Blog + Human Capital Management
Blog + Human Capital Management
In June, we shared a strategic response to upskilling and reskilling in today’s uncertain labor market. To expand on this topic, below we explore why reskilling and upskilling are important tools for addressing employee retention.
Organizational rationale for prioritizing skill building typically focuses on preparing employees for the “future of work”. Trends like automation and digitization are often the reasons behind increased employer spending on reskilling and upskilling, whereas employee retention is more of an afterthought.
Despite uncertainty in the labor market, one thing is clear: employees are more incentivized to switch jobs than ever before. Below we’ll share why this is, and how employee skill building to promote internal mobility can address it. We’ll also give our take on who’s leading in the space from an employer perspective ahead of offering our thoughts on what skilling providers can do in response.
A recent McKinsey study found that skills built on the job account for half of an average person’s lifetime earnings. This share becomes even higher for employees without college degrees. It’s no surprise, therefore, that nearly 70% of global workers are willing to re-skill or upskill on the job. Why then, did 4.2 million U.S. workers leave their jobs in July alone?
Our June newsletter defined reskilling as “looking for people with adjacent skills that are close to the new skills your organization requires and training those people to do a different job”. We defined upskilling as “teaching employees new skills to close talent gaps”. Both develop workers in ways that promote internal mobility (the internal movement of employees, vertically or laterally, for career transitions or development).
Internal mobility is an important factor in driving organizational retention. Employees who are not promoted or do not experience an internal lateral job change have a 45 percent chance of staying with an organization. Comparatively, employees promoted within three years of hire have a 70 percent chance of remaining, and those who make a lateral move have a 62 percent chance. Reskilling and upskilling increase opportunities for promotions and lateral moves, driving retention.
As we’ve discussed in prior months, labor market trends reveal future uncertainty. One area where there is more certainty involves the trends surrounding employee attrition. A record-breaking number of Americans — 47.4 million to be exact — quit their jobs in 2021. And the “Great Resignation”, as it has been deemed, shows no signs of stopping.
It’s no secret that attrition is costly to organizations in more ways than one. Beyond direct costs to hire and onboard replacements, organizational attrition can decrease employee morale and productivity. In turn, this can cause additional turnover amidst a hot job market. Employees have more incentive than ever to leave. For one, the switching costs to do so, especially in more senior-level positions, have decreased. As remote work continues to grow in popularity, workers (especially in high-paying occupations) have many more options.
In a world where over half of employees find it easier to locate a job outside their organization than within it, and one-third of workers are willing to leave their current role without another one lined up, prioritizing employee retention is paramount. Data tells us these trends are not solely driven by salary. Today’s workers are clear: they value non-monetary benefits, including skill building, to a greater degree than ever before. In their recent “Career Trends Report”, Cornerstone OnDemand found that 89 percent of U.S. workers would consider a lateral career move with no financial incentive. 66 percent would look internally first before considering a job outside their organization.
According to PwC, 77 percent of workers want to re-skill or completely retrain. The problem is, less than one-third of employers are supportive of them working in a different function. This gap is what perpetuates the attrition trends described above. Reskilling and upskilling, if done well, can increase employee retention while building future capabilities.
Merely offering internal reskilling and upskilling programs to employees isn’t enough. The opportunities must be designed intentionally to be consistent, measurable, and aligned to each learner’s current skills and future goals. To demonstrate, we’ve highlighted several companies below who are paving the way with innovative internal mobility programs that are driving employee retention:
Amazon has committed to investing over $1.2 billion into upskilling 300,000+ U.S. employees free of charge by 2025. Their Career Choice program has impacted over 80,000 Amazon employees to date. In particular, the AWS Grow Our Own Talent program offers on-the-job training and placement to Amazon employees with nontraditional backgrounds. More than half of Career Choice participants plan to use the education to advance within the company.
Workday introduced a skills-based people strategy in 2021. The initiative helps employees identify and close skill gaps via inter-organizational assignments. Initial data is encouraging: 95 percent of participants report developing new skills or honing existing ones. According to People Officer Ashley Goldsmith, participants experienced increased connection to and engagement with their work. Workday views this as increasing retention.
|In 2020, KeyBank partnered with Tech Elevator to launch an employee reskilling program. The goal was to increase diversity and improve retention in technology roles. The Tech Ready initiative is designed to reskill existing employees into software engineers. So far, the program has graduated 67 employees. Enrollment and interest in the program have tripled since it began. KeyBank has seen an encouraging 100 percent retention rate for program graduates.|
Reskilling and upskilling offer many benefits to employees and organizations, creating a space ripe for provider support. Skilling providers face a variety of considerations in developing their go-to-market strategies. One paradigm, for example, involves the decision to focus on assessment tools versus skilling content. Some providers have chosen to narrow in on skill assessments and analytics, arming clients with knowledge for internal decision-making around employee capabilities and gaps regardless of their content choices. Others are focused entirely on delivering higher value training content after assessments are already completed. In still other cases, providers have decided to offer both capabilities in an effort to provide a seamless solution.
In a future newsletter, we’ll explore the go-to-market dynamics of the skilling provider marketplace. Specifically, we’ll examine the tension between tools and platforms which are perennial but often secondary considerations and content which is more frequently primary, but often less sticky. We hope you’ll weigh in. Whether you’re considering entering the skilling space as an employer or provider, or if you’re looking to enhance existing organizational capabilities, Tyton would welcome the opportunity to support you. More broadly, we are happy to discuss these trends or others in the sector at any time.