An introduction to skills-based organizations

Part 1: An introduction to skills-based organizations

When you turn on a professional football (soccer) match, you’re seeing the result of some of the most innovative, forward-thinking decision-making to be found in any industry today. 

I’ve loved the game of football since childhood, both playing it in my spare time and following along with my favorite team: Arsenal. But what has truly stood out to me over the last decade is the exceptional performance levels demonstrated by football clubs. The competitive nature of the game has intensified remarkably. There's incredible synergy among players, and their athletic abilities have significantly advanced beyond previous standards. The speed of wingers, the precision of strikers, the robustness of defenders, and the goalkeepers' ability to accurately distribute the ball across the field have all markedly improved.

A key factor of this performance improvement is the establishment of new skills measurement methods and data analysis by football clubs. These days, elite clubs rely heavily on precise evaluation and analysis of player knowledge, skills, and abilities, guiding their strategic decisions. Each week, these clubs leverage mountains of data to select the most effective team composition to surpass their rivals. They have fully embraced the concept of skills-based organizations. 
But while Arsenal may be breaking new ground with dynamic, skills-focused strategies, other business industries are lagging behind. 

According to recent research from Boston Consulting Group, the pace of change for skills is increasing dramatically — in some fast-paced industries, more than three-quarters of the top 20 most requested skills completely changed in the five-year period from 2016 to 2021. This trend, combined with the emergence of highly-disruptive technologies like generative AI, means that individuals will need to update their skills twice as fast compared to today. Skills that used to be prized by employers, like logo design and data entry, are becoming obsolete. In 2020, I paid thousands for Workera’s logo design — I wouldn’t do the same today. Companies need to adjust to this new reality by helping employees acquire new skills and promoting those who can deliver the most value to the organization. 

According to research from Gartner, 53% of HR leaders said that the inability to identify skills was the largest impediment to workforce transformation. For businesses to be able to survive the current pace of change and drive transformation, they need to become skills-based organizations.

In this five-part series, I’ll provide a practical guide to skills-based organizations: what they are, how to become one, and why it matters.

• Part 1: In An introduction to skills-based organizations, I’ll define the concept and provide concrete examples to highlight how they differ from traditional organizations
  
• Part 2: In Measuring and managing skills to become a skills-based organization, I’ll dive into the different tools and methodologies used for assessing and maintaining skills, and I’ll offer a framework on how to deploy different tools for long-term growth Coming soon 
  
• Part 3: In How skills-based organizations use incentives to foster employee growth, I’ll examine the different motivational strategies and rewards that skills-based organizations use to foster employee development and retention
  Coming soon 
  
• Part 4: In The five levels of skills transformation, I’ll lay out a structured, step-by-step guide to achieving a comprehensive skills transformation, including five levels of progression within an organization’s journey. Coming soon
• Part 5: In Choosing the right skills KPIs, I’ll explain which tools organizations should use to make sure they’re accurately tracking progress and making the right interventions to keep employees moving forward Coming soon

Let’s get started.

What makes an organization
skills-based?

A skills-based organization is one that focuses on the skills of its workforce as the primary factor when hiring people, structuring teams, assigning tasks, developing talent, and driving business strategy.

A skills-based model differs from traditional approaches in several ways

These differences are observed in organizations’ day-to-day operations and decisions. Let’s take a look at some examples.

How skills-based organizations make talent decisions

The employee experience in a company is defined by several key moments and trajectories, from the recruitment process to upskilling and internal mobility to compensation and mentorship. Each of these factors will be shaped by the organization’s approach to skills.

Recruiting

Any employee’s journey with an organization will begin with recruitment and interviewing. When a sports team approaches their annual draft, they conduct extensive scouting, assessments, and interviews to determine what player best fits their current roster and long-term needs. Traditional organizations are less detailed in their approach, and the results are prone to biases. Skills-based organizations bring together a variety of methods to gain a complete picture that more closely resembles an NFL scouting report — for a tech company, this could include adaptive skills assessment, a coding assignment, live interviews, panel interviews, references, and background checks.

Crucially, skills-based organizations connect external assessments with internal assessments. Instead of just understanding what the potential employee brings to the table, they also have a deep understanding of internal proficiencies and skills and how the new hire fits in. Organizations may hire to fill in gaps (skills they don’t currently have) or to reinforce their workforce with the same skills at the right level of proficiency (skills they want more of, but at the same benchmark). The result of this approach to recruitment and interviewing is a more diverse, multi-faceted workforce that is carefully mapped to the needs of the organization. As a result, I've seen companies increasingly designate a singular executive role, such as a Chief Talent Officer or Chief People Officer, to spearhead both internal learning and development (L&D) and external talent recruitment efforts.

Upskilling

Before the analytical revolution came to Major League Baseball, it might have been enough for a pitching coach to tell one of his starters that they need to develop a curveball before the start of the next season. Baseball teams can now use high-speed video cameras to understand every detail of that pitcher’s curveball, allowing the coach to provide more granular feedback on how to develop the skill.

Every organization wants to upskill their employees and increase the value they deliver to the company, but many struggle to deliver the precise enablement necessary to maximize results. In traditional organizations, an upskilling program will have managers issue blanket requirements for employees to complete a training module — regardless of each person’s existing skill level or learning style. In many cases, employees will find that the training is either too easy, too difficult, or irrelevant to their goals — as a result, they won’t complete it.

