How To Build a Skills-Based Organization: 10 Steps for HR
The skills revolution is upon us. By 2030, it is estimated that 85 million jobs will go unfilled due to a lack of available skills. Skills-based organizations will be best prepared to navigate the reality in which artificial intelligence increases its ability to augment and form part of the workforce. Deloitte reports that 98% of business executives plan to incorporate more skills-based approaches in the future. Organizations leading the curve report performance increases, talent retention, and employee engagement.
As businesses look to HR to transition, this article will unpack what a skills-based organization means and deep dive into ten steps HR professionals can take to guide the organization through the transformation.
Contents
What is a skills-based organization?
Why are organizations adopting a skills-based approach?
An HR roadmap to create a skills-based organization
What is a skills-based organization?
A skills-based organization defines work by describing the tasks and activities that need to be performed to achieve set outcomes. Skills-based organizations deconstruct traditional roles and jobs and break them into smaller parts that describe the “work to be done”.
We are seeing organizations transition to more skills-based setups using three different approaches.
Approach 1: Relaxation of degree requirements for jobs
The first approach sees the skills-based concept as the relaxation of hiring requirements such as degrees and opening up opportunities to a broader talent pool with the practical experience and knowledge to do the work.
Examples of organizations that utilize this definition include Bank of America, Accenture, and IBM, to mention a few.
Approach 2: Deconstructing jobs into “work to be done”
The second approach focuses on deconstructing jobs into the “work to be done.” Breaking down jobs enables understanding which skills are required to perform what type of work and then organizing work around skills, not traditional jobs.
Several organizations, such as Mastercard and Unilever, have adopted this approach as part of redeploying internal talent marketplaces.
Approach 3: Technology-enabled internal mobility perspectives
The third approach helps create more internal visibility of skills for internal talent opportunities in the form of gigs and talent marketplaces.
Technology vendors such as Fuel 50, Skyhive, and Gloat play a key role in enabling the visibility of skills, insights into how skills mobility can enable organizational objectives, and transitioning from outdated work architecture and job descriptions to skills-centric approaches.
These three approaches all overlap in their practical application. We propose a more integrated approach that takes learnings from all three methods.
The table below shows the shifts required to move to a holistic skills-based approach.
Traditional approach Skills-based approach Perspective on how to achieve the desired outcome By breaking outcomes into smaller goals and objectives By identifying what the work is to be done How work is organized Into teams consisting of different roles Ever fluctuating as the work to be done changes Where to find the capacity to deliver Complement between internal and external talent sources Open talent markets using techniques such as gig work, freelancers, and permanent workforce How success is predicted By prerequisite requirements of what an individual has achieved in the past By validation of the proficiency level of that skill
Why are organizations adopting a skills-based approach?
There are several benefits to becoming a skills-based organization. First, this approach provides access to a larger talent pool as you define work in terms of specific skill requirements instead of a larger job requirement.
According to Alison Lands, Head of Strategy at a talent technology company Skyhive, skills-based practice is non-negotiable in some ways. “There simply is not enough skilled talent that matches the ways we’ve thought historically about talent, and so we’re starting to see persistent open vacancies, loss of productivity, and all enterprises are essentially fighting for the same four or five digital skill sets, which are largely undersupplied in the labor market.”
Second, you can match talent more closely with organizational needs, allowing more flexibility in accessing and deploying talent pools. This approach also allows for more visibility on talent capacity, which means the organization better understands available skills and the potential gaps they need to address to achieve organizational objectives.
There are also some that are more skeptical of adopting a skills-based approach. This is especially visible in the domain of skills-based leadership. Critics argue that skills-based approaches are too simplistic and focused on describing “what we need to do” and exclude “how we need to do it.” This statement has some truth, yet this perspective is limiting, and we will discuss it later in this article.
Lastly, there are also concerns regarding the ability of skills to accurately predict performance and the “shelf-life” or “longevity” of skills.
We believe that skills-based approaches can add immense value to organizations and, if approached correctly, can address these concerns.
We discussed how HR can build skills-based organizations with Alison Lands from Skyhive. You can watch the full interview below:
An HR roadmap to create a skills-based organization
HR plays a key role in moving organizations toward adopting skills-based practices. Here are ten steps organized into three distinct phases that can form the base of the process of building a skills-based organization:
Phase 1: Build the business case for skills
Step 1: Define what “skills” mean for your organization
Depending on the context, skills can mean different things to your stakeholders. As such, guiding your stakeholders to understand what “skills” refer to in different situations is important. Having one definition of skills is a critical first step in moving towards a skills-based organization.
