AI and the Reskilling Revolution: A Path to Talent Agility

In Price Waterhouse Coopers’ 2024 annual CEO survey, 45% of CEOs believe their businesses will not be viable in 10 years.  This is up from 39% in 2023, suggesting that the imperative for organizations to reinvent themselves is accelerating.  

The most significant upheaval for organizations may be the rise of artificial intelligence (AI). According to Goldman Sachs, generative AI could substitute up to one-fourth of current work in the US and Europe with 18% of work automated globally. Workers in jobs exposed to automation will not only experience significant changes in their roles, but in their overall occupations. According to McKinsey & Company research, automation-driven changes could lead up to 14% of the global workforce — 375 million workers — to change occupations by 2030.

Numbers like these reinforce the fears that the advent of AI could replace many workers. But the reality is the opposite. The World Economic Forum estimates that AI will create at least 12 million more jobs than it eliminates by 2025. However, these jobs will be largely different than exist today and will require new skills.

According to Josh Bersin, careers that used to stay within an industry are morphing into “skills-based careers,” enabling people to jump around more easily than ever before. This is evident in the movement we’re seeing with today’s technology workers. As the technology sector experiences job loss, industries not customarily focused on technology are scooping up recently laid-off tech workers to build out digital capabilities. Of the top 20 companies hiring technology talent today, Indeed reports that only five are technology companies. Management consulting companies are hiring the highest number of technology workers today, with aerospace and defense, healthcare, financial services, merchandising, and manufacturing rounding out the list.

Traditional businesses like Colgate-Palmolive are hinging growth targets on their digital capabilities, homing in on the development of new, agile work methods. But they are not just hiring technology skills from the outside. According to Colgate’s Chief Digital Officer, Brigitte King, their company is focused on upskilling their teams. Many other organizations are following suit, with 40% of business leaders saying they will need workforce reskilling over the next three years, according to IBM.

The focus on upskilling current teams and employees is enhanced by today’s significant talent shortage. The U.S. Labor Department’s jobs report shows the U.S. experienced surprisingly good job numbers in January 2024, with 353,000 jobs added and an unemployment rate of 3.7%. This surpasses the decline in the unemployment rate projected by the Congressional Budget Office from “5.1 percent at the end of 2023 before gradually declining to 4.5 percent by the end of 2027.” With so few unemployed people available to take new jobs, organizations must invest more in building the internal skills they need.

As AI and talent shortages accelerate the workforce transformation, organizations face a novel challenge: Adapt and reskill — or fade into obscurity. While 74% of organizations acknowledge the importance of reskilling workers in the upcoming 12 to 18 months, according to Deloitte, just 10% report feeling fully prepared to tackle the demand.

In this first of a two-part series on the reskilling revolution in the age of AI, we explore the significant impact these forces have on the shape of the workforce and discuss how organizations can respond to the skills crisis. This requires tearing down barriers for a future-focused skills model.

The AI-Driven Workplace: Amplifying the Human Impact

Rather than thinking of AI as a vehicle for diminishing human impact, it should be viewed as a way to create job enrichment. With 40% of time spent on routine activities perceived as inefficient today, generative AI can relieve organizational and employee inefficiency by automating tasks. However, while automation carries out tasks with improved efficiency, eliminates human errors, and delivers advanced business analytics that are beyond human capabilities, it lacks many essential human qualities. Humans bring judgement, critical thinking, decision making, empathy, listening, and care for others that help businesses thrive.  

While automating the mind-numbing tasks that a non-thinking AI entity can do in an instant, companies can better leverage the human brains of their employees. Through this lens, generative AI has great potential to improve the employee experience. Using automation to remove repeatable and mundane tasks opens up hours of efficiency to create better work-life balance. In addition, when employees use higher-level skills in their jobs, they experience more engagement and work fulfillment. As Forbes reports, “AI can help create a new future of work that's more flexible, diverse and well-being-oriented than ever before.”

