How skills-first transformation can unlock a new approach to talent potential

The skills-first transformation journey is like an ongoing marathon, where its early adopters have completed only a fraction of the race.

In brief

• Firms involved in skills-first transformation are enhancing diverse HR skills, placing emphasis on skills intelligence.
• A significant 83% of employees express confidence in remaining with organizations adopting a skills-first approach. 

In the dynamic landscape of today's workforce, the surge in demand for technology and artificial intelligence skills, coupled with evolving employee expectations, has propelled the emergence of skills-first transformation (SFT) as a vital organizational imperative. Serving as the cornerstone for proactively identifying and nurturing 'power-user' talent, SFT integrates skills taxonomy, intelligence, and inventory data throughout business operations and the employee lifecycle.

The previous EY and iMocha report, ‘Tech skills transformation: navigating the future of work by 2025 and beyond’ focused on how tech skills are set to evolve in the coming years across all job roles, including traditionally non-tech roles. Building upon the same, their latest report, ‘skills-first transformation: a new approach to unlocking talent’, explores the intricacies of skills-first transformation, providing a roadmap for companies to navigate the evolving terrain and embrace SFT as a catalyst for organizational growth and success.

Surveying 560 global HR heads, regional HR heads and Country HR heads across APAC, EMEA, India and the US, the report uncovers a comprehensive perspective on the 'when and how' of SFT. By investigating the experiences of early adopters and emphasizing the role of skills intelligence in streamlining adoption roadmaps (SFT 2.0), it aims to guide companies at different stages-whether advanced, just starting, or yet to explore SFT.

Unveiling the SFT landscape

The first insight drawn from the survey reveals that more than half of global companies surveyed are focusing on skills-first transformation (SFT) as a business priority. 83% of the employees believe that they will stay longer with firms with a skills-first approach. Among industry sectors, telecom, technology products, and IT lead in adoption, with the United States taking the forefront among geographic regions.

The focal point: skills intelligence

Companies engaged in SFT are developing multiple HR capabilities, with skills intelligence emerging as the focal point. Notably, 'building future skills' stands shoulder to shoulder with retention as a business priority for Transformation Leaders—companies that have successfully implemented SFT. 1.5-2x of SFT-focused HR leaders prioritise building future skills, establishing skills-first career paths and improving talent mobility as compared to business as usual (BAU) HR leaders. HR leaders across APAC and EMEA prioritize ‘building future skills’ and ‘improving talent mobility’, on par with foundational objectives – ‘improving recruitment pipeline’ and ‘reducing attrition’.

Value realization from SFT capabilities

The third insight underscores the positive impact of SFT on key HR metrics. The value realization from SFT by early adopters is intrinsically linked with their prioritization of SFT on par with core HR objectives and capabilities. Transformation Leaders report significant improvements in retention and employee performance. Moreover, these companies have experienced approximately twice the revenue growth over the past three years compared to their counterparts who are yet to explore SFT. Majority of Transformation Leaders have reported a positive impact on talent retention and development (63%), and improvement in employee performance (58%) due to adoption of SFT initiatives.

Challenges in the journey ahead

While SFT presents a promising path forward, challenges are inevitable. Lack of skills intelligence tools is perhaps a prominent hurdle in accurately capturing skills data. Additionally, a frequent obstacle is the lack of leadership support. Early adopters, who initiated their SFT journey with skills inventory and assessments, can mitigate several challenges by incorporating skills intelligence seamlessly across business processes.

The need to build technical skills of the future results in differentiated prerogatives at each level. Skill intelligence has emerged as the catalyst for SFT 2.0, offering a potential solution to the key challenges faced by early adopters of SFT 1.0. This includes the absence of tools to capture precise skills data, difficulties in integrating skills-based data into HR systems, and the lack of a skills taxonomy to identify relevant skills for specific roles.