Returning human abilities to skills-based hire & talent systems

Abstract

The deployment of skill-based hiring and talent systems faces significant challenges as many human resource and talent practitioners focus on skills but overlook the critical importance of the human abilities when building a future-ready workforce.

A meta-crisis is emerging due to macro factors, presenting fundamental hurdles for businesses. Current approaches to defining skills often fail to recognise the technical distinction and interdependency between skills and capabilities. Consequently, critical durable, non-technical, and intangible capabilities residing within each individual are assumed to be adequately addressed by skills-based taxonomies and solutions promoted by talent platform vendors. This paper delineates eight interconnected challenges that need to be tackled to enhance the effectiveness of skill-based hiring and talent solutions, enabling employers to optimise their workforce and enhance organisational future readiness.

Full text

Marcus Bowles and Theresa Simpkin
RETURNING HUMAN ABILITIES TO
SKILLS-BASED HIRE AND TALENT SYSTEMS

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THE FUTURE NORMAL
White Paper No. 2
Author
Dr Marcus Bowles, Chair, The Institute for Working Futures, https://www.workingfutures.com.au
and
Dr Theresa Simpkin, Founder, Mischief Business Engineering, https://www.linkedin.com/in/terrisimpkin
Published
22 May 2024
Copyright
© 2024
This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any
process without prior written permission from Capability.Co.

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Abstract
The deployment of skill-based hiring and talent systems faces significant challenges as
many human resource and talent practitioners focus on skills but overlook the critical
importance of the human abilities when building a future-ready workforce.
A meta-crisis is emerging due to macro factors, presenting fundamental hurdles for
businesses. Current approaches to defining skills often fail to recognise the technical
distinction and interdependency between skills and capabilities. Consequently, critical
durable, non-technical, and intangible capabilities residing within each individual are
assumed to be adequately addressed by skills-based taxonomies and solutions
promoted by talent platform vendors. This paper delineates eight interconnected
challenges that need to be tackled to enhance the effectiveness of skill-based hiring and
talent solutions, enabling employers to optimise their workforce and enhance
organisational future readiness.

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Contents
Abstract ................................................................................................................................................... 3
1. Introduction .................................................................................................................................... 5
2. The challenges limiting the deployment of skills-based hire and talent systems ..... 6
1. Optimise the workforce, not the jobs people do or the roles they fill .........................................7
2. Define and activate durable human capabilities.................................................................................. 8
3. Develop better talent metrics to show strategic impact ................................................................. 9
4. Avoid bloated skills and competence taxonomies .............................................................................10
5. Emphasise potential and cultural fit ............................................................................................................... 11
6. Rethink credentials ..................................................................................................................................................... 12
7. Avoid bias and exclusion of the next generations of workers ...................................................... 13
8. Find new talent pools ................................................................................................................................................14
3. Conclusion .................................................................................................................................... 15
Endnotes ................................................................................................................................................ 15

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1. Introduction
Faced with the pressure of rapid change and reduced pools of available talent,
organisations have adopted skills-based hiring and talent solutions as a panacea for
their people and culture problems. However, the unqualified push by human resource,
talent and learning platform and application vendors to promote a skills-based
organisational approach is being criticised for over-hyping the promise and
underdelivering on the types of skills an organisation will require to remain competitive.1
Under the rubric of building a skills-based organisation, employers can use automation in
the guise of Artificial Intelligence (AI) to prioritise skills and dynamically assemble the skills
into competencies required to perform role based tasks and activities. Assembly does not
rely on more traditional hierarchical structures, standardised job architectures, national
classification systems, or formal qualifications. Using AI, the assembly of myriad
descriptions of skills into ‘jobs’ provides greater responsiveness to emerging work roles
and supports more flexible and inclusive work environments.
The promise of skills-based hiring offers organisations the capacity to undertake the
unbiased assessment of each candidate’s skills and remove overreliance on highly
subjective assessments of prior experience, tenure and qualifications. However, evidence
is emerging of the dangerous consequences of human resource (HR) and talent
practitioners believing skills-based hiring and the enabling AI technologies can be a
remedy for obsolete industrial age thinking and practices. What is even more frightening
is the failure of many HR and talent professionals to see how strategic challenges are
undermining the promises made by vendors to employers investing in skills-based talent
platforms.

