How a Skills-Based Organization Closes Workforce Gaps in the

Age of AI

Across industries, executives and HR leaders face an urgent challenge: ensuring their workforce has the right skills to keep up with emerging technology and evolving business needs.

The reality? Many professional skills now have a half-life of just 2.5 to 5 years. That means companies must continually assess and upskill their workforce to stay competitive

At the same time, AI and automation are reshaping the labor market. With over 120 million workers potentially impacted by automation in the next three years, the future of work looks different—and traditional workforce planning models lose relevance.

Our take: It’s time for organizations to shift from job- and title-based workforce structures to a skills-based approach—one that builds agility, fosters innovation, and ensures long-term success.

What is a Skills-Based Organization?

A skills-based organization shifts the focus from job titles and tenure to capabilities and expertise. Instead of structuring work around rigid roles, these organizations dynamically align talent to business needs, ensuring employees are placed where their skills create the most impact.

In a traditional job-based model, employees are hired, promoted, and rewarded based on job descriptions, degrees, and experience levels. This can limit internal mobility and skill development, slows innovation, and often overlooks hidden talent within the organization.

By contrast, a skills-based model identifies and maps workforce capabilities, allowing employees to move fluidly across roles, projects, and teams. It fosters agility, equity, and continuous development, making organizations more adaptable in a fast-changing market.

Making the shift to a skills-based approach removes barriers to talent mobility, improves workforce resilience, and helps companies stay ahead of disruption. It’s not just a change in HR strategy—it can become a competitive business advantage.

Overcoming Barriers to a Skills-Based Organization

A skills-based approach unlocks agility, innovation, and internal mobility—but making the shift isn’t easy. Many organizations face deep-seated challenges that slow or prevent progress. Here’s what typically stands in the way:

• Cultural Resistance: Change is hard, especially when it challenges long-standing norms. Leaders and employees may resist shifting away from traditional job structures, making culture the biggest hurdle to success.
• Talent Hoarding: 43% of organizations report that managers block internal talent movement, fearing they’ll lose top performers. This limits workforce flexibility and prevents skills from being deployed where they’re most needed.
• Limited Internal Mobility: Two in five organizations say it’s easier for employees to find new roles externally than within their own company. Without clear career pathways, businesses risk losing high-value talent.
• Misaligned Incentives: Performance management systems still reward job titles, not skills. If promotions and pay increases are tied to traditional roles, employees have little motivation to develop new capabilities.
• Outdated Work Design: Rigid job structures make it harder to adapt. Organizations must rethink work models to prioritize skills over static job descriptions and create room for flexibility.
• Inflexible Learning & Development: Many training programs still cater to fixed job roles rather than evolving skill needs. A skills-first approach requires continuous learning opportunities to keep employees engaged and prepared for the future.

5 Steps to Build a Skills-Based Organization

Shifting to a skills-based approach doesn’t happen overnight. But the biggest impact comes from starting somewhere—and these five steps will set your organization on the right path:

1. Develop a Skills Framework

A skills framework (or taxonomy) provides a structured way to categorize workforce capabilities. It helps organizations understand what skills they need today—and what they’ll need tomorrow.

• Example: A healthcare organization might structure its framework into categories like clinical skills (telemedicine, diagnostics), digital fluency (EHR systems, AI automation), and leadership (team management, crisis response).
• How? Start with industry benchmarks, align skills to business goals, and update the framework regularly as job demands evolve.

» Pro Tip: Use workforce analytics tools to track skill progression and gaps in real-time.

2. Assess Your Workforce’s Skills Today

Start by conducting a skills inventory to map out your employees’ current capabilities. This means identifying both technical and soft skills across teams.

• Example: A financial services company assessing its workforce might track skills like data analysis, risk modeling, Python coding, and customer relationship management.
• How? Use employee surveys, performance data, and AI-driven skills assessments to quantify existing strengths and pinpoint gaps.

» Momentum Builder: Don’t overcomplicate it. Start small by evaluating one department, identifying the top 5-10 most valuable skills for that area, and assessing where your team stands. This focused approach makes it easier to scale the effort company-wide.

3. Unlock Internal Mobility

Many employees feel stuck in their current roles because promotions and career moves are tied to titles, not skills. Break this cycle by making skills-based mobility the norm.

• Example: Instead of requiring a “Marketing Manager” title for a leadership role, an organization could prioritize key competencies like digital strategy, campaign execution, and team leadership.
• How? Shift performance management, hiring, and career development to focus on demonstrated skills rather than previous job titles.

» Need help? Build an internal skills marketplace where employees can apply for projects or roles based on their capabilities, not just their current job.

4. Leverage Technology for Insights

Use AI and workforce intelligence platforms to track skill development, predict future workforce needs, and personalize learning paths.

• Example: A tech firm using AI-driven workforce analytics found that 40% of its software engineers needed cloud security expertise—leading to a targeted upskilling initiative that saved millions on external hiring costs.
• How? Invest in AI-powered talent platforms that provide real-time insights into skill gaps, helping leaders make informed workforce decisions.

» Consider tools like: Workday Skills Cloud, LinkedIn Talent Insights, or Degreed.

5. Build a Culture of Continuous Learning

In a skills-based organization, career growth is fluid, not linear. Replace rigid career ladders with dynamic, skills-based pathways that support continuous development.

• Example: A manufacturing company introduced “skills passports”—employees earn credentials for skills like robotic automation or supply chain analytics, which unlock new project opportunities across departments.
• How? Offer on-demand training, mentorship programs, and skills-based career planning to keep employees engaged and future-ready.

» HR’s Role: Partner with L&D teams to build a reskilling roadmap aligned with business priorities.

The Future of Work is Skills-Driven

The organizations that embrace a skills-based approach today will have a clear advantage tomorrow. By shifting from rigid job structures to a skills-first model, companies can increase agility, unlock internal talent, and build a workforce ready for whatever comes next.

This isn’t just an HR initiative—it’s a business imperative. Companies that act now will attract, retain, and develop top talent, while those stuck in outdated models risk falling behind.

The time for action is now. What steps will your organization take to bridge the skills gap and future-proof your workforce?

Authors: Dave Hilborn, Glenn Pfenninger, Brian Lynch