What is a skills-based workforce? The key to future-proofing your business

At TestGorilla, we believe the future of hiring is skills-based. But that’s only the beginning.

Organizations wanting to future-proof their workforces shouldn’t stop at skills-based hiring. They must also place skills at the center of building and managing their workforces. This approach creates a culture of continuous learning, adaptability, and innovation throughout your organization, benefiting both the business and your employees. 

In this article, we make the case for an approach to hiring and workforce management that turns the traditional model on its head.

Read on to learn about skills-based workforces, the advantages of skills-based hiring, and the common challenges businesses face when implementing them.

What is a skills-based workforce?

Traditionally, workforces have revolved around jobs: specific roles and titles with associated responsibilities within a static organizational structure. Jobs have been at the center of every HR function within an organization, including hiring, performance management, training, pay, and internal mobility. 

However, more and more organizations are moving towards a skills-based workforce by prioritizing job skills rather than roles or titles in workforce planning and management.

Take, for example, the hiring process. The traditional, role-based approach to recruitment involved HR identifying the relevant selection criteria – including minimum qualifications and the number of years of industry experience. HR would assess applications against these criteria and hire “the most suitable person.” 

Applying a skills-based approach to hiring, an HR manager identifies the skills required for an organization’s projects, tasks, and deliverables. The successful candidate isn’t necessarily hired for a specific role. They’re hired based on their skills and how they can contribute to varying tasks or projects across the organization. 

International management consulting firm Korn Ferry explains:

A skills-based organization recognizes that people have a wide range of unique skills, capabilities, and mindsets that can be utilized to succeed in various roles. These organizations also understand that a focus on technical abilities is just one part of the bigger picture: they consider the individual as a whole person, how this individual fits within their organization, and the work that needs to be done today and tomorrow.

Why are skills-based workforces becoming more prevalent? 

Many countries are seeing a declining working population and a general skills shortage, with increasing demand for highly skilled labor. A number of organizations are turning towards a skills-based workforce to solve these issues. 

In a recent Deloitte survey of 1,021 workers and 225 business and HR executives, 89% of executives feel skills “are becoming important for the way organizations are defining work, deploying talent, managing careers, and valuing employees.”

Employees also support the shift to skills-based workforces. In the same Deloitte survey, 66% of respondent workers said they’re more likely to join and stay with a business that focuses on skills and potential over roles and degrees in decision-making – including hiring. 

This is probably because this approach acknowledges and values each individual’s unique abilities and potential – rather than merely their formal qualifications. This might be especially true for people who have faced barriers to obtaining formal qualifications, such as financial constraints or lack of access to higher education.

Our own 2023 report, The State of Skills-Based Hiring, supports this. We surveyed 1,500 employers and 1,500 employees from the US, Latin America, the UK, Canada, and Australia. Our findings show that 86% of employees believe skills-based hiring increases their chances of “securing a dream job.”

Here’s what else we found:

• 73% of employers currently rely on a form of skills-based hiring, a significant increase from the 56% in our 2022 survey. 

• 70% of employers believe skills-based hiring is more effective than resume-screening

• 81.8% of employers believe skills-based hiring leads to hires stay longer in their roles

Unilever: An example of a skills-based workforce

Organizations can implement a skills-based approach to varying degrees. Some start by removing requirements for formal qualifications from job descriptions and relying on skills-based hiring. Others have implemented a radical overhaul of every internal HR structure and process to move all aspects of their workforce to a skills-based model. 

An example of this is leading consumer goods company Unilever. Speaking to the Australian Financial Review, Head of HR for Unilever in Australia and New Zealand, Anish Singh, explains:

“We’re beginning to think about each role at Unilever as a collection of skills, rather than simply a job title.” 

Unilever’s approach includes introducing programs like: 

• U-Day, which helps employees achieve their career goals through up and reskilling on dedicated workdays 

• U-Work, which offers flexible retainer contracts for short-term projects

• FLEX Experiences, an internal talent marketplace 

Unilever uses projects, tasks, and deliverables to organize work and its workforce better. Patrick Hull, Unilever’s former vice president of global learning and future of work, says, “When you can get to that level of detail, you can get much more targeted in your recruitment, in your internal mobility of talent, and applying the right talent to the right tasks and projects, and thereby also accelerate business performance.”

Why should you take a skills-based approach?

A focus on skills rather than roles offers various benefits to your business and employees. Let’s take a closer look. 

Improve employee retention

Deloitte’s survey found that skills-based organizations are 98% more likely to retain high-performing employees. This is mainly because a skills-based approach ensures employees are better matched to specific tasks, projects, or roles. 

Bryan Hancock, partner at global management consultancy McKinsey & Company, explains, “What we know is that organizations that use skills-based hiring practices see lower turnover in their skills-based hiring cohorts. So the response from people is, ‘Hey, this is great. This is a job that fits, that works, that lines up for me.’ And they’re more likely to stay.”

