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Source: OCED
Skills to develop
& maintain AI systems
Source: Statista
$400b
$300b
$200b
$100b
$0b
US
Dollars
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
302.2
295.6
244.4
271.1
286
291.7
306.9
322.2
355.6
359.3
362.2
366.2
370.3
357.7
345.56
363.26
380.7
Spending on Corporate Trainings Rises
Firms are also investing more in training and upskilling people, both in their workforces and in the general population.
….AND TRAINING THE RIGHT TALENT
Source: Skynova
23%
31%
32%
34%
36%
38%
42%
50%
40%
30%
20%
10%
Data Literacy
IT Automation
Language
Data Analysis
Coding
Copywriting
Computer
What Skills Are in Demand?
Sources: Morning Consult, Skynova
Share of who said they are retaining
more employees than they normally would due to
the difficulty of finding new workers.
56.6%
A majority of firms say they are
stocking up on skilled talent:
Share of surveyed that said
they were holding on to more employees than
what the current economy merits.
90%
Especially small firms:
Source: US Department of Labor; jobs figures in thousands.
12k
10k
8k
6k
4k
2k
0k
Jan
2020
May
2020
Sept
2020
Jan
2021
May
2021
Sept
2021
Jan
2022
May
2022
Sept
2022
Jan
2023
Sept
2023
May
2023
And except for the spike during the pandemic, the rate of
layoffs is still well below the trend in the 21st century.
Source: US Department of Labor; jobs figures in thousands.
155k
150k
145k
140k
135k
130k
125k
Jan
2020
Jul
2020
Jan
2021
Jul
2021
Jan
2022
Jul
2022
Jan
2023
Oct
2023
Jul
2023
But companies continue to add employees.
Source: US Department of Labor; jobs figures in thousands.
40%
30%
20%
10%
0%
10%
20%
30%
40%
Q1
2020
Q3
2020
Q1
2021
Q3
2021
Q1
2022
Q3
2022
Q1
2023
Q3
2023
When adjusted for inflation, the economy has been treading water for about two years.
-
-
-
-
Building Up (the Right) Talent
Firms normally cut back on investing in workers and their development.
Instead, companies are putting more investment in finding the right workers.
Finding the right talent….
Firms appear to be
pushing forward in the human-capital arena.”
“
xperts say a lot of today’s interest in preserving and developing human
capital is actually a direct result of what many bosses experienced after
the pandemic lockdowns ended. Leaders watched as hundreds of thousands of people who left the workforce during the lockdowns didn’t come back—at least, not immediately. Many of those who did return either quit outright or lacked the right skills for the post-pandemic boom in business.
This left organizations and their managers far short of both people and people with the right skills—sometimes desperately so. Retailers were forced to cut hours and postpone delivery dates, and companies in various other industries had to scale back ambitious production plans. It was a great stalling-out that has been hard to forget. If the way to protect against similar events happening in the future is to keep more workers around and better prepare them with new skills, many leaders say, so be it.
But preparing workers today for the future is no easy task. Welcome to the
so-called Skills Gap. According to one study by Wiley, the global research firm, nearly seven in 10 C-suite executives believe that the skills gap has increased
since 2021—and their concern continues to grow. Among managers, 69 percent see a widening skills gap in 2023, up from 55 percent just two years ago.
Critical shortages remain in multiple fields. Data analysts, AI developers, truckers, teachers, healthcare workers: all of them, and more, are in short supply. A short-term dip in business might induce a leader to lay off workers, but once business rebounds, finding replacements and upskilling them might be tough, or even impossible. What’s more, those replacements—if they can even be located—
may demand higher salaries than their laid-off predecessors were getting.
As John Long, sector leader of Korn Ferry’s North America Retail practice, sees
it, attracting and keeping highly skilled talent over time—versus following a boom-and-bust hiring and training cycle—just makes sense. “Rather than try and time the job market, it’s better to play the longer-term law of averages,” he says.
E
Experts
“
worry
ow flash back to 2022. After an earlier post-COVID
surge of 5.7 percent, annual economic growth slowed considerably. Inflation, meanwhile, was rising at an alarming rate. The consensus among economists was that a recession was coming soon—that it was time to batten down
the hatches.
But many companies haven’t battened down the hatches—
and certainly not to the extent analysts expected. Yes, the doom and gloom of cutbacks is making headlines, and firms have slowed hiring. But over the past year, US companies added an average of about 250,000 new workers per month, slightly above the rate before the pandemic. Job openings have slowed, but now number more than 9.5 million, a level never achieved prepandemic. Meanwhile, a host of major organizations are making headlines trying to upskill workers; among the most active is Amazon, which has tripled its investment to more than $1.2 billion in this area, with about 300,000 workers expected to receive free jobs training by 2025. And there are other examples of large commitments to both current workers and potential candidates, from AT&T’s “Future Ready” retraining program to Microsoft’s major
digital-skills initiative to Google’s apprentice program. As Jaimie Francis, vice president of programs and policy at the US Chamber of Commerce Foundation, sees it, “strategies
to upskill and reskill your workforce are necessary.”
