Skill-based working: How to convince managers and other stakeholders to adopt a skills-based approach

Why skill-based organizations are the future

I want to introduce skills or launch a pilot - how do I convince my manager, relevant stakeholders and specialist departments in HR?

Skill-based organizations break away from traditional structures. They are not based on rigid job profiles, but instead rely on the specific skills of employees.

The result? More flexibility, more targeted talent development and a faster response to changing market conditions. But how do you convince the relevant decision-makers in your company to support this change?

To what extent “skills” could convince my manager

In traditional talent management, development plans and career paths are often based on fixed job profiles. However, in an increasingly agile working environment characterized by rapid technological advances, rigid structures are reaching their limits. A skill-based organization offers clear advantages in terms of flexibility and targeted development. By using skills data, L&D can identify specific gaps (skill gaps), determine which future skills will be relevant and close the gap systematically, effectively and scalably through training measures. By identifying skill gaps, specific development measures can be prioritized and existing talent can be promoted in a targeted manner. This enables more sustainable talent development that is not only aligned with current requirements, but also with future company goals.

A skills-based approach gives L&D the opportunity to make resources and development programs more flexible and needs-based by supporting employees based on their specific skills and development needs. This enables a tailored navigation system that goes beyond traditional career paths and responds specifically to the changing requirements of the organization. Particularly in times of rapid change, a closer alignment between the company's strategic goals and the available skills of the workforce can be achieved. However, this does not require more resources in the L&D team, but rather frees up resources and potential: skill-based training systems are more scalable than traditional training programmes, as the degree of automation increases in skill-based organizations.

Skills-based structures also make it possible to link talent development more closely to the business strategy. L&D leaders can collect, analyze and communicate relevant data on existing and required skills to management. This information provides valuable insights that make it possible to tailor HR development measures to the needs of the organization and support long-term business goals more effectively.

A skills-based organization is therefore more than just a flexible structure: it is a strategic tool for L&D managers to manage the development and employability of the workforce and thus actively shape the company's success. This brings L&D departments closer to strategic business measures and makes them strategic partners for management.

How skills strengthen other HR departments

A skills-based approach not only makes managers' work easier, but also helps other HR departments to optimize their processes.

• Recruiting: With a skill-based approach, recruiting can create more precise job postings that list specific skills instead of general requirements or tasks. This saves time during screening, as skills in the job advertisement can be directly linked to skills in the CVs. In addition, recruiting can also identify new and relevant skills that appear in the application process and are in demand on the market but do not yet appear in the company's own skills landscape.
• Strategic workforce planning: A skill-based approach enables more precise personnel planning so that critical tasks in the company are covered at all times. An overview of employee skill gaps means that critical thresholds can be analyzed, after which essential skills are lost due to retirements, terminations or promotions. The right match between employees and skills helps to reduce turnover and strengthen team stability.

Performance management: Skills can play a central role in making performance discussions more structured and goal-oriented. Instead of relying solely on results or observations, skills can be used to define specific areas for development. Managers and HR can measure a person's performance in terms of outcomes (Y) and observable behavior (Z) and use skills to show which abilities (A) employees should develop in order to improve their performance. The results chain becomes clear: “Your current performance is X. If you build up skill A, you will be able to do Y and Z even better in the future.” This makes development opportunities more tangible and helps employees to manage their progress in a targeted manner.

Why skills convince managers and experts 

Managers and subject matter experts appreciate the transparency and tangible benefits of a skills-based approach. By introducing a skill-based organization, you gain deep insight into the skills and development needs of your employees, which creates strategic advantages for various areas of the company:

• Transparency about the skills of employees: Many managers have a rough idea of the skills of their teams, but often lack concrete, objective data. With a skill-based organization, you can create profiles for each employee that accurately reflect their existing and developable skills. This enables managers to make data-based decisions and increase the effectiveness of projects by bringing together the most suitable talents.
• Promoting internal mobility: Skills-based profiles make it clear where skills are located in the company and who is suitable for new tasks or projects. This enables managers to promote internal mobility in a targeted manner and deploy talent where it adds the most value - which not only increases efficiency, but also boosts employee motivation and development opportunities.
• Effective training and development: Skill profiles that clearly show the current status and skill gaps of employees enable managers to plan targeted and tailored training measures for their teams. The skills act as a navigation system that shows managers and L&D teams which skills are relevant for the future and which employees should be supported in these areas. At the same time, planning meetings and recommending suitable training is much easier as skills management forms the basis. This reduces the barriers to selecting and implementing the right measures and makes it much easier to implement training initiatives later on.

Optimization of onboarding and performance discussions: Skill-based profiles make it easier to onboard new employees, as it is already clear which skills they bring with them and which they should develop further. At the same time, performance discussions can be more structured and targeted on the basis of skill profiles. This gives managers valuable pointers for creating individual development plans that are better tailored to the needs and goals of employees.

Skills and co-determining bodies - How to involve co-determining bodies

Co-determining bodies such as the works council play a central role in the introduction of skill-based approaches. In order to make the introduction successful and win them over as partners, it is important to focus on transparency, fairness and individual benefits for employees. Skill-based approaches are not an instrument of control, but a tool for individualizing processes and promoting employees in a targeted manner. If certain aspects are taken into account, co-determining bodies can positively support the introduction.

