In the world of talent marketplace, there has been an increasingly valuable contribution towards individual skills rather than talent, past work experience, educational background, and industry connections.
As businesses are leading to more equitable outcomes, the focus shifted from the talent pool to a skill basic approach, thus creating a shift to fill the skill economy.
However, to understand that the new approach is different from the traditional one and what can be considered to ensure a streamlined adaptation, here is what HR leaders should know.
Table of Content:
What To Know About Skill-Based Economy?
81% of companies are leaning towards using skills-based hiring. However, to understand why the transformation is taking place in the first place, let’s understand more about the skills-based economy.
The economy is driven by the global skill shortage. As companies and employees are facing a huge gap in skills, they have switched to a different approach where talent is not a fixed asset.
Rather than that, skills are considered the ‘currency’ of work, replace education and qualification.
Also, it includes the prioritization of certifications, real-world skills, and practical experiences to help in achieving the organization’s goals.
On the other hand, employees are increasingly working on building the skills that can help them thrive in the talent market and pivot to better opportunities.
The shift leads companies and HR leaders to focus on competencies instead of job titles and credentials.
Why Should HR Consider the Skill First Approach?
82% of companies use skill-based hiring, which led them to streamline their hiring process. It was recorded as one of the effective and faster approaches, increasing the 12% rate in trend over the past year.
This approach also helps businesses to make better decisions related to talent, including:
- Expanding their talent pool, where the HR leaders can find the right talent with the needed skills to fill the roles.
- It improved creativity and innovation through a lifelong learning culture.
- Since more companies are including diversity, it increases fairness and encourages an objective approach when it comes to assigning talent.
- HR leaders can make workforce plans that are smarter and based on a fulsome understanding of the required sources and talent.
- It also helps the organization to be more adaptable and agile to keep up with continuous changes in the marketplace.
How To Adapt a1 Skill-Based Economy in HR Practices?
HR plays a crucial role when it comes to adapting to the skill-based economy and moving organizations through the following practices.
Here is what can help in making a successful roadmap:
Define The ‘Skills’ Organization Need
Skills can differ based on role and the organizational need. The basic problem starts with not having the skill data or having one that has been outdated and not completed.
Most companies use different systems to store information about talent, creating a centralized repository.
Here are a few pointers to remember:
- Data related to the employees, candidates, and previous applicants are ideal for creating enriched skill data.
- AI can help in creating adjacent skills that people are more likely to develop or learn based on their overall skill profile. Using AI can help in updating their profiles automatically.
- Once the right skills are selected for the respective job, this can help create an effective job architecture with a skill-first approach towards processes like hiring, development, and redeployment.
2. Articulate The Clear Benefit for Business
Businesses need to have a clear set of benefits after adapting to a skill-based economy. Let’s say the goal is to expand the talent pool using the skill-based hiring process. To determine this, the success criteria would be different.
After understanding the value added and articulating the benefits, the HR leader can set the metrics for delivering the intended outcome after implementation is done.
3. Deconstruct The Needs & Requirements
As per the traditional approach, the job description includes the list of responsibilities and tasks assigned to the candidate.
Moving to a skill-based approach, the description will reflect the work that has to be done in terms of tasks and activities.
It includes listing all the results and expected outcomes from the individual. The approach is not focused on defining the responsibilities, which makes it different from the traditional ones.
For example, if the requirement is for ‘business analysts’, the approach includes skills like performing analyses, process documentation, and user-acceptable testing.
Here, either the individual does all activities on their own or can be divided into three different people within the same skill profile.
4. Transition Using the HR Practices
From here, the HR leader starts to implement the approach through the practices, including:
- This can include performing the organization design and workforce planning to identify which skills are needed, how many would help, and what can be best constructed.
- This approach can be used for hiring practices both internally and externally. Internally, HR leaders can assign and construct skills that align with specific outcomes and projects.
- It can be used to create a skill-based performance and rewards based on skills and attainment applications. Also, it enforces the creation of a culture for skill development to achieve the goals.
- The skill-based approach can help the individual to build their skill portfolio. Alongside this, the employees can develop skills, and the HR leaders can provide the needed support, encouragement, and accessibility for all.
5. Managing The Transition
The approach is more like a mindset shift, which requires a continuous and iterative process. To ensure it stays effective and managed smoothly, here is what to remember:
- Instead of big shifts, start small and identify the low-risk areas in business for testing the approach and getting them comfortable with the process,
- Experiment with an approach to find what aligns with the business and supports the intended outcomes.
- Evaluate employee performance based on company KPIs and redefine metrics.
- Also consider aligning the HR with different departments like operations and IT for cross-functional collaboration and to integrate the shift through practices.
- Develop a clear career pathway that is tailored to individual needs and based on skill acquisition.
Conclusion
The skill-based economy gives a competitive edge. Embracing skill-first practices in HR can help tap into talent, equipment, and workforce development and ensure long-term and sustainable growth.
Also, it bridges the talent gaps, helping to focus on what individuals can do rather than making decisions based on their formal qualifications.
To future-proof the HR process and add a seamless transition, HROne offers automated complex workforce skill mapping and AI-powered solutions in HR software. Book your free trials to get started today!