The Cost of the Widening Skills Gap

The pursuit to hire rightly skilled talent seems to be never-ending in today's age. Companies have been feeling the brunt of this skills gap. Some have already begun putting strategies in place to mitigate the challenges they face; some are still on the fence. No matter what the current situation is for any organization, sooner or later, everybody will be feeling the impact of this widening skills gap.

I recently came across a report by Wiley titled, “Closing the Skills Gap 2023: Employer Perspectives on Educating the Post-Pandemic Workforce”. The report was released in January 2023. Though it focuses on things from an academic perspective, it still sheds significant light on the magnum of the crisis we are faced with. The study surveyed 600 HR professionals in the US and found that 69% of the professionals surveyed said that their organization had skills gap up from 55% that said the same thing just two years ago in 2021. Companies are facing unprecedented talent-related challenges and are having an increasingly tough time attracting as well as retaining workers who have the skills required to fill the open jobs at those companies. These challenges are making organizations less competitive and less efficient as a result.

As industry reports suggest very often employees express that they do not have the skills that are needed to master digital technologies. In current times, when digital transformation is quite the norm and no longer the exception, employees’ digital incompetence or lack of adequate skills can prove to be immensely expensive for organizations, directly hindering the company’s sustainability. This cost could be financial, operational, or human, the cost is undoubtedly very, very real.

Companies incur a significant cost mostly even without realizing it when employees must spend hours looking for information on ways to do things or about a situation they have encountered owing to a lack of the right skills. The hours they spend thus making up for the digital skills gap could have otherwise been used for working on key projects and tasks. It also very often leads to a huge load on the IT support or helpdesk teams, with lots of teams and team members facing challenges in accomplishing tasks, putting the onus on the service desk professionals to support all employees towards digital maturity.

A recent Salesforce-commissioned RAND Europe Report estimated that fourteen G20 countries would lose about $11.5 trillion in cumulative GDP growth if they didn’t address the skills gap. The demand for skills in emerging technologies in major markets is up by around 50% but where are the professionals who can fill those open jobs?

It won’t be an understatement that the digital skills gap has hit an inflection point. There are just not enough people with the right digital skills to fuel the growth stories of companies at the speed they need in this fast-paced world. The supply of skilled professionals is low, and the demand is unimaginably high. Technologies are evolving faster than organizations and even academic institutions can keep up with them.

Speaking with a lot of our customers and experts, we have realized that the cost of the widening skills gap for organizations, and even society, is huge. Some common costs organizations incur but may or may not realize immediately or in the short term, include:

·?????Cost of time lost

·?????Cost of lost productivity

·?????Cost of decreased performance

·?????Opportunity cost

·?????Cost of losing business competitiveness

·?????Cost of losing a strategic advantage

·?????Financial burden of slow growth and inadequate resource utilization

·?????Cost of inadequate customer satisfaction,

·?????Cost of reduced profits, etc.

The bottom line is that not finding employees who have the required skills is costing organizations a significant amount of money. And, this amount is set to rise with time. Reports have found that companies are spending upwards of $800,000 per annum looking for employees with the right skills to fill their open positions and still don’t succeed a 100%. The talent pool for a lot of critical skills is highly limited and everybody wants a slice of it but doesn’t get it. According to a report by Korn Ferry, this widening skills gap could cost businesses more than $8.5 trillion by 2030.

So, how do businesses address this and try to salvage the situation while working towards a brighter future?

A good starting point is to first analyze the skills gap your organization is currently facing and is likely to experience in the future, at least for the next few years. It would require all stakeholders to actively participate to get accurate results.

Once this is done, you would have a direction to build a roadmap. Strengthen your internal learning and development capabilities or work in tandem or in partnership with a qualified talent transformation partner who will not just help you plug the existing gaps in your talent pool but also address future needs. Most organizations have invested heavily in recruiting and onboarding talent, why waste that by letting employees go just because they didn’t have the right skills and they found better opportunities to upskill & advance their careers? Instead, invest in growing internal talent wherever possible. Keep your employees’ skills as fresh as possible and incentivize learning new skills.

The onus is not just on the employers but on employees – both current and prospective, too. Closing the skills gap will take initiative from both sides of the table. While employers will need to provide ample and suitable opportunities for talent to want to stay and grow, employees too will need to step up, ask and suggest where they can, and work towards expanding their knowledge base.

One thing that everybody understands very well now, is that change is the only constant in the times we live in. I strongly believe that if all stakeholders come together, understand the gravity of the problem, and devise appropriate steps they must take to overcome this turbulence this is causing, we can shorten or at least control the skills gap from widening further. Working together, in my opinion, is a win-win for everyone, and with the right efforts in the right direction, we can not just minimize the cost burden organizations incur because of the skills gap but also over time, slowly but steadily close the skills gap.