Skills Mapping & Development
How businesses can create a more agile and innovative workforce
This paper explores the transformative impact of adopting a skills-first approach to address rising costs and productivity challenges for Belgian companies. By prioritizing skills mapping and development, businesses can create a more agile and innovative workforce. Additionally, businesses can also learn on how leveraging Artificial Intelligence (AI) further enhances this process by efficiently managing their skills data, enabling them to improve internal mobility, boost employee engagement, retain talent, and navigate the complexities of a rapidly changing economic landscape.
Author: Beatrice Toussaint
Introduction
In recent years, companies in the Western world, including Belgium, have faced escalating costs, particularly over the past five years. While Belgian companies initially offset these increases with productivity improvements, recent trends indicate a slowdown in productivity growth, leaving them lagging behind peers in countries like Denmark and Sweden – where productivity has grown more than twice as fast as in Belgium.
In light of these challenges, it is crucial to look for ways to increase productivity and support business growth. According to a 2021 OECD study, there are three main areas in which a company's productivity rate can be significantly improved:
- Capital investment
- Intangible factors, including corporate culture, diversity, branding, R&D, AI and digitalization, product and service offerings and organizational structure
- The human factor, which includes skills.
We'll take a closer look at that last point:
the crucial role of skills in increasing productivity.
Why companies that focus on skills excel
In today's rapidly evolving economic landscape, putting skills first across the talent lifecycle provides critical solutions for modern businesses. This approach addresses various challenges, such as the agile redeployment of talent, making informed headcount decisions, enhancing workforce productivity, and planning for future needs. Central to all these benefits is the adoption of a skills-first strategy.
But why do businesses that focus on skills perform better than those who don’t? The past years it has appeared from multiple surveys and observations of several sources – such as Deloitte, McKinsey, and The World Economic Forum – that transforming into a skills-based organization does in fact make us reap some benefits.
Skills-based organizations are
- 57% more likely to anticipate change and respond effectively and efficiently.
- 52% more likely to innovate.
Talent shortages – or skills gaps – show no signs of abating. Economists predict that difficulty finding talent will be with us for at least the next decade and beyond. Not having the talent to sustain and grow the business will cost global economies over $8.3 trillion dollars by 2030, according to Korn Ferry. To tackle this issue effectively, a skills-based approach has proven to enhance speed and agility, fostering product innovation, rapid market access, and ensuring that talent is allocated to the most critical tasks.
Skills-based organizations are
- 52% more likely to unlock greater productivity and higher performance.
A skills-based approach also means you find the right talent in unexpected places: you can better utilize the workforce by unlocking untapped capacity and potential. This isn’t a new concept. A 1984 study of Hunter & Hunter found that hiring for skills is five times more predictive of job performance than hiring for education, and more than two times more predictive than hiring for work experience. The current economic landscape makes it more important than ever to tap into new sources of talent, to broaden the pool you are fishing from, and make the most of the talent you already have.
Clearly, getting the work done without bringing in outside talent also saves money, making this last point a crucial consideration in today's labour market shortage. Existing employees already know the business, have demonstrable track records, and can start adding value in a fraction of the time it takes to source, interview and onboard totally new candidates. On top of that, offering opportunities to move around the business gives employees the best possible ‘learning and development’ scenario: to learn by doing.
Skills-based organizations are
- according to 80% of business executives, more likely to boost Diversity, Equity & Inclusion (DE&I) and enhance employee wellbeing.
Making decisions about hiring, pay, promotions, succession, and deployment based on people’s skills rather than their job history, tenure in the job, or network, would also mean a less “cookie-cutter” approach – which implies a uniform set of criteria to all employees – to work. In contrast, a skills-first approach allows people to be recognized as unique, valued individuals, thriving in roles that fully utilize their abilities.
