How skills-first approach enables a fivefold transformation in organizations

In brief

• Across all business transformations, improved accuracy with skills intelligence can boost transformation efficiency by 1.5 to 5 times.
• Typical accuracy rates for hiring, training, and employee attrition are between 70% and 80%, and skills intelligence can potentially improve these rates by 10% to 20%. 
• Workforce transformation costs are substantial and often underestimated, with hidden expenses and accuracy rates potentially increasing costs by 3 to 10 times.
• Successfully realizing value from skills intelligence starts with a shared business case, requiring collaboration among HR, business, and finance leaders.

To address these challenges, organizations are leveraging skills intelligence to significantly reduce the costs related to workforce transformation. This approach improves the effectiveness and efficiency of critical areas, such as hiring, training and attrition. As skills intelligence gains traction, a key question arises: What impact can it have on an organizational level?

EY in collaboration with iMocha recently launched a report on “Driving economic impact and realizing value with skills intelligence” which explores the economics of workforce transformations and the transformative impact of skills intelligence across key industries, such as technology, BFSI, retail, and telecom. Drawing on in-depth interviews with HR and business leaders, as well as survey data from over 240 HR leaders and 340 employees across 175 unique companies, the report highlights that traditional methods often overlook the full spectrum of costs associated with workforce transformation. Skills intelligence provides a more accurate and holistic view, enabling better cost management.

The previous two reports in this series, ‘Tech skills transformation 2025’ and ‘Skills-first transformation - SFT’ highlighted four key learnings: AI and automation are significantly impacting job roles and skills; the emergence of the ‘power user talent’ persona is reshaping future job roles; companies are increasingly adopting skills-first transformations, despite some challenges; and skills intelligence is a key driver of the next phase of SFT (Skills First Transformation), referred to as SFT 2.0.

Talent transformation priorities of HR leaders and baseline accuracy rates

The global employee engagement is low on average. At-scale workforce transformation is imminent, primarily driven by tech skills. Typical accuracy rates during workforce transformation for hiring training and employee attrition are reported to be 70% to 80%.

SFT 2.0 approach can potentially help improve accuracies of hiring, training and employee attrition by 10% to 20%. Skills intelligence improves accuracy during hiring, training and employee attrition through improved visibility on individual skills, benchmarks and personalized training paths.

63% of HR leaders surveyed by EY reported a positive impact on talent retention, while 58% reported improvements in employee performance due to SFT initiatives. A notable 83% of employees also reported that they are more likely to stay with companies that adopt a skills-first approach.

HR leaders response on the scale of benefits areas and impact with skills-first approach

How realistic costs of hiring, training and employee attrition include multiple hidden costs?

The realistic costs of hiring per role are higher than the planned cost due to additional hidden costs, such as additional training cost, employee turn-over cost and re-hiring costs. Similarly, the realistic costs of training per role include additional hidden costs such as additional training, salaries and opportunity cost due to lost productivity. And the realistic costs of employee attrition per role includes additional hidden costs, such as a realistic cost of hiring a replacement and value realization over time due to the comparative productivity benefit/loss

The actual unit costs of workforce transformation can be 3x to 5x of typical unit costs, increasing even further based on the impact of the job role. 

• For typical accuracy of 75% and impact factor* of 1.5x of CTC, actual unit cost of hiring, training and attrition per headcount are ~30%, ~35% and ~30% of CTC, respectively.
• For impact factor of 5x of CTC, the same numbers are ~60%, ~72% and ~75% of CTC, respectively.

*Impact factor – the proportionate revenue impact for any job role, as a multiple of annual CTC (cost to company)

Skills-first approach is better across types of transformations

Irrespective of the type and nature of business transformation, an uplift in accuracy rates with skills intelligence can deliver 1.5 to 5 times higher transformation efficiency.  This gain in transformation efficiency comes from uncovering potential future states associated with better business outcomes, improved execution aligned to the plan and minimized transformation costs.

Accelerating the foundation of ‘skills-first’

Realizing value from skills intelligence requires three foundational elements: business case for skills intelligence, operating model/job role directory and skills taxonomy. A common understanding of the business case for skills first approach between HR, business and finance is essential for success. Resources such as O*NET and Singapore Skills Frameworks can be leveraged as a reference for building initial models alongside the business case frameworks presented in the EY iMocha report.