A Skills-Based Approach to HR - Relevant now more than ever

A Skills- based Approach to Human Resources - from theory to practice

Galit Rubinstein, Organizational and Work Psychologist

A Skills-based approach to HR practices has been in the works for some time now. Ever since the 4th industrial revolution was announced over a decade ago, work psychologists and analysts have been attempting to plan for the “skills shortage” around the corner. Then came Covid-19, in early 2020 - which accelerated the process that had already begun rendering the forecasted shortage - acute. 

With an abrupt stop in many manual processes due to lockdowns and isolation, many slow-changing processes became automatic overnight. Companies  accelerated their digital transformation journeys, new jobs were “born” and the need for new skills emerged. The problem was that the demand outweighed the supply and talk about skilled-based approaches quickly transitioned from theory to practice.

So what is a skilled-based approach and why is it central to the future of HR practices? This paper will attempt to define, discuss the challenges and provide practical tips for designing and implementing a skills-based approach to your HR culture. 

So what is a “Skills-based approach”?: 

A skills-based approach to Human Resources refers to a strategic and proactive method of managing and developing the workforce based on the specific skills, competencies, and capabilities required for a specific position. It is a powerful solution that can align with and contribute to every step of the employee’s journey. It focuses on identification of the key skills and personality based success factors identified for optimal organizational success.  It shifts the focus from traditional HR practices centered around job titles, qualifications and experience to a more dynamic and individualized assessment of employees' skills. It emphasizes one’s ability to adapt, the ability to learn continuously, and the strategic alignment of skills with organizational objectives. 

The Why: Why should it be important for HR?

In these extremely dynamic times, successful organizations are able to weather the many storms in the business microcosm. They are able to adapt well because their workforce is flexible and adaptive. Flexible and adaptive people who are able to shift and transition quickly and in alignment with the many changes that occur will enable their organizations to change and shift accordingly. In addition, research shows (McKinsey, 2022)  that “hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience.Workers without degrees also tend to stay in their jobs 34 percent longer than workers with degrees. Therefore, skills-based practices allow employers to not only find the best workers but also retain them during a time when it is historically difficult to do so. The approach saves time, energy, and resources while fostering a more diverse and better-prepared workforce.”

The following represent some direct benefits of the approach: 

• Organizational Agility: Companies that prioritize skills are more resilient, adaptable, and innovative. They respond to new developments faster and are able to bring together cross-departmental teams that tackle projects with great speed and efficiency.

• Strategic workforce planning: a skills-based approach simplifies and improves the allocation of resources, increasing collaboration between employees with similar and complementary skill sets, reducing dependency on specific individuals.

• Custom-made Learning and Development programs: Skills-based strategies will enable learning & development professionals to identify and choose opportunities that are better suited for the organizational needs, corresponding with employee’s career aspirations.

• Clear career pathways: Assisting employees in creating personalized career development plans that focus on acquiring and enhancing relevant skills. When speaking in the language of skills and competencies, in-house career coaching becomes an inherent practice.

• Expanded talent pools: By focusing on skills instead of degree requirements, years of experience, and other credentials, organizations will open the doors to wider pools of untapped candidates, who would normally be looked over or filtered out during the initial pre-screening stage. By expanding their pools, they will be “thinking outside of the box”, and in doing so will be able to differentiate themselves from their competition. 

• Skills development interrelated to performance management: Skills-based practices can help align employee development with performance evaluations, ensuring the focus is on gaining or expanding skills and monitoring the progress of your overall workforce capability. By incorporating personalized learning objectives into performance management, organizations can further accelerate employees’ development and enhance their active involvement in the learning journey.

The How: Some Key elements of a skills-based approach to HR include:

When designing a skills-based approach to HR, I would suggest following these steps: 

1. Skill Identification. Assessment and Mapping:

• Assessment: Conduct a thorough evaluation of the skills and competencies possessed by each employee per position, Identifying the key success factors involved in their success as well as the factors involved in their lack thereof. 

• Mapping: Create a comprehensive inventory of existing skills across the organization, identifying both current strengths and areas for development, keeping in mind “where we are going”, and what skills we will most probably need going forward (for example: the digitization process that occurred in the banking industry required banks to recruit a different personna than the traditional).  

• 2. Upskilling and Reskilling | Customized Learning and Development:
  

• Tailored-Made Training Programs: Designing training programs and professional development opportunities that align with the identified gaps in skills as well as organizational goals (For example: teaching traditional customer support teams “Customer Success”).

• A culture of continuous learning: Creating a learning platform that includes diverse opportunities to learn and expand one’s understanding and knowledge thus fostering a culture of continuous learning and upskilling to adapt to evolving job requirements and industry trends.

