January 31, 2024
By prioritising skills over traditional qualifications, organisations empower their teams to adeptly navigate challenges, contribute meaningfully, and fuel continuous growth.
Skills, they say, are the currency of the future. As the gap between the demand for skills and their supply in the labour market widens, more and more organisations are transitioning into skills-based organisations or SBOs. That’s because putting skills front and centre has benefits that are hard to beat.
Despite the rapid pace of change in the global business environment and the significant evolution of skills required to stay competitive in the past five to seven years, numerous people processes, including traditional HR processes, designed for a slower and more stable environment, are struggling to meet today's demands for speed and agility in business. This challenge underscores the imperative for organisations to adapt and rethink their approaches to talent management.
Skills-based organisations emphasise the cultivation and utilisation of a diverse range of competencies, fostering innovation and resilience in the face of industry shifts. This approach not only aligns with the demands of a fast-paced, globalised economy, but also fosters inclusivity by focusing on an individual’s abilities rather than conventional markers of status.
In fact a PwC report from 2023 said that many companies still prioritise formal qualifications and job histories over skills, which is why they are unable to fully utilise the potential of their workforce. The report also said: “A survey reveals that 35% of employees believe their skills aren't evident from qualifications or job histories, and 27% feel employers focus too much on job histories rather than skills."
By prioritising skills over conventional qualifications, organisations can unlock a wealth of potential, ensuring their teams are well-equipped to navigate challenges, contribute meaningfully, and drive continuous growth in an ever-changing economic landscape.
Deloitte defines a skills-based organisation as “a new organisational form” that “places skills and human capabilities at the heart of talent strategies, creating a new operating model for work and the workforce”. In a skills-based organisation, the emphasis is not on jobs but on skills. Skills are used to organise work in two ways:
Traditionally, individuals hold job titles and are defined by their jobs. The skills-based approach does away with this increasingly antiquated line of thinking. Instead, it treats each worker as an individual with skills and talents that can be freely applied to tasks that match their interests, a strategy that in turn creates alignment with organisational goals and priorities.
Anish Singh, Unilever’s head of HR in Australia and New Zealand, says it best: “We’re beginning to think about each role at Unilever as a collection of skills, rather than simply a job title.”
According to a Deloitte survey, eight in 10 employees and leaders agree that jobs are not the best way to organise work while 98% of executives say their organisations are determined to become more skills-based. That is because the benefits a skills-based approach brings to work, the workplace, and the workforce are many:
Today’s workplace is defined by change. The economy and the business environment are evolving constantly. Organisational needs and goals differ from day to day. Skills are no different. The in-demand skills of yesterday, today, and tomorrow are vastly different. Only skills-based organisations can keep up with the pace of such a fast-moving world. Only they have the capability to pivot quickly and reallocate skilled talent where it is needed. Agility, adaptability, and resilience all come from skills.
Skills-based organisations place skills at the centre of their recruitment policy. They hire individuals for what they can do rather than what they have done in the past and what qualifications they hold. The biggest reward of skills-based hiring is a large talent pool that is geared to meet every workforce requirement. With a healthy internal talent marketplace, organisations have the flexibility to access and deploy talent to meet all their business goals. Apart from strengthening the workforce, skills-based hiring also promotes diversity, which in turn is known to boost creativity and innovation.
When companies empower employees to go beyond the confines of their job titles, they create opportunities for meaningful work that suit each individual’s skill set and interests. Employees not only enjoy what they do but have the freedom to test their skills across the organisation in varying roles and functions. This internal mobility unlocks career pathways and avenues for professional development, which are top of the mind among today’s workforce. A happy and content workforce is the only way to achieve healthy engagement and retention rates.
Engaged, committed employees directly influence organisational performance, productivity, innovation, and culture. When workers are encouraged to contribute, they tend to perform at a higher level. Their pride and sense of purpose in their work allows them to take ownership of what they do and find value in the organisation’s goals and objectives. For its part, the organisation is successful in bringing out the full potential of its workforce. The success of an organisation is ensured when the employer and employee are of the same mind.
Transitioning to a skills-based organization involves a strategic shift in how talent is recognized and utilized. This transformation doesn't happen overnight and demands patience and commitment. It begins by taking small but meaningful steps toward cultivating a culture that values and leverages the diverse skills of its workforce, adopting a holistic approach that places individual skills at the forefront.
Planning comes first. Start by informing the entire organisation why the need to put skills first is a business imperative. Prepare them for what is to come. Leave no one out. A major plan for change needs everyone’s buy-in to be successful.
