HR management software: 5 steps to build a skills-based organization

A skills-based approach with HR management software

Being able to meet the increasing need for agility, agency, and equity in today’s work environment requires a well-structured organization that places an emphasis on honing key skills. However, making the switch to a skills-based organization can be challenging. It requires an investment of both money and time, and it can be hard to determine where to start. According to Deloitte, 85% of business and HR executives believe a skills-based organization will be very or somewhat important to their company’s success over the next three to five years. This article will discuss HR management software and how it can help you utilize your workforces’ talent – and transform your organization into a skills-based powerhouse.

What is a skills-based organization?

What is a skills-based organization

In the past, organizations were primarily focused on tasks, with job descriptions and roles based on what needed to be accomplished. This approach, however, doesn’t consider each individual’s unique skills and capabilities. As a result, many organizations are dealing with skills gaps and challenges regarding talent acquisition.

The solution is a skills-based organization. A skills-based organization places skills and human capabilities at the heart of talent strategies, creating a new operating model for work and the workforce.

Only 14% of business executives strongly agree that their organization uses its workforce’s skills and capabilities to their fullest potential. Cultivating a skills-based organization can change this by matching individuals with the tasks to which they are best suited based on their skill set. This leads to better task performance, and allows employees to use their strengths and develop their abilities. In turn, this can lead to increased job satisfaction and engagement. Ultimately, the goal of a skills-based organization is to create a more agile, adaptable, and successful organization.

Why do we need skills-based organizations?

The skills gap and the future of skills aren’t buzzwords. With the rise of new technologies and automation, they have become necessities.

The World Economic Forum predicts that 40% or more of today’s core skills workers will change within five years. According to a report by McKinsey on German labor market development up until 2030, for example, approximately 6 million employees need fundamental re-training, while 4 million others may need to switch professions due to automation.

Meanwhile, in a McKinsey survey, 44% of respondents stated that their organizations will face skills shortages in the next five years, and another 43% reported skills shortages that already exist – and 87% of respondents said they either have gaps now or expect them in a few years.

So how can we close this skills gap? One way is by creating an a skills-based organization.

A skills-based organization constantly measures and analyzes its workforce to identify which skills will be critical in the coming years. This approach allows businesses to stay ahead of upcoming trends and changes to maintain a competitive edge. It also fosters a culture of continuous learning, which is essential in today’s fast-paced world.

AG5 skills management software

What are the benefits of a skills-based organization?

The most successful organizations are those that embrace a skills-based approach. According to Deloitte, around 75% of executives and workers say skills-based pay and transparency regarding what skills are worth would be a positive development. In addition, Deloitte Research shows that workers welcome organizations using new data sources to better understand their abilities, with 79% of workers open to their organizations collecting data on their skills and capabilities.

Here are just a few of the many benefits of a skills-based approach:

For employers

  • Increased productivity. Workers who are compensated based on their skills and abilities are more likely to be motivated to use those skills to maximum effect.
  • Improved quality. When employees focus on using their skills to the best of their ability, they’re more likely to produce high-quality work that meets or exceeds expectations.
  • Reduced training costs. With skills-based pay, new hires can hit the ground running because they’re already being compensated for the skills they bring to the table. As a result, training costs are lower, and new employees can start contributing sooner.

For employees

  • Greater autonomy. One of the most significant advantages of a skills-based approach is that it gives employees greater autonomy over their work. Rather than being told what to do and how to do it, employees can use their ideas and creativity to get the job done as they see fit. This autonomy can lead to increased satisfaction and engagement.
  • Greater motivation. In a skills-based organization, employees know that they’ll be rewarded for learning new skills and putting them into practice, so they’re more likely to take initiative in professionally developing themselves.
  • More opportunity for advancement. Advancement opportunities are primarily determined by an individual’s skill set, meaning that anyone willing to put in the effort can earn a promotion or raise based on their own merits.
  • Enhanced workplace satisfaction.  Employees who are compensated based on their skills are more satisfied with their jobs. When workers feel as though their efforts are being recognized and valued, their commitment to their organization increases.

