Why you should use a skills ontology: The foundation of strategic, skills-based hiring

In a recent Gartner survey of HR managers, 47% admitted they didn’t know what skills gaps existed in their current workforce. [1] 

This finding is surprising given this information's crucial role in effective recruitment, strategic workforce management, and succession planning. It’s even more astonishing considering there’s a dedicated tool designed to help organizations understand their workforce’s skills: skills ontologies. 

Some organizations dismiss skills ontologies as overly complex, academic, or expensive exercises despite their benefits. Our opinion? They’re wrong. 

In this article, we argue for the adoption of skills ontologies to support skills-based hiring. We also discuss the benefits they offer organizations and some common pitfalls to avoid.

What is a skills ontology?

A skills ontology is a framework for arranging and categorizing information about employees’ skills. It functions as an internal database detailing the hierarchies and relationships between skills and roles in your organization. 

Think of a skills ontology as a map of the skills within your company. It sets out three relationships: which skills are related to each role, how these skills relate to each other, and how they relate to different roles. 

Skills ontologies play a crucial role in strategic talent acquisition, management, and workforce planning. They let you quickly see the skill hierarchy across your organization and the skills required for individual roles. They can also highlight skills gaps that need addressing.  

These ontologies can be easily confused with skills databases or taxonomies - but they’re very different concepts. 

A skills database simply lists all the skills in your organization. A skills taxonomy is a list of skills in your organization arranged into hierarchical relationships. While these tools can offer some value, they lack the relational insights that skills ontologies offer through their representations of the interconnections and dependencies between different skills.

The importance of technology in creating skills ontologies

Given the fluctuating nature of workforces, skills ontologies are dynamic and typically need to draw from multiple data sources. If your organization has only a handful of employees, you may be able to create and manage one manually. 

For most organizations, however, this task is unwieldy. Instead, they use third-party skills ontology software or enlist someone to create a digital skills ontology platform unique to their organization. 

This software can automatically gather and analyze skills-related data from various sources. These might include job specifications, resumes, completed projects, employee performance data, and employee surveys. 

Many modern skills ontology software use AI-powered and machine learning technology to automate functions like identifying and categorizing skills, streamlining the creation process and saving time. Several operate across multiple languages, making them ideal for managing global workforces. Some platforms can even assess the evolving market relevance of specific skills by using publicly available information – such as labor statistics and job postings.

Josh Bersin is a leading industry analyst and founder and CEO of Josh Bersin Academy, a global development academy for HR and talent professionals. He views a skills ontology builder as critical to the success of an organization, explaining that it’s “the new core of a human capital system, because it tells you how to hire, it tells employees what they need to learn, it tells managers how to coach and improve performance, and it tells the company where the organization is strong, weak, or falling behind.”

Even when companies rely on third-party software or engage others to create skills ontologies, HR managers remain a crucial part of the process, especially when identifying outdated and emerging skills. For example, they sometimes must capture additional market data and perform quality control to ensure the skills ontology aligns with the evolving needs of their organizations. 

Many organizations are turning to skills ontology builders to help future-proof their businesses. For example, Lynn Van Oossanen, senior manager IT Solution and Transformation at Ferring Pharmaceuticals, says in a Workday testimonial, “We really count on Workday [a skills ontology builder] and its AI functionalities to help us with moving into the future in the right direction.“

Keep an eye on updates in this space – skills ontology software will continue to evolve, and technology will play an even greater role in skills management in the future. For example, Deloitte predicts the emergence of “skills passports… digital records of an individual’s verified skills and credentials that a worker owns and that can be shared with prospective employers.”

7 reasons why you need a skills ontology

Skills ontologies provide a roadmap for talent acquisition, workforce planning, and employee management in your organization. Here are seven reasons why you should use one. 

1. Build a solid foundation for skills-based hiring

2. Transform job descriptions into talent-magnets

3. Uncover untapped potential for redeployment and succession planning

4. Turbo-charge knowledge sharing and strategic team building

5. Protect your competitive advantage by understanding skills gaps

6. Navigate career planning and professional development

7. Nurture objective performance management

1. Build a solid foundation for skills-based hiring

The benefits of skills-based hiring – where hiring is based on evidence of skills rather than experience or education – shouldn’t be underestimated. These benefits play a pivotal role in shaping a successful and efficient recruitment strategy. 

