Characteristics of the Skills-First Organization

Architecting the Skills-First Organization Series - Part 1

Architecting the Skills-First Organization Series

In this piece and over four, possibly five, more, I will describe many of the items necessary for a high-functioning skills-first organization. I'll begin with a description of a skills-first organization. In the rest of the series, I'll discuss Core Organizational Capabilities, Structural Implementation Models, Cultural Enablers, Implementation Strategies, and more. I'll include some case studies to show how companies are executing a skills-first program and what they may be able to teach others.

After describing a skills-first organization, I'll share the numerous changes impacting all facets of work. These changes are accelerating, increasing the pressure on most organizations to alter their approach to managing talent.

These changes place increasing pressure on individuals to develop skills continuously and anticipate future skill requirements to remain relevant and progress along changing career paths. Companies, of course, face these same challenges at scale, and the companies that build the capacity to support workers along these multiple career pathways and provide ongoing development and training stand to outpace their competitors with an adaptable and resilient workforce.

Defining the Skills-First Organization

A Skills-First Organization aligns the talent across the company tightly with its operational requirements by fully understanding the skills necessary to deliver work and matching people with those skills to complete the job. To do this, a company must understand the skills available today, the skills needed in the future, and a talent development program (training, shadowing, internal mobility, hiring, etc.) to meet the skills required in the future. A comprehensive Skills Taxonomy is central to building this capability, which I will describe later in this post.

Using the Skills Taxonomy, jobs are deconstructed into the tasks necessary to complete them, and the skills needed to complete each task are cataloged. Where possible, work deliverables are unbundled from job titles so that interchangeable groups of people with the collective skills required for the "project" can be assigned to complete the deliverable. Promotion and compensation processes are adjusted to reward skill development and skill execution. Internal mobility across numerous career pathways is common, with incentives for the individual transferring and managers who support advancement outside their units.

                                For information about the components of a 
                           Skills-First Organization, refer to my previous post, 
                                "Building Blocks of a Skills-First Organization."

We will cover more about capabilities and implementation methods in Parts 2 & 3 of this series. Still, at this time, I want to differentiate a skills-first organization from companies practicing pieces of a skills-first approach to talent management. A skills-first organization must implement skills-based hiring. That seems obvious, right? However, a company with skills-based hiring is not necessarily a skills-first organization. Similarly, a skills-first organization must have a robust workforce development program, but many companies with extensive workforce development programs are not operating as a skills-first organization. Now, let's turn our attention to the changes in work that make the skills-first transformation critical for almost all companies.

Evolutionary Imperative in Labor Markets

The modern workplace faces unprecedented disruption. Reports show that 37% of skills required for the average U.S. job changed since 2016.¹ Driven partially by AI adoption, this is projected to accelerate to 68% skill transformation by 2030.²

The Skill Disruption Index, a study by EMSI Burning Glass of 680 occupations across over 18,000 skills using data from more than 15 million online job postings, reveals that 73% of occupations experienced accelerated skill changes from 2019–2021, with AI and automation rewriting role requirements faster than traditional HR systems can respond.³ In tech-driven sectors like IT and finance, 76% of the top 20 skills per job were new or significantly transformed.⁴

This volatility creates existential risks:

• $8.9 trillion in global annual productivity losses from disengaged workers⁵

• 21% higher likelihood of first-year attrition for external hires⁶

• significantly longer time-to-productivity for external candidates versus internal transfers—up to two years longer in investment banking⁷

This seismic shift demands organizations abandon industrial-era talent models in favor of skills-first architectures that prioritize adaptability, skill liquidity—the fluid movement of talent based on skills—and continuous learning.

Skills-first organizations have reported achieving up to 21% higher profitability through engaged workforces while reducing turnover costs significantly through higher retention.⁸ However, 38% of workers say they lack the foundational digital skills required for their roles,⁹ and 56% of employees actively seek roles outside their current expertise,¹⁰ exposing systemic mismatches between traditional hiring practices and evolving skill demands.

