive and
grow. Previous research has shown that as many as 375 million workers globally
might have to change occupations in the next decade to meet companies’ needs and
that automation could free employees to spend as much as 30 percent of their
time on new work.1“Jobs lost, jobs gained: What the future of work will mean for
jobs, skills, and wages,” McKinsey Global Institute, November 2017. Now, in a
new McKinsey Global Survey on future workforce needs, nearly nine in ten
executives and managers say their organizations either face skill gaps already
or expect gaps to develop within the next five years.2The online survey was in
the field from May 14 to May 24, 2019, and garnered responses from 1,216
participants representing the full range of regions, industries, company sizes,
functional specialties, and tenures.
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Although most respondents say their organizations consider it a priority to
address skill shortages, few say their organizations understand how to equip
themselves with the workforce skills they will need most. In fact, only
one-third of respondents say their companies are prepared to cope with the
workforce disruptions resulting from technology and market trends. Most
respondents say their organizations are hiring employees in an attempt to
prepare for potential skill gaps, and some have made efforts to build skills in
their workforces: about one-third of respondents say their organizations have
begun reskilling efforts.3We define “reskilling” as a programmatic effort that
supports employees in building new skills so they can adapt to the fundamentally
changing requirements of their roles or move into new roles. Among them, many
report early progress and provide insights into what these programs look like.
SKILL GAPS HAVE APPEARED, AND COMPANIES ARE TRYING TO CLOSE THEM
The findings from our survey suggest that companies lack the talent they will
need in the future: 44 percent of respondents say their organizations will face
skill gaps within the next five years, and another 43 percent report existing
skill gaps (Exhibit 1). In other words, 87 percent say they either are
experiencing gaps now or expect them within a few years.
Exhibit 1
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Respondents expect market and technology trends to play a big part in these
shifts. Three in ten say at least one-quarter of their organization’s roles are
at risk of disruption in the next five years by these trends. Looking at
respondents by industry, those in financial services and in high tech and
telecom are the most likely to expect this level of disruption, while those in
healthcare services and pharmaceutical and medical products are the least
likely. (Explore the results by industry in “An interactive look at skill gaps
and reskilling efforts.”)
Respondents see a need for their organizations to address potential skill gaps
in a wide range of business areas. When asked where the greatest need exists,
they most often say data analytics, followed by IT management and executive
management (Exhibit 2). Similarly, when looking at the specific skills with the
greatest mismatch between current supply and what will be necessary in the next
five years, respondents expecting skill gaps to open during that time most often
identify advanced data-analysis and mathematical skills.
Exhibit 2
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Nearly all respondents classify closing potential skill gaps as a priority for
their organizations, and about one-third say it is among the top three
priorities. However, relatively few indicate that their organizations are ready
to respond. One-third say their organizations are prepared to address potential
role disruptions, and a smaller share—28 percent—say their organizations make
effective decisions on how to close skill gaps. A potential hurdle to effective
decision making is a lack of visibility into the skills of the existing
workforce and the effects that the disruptions will have on workers’ roles.
Fewer than half of respondents say their organizations have a clear sense of
their current skills, and just 41 percent report that organizations have a clear
understanding of the roles that are likely to be disrupted.
Nevertheless, most organizations are taking steps to address their talent needs,
often through a mix of actions such as hiring contract or freelance workers and
redeploying employees into new roles.4The survey asked respondents whether their
organizations are hiring (acquiring external talent through hiring or
acquisition of other companies), building skills, contracting (engaging
freelancers or contractors), redeploying (shifting employees to new roles in the
organization), and releasing (separating individuals from the organization). The
survey suggests that the most common tactic for addressing skill gaps over the
past five years has been hiring, cited by two-thirds of respondents. The
second-most common tactic, cited by 56 percent of respondents, is skill
building, as accomplished through reskilling programs and other efforts. On
average, respondents say their organizations take at least two actions to close
potential gaps.
