Skills Taxonomy: A Skills-Based Approach to Maximizing Talent

Imagine you’re recruiting for a new graphic designer. Would you rather hire:

• Candidate A: a designer with 15 years of experience, good attention to detail, and a great grasp of color theory.
• Or, Candidate B: a designer with 8 years of experience, good communication skills, and a history of continuous learning.

If you answered A, because they have more experience, your way of thinking aligns with a role-based approach to hiring. This makes sense as organizations have looked at hiring this way, historically.

However, research shows that ‘years of experience’ isn’t always a good predictor of a candidate’s success.

While candidate B has fewer years of experience, they also offer great communication skills and have invested time in developing their skills beyond traditional education, whereas their competition has not.

When you look at this question through the lens of a skills-based approach to hiring - a strategy that selects candidates based on how their skills align with the organization’s needs rather than experience - it’s clear that candidate B has some advantages that may make them the best fit for the role, depending on your organization's priorities.

The moral of this story is that if you want to hire the best candidates for your roles and maximize your organization's talent, you need to:

• Identify the skills your organization needs
• Hire people who match these skills by considering candidates’ skills, not just experience

So, how do you do this? With a skills taxonomy, of course!

• What is a skills taxonomy?
• How organizations can use skills taxonomies
• Skills taxonomy vs. skills inventory
• How do you create a skills taxonomy?

What is a skills taxonomy?

A skills taxonomy framework is a hierarchical system for defining an organization’s required skill sets.

The goal is to create a list of the skills essential to specific roles or departments, including soft and hard skills. Skills taxonomies help HR teams visualize the relationships between complementary skills and how skills overlap between job roles and even departments, which is invaluable for supporting career development.

Creating a skills taxonomy removes ambiguity, paints a clear picture of the skills required to excel in a particular job or category, and provides a consistent skills vocabulary for HR teams to reference.

Skills taxonomy example

Are you struggling to visualize how a skills taxonomy may look? Here’s a quick example of how this hierarchical framework breaks down broad job categories into

• Job categories
• Core competencies
• Skills
• Sub-skills

How organizations can use skills taxonomies

Organizations can use skills taxonomies to improve their operations in many ways, from informing hiring processes to supporting strategic initiatives. Let’s take a closer look at six ways your business can use a skills taxonomy.

• Create skills profiles… and job descriptions. Nothing puts good candidates off applying for a position like a vague and unclear job description. Skills taxonomies help HR teams understand the skills required for different job functions, informing skills profiles and thus helping them create accurate job descriptions that capture all the necessary requirements that a potential candidate needs to see.
• Inform reliable skills gap analysis. Skills gap analysis helps businesses identify gaps between the skills they need to succeed and the skills their current workforce offers. This is useful in identifying hiring needs and informing development initiatives. But without an understanding of these required skills, uncovering skill gaps becomes impossible.
• Assess job candidate suitability. Skills taxonomies look beyond hard skills, such as knowledge of role-specific software, to take into account soft skills, such as adaptability or critical thinking. This helps HR managers find people who have the appropriate technical experience and soft skills that complement business objectives.
• Support internal development. A skills taxonomy provides employees and managers with clear guidelines for what they need to develop to qualify for a promotion or a move into another department. This supports goal-setting, the exploration of new career paths, and upskilling initiatives.
• Improved human resource management. By dividing all the skills an organization requires into skills clusters, a skills taxonomy can help employers make the most of these skill sets.
• Shift to a skills-based approach. As we’ve learned, traditional role-based approaches to hiring prioritize years of experience over skill alignment. Skills taxonomies help businesses shift to a skills-based approach, which assesses individual competency against a set of key skills.

Skills taxonomy vs. skills inventory

If you think a skills taxonomy sounds a lot like a skills inventory, you’re not alone. But there’s a big difference between these two tools.

