In many sectors, traditional hiring models are being transformed by a new emphasis on skills-based hiring—where internal and external candidates are evaluated based on the work that needs to be performed and how well their skills match up to mastering that work, rather than their backgrounds.

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While getting such a strategy off the ground can be tricky, it can yield significant benefits for a range of HR outcomes, according to a panel of HR experts who spoke earlier this week on “Skills and Rewards: Breaking from the Confines of Jobs” at the WorldatWork conference in San Diego.

This emerging model is different than the traditional process of hiring based on prior experience and education, and thus creates new responsibilities for HR. For example, HR professionals need to identify the work that needs to be accomplished and which skills can help bridge that gap—and then, most importantly, which candidates may have those skills.

Despite the work involved in creating a skills-based organization, the desire to do so is strong among employers. 

It turns out 90% of business executives worldwide are actively experimenting with skills-based approaches across a wide range of workforce practices, according to Deloitte, which surveyed 1,200 business executives across the globe.

And 89% of these executives say skills are important for the way organizations are defining work, deploying talent, managing careers and valuing employees, the survey notes.

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Why companies are moving to a skills-based model

When polling session attendees on why they are interested in a skills-based operating model, 40% of survey participants pointed to workforce agility. That choice represented the largest group, though the panelists noted there are a number of advantages of shifting to a skills-based system.. 

For instance, when HR professionals look at jobs through a skills lens, they can overlay and correlate a candidate’s or employee’s skills and see new jobs for them, driving internal mobility, says Molly Leeds, senior principal with Mercer’s career business and a panelist. This can be a particular draw as organizations in today’s uncertain economy look to curb external hiring costs. 

There can also be benefits when it comes to total rewards, as drilling a job down to the skills needed to do the work can help in setting salary ranges, she adds. 

panel discusses skills based organizations
(L-R) Molly Leeds, senior principal at Mercer; Gregory Stoskopf, managing director at Deloitte; and Carly Ackerman, director of customer experience at eightfold ai discuss skills based hiring and breaking away from jobs

“When you get to the skills level, that may show you why two people with the same job title may be paid differently based on their skills,” Leeds explains.

Carly Ackerman, director of customer experience at software company and a panelist, says employers are finding it’s important to tie their talent strategy with the business strategy, and a skills-based operating model can assist with that.

“Skills have become the connective tissue between talent strategy and business strategy,” Ackerman says.

Will a skills-based hiring model be the death of a jobs-based model?

Despite the push for a skills-based model, the jobs-based model is still likely here to stay for the long haul, say the panelists.

For starters, most human capital management platforms are designed based on a jobs-based model, as is benchmark data, notes Gregory Stoskopf, a managing director with consulting firm Deloitte and a panelist.

“We see a lot of clients who want more information on a skills-based model, but they’re still inputting jobs information into the HCM,” Stoskopf says, adding, “but they are also layering skills into these jobs too.”

Ackerman says organizations are now navigating how to balance the two approaches. She considers a skills-based model similar to GPS in that it can help drive the business outcome, but also notes that a jobs-based model provides structure for that path—and there is no reason to break that. 

Can a skills-based model be sustainable?

Organizations that are looking to enhance their focus on skills should be cognizant that, as most industries experience rapid changes, especially in tech, skills are short-lived. That can potentially make it difficult to sustain a skills-based model, the panelists say.

The World Economic Forum, for example, states 85 million jobs will be replaced by 2025 due to automation, but automation will also create the need for 97 million new jobs. People who will be losing their jobs will need to retrain to fill the emerging positions.

“The job of HR is to make sure your people are ready for those new roles,” Ackerman says.

Business leaders will need to have strategic conversations around who will be doing the work to make a skills-based approach sustainable. After all, Leeds says, leaders will need to update the types of skills that various positions will require and some governance may be required to go with that, Leeds says.

Devising a skills-based hiring strategy

One important area to focus on when devising a skills-based strategy is pay, and there are several possible approaches, says Leeds. 

One is the traditional model where employees are paid based on the job they hold, and it’s a fixed work model. A second is a flow model where employees move from one role to the next based on the skills needed at the time, and their pay is based on the particular skills they are offering. Lastly, a flex model is when projects are added to a traditional job so the pay comes with a premium on top of the base pay.

Before getting to decisions like those around pay, employers looking to join the ranks of skills-based organizations need to first consider these foundational issues, panelists say:

  1. Understand your why. Why does skills-based talent management make sense for your company, and why it is important for your organization’s business?
  2. Understand what tools and resources are out there. For example, what taxonomy makes the most sense to use?
  3. Inventory your skills. Know what skills you already have on staff and agree with your team and business leaders the skill models you want to leverage. Evaluating existing market data can be beneficial.
  4. Continue to get buy-in. Work with your company’s business leaders and bring them along on this journey.

When it’s time to launch your skills-based model, Stoskopf advises picking only one or two function skills and running a pilot on this model. Once you achieve success with the model, roll it out to the entire organization, he notes.

“A skills-based model is good for the company, and it’s good for the employee,” he says. 

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