Of course, that’s partly because of an AI boom that’s been driven by interest in ChatGPT, with firms now fretting about whether employees will be ready for a game-changing technology. For employee training in AI alone, companies are now spending more than $100 billion a year. HR consultant Anne Donovan has organized reskilling programs for 20
years, primarily in industries with high employee turnover, such as hospitality, manufacturing, and healthcare. Since
the pandemic, she says, she’s noticed a surge in interest in reskilling and upskilling: “I’ve seen the shift in mindset. Now, it’s ‘How do we take the people that we have and reskill them to increase their morale and retention, and also help our customers?’” An unemployment rate near record lows certainly has helped. In Bozeman, Montana, where Donovan
is based, the unemployment rate has been tiny. Reskilling existing employees is often the only way to fill roles. “We don’t have the candidates to interview,” she says.
N
ny significant employee upskilling, of course, starts with firms maintaining
the right staffing balance: Companies may need to lay people off, at reduced levels, even as they also continue hiring. That’s a particularly challenging task these days, since macroeconomic theory has historically stipulated that when businesses slow down, as many did in 2023, leaders should trim labor-related costs. Investment in employees, according to the theory, will only drive up costs and depress productivity when business goes sour.
For their part, corporate leaders have generally stuck to this thinking. Particularly in service-oriented firms—grocery stores, hospitals, and others that don’t actually make goods—leaders continue to believe in adding or subtracting workers based on business forecasts. Indeed, many corporate executives have made a habit of following cutbacks in capital development with a speech to their remaining employees, exhorting them to “do more with less.”
A
All of which makes for a nice story for the corporate world to pitch; after all, how could anyone oppose developing human capital? In truth, experts say, the current situation actually poses a string of risks for corporations. For one thing, Wall Street analysts and investors point out that companies have historically reduced labor investments in uncertain times. Many worry about what might happen if the economy gets far worse than anticipated.
And there is this: surveys have shown that corporate training has rarely advanced skills effectively. The current climate is particularly challenging, with so many workers still operating out of their homes. For some analysts, what is happening today feels like an ambitious new business experiment. Does it make sense?
Companies are discovering that they need two critical elements to get through this decade of turmoil and opportunity: people—and people with the right skills. Managing and focusing on both is never easy, especially in today’s economy, where GDP growth has been inconsistent since 2021, both in the US and abroad, and where high interest rates make many experts fearful of more trouble.
But instead of a full retrenchment, firms appear to be pushing forward in the human-capital arena. Layoffs may be making the most headlines, for example, but many companies are still hiring and keeping people
at a higher rate than they did before the pandemic.
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See the
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It may not be the most glamorous business sector, but it has certainly seen some impressive growth this century.
Since the Great Recession of 2008, demand for its services has jumped more than 50 percent. When the pandemic slowed its growth, new digital offerings tailored to the times were created. Now, with an expected annual average growth rate of 8 percent, the sector’s revenues could exceed $485 billion by 2030. But this isn’t for artificial intelligence or
some other hot, headline-making product. It’s for corporate training.
Quick investments in upskilling
are needed, but only if firms can sway workers to see the need.
THE SOLUTION
Significant “skills gaps” can cause
dramatic drop-offs in employee engagement and productivity.
Why it Matters
Company leaders have grown increasingly concerned that workers lack skills needed for the near future.
The Problem
By Russell Pearlman
Illustrations by Tim Ames
Facing uncertain times,
firms are desperate to
build up worker skills—
or buy them.
Training Needs Will
Be Widespread
Skills to adopt, use
& interact with AI
applications
Specialized
AI skills
Data science
skills
Other
cognitive skills
Transversal
skills
Digital
skills
Elementary
AI knowledge
42%
of current workers’ core
skills are expected to change
in five years.
of employees will
need reskilling by 2025.
50%
Paid leave for training
Access to online education platforms
Mentoring/reverse mentoring
Debt-free degree options
Source: World Economic Forum
Source: Wiley
41%
36%
30%
15%
Source: World Economic Forum
More Upskilling, More Global Productivity
+3.2%
NORTH
AMERICA
How Companies Are
Reskilling Workers
Skills Needed in
the Age of AI
How much improving worker skills could increase the GDP in regions by 2030.
