Your strategy is only as good as your skills
The following contribution comes from the Boston Consulting Group website, which defines itself as follows: Boston Consulting Group bridges the gap between ambition and results. We collaborate with organizations around the world to generate transformative impact and lead this new era.
We are in an era of unprecedented change and disruption, driven by technology, marked by complexity, where change is amplified at scale. To lead, companies need a partner that can bridge the gap between ambition and results. BCG is ready for this moment. We bring strategic clarity, based on more than 60 years of deep industry knowledge, to ensure leaders make the right decisions. We combine this with applied AI, developed and managed by our professionals, working side-by-side with their teams to generate transformative impact at scale. The result? Increased profitability, capability transfer, and lasting change. We are BCG.
The authors are Sagar Goel and Orsolya Kovács-Ondrejkovic
Sagar Goel is Managing Director and Partner at BCG Henderson Institute – Global Leader in Market Research
Singapore, and Orsolya Kovács-Ondrejkovic is Partner and Associate Director at Zurich.
Why Deskless Workers Are Leaving and How to Win Them Back
Employment and Skills Trends
Workforce Strategy
Corporate leaders often say, “Our people are our greatest asset.” But when it comes to ensuring that this asset is fully prepared and empowered, improving employee skills is clearly not a priority.
Although leading companies invest up to 1.5% of their annual budgets in training and skills development—a figure comparable to what many companies allocate to transformation or IT programs—their executives do not treat skills development with the same importance as other objectives. Our research shows that few companies link skills development to their strategy or report on their skills management as they do with other important assets.
This lack of prioritization threatens to become an existential problem at both the individual and macroeconomic levels.
The World Economic Forum has estimated that 50% of the world’s population needs new skills to meet the changing demand driven by new technologies. By 2030, this figure could reach 90%. Failure to meet the demand for new skills could cost up to $15 trillion in lost GDP. Governments have a critical role to play in closing the projected skills gaps, but companies also have an essential role to play, and it is in their best interest to embrace their responsibility.
The Current State of Skills Development
To assess the current state of skills development, we examined the annual reports and environmental, social, and governance (ESG) reports of 88 leading companies selected from the Fortune 50 list of the largest U.S. companies and the 50 “Best Places to Work.” We analyzed how these companies describe their skills development initiatives and the key performance indicators (KPIs) they report. We combined this data with our own experience working closely with senior executives around the world on learning and skills development. Our findings suggest that companies need to pay much more attention to fostering skills development, tracking its outcomes, and enhancing its role and visibility within the organization. (See figure.)
Your strategy is only as good as your skills
Skills development is not a priority. Of the company reports we analyzed, 20% made no mention of learning or skills development, and in many others, the topic was only briefly addressed in a generic paragraph about human resources or social responsibility. The importance given to skills today is comparable to the attention given to diversity, equity, and inclusion (DEI) some 15 years ago. Currently, it is not uncommon for a company to dedicate between three and five pages to diversity, equity and inclusion (DEI), including details on measurement, commitments and employee testimonials.
Many companies don’t pay enough attention to skills development, even though it’s in their best interest.
In our experience, senior managers also don’t give enough importance to skills development internally. In a 2020 BCG study of the learning capabilities of 120 large global companies, only 15% said they gave corporate learning the high priority it deserves.
Skills are not linked to corporate strategy. The same BCG study shows that fewer than 15% of leaders believe that learning is a core part of their company’s overall business strategy. For most organizations today, skills development is seen as a human resources initiative rather than being closely integrated with corporate strategy. Only 24% of corporate reports place skills development efforts within the context of corporate strategy, and those that do describe these efforts simply and qualitatively, usually addressing strategic priorities and referencing skills development in that context. Only a handful of companies report having a structured process for anticipating skills gaps based on the company’s business needs.