It is also the best approach that allows “hidden gems” to come to light. Recruiters and hiring managers will find that people they may not have otherwise considered are put forward for roles, because – although their previous job titles or followed education don’t seem like a perfect match – their skills (and potential) could be ideal. This has a positive impact on diversity within an organization and can reduce bias and improve fairness at every stage of the talent lifecycle, not just in hiring.
Skills-based organizations are
- 98% more likely to have a reputation as a place to grow and develop.
- 98% more likely to retain high performers.
Last but not least … addressing the most pressing issue in companies is that a skills-based approach drives retention. Giving people career growth opportunities internally, rather than them having to leave to grow their careers, means you can hold on to people who are ready for a new challenge, and provide more opportunities for workers to learn ‘on the job’ by applying their skills to different areas within the organization. With a new definition around work – smaller ‘tasks to be done’ – workers are freer to try new things, learn continuously, and build on the skills they already have, using them in new ways.
But what does it actually mean to become skills based? How
can we make it a reality?
The beauty of a skills-first approach is that it can – and should – be applied throughout the entire talent lifecycle. Using a single currency and common language for candidates, employees, and other stakeholders allows businesses to adopt a holistic view of their human capital needs. This is something companies can tangibly achieve by understanding and managing skills with the help of AI, ultimately translating this into a real workforce strategy.
Understand your skills
The initial step to becoming a skills-based organization is to focus on the work, not the job. Instead of concentrating on job titles, companies should identify the specific tasks that need to be performed and the skills required to accomplish them.
It's crucial for companies to reflect on the skills they currently utilize and anticipate the skills they will need in the future. The nature of work is constantly evolving, with technology rapidly advancing, introducing new tasks while rendering others obsolete through automation. Therefore, having a clear understanding of the tasks and the skills needed to perform them is essential. But also, since some skills encompass different tasks depending on the context (e.g., “Project Management” for a Marketeer versus “Project Management” for an IT manager), an AI-driven skills platform can act as a valuable co-pilot in this process.
As a co-pilot, AI not only assists in managing complexity and making data-driven decisions but also helps businesses avoid starting from scratch. It provides valuable data to streamline the process, saving us time, money, and headaches.
Manage your skills with AI
How do we know that one version of a skill – let’s go with “Project Management” again – is the same each time, in each system? Does it mean the same in your business/industry as in another? How do we define which skills or capabilities mean something from a perspective of seniority or progression?
- This is where the value of AI in skill management becomes crucial. By understanding your talent as a comprehensive set of skills and capabilities, AI helps eliminate all kinds of bias throughout the talent lifecycle. But how is that achieved, at scale?
- To address these issues, it's essential to create a holistic view of all skills across disparate systems, connecting skills data comprehensively. At this stage, “simple” AI can be used to assemble and organize the data, providing a foundational understanding of the skills landscape.
This means that introducing AI into your HR initiatives can help reduce unconscious bias and improve representation efficiently. Such an approach ensures you don't overlook talent, especially those "hidden gems," who, with the right training, could make significant contributions to at least one area of your business.
Translate your skills to a real workforce strategy
With a clear understanding of your skills, businesses can shape their strategy in multiple ways:
STRATEGIC WORKFORCE PLANNING
As we previously mentioned, business skills requirements are constantly evolving. You know that future demands will require skills you do not currently possess, and it is becoming increasingly difficult to find candidates with the necessary skills. By understanding the existing skills within your workforce and identifying gaps and areas for development, businesses can effectively plan for future needs. This approach also helps organizations estimate the time and cost involved in upskilling or reskilling employees, ensuring preparedness for future demands.
However, traditional workforce planning methods are no longer suitable for the modern business landscape and are becoming obsolete. According to a study by Gartner (2023), CEOs recognize the significant impact of talent shortages on growth, making workforce planning a top priority for the following years.
