How the Skills Gap Can Kill Your Company's Profits: 3 Case Studies

Leaders know intuitively that critical skill shortages hurt performance, but specifying and communicating the actual costs is a major barrier to investing in effective solutions.

Click on the video below to hear three stories that illustrate very different types of skills gaps and the specific (but often hidden) costs for each organization.

These cases reflect common types of skill shortages that I see in my research and consulting.

1. Lost operational knowledge, like that experienced on the production line at Texas Instruments, can seriously decrease quality and efficiency and increase production costs.

2. Lost software and technology skills, as NASA experienced, can lead to major failures in legacy computer systems. I am seeing these increasingly serious risks in a wide range of core applications, from credit card to property tax collection systems, where an aging workforce threatens to leave with unique knowledge about outdated technology infrastructure, making it increasingly vulnerable to crashes and sustained downtime.

3. Knowledge lost during transitions or restructuring.  Acquisitions, mergers and reorganizations are a fact of organizational life today. But leaders seldom pay enough attention to the critical knowledge at risk while these changes are being implemented. As one pharmaceutical company learned, the knowledge allowed to walk out the door costs the organization millions when management doesn’t know how to identify and value it.

Depending on your context, three places to start in reducing the costs of critical skill shortages are:

  • Challenging assumptions about documentation. Many firms think it’s okay for employees to leave because everything is documented. But that always assumes the documentation is correct and thorough enough. Where possible, start by asking your veteran employees to review documentation to make sure it is an accurate reflection of how tasks are actually performed.
  • It may seem impossible to capture all the relevant knowledge of departing employees. But what is almost as helpful is capturing the essential questions that new hires must know to ask.

To reduce the chances of another software failure, for example, NASA created a technical questions database after the failure of the Mars probe. This database allowed some of NASA’s best engineers and managers to provide the key technical questions they might ask during project development or in a formal review meeting. These questions were intended to identify problems that could occur on NASA flight projects, even if veteran engineers weren’t available to review a team’s work.

  • The first step in preserving critical capabilities during a major organizational transition is to be aware of what knowledge and skills are at risk.  One tool for doing this is the Knowledge Silo Matrix, which gives management a visual picture of who has essential skills and their depth of knowledge in specific areas. This will help reduce the unintentional loss of important capabilities that are very expensive to recreate, recover, or rehire.

To keep top management’s attention on solutions, try to stay focused on the costs of failing to address skills gaps before it is too late. Contact me to explore the best solutions for reducing the costs of critical skills gaps in your organization.