Layoffs vs. Upskilling: Are Companies Cutting Training When They Need It Most?

The modern workplace is in flux. Economic uncertainty, tech disruption, and geopolitical volatility are reshaping the labor market faster than ever. In response, companies are making hard choices — and for many, that means cutting jobs. But here's the paradox: at the very moment businesses say they can’t find skilled talent, they’re slashing training budgets and laying off the very people they could reskill.

It begs the question: are companies undermining their future by prioritizing layoffs over upskilling?

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The Layoff Logic: Cutting Costs, Losing Capabilities

The Financial Playbook

Layoffs are the go-to move when revenue drops or growth stalls. From a CFO’s perspective, reducing headcount is a fast way to cut costs and appease shareholders.

And in uncertain times, preserving cash flow becomes king.

In 2024 alone, major firms across tech, media, and finance laid off tens of thousands of workers, citing automation, restructuring, and the need to “streamline operations.” But often, these moves are reactive, not strategic. Companies reduce their workforce without fully accounting for the long-term knowledge loss or the impact on morale, productivity, and innovation.

The Talent Drain

When companies lay off experienced employees, they don’t just lose bodies — they lose institutional memory, team cohesion, and potential future leaders. The irony? Many of these organizations then complain about skills shortages and hiring challenges, creating a feedback loop that worsens their own problems.

The Upskilling Imperative: Not a Luxury, a Lifeline

The Skills Gap Is Real — And Growing

A World Economic Forum report estimates that by 2026, half of all employees will need reskilling to stay relevant. AI, automation, and digital transformation are rendering old roles obsolete while creating entirely new ones. Yet companies often treat training as optional — a nice-to-have when times are good.

That mindset is outdated and dangerous. Upskilling isn’t a perk. It’s a survival strategy. Organizations that invest in employee development during downturns are better positioned to rebound, adapt, and outperform competitors.

Evidence From the Field

Research consistently shows that companies with strong learning cultures perform better over time. A Deloitte study found that high-performing organizations are five times more likely to have learning as a core part of their culture. IBM reported that every $1 invested in training yields $30 in productivity gains.

The bottom line? Training pays. Cutting it is often a false economy.

Why Companies Cut Training Anyway

Short-Term Thinking

Training is a long-term investment. Layoffs deliver immediate financial relief. For executives under pressure to show quarterly results, the choice can seem obvious — even if it’s ultimately self-defeating.

But short-termism has a cost. Eliminating learning programs during tough times often means that companies aren’t ready when growth returns. They scramble to hire talent they could have developed internally, usually at a higher cost.

Misaligned Metrics

Many organizations struggle to measure the ROI of training. Unlike sales or marketing, where results are quantifiable and immediate, the impact of learning can take months or years to materialize. Without clear KPIs, training becomes an easy target for cuts.

In addition, some leaders wrongly assume that external hiring is more efficient than internal development. But studies show that outside hires cost more and take longer to reach peak productivity.

Culture and Communication Failures

Some companies simply don’t value continuous learning. Others do, but fail to communicate its importance effectively. If employees see training as a box-checking exercise or a one-off workshop, it’s no wonder execs don’t see the point in keeping it during hard times.

The False Economy of Layoffs Over Learning

Layoffs Don't Solve Skills Gaps

Too often, layoffs are used to “fix” the problem of outdated skills. Instead of training existing employees to fill evolving roles, companies remove them and hire externally — assuming the market will provide ready-made talent. But with global skill shortages, that’s a risky bet.

For example, companies seeking AI and data talent in 2024 struggled to fill roles even after large layoffs. The demand far outpaced supply, and salaries soared. In contrast, companies that reskilled internal employees were able to fill roles faster and more cost-effectively.

Culture Takes a Hit

Frequent layoffs corrode trust and engagement. Employees become risk-averse, less collaborative, and more focused on survival than innovation. Upskilling, on the other hand, signals investment in people — which boosts loyalty, morale, and retention.

