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Article
20 minute read 08 September 2022
THE SKILLS-BASED ORGANIZATION: A NEW OPERATING MODEL FOR WORK AND THE WORKFORCE
THE MOST FUNDAMENTAL BUILDING BLOCK OF WORK—THE JOB—COULD BE HAMPERING MANY
ORGANIZATIONS. INSTEAD, MANY ARE NOW APPLYING SKILLS-BASED MODELS TO MEET THE
DEMAND FOR AGILITY, AGENCY, AND EQUITY.
SUE CANTRELL
United States
×
SUE CANTRELL
VICE PRESIDENT – PRODUCTS, WORKFORCE STRATEGIES
Susan Cantrell is Vice President of Products, Workforce Strategies at Deloitte
Consulting LLP. She is a leading expert and frequent speaker on future of work
and human capital. She is co-author of the Harvard Business Press book Workforce
of One, and has been published widely in publications like Harvard Business
Review, Wall Street Journal, and MIT Sloan Management Review. She has more than
20 years of experience serving as an executive advisor, author, researcher, and
developer of new solutions that help organizations harness digital technologies
and evolve their workforces to innovate, unlock agility, and drive
transformation. She holds a Master of Science degree in management information
systems from Boston University, and a Bachelor of Arts degree from Vassar
College.
* scantrell@deloitte.com
* +1 503 222 1341
*
MICHAEL GRIFFITHS
United States
×
MICHAEL GRIFFITHS
PRINCIPAL, LEAD FOR WORKFORCE DEVELOPMENT PRACTICE
Michael is a partner in Deloitte’s Workforce Transformation practice;
specifically leading Deloitte’s Workforce Development market offerings. With a
global team, these offerings drive the market in learning transformations,
knowledge management, leadership development and assisting clients to become
skills- based. He is also the co-lead for Deloitte’s Human Capital Trends
research and report. Griffiths is well published in the field of learning and
talent, and is the leading market voice on becoming a skills-based organization.
* mgriffiths@deloitte.com
* +1 914 255 5478
*
ROBIN JONES
United States
×
ROBIN JONES
PRINCIPAL | WORKFORCE TRANSFORMATION
Robin is a Principal with 22 years of organization and workforce transformation
consulting experience. She spent the majority of her career advising business
leaders of Technology, Media, and Telecommunications companies through complex
business transformations. With a focus on the Future of Work, Robin advises
senior executives as they contemplate how data, technology and societal changes
are impacting the work, workforce, and workplace. At Deloitte, Robin leads
Workforce Transformation with end-to-end responsibility for the market,
services, and talent, and serves on the CEO’s Marketplace Leadership Team in
Deloitte Consulting. Robin holds a PhD in Civil and Environmental Engineering
from Georgia Tech and an MS in Architecture and BS in Interior Design from Cal
Poly, San Luis Obispo.
* robijones@deloitte.com
* +1 212 313 1706
*
JULIE HIIPAKKA
United States
×
JULIE HIIPAKKA
VICE PRESIDENT | LEARNING RESEARCH LEADER
Julie Hiipakka is a leader in our workforce transformation offering focused on
skills-based organizations and workforce development. Prior to her current focus
on helping clients implement skills-based talent practices, she led the Learning
& Leadership research practice for Deloitte Consulting’s Human Capital Research
and Sensing offering. She advises clients on learning, workforce architecture,
enabling worker and leader performance in the flow of work. A change agent,
thought leader and advocate for human-centered work, workforce and workplace
practices, Hiipakka has 24 years of experience across learning and development,
talent management, and professional services, including as a learning leader in
a professional services firm.
* jhiipakka@deloitte.com
* +1 312 486 2985
*
*
*
* *
*
*
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THE SKILLS-BASED ORGANIZATION: A NEW OPERATING MODEL FOR WORK AND THE WORKFORCE
by
* Sue Cantrell
* Michael Griffiths
* Robin Jones
* Julie Hiipakka
*
*
* *
*
*
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ISSUE 31 | FEATURED ARTICLE
EXPLORE THE MAGAZINE
INTRODUCTION
For over a century, jobs have been the dominating structure for work—defining
how work is done, by whom, how it is managed and led, and how workers are
supported by every HR practice, from hiring to compensation to career
progression to performance management. It’s so embedded in everything companies
do that people rarely stop to question it at all.
Learn more
* View the infographic to learn more about the transition from jobs to skills
* Explore the Talent & work collection
* Go straight to smart. Get the Deloitte Insights app
* Learn about Deloitte’s services
* This article is featured in Deloitte Insights Magazine, issue 31
*
Opens in new window
But confining work to standardized tasks done in a functional job, and then
making all decisions about workers based on their job in the organizational
hierarchy, hinders some of today’s most critical organizational objectives:
organizational agility, growth, and innovation; diversity, inclusion, and
equity; and the ability to offer a positive workforce experience for people.
In response, organizations are moving toward a whole new operating model for
work and the workforce that places skills, more than jobs, at the center. One
company pioneering this move is Unilever: “We’re beginning to think about each
role at Unilever as a collection of skills, rather than simply a job title,”
explains Anish Singh, head of HR for Unilever in Australia and New Zealand.1
According to a global Deloitte survey of more than 1,200 professionals,
organizations are increasingly experimenting with what they hope is a better
way. By decoupling some work from the job—either by atomizing it into projects
or tasks, or broadening it so it’s focused on problems to be solved, outcomes to
be achieved, or value to be created2—people can be freed from being defined by
their jobs and instead be seen as whole individuals with skills and capabilities
that can be fluidly deployed to work matching their interests, as well as to
evolving business priorities. And by basing people decisions on skills more than
jobs, organizations can still have a scalable, manageable, and more equitable
way of operating. We call this new operating model for work and the workforce
“the skills-based organization.”
