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Libby Marks

The Beginner's Guide to Skills Management

A huge part of making sure that your service business succeeds today is skills management. But what is skills management, and how can you map your employee's skills in a tangible way?

Since the pandemic hit the world in 2019, the corporate sands have shifted massively. According to McKinsey, 50% of leaders are now facing business problems due to an unforeseen skills gap. Becoming better at skills management is now a must to surface hidden upskilling and reskilling opportunities and keep the business afloat. But where do you start? We've answered this question and many more in our complete guide. Read on. 

What is skills management?

Skills management is the process of cataloging the skills of your workforce and mapping them onto your organization’s current and future needs. It is a key part of both resource management and capacity planning

A skills management process provides you with information about what skills exist within your organization so you can use them effectively, as well as identify any skills gaps that you need to address. This ensures your business has the expertise it needs to be successful - and sustainable - in a changing and competitive landscape. 

Skills management is an ongoing process to

  • Identify required competencies for success 
  • Assess employee performance against these competencies
  • Identify gaps between current and desired capabilities
  • Develop plans for addressing any identified gaps or weaknesses
  • Match correctly skilled staff to the tasks that need their expertise

Why is skills management important? 

Skills management supports high performance, now and in the future, and is important at an operational and strategic level. 

Operational skills management lets you deliver day-to-day objectives successfully. A proper skills management process helps you understand and fully utilize your team's expertise. With this knowledge, you can assign the right tasks to the right people, rather than on an ad hoc basis. This means your tasks are completed by the most qualified people, delivering the best possible outcomes for clients.

Strategic skills management looks tothe future.  A successful skills management process will equip your business with the right skills profile for your direction of travel. You’ll know what skills and competencies you need to complete future work, as well as which are no longer needed. This forward planning helps you develop and recruit the skills you need to achieve long-term strategic objectives.

Why is skills management important right now?

Skills management is particularly important now, following on from the pandemic, as businesses face down:

  • A global recession and pressure on profit margins
  • Unprecedented changes to working practices
  • Challenges recruiting and retaining top talent
  • Digital advances and disruption - particularly AI and automation

By proactively planning and managing your organizational skill profile, you can overcome many of these challenges. For example by

  • Improving ROI on your resources
  • Retaining staff by offering training and advancement
  • Upskilling staff for the future of work 

Let’s take a deeper dive into the benefits of skills management.

The benefits of skills management

The benefits of skills management are numerous. Here are some of them:

1. Bridging the skills gap

We’ve already highlighted the high financial cost of the skills gap above. But what exactly is it?

At an individual level, the skills gap is the difference between the skills required for a job and the skills that someone has. At an organizational level, it is the difference between the skills your organization needs and the skills it has overall. 

You need to know what skills gap your business is facing if you have any hope of fixing it. A skills management process helps you audit the skills you need and the skills you have, so you can create a plan to bridge that gap.

You can close the skill gap by either training in-house employees, hiring new employees with the skills you lack, or hiring independent contractors to plug short-term needs.

64% of L&D professionals said that reskilling the current workforce to fill skills gaps is a priority now (LinkedIn).

2. Keeping up with change

According to Forrester, by 2030, 80% of all jobs will be changed or impacted by AI and automation. The world is facing accelerated change thanks to innovation and digitization. And businesses - and their workforce - need to adapt. 

Skill management gives you an accurate picture of your team's readiness for this changing landscape - what new skills they’ll need, and how long it will take to learn them before applying them in your business. 

Skills management is an ongoing process exactly because the world is changing so fast. You need to continually assess and align your workforce’s skills with new developments in your industry. By doing so, you’ll be more agile, responsive, and secure serious competitive advantage. 

3. Meeting training needs

Part of the purpose of the skills management process is to surface training needs. Training employees is one of the best investments you can make. They gain experience and knowledge they can apply directly to their jobs, and become more valuable members of your team. And you benefit from increased productivity, innovation, and engagement.

Employees who see good opportunities to learn and grow are 2.9 times more likely to be engaged, HBR reports. Companies with high employee engagement, in turn, are known to be 21% more profitable.

Training in-house is also often more cost-effective than hiring in new staff at a higher level of expertise. Plus has the added benefit that your upskilled employees already understand how your business works, so there’s not the same learning curve as with new hires.  However, if you do need to recruit new staff to fill a skills gap, being known for providing good training opportunities can make you an employer of choice for top talent.  

