We are in the midst of a skills-based economy. Employers’ traditional focus on credentials and degrees is steadily being replaced by an emphasis on specific skills and abilities.
Surprised? We shouldn’t be. Here’s why.
What are 5 steps to navigate the skills-based economy?
- Identify the essential skills your organization needs.
- Prioritize continuous learning in your organization.
- Use AI to map candidates’ skills against those needed for the job.
- Foster a collaborative work environment.
- Incorporate adaptability into your organization’s core values.
What’s Driving the Shift to Skills?
According to Harvard Business School researchers, the shift is rooted in economic and labor trends with seeds in the early 2000s. During this time, companies began adding degree requirements for jobs that had not previously required them — a trend known as degree inflation.
Recognizing that cultural reset was in order, business, community and government leaders began dispensing with these degree requirements after the Great Recession of 2008 to 2009. The 2017 to 2019 bull market for workers showed a degree requirement decrease of 46 percent of middle-skill positions and 31 percent of high-skill roles, the most affected of which were IT and managerial positions. Another factor was the Covid-19 pandemic and ensuing Great Resignation, quiet quitting and other empowered-worker trends on its heels.
Workers are increasingly in the driver’s seat with new job opportunities, career control and mobility. As employers adjust to the bull market and pandemic resets identified by the HBS authors, many risk being left behind, with smaller employers perhaps disproportionately affected.
In the course of our work helping employers source, acquire and optimize skills, we’ve identified five essential steps to accelerate employers’ progress in the skills-based economy.
1. Identify the Skills Your Organization Needs
Start by gathering a baseline analysis of your current employees’ skill sets to understand where potential gaps lie. Most employers haven’t reviewed their employees’ skills since they were first hired, and as a result have an out-of-date picture of their talent ecosystems.
AI can help make this seemingly insurmountable step feel like magic by scanning existing information about people’s skills. Recognizing the gaps in skills will help you tailor your hiring and training efforts to meet your organization’s skill requirements.
Skill identification is a critical first step, so do it sooner rather than later. Workers are embracing geographic flexibility, intensifying the emphasis on skills and raising turnover rates. And with the cost of living continuing to rise, PwC research reveals that 26 percent of workers plan to change jobs in the next 12 months, up from 19 percent in 2022. Making a transparent, visible effort toward identifying the skills your company needs and filling those gaps with the workers you already have can deliver a positive message to employees.
2. Prioritize continuous learning
If you haven’t yet invested in training and development programs to upskill your existing workforce, start by looking at tools such as Skill Share and edX. According to a report by the Adecco Group, 31 percent of workers reported lack of progression and reskilling and upskilling opportunities as the primary reason for quitting their job. In fact, research by Deloitte found that using skills-focused approaches can result in talent that’s 107 percent more likely to place workers in their optimal role with a 98 percent higher retention rate.
Encourage employees to embrace new learning opportunities and support their growth as professionals. Managers need to be thoughtful about the future needs of the organization, the goals of each of their direct reports and the specific courses that will help them reach those goals, and leadership needs to train managers on how to help their employees make the best use of the company’s learning management systems with an eye towards internal growth opportunities.
This is another area where AI can help personalize the learning program for each employee with very little overhead. AI can analyze the skills of each employee and the skills required for future roles to help managers create a shortlist of course suggestions for employees.
3. Use AI to hire and promote based on skills
Traditional qualifications are no longer the sole determinant of a candidate’s suitability for a position. While education and credentials are still important, focus instead on recruiting individuals with specific skills that align with your organization’s needs. Look for candidates who demonstrate adaptability and a willingness to learn and grow in a dynamic environment. Use AI to map the skills of your employees and candidates to the skill needs of open job requirements in order to discover hidden talent that may be buried in a resume pile.
You can also implement data-driven performance metrics that focus on individual and team contributions based on their skills. By doing so, you can better understand how skills align with organizational goals and make informed decisions to optimize your workforce. A good set of KPIs to focus on is how well the skills of candidates align with the skills required for the open job and how well the candidates who advance through the hiring process perform in skills-based assessments.
4. Foster collaboration
Emphasizing collaboration encourages employees with diverse skill sets to work together and share their knowledge, leading to cross-functional insights and innovative solutions. Good collaboration is grounded in a strong culture built by employees who seek help from their colleagues, rather than those who prefer to work in silos.
Managing an organization in a skills-based economy requires a proactive and adaptive approach.
Add ability to collaborate as a suggested or even mandatory skill in job descriptions and then assess for it during the hiring process. Ask candidates who they worked with to surface examples of those who worked with people who have complementary skills to their own.
Today, there are systems that employees can use to discover colleagues in other departments who may have the skills to help them get their jobs done. Employee directories, such as those built into Slack, Outlook or human resources information systems like Workday create opportunities for each employee to list their skills and interests. Expect the next generation of AI-powered HR technologies to automate both skills discovery and expert or mentor matching using these underlying directories. These can be powerful tools in fostering collaboration and increasing productivity, job satisfaction and retention.
5. Embrace adaptability
The skills-based economy demands the ability to adjust to rapid changes in technology, market trends and consumer preferences. Regularly reassess your organization’s skill development strategy to ensure it aligns with the shifting needs of the market. Stay attuned to industry trends and evolving skill demands to remain competitive. Encourage a culture that welcomes innovation and change, enabling your organization to stay ahead of the curve.
Investigate and incorporate new technology into your organization’s operations to streamline processes and automate repetitive tasks. This will free up your employees’ time, allowing them to focus on higher-value tasks that use their unique skills. AI technology, in particular, will help improve both skills-based management and job quality for skilled workers.
Managing an organization in a skills-based economy requires a proactive and adaptive approach. By identifying and developing the right skills, embracing collaboration and technology, and nurturing and appropriate employee behavior, organizations can thrive in this dynamic and competitive talent landscape.