In last month’s column, I highlighted the key questions that many business leaders have been asking when I talk to them about the skills gaps that are impacting their organisation.
How much will the skills gap really cost us? What is the benefit of investing to resolve the problem, and what happens if we do nothing?
The answers have proved elusive to all but a few companies with the time and resources to carry out the necessary financial analysis, but a new research paper by my team at Ennis & Co Group – Understanding The Cost Of Your Skills Gap – has come up with some interesting numbers.
Our conclusion is that there is a commercial upside for automotive businesses who invest in upskilling, with the potential for an uplift in annual turnover of around 3%, compared with the risk of a drop in turnover of 4% or more for businesses who do nothing.
The figures, which have been validated by the economics team at PwC, are based on data from multiple academic and business sources and interviews with 42 senior executives from organisations operating across the vehicle life cycle, from R&D to aftersales.
Taking account of research in areas such as attrition, the time and cost of hiring a new worker, the percentage of workers who require upskilling and the productivity uplift of upskilling staff, we have developed a ‘Skills Gap Cost Model’ to help organisations put a financial number on their skills shortages.
Using the example of a business with a headcount of 250 and an annual turnover £35 million, the model projects a spread of outcomes in the range of £2.5 million. An increase in turnover of more than £1 million is possible if the business invests in upskilling and recruitment. By contrast, zero investment could result in a drop of approximately £1.5 million due to additional costs and lost revenue opportunities.
Our research removes any doubt about the financial benefits of making the right skills investment at the right time. Given the challenges of the talent market, with automotive and mobility businesses competing with other sectors for the same ‘hot’ skills, upskilling and recruitment needs to be at the very heart of business strategy and, I would argue, owned at board level.
In the same way that the Skills Evolution Roadmap 2025 published last year has been used by several organisations in their strategies to tackle skills gaps, it would be nice to think that our financial model will play a part in helping businesses achieve the necessary boardroom buy-in. There’s nothing like a spread of 7% between turnover upside and downside to concentrate minds.
We all know that the sector is facing challenging headwinds when it comes to skills, as evidenced by the succession of gloomy industry surveys, but if you focus too much on the dangers, you risk failing to spot the opportunities.
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