Develop or replace employees, what is better?

Jim van Hulst has worked in several leadership functions at EY, ING Bank, ABN AMRO Bank, and Johnson Controls International. His positions have included Director Talent Management, Global Head Professional Development, and Global Learning Technology Leader. Jim has an MSc. in Learning Technology from the University of Sheffield and a Bachelor of Education from the University of Arnhem/Nijmegen. He also holds a diploma in Business Management and Leadership from the Rotterdam School of Management, and he completed his MBA in 2020 from MSM, The Netherlands. He is a frequently asked speaker and author of numerous articles. Jim founded Jignite recently in 2021.

Jim van Hulst, owner Jignite

Leaders in companies ask themselves “should I either replace or develop my employees”. The transformation in technology has a substantial impact on the near future workforce. Jobs will be changed or will disappear and, in many cases, be replaced by new roles. In research by McKinsey (Dua, et all., 2019), individuals who need training are likely to fall into three categories: those who need to learn a few new skills and technology to remain in their current or similar roles; those who need more substantial reskilling to move into new types of jobs within the organization; and those for whom there is no up-front, immediate next job in the organization.

Do existing employees have advantages?

Existing employees have a significant advantage. The general decision should be to train them for the necessary skills and professionally adapt them to the upcoming technologies and procedures (Gobakhloo, 2018, p.928). If an organization trains its employees, it may be adaptable to the new skill requirements of Industry 4.0. (Sony and Naik, 2018, p.14). However, the length of training to upskill is substantial and ranges from 83 days to 105 days (Future of Jobs, p.19, World Economic Forum).

How many employees need to be replaced or retrained?

In research delivered by McKinsey (2018), 62% of executives believe that more than a quarter of their workforce needs to be retrained or replaced between 2018 and 2023 to deal with the aging workforce and baby boomers who will retire during this period (born between 1946 to 1964). Moreover, numerous research works also suggest that training is an excellent methodology to skill people on Industry 4.0 rather than replacing them. So to answer the question in the heading: it is better and cheaper to develop your employees rather than to replace them.

For more information on Industry 4.0 see my related article.

Sources:

Deloitte (2019). How leaders are navigating the Fourth Industrial Revolution. The latest survey of Industry 4.0 readiness. Retrieved https://www2.deloitte.com/us/en/insights/deloitte-review/issue-22/industry-4-0-technology-manufacturing-revolution.html?id=gx:2pm:3dp:44ireadiness:5awa:6oth:20190122:WEF19 Last visited December 24, 2019.

Dua, A., Hilton Segel, L., Lund, S. (2019). It’s Time for a C-Level Role Dedicated to Reskilling Workers. Retrieved https://hbr.org/2019/09/its-time-for-a-c-level-role-dedicated-to-reskilling-workers. Last visited December 24, 2019.

Ghobakhloo, M. (2018). “The future of manufacturing industry: a strategic roadmap toward Industry 4.0”, Journal of Manufacturing Technology Management, Vol. 29 No. 6, pp. 910-936.

McKinsey (2018). Retraining and reskilling workers in the age of automation. Retrieved https://www.mckinsey.com/featured-insights/future-of-work/retraining-and-reskilling-workers-in-the-age-of-automation .Last visited December 24, 2019.

Sony, M., and Naik, S. (2018). “Key ingredients for evaluating Industry 4.0 readiness for organisations: a literature review”, Benchmarking: An International Journal, Vol. ahead-of-print No. ahead-of-print.

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