What is upskilling?
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Published: 4 December 2023
Contributors: Tasmiha Khan, Michael Goodwin

What is upskilling?

Upskilling is the process of improving employee skill sets through training and development programs to minimize skill gaps and prepare employees for new jobs or roles. 

While the concept of upskilling is relevant across various industries, it holds particular importance in the IT sector, where change is the only constant. 

Addressing the skills gap is a pressing concern. According to the Future of Jobs Report 2023 from the World Economic Forum, 85 million jobs are estimated to be displaced by automation by 2025, and 40% of core skills will change for workers.1 When companies struggle to find new talent possessing specific skills, it often results in vacant positions, project delays and lost business. In response, upskilling offers a transformative solution by developing the skills of existing employees to fill current and future needs.

Upskilling is often beneficial for both employers and employees. For employers, it is a cost-effective strategy—promoting from within often proves more economical and efficient than seeking external hires.1 Internal candidates are also already immersed in the company's culture and processes, which in turn allows them to more seamlessly integrate into new roles and responsibilities. In short, upskilling enables companies to retain, and demonstrate their commitment to, good talent.

For employees, upskilling initiatives are a testament to their value within the organization. It invests in their growth, provides avenues for career advancement and higher salaries (link resides outside ibm.com), enhances job satisfaction and fosters a sense of community. Recent research shows that there is an employee appetite for such programs. A 2021 Data/AI Salary Survey from O’Reilly found that 64% of respondents participated in training or obtained certifications in the past year, with 31% spending over 100 hours in training programs, ranging from graduate degree programs to reading blog posts.2

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Upskilling vs. reskilling

In the realm of upskilling, there are two fundamental concepts: upskilling and reskilling. Upskilling typically involves enhancing existing skill sets to make employees more proficient in their current roles or prepare them for new ones. Reskilling requires learning entirely new skills, often to adapt to changing job demands. In the IT industry, both upskilling and reskilling are common—and valuable—strategies. 

For example, the pandemic significantly expedited the adoption of automation and digital transformation across industries3, leading to a crucial demand for upskilling and reskilling. With the abrupt transition to remote work, companies were compelled to promptly provide their employees with essential skills and technologies to enable them to effectively carry out their jobs from home. Sales professionals, for instance, needed to become proficient with tools like Zoom for lead pursuit and virtual meetings.

Upskilling strategies

Organizations might consider the following strategies as they help employees enhance existing skills, or learn new ones, to meet evolving job requirements and industry demands:

Perform industry and organizational assessment

Assess industry trends and demands, and identify key technical skills in the organization's industry. Then, compare this research to current employee skill sets and company goals.

A stronger understanding of where the organization’s industry is headed will help identify what sort of employees (with what skills) will be most valuable, and will help ensure that upskilling efforts match organizational goals. It’s wise to consider both short and long-term impacts to ensure that upskilling investments are worthwhile and accurately targeted.

Balance with soft skills enhancement

Recognize the importance of soft skills, like communication, problem-solving and leadership skills, and their synergy with technical expertise for well-rounded professionals. In your overall skill assessment, consider any soft skills training that might need to accompany technical upskilling efforts.

Integrate artificial intelligence and digital transformation

Incorporate AI and digital transformation goals into employee upskilling programs to help both employees, and the organization more broadly, keep pace with technological advancements.

Gradual progression and ongoing learning

Encourage a gradual increase in responsibilities aligned with the acquired skills, promoting continuous learning as a part of the work culture. Let employees learn at their own pace when appropriate.

Provide accessible learning experiences

Ensure that learning experiences are inclusive and accessible to all learners. This helps foster a broad culture of learning within organizations. Human resources departments can play a pivotal role in upskilling efforts, helping to shape tailored development programs, and ensuring that the upskilling process is smooth, efficient and takes the interests of all parties into account.

Offer incentives

To encourage employee engagement with upskilling initiatives, organizations can offer financial incentives, benefits, certifications and credentialing opportunities to provide compensation and validation for newly acquired skills. New certifications and credentials help bolster resumes, and financial and benefit incentives help to provide immediate value and recognition to employees who have proactively participated in upskilling programs.

Types of upskilling programs

Upskilling can be accomplished through several methods, depending on the skills being taught and employee capabilities and preferences. This includes specialized in-person training workshops, online courses, self-paced certifications, mentorship programs and graduate courses. All these initiatives empower individuals to stay competitive in the job market by acquiring in-demand skills.

Training programs

Training programs are a fundamental component of upskilling. These initiatives provide structured learning experiences that empower employees to develop new skills and remain competitive in their field. Training programs come in many forms, and organizations will have to decide which is best for their workforce.

For example, does the organization have the resources to provide training in-house, or will training programs be outsourced? Can training be offered in a group setting, or does the skill set require one-on-one instruction? Is the training most effective in-person, or can employees learn the material online? Thinking through these types of questions will help organizations identify the most appropriate approach.

