In today’s dynamic business environment, staying ahead of the curve is not just an advantage—it’s a necessity. One topic that is being widely discussed and proclaimed for its potential to give the competitive edge is skills management. While we have been discussing aspects of skills management with many of our clients for some time, our visit to the Talent Management Reloaded conference confirmed that skills management is “all the buzz” right now. We ourselves touched on it briefly in our presentation alongside Schaeffler about “Workforce 2023 – Implementing Tomorrow’s Innovation Strategies Today“ as one of the use cases enabled by the customized job catalog we developed with Schaeffler. The skills management theme resonated across numerous presentations, sparking animated discussions about skills management at our booth and throughout several conference workshops.

With all the attention it’s getting, it’s worth asking: what is the current state of skills management that we see in the market? Is it truly “worth the hype”? Our firsthand experiences in client projects offer a unique perspective on this evolving field. Here is our take on this evolving landscape – let’s dive in.

Understanding Skills Management: A Short Introduction

At its core, skills management involves the identification, development, and leveraging of employee skills to meet current and future organizational needs. This process encompasses more than just listing employee skills; it’s about defining each skill with precision, distinguishing between skills, competences, aspirations, and aligning these skills with jobs, positions, employees, and training programs.

This paves the way for enhancing HR processes with skills or supporting them by applying skills, e.g.:

Talent Acquisition & Retention

Identifying and recruiting candidates with the right skills ensures a better fit for job roles and reduces turnover.

Performance Management

Aligning skills with performance metrics allows for more accurate evaluations and targeted improvement plans.

Learning & Development

Skills management informs training programs, ensuring they address specific skill gaps.

Succession Planning

Skills management helps organizations foster future leadersby identifying high-potential employees and providing targeted development opportunities.

Agile Adaptation

In a rapidly changing business landscape, skills management enables agility by helping employees acquire new skills as needed.

Promise of a New Era: How AI Transforms Skills Management

The landscape of skills management is experiencing significant shifts with the introduction of artificial intelligence (AI). As technological progress accelerates, organizations are finding that old methods are becoming increasingly inadequate as AI enables completely new aspects of skills management that could not previously be achieved by humans. AI is reshaping skills management from a static process to a responsive, data-driven ecosystem by introducing dynamic and adaptive capabilities that promise to revolutionize skills management in several ways, e.g.:

  • Learning Enhancement: AI-powered platforms can personalize learning experiences by analyzing individual skill gaps and recommending relevant courses or resources. Whether it’s upskilling or reskilling, AI ensures that learning aligns with an employee’s unique needs.
  • Career Pathing: AI-driven tools assess an employee’s existing skills, aspirations, and organizational context. They then provide tailored career path recommendations, considering future roles, skills, and market trends. This empowers employees to make informed decisions about their professional growth.
  • Skill Matching: Traditional skills databases often fall short in capturing the nuances of evolving roles. AI, however, maintains a dynamic skills graph that adapts to changing job requirements. It enables precise skill-to-job matching, ensuring the right talent is deployed for specific tasks as well as talent marketplaces that empower employee-driven careeer planning.
  • Predictive Insights: AI analyzes your own historical data as well as current data of competitors to predict future skill demands. Organizations can proactively address skill gaps, anticipate workforce needs, and strategically allocate resources.
  • Agile Workforce Planning: With AI, organizations can swiftly adjust their workforce composition based on market shifts, technological disruptions, and business priorities. Skills management becomes an integral part of agile talent strategies.

However, it’s important to note that the full extent of how AI will change skill management is not completely foreseeable yet. As AI continues to evolve, new possibilities and applications may emerge, reshaping the landscape even further.

Defining the Goal: Is a Skills-First Approach the Way to go?

Many talent managers believe that in the long run the full integration of skills into the organization is the most beneficial approach: skill-based organizations (SBOs) put skills at the center of their organization and base all HR functions along the employee life cycle as well as further functions (e.g. strategic workforce planning, leadership) on skills. So, should companies go all in and take the plunge into SBO?

While the concept is intriguing, practical implementation remains complex and the vision of an SBO does not work for all:

SBO envisions a world where jobs are abolished, and skills become the currency of work. However, in practice, many organizations are defining skills based on existing job roles as a starting point, because it ties in with existing constructs and thus creates acceptance as well as due to regulatory and worker’s council considerations. Thus, while the SBO remains a future vision for most, the journey towards it varies, with many companies at different stages of readiness and acceptance.

