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From Skills-Based to Performance-Based Organisations: A Necessary Shift for HR, Talent, and L&D?
The idea behind Skills-Based Organisations (SBOs) is undeniably appealing. At its core, it promises to identify & align skills with organisational needs and tasks, providing a structured framework to drive individual and collective growth. However, as with many emerging concepts, the practical execution of SBOs has been co-opted by vendors pushing their own technologies and solutions as “the only way to achieve this vision”. Unfortunately, a fragmented approach often oversimplifies human capability and creates more complexity than clarity.
Jon Fletcher
HR & L&D AI Strategist & Innovation Leader
9 October 2024
Related topics
Boosting human skills to succeed in an AI world
Leadership development programmes
Training courses
In principle, the idea of focusing on skills first should make sense. After all, roles are built around the capabilities needed to complete specific tasks. However, the reality is that many organisations already incorporate “skills” when designing their jobs, even if they don’t explicitly refer to themselves as "skills-based." In my view, and what I am seeing, is the shift to SBO, as marketed today, reduces roles to a disconnected set of skills that aren’t align to tasks, creating a narrow focus that risks losing sight of the bigger picture—how employees capabilities and mindset contribute, support and drive the overall organisational strategy.
Additionally, implementing an SBO framework requires organisations to track a myriad of skills, build inventories, align them to business outcomes, and manage an ongoing transformation. Most companies simply aren't prepared for the heavy lift this requires. What should be a tool for simplification often ends up creating more confusion. Moreover, much of the current focus on SBO seems more like a trend driven by external vendors capitalising on the buzz rather than a genuine organisational need. This has led many in HR and L&D to question whether the trend is just another overhyped fad.
It’s also important to note that there is a disconnect with the term ‘Skills’, as it often means different things to different individuals and organisations. I do feel like it's becoming a buzzword that professionals, vendors and organisations are using more than having meaning under it.
So, what if we pivoted away from the fixation on skills and focused instead on creating Performance-Based Organisations (PBOs)? By shifting the narrative, we can move from the notion of simply categorising employees by their discrete skills, which ideally are align to their daily tasks to fostering an environment where performance—both individual and team-based—is at the forefront of every decision.
In a PBO, the focus shifts from a granular breakdown of skills to a more holistic view of performance. Here, the role of HR, Talent, and L&D becomes one of driving employee effectiveness, team unity, and alignment with organisational goals. It’s about recognising that an employee's value is not just in what they can do but in how they perform in the context of their role, the team, and the organisation at large.
The concept of a PBO recognises that skills, while crucial, are not the only drivers of performance. Employees capabilities, experiences, their knowledge, organisational culture (and more) all play critical roles in an employee’s ability to succeed. These human elements are challenging to capture in a skills inventory, yet they are often the factors that differentiate high performers from average ones.
The other element, which for me is vital, is the refocus on human-centric capabilities that underlie performance. Attributes like emotional intelligence, adaptability, and collaborative problem-solving are often overlooked in skills-based frameworks, yet they are critical drivers of sustained success. These human elements must be at the heart of any performance-driven approach to unlock the potential of individuals, teams and their organisations.
By emphasising performance, organisations can realign HR, Talent, and L&D functions to focus on outcomes rather than processes. The objective has shifted from simply aligning individuals with the right skills for specific tasks to ensuring employees contribute meaningfully to broader organisational goals. This is achieved by integrating their tasks, skills, capabilities, mindset, and human behaviours (and more) into overall their performance.
Moreover, a PBO fosters a more inclusive and team-oriented culture. One critique of SBOs is that it can drive individualistic behaviour—employees are incentivised to develop and validate their skills in isolation. A PBO, on the other hand, puts the focus on collective achievement. When performance is measured at the team or organisational level, collaboration, mutual support, and unity naturally become higher priorities , without loosing the sight that the employee still has performance measurements they are accountable too.
Shifting towards a PBO doesn’t mean abandoning the idea of tracking skills altogether. Rather, it requires a recalibration. Skills are still valuable, but they should be viewed as part of a broader toolkit for enhancing performance, not the end goal. HR, Talent, and L&D professionals should look at performance metrics that consider both individual and collective contributions, with skills being one data point among many.
The key to success in a PBO is clarity. HR leaders need to define what high performance looks like in their specific organisational context. This includes setting clear, measurable goals for individuals and teams, aligning performance objectives with broader business targets, and ensuring that employees have the support they need to achieve these objectives.
This shift isn't easy, nor is it simple to implement. However, I believe AI has triggered the necessary conversations for real change, potentially helping to refine the HR function and its core purpose within the organisation. I’m more than happy to discuss this with anyone interested.
I want to point out that many of the elements and principles that underpin an SBO are the same for a PBO. This isn’t a wholesale shift, and skills will always be important, but they should not be the ‘sole’ focus, as I hear in most conversations I have around this.
By shifting the narrative to a Performance-Based Organisation, we can drive individual development, team unity, collaboration, and alignment with organisational goals, while also positioning employees to leverage AI effectively in supporting performance. In doing so, we ensure that they are not reduced to a collection of skills but are recognised and valued for their broader contributions to the organisation.
This shift will help HR, Talent, and L&D professionals move from managing complexity to driving meaningful performance and impact. Let's ensure the conversation isn't about whether we're "skills-based" or not but about how we're achieving our organisational objectives and maximising the potential of our people.