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While hiring is the most commonly reported tactic in all regions, the use of
other measures to match skills to needs varies by region (Exhibit 3).
Respondents in Europe are more likely than those in North America to say their
organizations are building skills in their workforces, whereas respondents in
North America are more likely than their peers in Europe to report that their
organizations have released individuals. While respondents in developed
Asia–Pacific are less likely than those elsewhere to say their organizations are
prioritizing skill building, those in India are the most likely to report
skill-building activities at their organizations.
Exhibit 3
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Respondents whose organizations are building employees’ skills are more likely
to say their organizations are prepared to address role disruptions than are
respondents whose organizations address gaps through other methods. Of the
respondents from organizations working to build skills, 44 percent say they are
prepared, compared with 19 percent of those at organizations taking other
actions.
Looking ahead, respondents are much more likely to cite skill building, rather
than hiring, as the most effective way to close skill gaps in the next five
years.5Similarly, a 2017 survey found that executives at companies in Europe
with more than $100 million in annual revenue were more likely to say addressing
skill gaps would require retraining than to say it would require hiring. For
more, see “Retraining and reskilling workers in the age of automation,” McKinsey
Global Institute, January 2018. Half of those who expect skill gaps in the years
ahead say skill building will be the most effective action for their
organizations to take, whereas 31 percent cite hiring as most effective.
THE WHO, WHAT, AND WHY OF RESKILLING PROGRAMS
To address talent needs, more than one-third of respondents say their
organizations either have reskilled at least one group or have a pilot or a
program to do so currently under way. Another one-third say their organizations
have plans to launch reskilling efforts. The most commonly cited purpose of
these efforts (57 percent of respondents) is to enable the implementation of a
new offering, business model, or strategy. The second-most cited reason (53
percent of respondents) is reacting to emerging technological disruptions.
> Half of those who expect skill gaps in the years ahead say skill building will
> be the most effective action for their organizations to take, whereas 31
> percent cite hiring as most effective.
Among industries, respondents in high tech and telecommunications are the most
likely to say their organizations have already reskilled part of their
workforce: 23 percent say their companies have reskilled at least one group or
class, compared with 13 percent of respondents in other industries. (For a look
at the data by industry and region, see “An interactive look at skill gaps and
how organizations tackle them.”)
According to respondents, reskilling programs most often focus on building
employees’ skills in critical thinking and decision making, leadership and
managing others, and advanced data analysis (Exhibit 4). All are skill types
that previous research has found will be in greater demand in coming years.
These programs also tend to focus on building multiple skills: on average,
respondents at organizations with reskilling programs say those efforts have
prioritized five skills.
Exhibit 4
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While a majority of respondents at organizations with current or planned
reskilling programs are confident in their organization’s abilities to choose
employees to train and skills to teach, most say their organizations lack the
capabilities for designing other aspects of the programs. Nearly six in ten say
their organizations are good at selecting which employees to reskill and have
effectively prioritized the skills to address. But fewer than half say their
companies have strong capabilities in curriculum design, and only one-quarter
say their organizations designed the programs’ incentives well. Four in ten say
designing the programs’ communications plans is a strength for their
organizations, and fewer than one-quarter say the same about plans to engage
external stakeholders.
Reskilling programs face other obstacles, too. Among respondents reporting
current or planned reskilling programs, 53 percent say the most significant
challenge has been balancing their programs’ needs with those of current
business operations. Measuring the programs’ business impact is another common
challenge, cited by 41 percent of respondents.
MCKINSEY’S ORIGINAL SURVEY RESEARCH
Read more
Despite these challenges, respondents expect further reskilling efforts in the
next five years. Of the respondents whose companies have delivered a reskilling
program, 46 percent say their organizations will reskill more than one-fifth of
their workforce in the years ahead. Nearly three-quarters of respondents say
they expect their organizations to invest more in learning and development over
the next five years.
