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Right-skilling for your future workforce

Right-skilling for your future workforce

by Emily Ross, Bill Schaninger and Emily Seng Yue

The fourth Industrial Revolution, as some call it, has the potential to disrupt entire industries and trigger massive job loss through technological innovations, such as artificial intelligence, machine learning and 3D printing. Just consider the impact of driverless cars on the taxi and ride-sharing industry. This new age requires significant “right-skilling” – retraining your workforce and acquiring people with the right skills to fill the gaps.

For right-skilling, organizations need to have a strategic plan for talent to make the shift. Any good talent strategy should focus on retaining and training existing talent, as well as take into consideration all of the levers and options, which includes acquiring new workers (either internal or external).

A growing number of forward-thinking organizations are concluding that to emerge stronger from the coming automation age, they must develop the skills of their workforce to meet new requirements rather than simply retrench. Contractors and new hires will not be enough; retraining must be part of the solution. Not to mention that firing 20 percent of the workforce because they don’t have the right skills has negative implications for the company and society.

A bank undergoing major changes in the workforce due to automation was not able to eliminate part of the workforce, due to employees being highly unionized. Instead, the firm worked to understand the future roles and skills needed by their workforce, and how to transition into these new roles. By determining the future capabilities and skills required based on functional team assessments, they were able to conduct an analysis to determine what percentage of existing employees had these skills, and what percentage needed to be reskilled.

By 2030, as many as 375 million workers globally will have to master fresh skills as their current jobs evolve alongside the rise of automation and capable machines, estimates McKinsey Global Institute. And while individual sectors and companies will experience layoffs, we expect most economies to generate net new jobs in the years ahead as different types of careers, new sources of demand and reskilled workforces emerge.

Still, an unprecedented skills crisis will strike unless employers and employees recognize that they must adapt to change and begin actively forging reskilling initiatives. For employees, self-direction is also necessary to discover new promising work opportunities and to reskill.

How should an organization think about right-skilling its workforce? One good way is to determine how many employees it will take to handle A, B and C skills. If you conclude you need ten but only can get five employees, it will take longer to build and benefit to the new way of working. Companies that identify the skills needed and the employees with those skills in advance will be at a strong advantage.

Certainly, employers will hire and outsource some of the future skilled talent they need. But right-skilling will play a significant role, since hiring and outsourcing won’t prove sufficient to fill most gaps.

Building a competitive workforce of the future proactively requires:

  • Gaining clarity on today’s workforce gaps and the future skills needed. Translate your strategy into a vision of what future skills are needed. Quantify the chasm, including the business value at stake.
  • A robust plan to supply the future demand. Design a portfolio of initiatives that encompasses hiring, right-skilling and contracting. Upgrade your talent and operations infrastructure to reinforce the new workforce composition and performance management system.
  • Rapid, disciplined execution. Establish a dedicated, cross-functional team, including HR and business unit members, for agile plan execution.

In a recent McKinsey survey, 75 percent of executives said they believed reskilling would fill at least half of their future talent needs, given the war for talent and hiring difficulties. How organizations specifically apply right-skilling, and the implications, will be explored in a subsequent blog post.