SKILLS DEFINED
We broadly define “skills” to encompass “hard” or technical skills (such as
coding, data analysis, and accounting); human capabilities or human skills (such
as critical thinking and emotional intelligence); and potential (including
latent qualities, abilities, or adjacent skills that may be developed and lead
to future success). Eventually, we see the word “skills” becoming short-hand for
more granularly defining workers as unique, whole individuals—each with an array
of skills, interests, passions, motivations, work or cultural styles, location
preferences and needs, and more.
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At Unilever, for example, an internal talent marketplace enables skills to
fluidly move to projects and tasks across the organization, either as a
permanent employee or as a “U-Worker”: a worker who has a guaranteed minimum
retainer along with a core set of benefits, and who contracts with Unilever for
a series of short-term projects.3 Explains Patrick Hull, vice president of
future of work at Unilever, “We just see that there’s all this opportunity that
we can unlock for people that maybe we wouldn’t have been considering because,
as with many organizations, we would have been more in our functional silos.”
Increasingly, departmental work at Unilever is being divided into projects,
tasks, and deliverables. Ultimately, Hull sees siloed departments breaking down
in the future, with a more granular method of viewing employees’ contributions
focused on outputs and skills rather than on years with a job title, to
understand what each employee brings. “When you can get to that level of detail,
you can get much more targeted in your recruitment, in your internal mobility of
talent, and applying the right talent to the right tasks and projects, and
thereby also accelerate business performance.”4
ORGANIZATIONS ARE MOVING TOWARD A NEW APPROACH
To explore how organizations are thinking about the move to skills-based
organizations and how (or if) they are operationalizing it, we conducted both
quantitative and qualitative research—surveying 1,021 workers and 225 business
and HR executives around the world and across industries, and interviewing
nearly a dozen executives.5 Across all the 11 workforce practices we asked
about, we discovered a plethora of experimentation with (and a strong
directional move toward) skills-based organizations, as well as a strong
preference from both executives and workers for a skills-based model over one
based on jobs. This was surprising because we expected more organizations to
resist moving away from a jobs-based model for organizing work and making
decisions about workers (figure 1).
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Despite this overall move, fewer than one in five are adopting skills-based
approaches to a significant extent: across the organization, and in a clear and
repeatable way. These early skills-based pioneers are achieving better business
results than those with jobs-based practices (figure 2). This indicates that
those who’ve adopted skills-based approaches to a significant extent are
building organizational models that better align to their organizations’
needs—and workers’ expectations—today.
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THE CASE FOR CHANGE CONTINUES TO DEVELOP
This shift in approach is a result of several broader business shifts:
ORGANIZATIONS’ GROWING SENSE OF RESPONSIBILITY FOR THEIR WORKERS’ WELFARE
There’s a growing acknowledgment of the importance of human-centricity at work:
79% of business executives agree that the purpose of the organization should be
to create value for workers as human beings, as well as for shareholders and
society at large, and 66% are facing increased pressure to show their commitment
to doing so, moving from rhetoric to results. About a quarter of workers (27%)
strongly agree that their organization is making progress on this front, while
64% say they would be more attracted to and remain at an organization that does
so, indicating that people want to work where they feel the organization is
contributing to their growth and realization of their potential, and where they
feel seen, valued, and respected. Instead of turning everyone into the same kind
of contributor through standardizing them in jobs, skills-based organizations
let people’s uniqueness as humans shine through, with work tailored to their
strengths.
Refocusing work around the people doing it and the skills required to do so—and
supplying the necessary skills training—can also increase employability. For
example, identifying adjacent or foundational skills of workers who are
displaced by automation or whose roles are no longer needed can help
organizations redeploy them to work that is needed.
Skills-based organizations can also promote equity: 80% of business executives
say making decisions about hiring, pay, promotions, succession, and deployment
based on people’s skills rather than their job history, tenure in the job, or
network would reduce bias and improve fairness; and 75% say hiring, promoting,
and deploying people based on skills (vs. tenure, job history, or network) can
help democratize opportunity and improve access to it.
77% of business executives agree their organization should help their workers
become more employable with relevant skills, but only 5% strongly agree they are
investing enough in helping people learn new skills to keep up with the changing
world of work.
WORKERS’ DEMAND FOR MORE AUTONOMY
Half of the workers we surveyed said they are more likely to be attracted to and
remain at an organization that grants them more agency and choice in how they
apply their skills to work. Although workers want to realize their full
potential and be seen as individuals, only 26% of workers strongly agree that
their employer treats them as whole individuals who can offer unique
contributions and a unique portfolio of skills to the organization.
TALENT SHORTAGES
Seventy-three percent of business executives expect to continue to experience
talent shortages over the next three years, and 70% of those respondents say
they are getting creative about sourcing for skills rather than just considering
job experience. For example, global commercial real estate firm Cushman &
Wakefield looked to understand how the skills and adjacent skills of those who
served in the military—such as leadership, project management, engineering,
strategic planning, and machinery maintenance—could easily be applied in an
entirely different industry and set of roles, thus recruiting from an
underutilized talent pool.6
THE NEED FOR AGILITY
In an era of accelerating, often unpredictable change, 85% of business
executives say that organizations should create more agile ways of organizing
work to swiftly adapt to market changes. COVID-19 is a case in point: A host of
examples, such as Virgin Atlantic loaning its furloughed flight attendants to UK
hospitals to help with customer care,7 demonstrate that workers are far more
capable than we think of stepping outside their usual jobs to add value in new
ways.
77% of business and HR executives say flexibly moving skills to work is critical
to navigating future disruptions.