LATIN AMERICA
& THE CARIBBEAN
+7%
WESTERN
EUROPE
+2.2%
MIDDLE EAST &
NORTH AFRICA
+3.6%
SUB-SAHARAN
AFRICA
+7%
EASTERN EUROPE
+1.8%
ASIA &
THE PACIFIC
+2.7%
o what’s wrong with keeping and developing 100 people when
you need only 75 right now? Experts say it makes sense—as long as keeping employees on payroll (even the not-as-productive ones) costs less in the short term than hiring and training new ones down the line. The hoarding-and-developing math looks dramatically different, however, if the business outlook changes.
If the economy does slow down significantly, companies could face considerable reductions in revenue and significant increases in payroll costs. Organizations may be forced to carry out layoffs far more extensive than would have been necessary had they begun culling earlier. If too many firms make this decision at around the same time, unemployment could spike dramatically, making a recession, or recession-like conditions, even worse.
Retaining workers without providing them with significant job development can also have less visible effects. Sure, working less but still getting a paycheck might sound ideal—but try telling that to Anna Davies. Earlier in her career, the New York writer and several of her colleagues had the same full-time job, even though their employer wasn’t able to keep them busy. But the employer kept them all on the payroll because it wanted talented communicators close at hand. Sitting around doing nothing, with no opportunity to advance, Davies grew frustrated, and eventually quit. “It just got silly,” she says. This type of frustration could create a culture of underperformance, warns Bill Armstrong, president of recruitment services at Safeguard Global—which could in turn alienate star performers who feel their work isn’t valued.
S
Investing in the wrong kind of job training, meanwhile, can backfire too. The corporate-training sector, currently seeing significant growth, may have a rich history, but employees have long complained that courses, whether in person or virtual, don’t teach the skills they need. The result is that many workers avoid them or invest little effort in getting ahead. Indeed, according to one study by edX Enterprise, an upskilling firm, less than a quarter of employees say they use their company’s AI-skills training programs (and not for lack of interest, either; almost four in 10 say they’d leave their organization for one with better AI training). “Most workers feel employer-sponsored training is for the benefit of the company, not for the employee,” says Alma Derricks, a senior client partner in the Culture, Change and Communications practice at Korn Ferry.
David Vied, a senior client partner in Korn Ferry’s Medical Devices and Diagnostics practice, says the remote-work environment that still exists makes all this training even less appealing. Online courses, after all, often lack the direct access and personalized instruction employees want from their training. According to survey data, only 20 percent of people took online-only job training courses last year. “It’s going to be a big issue for companies,” says Vied.
n response, some firms are already coming up with unique solutions to
deploy their workers more efficiently while also training them more usefully. Instead of trying to keep people in the same roles, many are reassigning them to entirely new departments with new duties, creating challenges to motivate and engage them. To improve training, experts say firms need to allocate more time for workers to take courses by creating
I
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Experts worry about what might happen
if the economy
gets far worse than anticipated.”
anticipated.”
than
worse
far
gets
economy
the
if
happen
might
what
about
arena.”
capital
human-
the
in
forward
pushing
be
to
appear
Firms
Finally, experts say firms that focus on career development can improve
their reputation in the eyes of their employees, customers, and clients in an unprecedented way. Surveys consistently show that employees value firms that provide career development and will stay with them longer. In the case of millennials, one Gallup survey found 87 percent view this training as important. Meanwhile, the short-term cost savings provided by large labor cutbacks often are outweighed by bad publicity, loss of institutional knowledge, lower employee engagement, and lower innovation—all of
which hurt profits in the long run, says Sandra J. Sucher, a professor
of management practice at Harvard Business School.
designated off days for education. Dennis Deans, vice president of global human resources at Korn Ferry, says managers and HR leaders need to make the connection between corporate-training programs and an employee’s personal career journey. “Employers that can illustrate the company’s commitment to their workers’ development and success will see better engagement,” he says.
Skills
Grab
hiring managers
small businesses
SEE THE
PODCAST
“You have a whole number of businesses that are just holding on to people, waiting for the bad things to happen, then go away, so they
can get back to business,” says Dana Peterson, chief economist at the Conference Board. And “back to business” means developing the right skills for coming challenges, whether it’s the emerging boom in artificial intelligence or the tragic and intensifying geopolitical upheavals that continue to create massive uncertainty.
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By Russell Pearlman
Illustrations by Tim Ames
Facing uncertain times,
firms are desperate to
build up worker skills—
or buy them.
Source: OCED
of current workers’ core
skills are expected to change
in five years.
42%
of employees will
need reskilling by 2025.
50%
Training Needs Will
Be Widespread
02/03
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01/03
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Jan
2020
Jan
May
Sept
2020
Sept
Jan
May
2021
Sept
Jan
May
2022
Source: OCED
41%
Mentoring/reverse mentoring
36%
Debt-free degree options
30%
15%
Paid leave for training
Access to online education platforms
How Companies Are
Reskilling Workers
02/03
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04/05
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Source: Wiley
01/05
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