Skills-Based Organizations

This article discusses how adopting a skills-based organization model can enhance agility, improve productivity, and boost employee retention in manufacturing environments. It emphasizes the importance of utilizing digital skills management tools and competency-based training (Deloitte, 2022).

What is a Skills-Based Organization?

A skills-based organization (SBO) is a transformative approach to workforce management, where traditional roles and qualifications are replaced by a focus on individual competencies and skills. Instead of assigning employees to tasks based on job titles or outdated qualifications, work is allocated according to the unique capabilities of each employee (Deloitte, 2022). In an SBO, employees are evaluated and assigned work based on their skill sets, ensuring that tasks align with their strengths and potential for growth. This approach empowers supervisors to assign tasks dynamically, leveraging real-time data from skills hubs or skills matrices to make decisions that best suit the operational needs.

While SBOs do not completely eliminate job titles or roles, they prioritize skills over conventional definitions of work, allowing organizations to adapt more flexibly to challenges. This model views workers as unique individuals with a portfolio of skills, capabilities, interests, and potential, enabling fluid deployment across projects and tasks (Deloitte, 2022).

Why Shift to a Skills-Based Organization?

Manufacturing industries worldwide are grappling with a skills shortage that is set to worsen. By 2030, more than 85 million jobs could go unfilled due to this skills gap, leading to turnover and operational disruption (Korn Ferry, 2018). To address these challenges, many manufacturers are turning to skills-based approaches to keep their workforce engaged and reduce turnover.

Key Benefits of Skills-Based Organizations:

• 79% of workers in skills-based organizations report a positive workforce experience (Deloitte and The Manufacturing Institute, 2024).
• 50% of employees are more likely to stay longer at an organization that grants more agency and choice in applying their skills (Deloitte, 2022).
• Many companies, including Unilever, are already transitioning toward this model, with promising results, such as using internal talent marketplaces for fluid skill deployment (Deloitte, 2022). However, many executives recognize the need for transformation but lack the resources or tools to fully implement it.
• Research shows that while 77% of business executives agree their organizations should help workers become more employable through skill development, only 5% feel they are doing enough to support this (Deloitte, 2022).

The Impact and Benefits of Skills-Based Organizations in Manufacturing

Here’s how adopting a skills-based model can revolutionize manufacturing operations:

1. Enhanced Agility and Responsiveness Skills-based organizations are 57% more likely to anticipate change and respond swiftly to challenges (Deloitte and The Manufacturing Institute, 2024). By cross-training employees in multiple skills, frontline teams become more adaptable, able to take on a variety of tasks with greater confidence and efficiency (Adler, Goldoftas and Levine, 1999). With this flexibility, manufacturers can respond more quickly to production demands, seasonal variations, and unforeseen circumstances, ensuring a smoother workflow.
2. Increased Productivity and Efficiency Placing an emphasis on skills means that employees are not limited by a fixed role. Instead, they can shift seamlessly between tasks, improving workflow and efficiency. Skills-based organizations are 49% more likely to improve their processes for maximum efficiency (Deloitte and The Manufacturing Institute, 2024). Using digital skills management tools, such as skills hubs and individual employee portfolios, manufacturers can easily track employee competencies and ensure tasks are assigned to the most qualified workers. This results in faster, more effective operations (Javaid et al., 2022).
3. Improved Employee Retention and Satisfaction Organizations that adopt a skills-based approach see a 98% higher likelihood of retaining high performers (Deloitte and The Manufacturing Institute, 2024). By focusing on employees' talents and growth potential, SBOs offer greater engagement and satisfaction. Employees feel more valued and motivated when they can develop their skills and take ownership of their career development (Deloitte, 2023). A skills-based organization fosters an environment of transparency, autonomy, and personal growth, which is especially crucial in an industry struggling with high turnover rates.
4. Streamlined and Effective Training Traditional training methods often focus on job titles, resulting in generic training programs that may not address specific operational needs. In a skills-based organization, employees receive training tailored to the precise skills required for their tasks. This makes training more focused, relevant, and effective (Al-Asfour et al., 2024). Training is often delivered on-the-job, which leads to better retention and comprehension of key skills. Moreover, managers gain immediate visibility into skills gaps, enabling them to target upskilling efforts more effectively (Javaid et al., 2022).

Conclusion

The shift to a skills-based organization is not just a trend—it is a strategic move that can lead to greater agility, productivity, and employee satisfaction in manufacturing. By prioritizing competencies and skills over traditional job roles, manufacturers can stay ahead of the curve in addressing the labor shortage and meeting the demands of a rapidly changing industry (Deloitte, 2022). Investing in skills management platforms and competency-based training is essential to unlocking the full potential of a skills-based workforce. This approach not only drives operational efficiency but also fosters a more engaged, motivated, and resilient workforce.

References

Adler, P. S., Goldoftas, B. and Levine, D. I. (1999) Skills, flexible manufacturing technology, and work organization. Industrial Relations: A Journal of Economy and Society, 38(1), pp. 48-79. Available at: https://www.researchgate.net/publication/48854155_Skills_Flexible_Manufacturing_Technology_and_Work_Organization

Al-Asfour, A., Weheba, G., Al-Kandari, B., Khan, S. and Mahdi, H. (2024) Bridging the skills gap divide in manufacturing: perspectives from industry leaders. Journal of Workplace Learning, 36(2), pp. 121-135. Available at: https://www.researchgate.net/profile/Ahmed-Al-Asfour-2/publication/378102301_Bridging_the_skills_gap_divide_in_manufacturing_perspectives_from_industry_leaders/links/65e85b28e7670d36ab009ddd/Bridging-the-skills-gap-divide-in-manufacturing-perspectives-from-industry-leaders.pdf

Deloitte (2022) The skills-based organization: A new operating model for work and the workforce. Available at: https://www.deloitte.com/us/en/insights/topics/talent/organizational-skill-based-hiring.html

Deloitte (2023) Navigating the end of jobs. Available at: https://www.deloitte.com/us/en/insights/topics/talent/human-capital-trends/2023/skills-based-model-end-of-jobs.html

Deloitte and The Manufacturing Institute (2024) Manufacturers support growth with active workforce strategies. Available at: https://themanufacturinginstitute.org/wp-content/uploads/2024/04/Digital_Skills_Report_April_2024.pdf

Javaid, M., Haleem, A., Singh, R. P., Khan, S. and Khan, I. H. (2022) Reskilling and upskilling the future-ready workforce for industry 4.0 and beyond. Technologies, 10(3), p. 55. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC9278314/

Korn Ferry (2018) The $8.5 Trillion Talent Shortage. Available at: https://www.kornferry.com/insights/this-week-in-leadership/talent-crunch-future-of-work