Is your organization already skill based?

To remain agile and flexible in the future, organizations must adapt and create an environment for their employees in which human capabilities & skills develop. Focus areas of the article:

1. How to approach towards building a skill based rewards program

2. Are you prepared for skill based rewards

Is your organization already skill based?

In the last two years (with the pandemic), a lot has changed; our way of working, our way of managing personnel and professional life from home, way of collaborating with colleagues and clients, and many other changes. We noticed that the human power to adapt and acquire new skills was of fundamental importance. To remain agile and flexible in the future, organizations must adapt and create an environment for their employees in which human capabilities & skills develop. To create this environment, organizations need to understand workforce expectations and build a future-proof rewards program that promotes skill development that needs to be consistent with the commitment to build a skill based organization (SBO). 

In our recent study 2020 Global HC Trends research, 53% of executives responded that between 50% to 100% of their workforce would need to re-skill by 2023 to provide the capabilities needed at that time¹  and hence this makes it important that in this journey of building towards a skill-based organization we reward and recognize employees when they acquire the capabilities and skills basis your organization needs. We have also noticed that some of the skills are getting hot such as technical skills (Artificial Intelligence (AI), Data Sciences, etc.) and Behavioral skills (Agility, Authentic Leadership, etc.) and skill-based organizations can hire, retain and engage employees. 

Future of Rewards

Traditional reward programs are often not designed to reduce skill gaps or encourage skill development, but are focused on yearly performance appraisals in which past performance is evaluated. Looking at the future of rewards and how organizations need to build towards motivator rewards², organizations need to rethink their rewards philosophy to reduce the skill gaps (picture 1) by encouraging employees to upskill and hence it is imperative that New age skill based reward programs include the right talent investments; that invest in the required skills and capabilities of the workforce. In addition, organizations must nudge employees to acquire the needed skills and capabilities by rewarding employees that are acquiring and displaying those skills.

How to build a skill based rewards program

As you decide to move towards you need to consider at which moment to reward people who adapt and acquire new skills. This can be done at several moments; during acquisition, upon acquisition and when displaying the required skill (picture 2). For example, when data visualization is a business required skill in your organization. You already reward the employee during the course. Employees often begin to demonstrate the skill while they are still acquiring the skill. This stimulates the employee to further master the acquired skill, which in turn will be rewarded. In addition, this will also trigger colleagues to acquire a business-required data visualization skill. Alternate solution can be to include skill based rewards part of your total compensation package. This can be done by adding a skill salary on top of your base salary. When an employee acquires a “business required” skill, the employee is rewarded for this. 

Conclusion: how to move towards a skill based rewards program

To build towards a skill based organization it is important that you start by setting the right foundation: building a governance around managing skills. We believe that can be done by the following steps:

1. Consider your organizations future state. What disruptions might your organization face? And how might this effect your business and required workforce?

2. What business capabilities do you need to survive in this future state? Does your workforce currently show these capabilities? What future job profiles and skills do you need?

3. Create an future-proof role-based job architecture, in which all the roles are connected to skills.

4. Identify the skill gaps you will face in the future, consider which gaps your employees can reduce by acquiring new skills and nudge your employees to do so by rewarding them for this!

5. Assess whether your Performance Cycle is suitable to support your skill based organization and if the entire process can be supported by HR technology (for example selecting an HR Technology that supports your vision on building a skill based organization and promotes skill based rewards).

Skill based organizations create more apt employees and are fully prepared for the future. With all the disruptions in the world, now is the time to move to a skill based organization. Would you like to know more about what this means for your organization? Please feel free to contact us.

This article is written in collaboration with Lotte Verhoeven.

¹Erica Volini et al., Beyond reskilling : Investing in resilience for uncertain futures, Deloitte Insights, May 15, 2020.

²Heleen Vaandrager, Charisse Schutte, Lalit Gurnani, Design your future-proof Global Rewards strategy now