As technology reshapes industries, digital skills that are considered essential one day can quickly become obsolete. From changes driven by artificial intelligence (AI) alone, LinkedIn data predicts that job skills will need to shift by at least 65% by 2030.
This fast-changing upskilling and reskilling landscape presents a significant challenge for organizations: How to prioritize training investments to ensure employees have the right skills to succeed now and in the future.
In addition to technical skills, the demand for soft skills like critical thinking, problem-solving and effective communication is also on the rise. These transferable skills are crucial for solving complex problems and fostering collaboration in an increasingly automated workplace.
In this new era, a traditional approach to learning and development (L&D) programs may not be adequate. To avoid low-ROI skill investments, organizations need to be proactive, using the latest tools to make smart investments to nurture the skills their workforce needs.
Challenges Organizations Face when Investing in Skills
Several key hurdles can trip up even the most well-intentioned skill investment initiatives:
1. A nonexistent or incomplete skills inventory
The foundation of any effective skill development program is a comprehensive compilation of the skills of the existing workforce. That’s necessary to understand employees’ current capabilities and identify skill gaps. Yet, research from the Institute for Corporate Productivity (i4cp) shows clear opportunities for improvement in this area: Among companies with 1,000-plus employees, only 10% reported having a comprehensive employee skills database.
Without a clear understanding of workers’ skills, particularly in rapidly evolving industries, organizations risk making costly investments in capabilities they don't need.
The prevalence of inferred skills adds an additional layer of complexity to creating an accurate skills map. Many organizations rely on subjective estimations of employee skills, based on job roles or experience, rather than objective analysis of verified skills based on assessments and other tools.
2. Budget constraints
A lack of resources can be a major obstacle to delivering high-ROI learning programs. Research from ILX Group highlights this challenge, revealing that 50% of company training programs fail to produce results due to budget limitations.
While L&D budgets have increased over the last few years, according to Chief Learning Officer, the pressure remains on L&D teams to develop programs that achieve the highest possible ROI.
The challenge is further amplified by the growing need for multiple training modalities that cater to diverse learning needs. “It’s important to recognize that every individual on your team doesn’t learn the same way,” says Karl Reynolds, Senior Director of Training and Certification at software company Red Hat. “Having different training options available to your staff will allow your organization to meet your staff where they are in their professional development journey.”
3. Employee engagement
Encouraging active participation in upskilling or reskilling initiatives can be another hurdle, especially if employees perceive the training as irrelevant to their careers or too time-consuming. Research underscores this challenge: While 80% of employers offer upskilling benefits, only 51% of workers use them.
4. Keeping pace with change
Staying ahead of the curve on industry trends and emerging skill requirements is critical for effective skill investment. The rapid pace of change demands proactive planning and adaptation.
Although much skill demand is driven by technological advancements, the rapid pace of change is being felt across nearly every sector. For example, more than a quarter of the top skills needed in financial services roles changed dramatically between 2015 and 2022. Organizations that fail to anticipate these shifts risk falling behind.
The Price of Poor Investments
Investing in the wrong skills isn’t just a missed opportunity. Poor or misaligned skill investments can hinder progress across the enterprise.
- Demotivated employees: When employees receive training that’s not relevant to their roles or career aspirations, negativity sets in. They may feel undervalued and question the purpose of investing effort in skills they can’t readily apply. This lack of connection erodes morale and can reduce productivity. Gallup estimates that disengaged employees cost a staggering $8.8 trillion globally in lost productivity.
- Strained budgets: Skill investments that don’t address critical skill gaps or align with the organization's strategic goals are a drain on organizational resources. With L&D budgets under constant scrutiny, organizations can’t afford to miss the mark with training programs that don’t deliver results.
- Stifled innovation: Perhaps the most significant consequence of misaligned skill investments is limiting organizational growth and innovation. To maintain a competitive edge, companies need the skills to adapt to market changes, explore new opportunities and develop novel solutions. According to Deloitte, organizations with a strong learning culture are 92% more likely to develop novel products and 17% profitable than their peers.
Practical Tips for Effective Skill Investment
Understanding the challenge of skill investment is just the first step. Here are four actionable strategies to ensure your skill development initiatives produce higher ROI:
- Build a credible skills inventory: Invest in a centralized skills database. This digital repository should house verified information on employee skills, including proficiency levels and areas for development. Update the inventory regularly to ensure the data remains current and relevant in identifying skill gaps.
- Provide targeted training: Address gaps with tailored training that leverages analytics and data-driven insights. This helps allocate resources to high impact areas while avoiding wasteful, duplicative spending. At the same time, targeted training boosts employee engagement and motivation.
- Incorporate digital credentials: Digital badges verify skill acquisition and provide recognition of worker learning. They include valuable skills metadata that help companies objectively analyze workforce competencies and align individual skill development with organizational goals. Increasingly, companies like Grant Thornton LLP are using digital credentialing platforms to validate skills, improve course completion rates and inform L&D strategies. [Explore additional real-world business outcomes achieved through successful digital credentialing programs in our factsheet]
- Provide opportunities for feedback and participation: Effective skill development thrives on continuous learning and employee participation. Create a culture where input is encouraged, allowing employees to voice their needs and preferences. Including feedback loops from employee surveys and data analysis provides insights to continually improve L&D initiatives.
Turning Strategy into Action
As the skills landscape continues to evolve, the ability to adapt will be paramount for organizational success. By acknowledging the challenges and implementing these practical strategies, you can ensure your organization’s skill development initiatives are worth the investment.
Complete the form below to access our whitepaper 'Strategies for Overcoming Challenges in Employee Upskilling and Reskilling' to learn more about utilizing digital credentials.
Credly Team
7
min read