Yet, conventional approaches are flawed in a world marked by rapid market shifts and technological advancements. Making decisions based on outdated plans is risky. In other words, the era of manual, static annual planning – characterized by cumbersome spreadsheets and rigid allocations – is over. It is being replaced by a more dynamic, real-time approach driven by Skills Intelligence and AI. AI-driven analytics provide a comprehensive assessment of skills demand and supply, guiding organizations toward the most strategic workforce interventions. This shift ensures businesses can stay ahead of evolving skills requirements and better align their workforce with future objectives.
OPERATIONAL TALENT MANAGEMENT
Next to optimizing a workforce strategy, focusing on skills also significantly enhances the operational efficiency of HR. A skills-centric approach seamlessly integrates jobs, people, and education, creating a transparent internal talent marketplace and a cohesive framework for hiring, assessment, development, and progression. This alignment strengthens the connection between workforce capabilities and business objectives.
Leveraging an AI-powered Talent Marketplace here is the way to go as it streamlines the processes of discovery, hiring, onboarding, and internal mobility, providing a unified platform for career management, networking, and recruiting. This dynamic approach not only improves efficiency but also enhances decision-making with up-to-date data, making it a valuable asset for businesses. Employees benefit from clear career paths and development opportunities, while businesses and HR teams gain significant advantages. A well-designed talent marketplace optimizes skill allocation, supports effective workforce development, and enhances talent retention, ultimately saving time and reducing costs.
Without a skills-based approach, businesses will feel the pain of attrition and disengagement costs, impacting their performance as a business.
The financial impact of staff turnover is staggering, with direct replacement costs ranging between 50% and 60% of annual salaries and total expenses climbing between 90% and 200%. Employee disengagement adds a further financial burden, costing up to 18% of an employee’s annual salary due to factors like absenteeism and decreased productivity.
Alarmingly, employee disengagement is on the rise, with up to 87% of EU employees admitting to feeling disengaged at work. According to respondents from the Talent Index, two primary reasons are:
- “My employer doesn’t know what skills I already have so can’t make suggestions on my progress.”
- “No-one has provided guidance on what skills will be needed in my role in the future.”
This disengagement leads to higher turnover, as evidenced by the fact that 32% of the EU workforce is actively seeking new employment.
However, focusing on skills can mitigate these costs. Using an AI-driven skills platform in a business case scenario with 250 employees, each earning an average gross annual salary of €60,000 and experiencing a 10% staff turnover, such a platform could save up to €750,000 in annual costs.
Then again, it's not surprising that substantial savings are realized with AI enhancing internal mobility and talent marketplaces. By identifying roles and opportunities for current employees, AI can improve retention, performance, and engagement. This technology mitigates disengagement and attrition costs by creating career pathways and highlighting the necessary skills for progression.
Sources
In association with talentguide
talentguide is an HR SaaS company that deploys AI for strategic talent management, promoting job mobility within companies and developing customized career paths for employees. talentguide provides insight into current skills and anticipates future skills needs, both at the organizational level and for individual employees.
This is made possible by an advanced SaaS solution built on the talentguide™ Library – a dynamic database capturing evolving skills in the labor market, using NLP.
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Bert Van Rompaey
Functietitel
Bert heef 20 jaar ervaring op het gebied van HR en verandertrajecten, waarvan 14 jaar als lid van Executive Committees in grote organisaties, voornamelijk in de bank- en luchtvaartsector. Bert werkte met en in verschillende culturen (Belgisch, Nederlands, Frans, Duits) en was succesvol in het realiseren van diepgaande & pragmatische veranderingen in die verschillende omgevingen. Het laatste jaar werkte hij voor kleinere bedrijven (bv. de fusie van 4 organisaties met in totaal 150 FTE's, strategie-implementatieproject in een IT-bedrijf van ~1000 FTE's, ...).
Focus: Strategische HR, reorganisaties & herstructureringen, fusies & overnames, sociale relaties, reward, strategische scenarioplanning, prestatiecultuur, personeelskosten & HR-gegevens.
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