The skills-based approach is dominating the conversation

Recent conversations around talent management have increasingly focused on skills, and organizational leaders are taking note. It dominated last fall's HR Technology Conference in Las Vegas and has been the subject of numerous, blogs, and webinars, and is even the subject of a recent book on the deconstruction of jobs. This new world of work, as some are calling it, emphasizes skills as the cornerstone of organizational success, marking a significant departure from the conventional job-centric model.

But what does this mean in practice? What must an organization do to become a skills-based organization? What must it have in place and, more importantly, what policies and culture must it develop?

Becoming skills-based requires a fundamental change in how companies approach their workforce. Organizations must develop new policies, cultures, and practices that prioritize skills throughout the entire employee lifecycle. Before we dive into all that, let’s go over some of the fundamentals of the skills-based approach.

Understanding the skills-based approach

The traditional approach to workforce and talent management focused exclusively on rigid job roles, each with its own specific set of responsibilities and tasks. As organizations evolve in response to technology and digital transformation, however, this rigidity is holding back progress.

The evolution from job roles to skills-based management recognizes that employees' abilities and potential extend far beyond their job descriptions. This shift allows organizations to tap into a broader range of talents to enable innovation and agility, and increase the likelihood of employees sticking around in the long term because of better internal mobility.  

Fundamentally, skills-based organizations understand that the capabilities employees bring to the table are more important than what’s on their resumés. They also understand that the move towards a skills-based organization involves more than just adopting the latest technology and that success can only be found by making changes throughout the employee lifecycle.

Reforming the employee lifecycle

The employee lifecycle is the model that outlines the various stages and touchpoints that an employee goes through and interacts with during their time at an organization. While the main components of the lifecycle are the same between both roles-based and skills-based organizations, it’s what is within these components that matters.

Roles-based organizations, for example, will focus heavily on formal qualifications and experience in similar roles when screening candidates. In contrast, skills-based organizations will look for the key skills that the organization needs and prioritize these over qualifications and experience.

A new approach to recruitment and onboarding

Job Architecture: All skills-based transformations begin with job architecture. It’s your blueprint for success—the essential skills needed for each organizational role. There are lots of ways to approach this. For example, by building a skills matrix, you can map out the competencies needed across various functions. This helps define clear expectations and aligns talent management practices with long-term business objectives. A robust skills architecture enables precise workforce planning, targeted learning and development initiatives, and effective talent acquisition strategies.

Screening and interviewing: The skills-based approach fundamentally transforms the hiring process. Instead of filling positions based on traditional job descriptions, organizations screen candidates based on their skills, potential, and career aspirations. This involves assessing the specific abilities a candidate brings, their willingness to learn, and the transferability of their skills to various roles within the company. This ensures that new employees can grow within the organization and contribute to its long-term goals.

Onboarding: Effective onboarding in a skills-based organization goes beyond a basic welcoming orientation. It integrates new hires into the company by focusing on their skills from day one. This involves not only helping new employees understand their immediate job responsibilities but also connecting them with colleagues who possess complementary skills, identifying relevant projects, and suggesting training courses to further develop their capabilities.

Reimagining traditional HR practices

Compensation and benefits: In a skills-based organization, the approach to compensation and benefits needs to be rethought to reflect the value of workers’ skills. Instead of basing pay on job titles, companies should assess the market value of specific skills and the combinations of capabilities employees bring to their roles. Ravin Jesuthasan, Senior Partner and Global Leader for Transformation Services at Mercer, suggests “benchmarking the market price for capabilities, skills, and work elements instead of jobs. How might we value the bundle of skills required to perform the typical work demanded of a team? Can we deconstruct the pay to reflect the value of various skill combinations?”

Career development: One organization on a journey to a skill-based organization is Merck. Eric Ervin, Executive Director of HR Operations at Merck, tells Diginomica that Merck “started to look at what was driving some of our retention challenges. Much of that was around not understanding what their career journeys could potentially look like at Merck — how could the capabilities that I have translated to other jobs and other opportunities within the organization? And then the other piece was organizational agility — the skills capability of taking a set of resources and retraining them, versus having to go out and hire for an entire new skill set.”

Performance management: Instead of advancing employees based solely on tenure or their ability to fit into management roles, promotions at skills-based organizations are based on the specific skills required for new responsibilities. This approach breaks down the traditional one-size-fits-all management track and allows for more tailored career advancement. This means that great individual contributors could be promoted to new and more interesting and better-paid individual-contributor roles rather than having to fit themselves into management boxes because there’s no other way to advance.

Operationalizing the skills-based approach

Projects and work deployment: It’s important to know who can do what in a skills-based organization, and maintaining a skills inventory is the best way to achieve this. In doing so, leaders can quickly identify employees with the necessary competencies for short-term projects and special assignments. This approach not only maximizes the utilization of existing talent but also provides employees with opportunities to apply and enhance their skills in different contexts.

Workforce planning and people analytics: Workforce planning in a skills-oriented organization goes beyond filling current job vacancies. It involves anticipating the skills needed to stay competitive in the future and developing strategies to acquire and cultivate those skills. People analytics plays a vital role in this process by providing data-driven insights into skill gaps, workforce trends, and potential future demands. Deloitte notes that “with a skill-based approach to workforce planning, organizations can plan for the skills they need, where they can get them, and the type of work in which skills will need to be applied.”

Layoffs and redeployment: A significant advantage of a skills-based approach is the potential to mitigate the impact of layoffs through reskilling and redeployment. When faced with the need to reduce the workforce, organizations can look at their skills inventory to identify opportunities for internal mobility. Employees whose positions are being eliminated can be retrained and redeployed to other roles within the company, matching their existing skills with new job requirements.

Are you looking for ways to foster workforce agility and transition to a skills-based organization? There are proven skills transformation models to follow. Contact SkyHive by Cornerstone or schedule a demo for more information on how skills-based planning allows organizations to meet new challenges and strengthen the bottom line.