DIGITAL TRANSFORMATION
Sixty-one percent of business executives say new technologies such as automation
and artificial intelligence (AI) that require new skills will be a primary
driver of their organization adopting a skills-based approach. Automation is
pushing organizations to “unfreeze” their jobs, disaggregate them into their
component tasks and subtasks, and then hive off those that can be automated and
reassemble the remaining tasks into a newly formed “refrozen” job. But with
newer technologies continuously reshaping jobs, many are looking for new
structures of organizing work that enable people to continually flex as needed,
instead of unfreezing and freezing jobs over and over again.
DECREASING RELEVANCE OF JOBS
Probably as a result of all these factors, the concept of a job itself is less
relevant than before. A full 71% of workers already perform some work outside of
the scope of their job descriptions, and only 24% report they do the same work
as others in their organization with the same exact job title and level.
Meanwhile, 81% of business executives say work is increasingly performed across
functional boundaries.
And many workers don’t even plan on performing work through a “job” at all
anymore. Over half of workers (55%) say they already have, or are likely to,
switch employment models throughout their careers—fluidly moving from permanent
full-time jobs through projects on internal talent marketplaces, freelancing,
and gig work, for example.
If jobs are no longer a useful construct to meet organizational goals and worker
needs, many organizations are realizing it’s time to change their approach.
THE SKILLS-BASED ORGANIZATION IN PRACTICE
Skills-based organizations operate based on four principles (figure 3):
1. Liberating work from the confines of the job by reorganizing work as a
portfolio of fluid structures, including and beyond the job
2. Reconceiving workers from being employees in jobs to being a “workforce of
one”—individuals who work on- or off-balance-sheet, each with a unique
ability to make contributions and a portfolio of skills and capabilities
that match the work
3. Using skills, rather than jobs, to make decisions about work and the
workforce—from who performs what work, to performance management to rewards
to hiring
4. Building a “skills hub,” an engine of skills data, technology, governance,
and more, to power these decisions
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Let’s explore each to understand how skills-based organizations operate in
practice.
LIBERATE WORK AND WORKERS FROM THE CONFINES OF THE JOB
THE BIG SHIFT
From: Work organized by jobs in a functional hierarchy
To: A portfolio of ways to organize work, enabling greater agility and more
fluid, meaningful packages of work including and beyond the job
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One approach to organize work without jobs is to fractionalize the work:
breaking it down into more meaningful chunks of work in the form of projects or
tasks that continuously evolve as business needs change, letting workers with a
relevant portfolio of skills and capabilities flow to the work. This approach is
gaining ground, and is advocated by leading thinkers such as Ravin Jesuthasan
and John Boudreau in their recent book Work without Jobs.8 Many organizations
are experimenting with partial fractionalization in the form of internal talent
marketplaces: letting workers carve out a portion of their time from their
traditional job to take on projects and tasks anywhere in the organization based
on their skills and interests, with opportunities suggested to them through
AI-powered matching technology. At Haier, the entire organization of more than
75,000 employees works in a fully fractionalized work model, with an internal
talent market that governs how talent is deployed on specific projects,
structured into self-organizing, fluid microenterprises, each with 10 to 15
employees.9
85% of HR executives say they are planning or considering redesigning the way
work is organized so that skills can be flexibly ported across work over the
next three years.
Some are taking this concept across organizational boundaries, temporarily
loaning or borrowing workers from other noncompeting organizations for projects,
tasks, or roles in the form of cross-company talent exchanges. For example, the
US Department of Defense and private sector defense organizations jointly
created the Public-Private Talent Exchange to share talent across organizations
through temporary projects and assignments.10
But as one of the authors lays out in a previous article, Beyond the job,
organizations can also go the other direction and broaden work, organizing it
around flexibly applying skills to achieve outcomes or solve problems.11 Our
research reveals that organizations that do this are nearly twice as likely to
place talent effectively and retain high performers, as well as have a
reputation as a great place to grow and develop.
Cleveland Clinic, for example, moved from being organized by medical specialties
and specific job titles such as “doctor” or “nurse” to broadly defining all
staff as “caregivers” responsible for treating not just physical ailments but
also patients’ spirit and emotions. Instead of organizing departments based on
the medical specializations, groups were instead formed around the patients and
their illnesses, creating multidisciplinary, collaborative teams―which also
sparked innovation in new treatments.12 Our research suggests that organizations
are moving to broaden the job, providing more flexibility regarding what is done
within it (figure 4). Twenty-four percent of surveyed workers report that their
organizations are already beginning to do this.
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Although there will always be a place for the traditional job, organizations are
increasingly looking to create a portfolio of different ways to organize work,
using different options for different workforces or businesses.
DEVELOP THE WORKFORCE OF ONE
THE BIG SHIFT
From: A one-to-one relationship between employees and jobs
To: A many-to-many relationship between work and skills, with workers seen
as unique individuals with a portfolio of skills who may be on- or
off-balance-sheet
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When workers are unbound from being defined by their organizations as their
“job,” work is no longer a one-to-one relationship between employees and jobs
but rather a many-to-many relationship between work and skills—with workers seen
as a “workforce of one,”13 or unique individuals with a portfolio of skills and
the ability to make meaningful contributions to a range of work. Organizations
that view workers this way are more likely to have better financial results,
anticipate and respond effectively to change, and retain high performers, among
other results.14 Even though 72% of surveyed workers say it would improve their
experience at work, only 12% say they are able to customize and personalize
their work responsibilities based on their unique skills, capabilities, and
interests (through projects and internal gigs, or choosing their own tasks) to a
significant extent.
Only 14% of business executives strongly agree that their organization is using
the workforce’s skills and capabilities to their fullest potential.