We surveyed 1,500 employers and 1,500 employees regarding skills-based hiring and compiled the findings into our 2023 State of Skills-Based Hiring Report. We found that a skills-based approach to hiring reduced mis-hires for 88% of employers and increased employee retention for 89%. The key takeaway? Skills-based hiring helps you find quality, loyal hires while reducing recruitment costs. 

However, taking a skills-based approach to hiring without knowing exactly which skills your organization needs is impossible. 

By using a skills ontology for organizing, classifying, and understanding the current skills in your organization, you’ll gain a deep understanding of the specific skills needed for a role. This information can enable you to craft more precise job descriptions, better target your recruitment efforts, and conduct focused, objective evaluations of candidates based on the skills that align with the job.

These actions streamline your recruitment process and increase your chances of finding the right person for each role. 

2. Transform job descriptions into talent magnets

Vague, poorly written job descriptions waste candidates' time and cost you money. They attract applicants with the wrong skill sets and deter quality candidates from applying. They also increase the risk of hiring someone with mismatched expectations about the role, impacting employee satisfaction levels and contributing to employee turnover. 

In contrast, well-written skills-based job descriptions can improve hires and employee retention. Writing for Forbes, Neil Morelli, Chief I-O Psychologist of assessment software company Codility, explains, “High-quality job descriptions help attract candidates aligned with a company's mission, values and culture… [and] help teams stay rooted in skills-based hiring decisions by focusing on the skills that predict success in the role.” 

Skills ontologies are an excellent tool for quickly creating clear job descriptions. With them, you can quickly identify the key skills needed for a new role. Then, you can write clear job descriptions that accurately describe the required skill set of ideal candidates. These attract serious, quality applicants.

Ontologies are equally helpful for regularly updating existing job descriptions. 

3. Uncover untapped potential for redeployment and succession planning

Say you’re looking to fill a new role in your organization. You could write a job description, review resumes, interview candidates, conduct pre-employment assessments, check references, and negotiate a hiring package with an external candidate. Or you could simply tap into your existing workforce. 

Taking advantage of internal mobility – hiring internally – saves costs associated with recruitment and maximizes your existing talent pool. 

Skills ontologies let you easily see existing employees’ hidden talents and how they may contribute to another role or team. 

For example, a skills ontology might reveal that a technical support employee has developed strong problem-solving skills and a basic understanding of programming. These abilities align well with an entry-level software development position, facilitating an internal move that saves the company the time and cost of external recruitment. 

This principle also applies to succession planning. With a skills ontology, you know which skills are required for key roles in your organization. When you know someone is retiring or moving into another position, using a skills ontology to identify possible successors who possess the relevant skills can preserve institutional knowledge and avoid training costs. 

4. Turbo-charge knowledge sharing and strategic team building

Skills ontologies are potent tools for streamlining knowledge-sharing across teams and departments. Rather than keeping skills information confined within individual teams or departments, a skills ontology makes this information available across the whole organization. 

This makes skills ontologies especially useful for large, cross-functional projects. Say you’re a tech company developing an innovative software solution. The project demands a team with diverse skills, including programming languages, UX design, project management, data analysis, sales, and marketing. 

HR managers can use a skills ontology to identify who has the necessary skill set to join the team. Teams can be assembled quickly, optimizing internal resource allocation and accelerating the project’s timeline. 

5. Protect your competitive advantage by understanding skills gaps

Wiley, a global leader in scientific research, recently surveyed 600 HR professionals in the US. Wiley’s market insights revealed that 34% of respondents believed their organization’s skills gap had a negative impact on efficiency, while 25% said it led to increased expenses. Respondents also linked skills gaps to impeded business growth, innovation, and competitiveness. 

By understanding the gaps in your organization, you can prevent such issues from arising. These insights also contribute to strategic workforce planning and adapting to industry changes to ensure your organization stays competitive. 

This use case is beneficial for staying ahead of emerging skills. In sectors like technology or healthcare, skills rapidly change and evolve. Here’s an example of how a healthcare organization might protect its competitive advantage: 

• Using a skills ontology: The healthcare organization employs a skills ontology to track both existing and new medical skills – like telemedicine skills.

