03 September, 2020

Skilling: 5 Themes in the Conversation

Dani Johnson
Co-founder & Principal Analyst

Heather Adams
Research Lead

TL;DR

  • This article addresses the current literature related to the skills conversation.
  • Not surprisingly, COVID-19 has intensified the level at which organizations are talking about skilling, upskilling, reskilling, etc. and organizations are seeing skilling as a way to address talent gaps.
  • This article highlights 5 major findings from the lit review and suggests 5 articles we think everyone thinking about skills should read.

Introduction

The conversation about skills has expanded dramatically in recent years. What used to be a one-note conversation about converting factory workers into knowledge workers has become an intense and complicated discussion. It is particularly complex now that COVID-19 and some of the other unrest in the world have forced companies to take a hard look at their business models, strategies, and budgets. Organizations are grappling with questions like, “Given the state of the market and our company, is investing in skills development worthwhile?” and, “Where do we even start to understand the skills we have versus the ones we need?”

In an effort to better understand and contribute to this topic, we recently completed a review of over 75 articles. This review of existing literature highlights the key themes, questions, and challenges we saw, and points to 5 articles we think you should read.

What we saw in the literature

In general, skilling is becoming an increasingly important issue. Organizations and public-sector entities alike are concerned about the growing gap between the supply and demand of certain key skills. In one McKinsey study, 43% of companies reported current skill gaps, and 44% said they will have skill gaps in the next 5 years.1 A PwC survey reported that 74% of CEOs were concerned about the availability of skills.2 Whereas hiring has historically been the #1 strategy for closing these gaps, upskilling and reskilling are now gaining prominence. While most companies still rely on both hiring and skilling, developing talent internally is being recognized as a much bigger piece of the puzzle than before.

From the reviewed articles, 5 major themes emerged. These themes are areas in which we can begin a more focused and action-oriented discussion. Each is discussed in more detail further below.

  1. Skilling is a shared responsibility
  2. Skilling is now about a lot more than just digital transformation
  3. Skilling efforts present risks and opportunities for D&I
  4. Skilling is about protecting people, not jobs
  5. Organizations face 2 significant challenges to developing new skills, but COVID has prompted new thinking

1. Skilling is a shared responsibility

Four players potentially have a role in skilling the workforce:

  • Organizations. Some research by McKinsey suggests that executives believe corporations should take the lead in reskilling because they are best suited to understand the skills needed.3
  • Individuals. PwC found that a majority of individuals feel it is their own responsibility to keep their skills updated, and 77% of 22,000 survey respondents said they would be willing to upskill in order to become more employable.4
  • Government. Some argue that government needs to provide opportunities for individuals to learn in accessible and affordable ways to ensure economic viability as a nation.
  • Academia. There is some concern that the skills colleges and universities teach are quickly outdated or not relevant.

There is general agreement in the literature that organizations and employees should have some responsibility for development; there is less agreement about the roles government and academia should play. When Deloitte asked organizational leaders who in society is primarily responsible for workforce development, 73% responded “organizations” and 54% responded “individuals” (respondents could select up to two answers). But only 19% said “educational institutions,” and 10% said “governments.”5

This agreement may be due to the fact that organizations and their workers stand to benefit most directly and obviously from new skills. McKinsey and PwC separately conducted surveys that indicated respondents’ efforts to develop skills in their organizations had improved performance on a variety of key performance indicators (KPIs) like employee satisfaction, employee engagement, customer experience, and D&I strategies.6

Other authors argue governments and academia should play larger roles in workforce development, as skills development presents global and social opportunities and risks that should be shared by all stakeholders. Particularly with the disruptions caused by COVID-19, skills development is increasingly recognized as a global socioeconomic problem (but also an opportunity), not something contained to particular industries, jobs, or companies.

The debate about responsibility for workforce development is most contested when “responsibility” means “costs.” According to one study, companies can only (profitably) afford to pay for 14% of the total estimated costs of workforce reskilling.7 While this estimate likely assumes organizations will use traditional methods for developing skills, who should pick up the rest of the tab remains an open question.

2. Skilling is now about a lot more than just digital transformation

As recently as 2 years ago, most of the literature suggested the conversation about new skill development revolved around data literacy or IT capabilities. Today, however, the conversation is much broader.

McKinsey, PwC, BCG, Deloitte, LinkedIn Learning, Mercer, and the World Economic Forum all released reports in the last year on talent trends, and skilling was discussed in each report. All the authors agreed that as technology replaces humans for routine, repeatable, and some physical tasks, demand will increase for uniquely human skills such as socioemotional perception, creativity, and higher cognition.