AG5 HR management software

Challenges in changing to a skills-based approach

Making the shift to a skills-based organization is not without its challenges. A Deloitte survey identified the obstacles to transformation to skills-based organization. Here are some critical obstacles and how HR management software can help you overcome them.

1. Legacy mindsets and practices (46%)

HR management software can help you overcome legacy mindsets and practices by providing visibility into the skills needed to perform specific tasks or roles. With this information, you can make data-driven decisions about which skills are essential for your organization, and which ones can be de-emphasized.

2. Keeping up with changing skills (32%)

It can be challenges to keep up when the skills needed by your organization change. HR management software helps you stay ahead of the curve by identifying the skills that are in demand, as well as those becoming obsolete. With this information, you can ensure your employees have the right skills for the present and the future.

3. Inability to connect skills to business priorities (29%)

HR management software can help you connect appropriately skilled workers to business priorities. Based on this overview, you can create training and development plans that help employees acquire the skills they need to succeed.

AG5 skills matrix software

4. Complexity and difficulty of managing skills-based practices (28%)

You can automate many tasks with HR management software, quickly and easily assess employees’ skills, identify skill gaps, and create training and development plans.

5. Lack of standard definition or taxonomy of skills (26%)

To overcome this obstacle, it’s essential to have a system for defining and categorizing skills. HR management software can help you create a skills taxonomy by providing a way to assess, identify, and track skills.

6. Insufficient skills data (20%)

HR management software provides a detailed report on the skills data of your employees. This data can help you identify trends and make informed decisions.

7. Inability to evaluate performance based on skills (20%)

By tracking employees’ skills and performance over time, HR management software can help you identify the most critical skills for success. You can also use it to create training and development plans to help employees improve their performance.

Challenges in changing to a skills-based approach

5 steps to building a skills-based organization

In a skills-based organization, employees can move more freely between projects and tasks based on their unique strengths and abilities. This allows for greater flexibility, creativity, and a more engaged workforce. So how can you go about making the shift from a traditional to a skills-based organization? Here are five steps to get started:

1. Define the skills your organization needs

Start by taking a look at your current organizational structure. Identify the areas in which you need improvement and the skills that would help you do so. Make a list of the top skills that are most important for success in your industry.

2. Align individual skills with organizational needs

Start by assessing the skills of each individual in your organization. Then match those skills with the organization’s needs to close the skills gap. For example, if you have team members willing and able to learn new skills, invest in training and development programs to help them close any gaps. If you don’t have internal candidates with the desired skills, look for talent outside your organization.

3. Identify the skills gaps and develop a strategy 

Once you’ve defined the skills your organization needs, it’s time to assess where those skills are currently lacking. To do so, talk to your team members and leaders, review job descriptions, and conduct performance evaluations. It’s important to be honest here; if there are areas where your team is falling short, it’s better to address them now.

Identifying the training and development resources available to your employees is essential. Create a plan for how employees can use those resources to develop the necessary skills.

AG5 HR management software

4. Implement your plans and monitor results

The next step is to implement your strategy. Start by rolling out your plan to employees and giving them time to complete training and development activities. Monitor the results of your efforts by assessing changes in employee behavior and job performance. If necessary, make adjustments to your plan so it continues to meet your organization’s needs.

5. Create a strong learning culture 

To truly make a skills-based organization work, you must cultivate a continuous learning culture within your organization. Encourage team members to seek growth opportunities, provide constructive feedback that leads to improvement, and create an environment in which everyone feels they can contribute their best work.

AG5 HR management software

The skills-based approach is a win-win for employers and employees. Emphasizing the importance of skills and human capabilities, it leads to better performance, increased job satisfaction, and enhanced workplace satisfaction.

AG5 software can help you manage this transition. Learn more about AG5 and how it can support you to build a skills-based organization. Request a free demo today!

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