Traditionally, work was a place we’d go to. But now, it has become more about what we do — from anywhere. It’s all part of a new talent equation of supply and demand based on skills being critical for organizational success.
Very soon, jobs will no longer be the sole corporate unit that everything in a firm is organized around. And we’re already seeing significant shifts in how we put skills to work. The first is a shift in how jobs are defined — from roles within traditional organizational hierarchies to a more dynamic model, where skilled individuals work across multiple project-based settings.
The next is a shift in work between humans and machines, as technology evolves to take over the more transactional tasks, and humans focus on more unique and strategic work. What’s important is how humans interact with technology instead of merely using it. Simply put, technical skills have become the “means to compete,” while interpersonal skills have become the “competitive advantage”.
These shifts will lead us to reshape how employees grow, navigate their careers and get paid. When done right, skills can drive organizational agility, and unlock the power and potential of people. In fact, skills-based approaches are one way that companies can be flexible with skills compensation and even skills-based talent matching. This flexibility is pivotal to delivering the productivity and efficiency required by modern-day businesses, though there’s still some way to go.
In Mercer’s 2023/2024 Skills Snapshot survey report1, we explored the challenges of attracting, retaining and rewarding talent based on desired skills across more than 1,400 organizations worldwide. Over half (55%) of the companies surveyed still needed to develop an approach for classifying skills. Of the companies that did, they have yet to reach a consensus on an optimum number of proficiency levels, and subjective processes were still the most common way to assess skills. The principal purposes for using skills-based pay included attracting and retaining premium skills (84%) and incentivizing skill development (65%).
Five steps to becoming skills-powered
The shift to having a skills-based workforce requires support across multiple sectors, from higher education to government, and even between industries. It also needs strong support from within a company, across senior leadership, finance and HR teams.
Below are five steps that companies can take to embark on a skills-based talent strategy:
1. Start with defining a skills inventory for your organization
It all begins with having a robust future-of-work plan for the organization. Consider what success might look like in the future and what skills are required to achieve it. Then create a skills inventory — including skill proficiency levels — across the different parts of the organization. One challenge with setting up a skills inventory is the need for a shared language to describe each skill. Within Asia, Mercer’s 2023/2024 Skills Snapshot survey report found that of the companies that have already classified skills, 85% were using a customized in-house solution rather than a skills framework from a third-party vendor or an open-source list of skills.
When trying to attract talent, a published skills taxonomy and skills library makes it easier for potential candidates to know what skills are needed so they can understand how to fit into the organization. Companies can also better manage and transfer talent between departments, and build their skillsets.
2. Map future skills needed against your longer-term business plan
The creation of new roles and the skills required to succeed in them are expanding, particularly around new technologies and business innovation. Work with your leadership team to identify the top priorities and skills required to support the business’ future success.
By aligning skills with the three- to five-year business plan, and the longer-term intentions of the company, you can start to plan how your organization can develop or acquire the necessary skills to meet its future goals.
3. Conduct skills assessments, and identify skills gaps and strengths across your organization
Now that you know what skills you need, it’s time to assess and map the current skills you have across your teams. It’s essential to avoid subjectivity when assessing skills as some like numerical reasoning, problem solving and negotiation skills may require more specific knowledge to understand proficiency levels.
About four in 10 companies in Asia have skills already mapped to individuals within their organization2. And while most of these companies perform some form of assessment, only 25% use a formal assessment or proficiency tool – such objective assessments can be an opportunity for companies looking to differentiate their value proposition. The most common method of assessing skills in Asia, based on our findings, is an employee self-assessment and manager sign-off, or just a manager’s assessment.
4. Create learning and development pathways to develop critical skills in your people
Rather than hiring new talent to fill identified skills gaps, you can train and reskill your existing workforce around the vital skills needed to succeed. Consider offering employees internal or external online learning courses, or on-the-job training to help them build and grow skills in practical ways.
As businesses become more focused on building skills, approaches to on-the-job learning could evolve. Companies may find it advantageous to explore innovative approaches to job-sharing, be it across other business units or even at other companies. It might be helpful to think beyond having full-time and part-time roles, and transition to managing resources and capacity based on skills.
5. Set up a pilot department and grow a skills-based talent program from there
This step is the most challenging of all. It requires a firm commitment to reject the existing HR value chain and start from scratch with a single business unit or department. Look at what forms and tools you’ll need to develop to recruit based on skills. You should then work through the employee journey to map out your talent attraction plan, and establish rewards and progression paths for their ongoing skills development.
It’s important to note that rather than clocking a certain number of years of experience or delivering what’s outlined in the job description as the primary criteria for promotion, proficiency in skills and growth within these roles is a better way to evaluate for advancement. Once you rewrite the HR value chain for one business unit, it will be easier to adapt and roll this out across the wider business.
We see organizations across all stages of the skills development journey. Some are just starting out by building a learning catalog, while more mature organizations have thought about connecting skills to careers and rewards, and are creating the infrastructure for it. Ultimately, having a skills-based talent strategy will equip your company with people possessing the right skills to position your business for success.
**The full report for Mercer’s 2023/2024 Skills Snapshot survey report will be released globally on 24 October 2023, and it can be accessed from https://www.mercer.com/insights/talent-and-transformation/skill-based-talent-management/rebuilding-reward-and-career-frameworks-based-on-skills
About the author
Puneet Swani is senior partner and leader of Mercer’s career business in Asia Pacific, Middle East and Africa. With over 23 years of consulting experience, Puneet has worked with leading and multinational organizations across 25 countries.