Skill benchmarking: what it is and why it matters

Right now, there’s no hotter talent management topic than skills and skills data. Leaders across the globe are brainstorming innovative strategies and looking to new digital platforms in an effort to get a firmer grasp on the skills their workforce has. Gartner recently named skills management as one of the most crucial HR technologies of the year, underscoring the need to keep tabs on workforce capabilities.

Although there’s a lot of buzz about skills, few executives are getting to the heart of this challenge by assessing why skills data matters in the first place. Ultimately, organizations that have an in-depth picture of their workforce’s capabilities can swiftly reallocate talent as demands shift and identify emerging knowledge gaps they must bridge.

In addition to these advantages, organizations that harness skills intelligence systems to comprehensively evaluate skills also have the ability to see how their people’s knowledge stacks up to the competition—also known as skill benchmarking.

What is skill benchmarking?

Skill benchmarking describes a process in which leaders measure employees’ skills and skill levels and see how they compare to organizational and industry-wide standards. This analysis can help HR and L&D leaders determine whether an employee has the required skill sets and proficiencies to perform a role and identify upskilling opportunities to help bridge any existing knowledge gaps.

Rather than guessing who might be a good fit for a certain project or role, skill benchmarking enables leaders to identify best-fit candidates within or outside of their organization based on their capabilities. Benchmarking can also help shape performance management processes by allowing managers to see how their direct reports’ skills compare to company and industry standards, paving the way for conversations about the skill-building opportunities employees should prioritize next.

How does skill benchmarking work?

Skill benchmarking is a relatively new phenomenon made possible by the rise of skills intelligence systems. Prior to this technology, it was very difficult for companies to gain a 360-degree view of all the skills within their workforce, let alone explore how these competencies compare to other organizations within the same industry.

Traditionally, most companies relied on Human Capital Management (HCM) platforms, which could only capture a sliver of information about their workforce’s skills. Unlike HCMs, skills intelligence platforms update in real-time, so leaders can feel confident that the skills information they see accurately reflects the knowledge their people possess. Top skills intelligence platforms like Gloat’s Skills Foundation also pull data from a variety of internal systems and harmonize it to create one holistic view of all the skills within an organization.

As skills intelligence goes mainstream, the concept of skill benchmarking is becoming increasingly popular. In addition to giving leaders complete visibility into their people’s skills, the tools can compare one workforce’s capabilities to the competencies another company within the same industry has. Leaders can also assess the market value of a job, learn if a skill is on the rise or decline, and gain insight into how competitors are positioning their jobs to pivot ahead of the curve.

Importance of skill benchmarking in the modern workforce

Understanding where skills lie and how your workforce’s capabilities stack up has always been beneficial—but it’s reaching a new level of importance in the Post-Industrial Age. Now that the World Economic Forum estimates that 50% of the global population needs new skills to meet shifts in demand driven by new technologies, it’s evident that no organization can afford to take their foot off the gas when it comes to training and development.

However, without skill benchmarking, leaders will struggle to determine what expertise they should prioritize in their skill-building initiatives because they won’t have insight into how their workforce’s capabilities compare to industry standards. Once companies begin utilizing skill benchmarking, executives will gain a comprehensive understanding of the skills their workforces will need to hone to stay one step ahead of the competition.

Traditional versus modern skill benchmarking

Before the rise of skills intelligence systems, skill benchmarking was more or less a guessing game. Leaders may have aimed to take a pulse on the skills their people had and how they compared to their competitors, but they lacked clear insight into what industry standards looked like and how they might be falling short. In contrast to more traditional skill benchmarking that relied on estimations, modern skill benchmarking harnesses market and third-party data to give leaders clear insight into the competencies their organizations must hone to be competitive.

Types of skill benchmarking

Generally, there are two different types of skill benchmarking leaders can consider when crafting their skill-building plans:

Internal skill benchmarking

Skills intelligence systems can help compare one employee’s skills to their colleagues who execute the same role. By comparing and contrasting the various competencies that employees within a given position or department possess, executives can develop a comprehensive understanding of the knowledge that someone needs to be successful in each position.

External skill benchmarking

In contrast, external skill benchmarking is all about comparing the competencies within your organization to the skills that another business possesses. External skill benchmarking can help leaders understand what areas of their business are most in need of upskilling and reskilling, as well as spotlighting particular teams or departments that are surpassing industry standards when it comes to knowledge and training.

5 skill benchmarking benefits HR leaders can’t ignore

If you’re interested in using skill benchmarking to get ahead of your competitors, here are a few advantages you can expect to benefit from:

#1. Identify and address skill gaps

Even when companies try to maintain an understanding of the skills their workforce has, they may not be aware of potential knowledge gaps until they snowball into large-scale skills shortages. In contrast, skills intelligence systems offer a complete picture of workforce capabilities that spotlights potential gaps between an organization’s competencies and the standards for their industry.

#2. Upgrade training and development

While most companies are looking to improve their skill-building strategies, organizations will only see results if they get strategic about their learning and development priorities. Skill benchmarking can show where people’s competencies might be falling short, enabling leaders and managers to identify the topics and competencies that future reskilling and upskilling plans should prioritize. Additionally, skill benchmarking can also help executives gauge how effective various training programs are by showing how employees’ skills evolve and expand after completing them.

#3. Improve performance management

In addition to shaping future upskilling and reskilling plans, skill benchmarking is an important performance management tool. When managers sit down with their direct reports to discuss their work and evaluate their progress, they can pinpoint exactly which skills people need to build based on benchmarking for their role. As a result, employees will gain a better understanding of the skills they need to master to be successful in their current position and the types of learning and development opportunities they should prioritize next.

#4. Enhance career planning

Many employees struggle to determine what direction they want to take their careers in and the steps they will need to take to turn their professional dreams into realities. Rather than guessing which skills they might need to hone to move into various positions, skill benchmarking spells it out so that employees and managers can identify any knowledge gaps that might be holding them back from moving into their dream role.

#5. Facilitate succession planning

Skill benchmarking can help leaders make more informed decisions about succession planning. The best skills intelligence systems showcase the skills employees should have to be successful in specific leadership roles, based on organizational and industry standards. Once leaders understand the skills and qualifications they’re looking for, they can assess employees based on who possesses most of these competencies and identify opportunities to build any outstanding skills to ensure they’re in a good position to take over when the opportunity arises.

Implementing skill benchmarking within your organization

If you’re eager to take advantage of the many benefits that skill benchmarking has to offer, make sure you choose your skills intelligence system wisely. Not all vendors have experience implementing AI-powered skills intelligence systems at the enterprise level.

There is also a great deal of variance between different offerings; for example, a full-stack skills system that uses LLMs and in-house models will create an ontology that is much more personalized to your organization than what you’d get from a skills vendor or Learning Experience Platform (LXP). The more personalized your skills data and insights are, the more accurately you’ll be able to assess existing skills and emerging knowledge gaps so that you can stay one step ahead of the competition.

To learn more about how skill benchmarking works and why it’s important, check out the ultimate guide to the skills-based organization.