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2. The challenges limiting the deployment
of skills-based hire and talent systems
"Amidst the whirlwind of technological change, the key to organisational
survival isn't just in skills, but in nurturing enduring human capabilities,
fuelling not only our ability to adapt but to flourish amidst disruption."
- Mark Britt, COO Australian Payments Plus -
AI, automation, and technological disruption are fundamentally reshaping traditional jobs
by automating routine tasks, augmenting human activities, and creating new roles.
Consequently, the organisation and execution of work have evolved. In response, the
capabilities demanded from recruits and existing workers have also shifted. These
changes entail the removal, resorting, or updating of both technical skills and human
abilities, leading to the emergence of new job roles that transcend traditional industry,
occupational, or job family classifications.
To amplify current efforts to build skills-based hire and talent solutions, several key
challenges must be acknowledged and addressed. The eight challenges include the
ability to:
1. Optimise the workforce, not the jobs people do or the roles they fill
2. Define and activate durable human capabilities
3. Develop better talent metrics to show strategic impact
4. Avoid bloated skills and competence taxonomies
5. Emphasise potential and cultural fit
6. Rethink credentials
7. Avoid implicit bias and exclusion of the next generations of workers
8. Find new talent pools

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1. Optimise the workforce, not the jobs people do or the roles they fill
Observation:
Building workforce capability has become a future-oriented activity. AI, cloud,
cybersecurity, and quantum computing are automating work at a speed where 6 out of
every 10 occupations will be fundamentally reshaped by 2028, and 30% of the skills in work
roles will need to be transitioned every 3 years. 2
No employer is sheltered from the next waves of technological disruption. As work and
customer needs are reshaped, employers must have the capacity to rapidly shift not just
skills but also the mindsets their workforce. To make a tangible response to the prevailing
global ‘productivity puzzle’ organisations must ‘hardwire’ adaptive capacity into their
cultural DNA.
The following conundrum facing one global organisation encapsulates the challenge
facing all HR, people, culture, and talent professionals.
For the first time, validated data from one major employer confirms that their five-year
strategy cannot be fulfilled unless they transition 22% of the skills possessed by each of
the 42,000 employees every two years. Additionally, the jobs of at least four thousand
workers are susceptible to becoming redundant. To improve retention, an investment in
creating a career corridor is essential to mobilise talent in readiness to access jobs and
careers that are still in the process of being created.
The scale of optimising the workforce confirms that the use of discrete, linear, tactical
solutions cannot add value if the scope of the core problem is underestimated and not
fully appreciated. Expecting a response to rapid and widespread change to be managed
one skill or a job at a time is naïve and ill conceived.
In this example, the organisation consciously deployed an AI-enhanced talent platform to
support new ways of managing their HR processes. But their greatest challenge was to
deliver a culture that hard-wires into every employee the mental models to embrace new
values centred on renewable energy, innovation, and a customer-centred approach to
doing business. Fundamentally, t’s not automation that will determine success, but the
investment in the five universal human capabilities that that will align how people think
and are disposed to act (mindsets). To do this, the investment in the skills-based talent
model must scale beyond job performance to hire and develop a workforce with the
appropriate mindsets able to build future competitiveness.

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2. Define and activate durable human capabilities
Observation:
If over 65% of all future role profiles will be composed of tangible, non-technical and
human capabilities, why are HR practitioners so fixated on developing role profiles and
workforces with the more perishable technical skills?3
In today’s business world, technical skills drive agility and efficiency. Yet, averaging just
two and half years, their limited longevity is often underestimated. Relying solely on
technical skills for long-term success is unsustainable. To bolster the workforce,
understanding skill durability and relevance to individual roles is vital. While technical skills
are easier to define and flexibly assembled into job
architectures, they increasingly have a shelf-life of less than
2.5 years.4 However, durable human capabilities like critical
thinking, problem solving, collaboration, creativity and
empathy that truly empower employees, remain stable and
are adaptable beyond a decade.5
Human capabilities are paramount but often overlooked.
Frameworks like the Working Futures™ Human Capability
Standards offer a model for assessing and enhancing
attributes. Unlike technical skills, human capabilities unite both skills and mindsets that
are tacit and acquired through experiences that remain embedded in context and
culture, even if an employee departs.
Figure 1 The scope and durability of skills, competencies and capabilities
Crude efforts to sort ‘hard’ and ‘soft’ skills ignore durability and is wholly inadequate when
attempting to predict skills required in an emergent and future workforce. Bundling the
more durable, human abilities with technical skills is akin to placing the Versace™
handbag in the two-dollar shop!
Bundling the more durable,
human abilities with technical
skills is akin to placing the
Versace™ handbag in the two-
dollar shop!