A skills taxonomy is highly structured and is used to categorize skills into a clear hierarchy, allowing businesses to define the skills they need across roles, departments, or skill clusters. Skills taxonomies are:

• Workforce-wide. A skills taxonomy acts as a guideline for recruitment rather than outlining a specific person’s skills.
• Standardized. One of the benefits of a skills taxonomies is that they provide a standardized language for skills management, supporting alignment across the business.
• Used in hiring and development. Skills taxonomies are most frequently used by HR teams to inform job design, recruitment, training, and development programs.

On the other hand, a skills inventory acts as a database that tracks employees' education, experience, and specific skills. Skills inventories are:

• Employee-specific. A skills inventory lists each team member's experience and current skills. A skills matrix is another similar tool useful for identifying a team’s skills.
• Dynamic. A business’s skills inventory will change every time a new recruit joins the workforce, employees gain new skills, or there's a departure. Skills taxonomies change, too, but much less frequently.
• Used in resource management. Skills inventories help HR teams identify training needs and skills gaps and help resource managers understand what skills are at their disposal, informing resource allocation on a project level.

While these two tools are similar, they're not the same. But they are complementary. Your skills taxonomy will inform your skills inventory by helping teams identify which skills to track while enabling better talent management.

To summarize, taxonomies are all about defining ideal skills, while inventories catalog a workforce’s actual skills.

How do you create a skills taxonomy?

Like most skills management frameworks, creating a skills taxonomy isn’t a one-time exercise. You’ll want to review and update the data as the business evolves, ensuring an accurate representation of your organization’s needs and development goals.

With that in mind, here's how to create a skills taxonomy in four steps.

1. Gather skills information

Rather than relying on guesswork, turn to your data sources to gather accurate and up-to-date information on the skills currently utilized in your organization and those the business will require moving forward.

• Use existing data. If you already have a skills database or inventory set up, you can pull data on currently available skills directly from this source.
• Speak to your team. Employee feedback is invaluable here. Speak to your employees to identify what skills they feel are essential to their role.
• Look at existing job descriptions. Review current job descriptions to understand what skills have been required to date and assess their relevance.
• Look at industry trends. Job roles are constantly evolving to meet changing requirements. Reviewing these trends can help you identify emerging skills.

2. Create a catalog of key skills

Using the data you’ve collated, draft a skills list. Include every skill that you’ve identified, including soft skills and hard skills.

3. Build your skills taxonomy

We recommend starting your list by creating broad categories, such as leadership skills, finance skills, project management skills, and so on.

Next, organize your broader skills or competencies under each category. For example, under project management skills, you may include risk management, budgeting, communication, and time management.

Then, keep digging deeper. For example, 'Software engineering' is a competency that may cover a range of skills, such as programming languages, debugging, and problem-solving.

Remember, the hierarchy begins with broad job categories and breaks down into skills clusters that include key competencies, skills, and sub-skills. The detail should get more granular as you work down.

4. Optimize, optimize, optimize!

If you want your taxonomy to work as hard as your teams, consider integrating these elements into the tool.

• Skills categorization. Why not use color coding or tagging to categorize technical skills, interpersonal skills, leadership skills, and other skills?
• Descriptions. Including detailed descriptions of each skill removes ambiguity for HR managers and employees.
• Skill-level indicators. While two job functions may require the same skill, they don't necessarily demand the same level of proficiency. For example, a head of finance would need a very high level of proficiency in forecasting, while an entry-level financial assistant would not.
• Using skill-level indicators to define the level of proficiency required for a role helps HR teams understand what skill level they should be looking for in recruits.
• Skill hierarchies. Not all skills are equally important to a role. Making this clear with a hierarchy can help inform the must-haves and nice-to-haves in job descriptions.
• Skill mapping. Skill mapping refers to matching skills to specific roles, aiding the creation of job descriptions.

Want to learn more about skills management? Read on with our Beginner's Guide to Skills Management ➡️

Put everything into practice!

Are you ready to upgrade your resourcing strategy? Using a skills management tool like Runn to track and manage your workforce's skill sets makes the process of gathering the data needed to build your skills taxonomy a breeze. With intelligent reports filtered by skill, team, and even skill level, you’re halfway there!

Start your free trial of Runn today ➡️