Skill-Based Revolution: how HR processes and organisational models are changing

On 19 March, the third workshop of the 2024-2025 edition of the HR Innovation Practice Observatory was held, entitled "Skill-Based Revolution: how HR processes and organisational models are changing". The workshop, through the presentation of data from the Observatory's Research and a workshop activity in working groups, explored the topic of the “Skill-Based Organisation”, i.e. an organisational approach that puts competencies at the centre of decision-making in HR processes.

THE OBSERVATORY'S RESEARCH

The first studies on the topic of 'Skill-Based Organisation' date back to the early 1990s, when Edward Lawler and Gerald Ledford, professors at the University of Southern California, theorised an approach to human resources and talent management that gave greater weight to competencies. This approach defined the characteristic elements in each HR process of what was called at the time a "competence-based organisation, an organisation whose strategic decisions were based on the competencies of its employees. Although the topic has been theorised for decades, experiments in practice have been limited to individual processes rather than embracing the totality of HR practices.

According to theHR Innovation Practice Observatory, , there are several reasons why it is important to talk about a “Skill-based” approach today.. These include, first of all, today's global context, defined by the acronym 'BANI' (from the English “Brittle”: anxiogenic, non-linear, incomprehensible), and its uncertainty, which has repercussions on people's general wellbeing, inevitably also involving the working sphere.

Added to this is a more rapid obsolescence of skills caused by technological evolution. Indeed, recent technological advances generate a dynamic labour market in which the key skills to work effectively change rapidly. This clashes with the rigidity of organisations, which are struggling not only to identify the skills needed by the organisation, now and in the future, but also to understand what skills are currently present within them. According to the World Economic Forum, 58% of people internationally are concerned that the skills required by their role will change over the next five years. In Italy, according to a 2024 survey by the HR Innovation Practice Observatory, 32% of workers are worried that their skills will become obsolete in 1-2 years and that they will struggle to find a new job. In this sense, one of the most urgent challenges for HR departments concerns the design of effective upskilling and reskilling programmes to respond to the enrichment of roles with new skills and the need to retrain people.

Closely related is the issue of skills shortages in the labour market.Technological advances do create new opportunities, but which organisations often fail to seize. The figures confirm this critical situation: in 2024, 88% of organisations had difficulty recruiting new staff from the market and only 35% were able to make use of the “hidden” skills of staff already hired. Faced with the difficulty of finding certain figures externally, organisations are increasingly focusing on their internal development, which could be facilitated precisely by the recognition and valorisation of people's “hidden” skills. Finally, adding further complexity is the entry of Generation Z into the world of work, the bearer of new needs and expectations, including the desire to see their skills valorised, the desire to receive continuous training and the demand for greater career dynamism. The search for, recognition and enhancement of people's skills and attitudes therefore become even more crucial for the future of organisations and HR processes.

For these reasons, in recent years, there has been a return to the term “Skill-Based Organisation”. In particular, this approach is based on three characteristics. Firstly, “job de-construction””, a new way of organising work in which employees' skills are dynamically matched to specific tasks or projects instead of fixed roles. This is accompanied by astrategic analysis of the competencies present in the organisation, which guides the HR processes related to talent management: recruiting, learning & development, career, performance & rewarding. Finally, with this approach, the organisational structure is more horizontal and based on self-managed teams that have autonomy and responsibility in conducting work.

A fundamental contribution to this organisational approach comes from technology: first of all, the digital tools on the market today make it possible to link training and growth opportunities more effectively and quickly with people's skills, aptitudes and interests; secondly, there are technologies that can facilitate continuous training there are technologies that can facilitate continuous training, favouring personalisation and enabling a response to the contextual needs of each individual; finally, digital support makes it possible to monitor the evolution of skills over time, in relation to the dynamics of the external market.

So how should the organisation evolve? At the workshop, the HR Innovation Practice Observatory presented a maturity model of this approach, which aims to identify the evolution of 5 main HR macro-processes (Work & Organisational Design, Recruiting, Learning & Development, Career Management, Performance Management & Rewarding), towards a growing maturity of adopting "skill-based”.

In order to observe how this approach can be applied in an operational context, the event continued with the testimony of Gianfranco Chimirri, Chief People & Agile Organisation Officer at SACE, who brought his organisation's experience towards achieving maturity on these issues.

THE TESTIMONY

Gianfranco Chimirri, Chief People & Agile Organisation Officer of SACE

SACE's experience on these issues began in September 2023, when the organisation decided to take steps towards an organisational model more focused on skills, with a view to making them a source of competitive advantage.

SACE's approach approaches the issue holistically, embracing different HR macro-processes related to talent management. To do this, the company has first of all created an internal catalogue to map the skills present, with a view to covering the needs not only for the present, but also for the future. Skills are assessed on an ongoing basis, taking into account both the assessments of team leaders and those of the colleagues with whom people collaborate in the projects in which they participate. This awareness of present competencies and possible gaps serves as the basis for the application of the “skill-based” approach in the different HR macro-processes.

In particular, in the career management process , people can move within a transparent framework that highlights the competencies associated with each role in the organisation. In order to make this process personalised, a tool, called 'Career GPS'has been implemented, which is able to guide careers by suggesting development opportunities best suited to the person's current skills and the trajectories he or she wants to pursue. The tool, in fact, gives visibility of the skills gap between one's own skill portfolio and that required to fill the current role or those desired for the future. All this with a view to providing useful information for making informed decisions on which skills to develop (e.g. whether the skills are of value in perspective). In addition, the tool also recommends ways in which competences can be enhanced, creating a connection with the training process and the different ways in which competences can be developed.

The “skill-based” approach was also applied to workforce planningactivities. The HR team can set the skills they are looking for on the platform, obtaining an overview of their presence throughout the organisation. This is possible thanks to the definition of a skills development strategy closely linked to the business strategy, from which training and internal mobility plans are defined accordingly. This planning is based on a specific approach that includes: considerations related to the activities to be automated and their impact on the competencies associated with each position; an analysis of the competencies the organisation will need in the future, combined with considerations on how to fill the need internally; strategies to search for competencies on the labour market, in the event that they cannot be developed internally; and the borrowing of competencies, for those areas that are not strategic or contingent, through temporary partnerships.

Finally, another area of application of the approach concerns remuneration issues. To date, in fact, the variable part of remuneration is partly composed of performance targets and partly of competence development targets. However, the initiatives are not limited to the variable component of remuneration; they also influence fixed remuneration.

The proposed model offers numerous benefits for both individuals and the entire organisation. In terms of employees, one of the main benefits is the recognition and enhancement of the uniqueness of the individual, which allows everyone to be seen as an individual with distinctive skills and characteristics. This approach alsoallows hidden skills to emerge, giving them the opportunity to express their potential. Moreover, employees acquire a sense of responsibility with regard to the development of their skills, taking an active role in their professional growth. As far as the organisation is concerned, this approach allows SACE, , in most cases, to draw on its internal resources to fill skills needs, without having to resort to the external market. Finally, the model creates protection on the investment in people's skills development, offering incentives to stay in the organisation and see their skills enhanced.

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Source: HR Innovation Practice Observatory