Closing skills gaps within an organization is crucial for effective talent management. These gaps continue to widen due to new technological advancements, like automation and artificial intelligence (AI), shifting labor expectations and growing global environmental concerns.
Understanding the underlying causes of skills gaps in your industry is the first step toward addressing them within your organization. By evaluating your employees’ current skills and competencies, you can pinpoint areas for improvement, whether through upskilling and reskilling existing staff or recruiting new talent.
Understanding Skills vs. Knowledge Gaps
Before tackling the skills deficiencies in your workforce, it’s essential to identify whether the gaps are in skills, knowledge or both. Skills gaps refer to the disparity between the skills that employers expect from their employees and those that employees have acquired through experience. Conversely, a knowledge gap can indicate a lack of understanding regarding processes, concepts or specific roles within the organization.
Both types of gaps can coexist, especially with the introduction of new technologies. For instance, employees need to grasp the overall workflow to enhance performance, manage teams or train others effectively. They also require practical skills to execute their tasks proficiently.
Consider a situation where a new software system is implemented to analyze production data. Machine operators must possess basic computer skills, such as data entry and mouse manipulation to navigate the program. Additionally, understanding the rationale behind the procedures ensures compliance and accuracy. As businesses adapt to societal changes, skills gaps inevitably arise. However, a significant number of these gaps can hinder productivity and profitability.
Causes of Skills Gaps
Several factors contribute to widening skills gaps:
1. Technological advancements.
The evolution of technology has created a substantial shift in workforce requirements. These innovations include:
- Cloud computing.
- Automation and robotics.
- Renewable energy technologies.
While some fear that these advancements will reduce the number of jobs, many experts believe they will merely transform existing roles. For instance, while data entry and assembly line jobs may decline, new opportunities in machine maintenance and data security are likely to emerge.
Addressing the resulting skills gaps is essential for workers to meet evolving labor demands. Transitioning an office clerk to a data analyst role, for example, requires a gradual adjustment based on their current skills and capacity to learn new ones.
According to a PricewaterhouseCoopers (PwC) analysis, jobs involving manual tasks, such as those in manufacturing and construction, are more susceptible to automation compared to roles that require critical thinking and interpersonal skills, like those in health care. Workers with lower educational attainment are particularly at risk.
2. Increased worker retirement.
The COVID-19 pandemic prompted many older workers to exit the job market, with many choosing to prioritize personal goals over careers. As of late 2021, over one-half of Americans aged 55 and older are retired, marking a notable increase since the COVID-19 pandemic started. The U.K. saw similar trends, with many workers over 50 opting to remain at home for various reasons, including health concerns and perceived skill deficiencies.
This exodus of experienced employees has resulted in significant knowledge loss and skills gaps across various departments. To attract these seasoned workers back, companies might consider tailored training programs that bridge their existing knowledge with recent innovations, as well as offering flexible work arrangements.
3. Shifting work ethic of younger generations.
With older workers leaving the workforce, younger generations are shaping the current workplace culture. Research indicates that nearly 55% of workers aged 18 to 34 would resign from a job that makes them unhappy, compared to only 40% of those over 55. Moreover, a significant portion of Millennials and Gen Z employees engage in “quiet quitting,” performing only the minimum required to retain their positions.
This high turnover and inefficiency can severely impact organizational productivity. To counteract this trend, companies should establish clear career progression paths that align with younger workers’ aspirations. Additionally, robust upskilling and reskilling initiatives can help keep these employees engaged and loyal.
4. Demand for sustainable business practices.
The push for environmental accountability has further exacerbated skills gaps. Companies must adopt sustainability initiatives to remain competitive in attracting talent, investors, and customers. This necessitates leadership to implement company-wide changes and develop new skills and roles to facilitate these transitions.
The International Energy Agency projects that by 2030 the transition to net-zero could generate 13 million new green jobs. While some of these will replace outdated positions, there will be a high demand for workers skilled in sustainability and energy-efficient practices.
Identifying and Addressing Skills Gaps
Skills gaps are prevalent across all industries and departments. According to McKinsey & Company, the most reported deficiencies are in data analytics and digital skills, followed closely by gaps in management, human resources (HR), sales, marketing, and product design.
3 Steps to performing a skills gap analysis.
- Assess current skills: Develop an assessment tool to identify the skills present within your workforce. This survey should involve input from all levels, from management to entry-level employees.
- Create a skills matrix: Utilize a skills matrix template to compile survey data, offering a comprehensive overview of your workforce’s skills. This will help you compare existing skills with those needed for current and future roles.
- Update regularly: Revisit the skills survey periodically to ensure the matrix remains current and reflective of your team’s capabilities.
Sourcing talent to bridge skills gaps.
Not all skills gaps can be resolved in the same way. Strategies to address these gaps include:
- Contract workers: Hiring temporary professionals for specific projects can help fill immediate needs without long-term commitments.
- Outsourcing: If particular divisions are struggling, outsourcing certain functions can allow your organization to focus on core competencies.
- New hires: In cases of long-term projects, investing in new talent may be necessary. Rethinking hiring criteria to promote diversity and adaptability can yield better candidates for future reskilling.
In-house skilling: reskilling and upskilling.
Leveraging existing employees to fill skills gaps is a hallmark of effective HR management.
- Reskilling: Training employees for entirely new roles.
- Upskilling: Enhancing current employees’ skills to perform their existing jobs more effectively.
Both approaches minimize recruitment costs and utilize proven talent. Furthermore, successful reskilling and upskilling initiatives improve employee morale and demonstrate management’s commitment to workforce development.
Interactive training methods, such as gamified learning, have proven effective in engaging employees and enhancing skill retention. Many employees learn better through interactive methods compared to traditional online training.
Evaluating the Success of Reskilling and Upskilling Programs
Recent studies indicate that well-structured reskilling and upskilling programs significantly reduce skills gaps. McKinsey & Company found that companies investing in these initiatives report improved employee satisfaction, customer experience, and retention. Notably, almost 70% of business leaders believe their investment in reskilling has yielded benefits that match or exceed the costs.
For instance, Unilever aims to reskill or upskill its 148,000 employees by 2025, emphasizing the importance of flexibility in roles to meet changing demands. Similarly, companies like Sonae advocate for diverse experiences within their workforce to foster growth and adaptability.
In summary, addressing skills gaps through targeted reskilling and upskilling strategies not only benefits employees but also enhances organizational performance, creating a win-win scenario for both parties.
