Upskilling v hiring: The workforce strategy divide CEOs must address

Australian CEOs are facing a defining workforce dilemma in 2026: do you build the skills you need internally, or do you hire them in? writes Leanne Lazarus.

With skills shortages intensifying across professional services, technology, risk, healthcare and infrastructure, many organisations are finding that treating this as an either-or decision is costing them time, talent, and competitiveness. Over 82 per cent of employers plan to recruit in 2026, yet 23 per cent cite low application volume and 27 per cent report poor application relevancy as key hiring challenges.

The reality is simple: upskilling and hiring are not opposing strategies; they are complementary, and the leaders who understand this are pulling ahead.

Why the divide exists

Economic uncertainty has reshaped workforce behaviour. Employees are more cautious about changing jobs, while businesses are under pressure to do more with leaner teams. At the same time, rapid advances in AI, automation, and regulation have accelerated skills obsolescence.

Many HR leaders default to upskilling as the “safer” option: investing in existing staff to avoid recruitment costs, cultural disruption, or onboarding risk. Others lean heavily on hiring, assuming fresh talent will instantly close capability gaps. Unfortunately, both approaches fail when used in isolation.

We’re seeing organisations stall because they’re trying to solve future skills gaps using only one lever. Upskilling without hiring is creating bottlenecks, while hiring without upskilling is creating churn. Career development remains the leading reason employees quit (37 per cent), reinforcing that capability growth must sit at the centre of any workforce strategy.

Where upskilling works and where it falls flat

Upskilling is powerful when:

• The capability gap is adjacent to existing roles.
• Skills can be developed within six to 12 months.
• Institutional knowledge is critical to success.
• Retention is a priority.

In fact, 60 per cent of employers say upskilling and reskilling will shape workforce impact in 2026, compared to just 26 per cent who see it as a longer-term priority. However, upskilling breaks down when organisations expect employees to learn entirely new disciplines on top of existing workloads, or when training isn’t paired with real role redesign.

In 2026, AI is the clearest example. Many employers are introducing AI tools without providing structured training, leaving employees anxious and underprepared. While 75 per cent of employers plan to invest in AI-focused learning and development in 2026, forty-six per cent still cite a lack of in-house AI skills as a key implementation challenge. This doesn’t future-proof the workforce; it quietly disengages it. Upskilling must be targeted, supported and realistic, not aspirational.

Why strategic hiring is not a failure

There is a lingering misconception among some leadership teams that hiring externally signals internal failure. In reality, strategic recruitment is often the fastest way to unlock growth, capability, and resilience.

Hiring works best when organisations need:

• Immediate expertise.
• New thinking or external perspective.
• Skills that are scarce or evolving too quickly to train internally.
• Leadership capability to guide transformation.

Sixty-four per cent of hiring managers have lost candidates due to slow hiring processes, and 47 per cent of teams report working overtime or missing deadlines due to hiring delays. Waiting too long to “build internally” can therefore carry operational risk.

Recruitment also plays a critical role in lifting internal capability. Hiring senior or specialist talent creates knowledge transfer, mentorship and capability uplift across teams. Recruitment isn’t about replacing people; it’s about strengthening systems, and the right hire can elevate an entire function.

The CEOs getting it right are doing both

The most effective workforce strategies in 2026 share three traits:

1. They hire for capability, not just headcount

Rather than backfilling like-for-like roles, high-performing organisations hire with a capability lens – asking what skills the business will need in 12–24 months, not just today. Thirty-one per cent of hiring in 2026 is growth-driven, not just replacement-based, signalling that forward-looking organisations are investing ahead of demand.

2. They upskill with purpose

Successful employers align training directly to business outcomes. AI upskilling, for example, is tied to productivity and decision making. AI and digital upskilling ranks as a top workforce priority for 51 per cent of employers in 2026, second only to productivity and performance (58 per cent).

Employees are given time, tools, and psychological safety to learn – because capability without support does not convert into performance.

3. They use recruitment as a diagnostic tool

Working with specialist recruiters gives CEOs real-time insight into:

• Talent availability
• Salary expectations
• Competitor activity
• Emerging skill sets

5 practical strategies for CEOs in 2026

For leaders navigating the upskilling versus hiring divide, people2people recommends:

1. Map critical skills, not just roles: Identify the five skills your organisation cannot afford to lack, then assess whether they’re better built internally or hired externally.
2. Separate future skills from foundational skills: Future skills (AI, data, automation) often require external expertise. Foundational skills (process, systems, leadership) can usually be developed internally.
3. Hire to accelerate upskilling: Use recruitment to bring in specialists who can train, mentor and uplift internal teams.
4. Design hybrid roles thoughtfully: Overloading roles with unrealistic skill expectations leads to burnout.
5. Treat workforce strategy as ongoing, not reactive: The strongest organisations review talent strategy quarterly, not when a resignation lands on a desk.

Leanne Lazarus is the recruitment manager, specialist for people2people.