Tailored approaches, acknowledging that SBO might not be a one-size-fits-all solution, especially in areas like compensation and benefits, are essential.

Key Steps: Navigating the Skills management Implementation Journey

1. Finding a Sponsor

Identify a champion within your organization who understands the strategic importance of skills management. This sponsor will drive the vision, secure resources, and advocate for skills management across departments.

2. Gathering Insights

Engaging in active research and conversations around the experiences of others navigating similar paths can offer critical insights, lessons learned, and valuable benchmarks. This also equips you with practical examples and proven approaches that can inform your strategy and decisions, ensuring a more informed and strategic journey ahead.

3. Defining Vision, Use Cases, & KPIs

Craft a clear vision for skills management. What outcomes do you seek? Consider use cases such as talent acquisition, succession planning, and performance management. Define Key Performance Indicators to measure success.

4. Developing a Roadmap

Rather than attempting a massive overhaul, break down your skills management program into manageable steps that allow early success. Dynamic progress (e.g. by doing a skills management pilot) generates momentum and buy-in.

5. Connecting with Job Architecture

Your job architecture can provide a good foundation for skills management. Tools like Colmeia can help with AI-generated or refined jobs, role-based skills and descriptions to easily develop an excellent starting point that aligns your skills framework with your job architecture and supports an employee mapping.

6. Planning for Future Skill Ontology

Start with the essentials, but keep an eye on the future. Skills management isn’t a one-time project; it’s an ongoing process. Consider future use cases and the necessity to integrate emerging trends and business needs along the way while designing your skill framework.

7. Choosing the Right (AI-based) Software Solution

When selecting software, it’s critical they align with your organization’s IT architecture, considering scalability and data integration. Customization is key, as standard software frequently doesn’t meet all needs (more info). AI-enabled skills management transitions from traditional skill lists to a flexible skills graph, providing up-to-date, searchable data and supporting algorithms that effectively match talent with work, learning, and job opportunities.

8. Implementing Governance

Effective skills management requires governance. Establish policies, guidelines, and ownership structures to ensure skills management in the organization evolved by engaging in regular reviews and making necessary adjustments in response to evolving organizational needs, emerging challenges, and opportunities for improvement.

Navigating Challenges: The Roadblocks in Skills Management Implementation

Adopting skills management is not without its hurdles. These include managing skill attributes effectively, including validation and updating skills as they evolve or expire, and scaling solutions to fit various use cases. Additionally, the absence of a one-size-fits-all software solution necessitates thorough discussions on target software architecture, including data flows and interfaces. Moreover, the shift towards skills management is as much a cultural transformation as it is a technical one, challenging traditional career paths and hierarchies in favor of greater employee autonomy and flexibility.

Charting the Course: How to Kickstart Skills Management Initiatives

Beginning the journey to effective skills management can seem daunting. A recommended approach is to initiate the process with an externally moderated stakeholder workshop. This is instrumental in defining the target vision for skills management within the organization, considering all possible applications for skills management across the employee life cycle (e.g. recruiting, performance & goal management, compensation & benefits) and other organizational functions (e.g. strategic workforce planning, staffing), and individually defining the level of skills management integration for each aspect within those two dimensions. Through collaborative and strategic planning, organizations can navigate the complex landscape of skills management, laying the groundwork for a more adaptable and future-ready workforce by prioritizing the roadmap towards achieving this vision.

From Hype to Reality: Our Conclusion

Coming back to our initial question, is skills management worth the hype? Or rather all glitter and no substance? We believe in the tangible benefits: empowering your workforce, fostering growth, and maintaining agility in our ever-shifting business landscape. However, we recommend to steer clear of radical transformations into fully skill-based organizations. Instead, consider a bespoke approach—a skills management solution tailored to fit your organization like a well-fitted suit. No leapfrogging recommended but pragmatic steps towards an effective skills management tailored to your organization.

Want to explore what skills management approach fits your company best and learn more about which pitfalls to avoid? Contact us and let’s embark on this journey together!

  • Dr. Ralph Köppen
  • Managing Partner