In the context of talent, skills refer to abilities that individuals have or can develop over time. This could include technical proficiencies (e.g., MS Excel), knowledge about a topic or subject (e.g., data analysis), or a particular ability to do something (e.g., problem-solving).
When referring to skills in the context of work, it relates to what is required to get the task done. Here, you consider the critical deliverables and the knowledge, practice, or aptitude essential to delivering successfully.
In this step, you must clearly align your stakeholders on what you mean when referring to skills.
Step 2: Clearly articulate the business benefit
Next, the business needs to be clear on the benefits they hope to gain by becoming a skills-based organization. For example, if the company aims to increase the available talent pool through skills-based hiring practices, the success criteria will be different than if the goal is to increase internal mobility through a skills-based internal marketplace.
HR needs to help the business define the value-add of this approach by answering a few simple questions:
- Why do we believe a skills-based approach is the right direction for us?
- What business problem is the skills-based approach aiming to solve?
- How will we know if we are successful?
- How is this different from what we are doing today?
Obtaining clear answers to these questions will help you identify the success criteria for the approach. Then you can showcase if the approach delivers on its intended outcome once implemented.
Phase 2: Deconstruct and determine your needs
Step 3: Break jobs down to “work to be done” or “tasks to be completed”
Traditionally, jobs are described as a list of tasks or responsibilities assigned to a particular individual. Those are linked to the execution of strategy. In moving to a skills-based organization, we want to deconstruct this description of jobs to broadly reflect the work that has to be done in terms of tasks and activities.
This step involves listing the outcomes or results you expect an individual to achieve rather than defining their responsibilities. Take a look at the example of a Business Analyst below:
Traditional approach Skills-based approach Job description for a Business Analyst:
“Defines business problems via in-depth investigation and gathering of technical and non-technical information. Outline detailed requirements for a solution and ensure the delivered solution meets those business requirements.” Tasks required for business analysis:
– Requirements analysis
– Process documentation
– User acceptance testing
In skills-based hiring, instead of searching for a “Business Analyst” in the talent pool, we are searching for talent with the skills to do requirement analysis, process documentation, and user acceptance testing.
One individual can perform these activities, or we could split the responsibility across three individuals. We can also decide to automate some of these tasks. This allows for more flexibility in our talent approach.
Step 4: Organize the work around outputs and skills
Once you’ve broken down work into the tasks that need to be done, you can organize the work around the required skills. How can you cluster the skills optimally so that you can easily access and deploy them to complete the tasks and achieve desired outcomes?
This approach helps organizations reuse, redeploy and reskill internal talent while creating access to talent pools. For individuals, it also creates opportunities for meaningful and exciting work, where they can deliver outside the confines of traditional “jobs” and their boundaries.
This step is essential for determining appropriate talent strategies to manage this supply and demand.
Step 5: Understand the skills you need
Next, you want to understand the skills you need to carry out the work. This includes the skills of your current workforce, as well as the potential skills you are able to access through external talent pools (such as gig work). You also need to evaluate the ease with which you can access these pools.
This step is based on a robust data-driven approach to mapping the skills profile of the organization aligned to the critical and scarce skills requirements. A useful approach to use here is to utilize a skills segmentation matrix that indicates:
- Scarcity: How scarce is this skill in the market?
- Criticality: How critical is this skill to execute the work to be done?
- Volume: How much of this skill do you need?
For example, Grafix is a business that develops bespoke IT software for its clients. Using historical data from previous projects and evaluating their current pipeline of future work, they can evaluate scarcity, criticality, and volume.
For their business, C# coding skills, QA testing, and project management are required to deliver the work to be done. In their case, it is to develop bespoke client software. Using market data from platforms such as LinkedIn helps them determine how scarce these skills are and how easy it is to access them.
The Grafix team assesses the criticality of the skill by working with their internal subject matter experts to rank the importance of these skills. By using their own workforce planning data, they can determine the volume, indicated by the size of the circle below.
They visualize their skills matrix as follows:
The next step is to understand the skills you already have access to both in the organization and externally.
Step 6: Understand the skills you have and can access
In this step, you want to collect two sources of data. The first is internal visibility of the skills you already have. To do this, technology solutions can be used that help you identify, validate and build an inventory of skills already within the organization. At its most sophisticated, AI-powered or machine-learning platforms can match skills to tasks relatively easily.
You can also utilize additional sources such as skills-based assessments or previous experiences to contribute towards a first view of your internal skills database.
“So many enterprises invest significantly in HCM systems or in HR technology that can support upskilling, and then they don’t actually utilize the skills modules of this software,” says Alison Lands from Skyhive.
The second source is to evaluate the external pools you can utilize to access some of these skills. For example, if you regularly use platforms such as Fiverr or Upwork or utilize contractors to supplement specific skills, you want to ensure these relationships are in place.
