Discussing skills in the workplace is nothing new. Companies have always been aware of the importance of skills, whether it’s during the onboarding process or through training initiatives. Certain professions, such as healthcare or law, even require specific skills to be certified before they can be practiced.

However, what sets today’s skill management apart is the AI-based ability to manage a much higher number of skills than a human being could ever do and integrate those throughout all aspects of HR management thanks to advances in technology. This enables organizations to find solutions for a whole range of acute challenges and it is what is causing such a buzz in the industry.

“What sets today's skill management apart is the AI-based ability to manage a much higher number of skills than a human being could ever do.”

Dr. Ralph Köppen

Using skills as a determinant for the design of HR practices quickly leads to questioning the prevalent model of organizing work. So far, the fundamental component in organizing work in companies has been the job. But is the job as the organizing principle and basis for human resources decisions still the best solution? It doesn’t offer answers to challenges such as creating greater agility, ensuring the availability of the right talent, stagnating performance, answering employees’ calls for individualized growth paths, a shortening half-life period of skills, providing equitable opportunities for everyone, and creating more innovation.

Introducing skills-based practices is a promising solution, rather than focusing on traditional roles with their job titles and responsibilities as the dominating building block for (work and) HR decisions, skill management prioritizes the specific skills and competencies of employees as a basis for management decisions. This shift transforms not only the way that companies approach hiring, training, career development, and other disciplines but also how they use their IT systems and replaces the whole organizing principle of their workforce.

So, what exactly are skills-based practices?

At their core, skills-based practices focus on the specific (cap)abilities, knowledge, and talents that employees possess, rather than their job titles, education, degrees, or previous work experience. While skills have never been absent from HR decisions, basing HR practices directly on skills leads to a novel way of doing things.

Three examples:

Hiring: In traditional methods, hiring managers would use previous experience, past job titles, hierarchical levels, or related certifications of an applicant as a predictor for future performance. With skills-based practices on the other hand, HR would first determine how to structure the work that needs to be done (i.e., in tasks, in projects, in outcomes, or maybe still in the form of a job), identify the skills needed, and then test and analyze peoples’ skills through suitable forms of skill assessment or auditions to predict if a person will succeed.

Career Development: Traditionally, careers have been defined by climbing the corporate ladder. Going up in the hierarchy by accumulating more responsibilities or people to manage. Looking at career development from a skill management perspective, because of the much higher number of elements to be considered, the task must be solved with new software. It supports determining the skill gaps in the organization (existing vs. to-be), as well as existing and aspired skills of employees, creating a tailored learning offer with internal or external sources, conducting skill tests, and matching the results with available positions/projects or gigs.

Performance Management: Evaluation is traditionally based on outcomes or performance against goals. Skills themselves have usually not been part of positive recognition and there is little reason to change it. But organizations can carefully balance the individual development of skills with individual performance objectives. Managers together with employees can identify priorities in skill development and define respective training. Organizations can also define which skills are needed to move into a different role (defined career paths) and communicate it transparently so that managers and employees have a shared understanding. They can then discuss during performance reviews how far employees demonstrate the skills needed.

These are three very different examples, and they show that the introduction of skill management practices can require very different types of actions. It requires changes in how HR works, it requires software, and it requires participation throughout the organization – i.e. employee engagement.


Key advantages of skills-based practices in organizations

Improved workforce performance by utilizing all skills in the workforce, assigning the skills where they are of most value, and meeting new skill demands quicker.

Improved hiring (or internal staffing and succession planning) by shortening the recruitment process, finding better fits for a skill gap, accessing a wider pool of talent, and reducing cost.

Greater diversity through decisions based on skills rather than job descriptions.

Higher organizational agility by enabling an easier response to changing skills needs and better matching.

Higher resilience by accessing a wider talent pool including internal talent with transferable skills.

Better employee retention by providing customized career and development paths based on individual skills and interests, and a better fit in hiring in the first place.

More efficient learning and development by tailoring training to the specific skills and competencies that employees need to succeed. Also encourages a culture of continuous learning.