With a goal of enhancing the human skills behind the machine, the successful adoption of AI and automation requires a careful analysis of the tasks and skills needed to deliver on business strategy. According to Randstad’s 2023 Top Ten Global Talent Trends, 69% of C-Suite and Human Capital leaders believe automation is shifting the talent needed within their organizations to highly skilled roles. As a result, 76% are placing more emphasis on upskilling and career engagement. Companies failing to attract skilled workers or reskill their existing workforces will scramble to respond to technological disruptions and fall behind the competition.

Companies that operate around “people and skills, not just jobs and positions,” according to Josh Bersin, perform better on key business metrics. These organizations are:

• 2X more likely to exceed financial targets.
• 2X more likely to delight customers.
• 12X more likely to have high workforce productivity.
• 9X more likely to attract and retain talent.
• 7X more likely to adapt well to change.

To stay competitive, companies need to shift from tactical job duties to strategic skill sets, taking a skills-centric approach to talent management and the organization’s workflow. This requires new ways of thinking and new approaches to how work gets done.

While many organizations are clearly aware they need to make this change, most are reluctant to do so. It’s difficult and scary to move away from traditional structures and organizational processes that have been ingrained since the Industrial Revolution. To lead this kind of systemic change, businesses must facilitate strategic realignment by evolving over time based on the highest impact to the business while adopting careful change management and communication.

Skills as a Strategic Priority

Relegating an organization’s skills-first initiatives to the HR organization is a legacy tactic — and one that lacks effectiveness. To prepare and guide employees through this cultural shift, the entire company must adopt skills-centered approaches. This starts with involving all organizational levels in the design and implementation of a new skills approach, especially middle managers who connect senior leaders and the workforce. Without the key insights and buy-in from those closest to the work, the design and the effort will fall flat. This wastes tremendous time and resources and, even worse, can sink the initiative and risk the organization’s viability.

The first step in this process is linking skills to the business strategy, which is largely not happening today. From Boston Consulting Group’s (BCG) research, “Only 24% of corporate reports put skill-building efforts in the context of corporate strategy.” Given that a vast majority (87%) of worldwide companies report facing a current skills gap or expecting one in the next five years, this is a shocking disparity.

To begin this work, organizations must clearly define and articulate the organization's short-term and long-term business goals. With an analysis of the organization's strengths, weaknesses, opportunities, and threats (SWOT), they can identify the key competencies and skills they need for achieving these goals. From there, they need to analyze the gap between the current skills in the organization with the skills they need.  

Even when organizations do this foundational work, most are not prioritizing critical skill-building efforts. According to BCG, “Only 36% of companies report on the financial resources they dedicate to skill building, and those that do mostly position it as a cost and rarely as an investment, or more specifically, an investment in future capabilities. Companies need to step up their efforts in skill building, which starts with reframing it as a strategic priority.” 

With skill building as a strategic priority, companies can enroll and create context for employees and managers alike, providing a clear understanding of the business case for how they will benefit from this shift. Organizations that lead with skills first aren’t just building critical workforce proficiencies. They are blending company goals with employee needs to enhance the employee experience.  

Co-Creating a Skills Approach

A recent study by the University of Pennsylvania and OpenAI found that four in five U.S. workers could see at least 10% of their tasks impacted by AI. Yet 88% do not trust the organization is supporting them in understanding AI. With 70% of senior business leaders reporting that their employees don’t have the skills to use generative AI successfully, there’s clearly a huge opportunity for organizations to prepare the workforce to incorporate AI into their daily tasks. 

But closing this gap and leading with skills first is easier than it may seem. It starts with enrolling employees in the change.

Employees are increasingly more interested in being a part of a workplace change. According to Edelman, 65% of employees are willing to partner with employers on urgently needed changes, up 7% from 2021. By engaging employees in the shift to a skills-based model, organizations must first increase transparency around what skills are needed in the organization today and in the future. Currently, only 27% of organizations make their employee skills profiles visible to all.