To address these issues, skills-first talent management organizations have transitioned from obsolete credential-based frameworks to dynamic skill ecosystems that:

• Unbundle work deliverables from rigid job titles

• Prioritize skill adjacencies over pedigrees and rigid career pathways

• Leverage internal mobility, which has been shown to reduce external hiring costs by 18%¹¹

• Institutionalize learning to address the projected 44% skill obsolescence by 2028 and up to 68% by 2030¹²

Core Skills-First Differentiators from Industrial-Era Models

When thinking about the primary differences between a skills-first approach to talent management and more traditional models, many people start with recruiting and hiring. That is important, and we’ll get to it, but successfully implementing skills-first management requires data-driven decision-making, specifically skills-data decision-making.¹³ This requires a common language and skills hierarchy, information about the skills necessary to do the work, and the skills available across the workforce and beyond.

Skills Taxonomy

Welcome to the skills taxonomy, a structured framework or classification system that categorizes and organizes various skills and competencies within an organization or field of expertise.¹⁴ Companies use this foundational framework to evaluate the work to be done and, through a ground-up process, determine the skills necessary to complete the job. The Skills Taxonomy should be dynamic and flexible, allowing for updates and changes as the organization evolves and new skills emerge.¹⁵

Dynamic Skill Mapping

Building upon the Skills Taxonomy, Dynamic Skill Mapping involves continuously updating and mapping skills to business objectives and roles. This component ensures that the skills framework remains aligned with the evolving needs of the organization and industry trends.¹⁶

Skills-Based Hiring and Management

One of the most apparent differences between skills-first talent management and the traditional management models is the primary focus on hiring and managing employees based on their specific skills and competencies rather than conventional qualifications.¹⁷ This is often called skills-based hiring, but it extends across the entire talent management process. It includes:

• Skills-based job descriptions that focus on the skills required for the role rather than traditional qualifications or job titles

• Skills assessments during the promoting and hiring processes to evaluate candidates' actual abilities

• Recruiting from non-traditional sources to expand the talent pool

• Performance management processes that prioritize skills development

Recognition and reward systems that motivate continuous learning and skill acquisition.¹⁸

Talent Mobility Supported by Cross-Functional Collaboration

Encouraging employees to move across different roles and departments not only increases retention and delivers recruiting cost savings, this approach also:

• Enhances organizational agility by quickly redeploying skilled employees to the most needed areas¹⁹

• Empowers employees to take ownership of their career paths, leading to increased job satisfaction and retention²⁰

• Facilitates continuous learning and development by encouraging employees to acquire new skills²¹

• Supports equity, diversity, and inclusion by focusing on skills rather than traditional qualifications

• Aligns skills with business needs, ensuring the right skills are in the right place at the right time²²

When supported with cross-functional collaboration, skills sharing and innovation increase, and organizations can fully optimize skills deployment across the enterprise.²³

Continuous Learning and Development

Of course, to fully capitalize on the current workforce, skills-first companies must offer robust talent learning and development programs. Differences here are related to how the companies determine the development programs and how they decide who participates in them. Skills-first companies use their comprehensive view of the types of skills and the number of people with those skills necessary to meet future operational needs. They then make training on those skills available to a broad set of people, including those in adjacent or ancillary roles that traditional training programs often ignore or overlook.

This investment in upskilling and reskilling programs enables employees to acquire new competencies, adapt to changing job requirements, and develop a culture of continuous learning. This component involves:

• Providing opportunities for upskilling and reskilling through various learning pathways

• Offering on-demand content, workshops, and mentoring programs

• Implementing learning management systems to track and facilitate skill development

Conclusion

Skills-first talent management is delivering impressive results for many companies as they address the business imperative to build a workforce able to meet the accelerating change in skills necessary to design and produce products, complete service calls, and compete in a dynamic economy. By implementing a comprehensive Skills-First Talent Management architecture, organizations can build a dynamic and future-ready workforce capable of adapting to rapidly changing business environments. This approach enhances organizational resilience and supports broader equity and inclusion efforts, making it a critical component of future-ready talent management strategies.²⁴

Architecting the Skills-First Organization Series

Stay tuned for Core Organizational Capabilities in a Skills-First Architecture, the Second Part in this series on Architecting the Skills-First Organization.

1. Sigelman, Matt, Bledi Taska, Layla O’Kane, Julia Nitschke, Rainer Strack, Jens Baier, Frank Breitling, and Adam Kotsis. “Shifting Skills, Moving Targets, and Remaking the Workforce.” BCG, The Burning Glass Institute, EMSI Burning Glass, May 2022. https://web-assets.bcg.com/c1/c0/649ce92247c48f4efdbf9e38797a/bcg-shifting-skills-moving-targets-and-remaking-the-workforce-may-2022.pdf.