Unlock organizational success

Adopting a skills-based approach can have a profound effect on organizational outcomes. Deloitte’s skills-based organization survey identified that skills-based organizations are 63% more likely to achieve business objectives. 

Why is this? One explanation is that a deep understanding of employees’ capabilities helps you better address business needs. Systematically assessing employees’ skills allows you to strategically deploy talent within your organization. It can also highlight fundamental misunderstandings of the skills your organization needs and how to address them. 

Josh Bersin, respected HR industry analyst and founder of corporate research and advisory service Bersin & Associates, highlights that “American Express actually did this years ago. They realized that the ‘skills’ needed in the Amex sales and service teams were not customer service skills at all, but hospitality skills. Amex treats clients like guests, so they started recruiting from Ritz-Carlton and other hospitality companies. It took a skills-based analysis to figure this out.” 

Deliver an enhanced employee experience

According to Deloitte’s survey, skills-based organizations are also 79% more likely to have a positive workforce experience. A key reason is that a deep understanding of employees’ skills leads to better matches with suitable roles, projects, and tasks. When employees feel their skills are well-matched to their work, they have higher levels of engagement. 

Plus, a skills-based approach enhances the employee experience by ensuring staff feel valued for their contributions. Writing for Forbes, CEO of client onboarding and project management platform GUIDEcx Peter Ord says, “When you build job roles that clearly define responsibilities and focus on the employee skills, [employees] will feel valued – that they are contributing to achieving department and business goals.”

Foster diversity

Skills-based organizations are also more likely to offer a diverse and inclusive environment. We found that 84% of employers have improved team diversity using skills-based hiring. 

One example of an employer that’s experienced this is IBM. Shortly after adopting skills-based hiring, the tech company noticed an increase in the number and diversity of applicants. 

To learn more about this phenomenon, we contacted Richard Heaton, Director of Cartisian Technical Recruitment, who has extensive experience hiring skills-based workforces. He says this approach supports diversity by allowing “individuals who may not have had access to traditional educational paths but possess critical skills and experience to be considered for roles they’re well-suited for.”

Widen talent pools

It’s estimated that 85 million jobs could go unfilled by 2030 due to a lack of available skills. Looking for innovative solutions to this risk, many organizations are considering a skills-based approach to future-proofing their workforce.  

Prioritizing relevant skills when hiring candidates or offering internal mobility opportunities – rather than focusing on traditional role-based experience – broadens the talent pool. It gives employers access to candidates excluded by traditional hiring methods (hidden workers) and those “skilled through alternative routes” (STARs). This approach is beneficial for the tech sector, which desperately needs candidates with relevant skills in emerging technologies. 

Build an agile workforce

Skills-based workforces offer built-in flexibility, enabling organizations to rapidly adapt and redeploy internal talent in response to evolving business needs and priorities.

We spoke to HR expert Yashna Wahal, who explained that, in her experience, a skills-based approach equips a workforce with more agility and flexibility than a traditional workforce. To illustrate this, she says that “a company could quickly adapt to a sudden need for cybersecurity expertise by upskilling employees who possess adjacent skills – such as network administration or software development – rather than going through an expensive and time-consuming hiring process.”

Key challenges in implementing a skills-based approach – plus solutions

Here are some common challenges you might encounter when taking a skills-based approach, as well as our solutions to these.

Challenge: Skills identification and mapping is complex

Understanding the state of skills within your organization and the skills needed in the future is fundamental to successfully introducing a skills-based workforce. But accurately defining these skills and aligning them with business objectives is difficult. 

The process can be complex and time-consuming, especially for large organizations. Getting this step wrong can result in misunderstandings and mismatches between employee skills and organizational needs. 

Solution: Use strategies for effective skills mapping

Skills mapping is the process of identifying the skills needed for specific tasks or projects and the skills your employees currently possess.

To map out required skills, you can use previous job descriptions, performance evaluation criteria, and direct input from managers. But it’s important to involve all levels of your organization. Engaging with stakeholders to gain insights into the skills employees require ensures no gaps in your understanding. 

Using these methods, try to figure out which skills specific roles, tasks, and projects require. 

Skills mapping isn’t a once-off exercise. You need to review and update your skills map on a rolling basis as the skills within your organization change. 

Challenge: Development and training can be ineffective and expensive

A proper skills-based workforce requires targeted training programs and leadership that supports a culture of continuous learning. And generic training isn’t going to cut it. To be truly effective, it should be adapted to the needs of individual employees. 

This can be an expensive undertaking that you need to carefully budget for. 

Solution: Use innovative approaches to skills development

Effective skills development requires a commitment to a culture of continuous learning. You should offer various learning opportunities across your organization that address diverse learning needs, including cross-functional training, mentorships, and online training and development programs. 

