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Talent Development

Organizations don't know their people's skills - and it's costing them

October 21, 2023
Emily Vo

Kaisa Savola

October 21, 2023
Talent Development

Organizations don't know their people's skills - and it's costing them

Kaisa Savola

According to our recent Learning & Development survey, organizations lack comprehensive knowledge of their employees' skills. When surveyed, 34% of individuals agreed and 10% strongly agreed that their organization understands their complete skillset, making up a total of only 44%.


Those who are unaware of their employees' skills are missing out on a tremendous opportunity. As skill sets continue to grow at a yearly rate of 10% and 30% of skills become obsolete every 3 years, it is crucial for organizations to understand the skills they possess and the skills they require for survival. When employees are unable to utilize their full skillsets at work and do not have opportunities for growth, they are more likely to leave. We are all aware of the costs associated with employee turnover. Replacing an employee with a €50k annual salary costs €16k. With an annual salary of €100k, the cost increases to €33k. By comprehending the skills and abilities of the employees, organizations can make informed workforce planning decisions, utilize their workforce and their skills more efficiently, remain competitive, and enhance employee engagement and retention.


Not understanding the skills of your employees can have a significant impact on your organization. According to a recent study by IBM, poor skills management costs organizations an average of $2.4 million per year. These costs stem from various factors, including expenses related to hiring and training, decreased productivity, and customer dissatisfaction.


Furthermore, there are indirect costs associated with not knowing your employees' skills. Organizations that lack knowledge of their employees' skills are less likely to innovate and adapt to change, resulting in a potential loss of competitive advantage.


In this blog, we discuss, how you can make sure you know the skills of your organization, team, and people, how to use them efficiently, and how to keep your people skilled so that you are prepared for the future and not spending your money on leakages. We will also shed light on the consequences of not knowing them.


From bad hiring to employee churn

"Previously, our hiring decisions were based on intuition, but now with Talbit, we are revolutionizing our approach by making data-driven decisions on hiring."
Manager, tech company


By utilizing Talbit, organizations can avoid the pitfalls of not knowing their employees' skills and making poor hiring and promotion decisions. When organizations are unaware of their employees' skills, they often resort to hiring new individuals to fill those skill gaps. However, this can lead to hiring someone who lacks the necessary skills, doesn't align with the company culture, or isn't as qualified as initially perceived during the recruitment process. Failing to recognize the skills of existing employees and instead hiring externally can result in frustration, demotivation, and disengagement, ultimately leading to resignations.


As an illustration, let's say an organization hires someone for a 100,000 position, but unfortunately, it turns out to be a poor choice. In this scenario, the organization could potentially face losses of up to $ 30,000 within the first year alone. Here's a breakdown of some of the issues associated with such a bad hire:

- Recruitment and hiring costs, including expenses related to advertising the job, reviewing resumes, conducting interviews, and extending an offer.

- Training costs, which can vary depending on the role but can be quite substantial, especially for complex or technical positions.

- A lack of effectiveness in job performance by the employee, resulting in lost productivity for both the team and the organization.

- Opportunity costs, such as missed deadlines, lost sales, and customer dissatisfaction, all stemming from the negative impact of a bad hire.


By being aware of the potential consequences of poor hiring decisions, organizations can proactively invest in skills assessments and training programs to mitigate these risks and protect their bottom line. 


Failing to develop employees

As mentioned earlier, the demand for skill sets is growing at an annual rate of 10%, emphasizing the importance of understanding current skills and building future ones. With the advancement of AI methods, which are already transforming our tasks and creating new ones, organizations must have a clear and up-to-date understanding of their skills landscape. This knowledge will enable them to navigate the present and future job market effectively and stay ahead of the competition.


As skill development doesn’t happen overnight, plans need to be put in place that will help people build skills that will prepare them for the future. Without knowing what skills their employees have, it’s hard to provide them with the targeted training and development they and the company need to stay relevant and succeed. This can lead to having an organization that isn’t ready for the future, and employees feeling unchallenged and unvalued, decreasing the competitive edge, motivation, and engagement.


Conducting a skills assessment provides organizations with valuable insights into their employees' abilities and expertise. It serves as a power tool to identify those with in-demand skills and pinpoint individuals who may benefit from further training and development opportunities. This comprehensive assessment allows organizations to better understand their workforce and make informed decisions to enhance productivity and success.


Talbit is a powerful tool that organizations can leverage to conduct comprehensive skills assessments. This innovative skills development platform not only helps identify and assess the skills of employees but also facilitates their growth and development. With Talbit, organizations can create skill-based roles, visualize career journeys, identify skill gaps, and build the skills necessary for future success. It's a one-stop solution for organizations looking to optimize their workforce and ensure they have the right skills in place for continued growth and competitiveness.


Losing employees to competitors

Based on our survey findings, it is evident that a vast majority of organizations are not fully utilizing the skills available within their workforce. While it is understandable that 100% utilization may not be achievable, our interviews have revealed that employees have untapped potential that can greatly benefit the organization.


When organizations fail to prioritize the development of their employees and overlook opportunities for them to showcase their talents, they risk losing these valuable individuals to organizations that truly value their potential. Unfortunately, this type of talent leakage is more common than many organizations realize. The lack of investment and recognition not only drives employees to seek opportunities elsewhere, leading to increased turnover and the loss of top talent, but it also has a detrimental impact on your employer branding.


By implementing a comprehensive skills assessment and a strategic approach to continuous learning and development, organizations can empower their workforce, maximize returns on investment in learning and development, enhance employee engagement and retention, minimize turnover rates, and enhance overall productivity.



Overall, the cost of not knowing your employees' skills can be significant. There is a correlation between the investment in skills assessment tools and employee turnover. Studies have shown that organizations that invest in skills assessment tools have lower employee turnover rates.


A study by the Society for Human Resource Management found that organizations that use skills assessment tools to make hiring decisions have a 20% lower turnover rate than organizations that do not use skills assessment tools. Another study by the Hay Group found that companies that invest in developing their employees' skills can see a reduction in turnover of up to 30%.


These studies suggest that investing in skills assessment tools can be a cost-effective way to reduce employee turnover. Here are some specific statistics on the cost of employee turnover:

  • US Department of Labor: the average cost of a bad hire is up to 30% of the employee's first-year earnings.
  • The Society for Human Resource Management found that the average cost of employee turnover is $15,000 per employee.
  • The Hay Group found that the cost of replacing a lost employee can range from 50% to 150% of the employee's annual salary.

Given the high cost of employee turnover, investing in skills assessment tools can be a wise investment for organizations. By helping organizations make better hiring and development decisions, skills assessment tools can help reduce employee turnover and save organizations money.


In addition to the financial benefits, reducing employee turnover can also lead to a number of other benefits, such as:

  • Increased employee morale
  • Improved productivity
  • Reduced stress and workload on other employees
  • Improved customer service
  • Reduced risk of legal problems

Overall, investing in skills assessment tools can be a cost-effective way to reduce employee turnover and improve the overall performance of an organization. With Talbit, not only do you get a skills visualization but also a tool that will allow you to communicate your strategic skills, skill gaps, and career journeys.

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