“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.