The economic impact of employee skills, transient training, and how organisations can plug the gaps using AI

Pre Covid-19, it was estimated that UK employers were spending more than £6 billion per year to address the issues associated with internal and external skills gaps. Recruitment costs topped this substantial bill; indicating that some employers were opting for short-term approaches to ‘buying’ talent rather than ‘building’ it within their own organisations.

In this article, Adrian Harvey, CEO of Artificial Intelligence provider Elephants Don’t Forget, assesses some of the key findings regarding employee skills. Providing an insight into why employers should consider adopting appropriate technologies to support sustainable learning environments and break down the cost barriers associated with effective employee learning, retention, and application of critical in-role competencies.

To address the escalating issue of employability skills in the UK, a number of pre-pandemic reports highlighted that more and more organisations were becoming acutely aware that there would have to be a shift in mindset towards adopting sustainable, long-term workplace learning provisions to produce a more agile, loyal, motivated, and productive workforce for the future.

In this respect, there was a trend emerging; one that was based upon the premise of moving away from economically impactful marginal gains towards a more sustainable culture of investing in the capability development of existing employees.

The answers to why some organisations still struggle to address the skills gaps issues within their business are complex and, of course, have many facets.

Firstly, many organisations may still lack objective clarity relating to the internal skills gaps and current capabilities of their employee base. Without this initial audit, organisations cannot assess baseline competency to help inform the development of a continual assessment program that helps sustain capable employees and deliver outcomes against business objectives and improvement of key KPIs.

Analysis of individual employee knowledge relating to services, products, policy, process, and governance is also likely to be time-consuming for small businesses, and complicated for larger enterprises due to the scale and scope of their operations and employee’s head count.

Training approach and mentality play a primary factor too. Many of the ‘default’ provisions that businesses are reliant on are often in the form of one-size-fits-all single-point-in-time-training and assessments, with little in the way of continual reinforcement and embedment of key learning concepts following initial training.

Yet, we know – because behavioral science dictates – that we forget as much as 80% of what we are taught within the first 30 days when there is no attempt to retain it.

Therefore, transient factors – the process of forgetting occurring with the passage of time – shapes how we learn and retain information. And, whilst the overall rate of forgetting differs little between individuals, the speed at which we forget what we are taught is impacted by the difficulty of the material, how meaningful it is, and how the material is provided to the learner for assimilation.

Without a continual assessment and improvement methodology to ‘plug’ these transient factors, it seems inevitable that organisations will continue to be plagued by the internal skills challenge – and the evidence available supports this perception.

In October 2020, The Department for Education published their Employee Skills Survey (ESS) 2019 research report.[ii] With over 81,000 employers participating in the 2019 wave, it was one of the world’s largest business surveys.

The ESS survey found that 13% of employers reported skills gaps within their workforce, with the proportion of employees not considered by their employer to be fully proficient in their role increasing for the first time since the ESS series began in 2011. This equated to around 1.25 million employees lacking full in-role proficiency in 2019.

Crucially though, the survey found that 79% of skills gaps were caused entirely by transient factors (they also noted this was historically the case in all previous ESS surveys and that the prevalence of transient factors had increased since 2017).

These factors included: individuals being new to their role (67%) and training only being partially completed (61%). Other common causes of skills gaps included: staff lacking motivation (38%), staff having been trained but not sufficiently improving (33%), and staff not having received appropriate training for their role (28%).

As a side note, based upon our own internal three-year competency assessment, conducted between 2017-19, we analysed over 72 million employee intervention questions across a broad spectrum of business sectors relating to employee operational skills and knowledge (defined as knowledge of products, services, policy, process, and governance) to ascertain an average level of tenured employee competency.

Our study concluded this to be just 52%, which effectively means that, in the majority of cases, employees only really know half of what they need to in order to optimally perform their role within organisational and (where applicable) regulatory requirements.^[iii]

Cost, senior management buy-in, and suitability of training are also key factors. With an array of training provisions on offer – ranging from hiring trainers internally to outsourcing – it can often be problematic for organisations to know which type of training will suit their specific needs and maximise their return on investment.

To some extent, this may explain why many organisations, pre-Covid-19, were spending significant amounts of their budgets on trying to ‘buy’ their way to better productivity rather than ‘train’ their way to it.

In a pre-pandemic study, the Open University’s Business Barometer – which monitors the skills landscape of the UK – estimated that the UK skills shortage was costing organisations a whopping £6.3 billion a year in additional spending.

91% of UK organisations were struggling to find workers with the right skills, and this, in-turn, was forcing businesses to pay premium prices to ensure they had the skills required to remain productive and competitive.

