Skill tree

What is a skills-based organization model and why it is so important?

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Change is indeed inevitable. To continue being successful, organizations need to keep redesigning their strategies and practices.  Ever since mankind started working, jobs became the dominating structures of work. Each job has a set of tasks and responsibilities which is performed, led, managed, and supported by HR.

As the business environment continues to change, organizations have realized that job roles are a collection of skills. Instead of referring an individual to a job title, they are seen as a whole person with specific capabilities and skills. 

Because of this, organizations started embracing skills-based talent. This new talent strategy can reflect what the future holds. The skill-based organization helps in placing the capabilities and skills of humans at talent strategies which results in building a new operating model for the workforce.

What is the skills-based organization model?

The expertise required to complete a task or job is called skills. In order words, it encompasses the competencies, abilities, and knowledge to perform the operational task. It further helps employees advance in their careers and diversify their job options. 

Currently we are witnessing a  shift in talent management focusing on job roles to skill profiles. Previously jobs were the main ingredient of the organization’s talent processes. Hiring, compensation, and succession planning, HR systems were based on job roles.  The HR professionals started facing challenges in achieving organizational growth equity, innovation, and agility. They could see the urgent need for valuing and rewarding employees for their skills rather than their education degree, level, or title. This traditional talent strategy was supporting standardization and bureaucracy. The jobs could not be developed or changed to achieve the organizational objective. Moreover, it views employees as filling them in organizational charts.

In contrast, skills-based organizations unlock the employee’s potential, bring innovation, and make them better at work. It helps in creating more worker-centric work which leads to organizational agility and resilience.  SBOs are an attempt to adjust to the ever-changing marketplace in order to help companies find their future of work. This Deloitte article defines skill-based organizations as: “The organizational form that places skills and human capabilities at the heart of talent strategies, creating a new operating model for work and the workforce”.

Interesting statistics related to the world of skills-based organizations:

Companies are now embracing skills-based concepts. They believe that the powerful impact of skills-based practices can help them solve intensified challenges. Following are some of the statistics which provide a sneak peek into the world of skills.

  • According to McKinsey Global Survey, 87% of the executives said that they experience a skill gap that a recent graduate often lacks in the competency level for key skills. 
  • 34% of the employees who do not have an educational degree tend to stay in jobs longer than the ones with a degree.
  • A Deloitte survey tells, Only 14% of the executives strongly agree that they are using workforce skills and capabilities to their full potential. 
  • According to an SHRM survey in 2018, 77% i.e. more than three in four of the employees who leave the organization could have been retained by providing them skills and career development. 
  • As per the prediction of the World Economic Forum, 50% of the employees will require to reskill by 2025 due to technological advances. 

The state of Maryland in the US declared that it would not require degrees for 50% of its job opening in 2022.

The below-mentioned statistics are from the survey conducted by Deloitte:  

  • 73% of the employees feel that skill-based practices can improve their experiences at work.
  • Only 14% of the executives strongly agree that they are using workforce skills and capabilities to their full potential 
  • Only 39% of the employee believe that they have a full understanding of their skills and capabilities.
  • 48% of the HR executive and business executives feel that they have documented the human capabilities of their employees which are valid and verified.

What are the advantages of a skills-based model?

Organizations are well aware of the benefit can skills bring to them. Following are some of the importance of skills-based organization. 

  • Organization agility: To respond to market changes, organizations need to be agile in nature. McKinsey & Company defines it as, “the ability of an organization to renew itself, adapt, change quickly, and succeed in a rapidly changing, ambiguous, turbulent environment”. According to a survey, 91% of the business executive and managers agree that the upcoming changes in their organization would require them to improve the new skill set, capabilities and competencies. 
  • Improves internal value propositions: Skills-based hiring results in more resilient employees which can be an excellent strategy for preventing the attrition ratio. If company hires for skills, then it is more likely that they would stay with the company for a longer period of time. Therefore, skills-based organization helps in achieving internal value propositions. It practices not only allow companies find best employees but also benefit in retaining their talent. This eventually results in saving time, effort, and resources. 
  • Fewer silos: Asilo organization are such where group of experts are divided by departments. In such environment, it is difficult to share information among different divisions. A dynamic skills-based organizations erases the concept of silos and rigid hierarchy. Here the skilful employees flow freely across the organizations. This helps in empowering frequent cross-cultural communication and reduces the chances of employees being stuck in the same department or specific team. 

In conclusion, the skills-based organization is the most effective solution for companies all over the world. With its help, they can unlock agility and will be able to keep up with the pace of changes, as and when required. The skill-based practices can expand their access to talented individuals. 

This will help employees as well to be more equipped with finding better jobs based on their skills rather than educational background. It is the right time for employers to commit themselves to skill-based practices.