The business case for a skills-first approach  

A skills-first approach provides solutions to a number of key organisational challenges, as emerging technologies and evolving customer behaviour are reshaping work.

As skills requirements change, organisations need to be more agile, to be able to redeploy employees where their skills are most effective, to improve recruitment and retention practices, and to align L&D with skills needs in a skills-first approach.   

In this article, we’ll make the business case for a skills-first approach, with data showing ROI, and examples of brands successfully pioneering this strategy.   

Why businesses are adopting a skills-first approach  

Understanding the importance of a skills-first approach in today’s workforce is crucial.

• Technological disruption. Automation and AI are transforming job roles. According to LinkedIn, the skill sets required for jobs have changed by around 25% since 2015. Organisations need to focus on skills to keep pace with rapid change.  

• Evolving customer expectations. Consumers demand personalised experiences, faster service, and excellent customer experience. A skills-first approach allows businesses to be more responsive and adaptable to changing customer needs.  

• Talent shortages and workforce mobility. Skills gaps are widening, and employees are seeking more flexible, meaningful career paths. Organisations that prioritise skills over roles can better attract, retain, and develop talent.  

• Cost efficiency and operational agility. Rigid job structures can create inefficiencies. This approach allows businesses to deploy talent dynamically, cutting costs and boosting productivity.  

Building your business case 

There are a number of data points you can use to build your business case for a skills-first approach. Here are a few examples:   

Workforce Planning  

Mapping the distribution of skills requirements across your organisation provides you with a much more informed view to support re-deployment, and to support development pathways into priority skills areas.  

By deconstructing jobs and breaking them down from traditional job roles into individual tasks and activities, it’s easier to highlight the specific skills needed for each task. In this way, alternative career paths can be created based on resources and directed towards areas where skills are most needed.   

This skills-led organisational design allows for a more flexible resourcing model that can better meet the needs of your service delivery requirements and fluctuate with changes in demand. It can also support a truly agile project management and delivery approach.  

Creation of Career Paths  

The CIPD estimates that the average rate of employee churn in the UK is 34%, and a skills-first approach can address this issue, through greater internal mobility.  

33% of leavers resign due to career growth and development reasons, and these are often more highly skilled and ambitious employees who are more costly to replace.  

A compelling business case data point is to look at your eNPS score and leaver data to show whether your employees feel that they have access to career opportunities or if it was a reason for leaving.  

Providing career advancement opportunities improves retention, with a skills-based approach being a key factor. Adopting a skills-based approach to providing linear and lateral career pathing and work opportunities can save up to £1.5m in retention costs.  

Identifying and defining skills proficiency requirements across jobs and levels provides a framework for career pathways, with employees able to see opportunities for linear and lateral career moves.  

Workers who have made an internal move at their organisation after two years have a 75% chance of remaining there, compared to 56% for those who have not.  

Skills-Based Hiring  
Research has shown that hiring for skills is five times more predictive of job performance than hiring for education, and more than twice as predictive than hiring for work experience.  

A compelling business case data point is to identify the number and cost of hires who left within 12 months. This is often a good indicator of inconsistencies in the assessment process – where an unstructured process not aligned to the specific skills requirement has been taken.  

Indeed, research shows that employees leaving within 12 months is often due to a lack of structured assessment processes and poor hiring decisions. 

A skills-first approach provides a more consistent and fair approach. Mapping skills enables the identification of priority skills proficiency requirements and is a better indicator for interviews and assessment. This enables a much more robust approach to hiring, which in turn reduces the cost of bad hires.  

There is plenty of data to support the case for skills-based hiring:  

• Croner estimates that employee turnover costs £11,000 per leaver, based on an average salary of £25,000.  

• Skills-based hires also tend to stay longer at the same company. A BCG study found that employees hired on skills had a 9% longer tenure than the average. 

• US employers hiring for roles with a $60,000 salary are saving between $7,800 and $22,500 by reducing mis-hires with skills-based hiring, according to a TestGorilla report. 

• The same report found that employers are also saving between 412 and 792 hours per senior management hire with skills-based hiring, and between 339 and 660 hours per hire for non-senior roles.  

• Skills-based hiring is favoured by 68% of North American job seekers. 

Performance Management  

Poor performance can cost organisations millions in lost productivity. The cost of poor management and lost productivity from disengaged U.S. employees is estimated to be between $960 billion and $1.2 trillion per year.  

Performance issues can also have a damaging, ripple effect across your entire business through loss of productivity, widespread loss of motivation, and a decrease in customer satisfaction. Other employees may become disengaged and resentful, leading to an increase in absence and staff turnover.  

Another compelling business case data point is to review the number of average and/or under performers you have in the business. Low performance leads to low productivity, which results in lower profitability. 

A skills-based approach enhances performance management, making it more robust and effective for both performance and career conversations and allows these issues to be addressed directly. Mapping skills and the specific skills proficiency requirements for your roles provides the baseline for performance in role and framework to support performance management decisions.  

Learning & Development  

A centralised view of skills distribution enables targeted L&D to support future workforce needs. This in turn helps you optimise your L&D budget, ensuring a focus on addressing the most in-demand and skills gaps.  

A skills-based approach identifies gaps, ensuring training is targeted effectively. By directly addressing employee needs, it can also be more effective, thanks to higher employee engagement.  

As you build your business case, highlighting your L&D budget and any wastage can be a compelling data point. 

Compensation, Pay Equity & Pay Transparency  

Pay equity issues often occur when pay does not keep pace with the actual responsibilities and tasks of a specific role, or where certain types of skills are undervalued.  By connecting skill proficiency and performance with pay, we can remove bias from compensation decisions, which in turn, helps to ensure pay equity.  

In addition, a key requirement of the EU Pay Transparency Directive is to show pay progression criteria. This is effectively the need to show the skill proficiency criteria as you go up and down a grade. 

Mapping skills and detailing the skill proficiencies provides clarity on requirements for performance and progression in role and satisfies reporting requirements for pay transparency legislation. 

Diversity, Equity & Inclusion 

A skills-first approach helps to remove bias. 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 reduces bias and improves fairness.  

From a recruitment perspective, focusing on skills opens recruitment processes to a greater range of candidates and increases inclusivity. Indeed, one study estimates that organisations can increase their talent pool up to 20x with a skills-first approach.   

The same LinkedIn study found that transparency around skills encouraged more women to apply for jobs. The increase in women applying was 1.8x that observed in men, with a similar impact on hiring outcomes.  

84% of employees agree that skills-based hiring can help prevent bias in hiring, while 90% feel they are more likely to secure their dream job because of it. 81% say it has helped them gain access to new employment opportunities.  

Summary

A skills-based approach can deliver a range of benefits for organisations. Improved hiring and retention can deliver a direct return on investment, leading to a more diverse workforce, while the greater agility and improved capabilities can directly impact business performance.   

RoleMapper's Skills Innovation Partnership can fast-track the shift to skills by co-creating and building innovative AI and technology solutions to support people strategies and overcome process challenges.