Over the past five years, the topic of skills has emerged as a key trend in HR strategies. Organizations are starting to see how crucial it is to understand and use skills effectively to ensure they have the talent they need to be successful. A skills-based approach can truly revolutionize workforce management, boost productivity, and drive business success. But it’s important to remember that there’s no one-size-fits-all solution. Every organization will have its own path to integrating skills into its HR practices, shaped by its industry, culture, and specific needs.

At SAP SuccessFactors, our HR research scientists have conducted five years of research to understand how skills can be effectively incorporated into HR strategies. After speaking with 278 HR leaders and surveying 9,432 global employees and managers, we’ve identified four key strategies to integrate skills into your people practices to become a skills-focused organization. Let’s explore these approaches and the technologies that can support them.

1. Skills-Implied Approach

In a skills-implied approach, organizations use traditional criteria like candidates’ or employees’ previous job titles, educational background, and past experience to make decisions instead of using skills data. Here, work is centered around job roles, and decisions about hiring and pay are based on job titles and levels. Learning and development is tailored to current roles, and promotions follow standard paths tied to credentials and tenure. Workforce planning tends to focus on short-term headcount needs, with minimal use of skills data for deeper analysis.

This approach is best for roles requiring specific certifications or highly specialized skills that are either externally regulated or require extensive training, such as lawyers, certified public accountants, and pilots.

In terms of tools and technology, job architectures can help clarify roles and align jobs based on the type of work performed. For example, the job profile builder in SAP SuccessFactors solutions helps manage job elements such as descriptions, experiences, qualifications, skills, competencies, behaviors, education, and certifications. It can offer a flexible, intuitive way to identify and share job description components across an organization.

2. Skills-Included Approach

In a skills-included approach, work is organized around job roles with an emphasis on a few key technical skills. Hiring focuses mostly on traditional criteria like education but includes some skills assessment as well. Pay is generally based on job title and level, though skills might impact bonuses. Learning and development targets skills that are crucial for current or future roles. While skills are considered in workforce planning and reported in broad terms, they’re not connected with other data sources for deeper insights.

This works best for roles where required skills remain mostly consistent, but the prioritization and application of those skills evolve over time, as in, for example, sales and people management.

Recruiters can use AI-enabled recruiting tools to consider an applicant’s technical and professional skills during the hiring process. For example, the SAP SuccessFactors Recruiting solution’s AI-assisted applicant screening can provide a skills compatibility score, allowing recruiters to view how well an applicant’s skills match job requirements. Candidate profiles include details on exact skills matches, additional relevant skills, potential skills, and missing skills to help recruiters quickly and effectively screen the best applicants.

Learning management systems can support targeted skill development for current roles. SAP SuccessFactors Learning, for example, can offer AI-driven learning recommendations and a dynamic search feature that filters by criteria such as duration, mobile availability, and specific skills. This helps promote continuous learning and can guide employees in developing skills for advanced proficiency levels. Additionally, SAP Content Stream applications by Skillsoft offer over 1,250 expertly curated learning paths aligned with high-demand skills and competencies. These include areas like AI and generative AI, cybersecurity, data management, leadership, first-time management, and performance and culture. Learners can refine their skills through various methods, including reading, watching, listening, and active practice.

3. Skills-Led Approach

In a skills-led approach, jobs are defined by a mix of technical and professional skills. Hiring looks at a range of skills, along with traditional criteria. Pay is linked to both the skills employees bring to the table and their performance. Learning and development is customized based on skills data and personal interests, helping to create personalized plans and internal mobility opportunities. Workforce planning becomes strategic, focusing on closing gaps between current and needed skills, and skills analytics are used to dive deep into skill levels and how they connect with other data.

This is best for roles where critical skills are specific or uncommon but proficiency can be inferred from adjacent skills, such as in marketing and operations.

Thinking about tools and technology, skills platforms can be useful to support this approach by tracking and analyzing skills across the workforce. The SAP SuccessFactors talent intelligence hub, for example, uses an AI-driven framework to integrate skills data from multiple sources, enabling organizations to make data-driven talent decisions. In addition, learning platforms provide development opportunities tailored to individual skills and career goals. For example, SAP SuccessFactors Learning offers AI-driven recommendations and peer suggestions for personalized learning. Skills tagging and the search for skills help to foster a habit of curiosity and a culture of continuous learning. Additionally, talent marketplaces like SAP SuccessFactors Opportunity Marketplace can offer experiential learning opportunities through AI-driven suggestions for mentors, short-term assignments, dynamic teams, and job openings.