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3. Develop better talent metrics to show strategic impact
Observation:
Existing talent metrics used to justify an organisation’s investment in skills-based hire
initiatives or to deploy AI-enhanced talent platforms are myopic and too tactical to
successfully scaffold long-term success.6
Traditional HR metrics, like cost to employ, time to competence or employee turnover,
offer short-term insights but fail to gauge the true value of the workforce or future/latent
productive capacity. Executive dashboards must move to include holistic metrics such as
Total Human Capital Value (THCV) or Workforce Agility Score (WAS), focusing on long-
term human capital impact. THCV, a potent metric for commercial organisations,
traditionally assesses worker performance against employment costs but overlooks the
broader value of human assets beyond what contribution they make in a job role.
Recognising humans' intangible capabilities like relationship-building and innovation is
essential. Therefore, metrics should assess both visible skills and less tangible but highly
valuable human assets, reflecting collective intelligence and adaptive capacity
embedded within the organisation.
As warned by David McClelland in the early 1980s, companies must go beyond relying on
skills and competencies as checklist confirming likely task performance and be more
intent on examining the underlying characteristics and nature of a person.7 To achieve
this end, skills-based hire and talent development metrics must show THCV by tracking
both the proverbial tip of the iceberg where skills visibly enhance current performance
and the less visible, latent human capabilities that fuel the capacity to adapt and respond
to future contingencies and inevitable uncertainties (See figure 2).
Figure 2 McClelland’s skills and competency iceberg reimagined

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4. Avoid bloated skills and competence taxonomies
Observation:
By their very nature, most skills currently deployed to optimise job performance are highly
perishable, and so durability of a skill becomes a major issue if investment in learning and
development is limited to short-term, tactical outcomes.
Skills-based hiring, touted as the solution to managing complex skill taxonomies,
promises better talent matches and a wider talent pool through AI-driven platforms.
However, relying solely on skills can overlook critical human capabilities and lead to
resource misallocation. Adding further complexity by devising even deeper skill
descriptions and expanding taxonomies may over-complicate HR processes, diverting
attention from essential skills. Despite AI support, maintaining vast frameworks consumes
resources and risks diluting focus from durable skills. Ultimately, if not managed
effectively, skill taxonomies may exacerbate rather than alleviate prevailing workforce
challenges.
Having deeper more complex descriptions of the skills required to hire and develop staff is
irrelevant if senior executives cannot standardise where they place scarce resources
already being hived off to fund technology change, cyber protection, improved customer
experiences, and mitigating growing supply chain inefficiencies. This only serves to shift
focus away from the handful of durable human capabilities that compose over half of all
emergent and future work profiles. By focussing on building human capabilities,
companies can selectively invest in the ‘bolt-on’, increasingly perishable technical skills
required to perform in new work roles at every level of work (figure 3).
Figure 3 Mix of technical, common and human skills and capabilities by level of work

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5. Emphasise potential and cultural fit
“You don’t hire for skills, you hire for attitude.
You can always teach skills.”
- Herb Kelleher, Founder, Southwest Airline -
Observation:
Demonstrated skills or learnt knowledge are an increasingly small percentage of the total
capability a human can bring to an employment exchange. Maintaining a narrow focus
fails to effectively report the true value of each candidate to the employer.
While many would argue that a resume has never been a valid tool by which to determine
candidate suitability for roles, in a world of generative AI, written resumes become even
less of a reliable tool to assess and select recruits. This is being off-set as skills-based
hiring uses AI to provide an effective means to predict the success of a candidate in a job
role. However, a skills-based hiring process seeking to recruit the person with the skills to
quickly reach high performance must not ignore the importance of a candidate’s
potential beyond the immediate job vacancy.
Employers must prioritise recruiting for potential because a sole focus on what a
candidate can do today is no guarantee they can perform in a different cultural context
tomorrow.8 While skills are essential for immediate tasks, examining latent potential
ensures the hiring process also examines mindsets associated with learning and
adaption to a candidate’s new work role and professional relationships. This consideration
becomes immeasurably more important as technology disrupts work roles and
workplaces.
Investing in people with latent potential has two profound advantages. Firstly, as human
capabilities are developed, so the capacity to learn, adapt, and be more resilient
becomes hardwired into how people think and act. Secondly, employees and the
workforce can secure a baseline on available latent potential that extends beyond a
current job role. With a baseline showing additional capacity in the workforce, the
organisation can harness and leverage it to improve future-readiness, innovation and
responsiveness to new opportunities.
By using a standardised psychometric assessment for human capabilities, an employer
can attract candidates with compatible skills and aligned values. For the candidate and
existing employees, assessing for human capabilities provides personal benefits through
greater insights into both their superpowers and the challenges that may affect
performance, interactions with others, and their choice of careers.
For all parties involved, the assessment tool and resultant report uncovers both tangible
skills (visible) and intangible mindsets (hidden) that can drive more successful
employment and development exchanges.

