As inflation, rising interest rates and complex geopolitical forces continue to roil the market, economists are raising the alarm that a recession could be on its way.
Current trends suggest the next recession will be unique in one fundamental way — it will likely exist alongside ongoing tightness in the labor market. An unusual paradox is already emerging: anxiety around layoffs and hiring freezes paired with continued hiring challenges in many industries.
This challenges companies to meet strategic priorities with fewer resources while retaining their best and brightest employees. One solution? Targeted investments in upskilling, which can help companies and their employees achieve more and weather the storm.
Addressing organizational and individual needs
According to McKinsey & Company, 87 percent of companies are either currently experiencing a skills gap or expect to in the next few years. These talent gaps and discrepancies in expectations hinder growth and success in a business environment characterized by increased competition and pressure on the bottom line.
The pace of technological change is only increasing and if employees can’t adapt to new technologies and shifting consumer demand, their employers risk falling behind. Skills gaps also widen when companies don’t do enough to retain workers who have essential knowledge and capabilities.
In a recession, hiring freezes may make filling skills gaps by hiring external talent a non-starter. In the best of times, hiring — whether to fill a new role or a vacated one — is expensive and time-consuming. And in a tight labor market, even companies positioned to seek new talent may not be able to compete for workers with the most in-demand skills.
At the same time, employees are worried about their own futures. Gallup found that a perceived lack of growth opportunities is the top reason employees leave their jobs. The desire to future-proof their careers is a key motivator. And a PWC survey showed 77 percent of employees want to develop additional skills to keep their options open.
Upskilling is a win-win solution for employees and employers alike. It allows companies to develop the skills they need to survive and thrive in tomorrow’s marketplace while offering employees the opportunity to grow in their current roles and develop transferable skills. Learning and development opportunities also increase employee engagement, driving profits and improving the company’s reputation. During a recession, offering development opportunities sends a compelling message to employees that their company hopes to keep them long term and is invested in their future.
Plus, upskilling is a powerful cost-savings lever. In January 2022, PwC UK and the Financial Services Skills Commission found that organizations can save up to £49,100 ($65,804) per employee by internally developing needed skills rather than hiring external talent.
Maximizing upskilling efforts
Upskilling efforts need to be targeted and aligned with both the company’s and employees’ needs to provide a strong return-on-investment. While some employees may find value in generalized content libraries or other low-cost options, more find they can accelerate their growth through programs contextualized for the specific needs of the company and industry. All the better if learners from a specific company can participate as a cohort and benefit from peer-level interaction and learning. Employees’ attention and time are valuable and an effective upskilling strategy must be rooted in data, with clear goals and metrics for tracking progress.
Upskilling opportunities also need to be accessible to employees. Too often, employees choose to forgo learning and development opportunities because they require an upfront financial investment to be repaid later. Best-in-class companies develop effective upskilling programs by offering training directly to employees at no cost.
Similarly, companies need to ensure upskilling does not place an additional burden on already-stressed employees. Progressive, effective companies run internal academies that allow employees to integrate flexible learning into their workweek, while others insert learning opportunities directly into projects. Time must be allocated to upskilling efforts, even if it means other initiatives need to take a temporary backseat. When contextualized and applicable upskilling takes place, employees are more likely to see an improvement in their day-to-day role.
Unlocking new potential
Truly effective upskilling efforts don’t just allow companies to keep pace with change or address skill gaps. They also help the organization leap forward with new ideas and abilities that propel growth.
Take the example of Christina Gilligan. At an impasse in her product management role, Gilligan enrolled in a product management course with Emeritus. She reports that the course addressed knowledge gaps she hadn’t previously recognized. Though her employer immediately noticed a difference in her problem-solving abilities and promoted her to a senior role, Gilligan ultimately left that company, citing a lack of growth opportunities. The company could have potentially avoided that outcome had they invested earlier in her development.
Even if employees do leave a company at some point — as most will — upskilling is never wasted. Companies receive the double benefit of an improved work product in the short term and reputational gains in the long term. Organizations like Procter & Gamble, with a reputation for developing strong employees, are magnets for top-tier talent. That commitment to learning creates a powerful growth mindset and innovation engine.
Upskilling can’t be viewed as an optional expenditure to be slashed during a recession. The opposite is true. Even as companies tighten their belts, investing in upskilling is both a hedge against recession and the most powerful way to ensure a future-ready talent pool.