Online courses

Online courses provide flexibility and convenience, and can be set up to allow employees to approach the material at their own pace. These courses can also be frequently updated and improved to keep content up to pace with industry trends.

One drawback, however, is that certain skills may not be as effectively taught in an online setting. Some instruction requires (or at least benefits from) hands-on or in-person instruction. Again, organizations will weigh these decisions on a skill-dependent basis.

Mentorship

Mentorship and shadowing team members plays a crucial role in upskilling. These techniques are great for skills that cannot be taught in a traditional instructional environment. They allow an employee to observe the role in action and get a live feel for the job.

Mentorship also allows the organization to leverage a subject matter expert within the company—and for this individual to sharpen leadership skills—and for the trainee to have direct access to someone who can help with questions along the way. It's a technique that often provides growth opportunities for all involved.

Graduate programs

Some roles may require additional degrees and more formal study. Organizations often invest in an employee’s educational development in exchange for a future commitment to the organization. Such programs help create more talented employees at the forefront of their fields who can provide greater value to the organization.

Benefits of upskilling

Upskilling offers valuable advantages such as a more capable and future-oriented workforce, greater employee satisfaction, cost efficiencies and more.

Improved employee retention and satisfaction

Companies that invest in upskilling their workforce show that they value their employees' growth and development. And employees who feel valued are more likely to stick around. Upskilling enhances overall employee satisfaction as it opens doors to new career opportunities and demonstrates to employees that there are multiple career paths within the company.

During the Great Resignation (link resides outside ibm.com), an Amdocs survey (link resides outside ibm.com) of 1,000 American workers found that nearly two thirds of employees cited a lack of training and development opportunities as the reason they would leave their jobs.4 Ninety percent of those surveyed consider upskilling programs to be an important feature in prospective employers—the figure rose to 97 percent for tech industry employees.

Employee satisfaction and retention is also assisted by the higher salaries associated with upskilling. O’Reilly’s 2021 Data/AI Salary Survey found that data and AI professionals who spent more than 100 hours in upskilling training and development earned a 55% higher salary increase than those who committed 1-19 hours.2

Reduced hiring costs

Upskilling is generally a more cost-effective solution than hiring new employees. New hires require a lot of work: developing job postings, advertising openings, finding and vetting candidates, conducting interviews and so on. Using a recruiting service or an agency will also cost an organization, through a percentage of employee salary or another form of compensation.

Through upskilling, companies cultivate a more knowledgeable and versatile workforce, and can reduce turnover rates4, as employees in upskilling programs feel supported and engaged in their professional development. 

The cost of hiring new employees varies by industry and position, however the consensus is that it is more cost efficient to upskill than to hire new employees. Trakstar Hire (link resides outside ibm.com) pegs the cost of hiring a new employee USD 5,000. This does not account for onboarding or training. The World Economic Forum's Future of Jobs Report 2023 concluded that the average cost of hiring a new employee was USD 4,425 versus USD 1,300 for upskilling an employee.1 These figures are often much higher in IT, and for more advanced positions.

More competitive workforce

Employees who continually enhance their skill sets become more proficient in their current roles and more adaptable to future ones. Upskilling yields more capable and talented employees who can take on advanced roles within the company and provide a greater contribution to the organization’s success.

Reports from organizations like the World Economic Forum (link resides outside ibm.com) highlight the importance of upskilling for staying competitive in the job market. They emphasize the rapidly changing nature of work and the need for employees to continually enhance their skills. 

Upskilling is not just about staying competitive; it's also about fostering adaptability and creating development opportunities. It enables employees to explore different career paths, enhance their resumes or LinkedIn profiles and move toward career goals. In IT, professional growth is closely linked to upskilling.

Greater ROI

Investing in employee development pays dividends down the line. According to a 2020 Guild Education report on the Dollar Value of Educational Benefits, companies that partnered with Guild’s tuition assistance programs realized a net savings of USD 2.84 for every dollar invested in education benefits. The same study found that these programs also made retention efforts twice as successful compared to organizations without such programs.5

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Footnotes

Future of Jobs Report,” (link resides outside ibm.com) World Economic Forum, May 2023
2021 Data/AI Salary Survey,” (link resides outside ibm.com) O’Reilly, 15 September 2021
"How the Pandemic Accelerated Digital Transformation in Advanced Economies,” (link resides outside ibm.com) Florence Jaumotte, Myrto Oikonomou, Carlo Pizzinelli, Marina M. Tavares, 21 March 2023
Workforce of 2022: Reskilling, Remote and More Report,” (link resides outside ibm.com) Amdocs, 2022
The Dollar Value of Education Benefits,” (link resides outside ibm.com) Guild, December 2020