An important aspect of viewing workers not as job holders but as unique
individuals is recognizing that every individual has the capacity to continually
learn and grow, and decide how they deploy their skills to work. By breaking out
of the confines of the job, workers can more easily try new things to
continuously learn, build on their adjacent skills to solidify new ones, and
leverage their foundational capabilities such as emotional intelligence or
problem-solving in whole new ways. This is learning as it is done best: in the
flow of work, experiential, and applied to real problems at hand.
In the past, only select “high potentials” were given the opportunity to tackle
business-critical challenges or move around to different projects, giving them
the development needed to rise. But a skills-based organization gives everyone
the ability to access the types of experiences that previously were reserved
only for those with perceived high potential, now democratizing opportunity for
all.
USE SKILLS TO MAKE DECISIONS ABOUT WORK AND THE WORKFORCE
THE BIG SHIFT
From: Decisions about how to organize work and make decisions about
workers based on the job
To: Decisions about how to organize work based on skills, and eventually, on
other unique attributes of workers as well
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If jobs are increasingly less relevant as the only organizing construct for
work, and skills become the new underlying unit of work, this requires nothing
less than a sea change in how managers and HR operate to support the workforce.
Today, every talent management practice is based on the job. HR writes job
descriptions, sets compensation, creates organizational charts, and assigns
training—all around predefined jobs. Managers hire, give feedback, promote, and
organize their teams around jobs. And workers progress throughout their careers
by moving to the next higher-ranking job. Talent management, in this view, is
standardized and process-driven, siloed and centralized, and based on a supply
chain–oriented view of the world that assumes that the workforce is an
interchangeable resource to be supplied and managed at cost rather than a unique
asset to be cultivated.
The skills-based organization turns talent management on its head, redefining
and reimagining every talent practice to be based more on skills and less on
jobs.
SKILLS-BASED HIRING
Take hiring, for example. When a work need arises, hiring managers typically
default to opening a job requisition and then use algorithms to screen
candidates based on prior job experience and degrees. But with a skills-based
approach, they would first determine how best to structure the work (through a
traditional job or not), the skills needed to perform the work, and who is best
positioned to deliver the work (for example, an employee or an external worker
such as a freelancer), with workers then being selected based on their skills.
By using AI to understand the capabilities workers have that are correlated to
their success—using “affirmative” filters that “screen in” based on skills and
demonstrated capabilities, even if these workers have never had a similar job
before—organizations can open the doors of opportunity and movement to millions
who have previously been shut out.
When one telecommunications company needed machine learning skills, for example,
it didn’t search for those who held machine learning or AI jobs, or who had
degrees in the field. Those workers were too hard to hire. Instead, it analyzed
profiles of thousands of workers who identified themselves as machine learning
experts to understand the aggregation of skills, experience, and pathways these
workers took to develop these skills. It then created algorithms to search and
hire for those—increasing the talent pool by at least three times what the
company had estimated. After hiring the workers who had these adjacent skills,
the company then quickly built on the foundation of these skills to train the
hired workers with the specific required machine learning skills. It now has
technology that enables workers to compare their skills profile to different
types of work and asses their fit, along with a list of skills they need to
develop.15
In an ever-evolving world of work in which the half-life of hard skills is
shorter than ever, increasingly more important will be hiring based on adjacent
skills, or foundational human capabilities such as learnability. Workers then
have the ability to build on the foundation of other capabilities to continually
develop the hard skills they need.
SKILLS-BASED WORKFORCE PLANNING
The move to a skills-based approach for this telecommunications company had the
added bonus of providing the organization with a host of skills data to inform
workforce planning. Instead of planning for headcount in jobs, it can now plan
for skills—understanding not only what skills the workforce possesses today, but
what skills the organization could easily have if, with a bit of investment, it
builds on the foundational and adjacent skills of its existing workers to
develop them.16
With a skills-based approach to workforce planning, organizations can plan for
the skills they need, where they can get them, and the type of work in which
skills will need to be applied. Unilever, for example, has identified more than
80,000 tasks it may need done over the next five years that are likely to be
performed by a combination of full-time employees, gig workers, contractors, and
those working flexibly.17
SKILLS-BASED PAY
How is pay set if not based on jobs—carefully benchmarked and determined based
on hierarchy and market position? The answer could be assessing some combination
of the work performed, how well it was performed, the outcomes achieved, and
skills needed.
At American multinational manufacturing company W. L. Gore (best known as the
maker of Gore-Tex fabrics), employees have no job descriptions upon which to
base pay. Instead, employees rank 20 to 30 peers based on added value and
contributions to the organization; a committee then uses this information and
external benchmarking data to decide on compensation.18 An alternative method
would be to make compensation completely based on an individual’s bundle of
skills, aligned to market value and the organization’s needs.
Around 75% of executives and workers alike say skills-based pay and transparency
regarding what skills are worth would be a positive development.
For many organizations that retain the job, employees may have both a base
salary based on their job, and a “skills” salary based on the market value of
and organizational need for their skills. This would enable people to still be
rewarded in line with market demand for their skills, but jobs could still be
far more broadly defined, thereby unleashing greater mobility for those skills
to be deployed across a variety of types of work. Organizations are starting to
experiment here: IBM uses AI-based system CogniPay to make pay decisions based
on market demand, internal forecast demands, and attrition data for a skill or
cluster of skills.19
SKILLS-BASED PERFORMANCE MANAGEMENT
Workers can be rewarded and recognized as they continue to develop their skills.
But should skills be considered in the performance management process? This can
be a point of contention; performance management approaches typically evaluate
worker outcomes or performance toward goals rather than skills themselves.