• Analyzing skills gaps: Using the ontology and employee skills assessments, HR identifies a lack of expertise in telemedicine practices among healthcare professionals.

• Training and hiring: To bridge this gap, the organization launches specialized training programs in telemedicine and recruits professionals with experience in this field. When recruiting, the organization uses talent assessments to ensure new hires will have the needed skills.

• Adapting to healthcare trends: Equipped with new telemedicine capabilities, the organization expands its services to include remote patient care, aligning with current healthcare trends.

• Updating skills: The skills ontology is regularly updated to reflect the latest advancements in healthcare technology and practices, ensuring the organization remains at the forefront of medical innovation.

Megan McConnell and Bill Schaninger, associate and senior partners at the global management consulting firm McKinsey & Company, note in McKinsey Quarterly that “what might seem like an irritating talent gap today could prove a fatal competitive liability in the not-too-distant future.” For example, a healthcare organization that doesn't address its telemedicine gap may find itself significantly behind in a rapidly evolving healthcare landscape where remote patient care is becoming increasingly critical. 

HR managers must have their finger on the pulse as new skills emerge and cross-reference them against their organization’s skills ontology. If a new skill is missing, HR managers can identify it and take steps to address it. 

In our conversation with HR expert Medi Jones, she explained, “An up-to-date skills ontology allows you to see which pieces of the puzzle are missing. When the gaps are clear, you can easily recruit for missing skills and strategically align your workforce with business needs and organizational goals.”

6. Navigate career planning and professional development

For its 2023 Global Talent Shortage Report, ManpowerGroup surveyed almost 39,000 employers in 41 different countries. It found that 71% of employers rely on upskilling and reskilling their workforce to bridge skills gaps in their organization. That is: they’re enhancing current employees’ skills to help them advance in their roles or training them in new skills for different roles.

These efforts exist for good reason: according to the University of Phoenix’s Career Optimism Index 2023, which includes responses from 5,000 US workers, 68% of employees say they’d be more likely to stay with their companies if the companies offered more upskilling opportunities. Meanwhile, 70% would be more willing to stay throughout their career with more reskilling. 

Here at TestGorilla, where we believe employers have a duty to set their employees up for success, we wholly support these initiatives. However, the effectiveness of reskilling and upskilling efforts is undermined by blind spots. Without understanding existing skills and gaps within your workforce, you can’t tailor your upskilling and reskilling initiatives to meet your organization's needs effectively.

HR managers can leverage skills ontologies to show employees their current skills and the skills necessary for their desired roles. This enables them to develop personalized development plans for employees and provide them with targeted training opportunities and learning resources. 

Consider the case of Deutsche Post DHL Group (DPDHL), a leading logistics company that uses Cornerstone’s AI-powered skills ontology software. 

According to a case study in the Financial Times: 

DPDHL introduced this technology to its workforce as a means to see what the next career move might be for an airside handler or supervisor in a warehouse. Once their skills were out on the table, the employee could choose what they’d like to develop in order to move up or across into a new career path opening up many possibilities and mapping out their future with the company.

Choosing this AI-led, skills-first approach to growth and development meant that employees at DPDHL could continually grow and learn, setting career paths that are not necessarily linear and also completely personalised to them.

DPDHL benefited greatly from using skills ontology software to reskill and upskill its employees. The software saved the company on external recruitment costs by making opportunities for internal career changes visible. These opportunities gave employees a stronger sense of purpose, led to higher engagement, and more. 

7. Nurture objective performance management

Like hiring processes, performance management can be susceptible to subjective opinions and unconscious biases. A skills ontology provides a way to assess and measure employee performance based on objective, skills-based criteria. This supports a data-driven, transparent approach to employee performance reviews and feedback. 

From the outset, a skills ontology helps employees understand a role’s expectations, including the specific capabilities they’re expected to demonstrate. When it comes to performance reviews, there are no surprises. The skills defined by the ontology provide a framework for fair, consistent, and accurate assessment of employees’ abilities and areas for potential improvement. 

Common mistakes organizations make with skills ontologies

Here are some mistakes companies make when using – or choosing not to use – skills ontologies.