In skills-based organizations, upskilling is tailored to each employee’s abilities and preferences. Managers will use a skills ontology (or taxonomy) to precisely define which skills their team needs to complete projects, use skills assessment tools to help employees understand their individual skill gaps in the context of their actual project goals, and focus on closing that exact gap with blended learning. The blend of content modalities ensures employees find the learning methods that work best for them. 

Moreover, not every organization is measuring upskilling effectively. In traditional organizations, success is measured based on completion, not according to actual skill building. Rather than simply measuring completion, skills-based organizations measure success by skill acquisition and learning velocity.

We can trust managers to understand what their team needs to succeed, but the task of understanding each employee’s individual skill levels and requirements is beyond the abilities of any human. The largest e-learning providers offer hundreds of thousands of courses and programs; no one can be expected to scan through and select the perfect options from an ocean of content. Skills-based organizations think of “upskilling” as “rightskilling” — using technology to design training programs so that each employee has exactly the right skills at exactly the right levels for the task at hand. This hyper-focused approach leads to dramatic increases in learning velocity — in some cases, Workera customers saw an 8x increase in their rate of learning. 

Internal mobility and talent marketplace

Think about the adjustments a football trainer or basketball coach make before each game. Their lineups aren’t set in stone. Instead, they make adjustments according to the strengths and weaknesses of their opponents. A basketball player who started at power forward one week may shift to center if they’re facing a smaller, faster opponent.

While there’s rarely such a clear-cut “opponent” in business, traditional organizations struggle to make adjustments according to the business environment and the task at hand. Managers are prone to hoarding talent for themselves, preventing highly-skilled employees from moving elsewhere in the company where they might deliver more value.

Skills-based organizations take the opposite approach to internal mobility. At Workera we call this “moving heroes” — if an employee is exceptionally skilled in a specific area (for example, coding), we’ll shift that star to a team that’s lagging behind. The result is a force multiplier: the entire team’s coding skills improve rapidly. Top performers are key to setting high standards and showing others what excellence looks like; we can’t afford to keep them siloed in one area of the business.

Mentorship

In the context of an individual sports team, mentorship is pretty straightforward: a veteran defenseman might take a rookie under their wing and provide some advice on how to adapt to the league. But on a larger scale, a mismatch will emerge between the number of mentors and mentees, leaving mentors overwhelmed and mentees undersupported. Some professional sports organizations use academies to group players together and allow younger players to be mentored by those who are 1–2 years older than them. This increases the likelihood that people will be mentored by those who are just above their current proficiencies, resulting in an organic and scalable mentorship pyramid.

In traditional organizations, managers will identify certain employees to be mentors and assign them to other employees based on observations and gut instincts. Not only does this often lead to mismatches, but it can also be prone to biases and office politics — an outgoing newcomer may be more likely to be matched with an exceptional mentor, while quieter employees are left without the attention they need to grow and succeed.

In skills-based organizations, mentorship programs are designed around internal skills and proficiencies. Employees must reach a specific maturity level before they’re ready to mentor others; at that point, mentors will be selected based on their skill levels as well as recommendations from managers. As a result, they will always be mentoring individuals who are just below their current proficiency level. 

Compensation

In Premier League football, teams are willing to pay astonishing salaries to players with rare, exceptional abilities. In cutting-edge industries like artificial intelligence, top employees are commanding salaries similar to those of professional athletes. We should expect this trend to increase in the corporate world as companies compete on compensation for the most exceptional skills.

In traditional organizations, compensation is largely tied directly to tenure. A classic example can be found in schools — teachers are paid on a defined scale that increases according to their education and how many years they’ve spent teaching. Skills don’t factor enough into the equation.

While this area of talent management isn’t as developed as the previous areas, the future of compensation will see employees paid and rewarded according to their ability levels — something companies like McKinsey are already introducing. Companies will also consider the overall market supply and demand for each skill, which I believe we will be able to measure accurately on a global scale in the coming decade. We may soon be entering a period of “employee free agency” that looks less like a high school and more like the NBA.

Benefits of skills-based organizations at all levels

Taking a skills-based approach to talent management doesn’t just benefit those at the top: it creates a rising tide that lifts every level of the organization.

For C-suite executives, a skills-based approach fosters a culture of lifelong learning, drives innovation through diverse skill sets, and effectively aligns skills with shifting business objectives. According to research from Forbes Insights, 92% of C-level executives believe organizational agility is essential for success, yet just 27% view themselves as highly agile. Focusing on skills makes it possible to break down silos and increase agility across the organization.

Managers have a multi-faceted need for better skills management. They need to secure essential skills within their team, reward their employees’ achievements and incentivize progress, and they need to build teams with a variety of competencies to complete their projects on time. They can only achieve these needs if they have a clear understanding of their employees’ skills and where they need to grow.

Skill development is no longer a “nice-to-have” for businesses — it’s essential in order to retain employees. LinkedIn’s 2023 Workplace Learning Report found that 93% of organizations are concerned about employee retention, while an earlier edition found that 94% of employees were more likely to stay longer in their roles if the company invested in helping them learn. A skills-based approach puts employees on an unobstructed path to career growth and development. Skills-based organizations allow employees to see the gaps in their current skill levels; establish clear goals and training approaches for skill development; and be rewarded when they reach those goals. 

The tools for a company to become a skills-based organization exist today, and there’s no reason why a Chicago tech company should be outperformed by the Bulls or the White Sox. In Part 2 of this series, we’ll look more deeply at the tools and strategies used to establish benchmarks for skills and measure progress.