New technology will accelerate the transition to a skills-based organization

The business world is buzzing about rebuilding the American workforce based on skills over degrees. With the labor market tighter than ever, companies know they must reinvent talent management. But except for a few industry giants, most employers seem to be making little progress towards building the capabilities to be successful in a skills-based world.

Oftentimes, they have been stuck because they don’t know where to start.

Technology, especially the internet, has remade how corporate America works. The one department seemingly unaffected, however, is human resources, whose talent-management tools can consist of gimmicky versions of old-school performance reviews and the sometimes-ever-changing opinions of managers and co-workers.

Human resources professionals will likely acknowledge that academic degrees don’t reveal much about job candidates’ skills. Still, despite that realization, they’ve made little headway in systematically assessing skills that can translate into both gaining and retaining valuable employees.

Companies that adopt a skills-based approach are seeing startling results: Hiring for skills is five times more predictive of job performance than hiring for education, says research published in Psychological Bulletin. And 70% of workers say if their company gave them more opportunities to apply new skills, they would be more likely to stay put, according to the 2023 Career Optimism Index study commissioned by University of Phoenix, where I am the chief operating officer.

Indeed, companies have started to remake themselves by emphasizing and measuring employees’ skills and work performance across the organization — not just work experience and degrees. But it has largely been a manual process based on interviews and assembling lists.

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To get where we need to be, however, we must leverage new technology, including artificial intelligence, that can analyze data easier and provide usable results dynamically because of a vast repository of information that can be assembled quicker. We’ve used technology to power marketing, communications, and operations; now it’s time to use it for talent management.

There’s a three-step process to make this happen. First, an inventory of skills required by a company that is unique to them. This can be, say, coding, proposal writing or bookkeeping. Second, and tightly connected to the first step, is an assessment of skill levels required to be demonstrated by those most proficient in those roles on a scale from lower to higher.

Third is aligning employees’ skills and their levels with the needs of the company. Those measurements are captured automatically as data to be analyzed, ideally by AI, and continuously updated and refreshed, providing a real-time look into a company’s operations on an ongoing basis.

But before that can happen, a company needs to ensure the organization is prepped for success. There are three must-haves:

  • Buy-in from managers and employees. New technology tools can be seen as a threat by many because they may reveal weaknesses, leading to fear of demotions or firings. Managers and employees must be reassured that skills assessments and tracking are used only for the growth and development of the company and employees.
  • Backing from a group of respected senior leaders. A partnership comprising the head of HR and the chief operating officer is ideal. The chief executive officer ought to be brought into the fold early as well, to spread the message far and wide.
  • The actual technology that’s needed. Companies will need to partner with a technology provider with deep knowledge of AI and employee engagement, not a mainstay consulting firm, because custom data systems require monitoring and updating, and the experience needs to be one in which employees embrace and utilize the information to develop their skills regularly. These are dynamic systems.

What can a company expect the new technology to do? For one, it can improve productivity, which is important amid the labor crunch. Also, it can build capabilities and enable employees to take on new or different roles within the company over time.

A company keen on making the switch to a skills-based organization must keep in mind that it’s a big project. This is a journey, not an event.

Raghu Krishnaiah

Raghu Krishnaiah
Raghu Krishnaiah is chief operating officer at University of Phoenix.

Raghu Krishnaiah

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