A recent report from the World Economic Forum and PwC found that investment in closing the skills gap could boost GDP by $6.5 trillion by 2030. However, many companies don’t have a comprehensive plan on how to measure their investment. Every business leader must take into consideration their return on investment (ROI); essentially, value goes in and the business thrives if more value comes out. Here are the three main ways to measure ROI for your company when closing the skills gap.
- Direct Value
The metric that gets the most attention, ostensibly because executive bonuses depend on it, is profit. When measuring ROI, consider the difference in your profits between upskilling and not doing so.
The first part of the equation takes into account the cost of the skills program, the time off work for the employees undergoing the training, costs such as overtime for replacement staff, and administrative expenses. To evaluate the cost of not reskilling, calculate the cost of hiring new staff (including the time spent on hiring and onboarding processes), severance packages for unskilled layoffs, and the comparatively greater administrative expenses.
Key take-away: Most companies find that the direct costs of reskilling are dwarfed by that of staying on a static course.
- Productivity
Managers often stumble at the productivity hurdle only because they do not define it precisely. We all have a vague idea of “fewer work hours” to accomplish a goal but that is not enough. To accurately assess the value of ROI, you will need to evaluate a very narrow metric and repeat that as many times as necessary.
A bad example would be to define productivity as “use data analytics to improve sales.” Instead, a definition such as “use data analytics to identify individuals most likely to purchase, and when they are most likely to do so.”
Key take-away: Identify exactly what the productivity metric is.
- HR Value
Employee turnover is not just disruptive but also expensive. The best companies do not just attract the best talent but also give each team member compelling reasons to stay. Among the most powerful of these reasons is upskilling, especially if it can lead to internal promotions.
Every employee considers leaving their employer at some point. However, resigning is harder when they recognize that the company does not just give them a paycheck every month but also invests in them as individuals.
Key take-away: Employee retention is a gift that keeps on giving since the company saves in recruitment and onboarding costs.
Creating a Skills Program
Every aspect of a company’s operations affects its ROI. To create a skills program for your team, first identify where the smallest efforts will yield the greatest results.
- Assess – Ascertain critical roles and assess the abilities of relevant staff. Use a transparent set of criteria.
- Plan – Specify desired outcomes and the requisite training. Train one batch and gauge the plan’s effectiveness.
- Monitor – Both your skills needs and industry trends change. Keep adapting the lessons to stay on course.
Key take-away: Learning is an ongoing process that brings far more value to the company than any single skills course.
Questions? Please contact me today to discuss how to close the skills gap within your organization—and how to measure success.
