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According to research by I4CP, only 30% of companies say their employees have the necessary skills to meet future goals.

What’s even more alarming is that most of the organizations surveyed have insufficient data regarding the skills and capabilities of their organization to enable strategic talent readiness planning.

Becoming a skills-based organization is an increasingly prevalent approach to tackling the above issue.

As an HR leader, I’m helping lead the charge in how my organization makes this tough transition from jobs to skills. Here, I share my knowledge and best practices to help you on your journey.

What Is A Skill-Based Organization?

A skills-based organization is fundamentally strategic workforce planning reimagined into a human-centric approach that puts your employees’ skills and competencies as the pinnacle of your talent strategy.

Instead of focusing on job titles and positions, the primary focus is on the unique skills and abilities of your employees and how they can be developed and deployed most effectively to meet business needs.

This approach requires the deconstruction of jobs into individual tasks and skills, as well as a deep understanding of the specific competencies and skills of each of your employees.

This skills data helps you to align talent with work more effectively and meet your strategic goals.

Additionally, this allows you to focus on both the talent acquisition and talent management strategies needed to build the capabilities your organization needs to be successful.

Key characteristics of a skills-based organization

  • Skills tracking and management: Processes, tools, and metrics are in place to actively track and manage the skills of the workforce.
  • Work assigned based upon skills and abilities: Work is not defined based upon the job title or area of accountabilities, but rather based upon their competencies/skills and how they can be best utilized by the organization.
  • Culture of Learning and Development: Colleagues are empowered to own their career development via a strong organizational emphasis on continuous learning where colleagues are rewarded for the acquisition and deployment of new skills.

Benefits Of Becoming A Skills-Based Organization

There are numerous reasons why organizations are making the skills-based transition.  

In my org, we were driven by increasingly competitive talent market conditions and the need to adapt to emerging technologies like artificial intelligence.

The focus on skills has enabled my organization to focus on reskilling the workforce and deploying our talent more effectively to meet the needs of the business.

Let’s take a look at some benefits of becoming a skills-based organization.  

Better access to internal talent

Having a flexible, skills-based organization allows you to optimize access to your internal talent, remove silos, and more effectively match talent to initiatives where their skills can be best utilized. 

This gives you the ability to put your best talent behind the work that will drive the most value for your company.

Enhanced strategic workforce planning

A deep understanding of your org’s competencies and skills drives significantly enhanced workforce planning capabilities.

A gap analysis of the skills you have today, versus what you need in the future, allows you to forecast and plan for the supply and demand of skills and develop the relevant talent management strategies to meet those needs.

Further, rather than sourcing externally, your learning and development teams will be empowered to create a culture and system of skills-based learning and employee development.

Additionally, focusing on skills can help reduce subjectivity and lead to more effective hiring and promotion decisions.

Increased employee engagement and retention

A skills-based strategy can do wonders for your employee engagement and retention strategies. This is because colleagues are empowered to own their development and have more opportunities to engage in different opportunities across your organization as they build skills.

Increased resiliency via enhanced agility 

The ability to quickly deploy talent based on evolving market conditions and business needs makes your organization more agile and resilient.

In the face of disruptions, you can readily redeploy your resources to where they are most needed to serve your business.

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How To Become A Skills-Based Organization

Becoming a skill-based organization won’t happen overnight.

It requires careful planning, re-evaluating many of your strategic HR processes, and tactful change management to drive adoption from your leadership team and employees.

I encourage you to take a crawl, walk, run model-type approach. You will want to take intentional, small steps to transform your company into a skills-based organization over time.

Here are some steps to take:

1. Get C-suite buy-in

The skills-based transformation will fundamentally change the way your organization operates.  

It’s not something that can be done in a vacuum and requires full buy-in and support from your executive leadership team to be successful.

It’s critical that your skills-based practices design are tied to the strategic direction of your business. 

Articulating the value proposition of creating a skills-based workforce to deliver your strategic imperatives will be critical to getting C-suite buy-in.

