Creating a common language of skills in a skills-based world  

More than a third of New Zealand HR leaders are concerned about a lack of workforce capability and future skills in their organisations, and designing talent processes around skills is a top HR priority. Yet very few organisations are actively monitoring the skills their people currently possess or have a clear view of emerging skills versus skills in decline.

It’s quite possible LinkedIn has greater visibility of your talent’s skills than you do. That’s not only a missed opportunity – it’s a potential talent risk.

The first, and often overlooked, step in designing talent processes around skills is articulating a clear and consistent skills taxonomy. A common language for how you define and organise skills data.

You can download or buy a skills and competency taxonomy off the shelf, but a generic library is unlikely to meet your unique needs as an organisation. The magic lies in its personalisation. When your people can see how skills connect with career opportunities and leaders can understand the strategic context for those skills, you can really leverage the power of your skills taxonomy.

Here’s how a skills taxonomy can support your journey towards better workforce insights, as well as building a robust careers framework and/or talent marketplace. 

Skills, capabilities and competencies are often used interchangeably, but they are all different.

Mercer defines skills as ‘the ability or knowledge possessed by a person, which may be required to perform a task, assignment, gig, job, or role’. This can include core skills, technical skills, certifications and licenses. They may relate to learning, jobs, opportunities or career paths – or help you match talent to specific work tasks.

Here’s an example. Business Acumen is a broad capability, but as you focus on more granular skills you might identify a range of skills around financial modelling and data analysis. This could include a specific skill of Power BI – the ability to use a specific platform for business intelligence.

You can then overlay your skills taxonomy with opportunities to assess for skills proficiency to help guide development and upskilling.  Armed with this knowledge, you’ll find it easier to match people with specific skills to the right work. Measuring proficiency also helps us understand what good looks like, providing a roadmap for self-directed or AI-encouraged upskilling. 

This is the power of a skills taxonomy.

At its simplest, a taxonomy is a way to organise data – in this case skills – that the organisation understands. In today’s markets, it needs to be a dynamic, living document or ecosystem – constantly updated as new skills emerge and others fade. 

A skills taxonomy makes it possible to create a single source for skills management. That can help you make better workforce planning decisions, benchmarks skills and job trends, and connect skills data with other HR automation tools.

So, what does that single source look like? It could be as simple as a shared directory - as long as data is maintained – or as automated and intuitive as an AI-enabled talent marketplace.

With an accessible platform to share your skills taxonomy, you’ll have more visibility over which skills are important to your company’s future and why reskilling matters. You can also encourage talent movement within the organisation.

Let’s say you have a great business analyst within your sales and customer service team. But she is feeling frustrated and ready to move into a new role. Your finance team is actively recruiting for a business analyst with these precise skills. Yet neither the analyst nor the finance team has visibility of this opportunity. So, the risk of the analyst taking an external job opportunity is far greater.

A common tech platform for your skills taxonomy internally makes it simpler to find the right people to do the right work – whether they are internal or external hires.

In this case, that business analyst could have been proactively nudged with a vacancy alert on a talent marketplace – or at the very least, her manager could have seen that there were other career options.

Often we see companies realise there are more commonalities than differences in the skills they need across different areas – and they can uncover talent in more meaningful ways. This can also remove potential hiring biases and provide a more fair and equitable way to share new opportunities rather than depending on traditional ‘who you know’ networks.

Understanding the skills in your organisation can help unlock your people’s capability and capacity. It can also provide valuable data insights for strategic workforce planning, talent, succession and mobility decisions, and even skills-based pay practices.

Despite these benefits, Mercer research suggests just 28% of companies are gathering information on the current skills among individual employees – a finding that remains stubbornly low.

Meanwhile 47% of companies report that they are yet to develop an approach to classifying skills at any level of their company, a minimal change since 2021.

This feels like a missed opportunity, because creating a skills taxonomy doesn’t need to be a complex process or require major technological change. You can start with one business area or job family, or start with a low-fi framework – it just needs to be more scalable than a hidden Excel spreadsheet.

It’s also the first step towards building a talent marketplace, which can help you supercharge the value of a skills taxonomy.

If some parts of your organisation have their own skills inventory, with varying degrees of scale and application, you will first need to resolve disparate interpretations of similar skills and bring these inventories together. We also sometimes see a lack of alignment on who measures the level of proficiency – the employee, leader or AI? Your culture should be the guiding principle here.

The most important thing is to make the skills taxonomy accessible so people can use it to help navigate their careers. It can help them think more broadly about their portable skills as well as their domain expertise. Coupled with a visible career framework, this can help them identify more lateral opportunities, diverse experiences or even mid-career changes. It can also get your organisation ready for skills-based pay discussions – 52% of the respondents to Mercer’s Pay for Skills Survey said this is a strategic necessity for revamping key technical skillsets.

Bringing together a validated skills taxonomy and talent marketplace can unlock the full potential of your organisation, your leaders and your employees. The shelf life of skills continues to decrease while the war for talent continues to intensify. That’s why we need to shift from a mindset of redundancy to one of reinvention.

Employees need to build new skill sets to be viable in the marketplace and have sustainable careers. By helping your talent understand the full scope of their skills, and helping them reskill in relevant and meaningful ways, you can transform the economics of work and reduce the cost of hiring and training. And by making it effortless, they have more reasons to stay with you, build longer-term careers and grow their earning potential.

It’s the perfect balance of empathy and economics – and it starts with a common language for skills.