Suggested reading: Examples of personal professional development programs.

One innovative approach to skills development is incentivizing skill development. While some employees might be self-motivated to learn new skills, other employees might benefit from incentives. 

This strategy worked for strategy company Rock Content, which uses a points-based reward system that includes company-wide recognition and financial incentives for employees.

Ariel Mendes, HR Global Learning and Development Leader, told LinkedIn that as a result of this approach, many employees doubled their learning and development time and the company identified that “people who are top learners are also top performers.”

Linking skills development to career planning is another powerful tool.

According to LinkedIn’s 2023 Workplace Learning Report, the top motivation for employees to learn new skills is to progress toward their career goals. The Josh example above illustrates this. When employees can clearly see their career progression, they’re more motivated to develop the necessary skills. 

Challenge: Leaders, employees, and other can be reluctant and resistance to change

Despite growing support and evidence for a skills-based approach to workforce planning and management, few organizations have implemented it comprehensively and successfully. 

According to Deloitte’s skills-based organization survey, less than one in five organizations have significantly adopted a skills-based approach “across the organization, and in a clear and repeatable way.”

A reason for this is a general reluctance or resistance to organizational change. Adopting a comprehensive skills-based workforce often requires radical change that affects every HR function within an organization. Without widespread support, executing skills-based hiring successfully is difficult. 

Solution: Tailor your approach to gain buy-in

Any successful organizational cultural change requires precise planning, commitment from leadership, and communication.

Getting buy-in from stakeholders is key. The same applies to implementing a skills-based model for workplace planning and management. 

When planning the shift to a skills-based workforce, tailor your approach to the capacity and goals of your business. It may be an incremental, step-by-step plan or a radical company-wide change. 

When leaders at the company fully support and model this change, it has a trickle-down effect on employees. Experts at Korn Ferry advise:

Without clear communication and leadership buy-in at all levels, the magnitude of such a shift can have a destabilizing impact. While adopting a skills-based approach could be the right decision from a business standpoint, the process of how this change is managed impacts the overall outcome. This is why it is critical to consider the impact of transformation on a practical level. This shift starts at the top but must permeate throughout company culture.

HR plays a vital role in securing leadership support for change. You must explain the links between the shift to a skills-based workforce and business objectives, including improved employee performance, increased diversity, and reduced employee turnover. Emphasizing the importance of this shift for future competitiveness is another persuasive approach. When leaders see the strategic value of the change and its contribution to long-term success, they’re more inclined to lend their support.  

Good communication is also crucial. Explain your vision for a skills-based workforce – including the “why?” – and encourage feedback and dialogue. Employees are also more likely to support change when they understand the reasons behind it and their role in it. 

Challenge: Choosing the right mix of technology is hard

Various software is available to support skills-based workforces. There are platforms for skills assessments, skills mapping, talent marketplaces, and skills-based training and development.  

Organizations need to use a combination of platforms to support a move to a fully skills-based workforce. Josh Bersin explains, “We have yet to find a company that uses one platform for everything. So while we may, at some point, find a single ‘skills cloud’ capable of storing every skill for every job in the company, that goal has yet to be achieved.”

The range of options can feel overwhelming, but finding the right mix of software products for your specific business and industry is essential.

Solution: Approach technology one problem at a time

Josh Bersin advises focusing on one problem at a time when building a skills ontology, taxonomy, or database – frameworks to organize and manage information about your workforce’s skills. Our take? Apply this same principle to choosing the right technology to support your transition to a skills-based workforce.

For example, is the main challenge a talent shortage and you’re looking to broaden your talent pool through skills-based hiring?

A talent assessment platform like TestGorilla can help you identify suitable candidates with the necessary skills who traditional screening methods may overlook. Through such platforms, you can often combine various scientifically backed skills tests into personalized assessments, and you can sometimes add your own custom questions. 

If internal mobility is more of a priority, you could look for software that helps you understand the skill gaps in your current workforce and how to fill them. Talent management software or platforms that offer employee skills assessments can help you measure the skills of your existing workforce so you can spot opportunities to promote employees to new roles. 

If skills mapping proves challenging, look for dedicated skills mapping tools, including AI-powered skills analysis tools. Alternatively, read our guide on how to perform a skills-gap analysis.

Identifying the key problem you’re facing highlights priorities, helping you narrow down which technology best supports your business needs. Once you fulfill one priority, you can move on to the next – and consider adding another technology solution to the mix.

Leading the transition to a skills-based workforce

The challenges facing organizations today when it comes to attracting and retaining talent require innovative solutions. 

Taking a skills-based approach to workforce creation and management – including skills-based hiring – helps you navigate the dynamics of the labor market and your business needs. It lets you build an agile and diverse workforce of engaged employees who will likely stay longer with your organization. 

A workforce centered around skills helps you face today’s challenges – and prepares for tomorrow’s.