Your skills strategy should be regularly reviewed and updated to ensure it stays aligned with your business strategy, your metrics and KPIs, and the direction of your industry.

2. Deploy an HR technology solution

An HR technology solution to help capture and rationalize your employees’ skills data will underpin your skills-based transformation. 

This is a non-negotiable for me. Whether your organization is large or small, you need a system that can help you track, manage, and analyze employee skill data to inform your talent deployment, workforce planning, and employee development efforts.

This functionality is available across many different HR software offerings. Modern HRISs, learning management systems (LMSs), and talent marketplaces all have capabilities designed to help capture skills data in meaningful ways and tie that data to your strategic HR processes.  

3. Skills assessment

Once you have a tech solution in place, your first step will be to assess the competencies and skills of your workforce. 

Ultimately, you will perform a skills gap analysis that compares the critical skills your business needs now and in the future against those of your current workforce.

This should include technical skills like coding and professional competencies like leadership, communication, and problem-solving.

This gap analysis provides critical input into your workforce planning, talent acquisition strategies, skills development opportunities, and other talent management programs and solutions.

4. Deconstruct jobs into tasks and skills

Presumably your organization, like almost every other company out there today, defines the roles your employees do as jobs.

Since the 1800s, job descriptions have been the common language through which we have defined, marketed, and hired talent.

Becoming a skills-based organization requires transitioning away from the tasks and responsibilities commonly used to define jobs towards roles defined by competencies and skills most needed by your organization.

By decoupling roles from responsibilities and defining them by competencies and skills, you’ll create a more agile workforce that can readily be deployed based on where those competencies and skills are most needed within your organization.

Let’s look at a couple of examples of this to help bring this to life:

RoleJob Responsibility TaskSkills
Software Engineering Develop high-quality software solutions according to technical specifications and design guidelines.Develop software solutionsProgramming languages (i.e., Java, JavaScript, Python), software development frameworks, software development methodologies (agile, DevOps), problem-solving 
HR/Talent Acquisition Manager Oversee recruitment and selection processes, including sourcing candidates, conducting interviews, and making hiring decisions.Oversee recruitment and selection processesCommunication and influencing, relationship building, candidate assessment, applicant tracking system (ATS) administration, strategic thinking, sourcing skills 
Marketing ManagerDevelop and implement marketing strategies to increase brand awareness and drive sales.Develop marketing strategiesStrategic planning, data analysis, creative design, marketing research, digital marketing, brand management 

5. Identify impacted areas

Becoming a skills-based organization will have a sweeping impact on your HR and employment functions across your organization.

Essentially, you will need to revisit all your major talent processes and adapt them to a skills-based model.

Talent acquisition

Your talent attraction, selection, and acquisition practices will need to be revised to focus on building talent pools with the competencies and skills needed for the future of your workforce.  

Hiring managers and recruiters will also need to be reskilled to source for skills rather than roles.

Skills-based hiring guides and assessment tools can be leveraged to more accurately evaluate candidate skills and ease your hiring teams into this transition.  

Compensation management

Traditional job levels and their associated compensation bands are traditionally focused around the roles/responsibilities associated with the jobs at various levels.

Your organization will need to redefine your compensation practices around the value of the skill sets of your employees and how they are deployed across your organization.  

Performance management

Performance management has historically been heavily aligned around team and individual-based goals and how your employees perform against them.  

This needs to be evolved to focus on skill development and application in a skills-based environment.

Learning and development

Your learning and development team will be a huge beneficiary of your skills data that they can use to create nuanced L&D strategies.

One major change L&D teams will experience is how training is delivered. Traditionally, L&D can be very role-focused. 

However, as jobs are deconstructed into tasks and skills, your L&D efforts will likewise need to be deconstructed to align to building competencies and skills regardless of role.

6. Develop a skills framework

Your skills framework is a comprehensive categorization and definition of the skills and competencies most relevant to your organization. 

This serves as a map of the skills needed across all the various areas of your organization and will be essential to how you develop and deploy talent based on critical business needs.  