4. Skills-Based Approach

In a skills-based approach, jobs do not exist – instead, work is organized entirely around the skills required to complete it. Hiring is all about evaluating skills instead of sticking to traditional criteria. Pay is tied to the skills employees currently have, with bonuses for skills that will be valuable in the future. Learning and development focuses on preparing for future skill needs, and internal mobility is driven by moving employees where their skills are most needed. Workforce planning is strategic, looking ahead to forecast what skills will be needed, and skills analytics keep track of trends and how skills connect with other business data.

This works for roles that rely more heavily on technical skills, roles that use certain tools or processes that are common across organizations or industries, and roles where skills can be gained outside of an educational setting, like HR, IT, and finance.

Integrated talent management platforms take care of all aspects of skills development and deployment in this approach. With SAP SuccessFactors solutions, organizations can use an AI-driven, unified skills model that covers everything from recruiting to learning, performance, and succession planning. The SAP SuccessFactors talent intelligence hub helps organizations get a clear view of their workforce by linking individual skills, strengths, and preferences with the right people and experiences across the platform. This can make managing skills throughout the employee lifecycle much easier and more effective.

As organizations work to weave skills into their HR strategies, understanding these four approaches can help them create a skills-based plan that fits their unique needs and goals. Whether you’re starting with a skills-implied approach for specialized roles or aiming for a skills-based framework for more dynamic functions, the key is to align the strategy with your organization’s specific context and objectives.

By exploring these approaches and using the right tools and technologies, organizations can build people practices that boost efficiency, transparency, and overall success. Finding the right mix and approach for your specific needs is key to unlocking the full potential of skills-based management.

Read the full report to dive deeper into our skills research. Want to see how focusing on skills can unlock an organization’s potential? Learn about Erie Insurance’s journey to becoming a skills-based organization.

Business leaders are increasingly making skills a top priority for their organizations as they strive for agility in a complex world. However, many are running up against a looming skills gap that threatens to undermine business continuity. In fact, the World Economic Forum predicts that 44% of workers’ skills globally will be disrupted in the next five years. Organizations cannot afford to simply wait and see how their industries will be affected; the risk of being left behind in the marketplace is too great. SAP SuccessFactors’ 2024 HR Trends research reveals the costly choices that organizations must now navigate to acquire new skills – whether to build, borrow, buy, or bot. 

Norsk Hydro, a global aluminum and renewable energy company based in Norway with 33,000 employees in 40 countries, is one example of an enterprise that is on a journey towards becoming a skills-based organization. Jeanine Fremstad, Norsk Hydro’s global lead for Skills and Learning, explains why the company is taking a proactive approach to skills development and learning: “We need to keep up with the evolving landscape of workforce skills to remain competitive and at the forefront of our industry.” 

Upholding a long-standing tradition of sustainable industrial development, Norsk Hydro has ambitions to pioneer the transition to “green aluminum” powered by renewable energy by the end of the decade. To get there, the organization decided to take a structured approach to skills and learning by undertaking a pilot project using SAP SuccessFactors solutions.

Fremstad says the initiative is essential to Norsk Hydro’s business strategy and to attract and retain people. “We need to know what skills we already have in the company in order to know what skills we need to attract. We also need to know what skills we need to develop,” she says. “Being able to offer attractive learning and development opportunities is key to retaining people.”

She offers a straightforward assessment of where the organization stands and why change is necessary: “Our internal research shows that one in three employees are unsatisfied with the opportunities for professional development, future careers, and equal opportunities. And we just think that’s not good enough; therefore, we started on a skills transition journey.”

Selecting a Trusted Partner for AI-Driven Skills and Learning

In April 2024, Norsk Hydro began a pilot to offer its workforce access to AI-driven skills and learning recommendations for their professional development. With 100 employee participants in various countries, the company’s HR team has purposefully set the bar for success high. “We believe that for Hydro as an organization, success will mean we will see improved employee experience and engagement, reduced attrition, and that we will have better insights from data for workforce planning,” Fremstad says.

Norsk Hydro selected SAP as its trusted technology partner and joined the SAP Early Adopter Care program because of a shared vision for people-centric skills and AI-enabled learning. It is working closely on the project with SAP partner TalenTeam, taking advantage of its Skills Transformation Suite to speed innovation.

