Matthew Brown's Analyst Perspectives

The topic of skills is not new to the world of talent management or development, making many appearances in the talent conversation over the years. Recently, it has been a permanent fixture in the discussion, focusing on the total integration of skills across all aspects of the employee experience. The term “skills economy” describes the evolution of how value is assigned in the workplace and employment, emphasizing the importance of individual skills over traditional job credentials.

The traditional workforce model yields many benefits. In recent years, it has gained opposition, and evolving business environments have exposed many opportunities for enterprises to address workforce challenges. The greatest challenge is inflexible organizations, unable to manage, adapt, mobilize and redeploy talent at the speed of change. By embracing the skills economy, enterprises revolutionize talent management, foster employee growth and engagement and enable long-term success.

The skills-based economy is fundamentally different from traditional job-based workplaces. In a job-based environment, all employee-centric activities and strategies support the construct of a job. The talent acquisition focus seeks to find workers who have performed the exact job at other organizations (known as years of experience in the job description). This narrows the consideration pool when culling through thousands of applications for a single job posting. There is an inherent flaw in this strategy that can be addressed by a skills-based process: Job-based hiring assumes that holding a specific position for a few years qualifies you as an expert. What happens when you hire that person, but your organization’s needs change relative to that job? Often, this is where we get into job elimination or organizational restructuring (excluding adequate workforce planning strategy as a factor). In a skills-based environment, hiring for skills ensures maximum talent agility as organizational needs change over time. There are numerous benefits for enterprises and workers, including increased agility and adaptability. It creates a faster path to enhanced employee engagement and overall satisfaction, and the impact on talent acquisition and retention is remarkable. A skills-centered workforce and operational strategies bring notable potential for higher productivity and innovation. Due to these benefits, we assert that by 2028, demonstrable, transferrable skills will overtake prior job titles and education as leading qualifiers in the hiring and promotion processes for one-half of enterprises.

At the heart of the talent conversation is the role of technology in unlocking a new level of personalization for current and potential employees. Technology serves as an enabler for the adoption of skills-based practices and even aids in the assessment of current process opportunities. As business processes evolve, technology becomes the conduit through which the process is managed, monitored, assessed and carried out. From recruitment and onboarding to learning and development, talent management, compensation and benefits, technology provides tremendous support for teams to perform continuous data collection and analysis to deliver the most personalized experiences for workers.

Technology is critical to enacting skills identification and assessment practices. Organizations—specifically HR teams—benefit from artificial intelligence and machine learning to assist with skills identification and mapping. Additionally, there is a benefit from using software to support data collection, analysis and interpretation, identifying skill gaps and predicting future gaps based on historical trends.

Hyperpersonalizing ongoing skills development and management practices at scale relies on a specialized platform. Powered by responsible AI and machine learning, the software enables a more comprehensive and inclusive approach to delivering personalized learning paths and development plans for workers. Imagine a world in which learning and development teams are not forced to make an either/or choice about where they place their focus and instead provide more equitable coverage across the entire workforce. Additionally, technological benefits expand the ability for skill certification and validations to occur asynchronously.

Integrating skills data into HR systems requires data to be consistently available across all dimensions of the HR technology ecosystem. AI provides tremendous value in assisting talent matching, talent mobility and talent maximization. Human intervention is still required to validate and further refine proposals in alignment with changing business conditions and needs.

It should be noted that embracing the skills economy is not a technology-only journey. Technology enables the integration of business processes into the business. Substantial process changes are required to maximize the technology. Many organizations will need a partial or total HR transformation to realize the impact of technology on the overall employee experience. We assert that, by 2027, one-third of enterprises will expect their HCM platform to provide career and skill-growth opportunities to system-matched employees to maximize opportunity and potential.

There are several steps an organization can take to move to a skills-based environment, and these steps can be incremental. A good first step is to consider the technology necessary to support the centralization of all skills data and design a comprehensive, future-state technology ecosystem. An organization does not have to acquire or integrate all of the technology from the future-state design, but it is immensely helpful to have the bigger picture in mind when making near-term decisions. Enacting a centralized skills repository enables consistency across all touchpoints of the employee experience, resulting in greater sophistication and value when analyzing the data. It is necessary to understand all areas of the business and employee experience where a skill touchpoint exists to ensure thoughtful design of process and technology strategies and avoid recurring overhauls.

Additional technology can be introduced to a centralized skills repository for skill assessment, personalized learning recommendations and ongoing skill development. Digital coaches can provide much-needed just-in-time assistance or reinforcement, enabling value for the worker and the enterprise. By 2027, compensation market pricing processes deployed in one-half of enterprises will include benchmarking skills, not just jobs. Referencing the same skill object across recruiting, learning, performance and compensation enables a cohesive dataset that does not require data normalization or standardization. Additionally, the centralized skill data can serve as a foundation for powering a skills-based talent marketplace, matching workers and work opportunities on needed skills.

Organizations that subscribe to a skills-based environment realize a tremendous impact on business outcomes. There is an increase in employee engagement and retention resulting from a more coordinated, targeted and personalized approach. This is further magnified by the alignment of employee goals with organization objectives, ensuring everyone is “rowing in one boat in the same direction.” Increased engagement and retention are underpinned by vastly improved opportunities for growth and development. When a skills-centered strategy is afoot, even the flattest of organizations offer unprecedented levels of opportunity for growth and development for all.

When workers are more engaged and goals align with business objectives, it naturally improves the ability of the organization to flex, adapt and even thrive in times of profound change or disruption. Focusing on the skills rather than the jobs ensures a faster, coordinated and aligned response to market changes and customer needs. It creates an environment rich with innovation and unparalleled problem-solving capabilities. All these things come together for lower turnover and recruitment costs, creating a tenured, high-performing workforce. When we arrive here, we reduce the time and resources spent on hiring because the focus moves to ongoing development and redeployment.

Enterprises stand to benefit significantly by embracing the skills economy. The journey to get there can be intimidating and overwhelming, but I challenge you to continue taking steps forward. No matter where you are on your journey, all organizations can benefit from reviewing strategies using three simple steps, including:

• Documenting the high-level skills strategy for your organization, focusing on the touchpoints of skills with all aspects of the worker life cycle. It is not imperative to have all the answers but to capture all the intentions. In this step, focus on the what and not the how.
• Reviewing the skills strategy and highlight where technology is engaged and what type of technology is needed. In this step, the focus is not to map to specific technologies but rather to capture the ways in which the first step can be enabled.
• Noting where technology exists to support the desired experiences and where there are gaps. This provides a longer-term view of your potential technology roadmap while also serving as a catalyst for discussions to understand what changes, if any, are needed to configure your current tools to begin implementing your strategies.

HR transformation relies on technology, ensuring the right tools and processes are available. Taking even one small step forward to enact a skills-centered culture and strategy can build momentum and unexpected excitement. It will not be easy, but it will be worth it.

Regards,

Matthew Brown