By Laurent Probst, Global Innovation Leader, and Christian Scharff, Partner @ PwC Luxembourg.
Imagine that you’re one of millions of people whose job is threatened by digital technology. You’re the compliance officer at a bank, an operations manager on an assembly line, a technical writer, a programming debugger, or a lighting coordinator for a photographer. Sometimes your job is so bound up in routine, you joke that it could be handled by a computer. Then the joke becomes reality. You are asked to help design the automated processes that will replace your position in a year.
You are shocked at first; then worried; and then, if you’re very lucky, you find out that an upskilling initiative has been set up in your company, perhaps in partnership with other organizations in your region. The initiative is made possible by advances in learning methods and analytics. It uses shared data about skills, tasks, and employment prospects to match people who would otherwise be laid off with new digitally oriented jobs and the training needed to fill them. To take a new job would mean changing roles, maybe changing companies, and undergoing an intensive 15-week training program. You talk it through with one of the initiative’s personal counselors, decide to apply for a position, and are accepted.
The training is tough, but your counselor keeps in touch with you throughout, offering encouragement and monitoring your progress. Around the seventh week, you meet with HR to discuss the on-boarding schedule. Then comes a three-month trial period in the new role, after which you are hired permanently. Your retirement and healthcare benefits carry over. You’re even paid a welcome bonus. You aren’t a layoff statistic; you are an example of the vital role upskilling will play in our turbulent digital economy.
Upskilling for the long run
The industrialized world is facing a skills crisis. On the one hand, automation is threatening many existing jobs. Hundreds of millions of young people around the world are coming of age and finding themselves unemployed and unemployable, while many older, long-established employees are discovering their jobs are becoming obsolete. A study published by the Organisation for Economic Co-operation and Development in 2018 estimated that 46 percent of all jobs have at least a 50 percent chance of being lost or greatly changed. A 2016 report from the International Commission on Financing Global Education Opportunity estimates that 30 percent of young adults will not graduate from secondary school with the skills they need to hold most jobs.
On the other hand, there is a severe shortage of qualified talent for the new digital economy. Jobs requiring knowledge of artificial intelligence (AI), robotics, and the Internet of Things are going unfilled in ever-greater numbers. Estimates suggest that U.S. software-related jobs (pdf) are growing at 6.5 percent annually — almost twice the rate of jobs in general — and that in Europe, there will be a high-tech skills gap of more than 500,000 unfilled positions by 2020.
Together, these two trends have broadened the gap between the employees of the present and the workforce of the future — hence the recent interest in upskilling. The term upskilling refers to the expansion of people’s capabilities and employability to fulfill the talent needs of a rapidly changing economy. An upskilling initiative can take place at the level of a company, an industry, or a community.
Upskilling is not the same as reskilling, a term associated with short-term efforts undertaken for specific groups (for example, retraining steelworkers in air-conditioning repair or locksmithing). Reskilling doesn’t help much if there are too few well-paying jobs available for the retrained employees. An upskilling effort, by contrast, is a comprehensive initiative to convert applicable knowledge into productive results — not just to have people meet classroom requirements, but to have them move into new jobs and excel at them. It involves identifying the skills that will be most valuable in the future, the businesses that will need them, the people who need work and could plausibly gain those skills, and the training and technology-enabled learning that could help them — and then putting all these elements together.
To someone accustomed to current forms of workforce training, in which resources are constrained and companies generally operate independently of one another, an upskilling initiative might seem massive and unaffordable. But it is feasible — although the process often means confronting long-held assumptions about human capital and organizational practices. And the payoff can be immense in economic results, overall quality of life, and increased opportunities. Not only do people move to new jobs, but the jobs are better and less likely to be rapidly automated out from under them.
A growing number of business leaders see the value of upskilling. In PwC’s 22nd Annual Global CEO Survey, 79 percent of the respondents said a shortage of skilled talent was one of their top three worries, and 46 percent said upskilling was their preferred solution. The same survey has found that aggregate chief executive confidence in their own company’s performance is a leading indicator of economic growth, and arguably there is no surer way to build CEO confidence than to raise the talent level.
Unless a solution is put in place, the social impact of job loss — for individuals, the businesses and organizations that employ them, and the communities around them — will be even more staggering than it has been in the past. Some of the most effective upskilling initiatives take place at a community level, where there are economies of scale, a broad range of opportunities, and an incentive for government to raise general prosperity. Government, business, and not-for-profit organizations work together in these partnerships, often in new ways.
Even if it is tackled by a single company, upskilling is not a one-time endeavor. In this time of rapid technological change, every member of the workforce, from the front lines to the C-suite, needs to continually expand or augment his or her skills. One way this can be done is through “gamified” apps that allow people throughout the enterprise to build their skills and create new software-based tools for others to use.
Those skills are not limited to the realm of technology. A recruitment manager in a large French utility company put it this way: “I now understand that we must change our recruitment criteria. We have spent much time investigating hard skills, like accountancy, but we must now look at soft skills and the ability to learn and grasp new knowledge, so that we build a workforce that can evolve into the new jobs we cannot even forecast today.” In short, upskilling and intellectual renewal need to become commonplace for any company or community that expects to thrive.
Costs and benefits
At first glance, the expenses of upskilling appear daunting. The World Economic Forum estimates a cost of US$24,800 per person to retrain displaced workers in the United States. Our own experience suggests those numbers or even higher costs are realistic for high-tech industries or smaller groups. But for large efforts (such as regional efforts), the expense might drop to $5,000 or $10,000 per person.
