Does Your Approach to Skills Management Strengthen Upskilling and Employee Retention?

Learn why skills management is different from a skills-based approach, and why both are necessary for an organization to effectively engage, upskill, and retain employees.

Amid the Great Resignation, “money talks” isn’t the whole conversation. While salary still matters, employees want opportunities to develop their skills. 

Consider this: Workers are citing stalled career growth as one of the primary reasons for quitting a job, according to a 2022 survey of office workers. Even for workers who stay in their roles, career growth is a top concern. In Workday’s “Employee Expectations Report 2022,” growth-related terms were commonly used in comments left by 1.8 million employees across more than 1,000 companies. And, in the 2022 “PwC Pulse Survey: Next in Work,” employees indicate that they deeply value nonmonetary benefits, which include career growth and upskilling. 

But the opportunities for employees to develop skills—whether that’s career growth or upskilling—depends on how companies manage the skills of their employees.

Organizations with a skills-based strategy are more responsive to change and emerging opportunities, whether that’s getting new products or services to market faster or redefining how work gets done.

“Focusing on skills is truly a win-win for everyone,” says David Somers, Workday group general manager, office of the CHRO. “It provides workers with more control of their own skills development, while empowering organizations with more flexibility in how they develop and deploy talent.”

Despite its name, skills management tools can only go so far in, well, managing employee skills. The advantages of skills management are actually better achieved through a human resources (HR) system with an integrated, skills-based approach to driving business.

Skills management sees skills as part of the work equation, whereas a skills-based approach sees skills as foundational to running an organization and achieving business goals, not just one more thing. 

It should be clear by now that to attract and retain workers, companies will need to focus on skills. In this blog, learn about skills management, how it’s different from having a skills-based people strategy, and how integrating employee skills data with HR data is fundamental to any successful upskilling strategy.

What Is Skills Management, and Why Is It Important?

We’re experiencing seismic, global shifts in the world of work. Leaders and employees alike are still figuring out how to adjust to hybrid and flexible work as the new normal, and companies continue to struggle with how to diversify their workforces. 

That’s where skills management comes in. Skills management is the practice of identifying and tracking the skills of employees, mapping those skills to jobs or roles in the business, and measuring how effectively employees use their skills to operate and respond to market shifts.

The importance of managing employee skills is moving into the forefront as organizations need to navigate these big changes in the business landscape: 

  • Democratization of work: The pandemic has democratized work by making it more accessible. Companies rely more on employees with the right skills even if those skills are outside their specific role.  

  • Technological progress: Digital transformation has accelerated during the pandemic. Artificial intelligence (AI) and machine learning (ML) technologies, for example, have enabled companies to adjust to new business models, create efficient business processes, and create new products or services.

  • Tremendous uncertainty: As the pandemic has worn on, uncertainty has become part of the business landscape. As a result, business leaders have adopted agile operating models to navigate change.

The convergence of these three areas has created a skills imperative—the need to identify the essential skills that will move a business forward. Building the critical skills and competencies needed in an organization requires an understanding of employees’ skills gaps. It also means integrating learning into employee workflows and experiences, and creating skills development solutions that can scale to meet evolving business needs.

What Is a Skills-Based Approach?

Even though skills management helps organizations identify and map out the skills of employees to different projects or roles, it can only go so far in helping an organization achieve business goals.

Consider this scenario: A company needs to form a cross-functional team for an upcoming high-priority project. Through a skills management software solution, the company can identify the employees who have the skills required for the project. But does the company have a skills gap between what the current workforce can do and what’s needed for the project? How quickly can the right employees be reassigned to the new team? If the company doesn’t have enough capable workers for the project, can workers with adjacent competencies go through training to obtain the required skills?

Companies need a skills-based strategy to address those types of questions. 

In HR, a skills-based approach means making skills the foundation of responding to a changing business environment, and as a result, enable greater agility across the organization. This could mean growing a workforce through recruiting (acquiring skills), aligning a team around a strategic business goal (mobilizing skills), or adapting to the changing needs of the customer (upskilling current employees). 

Often, “skills based” is heard in the context of hiring, an approach gaining traction in landing talent in a competitive hiring market. Skills-based hiring focuses on a person’s capabilities, competencies, and relevant experiences and gives less weight to their formal education or number of years in a previous job.

But to apply a skills-based approach in every aspect related to people strategy—whether that’s hiring, talent management, or even upskilling—organizations need these essential elements: 

  • A data foundation: Understanding the skills and capabilities of your workforce is, essentially, skills DNA gleaned from the organization’s unique private and public data.

  • Reporting and analytics: The capacity to analyze and plan for the skills needed in the organization, whether that’s through building (upskilling and growing from within the organization), buying (acquiring new talent), or borrowing (using an external resource, such as a consultant).  

  • Technology: The ability to put plans into action by leveraging technology and tools that focus on both acquiring (such as through hiring or redeployment) and developing talent (such as upskilling or reskilling).

  • Defining and building consensus around a skills-based approach: Company leaders need to build consensus around key talent challenges that require attention and support, the path forward to solve those problems via skills, and a common definition of skills and the role they should play in technical and operational solutions.  