The information companies provide about the outcomes of their skills development programs is limited. While they discuss the process they follow to train their employees, few disclose the actual results. Four out of five companies report process metrics related to training, such as hours delivered or the number of attendees. However, these figures provide very little insight into the actual results. Here is a typical example (adapted) from our research: “In 2021, we implemented 56 new programs… [We issued] more than 24,800 certifications and delivered nearly 350,000 hours of training.” Meanwhile, only 4% of companies report on the results of their skills development programs in terms of business outcomes (such as increased productivity or the implementation of a new tool at work) or talent-related outcomes (such as increased employee engagement or the employability of participants).
Skills development is often described as an expense.
Despite its clear importance and the significant budgets allocated to it, most leaders consider it simply an expense, similar to equipment maintenance. Only 36% of companies report on the financial resources they allocate to skills development, and those that do mostly view it as a cost and rarely as an investment—or more specifically, an investment in future capabilities. The expenditure is significant: the companies surveyed allocated between 0.5% and 1.5% of their annual budget to skills development, an average of $150 million per year, and often much more. It is not uncommon to find learning and development budgets of $300 million or even $400 million. But as long as these budgets are considered costs, this spending is likely to be a lower priority than other investments. As the human resources director of a global industrial goods company told us, “When there’s pressure on costs, the first thing to be cut is the learning and development budget. How can we expect the company to maintain results when key resources—that is, people—don’t have the skills to deliver them?”
Improving Skills Development
Companies must ramp up their skills development efforts, starting with reframe it as a strategic priority. As the former head of human resources at a major automotive company noted, “Investors, regulators, and employees are all interested in how a company ensures the skills of its workforce remain current. Since the COVID-19 pandemic, people-related issues have been taken much more seriously, and it’s only a matter of time before skills development gains the strategic importance it deserves.”
Our research and customer experience suggest five practical strategies for boosting the importance of skills development within your organization.
Start with a strong strategic intent. Every company needs a plan to develop the skills necessary to deliver its business strategy. They also need to take steps to reassure investors and other stakeholders that they have such a plan. This doesn’t have to be a complex HR plan; it can begin with a clear explanation from senior management of how skills development efforts align with the company’s key strategic priorities. For example, the German insurer Allianz states in its 2021 sustainability report that “digitalization and automation will transform the composition of the future workforce, with the disappearance of some job profiles, the emergence of new profiles and capabilities, and considerable changes in existing profiles and skills. This will require significant retraining and reskilling initiatives to prepare the workforce for the future. Our main objective will be to develop digital, data, and agile working skills. Skills such as cybersecurity, communication, and human resources will also be essential.” Allianz also reports on what this ambition means in quantitative terms: “3,155 full-time employees recruited and retrained in strategically relevant talent segments across Allianz’s operating entities in 2021 (2021 plan: 2,177).”
Consider the driving force behind skills development
Companies should consider skills development like any other investment. The World Economic Forum recommends “treating investment in human capital the same way we treat investment in natural resources, particularly oil. … Investment in the workforce could be capitalized and recognized on the balance sheet.” As our analysis shows, this is not common practice today. Reclassifying balance sheet categories can be difficult, but companies can allocate a specific budget to strategic skills development and measure their spending. This sends employees a clear message that the company is investing in them. For example, Bosch has announced it will invest €2 billion in reskilling its employees in anticipation of the automotive industry’s transition to electric vehicles. Amazon plans to invest $1.2 billion to provide 300,000 employees with access to training and development programs.
Prioritize results over process
Public disclosure can be a powerful motivator, but only if it focuses on the right metrics. By shifting the reported results from «number of employees trained» to «business and talent outcomes achieved,» companies can generate a greater impact and keep the organization focused on investments in skills development. Business outcomes can be measured at multiple levels, such as the application of learning on the job (Did employees use the new technology? Did they demonstrate new skills?) or achievement metrics (faster or more cost-effective production or increased sales). Outcome evaluation should also focus on how the learning enhances participants’ skills, capabilities, engagement, and employability.