More effective reward system by giving incentives to learn specific skills and making it transparent by connecting it with understandable contributions.

Improved innovation by assembling teams with diverse skill sets to solve specific challenges.

Achieving higher performance and better-motivated teams goes hand in hand with the challenges of the adoption of skill management practices. It influences all areas from staffing, training, and performance management systems, to succession planning, and even basic HR tools such as job descriptions. These processes have long been based on traditional hierarchies and job titles and may need to be adapted or completely overhauled. This can be a daunting task.


Possible changes to the way HR departments are structured

Rather than having separate teams or functions for different HR areas such as talent acquisition, learning and development, and performance management, HR departments might be restructured around specific skills and competencies. For example, there might be a team responsible for developing and managing digital skills, a team responsible for leadership and management skills, and a team responsible for technical skills.

HR roles might also be redefined to allow for a greater focus on coaching and advisory, rather than administration. This could involve HR professionals working more closely with managers and employees to identify and assess skills, develop tailored development plans, and match employees with the best opportunities.

HR departments might also want to adopt a more agile and flexible approach, such as using project-based or matrix structures. This can help to better align the skills and expertise of HR professionals with the needs of the business and allow for more flexibility and adaptability.

Project and position staffing exercises can be (at least) prepared by an intelligent skills engine which maps skill requirements with existing (validated) employee skills. The matching results can be assessed by the (project) manager to approach appropriately skilled persons, or the matched employees can directly be invited to apply.


Possible constraints to keep in mind in specific industries or company sizes

In highly regulated industries there may be specific standards that need to be met in order to operate legally and ethically. For example, the finance industry is subject to the Consumer Protection Act. Healthcare professionals are required to have a specific license to practice. Companies in regulated industries must ensure that their employees comply with these regulations.

In small companies, the introduction of skill management practices may be more challenging due to limited resources needed for new tasks such as coaching or tailoring career paths. But also, small companies may stand to benefit more because changes are easier to implement and because they can compete better with larger companies in attracting and retaining top talent.

Larger organizations may have more resources and infrastructure in place to support skills-based practices, but they may also face more resistance to change from employees who built their careers on traditional hierarchies or managers who fear to loose decision making power to an AI-based algorithm. The resistance may also come from trade unions or worker representation, as these groups may be concerned about the potential impact on job security, matching algorithms, and achievements made in pay levels.


Possible implications for the use of HR technologies

The adoption of skills-based practices influences all HR technology in use – and not yet in use. Many general HRIS systems are based on roles and don’t make the shift easier. Individual processes will be redesigned and this has to be reflected in the individual software applications that are being used to support them. But the fundamental point is that most likely new software will be necessary. One that can help identify and assess skills, track skill development, include employees in the processes, and match employees with the right opportunities. There are various solutions with different focuses. I.e., one focuses on skill assessment, and another on internal marketplaces. Any organization should decide upfront where they want to put their own focus before deciding on any solution.


The COVID-19 pandemic has accelerated the need for skill management in several ways. Firstly, the pandemic has resulted in rapid changes to the business environment, as companies and employees (i.e. those who lost their jobs) have had to adapt to new challenges and opportunities. This led to a greater need for agility and flexibility in the workforce, as organizations seek to quickly reconfigure their staff. Skills-based practices can help organizations to be more responsive to change. Secondly, the pandemic has resulted in a shift towards remote work and virtual collaboration, which has highlighted the importance of digital skills and competencies (of employees and their managers). By focusing on digital skill development, organizations can better prepare their workforce for the challenges of an ever-more digital future.

“Every skills management project starts with the same step: Decide which area you want to improve primarily and start from there. Although, not without understanding all skill-related needs and a strategy for a cross-functional implementation.”

Dr. Ralph Köppen

Skill management offers solutions to many of the most important challenges organizations are facing today. The advantages clearly outweigh the challenges and large organizations such as Unilever, Google, and Ford are showing the way. But the decision of the how needs to be based on the specific needs and goals of an organization. The first step, therefore, is always the elaboration of an individual plan. What do you want to achieve and which could be a good starting point to start learning?