In fact, LinkedIn’s 2023 Workplace Learning Report found that employees at companies with strong learning cultures are 57% less likely to leave.

Case Studies: What Works, What Doesn’t

Microsoft: Upskill to Stay Ahead

When Microsoft began its digital transformation in the mid-2010s, it didn’t just hire new talent — it retrained existing staff. From engineers to marketers, employees were offered programs in cloud computing, AI, and agile methodologies.

The result? Microsoft emerged as a dominant force in cloud technology and saw sustained growth, even through economic downturns.

Meta and Google: Layoffs Without Learning

Contrast that with Meta and Google, which made massive layoffs in 2023 and 2024 while reducing internal development programs. Despite enormous resources, these companies struggled with public backlash, internal confusion, and hiring delays for emerging tech roles. Many ex-employees later reported they would have stayed — and grown — if training had been offered.

AT&T: A Long-Term Commitment

AT&T launched its Future Ready initiative to upskill 100,000 workers in areas like cybersecurity, data science, and cloud computing. Instead of laying off legacy employees, the company gave them pathways to transition into new roles.

That investment paid off. AT&T was able to meet new tech demands without losing talent or incurring massive hiring costs.

What Companies Should Be Doing Instead

Make Learning Non-Negotiable

Upskilling shouldn’t be a budget item that gets cut in hard times — it should be embedded into business strategy. That means treating learning as infrastructure, not overhead.

Companies need to align training programs with business goals. That starts with leadership buy-in and extends to frontline managers who reinforce learning as part of daily work.

Use Data to Prove ROI

To protect training budgets, companies must get better at measuring impact. That includes tracking skills acquisition, performance improvements, internal mobility, and retention rates. Tools like learning analytics platforms and skills taxonomies can help tie development to business outcomes.

When learning is tied to metrics that matter — like revenue growth, customer satisfaction, or innovation speed — it’s harder to cut.

Reskill Before You Hire

Before going to the job market, companies should look inside. Can the role be filled with someone already on the team — with the right training? Can existing employees be given stretch assignments or learning pathways?

Internal mobility not only saves money — it builds loyalty and strengthens culture. It also allows companies to fill roles faster, since they’re not competing in tight external labor markets.

The Role of Leadership: Set the Tone at the Top

From Expense to Investment

If leaders want to future-proof their organizations, they need to flip the narrative: training isn’t an expense, it’s an investment. And in a world of accelerating change, it may be the only sustainable way to keep up.

CEOs and CHROs must champion learning as a business-critical function — not HR window dressing. That means funding it, measuring it, and making it part of everyone’s job.

Transparency and Trust

During times of uncertainty, employees want clarity. If layoffs are unavoidable, leaders must communicate why — and how they plan to support the remaining workforce. Offering reskilling, career pathing, and upskilling options isn’t just good optics — it’s good business.

Summary: The Choice Is Clear — and Urgent

The world isn’t slowing down. Automation, AI, and global disruption are only accelerating. In this environment, cutting training is like throwing out your tools during a home renovation.

Companies that choose layoffs over upskilling may win the next quarter. But they risk losing the next five years. Those that double down on learning — even in tough times — will come out stronger, smarter, and more resilient.

The question isn’t whether you can afford to invest in upskilling. The question is: can you afford not to?

About LMS Portals

At LMS Portals, we provide our clients and partners with a mobile-responsive, SaaS-based, multi-tenant learning management system that allows you to launch a dedicated training environment (a portal) for each of your unique audiences.

The system includes built-in, SCORM-compliant rapid course development software that provides a drag and drop engine to enable most anyone to build engaging courses quickly and easily. 

We also offer a complete library of ready-made courses, covering most every aspect of corporate training and employee development.

If you choose to, you can create Learning Paths to deliver courses in a logical progression and add structure to your training program.  The system also supports Virtual Instructor-Led Training (VILT) and provides tools for social learning.

Together, these features make LMS Portals the ideal SaaS-based eLearning platform for our clients and our Reseller partners.

Contact us today to get started or visit our Partner Program pages