KPMG: Firms Favor Reskilling Over Layoffs Amid Talent Gaps

What happened

New KPMG research finds that talent shortages remain one of the biggest obstacles executives face as they try to adapt their organisations to new technology and shifting market demands. According to the survey, roughly a third of executives name talent gaps as a top barrier to transformation.

Despite widespread headlines about layoffs across sectors, the same research indicates that most companies are choosing to reskill existing employees rather than cut them loose. Employers appear to be betting that retraining current staff for new roles and capabilities is a more effective response to skills gaps than workforce reduction followed by external hiring.

Why it matters

The finding complicates the prevailing narrative that layoffs are the default corporate response to technological disruption, particularly as automation and AI reshape job requirements. If executives are genuinely prioritising reskilling over redundancy, it suggests organisations increasingly view internal talent as a strategic asset worth investing in, rather than a cost to be trimmed whenever efficiency pressures rise.

For leaders managing digital transformation and AI adoption, this points to workforce capability — not headcount — as the real constraint on pace of change. Reskilling programmes, internal mobility and capability-building are becoming core levers for transformation delivery, alongside technology investment itself.

By the numbers

• A third of executives cite talent shortages as a top barrier to organisational adaptation, per KPMG.

The Renascence take

Headlines about layoffs travel faster than stories about retraining, which skews public perception of how organisations are actually responding to disruption. The real story is less dramatic but more consequential: firms are quietly recognising that institutional knowledge, customer relationships and workplace trust are expensive to rebuild once lost.

The behavioral economics here is simple — loss aversion cuts both ways. Executives fear the visible cost of layoffs (severance, reputational damage, disrupted service) more than the invisible cost of reskilling delays. But reskilling only works as a genuine strategy if it's paired with clear pathways, measurable outcomes and honest communication about which roles are actually changing. A customer-obsessed operator should treat reskilling not as a PR alternative to layoffs, but as a service-design discipline: map the customer-facing capabilities you'll need in eighteen months, then build the internal mobility routes to get current employees there before the gap becomes a crisis.