Defining the ROI of a Skills-Based Organization

You’ve decided you want to become a skills-based organization, but how do you prove the value of your skills-based initiatives? In our recent blog, Becoming a Skills-Based Organization, we outline the first three steps to successfully implementing a skills approach. First, organizations should level-set and plan, and then find quick wins. The third step in this skills roadmap is to solidify your business case and demonstrate ROI. Here and in our recent webinar, we dive deeper into this topic to explore the importance of defining ROI, where to start, and provide tangible examples you can use to gain buy-in from your team and leadership.

Defining a Skills-Based Organization

Becoming a skills-based organization is challenging, but it doesn’t have to be overcomplicated. Don’t feel like you’re starting from scratch—skills are the perfect complement to many of your existing solutions. They will help your organization adapt to changes in the labor market, as well as keep your people engaged, informed, and progressing in their careers. The ability to see skill gaps and understand the short jumps between roles allows organizations to make meaningful change and forward progress. With this in mind, companies can leverage their existing workforce as well as people they’re looking to hire in the labor market. 

The Benefits and Expansion of Skills-Based Initiatives

Beginning your skills journey might seem daunting, but you have to start somewhere. Skills-based initiatives typically begin in learning and development (L&D), but it is natural that they will expand into other functions of your organization, like skills-based hiring, succession planning, and strategic workforce planning. 

By establishing a foundation of skills, you are constructing an infrastructure for your organization that will outlast you and continually deliver value. You’re building a framework to be agile and responsive to changing market conditions. 

Many companies have been using skills for years and in different capacities, so they aren’t new. But it is becoming more critical to connect skills with learning, work, and career paths along with cost and revenue forecasts. Start by identifying your business’ purpose and desired outcomes, then develop the remaining pillars to make them all work together.

Skills go one level deeper than competency models and certifications. 

Skills give us a peek around the corner to understand emerging skills for the workforce of the future, and know what you’ll need to drive value not just today, but tomorrow. If you know the skills you’ll need, you can make plans to develop skills internally or which ones you’ll have to buy from the marketplace. Your skills taxonomy needs to be dynamic because the emerging and disruptive skills that are in-demand today didn’t necessarily exist one to three years ago. 

Don’t get hung up on the definition of skills.

Think of skills as the connective tissue between learning, work, and systems. Skills are a catchall term for the granular definition of work that describes a knowledge area, hard skills, soft skills, or even a certification. 

Certifications and degrees, for example, can be boiled down to the skills they actually deliver. And how you define skills should be most useful for matching up with projects you’ve already launched or applicable to your specific use case. Remember, skills will define themselves when used in context for your use cases, so don’t let that hold you back when you’re getting started; refinement can come later.

Ready to define the value of becoming a skills-based organization? Here are three topics to help you do just that:

Topic 1: How to Initiate a Skills-Based Project

Where do you even start? Think about your skills-based initiatives as multi-generational, and identify where employees will experience and embrace them first. Realize that these projects are a process, so organize them in a way that makes sense for your company and context. 

Consider what’s driving you to become more skills-based. It might be from a hiring standpoint because you’re not getting the candidates you need. Or maybe you need greater visibility into the skills your people have and the ones they need to build. You can use Lightcast data to understand the critical skills for your roles, and enable people inside your organization to understand what skills they need to be successful in future roles. Hiring, L&D, and internal mobility can serve as starting points to show early wins, allowing you to gain momentum to move into other business functions.

When you think about building your business case, show the ROI that has an impact across your entire organization. Not all value necessarily comes back to the dollar, so think through the intangible benefits of becoming a skills-based organization, too. For example, you can use skills data during succession planning to reveal a broader pool of diverse candidates who have the required skills to be successful at the next level. 

Topic 2: Achieving Quick Wins with Skills-Based Initiatives

Many quick wins for companies revolve around optimizing job postings and job descriptions. Are your job descriptions all over the map? Take a step back and think about what job title you’re calling workers, and what you think they are doing versus what they’re actually doing. Maybe the descriptions you’re using in postings haven’t been updated and the position has changed. By optimizing job descriptions, you can keep up with the rapidly changing labor market. 

Here are a few more ways to achieve quick wins: 

• Collect skills-based assessments for your employees

• Compare your employees’ professional social profiles with your competitors’

• Standardize your skills taxonomy to get everyone speaking the same language

• Create skills-based interview guides to equip candidates

• Choose two or three critical roles to refine your skills-based approach

• Leverage an influential leader to be an advocate for your initiatives

Topic 3: Building a Roadmap Fueled by ROI Data 

Be sure that everyone, especially leadership, is in agreement if you decide to take a skills-based route. You need to be able to calculate ROI and demonstrate the financial impact associated with your skills-based initiatives. Here are a few examples:

Use career pathways to promote internally rather than hire externally.

By standardizing roles and cleaning up job architecture, you can clearly define role profiles and achieve full visibility into the characteristics of your roles. This will allow you to understand how employees can progress between roles, increasing employee loyalty and retention. Upskill employees and promote internally to save thousands of dollars per employee. 

Build emerging skills rather than buy them from the market.

Do you know what skills will be critical for your organization's future success? Emerging and disruptive skills are changing the way you need to think about hiring. Many of these skills come at a premium and are hard to find, so if you can build them internally, you’ll potentially save upwards of $20,000 per employee. 

Eliminate degree requirements for roles that don’t necessarily require them. 

Think about what skills you need rather than the degree a person might have. It’s not the college degree itself that counts, but what the person learned and what they know. Degrees are just a signal into the skills they possess, and removing degree requirements can have significant financial impact. 

Build transparency around career opportunities to increase productivity. 

Use skills data to connect people to suitable projects outside of their core job responsibilities. This approach not only increases work efficiency but also enhances career mobility. It allows for employees to pursue work aligned with their interests, creating employee buy-in while leveraging their extra capacity. 

Becoming a skills-based organization is a win for everyone.

In our current economic environment, you can use skills to your advantage. Take a high-level and long-term perspective to establish realistic strategies and achieve alignment throughout your organization. Lightcast can partner with your organization to provide talent intelligence and insights to initiate skills-based projects, as well as guidance for building your case around skills. When you define the ROI of becoming skills-based, you have the foundation to create a cohesive system across your organization to drive strategy, achieve business goals, and create lasting engagement.