Transitioning to a Skills-Based Organization

The first step in Norsk Hydro’s skills journey was to build the company’s skills library based on a curated skills library from an external provider. The AI-assisted curation process analyzed Norsk Hydro’s job architecture and 33,000 job titles and identified likely relevant skills from the external skills library. As a result, approximately 4,000 skills relevant to Norsk Hydro were mapped against job families. The central project team is working to validate and refine these results.

Next, Norsk Hydro used SAP SuccessFactors talent intelligence hub to help gain the power and simplicity of a single skills model from recruiting, onboarding, learning, and development through to performance and succession. The talent intelligence hub can connect skills, attributes, strengths, and preferences to both people and experiences throughout SAP SuccessFactors solutions. Each employee has a growth portfolio of skills, which helps empower them to own their learning and career development. Employees can also manually add role-specific skills and skills of interest for their development. Norsk Hydro is applying a trust-based approach that allows employees to maintain their skills profiles and build their development plans based on their prioritized skills. While certain skills may need to be validated and assessed for legal compliance requirements, the employee generally may decide their proficiency levels for most skills.

As a third deliverable in the project, Norsk Hydro updated its internal development process to ensure that skills are an integral part of the leader-employee dialogue. It aims to tighten the connection between skills, goals, performance, and learning.

Also, Norsk Hydro recently implemented the new integrated learning experience from SAP SuccessFactors Learning. Embedded AI can enhance the employee’s experience with relevant skills-focused learning recommendations that are unique to each employee based on their needs and interests. Norsk Hydro’s offering of learning opportunities comprises a broad set of both internal and third-party channels. On the organization’s new learning homepage, all courses are now automatically tagged utilizing TalenTeam’s Skills Transformation Suite, so that relevant learning to close skills gaps is easy for employees to find and access.

The project team has taken away some good learnings on the journey to becoming a skills-based organization. For example, Fremstad recommends taking the time to validate the skills library to ensure the correct level of granularity for skills and establishing only one skills library to make certain each employee has a single skills profile. Different vendors use different skills taxonomies, which can cause problems when integrating them. She underscores that it’s important to constantly work towards delivering the best user experience possible.

A key element to the success of the pilot is continuously testing and collecting feedback from users, she says. Pending a successful pilot, Norsk Hydro’s long-term ambition is to implement the SAP SuccessFactors Opportunity Marketplace solution – offering AI-driven recommendations to help match employees with assignments, career opportunities, and mentors – and a broader rollout of the talent intelligence hub to all employees. Employees will benefit from having a “single pane of glass” overview for all learning and development opportunities across the organization.

Elevating Skills as the Red Thread in HR

Norsk Hydro is building a skills-based organization rooted in a learning culture that will ultimately deliver benefits to employees and leaders alike. Employees will gain the autonomy, leadership support, and growth mindset to set them on a path of lifelong learning and development, so that they have the skills they need to build their careers and ensure future employability. Leaders will benefit from having data-driven insights that support workforce planning and match the right people with the right task to achieve business goals. They will also be able to attract and develop talent by offering a more compelling career proposition that includes skills growth and re-skilling.

“We believe by doing this,” Fremstad says, “we are creating the foundation for a skills-based organization by starting with learning and development. Long term, we would like to see skills as the red thread throughout our HR processes.”

Find out about talent management with SAP SuccessFactors solutions and the integrated learning experience from SAP SuccessFactors Learning.

WALLDORF — SAP SE (NYSE: SAP) today announced that the SAP Supervisory Board has reached a mutual agreement with Chief Technology Officer and Executive Board Member Dr.-Ing. Juergen Mueller to leave the company’s Executive Board, effective September 30, 2024.

Mueller stated: “I want to address an incident at a past company event where my behavior was inappropriate. I regret being inconsiderate and sincerely apologize to everyone affected.  I recognize my behavior at that moment did not reflect our values at SAP. I take full responsibility and believe stepping down is best for the company. I wish the team continued success.”

Mueller has played a key role in establishing the SAP Business Technology Platform (BTP), which provides the technical foundation for SAP’s  best-of-suite offering and serves more than 23,000 live customers. 

“We thank Juergen Mueller for his significant accomplishments and wish him well in his future endeavors,“ said Pekka Ala-Pietilä, Chairman of the Supervisory Board of SAP SE.

In the interim, SAP CEO Christian Klein will assume responsibility for most of the Technology and Innovation Board area that Mueller leads. The SAP Global Security & Cloud Compliance team will join the Customer Services & Delivery Board area under Thomas Saueressig.

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