5 essential questions for skills-based success 

Around two in three employers are integrating skills in career development, learning, talent acquisition and workforce planning, according to Mercer’s 2023 Skills Snapshot Survey. With responses from 1,400 talent, rewards, and HR team leaders around the world, the survey also suggests significant gaps in skills-based talent and reward strategies. 

Only 32% of Australian respondents are very confident that they know the skills that are most critical for their company. The results also revealed that for more than half (55%) of respondents in Australia, HR capabilities or capacity are the number one barrier to implementing skill-based best practices. This suggests that the effectiveness of skill development and utilisation within Australian companies may be hindered by challenges in HR functions.

To address these challenges, it is crucial for organisations to develop a strategy that aligns with the needs of the business, HR and employees. Skills-powered companies work through this process by answering the following five questions. 

An organised list of skills, or a skills taxonomy, is the foundation for any successful skills-based transformation. Without this, it is very difficult to implement career-pathing, upskilling and reskilling initiatives.

Yet less than half (46%) of Australian companies have incorporated a skills taxonomy into their job architecture – the very first step in the skills-based process.

This can be due to business units using their own Skills Libraries for workforce planning. They have invested in this asset, and they don’t want to let it go. If you need to integrate multiple skills frameworks from different parts of the organisation, it can be challenging to achieve one consistent taxonomy and a unified skills language.

However, overcoming these data siloes and skill classification contradictions will enable lateral or diagonal talent movements.

The other challenge is finding the most up to date data at an individual level. It is quite likely your most relevant employee skill data is not held in your internal systems, but on LinkedIn. Only 36% of Australian respondents have reliable employee skills data in their HRM system – and 28% do not have a formal method for capturing and updating skills data.

What can you do to address these challenges? Start by assessing your current state. What are different business units using right now, and what are their use cases? Are they using spreadsheets to manage it? An integrated tech platform could help you break down those siloes.

Proficiency levels provide a standardised framework that categorises and measures the level of knowledge, expertise, and ability in a particular skill. To facilitate skills-based talent practices, it is important to first clarify the roles, followed by identifying the skills required for those roles, and then determining the proficiency levels associated with those skills. Proficiency levels provide a unique point of difference in expectations for the role, work, career progression, and learning for growth.  It also helps talent acquisition teams to accurately assess candidate suitability against a set criteria.

In Australia, the use of proficiency frameworks is mixed. More than half (58%) of organisations do not define and manage skill proficiency levels, and only 17% manage them centrally. Yet, without a formalised proficiency scale across all skills, it is difficult to compare across departments and employees – or enable managers to have regular skills-focused conversations that speaks the language of the organisation.

There is no one-size-fits-all structure for a proficiency framework – it tends to be unique to your organisation. For example, an engineering consultancy would need clear visibility over the skill level of its engineers before deploying them to a major infrastructure project. 

A skills-powered approach can significantly improve the effectiveness of your learning and development programs by making it easier to focus time and resources on helping people bridge their skills gaps. To do that, you need to enable both self-assessment and manager assessment, and at times expert assessment on a regular basis.

In Australia, 42% of respondents told us they assess skills once a year, 21% only assess as needed, and 5% don’t perform any assessment at all.

This falls short of what we consider best practice. If an employee feels they have mastered a specific skill, they should not need to wait for an annual review. In an ideal world, it would be easy to update their profile and trigger manager approval through tech such as a talent marketplace platform.

Around one in five (21%) of respondents said they believe in continuous assessment, so some organisations are already making this shift. But if your processes are too manual to enable real time skills assessment, consider having a skills proficiency conversation at least quarterly. Managers can use these check-ins to ask how employees feel they are tracking with skill proficiency, and what other skills they would like to develop. They can then allocate them to more challenging tasks or help them build those skills as part of their career development and allocated work.

This is an important step in fostering a culture of continual learning, where every team member is encouraged to share their skills, teach others, and update their own records on a continual basis. 

Employee compensation has a big impact on the bottom line, and optimising this spend can provide significant payback. So, it is unsurprising that while just 38% of Australian respondents say they are using a skills-based approach to rewards, the vast majority (91%) are optimistic about its potential.

We see the use of skills data as complementary – when you combine this evidence with your existing rewards practices, you can make more informed and equitable decisions. For example, during the hiring process you may recognise it is worth paying a premium for a specific skill based on your own remuneration data and external benchmarks. 

Respondents told us the main benefits of a skills-based approach to rewards include the ability to attract and retain critical skills, incentivised skill development and career progression, and formalising a fairer approach to pay.

To build a business case for a skills-based talent strategy, talk to people across the organisation to understand how they can use this data. By collaborating, you can identify specific use cases and determine how business leaders can effectively utilise skills information to gain insights into the workforce, align work with long and short-term goals, and achieve organisational objectives.

Having access to the right skills at the right time is a key driver of success and enables the organisation to adapt to changing business needs. Additionally, it is crucial to recognise that understanding the data is just as important as empowering managers to have meaningful development conversations with their team members.

These conversations contribute to the growth of team members' careers, allowing them to explore alternative opportunities, enhance workforce capability, and optimise project allocation. Ultimately, this inclusive approach benefits everyone involved.

We often find there is strong buy in for the potential to improve productivity and agility, improve talent acquisition and retention metrics, and strengthen the organisation’s culture. For example, managers can find the right people in the organisation for a specific project, or quickly and efficiently assign team members to tasks or activity. It is also easier to spot future skills gaps to target the right hires, or identify team members with adjacent skills and train them in areas where you currently lack depth.

The Australian respondents to our survey agree, citing the ability to attract and retain critical skills the number one benefit of a skills-based practice. 

To then operationalise the strategy, you will need to think beyond manual spreadsheets. You could use your existing HRM system, or plug in a talent marketplace so AI can help you supercharge the experience.

Start with simple use cases to test and learn. For example, if part of your business depends on gig-style project work, use a skills-based model to enable effortless flow of talent to work.

Transparency may be another lever you can pull. Employees need to feel empowered to take control of their careers, yet 59% of Australian respondents told us their employee skill profiles are visible only to HR, leadership, and line managers.

Ultimately, you need to take advantage of what you have already – and make it as easy as possible for your people to access the data and engage with the process. Just as they use LinkedIn to share their skill profile and find their next opportunity, you can create the same experience within your organisation.

A skills-based talent strategy acknowledges an individual’s whole potential, beyond a job title. It gives you access to valuable data that can enable more personalised development pathways and tailored career progression. And it gives employees more reasons to share and strengthen their skills, more opportunities to grow, and fewer reasons to leave. 

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Learn how Arcadis is transforming access to growth opportunities and diverse career paths with skills-based talent practices. Watch the video.