EARLY RESKILLING EFFORTS APPEAR TO PAY OFF
Although reskilling programs are generally at an early stage, many organizations
are already seeing positive results from them. Nearly seven in ten respondents
reporting reskilling say the business impact from the programs has been greater
than or equal to the investment in them. What’s more, 48 percent say the
programs are already enhancing bottom-line growth. Respondents also see other
benefits: most say their organizations’ reskilling efforts have improved
performance on seven other key performance indicators, including employee
satisfaction and customer experience (Exhibit 5). Further, respondents reporting
reskilling efforts are more than twice as likely as other respondents to say
their organizations are prepared to address potential role disruptions (53
percent, compared with 24 percent of all others).
Exhibit 5
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Respondents who say their organizations have successfully reskilled (by virtue
of being effective or very effective at delivering reskilling programs and
achieving impact that matches or exceeds their investment) offer clues as to how
other companies might run reskilling programs. These respondents tend to credit
the engagement of leaders and employees: 48 percent say having the
senior-management team sponsor the programs helped them succeed, and 43 percent
say having high levels of employee engagement set their programs up for success.
Respondents reporting success at reskilling are likelier than others to say
their organizations have a culture of lifelong learning. Eighty-four percent of
respondents reporting reskilling success say their companies have such a
culture, compared with 58 percent of those from organizations with unsuccessful
programs.6We define an unsuccessful reskilling program as one that, according to
respondents, has been delivered ineffectively or very ineffectively, or where
the investment in the program has exceeded or significantly exceeded the
program’s impact.
Additionally, respondents from organizations with successful reskilling efforts
are more likely than others to say strong skill-management practices are in
place (Exhibit 6). For example, respondents reporting success are about three
times likelier than those with unsuccessful efforts to say their organizations
effectively make decisions on the right actions to take to close future skill
gaps.
Exhibit 6
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LOOKING AHEAD
As more tasks become automated and companies redesign jobs to encompass
different activities, it will be critical to enact strategies that help
employees develop the new capabilities needed. This will be a major undertaking.
Our survey results suggest that most companies will prioritize learning and
development as they try to close skill gaps. Companies that have not yet begun
reskilling their employees should consider taking these actions:
* Understand which skills you need. Companies might not recognize skill gaps in
their workforce, but they probably have some already. A diagnostic can show
which skills the workforce possesses and which will be necessary in the
future. Understanding which skills to develop in the workforce requires a
rigorous, empirical approach to comparing the supply of each skill with the
business’s strategic needs.
* Be strategic in how you close gaps. Companies must decide what actions they
should take to address each gap. Filling most gaps will require a mix of
approaches, such as hiring and reskilling. For each approach, it is necessary
to decide which specific programs or initiatives to implement to gain the
right skills in the workforce. This decision also includes candidate
selection: Which employees should be reskilled first? Meanwhile, companies
should prepare the workforce for change by explaining the reskilling agenda,
including each employee’s future role and reskilling options.
* Build training capabilities and partnerships. Applying the science of
learning will improve the outcomes of any reskilling effort. Companies should
structure the learning journey to help employees retain new skills and apply
them to their role. To do so, the reskilling curriculum should blend
in-person and digital learning opportunities. Employees should be assigned to
train in a cohort of employees with similar experiences and should be
involved with projects that allow them to practice skills while they learn.
Because organizations may need to cultivate a broad range of workforce
skills, they will likely need to assemble learning resources from multiple
providers—for example, online platforms, universities, and technical
organizations. Fostering a culture of lifelong learning also can encourage
employees to develop new skills.
ABOUT THE AUTHOR(S)
The survey content and analysis were developed by Sapana Agrawal, an associate
partner in McKinsey’s London office; Aaron De Smet, a senior partner in the
Houston office; Pawel Poplawski, a senior research science analyst at the Polish
Knowledge Center; and Angelika Reich, a partner in the Zurich office.
They wish to thank David Mendelsohn and Giulia Perin for their contributions to
this work.
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