The most important part of workforce planning is skills intelligence

An organization’s workforce plan is a huge roadmap that should set it up for success, covering several years and every aspect of the business. For many, “workforce planning” means focusing on managing costs, and deducing where the largest ticket items are on the profit and loss statement. And one of the most significant costs any organization manages is headcount.

To truly plan for the future, every organization needs to take a critical look at how it approaches staffing and supporting its employees. To do this effectively, you must factor in skills–what skills your organization has, which ones it needs, and how to get them. Taking a critical look at your workforce’s skills will be imperative for any business plan going forward.

Skills connect all aspects of the employee life cycle, allow for better decision-making in your workforce, and ensure that your organization has the right talent in place to achieve its business objectives.

Skills are an underused yet critical aspect that helps any organization avoid over-hiring or under-hiring–something that many tech companies could have implemented to avoid the layoff repercussions they’re experiencing now. The challenge, however, is identifying, collecting and analyzing skills at the organizational level, and leveraging skills for a more dynamic look at your workforce.

What is skills-based talent planning?

In today’s skills-based organizations, skills can range from functional (change management), technical (data analysis), or power (leadership), to adjacent skills that can be developed based on current abilities. The idea is to tap into the full range of a person’s capabilities and make people decisions based on skills instead of the traditional structure around jobs.

Skills are the building blocks of all workforce capabilities and essentially affect all talent decisions.

In this rapidly changing business environment, along with technological and social landscape shifts, organizations’ skill requirements are evolving, creating a talent gap for future critical roles. The pace at which skills are becoming obsolete has accelerated in recent years as the half-life of skills continues to shrink while the time that it takes to close a skills gap has ballooned. IBM Research suggests that the half-life of a skill is about five years, with more specific technology skills at just two and a half years. Organizations must find ways to stay ahead with skills for the future.

To remain competitive and shield themselves from talent shortages, organizations must recognize the need to focus on retraining and reskilling, but too often, business leaders don’t know where to begin. Based on a 2022 Deloitte survey, 89 percent of executives say skills are becoming important for the way organizations are defining work, deploying talent, managing careers, and valuing employees. Yet, fewer than one in five are adopting skills-based approaches to a significant extent across the organization. Since making that first step isn’t simple and may vary across organizations, here’s how to break it down to incorporate skills into your total talent strategy.

Identify the overall strategic direction of the organization and align your workforce analysis to business priorities

Understanding key strategic business priorities and goals is fundamental to linking the overall organization’s goal to individual business unit goals. Think about how the overall goals fit into the objective of each business unit. For instance, if a business goal is to catch up to your competition in terms of product development, then you can pinpoint the specific features that your competition has that you’d like to build on.

Once you have an idea of the goals and objectives of each business unit, you can determine what the current workforce resources are, and how they should evolve to accomplish the company’s strategic plan. Inventory your current skills and create a work architecture by mapping work to skills to jobs. Where do the skills gaps exist between the current and projected workforce needs?

This is the opportunity to pinpoint the roles within the department, assess your workforce’s current skills, and benchmark against the industry or your competitors. Evaluate the output from your organization’s perspective, your market, and your overarching goals. Perhaps your competitors have skills relating to certain software, frameworks, or methodologies, and your business does not, but that may be due to their niche — an area you don’t want to tap into.

Video game company Activision consolidated its talent pools into one AI-powered talent intelligence system so that they can have a complete view of all their talent and their skills potential. In addition, they’ve started to look more at skills when it comes to hiring and planning. “We’ll have intake meetings with hiring managers, and we’ll look at our current database and serve up — almost instantaneously — potential candidates and using skills and skill adjacencies to show how the market elasticizes based on specifics that we’re looking for in candidates,” Activision’s Director of Talent Sourcing, Justin Ghio, told Eightfold AI.

Construct a skills-based talent strategy and evaluate how your company’s roles and skills compare with the industry

After determining which areas to focus on and invest in, learn more about those specific skills, and knowledge areas, and perform a deep dive into the most common skills at benchmark companies. Validate your results, and add or remove skills depending on your organization’s goal, in turn delivering business agility and worker autonomy.

A companywide, skills-based strategy will allow you to understand what you are hiring for and how to evaluate prospects. This approach should help gain a deeper understanding of proficiency levels or where candidates may be lacking.

Deeper insights into roles will also allow for succession planning, restructuring, technological enhancements, or other internal moves across the organization. Tailored learning and development suggestions based on skills can help to reskill and upskill employees across the board. Additionally, this approach can provide self-sufficiency for workers to choose their paths based on the skills they want to learn.

The skills-based talent strategy also shows organizations which roles to phase out. For instance, IT manager was a popular title in the previous decade, but now IT has become much more specialized. This system helps find other roles IT managers can move to based on their current skills and potential to upskill.

Additionally, organizations can also decide what to do with a new role or skill in need–whether to build and upskill internal talent, buy or hire external talent, or borrow contingent workers to fulfill their new needs.

The impact of not doing skills-based planning

As work is increasingly performed across functional boundaries and extends beyond current job descriptions, not incorporating a skills-based approach has big repercussions, including stunting organizational agility and not being able to quickly redeploy workers in times of crisis.

Without skills intelligence backing decisions and workforce planning, staffing critical departments are based on guesswork for plugging gaps with internal resources. Labor shortages will persist as talent leaders will continue to look for people with specific backgrounds, an overreliance on degrees, and previous job histories.

A lack of skills-based planning also hurts DEI efforts as qualified candidates are screened out of talent pipelines due to their inadequate job history. Additionally, if organizations fail to upskill or reskill, employee skills will quickly become obsolete, and they will have to look outside the organization to hire talent — a difficult task with today’s skills shortages — and be at risk of losing their existing top talent for new opportunities.

“When you have the kind of transparency for employees to see roles across the company, all of a sudden, you’re empowering them for their career movement,” said Eightfold AI’s Head of Talent Strategy Andrea Shiah. “Leaders must be very comfortable supporting their employees to move to other roles, including the best talent on their team. Because if you’re not going to help your employees find opportunities internally, they’ll look externally.”

Shiah says now is the time to be more transparent and create a supportive environment to promote positive employee experiences. This enables employees to learn new skills or switch roles or departments, which benefits the organization in the long run.

“If you step back and think about it, that’s the right thing to do, and that’s how it should be,” Shiah continued. “The change is necessary to compete into the future.”

Sania Khan is the chief economist at Eightfold AI, the AI-powered platform for all talent, and the author of the upcoming book Think Like an Economist. She previously worked for the U.S. Bureau of Labor Statistics.

This article originally appeared on Inc. in March.