To achieve the greatest impact, companies should report on the results of skills development, not the process.
Take AT&T, for example. Their March 2022 ESG report describes the impact of their new Real-Time Training program: “We identified who needs training and when, as well as the training solution most likely to generate the greatest improvement in each employee’s key performance indicators (KPIs). In 2021, approximately 1,950 employees received real-time tutorial recommendations, resulting in approximately 4,300 new customers and about $4.5 million in additional annual revenue.”
In addition to tracking business outcomes, AT&T also monitors the impact of training on participating talent. According to the company’s March 2022 ESG Summary, “Our metrics show that those who participate in our training and development initiatives are:
– more likely to receive a higher performance rating at year-end
– more likely to receive a higher recognition award at year-end
– more likely to be promoted to a similar role
– less likely to leave the company.”
Many companies avoid quantifying results because the process can be complex, but as the experience of a large North American retail chain demonstrates, it doesn’t have to be a complex problem-solving exercise.
The company conducted a pilot program with a test group and a control group to demonstrate the commercial viability of its leadership development program for frontline staff before implementing it organization-wide.
The pilot program showed a 150 basis point increase in sales
in the test group stores compared to the control group. Other companies use existing or easily obtainable data, such as information from learning management systems or self-reported training results. When data on outcomes is unavailable, companies can at least share success stories or present case studies on the impact of skills development.
Inspire commitment, not mere compliance.
Measurement is essential, but numbers alone won’t drive new behaviors. Senior managers, not just those in HR, must emphasize the importance and urgency of skills development for everyone, including themselves. Leaders can encourage participation by sharing stories of their own skills development experiences. For example, a professional services firm began implementing its strategic «skills enhancement» program by asking senior managers to participate in training programs and then share their experiences with their teams. Corporate communication channels can showcase examples of «skills heroes» who make successful career transitions or create real business value by developing new skills in areas such as data analytics or agile work methodologies.
Incorporate Skills Development into the Daily Agenda
Leaders don’t need to wait for investor days or quarterly strategic reviews to emphasize the importance of skills development. They can instill a culture of lifelong learning in their organizations through simple, regular reinforcement. For example, they can make it a practice to ask, “What would we like to learn as a team and individually?” at the start of new tasks and encourage team members to identify newly acquired skills during weekly meetings.
Two Clear Trends
Companies can count on two trends: the importance of a skilled and competent workforce will only increase, and the lifespan of critical skills, especially those related to advanced technology, will continue to shorten. Successful companies of the future will not only invest in human capital but will also dedicate the same effort and attention to tracking and reporting on skills development as they do to investing in financial or tangible assets.
The authors would like to thank Laura W. Geller, Executive Editor of
Why Your Business Strategy Needs a Purpose and Why You Need a Solid Strategy from the Start
The following contribution comes from the Brueckmann portal, which describes itself as follows: Alex Brueckmann, an internationally renowned business strategy facilitator and part-time strategy director, is the president and CEO of Brueckmann Strategy Consultants Ltd.
He leads our team of carefully selected strategy facilitators and executive development experts.
Based on 9EOI™, we help our clients design and implement strategies that are integrated with their company’s culture and leadership. We focus on strategy AND how to make it effective in the real world.
Our clients are medium-sized and large organizations. We support them on every continent and in dozens of industries.
We understand the challenges that traditional consultants can present. That’s why we don’t come across as know-it-alls or lecture you on what to do or how to run your business.
Instead, think of us as the facilitators who create the right environment for a real strategy to be built. We handle the process, while you own the results at every stage.
Author: Alex Brueckmann
My first encounter with strategy as a discipline was in business school, and I found it incredibly boring. It was taught with little business context and had no visible connection to my life. For me, at that time, strategy was reduced to theoretical frameworks disconnected from the outside world. However, shortly after graduating, this perception changed rapidly, and I realized how conscious leadership and strategy are interconnected, and how both are essential ingredients for business success.