PwC even coined a term, “no-regrets skills,” to describe a skillset that will be applicable no matter what happens in the future. This skillset includes digital skills like data analysis and computer literacy, but also “soft skills” like leadership, communication, negotiation, creativity, and problem-solving.8

Many authors attempted to identify the skills that will be needed in 3, 5, or even 10 years. These analyses were done on global or national scales, however, and are mostly unhelpful for organizational leaders trying to develop talent strategies. Because of their scale, they do not approach the level of specificity that organizations need. Skills analysis and needs identification will remain the purview of individual organizations and L&D leaders; the literature only gives broad directional indications.

3. Skilling Efforts Present Risks and Opportunities for D&I

The literature also suggests that if we do not focus on developing new skills in targeted ways, already disadvantaged populations are likely to be disproportionately impacted by automation and job displacement.

McKinsey, for example, estimates that African Americans will likely lose more jobs to automation than other racial groups (except Latin Americans) because they are over-represented in both the jobs and the geographies most likely to be affected by automation. “By 2030, the employment outlook for African Americans—particularly men, young workers (ages 18-35) and those without a college degree—may worsen dramatically.”9 The odds of finding a good job in manufacturing with a high school diploma or less have been cut in half since 1991,10 for example, and African Americans are over-represented in the population of people with no more than a high school degree by 4.1%.11

Far from simply pointing out this risk, however, the literature shines a spotlight on the opportunity that skills development presents. If organizations, government, and academia implement targeted skills development programs that focus on the populations most likely to be displaced, then we as a society could make strides toward evening the playing field for many currently disadvantaged and underrepresented populations.

For example, a recent BCG article highlighted how reskilling programs, if done well, have the potential to increase female representation in STEM and leadership roles, where they are currently underrepresented.12 The World Economic Forum went so far as to claim, “Diversity is the bridge on which we can cross the skills gap.”13

4. Skilling is about protecting people, not jobs

As recently as 2 years ago, the literature emphasized the number of jobs that would be lost to automation. Now, it points out that although some jobs will be lost, there is likely to be net job creation due to automation. It also highlight the role of machines in augmenting—rather than completely replacing—humans. Many jobs in the future will be hybrid roles where individuals bring skills and knowledge in science, human behavior, business, and data and analytics.

Underpinning this perspective shift is the belief that skilling should fundamentally be about protecting people, not jobs—meaning  helping people gain the skills they need to stay employed, even if their role shifts. As Deloitte analysts wrote, “Through a resilience lens, reinvention shifts from something that could threaten worker security to the very thing that defines it: Workers who are able to constantly renew their skills and learn new ones are those who will be most able to find employment in today’s rapidly shifting job market.”14

This belief holds true even through COVID. Much of the literature argues that developing skills should be an even higher strategic priority and investment now, during COVID, than before. Skills development not only helps companies prepare for and respond well to uncertain futures, it also builds trust between employees and the organization.

5. Organizations face 2 significant challenges to developing new skills, but COVID has prompted new thinking.

While skill-building is seen as an urgent strategic priority in many organizations, few organizations are making real progress on skilling initiatives. PwC showed that although 46% of CEOs said in 2019 that retraining and upskilling were their primary strategy for closing skill gaps in their organization, by 2020 only 18% of them reported “significant progress” on reskilling initiatives.15

The literature suggests that this disparity in knowing versus doing is related to two major challenges: 1) identifying skills to develop and 2) keeping up with the pace of change. Identifying workforce development needs and priorities is one of the largest barriers to workforce development. And by the time an organization can understand the skills gap and deploy a development program, the skills are likely to be irrelevant.

Interestingly, however, COVID-19 and other developments in 2020 have forced companies to start focusing on developing new skills despite these challenges, as disruptions to supply chains and business models prompted organizations to reallocate workers to new and unfamiliar roles.

These workers have been developing skills on the job, learning as they go. And it seems to be working to some extent. As one analyst put it, “Whereas traditional reskilling or upskilling within companies might arm employees with knowledge or training that could hypothetically be put to use at a later date, these ‘thrown into the fire’ moments are providing real value in real time for both the employee and the employer.”16

Another author pointed to the benefits of the talent sharing arrangements some companies have put in place during COVID. Sysco and Kroger, for example, have an arrangement for Sysco associates to work at Kroger distribution centers.17 These agreements are an innovative way for companies to take care of their employees, fill critical gaps, and develop their workforce all at the same time.

