Addressing the growing human skills gap: recruit or train?

When it comes to tackling the human skills shortage in the market, Australian businesses tend to prefer recruiting new talent over training existing staff, according to new Deloitte analysis. The report elucidates the pros and cons of each approach, at a time when human capital management is a central debate.

Deloitte’s report comes in the context of a growing skills gap in Australia, and a gradual realisation amongst businesses that despite today’s tech-savvy era, people remain at the heart of every organisation.

Automation and technological advancement are causing concern over loss of jobs, although the debate has since somewhat shifted to the lack of skills available in the workforce to unlock the potential of digitalisation. Predictions from some analysts have found that human skills are not on their way out; but just evolving.

In a new report by Deloitte, the firm’s researchers find that human skills will only become more important – by 2030 two thirds of jobs in Australia will be human skill intensive. Two central human skills in demand across all sectors are customer service and time management. At present, 97% of all jobs in Australia require one of these two skills. 

As it stands, the workforce is not equipped to meet the demand for these two human skills. In addition, digital literacy, leadership, creativity and teamwork are others areas where Australia faces a substantial deficit.

Recruit or train?

In trying to bridge the gap, the business environment tends to take one of two approaches: build or buy. The former involves an organisation’s investment in their own staff to develop the skills required to remain competitive in the future. This approach requires considerable investment in not only funds, but also time. However, the risk here is that the enhancement of skills is constrained by the internal pool of talent.

The second approach involves recruiting people with the necessary talent and skills. This involves a considerable investment upfront, but comes with the benefit of being able to directly tap into the capacities required and cater to the needs of the dynamic work environment. 

Each option has advantages, but also costs. For instance, building skills can be time consuming with uncertain outcomes. But buying them can be risky, and the cost of a bad hire is significant. At a macro-level, recruiting talent is the more popular of the two approaches. The overall investment in recruitment per year in Australia stands at $7 billion, compared to $4.5 billion invested in training.

Boosting performance

Executed well, a refresh of human skills can bolster the productivity of organisations. For example, “in Australia, employees that utilise teamwork are 3% more productive than their co-workers, and worth an extra $2,000 per year to the business,” found the report.

Further, “individuals with strong emotional judgement and teamwork skills could help to foster a collaborative and welcoming workplace culture.”

Ultimately, a higher level of human skills among staff can increase the revenue of an average Australian business by over $90,000. Illustrating this, the authors point at the UK manufacturing sector, highlighting how human skills constitute as much as 3% of the productivity gap between the top manufacturing companies and the lower rungs of the sector. 

Concluding, Deloitte’s researchers state, “Over the next decade, Australia will face significant skills shortages. And while the government has a significant role to play, addressing the human skills shortage is everyone’s responsibility. Businesses, and even individuals, have the opportunity to proactively focus on human skills. Doing so could unlock more human capital to power the economy going forward.”