4. Improving resource allocation 

Skills management lets your project manager assign the right person to the right task at the right time. It’s a key element in successful resource allocation

It’s great news for project outcomes because someone with the right skills for a task will do the work well. And they’ll do it in a timely manner because there’s no learning curve to account for. It keeps projects on track and at a high standard.

But it’s also good news for staff satisfaction. By giving people work that uses their skills, you show that you recognize their strengths and value their expertise. And you give that person the chance to shine, making a meaningful contribution with their unique knowledge.

Of course, sometimes you want to stretch people, so they can develop new skills. That’s part of skills management too. For example, you can see who’s operating at an intermediate level for Java and assign them to a project that will challenge them to develop advanced expertise.

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5. Reducing employee turnover

You might be surprised by how important skills development is for employees.  

46 percent of employees surveyed by Degreed believe their current skill set will become irrelevant by 2024. But only 34 percent of workers surveyed by MIT/Deloitte feel supported by their organization’s skill development opportunities. 

This dissatisfaction and - let’s be honest, fear about the future - can reduce employee morale and see them searching for better opportunities. 

On the flipside, support staff skills development can help retain employees and reduce turnover. It shows your staff that you value them enough to invest in them and see a long-term future for them in your business. 

Allowing employees to develop their skills, in turn, helps them feel more satisfied with their jobs and more loyal towards your company. If they feel like they are growing within their position, they will be more likely to stay with your company, for a longer period of time — which means less employee turnover in general.

6. Knowing who to recruit (and when)

Skills management processes support strategic capacity and resource planning. They highlight which skills are always in demand and which are growing less relevant. This lets senior leaders make data-informed decisions about which skills and roles to recruit, to ensure future success. 

It also forecasts which roles will become redundant, allowing leaders to plan how to reskill valuable employees and move them into new positions, rather than lose them altogether.

At an individual level, having a thorough understanding of individual’s skills makes it easier if you have to replace them. Skills management will help you scout for new talent to replace an employee on sick leave, parental leave, or after someone left. In this way, you will safeguard organizational continuity and stick to your deadlines. This is particularly important if you're hiring for a highly technical role or one that requires specific experience.

The challenges of skills management

Now you know the benefits, what about challenges. If skills management was easy to master - or a well-established process in every organization - we wouldn’t have written this guide. So what’s the problem? 

Team size

In a small team, skills management isn’t too tricky. When there’s just a handful of people working with you, it’s fairly easy to keep track of the different skills your staff possess. You can keep mental note of who knows what. Or you can employ a simple tracking system like keeping a spreadsheet. 

But in larger organizations, it quickly becomes a challenge. Beyond a certain number of staff, you can’t remember different skill sets. And you’ll quickly realize that a simple spreadsheet isn’t an effective way to keep track.

Hybrid, remote and flexible work

Then there’s the added complication of remote and hybrid working. Where once you could see and speak to colleagues every day, now you might never actually meet. Not only does that make it harder to discover their skills, it also means they may be less likely to be front-of-mind when assigning resources.

In this context, using skill management software can be highly beneficial. It provides a single, centralized place to record all your resources and their skill sets. This means - even if you have a global workforce of 1,000s - you can quickly search and filter employee skills to find the perfect person for any task.

How is that different to using a spreadsheet, you ask? Let us explain.

The benefit of skills management tools

Skills management functionality is often built-in to resource management software. This means you’ll see staff skills alongside other key information like their availability, capacity for work, and cost to the business. 

Try using Runn to create skills matrix for your team

Equipped with this information, you can make better-informed decisions about who to assign to different tasks and avoid any nasty surprises. Like the fact your top choice is about to retire, doesn’t have room for more work, or is going to be outside your budget.

In dedicated resource management software, you’ll also be able to drag resources directly into your project plan, automatically assigning tasks to them. But it isn’t just operational skills management that software can help with. It also helps with strategic skills management. 

Resource management software lets you run reports showing which skills are consistently in-demand and which are hardly ever used. This helps you plan recruitment and training activities so you’ve always got the skills you need.

Some resource management tools also support scenario planning. That’s when you model different scenarios (like combinations of potential projects or different people working on them) to understand the impact on budget, profitability, schedules etc.

Can your spreadsheet do that?! 💪😁

How to introduce an effective skills management process

The skills management process means using tools and techniques to identify, assess, improve, and manage the skills of team members as they work on projects. As a result, you will have a plan for every skill that each member may require at any given time. 

This process is helpful when screening candidates before hiring them or even during training sessions. It is also used for determining what other training needs employees have so they can grow professionally through continuous learning.