• 3. Performance Management Based on Skills:
  

• Objective Evaluation: Evaluating employee performance based on the mastery and application of specific skills rather than relying solely on job titles or tenure. This allows management to assess performance in a crystallized way, focusing on the value they contribute in practice. 

• Regular Feedback: When providing regular feedback on skill development, acknowledging achievements, and identifying areas for improvement - a skills-based organization is committed to a culture that encourages and celebrates learning and will take the time to mirror progress when needed. 

• 4. Flexible Job Roles and Career Paths:

• Skill-Centric Roles: Defining job roles and career paths based on required skills and competencies, allowing for greater flexibility and adaptability. Upon identification of the skills and competencies, clusters of roles can be marked and career lattices and ladders (vertical and horizontal) can be planned accordingly. 

• Career Development Planning: Assisting employees in creating personalized career development plans that focus on acquiring and enhancing relevant skills. When speaking in the language of skills and competencies, in-house career coaching becomes an inherent practice.

• 5. Skills-Based Recruitment and Hiring:

• Targeted Recruitment: Attracting and hiring candidates based on their skills and potential contributions to the organization's strategic objectives.

• Competency-Based Interviews: Conducting interviews that assess candidates' abilities to perform specific tasks and demonstrate key competencies.

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• 6. Data-Driven Decision-Making:

• Metrics and Analytics: Collect data at all stages of the process. This will enable leverage of the data and analytics to track and measure the impact of skills development initiatives on employee performance and overall organizational success.

• Strategic Workforce Planning: Using insights gained from skill assessments to inform strategic workforce planning and talent acquisition as well as performance reviews and planning learning and development initiatives.  

Why not? If it’s so easy why aren’t we all doing it? The Challenges involved in a skills-based approach.

As in any process of change, although transitioning into a skills-based approach makes much sense, many organizations are struggling with interpreting theory to practice. Some challenges HR professionals face while attempting to transition into this approach are as follows: 

1. Resistance to change: Changing old and well based habits requires good old change management. Switching from the way things are always done to a new paradigm redefining how things are done, how work is defined and how talent decisions are made can be daunting. It is challenging to teach professionals who believe in the way they work and have always worked - new methods. Therefore it is important to ensure all relevant internal stakeholders are onboard. You could begin implementing the change one department at a time, showcasing the process and the data collected throughout the process. 

2. Skill Identification and Assessment: Accurately identifying and assessing the skills related to different positions can be complex. Determining their proficiency levels and staying updated on evolving skill requirements can pose significant challenges. In addition, the process involves identifying sometimes elusive skills and rendering them transparent. When they are not clear and transparent, managers and their employees will experience difficulty in adapting and even understanding what is expected of them. As such, I would suggest beginning with smaller departments and critical roles malleable to the process. A Skills Taxonomy can help identify both the hard and soft skills that characterize the different positions both in the present and future. To begin with, start by identifying 15-30 “must have” soft skills for every person working at your company (For example if you work at a startup you may expect your employees to exhibit flexibility and independence as well as a “can-do approach). Following this step, you can focus on the specialized skills (5-10) needed for specific roles or departments (Skills needed in the R&D department are different than those needed in Product).

3) Sourcing job seekers with the right skills and getting them to apply: Once skills have been effectively mapped and defined, HR and internal stakeholders “onboard”, it becomes challenging to “educate” job seekers possessing the skills identified to think outside the box and apply to a position that doesn’t appear to be aligned with their previous career paths.  This could be solved by reaching the desired candidates directly or ensuring that job descriptions make it clear that they are looking for specific skills transcending experience and academic credentials. 

4) Lack of Standardization: Due to the absence of standardized frameworks it becomes quite challenging to maintain consistency and fairness while evaluating skills across the organization. When assessments are subjective they can be influenced by bias - rendering the results unreliable and invalid. 

5) Measuring ROI on Skills Development: Quantifying the return on investment (ROI) for skills development initiatives can be challenging. Determining how improved skills directly contribute to organizational success can require robust measurement methodologies. Alternately, ROI can be measured in different ways, as such, I would suggest putting in place a tool for measurement - manager’s assessment, performance reviews, looking at the financials (increase, decrease?)

Discussion

Despite the fact that the job market has changed dramatically since we began talking about the skills shortage - more specifically changes in supply and demand and the shift from a candidate’s market to an employer’s market - transitioning to a skills-based approach remains an important and strategic future-forward decision.  The process is not an easy plug and play type and demands dedicated and experienced HR professionals and organizational psychologists - however, when conducted will contribute to your competitive edge. The job market is dynamic and fast-paced, therefore, I highly suggest you begin this process now. Remember, it is a cross-organizational project and requires all stakeholders buy-ins. Begin through small steps and partner with managers who can readily see the advantages of this process. 

In summary, skills-based organizations, according to Deloitte’s  are: