The ROI of Investing in Employee Upskilling
Once, employers hired employees for a specific skillset those individuals already possessed. They then used those skills within a defined position in the company to help it achieve its stated goals. Things were pretty cut and dried.
Today, the situation has changed dramatically. Between the lingering effects of the COVID-19 pandemic, the Great Resignation, supply chain upheaval, and global economic instability, businesses in all industries face one choice: evolve and thrive or stagnate and fail.
Nowhere is that clearer than your in-house employees’ skills.
The Need for Employee Upskilling
Employee upskilling is no longer an option. It’s necessary to stay current with the evolution of the workplace, combat things like the rise of artificial intelligence tools, and keep up with competitors. Today’s employers must face this and develop strategies to help employees build skills and competencies.
According to a survey conducted by LinkedIn, 62% of CEOs already understand this and have made upskilling a priority to their business success. If you’re not among them, then you can bet your competitors are. Upskilling also offers a wide range of additional benefits beyond not being left behind, including improved performance, enhanced employee reliability, greater engagement, and more.
There’s also the fact that much of today’s workforce will need reskilling and upskilling due to technology’s ongoing evolution. It’s no longer enough to be proficient in Microsoft Office. You need to know how to use Slack, Trello, Microsoft Visio, Asana, and more for communication, collaboration, file sharing, and data analytics, to name just a fraction.
The good news is that upskilling employees delivers those benefits, plus more. Below, we’ll dive deeper into what CEOs and decision-makers should know about the ROI of employee upskilling and on the job training.
Investing in an employee upskilling strategy can improve productivity, as employees with new skills and knowledge are better equipped to complete tasks and solve problems effectively. This can lead to increased efficiency and output, which translates to financial benefits for the business.
Put another way, the more knowledge and skills employees have, the better they can do their jobs. By improving efficiency across different tasks, employees have more time to dedicate to other tasks, improving productivity for themselves, their teams, and entire departments. This has a knock-on effect that bolsters the entire business over time and with sufficient upskilling efforts.
It’s not just about being able to do tasks faster and more efficiently or being able to do more tasks. According to Zippia, engaged employees are 21% more productive, and 71% of employees say job training and development increase their job satisfaction. According to a Gallup poll, employee engagement increases profitability by 21%.
Employee turnover is costly. However, while you cannot eliminate it, you can reduce it dramatically. Providing opportunities for existing employees to learn and grow can increase job satisfaction and reduce turnover, saving you money on the cost of hiring and training new employees. Consider the fact that employee turnover costs US companies $57,000+ per year in lost productivity, the costs of rehiring, onboarding, etc. That figure is much higher for some companies, approaching $100,000 annually.
One Gallup poll points out that 57% of US workers want to update their skills and 48% of employees (including yours) would leave their current jobs for the opportunity to do so. However, CNBC points out that 94% of employees would stay with their current employer if the company invested in a formal upskilling and career development program.
The cost of recruiting a new employee is also considerable. According to SHRM, the average cost per hire in the US is around $4,700, but this varies greatly by industry, niche, and even employee role. For some organizations, the cost to hire a new employee can be up to four times the position’s annual salary. By improving employee retention, you avoid those costs.
Finally, you cannot discount the value of employee retention over time. Turnover affects your company in many ways, not just the cost to attract, hire, and onboard a replacement. It affects everything from day to day operations, business performance and your ability to compete and remain agile.
It is also increasingly difficult to attract and retain talented employees, which means positions could sit unfilled for long periods. By retaining more employees, you avoid this fate while building a loyal, engaged, highly efficient team.
No business operates in a vacuum. Your firm has competitors, both large and small, known and unknown. Upskilling employees can help you remain competitive within your industry by keeping employees updated on the latest trends and technologies.
Job roles evolve faster than ever today. New technologies debut and get adopted with startling speed. If your employees cannot keep up with this pace, the organization will fall behind competitors that can.
Upskilling ensures that your employees have the competencies needed to keep pace or even move ahead of competitors while dealing with the evolutionary challenges seen in recent years. Those challenges include the shift toward remote and hybrid work, increased automation, reliance on AI, and a need for more data-driven decision-making within all positions.
Employee retention also factors into an organization’s increased ability to compete. With seasoned, experienced employees, you can compete on a different level while reducing the slowdowns and loss of productivity that stem from employee churn, onboarding new employees, and waiting for them to get up to speed in the position, which can take weeks or even months.
Building a Reputation as an Employer of Choice
Developing a corporate culture that values learning and deploying strategies that help employees upskill and move forward within their careers can also boost your company’s reputation. Understand that 66% of workers between 18 and 24 ranked upskilling as their third most prized benefit, behind health insurance and disability coverage (and outranking annual pay).
As an employer of choice, you’ll be able to attract top talent. This is critical for several reasons. There’s the obvious – you want the best of the best and don’t want to settle for someone who won’t be around for long.
However, attracting higher-caliber employees also helps in other ways, including bolstering your ability to innovate and collaborate, improving productivity, enhancing efficiency, and more. Having top-tier talent on staff will attract other high-caliber employees, creating a feedback loop that ensures your applicants are the cream of the crop.
The Potential for Increased Revenue
Investing in employee upskilling can lead to increased revenue for your business, as well-trained and knowledgeable employees are better equipped to provide high-quality products and services to customers.
This occurs in a couple of ways:
Improved Innovation: Your employees can innovate and ideate, leading to products and services that better address customer needs and pain points. As product/service quality and fit improve, more customers invest in your offerings, and you will likely retain more current customers. Your company also develops a reputation as an industry leader and trendsetter, encouraging more customers to gravitate toward you.
Improved Customer Service: Upskilling allows employees to build better customer service skills and master new technologies like CRMs that help deliver a better customer experience. With better customer service at all touchpoints, more leads will convert to customers, and more customers will remain with you for the long term.
The business world is irrevocably changed. The sooner decision-makers and leaders come to grips with the ramifications of this seismic shift, the sooner they can shore up faltering employee loyalty, engagement, and productivity. It’s no longer sufficient to expect employees to come to the table with all the skills they’ll need to help the company grow.
Employee upskilling, creating a culture that values ongoing learning and development, and deployment strategies that help employees continue to grow and learn are vital, regardless of your industry or niche. It’s about more than upskilling to keep up with the pace of technological evolution. It’s also necessary help employees develop and move forward in their careers within the company.
An employer that can successfully achieve this will build a reputation as a leader and an employer of choice, dramatically increase their ability to compete, reduce employee turnover, and boost both profitability and productivity across the board.