What you can look out for to make skill-based approaches a success:

• Ensure fairness and accessibility: It is important that all employees can benefit from skill-based approaches - regardless of their role or department. Make sure that blue-collar employees are included in the same way as white-collar employees. This creates trust and strengthens acceptance. In addition, it can help to offer participation on a voluntary basis so that no one feels forced to do anything. Make it clear that the focus is on supporting employees and exploiting their individual potential.
• Emphasize the added value for employees: Show how skills management brings concrete benefits for all employees. For example, by helping them to receive targeted development plans that are tailored to their strengths and potential. Skill management can open up new career paths for employees and help them to better prepare for future challenges. An approach that empowers employees is usually well received by the works council.
• Ensure data protection and transparency: Communicate clearly how data is processed and used. Aggregated evaluations that do not reveal individual profiles are often more readily accepted. Make it clear exactly what the data is used for: for example, it can help with acceptance if the data is used exclusively to identify development and learning opportunities - not for evaluation or monitoring. Close coordination with the works council creates trust here.
• Encourage voluntary participation and personal initiative: employees should be able to maintain skill profiles themselves. This gives them control over their data and strengthens acceptance. Show that these profiles are used to show employees new opportunities, not to assess them.
• Emphasize the positive benefits of assessments: If assessments are part of the process, they should aim to identify development opportunities rather than evaluate performance. Together with the works council, formulate clear guidelines to ensure that assessments are only used for development rather than selection processes. 
• Promote open communication: Provide early and transparent information about the benefits of a skills-based approach, both for the company and for employees. Actively invite the works council to help shape the project. Joint development of the framework conditions strengthens acceptance and prevents misunderstandings.
  

Skills-based approaches offer clear advantages not only to companies, but above all to employees. If transparency, fairness and voluntariness are prioritized, works councils can be a valuable partner in successfully implementing these initiatives. With a clear focus on employee development and individual added value, potential concerns can be allayed and the way paved for a skills-based organization.

Skill management as a business case: how to convince with clear figures

A skills-based approach not only offers strategic advantages, but also has a measurable economic benefit. To convince decision-makers, it helps to make the financial impact on the company tangible.

Below we have defined an example of how to calculate a business case:

1. Savings on recruitment costs

Foundation:The cost of a new hire is typically around €10,000 per employee (source: McKinsey). This includes recruiting, selection process, and the time that managers or HR invest in the process. Calculation:With a workforce of 10,000 employees and an average annual turnover rate of 20%, 2,000 people leave the company each year. This leads to recruitment costs of €10,000 x 2,000 = €20 million.If employee retention is increased by just 1 percentage point through improved skills management (e.g. from 80% to 81%), 100 fewer people need to be hired. This saves 100 x € 10,000 = € 1 million per year.‍

2. Reduced onboarding costs

Foundation:New employees need around two months to become fully productive. During this time, onboarding costs are incurred due to lower productivity and additional training resources. The average personnel costs (including salary and ancillary costs) amount to €50,000 per year, i.e. around €4,200 per month.Calculation:If 100 new hires are avoided by a 1% point improvement in retention, you save two months of onboarding costs per person:100 x €4,200 x 2 = €840,000 annually.

3. More efficient further training

Foundation:Traditional training programs are often more general and less individualized. They require large budgets for planning and implementation. Skill-based systems are more scalable as they are based on data-driven recommendations and automation, for example through AI-powered learning platformsCalculation:Instead of sending all employees in a department to general training, you can use skill management to offer targeted training for employees who have specific gaps. This reduces the costs per participant and increases the ROI, as the measures are more needs-oriented.Savings potential:If 10% of a training budget of €5 million per year can be saved through more efficient planning, this means a saving of €500,000 per year.

4. Strategic adaptability

Foundation:A skills-based approach provides transparency about the skills of employees and enables critical projects to be staffed more quickly or innovative ideas to be implemented. Companies can also react to sudden changes, such as new technologies or market requirements, without having to undertake time-consuming restructuring.Example:If a company can tap into new business opportunities through the rapid deployment of skills (e.g. through faster project implementation or innovative product launches), potential sales increases or competitive advantages are difficult to quantify precisely, but their impact is nevertheless significant.Summary of financial benefits:

• Savings on recruitment costs: ~€1 million
• Reduced onboarding costs: ~€840,000
• More efficient training: ~€500,000
• Total savings and benefits: ~€2.34 million annually

Do's and don'ts when convincing stakeholders

Convincing decision makers is a crucial step in building a skills-based organization. Here are a few do's and don'ts to keep in mind:

Do’s:

• Demonstrate relevance: Link the benefits of your skill-based approach to the company's strategic goals, such as agility, cost optimization and employee retention.
• Use data and benchmarks: Show how companies that are already skill-based are gaining agility and efficiency. Such data and benchmarks give weight to your arguments.
• Offer pilot projects: Offer to test the skill-based approach in one department to demonstrate the effects on a smaller scale and identify potential challenges early on.

Don’ts:

• Arguing too technocratically: Be careful not to explain the approach too theoretically. Decision-makers prefer practical arguments that make the added value for everyday life clear.
• Underestimate complexity: The implementation effort for a skill-based approach is high. Communicate this openly to create trust and avoid unrealistic expectations.

Conclusion - How to make your organization ready for the future

A skills-based organization brings numerous benefits, not only for employees, but for the entire company. By presenting the advantages of a skills-based approach in an understandable and convincing way, you create the basis for sustainable change.

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