The cost of training is just one element, and not necessarily the most expensive one. To bring someone to a new level of competence — for example, from a midlevel accountant to a cybersecurity agent or data analyst — might take nine weeks. During that time, individuals need financial support, and their current job must be covered with a full- or part-time substitute. The company also may need to set aside funds to ensure that employees who switch to new jobs receive the same salaries they made previously. If the budget forecasts that, on average, only hundreds of dollars will be spent on each individual, it is not an upskilling initiative. It is skills maintenance.
But the expense of upskilling should be considered in the context of the alternatives: severance costs for laid-off workers, plus the time and costs involved in finding, recruiting, and on-boarding new people with the skills most in demand. Moreover, an upskilling program does not need to upgrade skills for the entire workforce at once. In any given year, only 10 percent of a company’s workforce is immediately at risk. If you target that group and successfully move them into new roles, you create a track record and garner further support. Within five years, moving at the same pace, you can reach close to half of the employees in a company. Focus on developing people, not saving jobs, because not all jobs can or should be saved.
Upskilling is especially cost-effective for communities. Skills mismatches have a direct impact on a nation’s GDP, taxation revenues, and social safety net bill. Analysis of return on investment for existing cases suggests that $1 invested in upskilling tends to return at least $2 in revenues or savings. Financing mechanisms include skills insurance plans (collecting contributions from employers) and tax incentives for participating companies and employees. In the end, if you regard workers as an asset worthy of investment, and recognize the value of being part of a community of adaptable and continual learners, a well-designed and well-managed upskilling initiative is extremely cost-effective.
Experience on the ground
Upskilling initiatives are typically championed by visionary leaders who have reflected deeply upon the long-term business and social elements that sustain growth in their region, country, or industry. Programs of this sort have been initiated in Bangladesh, Belgium, Brazil, Canada, Denmark, France, India, Ireland (pdf), Luxembourg, Mexico (pdf), Singapore, the United Kingdom, and the U.S. (most prominently in Florida). Most initiatives are relatively new and were launched with a rationale directly linked to the job risks of the new digital economy. They are already beginning to demonstrate significant results.
Consider, for example, the Luxembourg Digital Skills Bridge project, a case we at PwC know well because we were involved in developing it. Launched in 2018 with a wide range of stakeholders on board, including trade unions and trade associations, it began with the idea of saving money on unemployment costs by investing in building a cluster of digitally oriented industries and developing the relevant skills.
This cluster-based approach required a great deal of up-front coordination. The Luxembourg ministries of education, labor, and the economy aligned on a common national skills strategy. The initiative assembled a group of digital apps and tools for all participants to share. Companies abandoned their existing “shotgun” approaches to training and agreed to foster long-term employability, even if that meant investing in employees who might move to other companies in the future. They also agreed to identify at-risk employee populations, to collaborate more readily with other companies (for instance, making it easier for incoming employees to keep their past seniority level), and to adopt more flexible human resources practices. Individual workers, for their part, took responsibility for their career in a way they might not have done previously: using the skills banks, investing their time in the training courses, and recognizing that without their participation in the initiative, they might not keep their job. For everyone involved — the employees undergoing training, the companies hiring them, and the leaders arranging this new reality — upskilling represented a leap into the unknown.
From the beginning, clear metrics were established: The Luxembourg Digital Skills Bridge would place 65 percent of the pilot project participants in new positions. It would thus justify the technical and financial assistance provided to companies and individuals. To facilitate communication and “self-branding,” there was a digital platform called MySelf; participants posted video profiles as well as documents about their skills and aspirations. The initiative covered 90 percent of an employee’s salary during the training period and a portion of the company’s training costs, ranging from 35 percent (for a new role in the same company) to 80 percent (for a move to an entirely new industry). Perhaps most important was the guidance, which consisted of 12 days per company in employee assessment and workforce planning assistance and up to 12 hours of coaching per employee in addition to the training.
“Upskilling has become…the indispensable response to the ongoing technological and economic transformation,” noted Nicolas Schmit, former minister of labor, employment, and the social and solidarity economy, who was a key sponsor of the initiative. “Luxembourg has made the choice of becoming an advanced digital society. This means a high level of investment into digital infrastructures…to help citizens as well as workers and entrepreneurs to be ready for the future. To do that successfully, we are convinced that confidence is key. This can only be achieved through dialogue with all stakeholders. It is the best way to make the digital society as inclusive as possible.”
A few other locales are beginning their own upskilling plans, each with its own focus. The Canada Job Grant program, a federal government initiative administered by the provinces, pays employers most or all of the costs for training their employees in workplace skills. In the Wallonia region in Belgium, Crédit Adaptation offers grants of up to €80,000 (US$90,000) every two years to companies facing change. India’s National Skill Development Corporation, established by the government in 2009, offers courses and job placement, and focuses on entrepreneurial opportunities for women. It is expected to fill 109 million job vacancies in 24 key sectors by 2022. And in the U.K., the Sheffield Skills Bank — funded by the European Union, the U.K.’s Business Investment Fund, and local government — has an overall goal of creating 70,000 new jobs and 6,000 new businesses by 2025. Although the programs are all worthwhile, there is often a key element missing, such as skills assessment or employee guidance — hence the value of a comprehensive approach.
Communicated by PwC Luxembourg
Publié le 05 août 2019