Effectively identifying and closing the skill gap amid The Great Reshuffle

Leveraging data can help companies effectively assess talent, highlight development areas and uncover capabilities.

The economy has taken many twists and turns over the past year, but one trend remains steady: the number of people quitting their jobs. In July 2022, 4.2 million Americans left their jobs, according to data from the Bureau of Labor Statistics.

The desire to change employers and seize new career and earning opportunities is fueling a fight over skilled employees in the labor market. Many analysts expect this job churn of the Great Reshuffle to endure. Companies will continue to suffer an ongoing brain drain as their skilled workers leave and leaders struggle to replace them with comparable talent. This brain drain has already caused considerable disruption – delaying projects, impacting team performance, leading to lost corporate knowledge, and often impacting morale. 

As companies attempt to combat the Great Reshuffle-inducted disruption and rebuild their workforce, they should ask themselves these critical questions:

  • What level of talent are you losing and are you replacing them with equally skilled employees?
  • How much are your employees improving their skills each year? Is the year-over-year growth fast enough to meet your strategic business goals?
  • Can you easily identify your high-potential employees and do you have a strategy to develop and retain them?

Many companies may have the answers to these questions hidden in data they already possess or can easily obtain. Purposefully drilling into these questions with the right data will help identify skill gaps to inform and guide a company’s workforce strategy for effectively navigating the shifting labor landscape.

Adopting a comprehensive, data-informed feedback approach

To address these questions, businesses need to consider the right approach to bridging the skills, knowledge and competencies gap. A common approach for implementing a data informed strategy is to gather feedback on employees’ skills and capabilities from multiple perspectives in the form of 360-assessments. 

Many HR leaders position 360-assessments as useful for individual and team development. Individual and department level reports from 360s can help managers and their employees align on employees’ current capabilities and what they need to develop. Yet, companies should go a step further and consider the deep insight they can gain from the aggregate data they collect with these assessments. 

When done correctly – with the right people and processes – 360-assessments can provide insight into the shifting capability of a company’s workforce and where the greatest risks lie. Moreover, this data supplies critical input to the strategic workforce planning process as a company determines how to meet current and future staffing needs and weigh options for the most efficient and cost-effective methods to recruit and retain talent in a hyper-competitive labor market.

Capability of talent lost vs. new talent

A fundamental challenge for an HR leader is: “What level of talent is walking out the door and are you replacing them with equally skilled employees?” If you can answer these two questions, then you can pinpoint the type of talent the organization should recruit, hire and retain to ensure the organization thrives and grows.

Data from 360-assessments can help address that challenge, particularly when organizations conduct these assessments consistently, over time. Even before the pandemic, organizations, particularly in the private sector, had average employee separation rates of nearly 50 percent. Internally, the level of employee movement was inevitably higher as employees sought better opportunities within their own firm, either to broaden their span of responsibilities or move to a new and more engaging discipline. When a company loses talent – or experiences inter-firm shifts – the impact on specific departments or functions can be significant.

For example, a marketing department within a Fortune 500 firm faced significant pressure to enhance marketing skills which were essential to the growth of the company in a highly competitive environment. At the same time, the function had lost 16 percent of its employees from the prior year. While most of these employees stayed with the company, the marketing function had lost access to its key talent. 

The client conducted a 360-assessment focused on employee development. In a typical 360, raters (who may include the manager, peers, direct reports and even external clients) evaluate each employee’s capabilities on a list of defined behaviors, while the employee does the same for their own behavior. In this case, the firm employed a streamlined process where only the manager and employee responded to the assessment questionnaire. 

The 360 data proved to be enlightening, particularly when marketing employees were segmented into three cohorts: 1) Employees who left the function and moved to roles within or outside the company (the Leavers), 2) Employees who were hired into the function to backfill the employees who left (the Joiners), and 3) Employees who stayed within the marketing function over the two-year period (the Stayers). 

Think of the Leavers as talent and capabilities lost, while the Joiners are the talent or capabilities acquired. Organizations can calculate the net capability of change due to employee turnover by subtracting the capability of the Leavers from the capability of the Joiners. At worst, a leader would want the net capability change to be zero, where the talent hired has the same capability as the talent lost. At best, the organization would increase the net capability of the function by hiring even more capable people than it lost.

In the current labor market, replacing lost capability will be significantly more expensive than before. Companies must be willing to make investments in workers with more advanced capabilities. Many managers think they can hire more junior or less capable talent and address the competency gap over time through training. This type of decentralized approach can suboptimize the organization without a broader workforce hiring strategy in place.

Enticing employees by improving their skills

Businesses cannot afford to lose their experienced talent in the current labor environment, so they need to find ways to entice current employees to stay. If an employer’s strategy is to enhance or expand training offerings, they must recognize that the quality of the training matters, both in its design and execution so that it increases employee skills and capabilities. Unfortunately, a lot of training does not achieve that basic goal.

For instance, between 2019 and 2020, for the Stayers within the marketing function of the Fortune 500 firm, the average year-over-year gain in competency was less than 5 percent. This gain in performance is consistent with an organization that either lacks the right training programs or an organization that does not design its learning for application (or both). Further, assuming a linear growth at less than 5 percent per year, it would take the Joiners more than seven years to achieve the level of their peers in 2020. 

No organization could operate effectively in a world where it took them seven years to get an employee to full productivity (or to replace lost productivity). Beyond that, during those seven years, their peers would have grown as well, so the lower skilled Joiners would continue to be a drag on the overall competency of the organization.

To accelerate capability growth of an employee base, companies should consider offering formal and informal learning to build skills, while providing the appropriate tools and resources to employees and ensuring they have the time to apply them. Regardless, being purposeful about training strategies and measuring their effectiveness to quickly adjust tactics will enable businesses to successfully grow their workforce.

Identify and retain high-potential employees

Given the concerns about retention and shifting skillsets, organizations feel more pressure than ever to attract and retain top talent and improve the capabilities of all employees. Leveraging 360 data can help companies effectively assess talent, highlight development areas and uncover various perceptions of capabilities.

Companies can shape effective training and development strategies using 360 data to pinpoint tactics relevant to different populations of employees and provide more meaningful and impactful solutions. For example, for highly valued employees who are significant contributors to the organization, 360 data can uncover strategies for retaining this population of employees through development or growth opportunities to engage and motivate them.

Hidden gem employees who are rated highly by others may not view themselves nearly as competently as their peers, or they may need coaching or development to boost their self-confidence. With proper guidance, stretch assignments and a steady stream of feedback to help align their self-perception with those of their colleagues, these employees can become future stars. 

To retain promising Joiners, onboarding functions should deliver more intense and targeted training to help replace any lost capabilities. Similarly, organizations must actively engage managers and help build their coaching skills to accelerate new employees’ development. Learning and development strategies can supply more robust performance support to enable new employees to speed up their time to full productivity. Ultimately, the goal for many companies is to turn Joiners into Stayers rather than see them leave within a year (or less) because their people practices were not tailored to the different mix of employees brought into the organization.

Every organization will experience disruption from the Great Reshuffle. To mitigate the risk associated with workforce churn, companies should leverage the deep insights buried within 360-assessment data to help rebuild their workforces more efficiently and effectively for a promising future.