Google strives to balance skills and outcomes in its new performance management
process. Googlers are encouraged to work with their managers to identify and
document what their “priorities” should be in terms of their own development,
and identify specific learning opportunities based on these priorities to act on
in subsequent quarters.20
There are additional ways organizations can foster skill development during
performance management activities. One example is by clearly defining criteria
that indicate that employees are qualified to move into a different role in
another part of the same company, and communicating those criteria
transparently. During talent reviews, HR and managers should discuss how
employees are demonstrating the skills that are seen as critical for future
leaders and “next-level” roles. Individuals and their managers should have a
shared understanding of what skills are important for the employee to develop,
and actively discuss on a quarterly basis (or more frequently) how to get the
exposure, experiences, and education that will help them develop and demonstrate
those skills on the job, in the flow of work.
SKILLS-BASED LEADERSHIP AND MANAGEMENT
With a skills-based approach, managers’ and leaders’ roles shift from managing
employees to dynamically orchestrating work and skills through projects, tasks,
or problems to be solved, with influence and empowerment of others becoming more
important than hierarchy. Managers then share talent across business functions
and teams for the greater organizational good rather than hoarding it for their
own team.
Managers will still have a critical role to play in communicating the purpose
and vision of the organization, defining the work and aligning skills to it,
refining how the work is done in a constant cycle of agile experimentation,
providing resources and support, and helping workers cultivate an ever-changing
portfolio of in-demand skills. However, in some organizations, many of these
critical capabilities are diffused through workers at all levels, or given to
some workers as part of their temporary role at that time, with the result that
few, if any, managers might be needed at all. In other cases, the traditional
role of the manager may evolve to look more like a project manager.
MATCHING SKILLS TO TEAMS
14% of HR executives say they are matching skills to teams to create optimal
team compositions to a significant extent, and 84% say they are doing so at
least to some extent.
Case in point: IBM built an AI tool to suggest optimal sales teams using skills
and other attributes of people, predicting win probability based on team
formation.21
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BUILD A “SKILLS HUB”: THE ENGINE OF THE SKILLS-BASED ORGANIZATION
Organizations that opt for a skills-based model may wonder how to operationalize
it. A crucial engine that powers this model is a centralized “skills hub,” with
the following components:
A SHARED SKILLS-BASED TALENT PHILOSOPHY
Moving from jobs to skills as the organizing principle of work and the workforce
will require a shared approach across the organization regarding the value and
prioritization of skills as the connecting thread of talent management, and how
they will inform all workforce decisions. As one Dutch communications company
embarked on its transformational journey to become a skills-based organization,
for example, it first defined its skills-based talent philosophy.22
The good news? Sixty-three percent of business and HR executives already say
their organization’s business and HR executives are aligned on the importance of
skills in making decisions about work and the workforce.
CLEAR AND ESTABLISHED GOVERNANCE
Who will own the transformation to a skills-based organization? Organizations
will need a clear understanding of skills “ownership” across the enterprise,
along with the structures and processes to enable adoption and drive change
management efforts. Sixty-four percent of organizations say the HR function
currently owns the transformation.
But transforming the very fabric of the way work is done goes beyond HR,
requiring cross-functional governance and buy-in. For example, finance will need
to change the way it values work so that HR can set compensation levels,
procurement will need to assess and deploy skills when hiring freelancers, and
strategy and operations will need to think differently about how to structure
and organize work. Ninety percent of business and HR executives say moving to a
skills-based organization will require a transformation for all functions and
leaders, not just HR.
For HR in particular, this will be a massive transformation. Instead of managing
employees in jobs, 72% of business and HR executives agree that the role of HR
will move away from managing employment to orchestrating work.
A COMMON LANGUAGE FOR SKILLS
If skills are to become the lingua franca of work and the workforce, then
organizations need to create a common language and framework for skills. Yet
only 10% of HR executives say they effectively classify and organize skills into
a skills taxonomy or framework—although nearly all (85%) have some efforts
underway.
STRONG DATA AND TECHNOLOGY ENABLERS
New developments in technology make the skills-based organization possible for
the first time. Technologies span the gamut from AI-powered skills assessment
and inference; matching of skills to work, career opportunities, teams, and
learning; sensing of internal and external skills data to inform workforce
planning or skills benchmarking; and managing skill badges, portable skills
passports, or stackable credentials. On the work side, AI can now sense what
work people really do to create dynamic “work” charts or organizational network
analyses instead of “org charts” based on jobs.
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Yet organizations still feel they have quite a bit of work to do to take full
advantage of such technologies (figure 5). Some organizations don’t even know
what skills their workforce possesses. And if you’re going to be making
decisions about people as sensitive as promotions, pay, or deployment to work
based on skills, then that skills data needs to be verified and valid. Many
organizations continue to rely on workers self-reporting their skills and
proficiency levels, in comparison with more valid ways of confirming skills
(figure 6).
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OBSTACLES, CHALLENGES, AND THE FUTURE OF SKILLS-BASED ORGANIZATIONS
Today, the technology to enable the transformation to a skills-based
organization is there—or quickly catching up. It is organizations that are
lagging behind, hindered by entrenched mindsets about what it means to manage
talent, work, and be a worker. When asked to name the top three barriers to
transforming into a skills-based organization, business and HR executives cited
technology last. By far the biggest barrier? Legacy mindsets and practices
(figure 7).
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This is not an easy challenge to overcome. And as skills-based organizations
mature, they will continue to raise many questions and challenges that still
need to be solved, including the following.