To further enroll employees in the shift to a skills approach, leaders need to communicate the benefits of tapping into and developing internal employee skills rather than hiring skills from the outside. As Harvard Business Review reports, an internal skills focus “helps organizations gain new capabilities while preserving in-house functional knowledge, experience, and understanding of company culture.” Rather than displacing current workers by hiring from the outside, this option creates more job security and mobility for current employees.

An internal skills focus provides fresh career paths based on skill advancement. Rather than moving up a traditional career ladder (e.g. from junior financial analyst to senior financial analyst to finance manager), an employee can morph their career into a series of developmental steps that help them progress and grow in alignment with the organization’s needs. For example, a financial audit specialist might move from the finance team into a cybersecurity specialist role on the technology team by leveraging and adapting strong analytical skills.

Building an Internal Talent Marketplace

To enable this type of movement, companies need to create internal talent marketplaces built on skills. According to Josh Bersin, “Companies like Cisco, Nestle, Google, IBM, GE, Procter and Gamble, General Mills, Unilever, and Bank of America have been ‘internal talent machines’ for years. They’ve built a culture of internal growth, enabling people to work in the company for decades and constantly reinvent themselves along the way.”  

By accessing an internal skills platform, employees can work on projects to build identified skills or enhance their expertise in defined areas. In addition to creating endless paths for employee growth, this approach gives leaders more access to talent and skills across the organization, pulling employees out of their functional silos. This type of platform provides full transparency on the skills needed within projects and in the organization, creating pathways for employee development through real work.

Another key component of embracing a skills-based talent approach is tying compensation to skills development. “A move to a skills-based philosophy is a future promise to employees that their investment (of time and energy) will pay off,” reports Mercer’s skills-based talent and pay practices guidebook. “Employees need to see that learning leads to rewards, recognition and promotion, and that it impacts performance goals.”  

In an increasingly digital and AI-driven labor landscape, connecting salary and rewards to reskilling can ensure talent retention and business growth. By linking compensation packages to new skills acquisition, organizations can encourage retraining initiatives, build a more agile and adaptable workforce, and drive productivity that impacts the bottom line. And this seems to be catching on. In a 2021 survey conducted by Willis Towers Watson, 43% of respondents said that their employers planned to increase their use of skill-based pay in the coming years.

Once a skills framework is designed, individuals should own their skills development, with their managers and the organization playing a supporting role by providing clear linkages between skills, overlaps, gaps, and paths for both development and pay growth. This moves the conversation from a closed-door, check-the-box activity to an open, strategic dialogue about development and career progression.

In Summary

The Organization for Economic Cooperation and Development predicts that disruptive technologies could eradicate 14% of worldwide jobs and revolutionize 32% more within just 15 to 20 years. To stay competitive in the face of these disruptions, organizations and employees need to prioritize reskilling as a strategic imperative. A skills-first approach has incredible upsides for organizations and employees alike.

With an estimation of a five-year half-life of skills, which drops to just 2.5 years in some technology sectors, millions of employees will find themselves in new parts of the organization or in entirely new fields based on skills, not tenure and experience. Rather than climbing a traditional career ladder, employees must refocus their career path on skills. This creates multiple pathways for employees to continue to grow, especially when tied to pay opportunities, giving them more agency to create career paths that align with their strengths and interests.

The traditional frameworks and processes that define roles and people based on hierarchy, tenure and experience no longer work within this context. Hierarchical frameworks and processes are being replaced by a skills marketplace.

With access to an internal skills marketplace, organizations can deploy the right skills against technological and economic disruptions, staying competitive and relevant in a dynamic marketplace. Through the skills lens, organizations can also improve the employee experience by better leveraging the purely human strengths behind the machines. These are key reasons why organizations that embrace a skills-based approach are achieving stronger financial and operational results.

See What’s Possible — with Acera Partners

To learn more about the benefits of a skills-based culture in the face of AI and a diminishing labor force, or to discuss your reskilling transformation and collaborate with our talent agility experts, please connect with Acera Partners today.

‍