Why companies need to move towards a skills-based approach

Talent acquisition has traditionally involved matching job descriptions and roles to people. Candidates were screened on the basis of their credentials and/or experience. Now however, as businesses grapple with the challenges of a dynamic business environment amid a skills and labour shortage, they have realised that to build a lean and agile company, it is imperative they change their approach to talent management and move towards skills-based recruitment.

The imperatives driving a skills-based approach

According to the Merriam-Webster dictionary, skills are the ability to effectively and readily use knowledge to perform or execute a task. Hiring a worker who has the requisite skill sets gives organisations the freedom to match work and abilities, and also deploy them based on business priorities. A skills-based hiring model enables scalability, accelerating business operations, and improving employee satisfaction, besides other business drivers.

Increasing human-centric approach: As they realise the importance of human capital, organisations are increasingly focused on the worker, rather than on the job. Employee experience and engagement has become a key factor to retain top talent.When people feel that they are adding value to the organisation in tangible ways, they are intrinsically motivated to stay in the job, and perform better. People want to feel respected, as well as realise their potential. Employees today increasingly demand more autonomy. A skills-based model allows for employees to utilise their unique skill sets and strengths. Hiring for skills allows organisations to utilise their workforce in a more agile manner. By developing a composite skills database, organisations will be able to match skills to projects or jobs, and completely revamp talent management, either through internal recruitment, or by taking advantage of the thriving gig economy to recruit talent as needed.

Driving diversity, equity and inclusion (DEI): DEI has gained traction over the years, and forms a key aspect of talent management. When organisations focus on skills rather than the job and provide skills training to existing employees, they are making every employee more employable across the organisation, and providing equal opportunity. Furthermore, prioritising skills over prior job history, qualifications etc. helps to reduce unconscious bias while evaluating candidates. Automated screening of candidates through online assessments and tests democratises hiring and increases diversity.

The skills gap and talent shortage: According to a global McKinsey survey, nearly 90 per cent of organisations said they are already experiencing skills gaps or anticipate skills gaps in the coming years. Apart from technical skills, companies are also experiencing a shortage of soft skills, which can reduce competitiveness and efficiency.  In a Wiley survey, 40 per cent of employers said that they are compelled to offer more pay and benefits to retain employees, and that long-term retention is a top priority.  With a  skills-based hiring approach, organisations can access a wider talent pool, thereby bridging these gaps.

A changing business environment: The digital transformation across industries, and the advent of technologies such as Artificial Intelligence (AI) / Machine Learning (ML), Augmented Reality (AR) and Virtual Reality (VR) translates into endless possibilities for businesses in a phygital world. Organisations need to be lean and agile to respond quickly to changing market conditions, and rising customer expectations; to adapt, workers must possess or quickly upskill themselves.

Building a skills-based organisation requires that organisations make a paradigm shift in talent acquisition and management, as well as business operations. Logical breakdown of work into projects that require specific skill sets will allow project managers to pick employees from an internal talent marketplace or skills database. Employees should be able to work for projects beyond what they were recruited for, and be recognised for their individual contributions. Organisations also need to rethink hiring practices. Talent management needs to be redefined too —  skills-based compensation and performance appraisals lead to better pay parity and equity.

That said, adopting a skills-based hiring approach requires organisations to surmount several challenges including legacy practices and establishing a common skills taxonomy. Defining the value proposition and identifying  areas that would benefit the most from a skill-based practice would be a good place to start. Moving towards a skills-based operating model requires organisations to evolve gradually, to ultimately build a lean and agile business armed with the workforce of the future.