The need for strategic skills transformations

Talent gaps are growing in severity—and there’s no sign of a slowdown. In fact, more than 50% of HR leaders believe skill shortages have worsened over the last two years.

Most executives agree that skill-building initiatives are the answer to turning things around, with 69% noting that they’ve doubled down on skilling efforts in the pandemic’s aftermath.

While this growing emphasis on honing critical capabilities is promising, not all skill strategies are created equal. McKinsey’s research points to large-scale, programmatic skills transformations as the most impactful type of initiative, with between 71 and 90 percent of organizations that take this approach reporting a positive impact on their ability to realize company strategy, improve employee performance and satisfaction, and bolster employer branding.

Rather than ad-hoc or responsive initiatives in which employees must scramble to build skills after priorities shift, visionary organizations embark on strategic skills transformations that are rooted in data on workforce capabilities and emerging market demands. While this approach is relatively new, organizations that are harnessing data-driven insights to fuel their skills transformations are already enjoying several game-changing advantages.

What is a strategic skills transformation and why is it important?

Strategic skills transformations describe change initiatives that are rooted in the skills organizations will need to be successful in the future and bridge any knowledge gaps that may hold the business back.

Design and implementation of a large-scale skill-building program is challenging and generally comprised of three key components: assessing potential knowledge gaps, developing a skills strategy, and reimagining infrastructure for skilling at scale.

According to McKinsey research, when organizations implement all of these practices, respondents report a nearly 100 percent chance of having a successful transformation—2.5 times higher than the success rate for organizations that have failed to implement at least one of these practices.

Skills transformations are rising to the top of leaders’ radars because of the great threat that knowledge gaps pose to business success. If organizations don’t have the skills needed to complete high-priority projects efficiently, their bottom lines will suffer. Employees who don’t learn new skills are at risk of falling behind and eventually losing their value to their employer. Given how fast technology is advancing—especially with recent AI innovations—employees must constantly learn new skills to stay employable.

5 steps for a successful skills transformation

If you’re looking to kick your strategic skills transformation into overdrive, here are a few best practices to prioritize:

#1. Conduct a skill gap analysis

Before embarking on a skills transformation, leaders must have a clear understanding of their workforce’s capabilities and where knowledge gaps lie. A skill gap analysis is a tool used to identify current and projected training requirements within an organization to help determine the gap between existing skills and the competencies that employers would prefer their people have.

A skill gap analysis will help HR leaders fill in the gaps in their organizational talent landscape, ensuring they’re developing a workforce that is competent, committed, and creative. Conducting a skill gap analysis can also help executives decide when they need to bring new talent into their organization and when existing employees can be reskilled or reallocated to fulfill emerging business needs.

#2. Set a goal and define your vision

Once leaders have a clear idea of the knowledge gaps their organization is dealing with, it’s up to them to create a clear set of goals to guide their strategic skills transformation. The most impactful objectives are aligned with business priorities, as former Telstra transformation executive Alex Badenoch explains. “I would encourage people to ask themselves ‘What is it that needs to change at your company? Why is that your company’s strategy? And what do you need to do with your people to enable that change?’ You need to get that narrative clear because you can’t change your people or your goals for the sake of it. Presumably, it’s in the service of the company strategy,” she concludes.

#3. Engage stakeholders

The most successful strategic skills transformations have support from leaders across the organization, rather than relying solely on buy-in from HR executives. Without broad-level support, there’s a risk that your transformation strategy will fail to gain traction throughout your organization because employees may not see it as a priority if their leaders or managers aren’t aligned with the strategic vision. According to Badenoch, “Any transformation needs to start with an understanding of the company. When people are struggling with getting engagement, it’s often because your transformation starts from an HR perspective. But transformation must start at the company level.”

#4. Design a transformation plan

When it’s time to design your transformation plan, Badenoch recommends that skills play a central role. “I can’t imagine a transformation that doesn’t have some connection to skills,” she explains. “As a leader, you’ve got to know the skills you have today, what you’ll need tomorrow, and how you’ll close any gaps. That’s the kind of workforce planning that people have talked about for a long time but few have done it. Most organizations have a gap in that space which takes a toll on transformation.”

Many leaders are looking to skills intelligence tools to gain the strategic workforce planning insights that Badenoch deems crucial for successful transformations. These systems showcase where knowledge gaps lie, forecast skills that will become more important in the future, and help leaders update and optimize roles within their organizations through job architecture management.

#5. Implement the transformation plan

After leaders align on a strategic skills transformation plan, it’s time to begin putting it into action. Executives must share their larger vision with employees and transparently communicate expectations regarding future skill-building opportunities. Many organizations are using talent marketplaces to encourage all employees to participate in skill-building opportunities. By generating recommendations for projects, gigs, and mentorships that match employees’ skills and ambitions, the platforms empower workforces to begin broadening and deepening their skill sets.

How to address the top strategic skills transformation challenges companies face

While there are many benefits associated with embarking on a strategic skills transformation, here are 3 challenges to watch out for:

#1. A lack of clear objectives

Leaders must set measurable goals to guide their transformation initiatives. Without clear objectives in place, executives will struggle to evaluate the progress their initiative is making and employees may be hesitant to start pursuing skill-building opportunities. Objectives should be mutually agreed upon and relate back to business-wide priorities.

#2. Measuring progress and success

Once an organization has a series of objectives in place, executives must make time to measure their progress and identify any roadblocks that are holding their business back from achieving success. “Measurement was so important to us,” Badenoch notes, reflecting on her time at Telstra. “It helped with providing clarity to us as an executive team and to the whole company. Sometimes you embark on a journey and it’s not clear what success is going to look like so it’s a bit harder to maintain momentum.”

#3. Keeping up with rapidly evolving industry trends

The best skills transformation strategies can adapt as new priorities emerge and market demands shift. Badenoch emphasizes the importance of a dynamic approach, noting, “What executives should be asking themselves is are they building an organization that is actually adaptable to change and moves away from our traditional world where we resisted change and held onto the way things were until we couldn’t resist anymore? Or do you build a dynamic organization that can actually constantly adjust and evolve?”.

To learn more about what a successful transformation looks like in action, check out the ultimate guide to the skills-based organization.