In today’s world, we have seen the increasing need for organizations to be more agile and adaptable in response to the global pandemic. The economic, social, and psychological impact of covid-19 is ongoing and will have a lasting effect on organizations as we know them. The pandemic disrupted labor markets, triggering what is described as one of the worst job crises since the great depression. As a result, millions were left jobless or with reduced incomes. Meanwhile, many businesses had to close or downsize, and most had to adjust to a new way of working as business premises became obsolete. The post-pandemic world has an inherent danger of job insecurity, increased poverty, and inequalities. While the future remains uncertain and unpredictable, we can be sure that there will be an ongoing need for organizations to respond quickly and adapt to change as we navigate our new global pandemic reality.
When reviewing the literature, it was evident that organizations surviving the global pandemic had successfully changed the way they:
- operate and maintain profitability.
- optimize e-commerce.
- organize supply chains.
- leverage digitization, automation, and ai.
- facilitate remote working.
- manage organizational cultural change.
- maintain employee wellness.
Redesigning and executing process changes, like those listed above, is not easy, let alone doing this continuously in response to the evolving and complex global environment. However, research suggests those organizations taking a skills-based approach to talent development have a competitive edge.
What are skills-based organizations?
Skills-based organizations have a more agile and employee-centric approach to work where employees are valued for their skills rather than their job title, level, or educational qualifications. It is a new operating model of work where employees are matched to tasks and projects based on skills, capabilities, and interests. Focusing on skill sets instead of job experience can help organizations optimize their existing talent pool. Skills-based organizations are moving away from traditional job structures and adopting agile talent development strategies. They have flatter, team-based structures with leaner job architectures, i.e. , fewer levels and job titles as well as broader pay structures.
What are the benefits of being a skills-based organization?
Moving away from rigid job architectures to an agile skills-based approach has many organizational and employee benefits. Companies that have clear visibility to all the different types of talent at their disposal, with a line of sight to how work is getting done, by whom, with what skills, performed where and at what value, will have an immediate and significant competitive advantage.
Increased talent supply: By tapping into skills as opposed to job titles only, organizations can source talent from a broader, more diverse talent pool at scale, which allows them to address talent demand and supply more effectively. In turn, this presents a different way of solving talent shortages. Effective skills management strategies enable organizations to pivot in response to rapid dynamic and competitive environmental demands. And visibility to the skills pool makes it easier to transfer skills to other parts of the organization affected by change.
Enhanced career opportunities & growth: An organization that adopts a transparent culture around skills can promote curiosity and creativity by enabling employees to think outside of the box about work experiences and, ultimately, their career trajectories. When organizations appreciate skillsets for their collective value of interdisciplinary and cross-functional knowledge, it opens up more growth opportunities for employees.
Reduced bias in selection & promotion: Focusing on skills provides a more objective assessment of suitable talent in hiring and promotion processes and may also reduce unconscious biases associated with these processes.
How prevalent are skills-based organizations today?
Conversations with our clients have indicated that HR leaders are starting to explore skills-based talent strategies. However, our global talent mobility best practice research, revealed that 25% of HR teams currently have no visibility to their talent bench strength (i.e. , the skills and capabilities) across their organization. In support of this, Mercer’s global talent trends study observed that organizations are beginning to dig deeper to understand their skills. But the majority are only just starting on this path.
There is also growing interest in returning to skills-based pay models, but few organizations have figured out how to approach this. According to a recent research, credentialling, skills validation, and block-chain modeling may be strategies to shift remuneration to support a more skills-centric work model in the future. And our global talent mobility best practice research found there was a strong positive correlation between compensating and rewarding the development of new skills and critical business outcomes like revenue per employee, overall business revenues, employee engagement, and retention.
Ultimately, although this is a trending topic, very few organizations have successfully transitioned to being skills-based.
How to transform to become a skills-based organization
We are at a time when talent optimization and internal mobility are more critical than ever for business agility and business continuity. We anticipate interest will continue to grow for skills-based organizations, so to support HR professionals on this journey, we have outlined some critical considerations:
Implement a more flexible, agile job architecture: Many organizations are transitioning to a new operating model of work, moving away from what were hierarchical job architectures to something more agile and fluid. In our recent research, we saw that 35% of organizations surveyed had already simplified to a flat organizational structure, while 25.5% had no intention of doing this at all. A further 24.5% of organizations said they would opt for a more agile skills project-based workforce in the next 12 months. Flexible, agile organizations are quick to mobilize, nimble, highly collaborative, responsive, have free-flowing information, and empower people to act. In contrast, traditional job architectures can struggle to stay up-to-date and respond to the changing needs of the organization. Today’s ai- enabled architectures, as supported by our talent blueprint methodology and market data-feeds, provide a mechanism to stay agile and relevant as organizations evolve. In the first instance, moving to more project-based work units is a start where skills are matched at the project level, as enabled by the AI functionality. This feature creates a valuable starting point, using talent marketplace technology to deliver visibility, keep track of skills and facilitate more agile working practices by enabling skills matching at the project level. It also lays the foundation for structural changes in the future. In the future, we are likely to see skills as a foundational unit of currency in the organization. Some companies already adopting this future-focused approach, we really want to say, in our internal marketplace, that skills are the new currency. There is growth to be had in so many different directions.
Take a skills-based approach to talent development: Creating a dynamic talent development strategy will enable your organization to understand the skills they need now, and, in the future, which provides skill transparency to your employees. A skills-based approach enhances talent development strategies by:
- creating visibility of skills across the organization.
- highlighting skills gaps, allowing organizations to plan upskilling initiatives.
- creating a common organization-wide approach to skills and talent management.
- transforming talent management strategies to include skills management strategies that enable upskilling and re-skilling.
Implement agile methodologies: Agile methodologies are a huge enabler for the success of skills-based organizations. High-performing organizations have adopted agile core values. These prioritize individuals and interactions over processes and tools, prioritize customer collaboration over contract negotiation, and prioritize responding to change over following a plan. A skills-based organization optimizes organizational, talent, and career agility.
Deloitte’s human capital blog emphasizes that organizations need to consider the following critical principles for a skills-based approach to be successful:
- creating a common language of skills across the organization.
- performance management needs to include skills application and development.
- leveraging talent marketplaces that match skills to jobs, tasks, projects, gigs, and mentoring assignments.
- learning and development programs should be designed on skills, not jobs.
- adopt a skills-based approach to recruiting talent.
- design compensation policies based on skills.
- include skills into succession planning.
- leverage technology to help create visibility and keep track of skills development progress.
Our research has identified some transformational capabilities to support organizations in shifting to skills-based organizations. We have found that the following capabilities need to be embedded into three levels (individual, leadership, and organizational) to successfully transition from a job-based to a skills-based organization.
At Innovation Minds, our Hybrid Work Success Solution offers all the project management tools you need to get the job done leveraging skills-based AI approach. Why be hard on yourself and the people around you? Contact us today to find out how we can help.
By – Team, Innovation Minds (external references/citations are also used in this blog).