Next, create a common language of skills that is current and in sync with the talent market. Ensure that the data to be used is up-to-date, authentic, error-free, and accessible to all stakeholders. Creating a common base will ensure that everybody understands what everybody else is saying.
The following step in this strategic workforce planning process is to ask the important questions, some examples being:
Only by asking questions can we find answers and work systematically to a plan. A carefully planned roadmap is the solid foundation we need to transition into a skills-based organisation.
This is the most basic requirement for a skills-based organisation. Workplaces are littered with generic job titles – consultant, manager, analyst, and so on. There might be multiple employees in a single organisation holding these titles that reveal next to nothing about their roles and responsibilities. The journey to becoming a skills-based organisation starts with deconstructing each job title and defining it by the skills required to perform in that role. For example, instead of simply posting a job listing for a business analyst, specify that candidates must have knowledge of data mining, process documentation, and database management. This way, only individuals with the required skills will apply and the recruitment team will hire the right candidate.
Next, you need to know if your organisation has the skills to perform the tasks mentioned above. You’ll need to do some skills mapping for this. Graphically depicting the skills and competencies in an organisation is the best way to gain clarity into each employee’s skill set and proficiency levels. Skills mapping also helps identify missing skills and areas of improvement.
As a visual representation of skills, a skills matrix is convenient and easy to use. It serves as a centralised database of every single skill, competency, and ability an organisation possesses. It can be made more detailed by accommodating proficiency levels and certifications for each listed skill.
Another useful skills management tool is a skills taxonomy, or an exhaustive list of skills and competencies. By creating a skills taxonomy, you can clearly and accurately identify the skills required for each role and/or task, create lucid job descriptions, hire the right candidates, and comprehend upskilling and reselling requirements and opportunities.
Both skills matrices and taxonomies throw light on skills gaps – the missing abilities that are crucial to an organisation and the work it does. If not identified and fixed in time, these gaps can paralyse operations and hurt employee performance. The next important step is, therefore, to perform a skills gap analysis. This exercise is not just about identifying missing skills but about analysing how best these skills can be acquired.
One way to augment a skills gap analysis is by scrutinising one’s talent management strategy through the four Bs – buy, build, borrow, bot. Each B represents a specific workforce scenario. ‘Buy’ stands for sourcing talent through recruitment. ‘Build’ defines building talent via upskilling and reskilling. ‘Borrow’ refers to outsourcing employees, such as contractors, consultants and gig workers. ‘Bot’ stands for roles that can be automated. Cracking the right combination of the four Bs raises your chances of successfully becoming an authentic skills-based organisation.
A skills gap analysis is integral to identifying core skills and high-potential employees, relocating under-utilised team members, and implementing useful learning and development programmes.
That means a skills-first approach to hiring, workforce planning, talent management, performance monitoring, employee development, and everything else in between. Take hiring, for example. It was once popular – and perhaps still is – to hire people for their qualifications, work experience, charisma, or because they seem like a good fit. But a skills-based organisation hires people for their skills. One way of making the transition to skills-based hiring is by giving candidates problems to solve during the interview phase, as problem solving requires the deployment of skills.
That said, making skills the focus of all work processes can be a tall order, as skills and competencies remain relevant for a very short time. The skills required for a particular task today will likely not be the same tomorrow. In the face of such a challenge, organisations need to make a serious effort, show deep commitment to change, and reskill/upskill often so that they never run out of core skills.
You are now on your way to becoming a skills-based organisation, but is your strategy working? Don’t forget the last-mile stage in this journey of change, which is to review, re-evaluate, and realign. If an initiative is not showing the desired outcome, experiment with different approaches till you find the one that shows the most value.
As the world of work changes and the stakes get higher, only skills-based organisations will have the ability to adapt and succeed. What this calls for is shrugging off old mindsets, liberating employees from the confines of their jobs, and joining the skill revolution.
In conclusion, the transformative journey toward becoming a skills-based organisation unfolds in five strategic steps. Recognising the escalating demand for skills in the market, organisations are increasingly embracing this paradigm shift. A skills-based organisation thrives on valuing individual competencies and aligning them with organisational goals, challenging the traditional job-centric mindset. The benefits are manifold: enhanced resilience, an enviable talent pool, improved employee retention, and boosted performance. To embark on this transformative journey, organisations must follow a roadmap, deconstruct jobs into skills-centric tasks, map existing skills, place skills at the core of work processes, and continually review and realign strategies. As the business landscape evolves, only those adaptable to the skills revolution will possess the agility needed to succeed in an ever-changing world of work.
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