The study concluded that additional recruitment costs were costing employers in the region of £1.23 billion per year, with training for those hired at a lower level than required costing around £1.45 billion.

70% of business leaders also noted that the recruitment process was lengthening too and – when they did eventually identify suitable candidates for roles – the demand for their skills were so high that it was pressing employers to fork out an additional £2.16 billion on salaries on offer to secure them.

53% of business leaders said they expected the skills situation to continue to deteriorate over the coming years too, foreshadowing the idea that there was a critical requirement to focus more on internal training and development initiatives to tackle the escalating issue of in-role skills and curb unsustainable and spiraling business costs.

Fast-forward to today and few among us could have comprehended the devastating human impact and organisational disruption caused by a global crisis that forced the majority of businesses and their employees to change the way they operate almost overnight.

We are all too acutely aware of how Covid-19 impacted (and continues to impact) our operations. The responsibility of employers now is to critically assess the fallout of the pandemic on their business in conjunction with the evidence of the skills available and ensure they adapt and usher in effective ways to upskill and reskill their employees to deliver against changing business models and objectives in a post-pandemic era.

And, whilst it is now acknowledged by an increasing number of employers that investing in work-based training, which effectively enables employees to ‘earn while they learn’, fosters the idea of driving up employee skills, growth, productivity, and experience whilst driving down unnecessary spending, the very same transient barriers that existed before Covid-19 have only been further exacerbated.

So, if the skills issue was trending way before the pandemic; it now has a gleaming spotlight on it. Employers are acutely aware of this fact too; with 87% of executives surveyed in a recent McKinsey Global Survey stating they were still experiencing skills gaps, and – crucially – less than half of them had a clear sense of how to address the problem.[v]

And, if new research is to be believed, it is set to remain a major problem for the future. Findings indicate that 30.5 million UK workers (94% of today’s workforce) lack the skills they will require in 2030 to perform their jobs well.[vi]

It appears that the root causation of (some) of the internal skills gaps issues continues to be ignored, despite overwhelming evidence illustrating the impact transient factors and a lack of training investment is having on productivity.

The ESS survey concluded that 66% of employers said that skills gaps were directly impacting their establishment’s performance and that skills pertinent to specialist skills or knowledge required to perform a job role were the most prevalent specific skill lacking amongst both existing staff and new recruits.

Yet, ironically, fewer employers arranged or funded training for their staff. In fact, the proportion of staff being trained has decreased; reaching the lowest level recorded since 2011. The number of allocated training days and investment in training is falling too; even safety and basic induction training have decreased since 2017.

Now, in the lead up to 2025, organisations surveyed by the World Economic Forum for their Future of Jobs Report 2020 estimate that 40% of workers will require reskilling, with 94% of business leaders setting clear expectations for their employees to pick up new skills on the job.

On average, 66% of employers surveyed expected to get a return on investment (ROI) from their upskilling and reskilling initiatives within 12 months too, yet 17% stated that they were uncertain of what that ROI actually looks like.

And, to compound matters, whilst employers said they expected to offer reskilling and upskilling to 70% of their workforce, on average, engagement from employees with the provisions being offered was deemed to be ‘lagging’, with under half (42%) of employees taking up employer-supported opportunities.

Our own research corroborates this too. At the end of 2020, we distributed a survey to over 2,000 Learning & Development (L&D) practitioners across several business sectors to gauge their sentiment as to their achievements and concerns whilst working through the pandemic.

Just 3% of respondents stated that they had seen substantial uptake in their employees engaging with training material online, even though 92% stated they had included more digital learning content and virtual support within their online learning stores.

In conclusion, it seems evident that organisations may have a lot to learn about the ways in which we learn. Substantial skills gaps issues existed pre Covid-19 and – on evaluation of the evidence available – they seem set to get worse unless organisations recognise and fix root causations.

Suitable, cost-effective technology is now readily available to help fix these. Artificial Intelligence (AI) – like our very own Clever Nelly – is being deployed worldwide across a spectrum of large enterprises, SMEs, and small businesses to support internal individual capability building.

Employee-centric AI platforms that work in tandem with training and talent teams to ensure that they can continually assess, repair, evidence and embed key learning concepts, and quantify the impact of learning against business objectives and key KPIs, are helping organisations to become sustainable learning providers, plug and improve critical skills and knowledge gaps, and effectively measure ROI.

To fundamentally tackle the internal skills challenge though, organisations will need to be mindful of the ‘one and done’ attitude when it comes to their training, upskilling, or re-skilling of their employees.

No employee can act on the training they have received but failed to retain, and employers should be open to adopting solutions to help alleviate the very real – and very costly – transient training issues that exist.