2. Manpower Group. “Accelerating Adaptability 2025 Global Workforce Trends.” Manpower Group, 2025. https://go.manpowergroup.com/hubfs/MPG%20-%20Trend%20Report/MPG-2025-Accelerating-Adaptability-Trends-Report.pdf.

3. Sigelman, Matt, Bledi Taska, Layla O’Kane, Julia Nitschke, Rainer Strack, Jens Baier, Frank Breitling, and Adam Kotsis. “Shifting Skills, Moving Targets, and Remaking the Workforce”.

4. Ibid.

5. Gallup. “State of the Global Workplace Report.” Gallup.com. Accessed February 20, 2025. https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx.

6. Deloitte Insights. “Are You Overlooking Your Greatest Source of Talent?” Accessed February 20, 2025. https://www2.deloitte.com/us/en/insights/deloitte-review/issue-23/unlocking-hidden-talent-internal-mobility.html.

7. Adams, Susan. “Why Promoting From Within Usually Beats Hiring From Outside.” Forbes. Accessed February 20, 2025. https://www.forbes.com/sites/susanadams/2012/04/05/why-promoting-from-within-usually-beats-hiring-from-outside/.

8. Peoplebox. “Latest Employee Engagement Statistics in 2025,” July 10, 2024. https://www.peoplebox.ai/blog/employee-engagement-statistics/.

9. Coolberth, Nicky Lauricella. “Nearly 1 in 3 Workers Lack Foundational Digital Skills, New Report Finds.” National Skills Coalition, May 20, 2020. https://nationalskillscoalition.org/blog/future-of-work/nearly-1-in-3-workers-lack-foundational-digital-skills-new-report-finds/.

10. Heger, Brian. “9 Future of Work Trends For 2023 | Gartner.” BrianHeger.com, January 2, 2023. https://www.brianheger.com/9-future-of-work-trends-for-2023-gartner/.

11. Bidwell, Matthew. “Paying More to Get Less: The Effects of External Hiring versus Internal Mobility.” Administrative Science Quarterly 56, no. 3 (September 1, 2011): 369–407. https://doi.org/10.1177/0001839211433562.

12. Lorelei, Trisca. “Employee Development Statistics You Need to Know Right Now,” January 31, 2025. https://www.deel.com/blog/employee-development-statistics/.

13. Coleman, Katie. “8 Essential Components of a Skills-Based Talent Development Strategy | Talent Development Solution | PeopleFluent.” Accessed February 20, 2025. https://www.peoplefluent.com/blog/skill-enablement/8-essential-components-of-skills-based-talent-development-strategy/.

14. “What Is a Skills Taxonomy - How Can It Benefit Your Company?” Accessed February 20, 2025. https://disprz.ai/blog/skills-taxonomy.

15. Guy, Nick. “Skills Taxonomy: Unlocking the Benefits of a Skills-Based Approach.” AIHR (blog), September 14, 2021. https://www.aihr.com/blog/skills-taxonomy/.

16. Draup. “Building a Future-Ready Skills Architecture: A Strategic Framework for Modern Organizations.” Accessed February 20, 2025. https://draup.com/talent/blog/building-a-future-ready-skills-architecture-a-strategic-framework-for-modern-organizations/.

17. Ibid.

18. Coleman. “8 Essential Components of a Skills-Based Talent Development Strategy”.

19. Verduyn, Monique. “What Is Talent Mobility? Plus How HR Can Develop a Winning Strategy.” AIHR (blog), April 18, 2023. https://www.aihr.com/blog/talent-mobility/.

20. PSHRA. “The Skills-Based Approach to Talent Mobility - PSHRA.” Accessed February 20, 2025. https://pshra.org/the-skills-based-approach-to-talent-mobility/.

21. 365Talents. “Why Should HR Think Skills-First?” Accessed January 23, 2025. https://www.365talents.com/en/resources/why-should-hr-think-skills-first.

22. iMocha. “Talent Mobility in the Skill-First Organization | iMocha.” Accessed February 20, 2025. https://www.imocha.io/talent-mobility.

23. Baker, Zuri. “How to Implement a Skills-First Approach in 2025 [+Benefits].” Accessed February 20, 2025. https://www.edstellar.com/blog/skills-first-approach.

24. Grads of Life. “Skills-First Talent Management.” Accessed February 20, 2025. https://gradsoflife.org/skills-first-talent-management/.