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6. Rethink credentials
Observation:
A belief has emerged that skills will replace credentials in the hire process. This binary
choice between skills and education fails to recognise that alternative credential models
have emerged that allow workers to acquire experience and demonstrate tangible skills
and intangible attributes in ways that can incrementally contribute towards formal
qualifications.
In a skills-based hiring approach, individuals are assessed according to what they can do,
rather than solely on their formal qualifications, tenure, or experience. However, a
prevailing myth has emerged that using vendors offering the vast array of skills
taxonomies and related short courses will stress the competence of a candidate over the
credentials they hold.
There is a macro-problem where formal credentials such as qualifications are being
devalued in the hire process. A mismatch exists between what a graduate’s degree says
they can do and how much employers trust these assertions. As technology continues to
disrupt the labour market, the disparity between its pace of change and the sluggish
adaptation of obsolete, discipline-based curricula widens.
As the suppliers of traditional vocational, technical, and higher education credentials fail
to develop job ready graduates and fail to deliver sufficient numbers of employable
graduates to satisfy demand in current and emerging work roles, the void is being filled by
new approaches promoted by the owners of demand.9 Professional associations,
employers, and vendors have developed alternative credentialling models that use digital
badges and micro-credential to open the talent supply pipeline and to tap into non-
traditional sources of capable employees.
By the end of 2024, the targeted agenda to develop the future workforce using human
capabilities will see validated micro-credentials, authorised by respected third parties
(e.g., universities, admissions bodies, or professional associations) and assessed using
evidence gathered in the flow of work, available to nearly a million Australian students,
professionals, and employees. Collectively, providers of digital badges and validated
credentials are predicted to issue over 90 million badges across the globe in 2024.10
Indeed, the recently released Universities Accord document supports the use of more
innovative, collaborative methods and mechanisms such as micro-credentialling to
establish robust but responsive alternative to traditional education pathways and
qualifications.
Leading employers are ensuring credentials are globally portable, validated by trusted
third parties, and assure a person has demonstrated skills application or capability uplift.
Backed by rich metadata and robust assurance mechanisms, validated digital
credentials can enhance skills-based hire and talent development processes.

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7. Avoid bias and exclusion of the next generations of workers
Observation:
There is a noticeable shift in the values expressed by the next generation of workers
compared to those evidenced by most businesses. The challenge lies in ensuring that
architectures and AI supporting skills-based hiring do not inadvertently exclude the new
generation of employees by failing to adequately engage, develop, or support their
attitudes.
In offices and popular magazines, we often see leaders portraying the new generation of
employees as lazy and disengaged. However, the reality is that these employees are more
pragmatic in their efforts to achieve a work-life balance. They aim to work to live rather
than live to work. While compensation is important, the employee value proposition (EVP)
used to attract them must address personal development, career growth, wellbeing, and
engagement in a meaningful purpose. Social relationships, work flexibility, and
contributions to personal and societal well-being are also
significant.
As the generations born after 1996 overtake Baby Boomers in
the workforce, implicit or overt bias poses one of the largest
challenges for companies aiming to have their leaders
refrain from turning talent processes into mechanisms to
imprint their personal preferences. This issue is not limited to
skills-based organisations or hiring processes. It reflects a broader and insidious problem
where previous leadership talent recruitment and development processes prioritised
technical skills over the human capabilities required to cultivate a more authentic,
collaborative, adaptive, resilient, and empathetic leadership cadre.
Skills and performance may be an insufficient basis to build an inclusive talent or
workforce development strategy. As supported by insights from employers in both the
public and private sector, managers who had been with the organisation for over 20 years
and consistently rated well on their performance appraisals were still found to be toxic.
When all human capability were rated two steps below expected level, a subsequent
examination of HR data showed that while forming less than 10 percent of all managers,
these managers were responsible for over 80 percent of the attrition rate for new recruits
who had left within the first 12 months from selection. The highest exit rates were women
and those under 25 years of age. Beyond the retention deeper data analysis also showed
these managers’ areas of operation were in the lowest band of scores for employee
engagement, participation in development programs, and key cultural indicators.11
Skills and performance may be
an insufficient basis to build an
inclusive talent or workforce
development strategy.