It’s necessary to regularly review and update your skills framework to stay relevant to industry trends and business needs.

7. Introduce a talent marketplace

The aforementioned talent marketplace is often an organization’s first foray into the skills-based environment and will be a significant stage on your skills-based journey.  

Talent marketplaces are simply highly connected, transparent, and skills-based talent management systems underpinned by technology.

This solution will  provide your employees with transparency and support for: 

  • Career paths based on skills and job movement through your organization 
  • Personalized upskill opportunities based on skill gaps
  • Utilization of gigs/stretch assignments designed to expand employee capability and democratize talent deployment 
  • Personalized job recommendations based on current skills and future potential 
  • Enhanced mentoring programs that connect mentors/mentees based upon a common language of skills and interests.

8. Implementation: Skills-based workforce planning

After implementing your talent marketplace, you can begin to do more advanced and intentional strategic workforce planning.

This includes defining skills gaps and building talent acquisition and learning and development strategies needed to meet the future needs of your business.

This is also where you would fully introduce your new talent processes including compensation programs, performance management, and enhanced talent acquisition approaches.

Remember, this will be a large transition for leaders and their teams.  

I’d recommend that each of these items be launched as distinct, incremental improvements designed to support your skills framework. 

It’s critical that, as you communicate these enhancements, you use your skills framework as the thread that ties all of these items together.

All of your strategic HR processes should support the critical skills your organization needs for future success.

Building A Skills-Based Organization: Challenges And Best Practices

Having embarked on the skills-based organization journey with my org, I can share firsthand some of the challenges we’ve encountered and share best practices we

One of my biggest findings was the requirement for the right HR technology tool to support our skills-based needs.

The first vendor/tool we went with is not the one we use today.

Understanding which tool set could meet our size, complexity, and specific needs took some trial and error.

However, once we found the right tool, collecting employee skills and leveraging the data for meaningful workforce planning became infinitely simpler.

Let’s look at some additional potential challenges you’ll have to mitigate against, as well as some best practices you can employ.

Challenges

Lack of leadership buy-in

Leader buy-in, or a lack thereof, is a major pitfall you must overcome as part of your skills-based practices.  

Leaders are often (and rightly so) very protective and proud of the people on their team. They are also traditionally heavily reliant on their talent for both their personal and team success.

This creates a real risk of talent hoarding as leaders get used to the idea of their talent being deployed much more broadly around the organization versus a previously much narrower purvey based on their role accountabilities.  

Overly rigid approach

Like most disruptive changes, transitioning to a skills-based organization is easier said than done.  

There’s no one-size-fits-all approach that will work for every organization. It’s essential to take a flexible approach to how you think about skills and their deployments and ensure that you do not create a structure so rigid that it fails to meet all of the unique needs of your organization.

For instance, certain jobs will presumably always require specific degrees and roles: doctors, nurses, lawyers, and numerous other highly specialized roles often have external licensure/credentialing requirements that govern how these roles can function within your organization, and that’s okay.

The key is for your organization to take into consideration the unique fabric of the work being done and build a skills strategy that works around the parameters of that work.

Maintaining up-to-date skills data

Your ability to deploy your workforce effectively based on skills will only be as good as the data available to you. This means that you need an effective way to continuously collect and maintain skills data.

Having an HR technology tool capable of tracking this information is essential, and it’s equally essential that your colleagues engage with it as intended.

This means that, as new skills and competencies are developed to higher levels of proficiency, you have an ongoing way of capturing these developments. 

This is where evolving your performance management process to a skills-based approach can highly incentivize your colleagues to continuously document new skill-building.

It’s much easier to keep employees engaged in the skills collection process if their performance will ultimately be rated based on skill acquisition and utilization.

Dated compensation structures

Another pitfall to avoid is relying on dated compensation philosophies and structures.  

Traditional compensation structures place employees in broad compensation ranges based on common rubrics of how job levels are defined.

