In today's tough labor market, a shortage of qualified workers is hindering businesses from increasing their productivity. Organizations can no longer increase profitability or improve productivity through hiring.
But that doesn't mean you don't have a choice. In my 20+ years as an advisor to business owners and executives, I've come to believe that sometimes the best thing to do is to upskill your existing employees.
The U.S. unemployment rate is near a 50-year low and has only risen slightly in recent months. Long-lasting low unemployment means the days of simply hiring new employees and increasing sales are all but over. Companies must now focus on productivity and look inward to drive growth. In fact, according to a recent Executive Network survey, 74% of L&D leaders say that skills development programs are a key priority today, especially for improving productivity.
The broader economic picture is interesting as well. Research from McKinsey & Company points out that if U.S. productivity had grown at its historic rate, gross domestic product (GDP) would be significantly higher. Slow productivity growth is slowing the economy and highlighting the need for companies to continually become more efficient.
Skills gaps as the workforce ages
Further complicating the productivity issue are two factors: an aging workforce and advances in artificial intelligence (AI). Some older workers have a hard time keeping up with the latest technological developments. Meanwhile, younger employees, while familiar with tech and AI, lack the skilled tradeoffs of more experienced employees that could contribute to increased productivity.
I would argue that the solution is for companies to thoroughly assess their workforce skills and fill the gaps. This involves a solid understanding of the current capabilities of the workforce and identifying areas for improvement and evolution. Only then can companies design effective upskilling programs that are aligned with financial objectives. This effort is not necessarily difficult, but it does require focus and prioritization from leadership, and I would argue that it is worth investing time in.
Five-step solution
1. Objective analysis of skills
The first step in skills assessment is to collect unbiased and objective data. This means using technology tools to infer skills from employee activities rather than relying on self-reported information. To do this, assemble a small SWAT team, either internally or externally, to launch this project. Remember, this is not a one-time task; it's an ongoing process.
2. Cross-validation of skills data
To ensure data is reliable, third-party cross-validation is often required. This step is critical to building trust in the assessment process. Having an outside organization verify the information gives companies confidence that their skills data is robust and accurate.
3. Organizational Acceptance
The information collected must be accepted by both the company and employees. For the process to be effective, there must be support from management, demonstrating that this effort is a priority. The organizational culture must view this data collection as beneficial to both the company's growth and the development of its employees.
4. Skills linked to goals
Skills assessments need to be tied to clear business objectives, with productivity as the primary metric. Employees need to be focused on being agile and mobile within the company while also understanding that the company's success is in their interest. This process ultimately becomes part of the organization's DNA.
5. Training Program
The order of this process is that once steps 1 and 2 are established, a company can determine the most effective training program. Options include bootcamps, college courses, special projects, etc. The goal is to find the training that provides the best ROI. In my experience, steps 3 and 4 tend to happen naturally and are relatively easier to achieve than steps 1 and 2.
The way forward
The U.S. workforce is undergoing major change: Baby Boomers are retiring in large numbers and Gen X is following suit, with the oldest of that generation now turning 59. Finding replacements for these workers is critical, but competition for top talent is fierce.
While many pay lip service to skills-based hiring, the reality is that employers can't just hire to replace employees who have left: New hires may be more tech-savvy, but they still need skill development.
My advice here takes time and money. Companies have to put in the hard work of continually assessing and upskilling their employees. This isn't a one-time effort, but a process of ongoing monitoring and improvement.
CEOs need to understand that upskilling their workforce is not just a strategy for survival, but also a way to thrive in a competitive marketplace. For any company in any industry, getting serious now can help drive productivity to new levels, increase employee retention and satisfaction, and secure its market position for years to come.