Whether these approaches will stay popular after COVID remains to be seen, but at a minimum COVID has given companies a taste of what “attacking the skills gap” could really look like for them. And a more agile, test-and-iterate approach to new skills development may be here to stay. We are seeing more literature addressing creating “connected learners,”18 “cyclical models of reinvention,”19 and “resilience”20 among employees. They argue that, rather than building specific skills, organizations should focus on enabling workers to continually identify their own gaps, experiment, fail, learn, and develop.

What caught our attention

Of the literature we reviewed, several pieces stood out to us. Each of the pieces below contained information that we found useful and/or intriguing. We learned from their perspectives and encourage you to do the same.

What would it take to reskill entire industries?

Anand Chopra-McGowan and Srinivas B. Reddy  |  Harvard Business Review, July 2020

“This is a unique scenario — millions unemployed on the one hand, and rapidly evolving and growing skills needs on the other. There is an opportunity for the former to solve the latter’s problem. With it, comes an urgency for companies, governments, and workers’ organizations to join forces and offer the global workforce clear reskilling pathways.”

Highlights:

  • COVID-19 has rapidly accelerated three major forces: deglobalization, digitization, and corporate consolidation. As a result, businesses have had to implement digital transformation plans in months instead of years.
  • Organizations knew they needed to reskill before COVID; the pandemic has only made the need more urgent.
  • The costs and responsibility of reskilling should be borne jointly by employees, employers, and governments, since all three benefit from the effort.

This article has a global perspective and provides a sound argument for shared responsibility of the skilling burden.  It also has an interesting definition of reskilling: “learning in service of an outcome, which is usually the successful transition to a new job or the ability to successfully take on new tasks.”

The COVID-19 crisis has rewritten the playbook on upskilling

Dr. Parves Khan and Els Howard  |  Training Journal, June 2020

“Rather than press the pause button on closing skill gaps, this crisis has created an unprecedented urgency to ramp up upskilling interventions. But not in ways we thought so previously.”

Highlights:

COVID-19 has created four major shifts in the way organizations are (or should be) upskilling.

  • Collaboration, not competition: all companies should work together to develop new skills, even if they are competitors in an industry.
  • Sprints, not marathons: There need to be shorter, faster, and cheaper upskilling interventions.
  • Mastery, not pedigree: The system should include quick accreditation to demonstrate mastery, not full degrees.
  • Smart learning, not just learning: Developing new skills should be highly relevant to work.

This is a fast, succinct article with practical recommendations and lots of examples.

To emerge stronger from the COVID-19 crisis, companies should start reskilling their workforces now

Sapana Agrawal, Aaron De Smet, Sébastien Lacroix, and Angelika Reich  |  McKinsey & Co., May 2020

“Imagine a crisis that forces your company’s employees to change the way they work almost overnight. Despite initial fears that the pressure would be too great, you discover that this new way of working could be a blueprint for the long term.”

Highlights:

Organizations knew, before the current crisis, that a focus on new skills development would be necessary. In one survey, 87% of executives said they had skill gaps in their workforce, but less than half knew how to address this problem. COVID-19 has exacerbated this problem—and doubling down on skilling efforts is the answer. There are six steps organizations can take.

  • Rapidly identify the critical skills your business recovery model depends on
  • Build those critical skills
  • Launch tailored learning journeys to close critical skill gaps
  • Start now, test rapidly, and iterate
  • Act like a small, agile company (even if you’re not)
  • Protect learning budgets

This article gives practical and highly relevant advice based on solid analysis of the ways COVID-19 has affected skilling trends, distance work, talent supply and demand, and global supply chains. It prepares organizations, and particularly L&D leaders, to act quickly and decisively to pivot workforce development efforts and align them with new realities.

Upskilling: Building confidence in an uncertain world

Carol Stubbings, Bhushan Sethi, and Justine Brown  |  PwC, April 2020

“A people-centric approach builds the trust that leadership needs when faced with disruption: companies that invest in their people develop stronger cultures and are more confident of their future success.”

Highlights:

  • In-demand skills remain hard to get: 74% of CEOs were concerned about the availability of skills (vs. 79% the prior year)
  • Progress on upskilling can breed confidence: 38% of CEOs who are the most advanced in delivering their upskilling programs were very confident about growth over the next 12 months. Only 20% of those who are just starting their upskilling journey agreed.
  • Upskilling delivers more than skills. 41% of CEOs said their upskilling program has been “very effective” in creating a stronger corporate culture and engaging employees.
  • More talk than action. 18% of CEOs said they have made “significant progress” in “establishing an upskilling program that develops a mix of soft, technical, and digital skills.”

This article was published in April 2020 but is based on research conducted before the COVID-19 pandemic began. The authors clearly draw out the implications of COVID on the data that was collected, concluding that it is perhaps even more relevant now than before. Visual depiction of the data is well-done and easy to digest.