1. Dismissing them based on cost

Outsourcing the development of your skills ontologies comes with a cost. 

As with any business decision, deciding whether to invest in a skills ontology should involve an analysis of the cost and benefits relevant to your business. 

While there will be an initial significant investment and ongoing costs, the returns on an effective skills ontology are substantial. You gain a deeper understanding of your organization's current skills and roles and how they relate to each other. This is powerful information to use when making strategic decisions around talent acquisition and management – decisions that can potentially offer cost savings in the long term. 

2. Not updating them

We reached out to Gianluca Ferruggia, General Manager of agency directory DesignRush, who said “the main limitation [of a skills ontology] is its static nature. Skills are rapidly evolving, especially in digital-centric sectors, making it difficult for [an] ontology to keep up without continuous updates.” 

An out-of-date ontology is an ineffective ontology.

This is where HR managers play a crucial role in maintaining skills ontologies. Skills should be regularly updated to remove outdated skills and add emerging abilities to ensure they accurately reflect your workforce and the broader state of skills in your industry. 

3. Overlooking soft skills

Traditional ontology frameworks tended to focus exclusively on hard skills. However, you must include relevant soft skills like communication, adaptability, teamwork, and time management. 

Research from LinkedIn’s 2019 Global Talent Trends Report, which surveyed 5,164 hiring managers and talent professionals, showed that 89% of companies say that bad hires come down to a lack of soft skills. According to Forbes, soft skills are especially relevant for remote workers. Such skills are also highly transferable across roles. In summary: they’re important.

Yashna Wahal is an HR expert with experience creating skills ontologies. When we interviewed her, she mentioned that skills ontologies in their traditional form don’t focus much on soft skills. She said, “If you don’t add these soft skills and traits to your skills ontologies, there’s a chance you forget how important they are in hiring and employee development.” This could lead you to hire employees lacking the soft skills you require, undermine your employee development programs, and more.

4. Adding too much – or too little – detail

Striking the right level of detail in your skills ontology is essential. 

Too much can become unwieldy to manage and inaccessible. This leads to information being used inefficiently, eating away at the return on investment (ROI) of your ontology. 

In contrast, ontologies that lack nuance don’t accurately represent the skills in your organization. They also overlook the detailed information you need to make strategic talent acquisition and management decisions. 

We reached out to Clarke Duncan, founder of OutsourcingStaff.ph, who discussed one of the risks of an ontology lacking nuance. He said that focusing solely “on specific skills or terminologies [in your skills ontology] could lead to overlooking candidates with transferable skills or unconventional career backgrounds.”

A well-balanced ontology strikes the right level of granularity – it’s both comprehensive and manageable. This level depends on the nature of the skills and your organization’s needs and workforce. 

5. Not using the right software

Choosing the wrong software for your company’s needs can lead to inefficiencies and missed opportunities.

“If you're an oil and gas company moving into solar energy, for example, and looking to identify skills you already have and those you need to fill gaps as you make that transition, your [skills ontology] system needs to be smart enough to know what new workforce skills will be needed to support the shift in strategy.”

– Josh Bersin, HR industry analyst

Many companies are taking advantage of AI-powered tech because of its abilities to automate certain tasks – like updating skills. These tasks often still require human input, but they make HR managers’ jobs much easier. 

Picking the right software – and keeping up with software developments – can enable organizations to make the most out of their skills ontologies. 

Using a skill ontology to support skills-based hiring and unlock hidden talent

In the dynamic landscape of talent acquisition, a skills ontology acts as your compass. Understanding the existing skills in your organization and how they relate to each other is the foundation for effective skills-based hiring. It also supports strategic workforce planning and talent management, helping your business stay competitive. 

While creating a skills ontology requires an initial investment and ongoing maintenance, the benefits to your business typically justify the cost. A skills ontology helps you decode skills in your organization, find the perfect person for a role, and unleash the full potential of each employee. 

Sources

1. “Gartner Survey Reveals HR Leaders’ Number One Priority in 2022 will be Building Critical Skills and Competencies.” https://www.gartner.com/en/newsroom/press-releases/2021-10-20-gartner-survey-reveals-hr-leaders--number-one-priorit