I continue to be amazed by what our research at Sapient Insights Group uncovers. Sometimes, our analysis confirms trends that are already being talked about. Sometimes, our findings contradict—or at least temper—popular predictions. And then there are findings that uncover issues percolating under the radar.
This year, one such discovery is the skills management conundrum—a problem staring many HR and business leaders in the face that has yet to get the detailed attention it deserves.
Our research—confirmed by many other organizations—clearly shows that companies across all industries and regions are grappling with skills gaps caused by many factors, including retirements, rapid onboarding of new employees, and evolving business and technology changes. Just as one example, our research into the HR profession alone showed that 54% of HR technology professionals have been in their jobs for less than three years.
According to a 2023 U.S. Chamber of Commerce study, financial service companies reported that 50% of job openings were going unfilled; professional service companies were even worse off, with 60% of openings unfilled. And the shrinking labor pool is only going to exacerbate these issues.
And yet, when we looked at the most recent research data, we found that only 20% of companies are currently using some type of skills management solution—and that’s down from the 30% using a solution the year before.
So, the big question to address is this: If the need for effective skills management is so great, why are so few companies doing so little and not capitalizing on supporting technology solutions? What’s with the disconnect?
A complex skills management market
The factors behind this inaction are many and too complicated to fully explain here, but I’ll outline a few.
First, true skills management—which identifies, assesses, develops and manages employee skills throughout the business—is really hard. Too often, skills management is viewed as an HR project rather than a business initiative, which immediately sets up challenges. While using off-the-shelf skills, taxonomies can be helpful to start; they typically don’t provide the level of specificity and cultural alignment that meet the unique needs of any company over time.
Nor can they keep up with the constant change and churn in today’s business environment without some type of technology support for constantly capturing, mapping and updating models with internal and external data.
Then, there is the scope of skills involved. Even the smallest companies require hundreds, if not thousands, of unique skills to keep the wheels turning. Attempting to accurately identify and define them all manually is as fruitless as trying to count the grains of sand on a beach.
The market does now offer technologies that make it possible to manage skills in ways that we couldn’t have imagined 10 years ago. For instance, thanks to AI, we have solutions that can evolve with organizational needs by leveraging existing data on job roles, career paths, development activities and actual work to create perpetually updated skills ontologies.
However, none provide end-to-end solutions. We’ve found that most companies use whatever functionality is bundled into their HCM or talent solutions. Those companies that are more advanced on a skills management journey use, on average, 2.7 different products. They also either have or are looking for products that support existing talent processes, have solid reporting capabilities and leverage AI-created skill inventories and assessment options.
Yet, there’s definitely a gap—or maybe even a chasm—between what is expected from purchased solutions and what gets done. Buyers think built-in functionality will do more than it actually does while underestimating the amount of foundational planning and behind-the-scenes work required of them. I attribute much of the 10% decline in using skills management solutions to such expectation gaps.
Start with strategy
However, I don’t want to paint a picture of gloom and doom. We’ve seen companies—Accenture is one—make significant progress in skills management by investing the time needed to reflect cultural changes and taking advantage of technology updates, including AI.
Even if you have limited resources, it’s important to begin now. Rather than starting with a random set of skills, we strongly recommend beginning by identifying a critical business problem. This could be a need to hire or reskill employees to bring a new product to market, revamp the marketing organization to take on new audiences and capitalize on digital selling, or develop supervisors to better manage hybrid and remote teams.
You’ll want to assess the data available to you, create a taxonomy and skills descriptions applicable to the problem to be solved, identify the business and HR processes that should be involved and determine what metrics can be used to note progress. Obviously, there’s much work involved in these steps that will require concerted team effort—but the payoff is evident.
Companies investing time and dollars in skill management see 11% higher business, talent and HR outcomes, while organizational innovation improves by 10%. When HR organizations are involved in skills management initiatives, they are 35% more likely to be viewed as strategic.
Undoubtedly, the skills management category will significantly grow and evolve over the coming years. The business impact of demographic trends will soon make skills management a critical imperative. AI will also be a game changer. This is a space where the use of AI will prove to be invaluable and essential.
For more on this emerging category and a framework for getting started, check out our 2023-2024 HR Systems Survey report.