Beyond Hiring: How companies are reskilling to address talent gaps

Sapana Agrawal, Aaron De Smet, Pawel Poplawski, and Angelika Reich  |  McKinsey & Company, February 2020

“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.

Highlights:

Almost 90% of leaders say their organizations either currently face skill gaps or will likely develop skill gaps in the next five years.

  • Skill gaps are appearing for data analytics as well as a variety of other business and soft skills.
  • Hiring has been the most common tactic to address gaps globally, followed by skill building.
  • Early efforts to build skills internally appear to be improving performance in employee satisfaction, customer experience, brand perception, and other key metrics.

This article has great data about recent efforts to build skills within organizations. It gives some specific recommendations about how to launch a skill-building program and provides links to an interactive graphic about skills gaps and skill-building efforts.

Additional readings

  1. “Jobs of Tomorrow: Mapping Opportunity in the New Economy,” World Economic Forum, Ratcheva, V., Leopold, T., Zahiki, S., 2020.
  2. “Win with Empathy: Global Talent Trends 2020,” Mercer, Bravery, K., et al, 2020.
  3. “How Reskilling Can Transform the Future of Work for Women,” BCG, Tsusaka, M., 2020.
  4. “Diversity is the bridge on which we can cross the skills gap,” World Economic Forum, Elias, H., 2020.
  5. “The future of work in black America,” McKinsey & Co., Cook, K., Pinder, D., Steward, S., Uchegbu, A., & Wright, J., 2019.

Footnotes

  1. “Beyond hiring: How companies are reskilling to address talent gaps”, McKinsey & Company, Agrawal, S., De Smet, A., Poplawski, P., & Reich Angelika, 2020.
  2. “Talent Trends 2020: Upskilling: Building confidence in an uncertain world,” PwC, Stubbings, C. & Sethi, B., 2020.
  3. “Retraining and reskilling workers in the age of automation,” McKinsey & Co., Illanes, P., Lund, S., Mourshed, M., Rutherford, S., Tyreman, M. / McKinsey & Co., 2018.
  4. “Talent Trends 2020,” PWC, 2020.
  5. “Beyond Reskilling” in “The Social Enterprise at Work: Paradox as a Path Forward,” Deloitte, Volini, E., Schwartz, J., et al, 2020. This survey was levied globally to nearly 9,000 business and HR leaders in 119 countries. It may be the case that people from different countries have different expectations about the responsibility for development.
  6. “Beyond hiring,” McKinsey & Company, 2020, and “Talent Trends 2020,” PWC, 2020.
  7. “Towards a Reskilling Revolution Industry-Led Action for the Future of Work,” World Economic Forum and BCG, Hadzilaos, R., Leopold, T., Ratcheva, V., Zahidi, S., Fink, T., Lingelbach, Y., & Strack, R., 2019.
  8. “Talent Trends 2020,” PWC, 2020.
  9. “The future of work in black America,” McKinsey & Co., Cook, K., Pinder, D., Steward, S., Uchegbu, A., & Wright, J., 2019.
  10. “The Manufacturing Labor Force Is Upskilling and Downsizing, Says New Georgetown University Report,” Georgetown University Center on Education and the Workforce, Yahoo Finance, 2019.
  11. “The future of work in black America,” McKinsey, 2019.
  12. “How Reskilling Can Transform the Future of Work for Women,” BCG, Tsusaka, M., 2020.
  13. “Diversity is the bridge on which we can cross the skills gap,” World Economic Forum, Elias, H., 2020.
  14. “Beyond Reskilling,” Deloitte, 2020.
  15. “Talent Trends 2020,” PWC, 2020.
  16. “COVID-19 Is Forcing Reskilling to Occur in Real Time,” World at Work, Christie, B., 2020.
  17. “Remote Work, Talent Sharing Could Expand Beyond COVID-19,” World at Work, Christie, B., 2020.
  18. “Reskilling the Workforce: What works better – building continuous learners or building connected learners?” Gartner, 2020.
  19. “Win with Empathy: Global Talent Trends 2020,” Mercer, Bravery, K., et al, 2020.
  20. “Beyond Reskilling,” Deloitte, 2020.
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ABOUT THE AUTHOR

Dani Johnson

Dani is Co-founder and Principal Analyst for RedThread Research. She has spent the majority of her career writing about, conducting research in, and consulting on human capital practices and technology. Her ideas can be found in publications such as Wall Street Journal, CLO Magazine, HR Magazine, and Employment Relations. Dani holds an MBA and an MS and BS in Mechanical Engineering from BYU.