Phase 3: Transition and manage the change
Step 7: Incorporate skills as the basis for HR practices
In this step, you want to start implementing skills-based approaches across your HR practices. Here are a few examples of how you can incorporate skills into HR practices:
- Skills-based organizational design and workforce planning: Organizational capabilities are used to determine the broad outcomes to be delivered within the organization to execute on the strategy. The underpinning skills are, in turn, identified and used to assess workforce planning demands – which skills, how many are needed, and how can skills best be constructed?
- Skills-based hiring practices: Externally, skills-based hiring involves pooling skills through alternative talent pools and deploying these in a project or gig-based manner. Internal hiring practices involve gig assignments and the construction of skills aligned to projects or particular outcomes. Internal mobility is based on the use and development of skills rather than the movement between jobs.
- Skills-based performance and rewards: Traditional performance and rewards are strongly linked to the achievement of outcomes. In skills-based organizations, this is based on the attainment or application of skills. Practicing this embeds a culture of skills development and the application of skills to achieve business objectives.
- Skills-based development and talent management: Similarly, skills form the basis of development initiatives. Instead of focusing on development in relation to role requirements, development focuses on building skills required within the organization. This allows for more development opportunities for individuals but also builds broader organizational capabilities in shorter timeframes. Talent management would consider the scarcity and criticality of skills to determine high-priority talent strategies within the business to manage the supply and demand of skills or talent.
The goal over time would be to have all HR practices based on a skills approach. To start, take a phased approach and start with practices that are slightly easier to implement, such as learning and development.
“Learning and development is a really promising area for skills-based practice,” notes Alison Lands from Skyhive.
“It can both have the effect for enterprises of helping cut through some of the content chaos and clutter of many, many learning assets. And it can deliver a more personalized learning experience for the individual that is aligned with the needs of the company, but also aligned with the needs of the larger labor market.”
Step 8: Help individuals build a skills portfolio
One of the biggest benefits of building skills-based organizations is that individuals have the ability and opportunity to develop skills outside of the confines of their roles. In turn, the organization has access to a diverse talent pool and skills base.
For this exchange to work, individuals need support and encouragement to develop the skills required within the organization in the short and longer term. Embedding skills-based approaches in HR practices is an excellent way to ensure the active development of these skills. These development activities should be visible, transparent, equitable, and accessible to all.
Step 9: Implement transparency and visibility of skills
Developing skills is an individual-led process, with the organization playing a supporting role. This means that skills-based data is democratized and maintained by individuals. Although technology can help to manage this level of detailed data, it does require human intervention to ensure the how and why of data use.
For individuals, there should be a clear benefit to sharing and maintaining their data. You can do this by clearly showing the linkage between skills, overlaps, gaps, and paths for development. This elevates skills data beyond just what the organization and HR require. It becomes a top-of-mind way of engaging with development and career progression.
A good approach to consider is continuously collecting and validating information with employees at key moments in the life cycle. For example, when updating skills profiles before development conversations, ask for the submission of new certifications before the workforce planning cycle.
Step 10: Manage the transition and change
Building skills-based organizations is a continuous and iterative process. It will be crucial for you to bring your stakeholders along the journey and help the organization adopt a mindset that uses skills to describe work.
“Skills-based practice is a mindset shift, and so getting organizations even within the different functions of HR to start to adopt this mindset shift and to support the change management of the enterprise is a huge endeavor,” says Alison Lands from Skyhive. There are a couple of things you can do to manage this effort:
- Start small. Identify a low-risk business area to test the approach and get comfortable with the process.
- Iterate and realign as you progress. Rather than reaching an ideal end-state, experiment with approaches that best support your business and the intended outcomes.
- Tell the success stories as proof of concept. Show stakeholders how the approach is changing.
- Link back to the business case and show how benefits are being realized.
We cannot stress enough the importance of executive sponsorship and support. Beyond the first step in the approach, skills have to become part of the organization’s DNA, how we think about work, and how we approach all HR practices.
A final word
The promise and potential of transitioning your business into a skills-based organization is great. To reap the benefits, HR needs to follow a structured approach to align their stakeholders on the business case for skills, guide the business to adopt a skills-based mindset, and move HR practices to become skills-based.
For organizations that manage to do so successfully, the future promises to access broader talent pools and solve current skills shortages. Those that refuse to shift their thinking will be at a significant disadvantage in the war for talent.
Weekly update
Stay up-to-date with the latest news, trends, and resources in HR
Learn more
Related articles
Are you ready for the future of HR?
Learn modern and relevant HR skills, online
