
The world of work is evolving at an unprecedented pace. Such rapid evolution is pushing organizations to adapt even their core structures to keep up as traditional job titles and org structures are starting to lose their relevance in today’s dynamic workforce.
Organizations are beginning to recognize that in order to excel in such a rapidly changing environment they need to be grounded in flexible practices and capabilities instead of static roles and structures. As a result, skills are now becoming the new currency of work. This blog series will explore the evolving world of skills, starting with the transformative potential of a skills-first approach.
What’s the rush?
People are quick to point the finger at AI. However, the move towards a skills-first approach is prompted by the combination of multiple different factors:
AI and Automation: The rapid integration of AI and automation into the world of work is reshaping job functions by automating repetitive and low-skill tasks, leaving open the roles that demand uniquely human skills. McKinsey notes that more jobs will be changed by AI and automation than those that will be lost or gained.
Pace of Technological Change: Technology is evolving faster than ever causing skills to become obsolete in a matter of years or even months. Employers estimate that 44% of workers’ skills will be disrupted by technology in the next five years (WEF, 2023). Fixed job positions and educational processes are struggling to keep up with the pace of change.
Changing Workforce Expectations: Younger generations, particularly Gen Z, perceive work very differently to older generations. These workers are less focused on the traditional climbing of the ladder and instead value investment in their learning and development. In fact, 76% of Gen Z professionals desire more learning opportunities at work (LinkedIn, 2023).
Global Talent Shortage: The talent shortage remains a persistent issue - one that is affecting organizations everywhere. Companies are being pushed to get creative when it comes to attaining top talent. A focus on skills, instead of credentials or job titles, broadens the talent pool and allows for more diverse hiring practices.
The combination of labor evolution and automation, the shortening lifespan of skills, and changing employee expectations all contribute to one huge talent shortage. Dealing with a gap of this magnitude calls for fundamental changes in the way organizations connect people to work.
Is it even worth it?
While job titles tend to emphasize rigidity, a skills-first mindset is able to put adaptability, flexibility and innovation at the forefront. Therefore, by focusing on skills rather than titles, organizations can unlock:
Enhanced Agility: By adopting a flexible structure where skills serve as the primary organizing metric, organizations can build stronger talent pipelines enhanced by internal mobility. This approach ensures that employees with diverse skill sets are no longer confined to a single role but can contribute wherever their abilities are most valuable. Organizations that implement a skills-based approach are 57% more likely to be agile, enabling them to adapt swiftly to market changes and disruptions (Deloitte, 2022).
Improved Employee Retention: Skills-based hires tend to have a 9% longer tenure compared to traditional hires (BCG, 2023). This increase in tenure is driven by the greater job satisfaction and engagement associated with employees who work on projects that align with their capabilities.This alignment fosters a sense of purpose and achievement, motivating employees to grow and contribute further to the organization.
Broadened Talent Pool: A skills-first approach facilitates access to a more diverse and qualified workforce by removing potentially redundant barriers to entry. Globally, adopting a skills-first approach can expand talent pools nearly tenfold and in the U.S. specifically talent pools could increase by 19 times (LinkedIn, 2023).
Increased Organizational Performance: A skills-based organization makes employment decisions based on individuals’ skills and competencies, rather than using proxy credentials, which makes them more suited to their roles. In fact, organizations that embed a skills-based approach are 63% more likely to achieve their business objectives, reflecting improved efficiency and effectiveness (Deloitte, 2022).
In sum, a skills-first approach helps employers to strengthen their recruiting, hiring, and retention capabilities while simultaneously improving productivity, performance and agility. However, it is not just employers that stand to benefit from a skills-first approach. A skills-first approach, if implemented effectively, can enhance career transparency by aligning required competencies to career progressions, broaden access to opportunities by prioritizing skills over credentials, and improve training quality by focusing on developing in-demand skills (Gartner, 2024; WEF, 2023; LinkedIn, 2023).
Where do we start?
According to Deloitte, organizations typically take one of three paths toward adopting a skills-based approach:
Transform one talent practice at a time: Often organizations opt to start in one functional area and reduce the dependence on jobs by increasing the use of skills taxonomies for the organization of work. From here you can move outwards by either similarly transforming another practice or by determining that a skills “hub” is necessary before realizing further transformation.
Create a centralized “skills hub”: On the other side of the coin, organizations may want to start with a centralized philosophy before expanding out to each talent practice. To do this, one must start by inventorying or creating a language for skills that forms the basis of a “skills hub” or “skills taxonomy”. This categorization of skills can function as an independent tool or complement job families to offer valuable structure during your skills transition.
Start with re-defining work: The final option is to start at the level of work itself and then work backwards toward a governance system. Organizations tend to either build an internal talent marketplace that lets some work live as projects and tasks outside of the job or develop broadened job specifications.
Whichever approach you decide to investigate you will need to lay the groundwork first. This requires a substantial shift in mindsets that challenges conventional thinking. Consider these strategies to lay the groundwork for implementation ahead of time:
Be transparent: A skills-first approach can often initially feel impersonal or overly transactional so be sure to address these concerns proactively by outlining what a skills-first approach means for both your organization and your employees. More specifically, within your communication strategy be sure to not only touch on the ‘why’ but also communicate the ‘how’ to address any uncertainties regarding the shape of the transition.
Manage expectations: Without titles, organizations need a clear framework to manage employee expectations and show them how they can grow. It’s essential to define meaningful metrics for tracking and recognizing success, progress and achievements. By using this framework, employees can focus on skill mastery and cultural contributions, helping them to feel like a valued asset within the organization.
Start small: Begin with a pilot project involving a small team to gather valuable data. This will help to build a foundation upon which you can refine the process before rolling it out on a larger scale. Starting small will help to shift the culture over time without it feeling like such a big shock to the system.
Transitioning to a skills-first approach is an ambitious but achievable transformation. Any implementation must be done so thoughtfully, grounded in continuous dialogue and cooperation. Having explored the big picture, we need time to dive into the specifics of designing a dynamic skills-first framework - what skills are truly essential for success? Stay tuned for the next blog to uncover the answers!
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