The skills-based organisation: the future is here

More and more companies are moving towards a skills-based organisation.

Many people processes, including traditional human resources processes associated with a slower, more stable environment, are trying to meet today’s demands for speed and flexibility in business. This challenge highlights the need for organisations to adapt and rethink their approaches to talent management.

Skills-based organisations emphasise developing and using a range of competencies, encouraging innovation and resilience in the face of industry changes. This approach not only meets the demands of a rapidly evolving, globalised economy but also promotes inclusion by focusing on the individual’s abilities.

By prioritising skills over conventional qualifications, organisations can unlock a wealth of potential, ensuring their teams are well equipped to tackle challenges, contribute meaningfully and drive growth in an ever-changing economic landscape.

What is a skills-based organisation?

Deloitte defines it as a “new organisational form” that “places skills and human capabilities at the heart of talent strategies, creating a new operating model for work and the workforce”. The emphasis is on skills rather than job titles. Skills are used to organise work in two ways:

1. Traditional roles are broken into smaller parts (tasks and projects) based on the skills and competencies needed to perform them;
2. Work is broadened by creating a specific commitment to solve a problem, achieve an outcome or create value.

Traditionally, people hold jobs. A skills-based approach moves beyond this ageing mindset. Instead, it treats every employee as an individual with skills and talents that can be freely applied to tasks matching their interests and personal strategy, which in turn align with organisational goals and priorities.

Benefits of a skills-based organisation

1. Adaptability

The economy and business environment are constantly evolving. Organisational needs and goals change. The skills in demand yesterday, today and tomorrow differ considerably. Only skills-based organisations can keep pace. Only they can change quickly and redeploy skilled talent where it is needed. Agility, adaptability and resilience come from skills.

2. An enviable talent pool

Skills-based organisations place skills at the centre of their recruitment policy. They hire people for what they can do, rather than what they have done in the past or the qualifications they hold. The greatest reward of skills-based hiring is a broad talent pool geared towards meeting every workforce requirement. Besides strengthening the workforce, skills-based hiring encourages diversity, which in turn stimulates creativity and innovation.

3. Higher performance and productivity

Engaged, committed employees directly influence organisational performance, productivity, innovation and culture. When encouraged to contribute, employees tend to perform at a higher level. Their pride and sense of purpose in their work allow them to dedicate themselves to what they do and find value in the organisation’s goals and objectives. In turn, the organisation can unlock its workforce’s full potential.

4. Employee retention

When companies enable employees to go beyond the boundaries of their jobs, they create opportunities for meaningful work that matches each individual’s skills and interests. Employees do more than enjoy what they do. They have the freedom to test their skills across the organisation in different roles and functions. This internal mobility opens pathways for careers and professional development, which are extremely important to today’s workforce. A happy, satisfied workforce is the only way to achieve healthy levels of engagement and retention.

First steps towards a skills-based organisation

1. Think evolution, not revolution. Breaking down the job paradigms and practices we have lived with for so long is best viewed as evolution rather than revolution.

Few organisations will be ready to abandon jobs, titles and hierarchies entirely. However, there may be particular areas of your organisation where doing so, wholly or partly, would deliver tangible benefits. Think about where you could use diverse thinking and skill sets to solve problems or innovate. Most organisations start small and build from there. The majority begin by transforming a single talent practice rather than taking on the greater challenge of reorganising work entirely.

2. Identify your reasons. This involves many system-level changes to people processes and how things are done, but it will also enable greater speed and flexibility. You will serve customers better with the right skills when the business needs them.

You will give employees more opportunities to grow through unique career experiences, applying their skills in different areas. You will reduce variable costs by enabling employees to take on new projects and tasks instead of paying external contractors. You will make better use of your workforce by unlocking unused capacity.

3. Find your pain point. When starting a skills-based practice, choose the area with the strongest business case based on your organisation’s specific needs and pain points.

Many organisations, for example, now emphasise the value of skills rather than degrees or experience alone when hiring. This both responds to labour-market trends and improves equity, diversity and workplace culture. Start with practices that have the clearest connection to skills today, such as learning and development or talent acquisition, or those that can use mature technologies readily available as upgrades to existing human resources information systems, such as talent marketplaces.

By adopting a skills-based approach, leading organisations can move from a traditional, ageing model to one much better suited to a world where speed, flexibility and innovation prevail, and where people expect more meaning, choice, growth and autonomy at work.