Building a skills-based organization: Shift your people strategy to prepare for future workforce challenges

Succeeding as a skills based organization in a time of rapid change

The World Economic Forum estimates that by 2030, 1 billion people will need training in essential technical and soft skills. Though these skills are a requirement for staying competitive, they only have a half-life of 5 years. 

It’s an intense situation, but transitioning into a skills-based organizational model can help. Lately, this term – sometimes referred to as a competency-driven organization – has also been gaining traction in the HR field. But really, what is a skills based organization? Looking past the hype, it's about making skills the cornerstone of your talent management strategy and approach to organizational agility.

After all, the way we work is changing quickly. Technology is transforming roles and labor shortages present challenges for organizations of all sizes. Skill gaps also mean that many employees simply lack the ability to thrive. The days of clear-cut job roles and traditional hierarchies are ending as well. Flexible, fluid approaches to talent management aren’t just nice ideas – they’re required for survival.

In many ways, embracing agility is exactly what being a skills-driven organization is all about. The skills and competencies of people are valued more than educational qualifications and traditional job titles. Leaders concentrate on identifying, developing and leveraging the abilities of each individual, helping them make the biggest impact possible.

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Creating a skills-based organization 

The idea of building a skills based organization might sound daunting. After all, maybe your company has succeeded for many years with a traditional structure. People have their titles and credentials, and it might feel like there’s no reason to change. But there are many benefits that a skills-based approach brings:

• Expanded talent pool: By valuing potential instead of CVs, companies that pursue a  skills-based organizational structure can access a more diverse talent pool and discover talented candidates who might have otherwise been overlooked.

• Greater clarity: Creating a skills-based organization makes it easier to let team members know exactly what skills are required to succeed in their roles, helping you avoid confusion and wasted time.

• Prevent bias: Skills-based hiring can minimize the effect of bias when adding new team members and promoting current employees. Instead of focusing solely on degrees and certifications, organizations can build a capable workforce where people succeed based on their abilities. 

• Better retention rates: When people believe their skills are valued and they’re given chances to develop, they’ll feel happier. They’ll also be more likely to stay in the roles, preventing a constant cycle of losing and replacing employees.

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Is it time to make the change? 

Becoming a skills-based organization  can be a game changer for companies of all sizes. But it’s important to take a moment and consider a few factors before making the switch. A solid understanding of your team’s capabilities and organization’s skill gaps will help you determine whether it’s the best move. 

Start by asking 3 questions:

• Is it hard to fill roles with traditional criteria?

If your organization faces recruitment challenges due to candidates not aligning with traditional educational and career experience, consider skills-based hiring. It can help expand your talent pool by prioritizing specific skills instead of formal qualifications and previous job titles.

• Are you experiencing rapid technological or market changes?

Employees who can adapt and learn new skills quickly are invaluable in the face of shifting markets and technological breakthroughs. If new tech platforms, operations and tools are the norm for your company, you might want to explore how to adopt skills-based talent management practices.

• Do you struggle with low engagement and high turnover?

High turnover and low engagement might mean your people don’t believe their skills and career goals are truly recognized and used. Becoming a skills-based company can help align employee roles with interests and skills, boosting the job satisfaction and engagement needed for higher retention.

Making the transition and putting skills first

Pursuing a skills-based organizational structure can help companies become more agile, find the best talent, navigate change, and much more. Before diving in though, make sure you have a solid plan. Challenges are inevitable.

Prepare your leaders and employees for a culture and mindset shift. Share the skills based organization definition with others to get them up to speed. Most importantly, make sure people have the support they need. Recruitment specialists will have to emphasize and assess skills over qualifications when hiring. Personalized training and development programs will be needed to provide employees with the skills required to succeed. 

Eager to get started? Read our new report, Put Skills into Strategy: A Roadmap to Building a Skills-Based Organization That Drives Growth. A comprehensive look at the challenges and rewards of pursuing a skills-based business model, it includes insights from leaders from top organizations, including Electrolux, Aircall, PwC and Vopak.