By Wilhelm Crous
May 9, 2023
Boston Consulting Group (BCG) recently conducted research among 50 of the largest US firms and Fortune magazine’s Best Places to Work to determine how much emphasis companies place on skills development when it comes to delivering on their strategies. The results were not encouraging!
Only 24% of the companies studied linked skill-building to corporate strategy, while 20% made no mention of skill-building or learning and development. Only 15% of senior leaders said they gave corporate learning the high priority it deserves. This should be viewed against the fact that the World Economic Forum has estimated that 50% of the global population needs new skills to meet the demands of new technologies. It is estimated that by 2030, this figure may grow to as high as 90%.
According to BCG’s Goel and Kovacs-Ondrejkovic, “companies need to devote far more attention to fostering skills development, tracking its outcomes and elevating its role and profile in the organisation”. Despite this, only a handful of companies indicate that they have a structured process for forecasting skill gaps based on corporate business needs.
Furthermore, many companies describe skill-building as an expense, with 80% of companies only reporting on process metrics related to training, such as hours of training delivered or number of people attending courses. The fact is, when companies consider skill development to be a cost, this spending will be a lower priority than other investments.
How can this situation be rectified? Goel and Kovacs-Ondrejkovic recommend the following:
- Start with strong strategic intent
Every company needs to create a plan to develop the skills required to deliver on their business strategy, which must then be communicated to investors and other stakeholders. It should start with the C-suite indicating how skill-building efforts tie in with key strategic business priorities. An example here is the German insurer Allianz, which stated in its sustainability report that: “Digitalization and automation will change the composition of the future workforce with some job profiles no longer existing, new profiles and capabilities emerging, and considerable changes in existing profiles and skills. This will require major upskilling and reskilling initiatives to prepare the workforce for the future. Our main focus will be on developing digital, data and agile working skills.” Allianz also indicated that this strategy will have a positive impact on the bottom line.
- Companies should position skill-building as they do for other investments
The WEF recommends that companies “treat investments in human capital in the same way we do investment in natural resources”. As an example, Bosch has announced that it will spend €2 billion on reskilling workers as the auto industry shifts to electric vehicles.
- Target outcomes over process with a focus on the right metrics
Companies should shift from ‘number of employees trained’ to ‘business and talent outcomes achieved’. This can be done by assessing the metrics of achievement, e.g., faster or cheaper production, more sales, etc.
The assessment of outcomes should also focus on how learning improves skills, capabilities, engagement and employability. For example, AT&T reported in 2022 that: “Our metrics show that those who take part in our training and development initiatives are:
- more likely to receive a higher performance rating at the end of the year;
- more likely to receive a higher key contributor award at the end of the year;
- more likely to move laterally; and
- less likely to leave the company.”
This implies that a more evidence-based approach by the learning and development and talent management departments will be needed. For their part, AT&T ran a pilot scheme using a test and a control group to demonstrate a clear business case for its frontline leadership development programme, before scaling it across the organisation.
- Leaders can encourage buy-in with stories of their own skill-building journeys and by putting skill-building on the everyday agenda
In this fast-changing world where skills can become obsolete almost overnight, linking upskilling and reskilling with the organisation’s strategy can be a game changer.
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Reference: Goel, S. & Kovács-Ondrejkovic, O. 2023. Your strategy is only as good as your skills. Retrieved from: Your Strategy Is Only as Good as Your Skills | BCG.