MANAGING A PORTFOLIO OF DIFFERENT TYPES OF WORK ARRANGEMENTS WITH FAIRNESS AND
EQUITY
When the traditional fixed job is no longer the sole organizing construct for
work, and there is far greater variety in types of work, people’s work and
employment experiences will vary tremendously from person to person. Many
organizations may establish a multipronged approach, with some workers in
traditional narrowly defined jobs, others in more broadly defined roles oriented
toward achieving outcomes, and still others performing work in talent
marketplaces through projects and tasks, with potentially different ways to
deploy, pay, and promote people. Not only can this add complexity to existing
talent processes, it may also lead some workers to question fairness when one
worker receives an altogether different experience than another.
In focusing on their worker experience, organizations will need to be careful
not to confuse fairness with sameness. When people are treated the same,
differences may be ignored. But when they are treated equitably—with transparent
and consistent standards based on a particular type of work arrangement and set
of skills-based talent practices—then differences are recognized, celebrated,
and harnessed so that people are viewed as the humans they truly are. With this
approach, equity is achieved by providing people with fair access, opportunity,
resources, and the power to thrive. This essentially human view is critical to
the new world of work.
With a consistent framework for varied types of work arrangements put in place,
organizations can avoid making individual side deals, where only some workers
get to experience varied work relationships beyond the job. The trouble with
these individually negotiated arrangements between manager and employee is that
they are difficult to control, scale, or manage consistently or fairly.
OVERINDEXING ON SKILLS
While we have seen why skills are important to make decisions about work and the
workforce, organizations will be in danger if they focus solely on skills.
Explains Julie Dervin, head of global learning and development at global food
company Cargill, “I think it’s important, as you evolve to being a skills-based
organization, to make sure that other important aspects aren’t lost. When all is
said and done, we’re talking about our people—humans with varying interests,
motivations, mindsets, lived experiences—and skills are just one part of the
human performance equation.”23
We see the shift to a skills-based organization as the first step of an
evolutionary journey to making decisions based on individuals rather than
jobs—with the word “skills” eventually becoming short-hand for more granularly
defining workers with an array of skills, interests, passions, motivations, work
or cultural styles, location preferences and needs, and more (see figure 8 for
some of the types of data workers and executives would find valuable in matching
workers to work).
Digital agency Forum One is one organization paving the way. As part of an
effort to improve diversity, equity, and inclusion, the organization updated its
skills matrix to go beyond skills to also include worker interests, preferences,
and professional development goals. The goal? To provide a holistic
understanding of a person’s strengths and growth trajectory.24
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RESPONSIBLE USE OF WORKFORCE DATA AND AI
When sophisticated technologies such as AI collect more and more data on
workers, not only on skills but also other dimensions, do workers find it
intrusive? Not necessarily: Our research suggests that workers embrace
organizations using new sources of data and AI to better understand them as full
human beings, and would prefer this way of understanding them than understanding
them solely as jobholders.
For example, 79% of workers are completely open to their organizations
collecting data on their demonstrated skills and capabilities, and as many as
70% are open to data collected on their potential abilities. Even the most
sensitive ways of collecting data—using AI to passively mine worker data as they
do their tasks—are seen more positively than negatively, with 53% percent of
workers and 44% of business and HR executives viewing these as a positive
development, compared with only 20% of workers and 28% of executives viewing
them as negative.
But to maintain this trust, organizations need to harness the power of new
sources of data and AI responsibly, including monitoring AI for bias. Workers
are open to sharing their data, but many want to do so only if their employer
clearly tells them how their data is collected and used, and the benefits that
will ensue: new opportunities for growth and development; fairer and more
meritocratic hiring, pay, or promotion decisions; and more customized work
experiences (figure 9).
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MAKING SKILLS DATA PORTABLE AND INTEROPERABLE BEYOND THE BOUNDARY OF THE
ORGANIZATION
When skills rather than jobs become the currency of work and the workforce,
organizations may evolve to being ones in which the most highly skilled workers
become more easily discovered and better rewarded. Sixty-one percent of workers
and 60% of business and HR executives say this would be a positive development,
with only 9% of workers and 11% of executives saying it would be negative.
But for the entire labor market to become one that rewards ability more than
pedigree, verified skills data must be portable across organizations. Today,
most data on the skills of workers, especially employer-verified data, sits
inside a company. But when workers leave, all their verified records get left
behind, hindering their ability to easily move between permanent roles,
projects, or gigs across organizations. Organizations that hire these workers
have to rely on self-reported skills, which may not be reliable, or reassess the
worker’s skills on their own.
Some organizations are trying to find a solution. For example, the Navy, a
component of the US Department of Defense, recently launched a platform called
MilGears, which enables service members and veterans to capture all the skills
acquired through training, education, and on-the-job experience during their
entire military career in a Learning and Experience Record. This record is
linked to the O*NET framework, which links to jobs across the US economy.
Defense and Navy service members can identify which validated credentials gained
through their military experience apply directly to a target civilian
occupation, and determine what skill gaps still exist and how best to address
them.25
What could help is combining a common language (taxonomy) of skills that spans
organizations with portable and credible skills data, ultimately creating global
skills passports for each worker. Organizations can also share their overall
skills supply and demand data to help educational institutions, workers, and the
government better understand at an industry level what skills should be
developed.
76% of workers say they want their employer-verified skills and work-related
data to be portable, enabling them to share the data with others once they
leave.
55% of executives are open to it.
BALANCING WORKER AUTONOMY AND CHOICE WITH ORGANIZATIONAL NEEDS
If work is unbound from jobs, and workers are given more opportunities to
exercise choice and autonomy in how they apply their skills, what happens if the
work workers want to do no longer aligns with the work that organization
needs them to do?
The rise of internal talent marketplaces so far has been primarily based on
workers exercising discretion as to which projects and tasks in addition to
their “day job” they want to take on, once they negotiate with the manager
offering the work. Rarely is a person’s performance on this type of work ever
formally evaluated, recognized, or rewarded; only 15% of business and HR
executives say they capture this data.