Traditionally, these rubrics are heavily reliant upon the definition of the job, its organizational impact, span of control, responsibilities, and complexity. 

Akin to your performance management evolution, skills-based organizations require compensation structures that put a premium on skill acquisition and deployment throughout your organization versus traditional job evaluation criteria.

This is critical to maintain the efficacy of your skills-based approach and to ensure colleagues are rewarded appropriately for their contributions.  

Best practices

Cross-functional work teams

It’s essential to assemble both a cross-functional leadership steering committee and a diverse functional project team representative of the various areas of your business to lead your skills-based approach.

If your whole plan is led by HR, without leadership buy-in, support, and partnership, you run the risk of implementing a solution that fails to meet the needs of your stakeholders and will therefore fail to get adopted by your stakeholders.

For example, in our project, I included colleagues from the HR Business Partner, HR technologies, and change management teams, as well as leaders and colleagues from various business areas.

A great approach is to look for a subset of your organization as early adopters who can pilot new functionality and help refine your approach before rolling out to the rest of your organization. 

In my case, we used our HR and technology organizations as those early adopters to pressure test new tools, systems, and processes before expanding more broadly.  

Change management support

Like any other big organizational initiative, change management is key to driving awareness, understanding, and adoption.  

Involve your change management team (or professionals who can help drive change management like your HR Business Partners) early and often to come up with change adoption and communication strategies that bring your organization with you on your skills-based journey.  

Colleague involvement in the process

Co-designing solutions with your colleagues serves two important roles: 

  1. Your colleagues will be much more likely to buy into a solution they had input into
  2. Your skills-based organization approach will be significantly more likely to meet their needs. 

There are simple ways to do this.  

Listening strategies like surveys or focus groups are great ways to get your employee's feedback and leverage that as part of your design process.

This can help shape your messaging to your employees as part of your launch strategy and allow you to say “You spoke, we listened.”  

Personalization based on your employees’ wants and needs will create a more impactful solution with a higher likelihood of adoption. 

As all employment-based decisions need to be legally defensible and non-discriminatory, your legal team is a key partner in your skills-based transformation  

Developing a system where skills become the currency of your HR practices requires a deep dive into all of your HR practices to ensure they are equitable, consistent, and legal. 

In a union-based work environment, this will require additional considerations from a labor relations and contract negotiation perspective as well.

Further, we have decades of employment law at federal, state, and localized levels that are all based on a job-centric definition of employment.

It’s essential that you examine all risks based on the locality of your organization to ensure you minimize risk and ensure legal compliance.

The “Post-Industrial Model” of Work

As we wrap up, let me share one final thought with you all.

While I believe strongly in skills-based organizations and how this approach can fundamentally reshape how we think about jobs and the world of work, I also believe that a level of pragmatism is required.

This is a trend that’s looking around the corner of literally decades of work culture and expectations across the modern world. 

Josh Bersin, one of the leading thinkers in the skills-based space, refers to this skills-based transition as the “dawn of the ‘post-industrial model” of business.”  

It’s not going to happen overnight. Organizations like mine are developing multi-year strategies to nudge their organization in a skills-based direction. 

Therefore, I’d encourage you to give yourself some grace as you embark on your skills-based journey.

Bersin articulates that “companies succeed based on culture, ambition, learning agility, and alignment.”  

It will take time for employee expectations to evolve, work cultures to shift and to create a fully aligned organization built around skills.

Don’t let perfection get in the way of progress. It’s okay to take an iterative approach, learn from what you implement, and gradually transform your organization into a more adaptable, nimble, and successful organization.

Alex Link
By Alex Link

Alex is a HR Director for a Fortune 4 organization with a passion for developing the leaders of tomorrow. He has a Masters of Science in Human Resources and Labor Relations and has extensive experience in HR, Leadership Development, Talent Management, Learning and Development, and more. When not focused on helping people realize their career aspirations, he enjoys playing guitar, reading sci-fi fantasy novels, relaxing with his wife, and playing with their two young children.