The skills management process is an integral part of the HR function, and it is a complex and integrated area that covers recruitment, selection, and development. If you want to get the best out of your employees, you need to understand how to manage their skills effectively.

The following are some tips for improving your skills management process:

The skills management process spans recruitment, retention, training, upskilling, capacity planning, resource allocation and more. As a result, it involves people from various teams. Typically it is owned by HR but draws on insights from project managers and department heads. And informs decision-making at the highest levels of the organisation. Here’s how to start implementing an effective skills management process in your organization.   

1. Determine the skills you need 

To understand whether you have the skills you need for your future success and sustainability, first you have to determine what those skills are. That means senior leaders communicating their future vision and planned work program, so that HR can understand the ideal skills profile of the future workforce. 

Scenario planning can be helpful here - planning out future projects to understand their impact on capacity, skills demand and more. 

Equipped with this knowledge, they can then compare the company’s skill profile to its future needs - and begin planning how to bridge the gap.   

2. Assess the supply of the current skills

To compare skills supply to demand, you need to know what skills your workforce currently has. If you don’t have a central register of staff skills, now’s the time to start one. Create a profile for each employee that outlines their skills, level of expertise, qualifications, experience, etc. 

If you have access to information about capacity and utilization, look at that too. If you can see that certain people, job roles, or skill sets are perpetually in high demand, this may be a sign that you need to recruit more - right now!

3. Plan how to bridge the gap 

Equipped with an understanding of which skills are most in-demand, your HR team can begin to strategize. How will they bridge that gap?

  • By upskilling existing employees?
  • By hiring new talent?
  • By bringing in contractors?

They’ll need to address questions such as how quickly the skills are needed,  how much each option will cost, and what other benefits the business could achieve (such as staff retention).

4. Look inward and upskill

According to a WEF cost-benefit study, it is in the best interest of American firms to upskill at least 25% of workers who face job loss. 

Research proves it's a lot faster and cheaper to engage employees in development and training programs than look for talent outside. Gallup proved that the costs of upskilling aren't as significant as hiring and onboarding someone new. The average cost of employing a new person in the United States is $4,425, which includes recruiting and advertising expenses, TechTarget has found.

In a survey by Citrix, 62% of HR directors said they believe that workers will need to reskill or upskill at least once a year to maintain a competitive advantage in a global job market.  

The good news is that your people are willing to retrain. 77% of workers surveyed by PwC Global are ready to learn new skills or completely retrain.

5. Recruit the skills you lack

If you aren’t able to upskill existing staff - or if there’s demand to hire more employees - it’s time to recruit. 

One of the future of work trends we’re seeing in 2023 is that more organizations are recruiting based on skills than traditional, sequential career progression. This reflects the fact that jobs have changed so much over the past decade. Experience from past roles might not equip people for future ones. Proving skills is far more important than potential employees having a specific job title on their resume. 

In the global market for top talent, competition for knowledge workers is especially high. They can work from anywhere and shop around for the best benefits. Businesses need to consider their full employee offer - not just salary - to attract and retain the best people. In our experience, flexible working and autonomy at work are a good place to start.   

6. Use appropriate skills management software 

We’ve already touched on the benefits of skills management tools above. While you can get specific skills management software, that may be a little limited. Resource management software that incorporates skills management functionality will deliver bigger benefits.  

A centralized resource pool lets everyone see the skill profile of your staff and choose the right people for different projects - even if they’re in a different location or even timezone.

The ability to book people's time on projects lets you see the impact of different resource allocations on project budgets and schedule, so you can easily find your best options. 

Utilization charts and reports easily show which skills or roles are consistently in high demand. This supports capacity planning, recruitment and training initatives. It also helps keep workload managable and schedules realistic, so your projects - and your people - keep ticking over nicely!

When you have your skills management tools, resource scheduling, and project management all in one place, you won't have to juggle between different tools to optimize your resources on every project - and deliver great results to happy clients. 

Your HR team will be happy too. One of the most critical challenges for HR and talent management professionals is how to develop a talent pipeline that can meet the ever-changing needs of your business. 

Combining skills management with resource and project management helps you align your project pipeline to your skills profile, so you can recruit and retrain staff more strategically. This helps your business to

  • Fill skills gaps in good time, to avoid delayed projects and disappointed clients 
  • Recruit in the most cost-effective way, for example, hiring junior staff and upskilling them in-house
  • Decide when to hire freelance experts, which may be cheaper than long-term employees
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