If work becomes completely fractionalized into projects and tasks, will some
organizations decide to match workers’ skills without the workers’ agreement,
either via algorithms or at the discretion of managers? Surprisingly, 54% of
workers say this would be a positive development—perhaps because they would
prefer this to being confined to a job entirely—yet only 33% of business and HR
executives agree.
Organizations will need to be careful that work doesn’t get parceled out only in
a top-down or mechanistic fashion, driven by opaque and potentially biased
algorithms. Leaders seem ready to cede this type of control: 70% of business and
HR executives say providing workers with more autonomy, agency, and choice in
the work to which they apply their skills, with subsequent less centralized
control by the organization, would be a positive development, and only 4% say it
would be a negative one. Ceding control like this can yield big gains in
innovation and growth (think of Google’s engineers who developed Gmail in their
20% time allotted to letting them apply their skills to solving problems they
think are worth tackling),26 but, as with most organizational transformations,
it’s a massive culture shift that will require ongoing effort.
TAKING THE FIRST STEPS TOWARD THE SKILLS-BASED ORGANIZATION
In our experience working with organizations embarking on this journey, they
typically take one of three different approaches.
1. Often, they’ll start with a particular talent practice and transform it to be
based more on skills and less on jobs, and then continue to either similarly
transform another practice or determine that they have to create a skills “hub”
before realizing the transformation.
For example, Cargill started by transforming learning and development to be
based more on skills, and less on suggesting learning and development
opportunities based on people’s jobs. As it proceeded to also adopt skills-based
hiring and a skills-based talent marketplace, it realized it had core skills hub
work to do to realize the vision; so it embarked on an initiative to develop an
enterprisewide skills framework, using skills as a unit of measurement to better
acquire, manage, and develop its people going forward.27
2. Others start with creating a centralized “skills hub” before expanding out to
skills-based talent practices. To do this, they often start by inventorying or
creating a language for skills or developing a skills-based talent philosophy.
One life sciences organization focused on designing a skills-based
organizational philosophy and value proposition, and then developed a
skill-mapping playbook that enabled it to tag its skills ontology and
proficiency levels to learning objects. This enabled the organization to start
on transforming learning with a skills-based approach, with an ultimate goal of
creating more personalized development opportunities for its employees. It also
identified the “hot” skills (skills in high demand but short supply) upon which
to focus its efforts. Ultimately, the organization hopes to incorporate skills
into many aspects of the talent life cycle in the future, from talent sourcing
to compensation.28
3. The third archetypal journey is to start with the work, either with an
internal talent marketplace that lets some work live as projects and tasks
outside of the job, or as broadened jobs.
Trane (formerly Ingersoll Rand) started with broadening the job: doing away with
highly specialized jobs spread across 28 distinct job grades, and instead
creating broader job “clusters” that share similar broadly defined work
responsibilities and outcomes, spread across seven job grades, and narrowed down
to only 800 job titles with a set of skills for each job. This allowed the
organization to effectively build a skills-based development and career
strategy, enabling employees to assess their career goals and current skills,
find a future role, and create a development plan for growth. Using the platform
Fuel50, the company now has a career assessment, matching, and development
system—which the organization believes has increased employee engagement and
retention by double digits.29
Whatever the archetypal journey chosen, the following practices can help
organizations:
* Think evolution, not revolution. Dismantling the paradigms and practices of
jobs we’ve lived with for over a century is best thought of as a long-lasting
evolution, not a revolution. Few organizations will be willing to abandon
jobs and hierarchies entirely. But there might be certain spots in your
organization where doing so, either fully or partially, will yield
significant benefits. Consider places where skills are changing so fast that
talent practices can’t keep pace, where you could use diverse thinking and
skill sets to solve problems or to innovate, or where you’re spending time
determining what automation or humans should do but never seem to be done.
Most organizations start small and build out from there, with the majority
starting with transformation of a single talent practice rather than starting
with the bigger challenge of reorganizing work beyond the job.
* Always lead with the why. Explains Cargill’s Julie Dervin, “Start by defining
the why, which is your value proposition and your business case to support
this multiyear journey. It involves a lot of change at a very systemic level
in people processes and the way things are done.” For Cargill, this “why”
included the ability to:
1. Create greater speed and agility, including speed to market
2. Better respond to customers with the right skills accessible when the
business needs them
3. Provide more opportunities for workers to grow through unique career
experiences by applying their skills to different areas within Cargill
4. Reduce variable costs by letting employees take on new projects and tasks
instead of paying contractors or off-balance-sheet talent
5. Better utilize the workforce by unlocking untapped capacity30
* Find your pain point or lowest-hanging fruit. When starting with a
skills-based practice, pick an area where the business case is the biggest,
based on your organization’s specific needs and pain points. Many
organizations, for example, are now emphasizing the value of skills, not just
degrees or experience, when hiring—both in response to a tight labor market,
and to improve equity, diversity and workplace culture.31 Alternatively,
start with those practices that have the clearest connection with skills
today, such as learning and development or talent acquisition, or that can
use mature technologies easily available as upgrades to existing HR
information systems such as talent marketplaces.
For most organizations, the notion of the job won’t go away entirely. Instead of
being the only way to organize work and make decisions about workers, it will
become just one of many ways, giving leaders the option to use a variety of
approaches. By moving to a skills-based approach, leading organizations can
pivot from a traditional model aimed at scalable efficiency that grew out of our
industrial past to one that is far more suited to a world in which speed,
agility, and innovation rule the day, and in which people expect more meaning,
choice, growth, and autonomy at work.
View the infographic to learn more about the transition from jobs to skills
LET’S MAKE THIS WORK.
