Business leaders routinely invest significant resources to develop and deliver ambitious business plans, taking time and great care to work through the strategic, operational and financial details. But the essential contribution of key people, and hence skills, to the successful implementation of the strategy is often neglected. Consequently, a damaging imbalance emerges between growth targets and the core capabilities required to achieve those goals.
This disconnect has become exacerbated in recent years. As IT becomes a more critical enabler of business today, many IT organizations have failed to adopt a comprehensive human capital strategy. While much focus has been placed on systems, technical capabilities and IT assets, ensuring that the organization has the proper talent in place and is equipped with the right skills to align with and drive the evolving business capabilities of the enterprise has typically taken a back seat.
Although the effects are not always immediately obvious, experience has shown that the inability to predict key skills requirements and ensure that the right talent is in place when and where needed undermines business performance in the long term. The results are missed growth targets, mediocre productivity and higher recruiting costs.
A DANGEROUS SKILLS GAP LOOMS FOR MANY COMPANIES
The risks of a supply and demand mismatch when it comes to key skills are likely to only grow as technology continues to become a leading driver in businesses worldwide. According to a Gartner report, 42% of CIOs globally feel they do not have the right skills and capabilities in place to tackle future business challenges.
First, the scale and pace of large organizations make it challenging to maintain a skills portfolio that is business-driven. New projects or initiatives in a single division can generate demand for dozens of new personnel overnight, while recruitment and training teams can take months to catch up with those skills gaps.
Second, siloed business portfolios, where each division has its own technological needs and business goals, create an opaque view of IT skills needs. Incorporating these varied needs under a unified and structured architecture for skills across the entire organization requires balancing critical business function needs across all company divisions.
Third, every IT organization has key employees with a disproportionately large impact on the overall functioning of the company due to their specific technical skills or deep understanding of the business. Yet typical approaches to succession planning and recruitment often focus more time and energy on the executive tier, to the exclusion of less visible but often more vital roles deeper within the organization.
Lastly, the rapidly changing technology landscape demands that companies build greater agility in developing and acquiring the skills needed to outperform competitors. The skills required to succeed today and those that will support the technology infrastructure of tomorrow may be substantially different, and any effective skills management strategy must be agile enough to keep pace with the fluid and evolving business landscape.
As a result of these challenges, many companies resort to reactive skills management to staff their businesses. They attempt to fill skills gaps only when an urgent need arises, or they simply execute with insufficiently skilled employees and accept the resulting negative impact on performance. This ultimately leads to missed growth targets, failure to maintain schedules, lower productivity, higher recruiting costs and a decline in staff morale. Our experience suggests that these problems are much more common than many executives would like to admit.
A TOP-DOWN APPROACH TO AN EFFECTIVE SKILLS MANAGEMENT STRATEGY
Responsible, farsighted management anticipates the problems that imbalances in supply and demand for key skills may cause and integrates critical skills planning when setting business targets. Effective skills management requires a combination of deep sector knowledge and sophisticated analysis to appropriately factor in the interrelationships between multiple factors. (See Exhibit 1.)
The process must start with the CIO and IT management taking an in-depth look at the critical skills that drive the business and the current competency levels within those skills. The next step should focus on establishing a comprehensive framework and inventory of skills that provide a comparative view of supply and demand today and into the future—factoring in both core skills that drive the business as well as commoditized skills that “keep the lights on.” Finally, this comprehensive skills framework needs to be integrated with HR processes to efficiently source talent with the required skills—either internally or through recruitment and third-party vendors.
ENGAGE WITH THE BUSINESS TO UNDERSTAND SKILLS NEEDS
As a first step in developing an overall skills strategy, IT organizations often expend considerable effort in understanding the existing skills of their workforce. But these initiatives typically take considerable time and effort while still being prone to failure due to changing internal and external environments. Our experience with multiple clients has shown that it is more effective to take a top-down approach that prioritizes the skills needed to run the business and gain a competitive advantage, rather than assessing current capabilities.
The best approach begins by first engaging the lines of business to understand the key capabilities that IT currently supports or will support in the future—distinguishing between core and commodity functions. Core business capabilities are those which directly contribute to executing the firm’s vision, such as customer mobile app development or cybersecurity functions. Commodity business capabilities, on the other hand, are those that play a supporting role in “keeping the lights on,” such as upkeep on the company email server or tech support functions.
ESTABLISH A SKILLS FRAMEWORK AND REPOSITORY
In order to identify and mitigate potential pain points around critical skills needs, management must understand not only how to classify needed skills, but also what future need there may be for those skills. This is the same supply and demand perspective that might be taken with any other principal resource required to run the business. In the case of employee skills, however, the multitude of additional factors affecting the supply side and the uncertainty of future operational needs can quickly complicate the picture.
To make a supply and demand assessment simpler, Kurt Salmon employs a framework that uses current inputs to predict future needs while also pairing with reporting tools that make it straightforward to identify and mitigate future skills gaps. For each critical skill identified, the framework yields a prognosis of the future balance of supply and demand; estimates the shape of the skills pyramid at each point in time; and makes clear the overall implications for recruitment, training, retention and redundancy.
Employed to deliver regular forecasts over a defined period of time, this framework specifically highlights when and where certain skills are likely to be in short supply. Forecasting and monitoring key capability shortages over time provides an early warning-system. This enables organizations to identify and quantify potential shortages and then take practical measures to overcome them.
To maximize the impact of the skills framework, it should be viewed as an iterative process, integrated into a continuous tracking system such as a dynamic online skills repository. By encouraging managers to build their own skills portfolios, the organization as a whole can gain greater clarity into the alignment between existing skills and projected future demand. Ultimately, the effectiveness of such a dynamic system is dependent on its regular use by managers —an outcome that is best achieved by integrating the skills framework into key HR processes.
INTEGRATE SKILLS MANAGEMENT INTO KEY HR PROCESSES
The skills management framework provides an effective inroad to empower HR and talent sourcing teams to more directly manage skills demand and supply through both internal and external hires. Critical skills should be highlighted in relevant job descriptions to ensure that HR processes—hiring, reviews, promotions, etc.—are appropriately aligned with the skills needs of the IT organization.
Together, HR and the IT organization must prioritize core skills as a way for the company as a whole to maintain its competitive advantage and should consider this in determining retention, redundancy, hiring and training processes for internal resources.
Job openings focused primarily on core skills should either be fulfilled internally or by hiring full-time employees, making it easier to manage and retain these critical skills inside the organization. On the other hand, roles that draw largely on commodity skills can be fulfilled externally—by hiring contractors or consultants or by leveraging managed service provider (MSP) contracts. This lowers the cost of meeting commodity skills needs and also ensures that the organization creates the agility to scale its commodity skills portfolio.
As success in today’s business environment depends increasingly on cutting-edge technological capabilities, organizations that have defined a strategic approach to identifying, prioritizing and acquiring the necessary skills will have a distinct advantage over the competition. Spotting potential disconnects in the supply and demand for key skill sets relies on understanding a complex web of factors and interrelationships and an in-depth regional and industry analysis. It takes experience to work through the inputs that will provide the early warning system that many businesses so clearly need.
With this information in hand, however, IT leaders can mitigate potential skills shortages, prioritize hiring, support business lines across the organization and remain agile enough to adapt to shifting business priorities. Adopting a strategic, business-centric approach to skills management enables IT to become a trusted, long-term partner, supporting the business demands of today and tomorrow.
7 October 2015