Leading from the front in the skills revolution 

5 steps organizations should take when setting up a skills-based talent strategy

Traditionally, work was a place we’d go to, but now it has become more about what we do — from anywhere. It’s all part of a new talent equation of supply and demand based on skills being critical for success.

In the future, jobs will no longer be the corporate unit that everything is organized around. Instead, tasks will be divided between humans and machines, depending on who best suits each task.

We’re already seeing significant shifts in how we put skills to work. The first is a shift in how jobs are defined — from roles within traditional organizational hierarchies to a more dynamic model, where skilled individuals work across multiple project-based settings.

The next is a shift in work between humans and machines, as technology evolves to take over the more transactional tasks, and humans focus their skills on more unique and strategic aspects. This shift becomes less about humans using technology and more about how they interact with it instead. Simply put, technical skills become the “means to compete,” while human interpersonal skills become the “competitive advantage.”

These shifts will lead us to reshape how employees grow, navigate their careers and get paid. When done right, skills can drive organizational agility and unlock the power of people. Skills-based approaches are one way that companies are reinventing flexibility, from pay to skill to skills-based talent matching. This flexibility is pivotal to delivering the productivity and efficiency required by modern businesses, but there’s still some way to go.

Approximately half (47%) of companies report that they are yet to develop an approach to classifying skills at any level of their company, which is a minimal change since 2021.
Mercer 2022 Pay for Skills survey
In Mercer’s 2022 Pay for Skills survey, we explored the challenges of attracting, retaining and rewarding talent based on desired skills across more than 650 organizations worldwide. Nearly half (47%) of the companies surveyed still needed to develop an approach for classifying skills. Of the companies that did, they had yet to reach a consensus on an optimum number of proficiency levels, and subjective processes were still the most common way to assess skills. The principal purposes for using skills-based pay included revamping critical technical skill sets (52% or organizations surveyed) and an implicit need linked to strategic goals (42%)

The skills revolution is now

A shift to a skills-based talent strategy requires support across multiple sectors, from higher education to government and even between industries in the private sector around skills development. It also needs strong support from within a company, across senior leadership, finance and HR teams.

Below are five steps for companies to take when switching to a skills-based talent strategy.

It all begins with having a robust future-of-work plan for the organization. Consider what success might look like in the future and what skills are required to achieve it. Then create a skills inventory — including skill proficiency levels — across the different parts of the organization. 

One challenge with setting up a skills inventory is the need for a shared language to describe each skill. Around the Asia-Pacific (APAC) region, the Pay for Skills survey found that of the companies that already classified skills, 83% were using a customized in-house solution not linked to an open-source list of skills

When trying to attract talent, a shared taxonomy makes it easier for potential candidates to connect and understand how their skills fit in with others. It also makes it easier for companies to manage, transfer between departments and build skill sets. 

The creation of new roles and the skills required to succeed in them are expanding, particularly around new technologies and business innovation. Ask your leadership team what skills they need to support the business’s future success and identify the top priorities.

By aligning skills with the three- to five-year business plan, and the longer-term intentions of the company, you can begin to identify and plan for the skills your organization will need in the future to meet its goals.

Now that you know what skills you will need, it’s time to assess and map the current skills you have across your teams. It’s essential to avoid subjectivity when assessing skills as some skills may require more specific knowledge to understand proficiency levels compared to traditional jobs.

The most common method of assessing skills around the APAC region is an employee self-assessment and manager sign-off, or just a manager’s assessment. Only 23% of APAC companies use a formal assessment or proficiency tool, so objective assessments can be an opportunity for companies looking to differentiate their value proposition.

Rather than attracting new talent to cover skills gaps, you can train and reskill your existing workforce around the vital skills needed to succeed. Consider adopting internal or external online learning courses. Or offer on-the-job training to help build and grow skills in practical ways.

As businesses become more focused on building skills, approaches to on-the-job learning are likely to change. Companies may find advantages in exploring innovative approaches to job-sharing and the experiences gained across other business units or at other companies. It might mean going beyond thinking about full-time and part-time roles and moving more towards managing resourcing and capacity based on skills.

This step is the most challenging of all, and it requires a firm commitment to rejecting the existing HR value chain and starting from scratch for a single business unit or department. Beginning with recruitment, look at what forms and tools you’ll need to develop to bring people in based on skills. Then keep working through the employee journey to map out your talent attraction plan and establish rewards and progression paths for their ongoing skills development.

Rather than having years of experience or job descriptions as the primary factor for promotion, proficiency in skills and growth within these roles, over time, is a better way of evaluating advancement. Once you rewrite the HR value chain for one business unit, it will be easier to adapt and introduce this across the wider business.

We see organizations all along the maturity curve for skills. Some are just starting by building a learning catalog, while the more mature organizations have thought about skills connected to careers and rewards and are creating the infrastructure for it. Ultimately, having a skills-based talent strategy will mean that your company is well-equipped to find people with the right skills for the business to succeed.
About the author(s)
Puneet Swani

Senior Partner and Career Business Leader, Asia, IMEA & Pacific

Related solutions
Related insights