  • A culture that supports a skills-first approach: This requires identifying what an agile, skills-first culture looks like, and then determining what’s required to operate with a skills-first strategy. For example, are employees encouraged to take risks as they learn new things? Do managers have visibility into their teams’ skills gaps? 

These essential elements lay the foundation for organizations to operate with a skills-based people strategy, where workers are valued and rewarded for their skills and how they apply them to create organizational value rather than solely for their title, level, or educational degree.

“A skills-based people strategy is becoming critical to understanding how your organization can deliver its business strategy and help guide career growth and talent development.”

David Somers Workday Group General Manager, Office of the CHRO Workday

Understandably, organizations may struggle to think strategically about philosophies, processes, and organizational structures in new ways. However, these foundational steps are critical for planning a skills-based journey and ensuring that the new approaches will actually solve business challenges.

What Is Skills Management Software, and How Does Workday Skills Cloud Take Skills Management a Step Further?

A skills management system is software that helps an organization manage the skills of its employees. Skills management system capabilities vary depending on the software vendor, but basic features include recording the skills of employees, identifying skills gaps in the organization, and tracking new skills. 

But when researching vendors for skills management software, companies need to consider how the skills management solution leverages HR data. Companies are sitting on a wealth of HR and employee data—employee feedback, tenure, or voluntary turnover rate—but lack the ability to connect that data to information on employee skills. 

Essentially, all functions of an organization’s people strategy—whether it’s recruiting, upskilling, or talent management—are connected to employee skills. When skills data seamlessly merges with HR data, it gives company leaders greater insight into how the company can achieve strategic initiatives.

That agility is why Workday Human Capital Management (HCM) has built-in capabilities to manage employee skills. It’s called Workday Skills Cloud

Infused into Workday HCM, Skills Cloud is a machine learning-powered, universal skills ontology—a way of understanding what makes up a skill and the relationship between different skills. Because Skills Cloud is woven into the fabric of Workday HCM, it naturally extends to many Workday applications that use employee skills data, such as Workday Recruiting, Workday Learning, and Workday Talent Management. An HCM system infused with a skills ontology provides organizations with an effective skills management strategy that impacts the entire organization. 

What Is Upskilling and Why Is It Important?

Upskilling is the practice of providing employees additional training and educational resources to gain advanced skills and new competencies that are still relevant to their current role in the organization. Upskilling is different from reskilling, which involves training for a different role.

Companies have leaned into upskilling to navigate the pandemic. According to a 2021 PwC global survey of 32,500 workers, 40% of employees successfully improved their digital skills during the pandemic. In that same survey, 77% of employees are ready to learn new skills or completely retrain, and 80% say they’re confident they can adapt to new technologies entering their workplace.

Employees expect their workplaces to offer opportunities to upskill or reskill as a standard benefit, not a perk. And yet, according to a 2022 PwC pulse survey, only 36% of companies who have implemented career advancement and upskilling opportunities plan to continue providing growth-related benefits. 

It should come as no surprise that only 30% of HR and business executives think that their workforce has the necessary skills to advance strategy in the coming years, according research from the Institute for Corporate Productivity (i4cp), which was cited in the Workday white paper “Insights for Accelerating a Ready Workforce.”

“If we’ve learned anything from the pandemic-generated recession, it’s that organizations need to focus on putting their employees first,” Somers says. “One of the biggest reasons employees leave a company is a lack of career and capability growth. That’s why we’re seeing a massive shift in how organizations approach talent with a growing focus on skills. A skills-based people strategy is becoming critical to understanding how your organization can deliver its business strategy and help guide career growth and talent development.”

It should be clear by now that to attract and retain workers, companies will need to focus on skills.

So what does upskilling look like in the workplace? For high-performance organizations, supporting upskilling in the workplace is a combination of practices:

  • Providing a robust learning platform. 
  • Developing performance management practices to better emphasize upskilling and reskilling. 
  • Offering job rotations.
  • Developing career pathways to provide structure for upskilling and reskilling.
  • Creating rewards and recognition programs to support continuous learning.

Another important aspect of upskilling in the workplace is establishing and maintaining a learning culture. This is best created from the top down. High-performance organizations regularly involve leaders in coaching others, and encourage them to emphasize continuous learning in formal performance reviews. What’s more, leaders are held accountable for developing top talent.

Skills-Based Approach Enables Greater Business Agility

The desire for career growth is driving the Great Resignation. In addition to better wages, people are searching for jobs that align with their purpose and personal values, which has spurred a fundamental change in securing and retaining top talent.

To attract and retain workers, companies need to demonstrate how career growth is a standard practice in their organization and how it aligns with the needs of the business. While skills management helps with identifying and mapping the skills of employees, organizations need to align upskilling and career growth with internal opportunities and strategic initiatives, which as a result strengthens employee retention.

But upskilling and employee retention aren’t the only needs of a business. Having insight into the skills of employees is beneficial for strategic initiatives across the organization, not just in HR. Organizations with a skills-based strategy are more responsive to change and emerging opportunities, whether that’s getting new products or services to market faster or redefining how work gets done.

The need for speed, powered by skilled and engaged employees, is why more and more leaders must take a skills-based approach to their overall people practices. And as a result, organizations and their employees feel more empowered to adapt in a changing world.

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