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8. Find new talent pools
Observation:
The response to a lack of personnel to support attainment of long-term strategic goals
and disruptive digital and data advances has been to headhunt from other employers or
to attract scarce talent by paying more with no corresponding productivity uplift.
Ultimately, these actions fail to address scarcity and drive up human resource costs,
reduce the loyalty of talent to the company, and further tighten the focus on technical
skills required to undertake critical job roles in emerging areas of work such as
cybersecurity, cloud, data analytics, quantum computing, renewables, personal and
home care, and such like.
Given the shortage of talent in the labour market, employers should assume they need to
look to non-traditional pools of talent. The largest local pools to source alternate talent
supply are currently falling into four major groupings; (a) School leavers, (b) military
veterans transitioning to new careers, (c) employees in areas of work or careers that are
in decline due to economic or technological change, and (d) people attracted to a
company because they believe they can flourish in the environment or perceive an
aligned purpose.
For some employers, they can look further afield to find and contract talent. When labour
supply is limited, particularly for emerging work roles in digital, data, and AI roles, talent
may be sourced anywhere in the world where appropriate internet connectivity exists.
When building new talent pools, whether local or global, most employers need to set
discovery parameters that go beyond the simple search for demonstrated skills. The
talent search process and the hire process need to remove implicit and overt bias and
confirm cultural-fit. The aim is to find and build a pool of talent with a supply of
candidates exhibiting appropriate skill-sets and mindsets that orient their employment
preferences towards one employer. It’s a more complex, longer-term strategy, rather than
a reactive search for the person (perhaps unicorn?) with the right skills able to fill a short-
term talent shortage.

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3. Conclusion
Successful talent strategies appreciate that we must look for more than skills from our
employees and contractors. While many will group attitude, behaviours and mindsets
under skills, the word should not, and cannot, be used if it diverts our attention away from
intangible, more durable human abilities. When handed to HR professionals using legacy
language from the industrial age, the whole skills-based hire approach is in danger of
being dumbed down to a focus on tangible, technical skills required to perform well in a
job.
Companies relying on ‘simple to see’ and understood skills approach overlook human
capabilities, risking the neglect of crucial intangible qualities employees must nurture and
organisation must have access to if they wish to build an adaptive workforce for today
and future read workforce for tomorrow.
—END—
Endnotes
1 Effron, M. (February 12, 2024). Is the Juice Worth the Squeeze? Questions About Becoming a Skills-based Organization, Talent
Strategy Group. Retrieved 2 March 20-24 at https://talentstrategygroup.com/is-the-juice-worth-the-squeeze/
2 Manyika, J., et al. (2017). Job Lost, Jobs Gained: Workforce Transitions in a Time of Automation; McKinsey Global Institute: New York.
3 Manyika, et al, 2017; & Deloitte Access Economics (2017). Soft skills for business success, DeakinCo., Melbourne.
4 Taylor, A., Nelson, J., O’Donnell, S., Davies, E. and Hillary, J. (2022). The Skills Imperative 2035: What does the literature tell us about
essential skills most needed for work?, Slough, National Foundation for Educational Research.
5 Original reference framework was issued in 2012, Capability.Co (2023). Human Capability Standards Reference Framework 2023,
Fifth Edition, Enterprise edition, Sydney. Available at https://capability.co/human-capability-standards and
https://www.workingfutures.com.au/human-capability/
6 Manyika, J., et al. (2017). Job Lost, Jobs Gained: Workforce Transitions in a Time of Automation, McKinsey Global Institute: New York.
7 McClelland, D.C. (1985). How motives, skills, and values determine what people do. American Psychologist, 40(7), 812.
8 Groysberg, B. & Abrahams, R. (2014). Manage Your Work, Manage Your Life. Harvard Business Review, 92(3 ), 58-66.
9 Bowles, M., Ghosh, S., & Thomas, L. (January 2020). Future-proofing accounting professionals: Ensuring graduate employability
and future readiness. Journal of Teaching and Learning for Graduate Employability, 11(1), 2–23.
10 1Edtech, trend analysis for issuers compliant with Open Badges, March 2024.
11 Capability.Co (2013). Impact analysis of Future Ready Discovery and Activation Solutions, Internal report.