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ENDNOTES
1. Therese Raft, “Unilever is turning the work week towards skills building,”
Financial Review, April 27, 2022.
View in Article
2. Susan Cantrell, “Beyond the job,” People+Strategy Journal, Summer 2021.
Reprinted in Deloitte Insights, October 2021.
View in Article
3. Gloat, “How Unilever upskilled for the future,” accessed June 25, 2022;
Leena Nair et al., “Use purpose to transform your workplace,” Harvard
Business Review, March-April 2022; Avivah Wittenberg-Cox, “Flexibility for
all: Unilever’s vision for the future of work,” Forbes, May 23, 2021.
View in Article
4. Aman Kidwai, “Inside Unilever’s program that allows employees to try out
new jobs and gig working opportunities at the company,” Business Insider,
May 5, 2021.
View in Article
5. The surveys were conducted in the spring and summer of 2022 across a range
of industries and in 10 countries: Australia, Brazil, Canada, Germany,
India, Japan, Singapore, South Africa, the United Kingdom, and the United
States.
View in Article
6. Indeed, “Want to hire better amid the ‘Great Realization’? Focus on
skills,” The workplace report, Wall Street Journal, July 28, 2022.
View in Article
7. Ravin Jesuthasan, Tracey Malcolm, and Susan Cantrell, “How rapidly changing
market conditions are redefining jobs,” Harvard Business Review, April 22,
2020; James Asquith, “Grounded flight attendants are being redeployed to
hospitals in coronavirus battle,” Forbes, March 30, 2020.
View in Article
8. Ravin Jesuthasan and John W. Boudreau, Work Without Jobs: How to Reboot
Your Organization’s Work Operating System (Cambridge, MA: MIT Press, 2022).
View in Article
9. Cantrell, “Beyond the job.”
View in Article
10. Office of the Under Secretary of Defense for Acquisition and Sustainment
(A&S), “Public-Private Talent Exchange,” accessed July 28, 2022.
View in Article
11. Cantrell, “Beyond the job.”
View in Article
12. Gillian Tett, The Silo Effect: The Peril of Expertise and the Promise of
Breaking Down Barriers (New York: Simon & Schuster, 2015); Toby Cosgrove,
The Cleveland Clinic Way: Lessons in Excellence from One of the World’s
Leading Health Care Organizations (New York: McGraw Hill, 2014).
View in Article
13. Susan M. Cantrell and David Smith, Workforce of One: Revolutionizing Talent
Management through Customization (Boston, MA: Harvard Business Press,
2010).
View in Article
14. Deloitte analysis of the Skills-Based Organization Survey results.
View in Article
15. Company interview with Deloitte author, November 19, 2018.
View in Article
16. Ibid.
View in Article
17. Nair et al., “Use purpose to transform your workplace.”
View in Article
18. Jorge Mazal, “Flat and fluid: How companies without hierarchy manage
themselves,” Medium, February 16, 2014.
View in Article
19. Nicole Lewis, “IBM transforms its approach to human resources with AI,”
SHRM, May 21, 2019.
View in Article
20. Google, “Googler Reviews and Development,” accessed July 28, 2022.
View in Article
21. IBM, “Building a winning team using AI,” March 16, 2018.
View in Article
22. Work performed at a Dutch communications company by Deloitte.
View in Article
23. Deloitte, “The Skills-Based Organization,” Capital H Podcast with guests
John Boudreau and Julie Dervin and hosts Michael Griffiths and David
Mallon, December 2021.
View in Article
24. Forum One, “How we’re furthering our DEI efforts through a skills matrix,”
October 29, 2020.
View in Article
25. Christina Curnow et al., “Measuring skills at work: Lessons from the
field,” American Institutes for Research (AIR), June 2021.
View in Article
26. Christopher Mims, “Google’s ‘20% time,’ which brought you Gmail and
AdSense, is now as good as dead,” Quartz, August 16, 2013.
View in Article
27. Deloitte, “The Skills-Based Organization,” Capital H Podcast with guests
John Boudreau and Julie Dervin.
View in Article
28. Work performed at a global life sciences organization by Deloitte.
View in Article
29. Deloitte, “From interesting to irresistible: Raising the bar on the
employee experience,” Capital H Podcast with guests Craig Mundy, Ina
Gantcheva, and Jeff Mike and host Bradd Craver, February 2019; Josh Bersin,
“The future of work: Lessons in job architecture and career management,”
JoshBersin.com, February 9, 2020.
View in Article
30. Deloitte, “The Skills-Based Organization,” Capital H Podcast with guests
John Boudreau and Julie Dervin.
View in Article
31. Lucas Mearian, “No degree? No problem. Tech firms move away from college
requirement for new hires,” Computerworld, May 16, 2022.
View in Article
ACKNOWLEDGMENTS
The authors would like to thank Julie Hiipakka, Frances Symes, Joi Bruce, Denise
Moulton, Chelsey Taylor, Rebecca Greenberg, and Laura Durando for their
contributions to this article.
Cover image by: Jim Slatton
TOPICS IN THIS ARTICLE
* Employee engagement,
* Strategy,
* Talent,
* Purpose,
* Future of Work,
* Human Capital
WORKFORCE TRANSFORMATION SERVICES
Deloitte Consulting LLP’s workforce transformation practice help organizations
reimagine their talent management strategies across leadership, learning,
rewards, inclusion, performance management, career mobility, and talent
acquisition.
Learn more
MICHAEL GRIFFITHS
Principal, Lead for Workforce Development Practice
mgriffiths@deloitte.com
+1 914 255 5478
ROBIN JONES
Principal | Workforce Transformation
robijones@deloitte.com
+1 212 313 1706
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