January 30, 2024

Skills management: What is it, and why do you need it?

Editorial Team
Skills management: What is it, and why do you need it?

Hint: It’s the secret to the success of an organisation

You’ve heard it said often enough that the success of an organisation lies in its workforce and the skills they possess. Our workplaces are in a regular state of flux with every day bringing with it a demand for new skills. At the same time, the global labour market is struggling to find talented people with the required skills. In such a situation, the only effective survival strategy for organisations is to build on and develop their employees’ skills. Skills management is the tool that can make this happen.

Read this article for an in-depth understanding of skills management, and how it benefits organisations and individuals alike. You’ll also find tips on how to use skills management to develop a skilled workforce and achieve organisational success.

What is skills management?

A skill is the learned ability to perform a task or activity with a certain level of proficiency. Workplaces are dependent on both hard skills and soft skills. Hard skills are technical skills that can be learned, such as data analysis, coding, and accounting. Soft skills are personality traits (which might be innate but can also be learned to a great extent) that shape the way you work, such as effective communication, empathy, adaptability, and critical thinking. The process of identifying and developing the skills in an organisation in order to match the right people with the right jobs and address any existing or emerging skills gaps is called skills management. In today’s world of work, where employees want more out of a job than just a salary, and skilled workers are an increasingly rare species, skills management is a win-win for organisations of all sizes. Not only does it drive organisational success and productivity, it also meets the needs of the workforce.

Along with skills, the term ‘competencies’ also comes up in any discourse centred around workplace changes. To differentiate between the two, a skill is one of four elements that make up a competency, the other three being knowledge, ability, and behaviour. Given the current demand for competencies and not just skills, many organisations are investing in competency management. The process of identifying and developing employee competencies (both existing and required) in order to support company growth is called competency management. Therefore, while skills management and competency management have different definitions, they are similar in terms of what they set out to accomplish. So, when we speak of skills management in this article, we include both skills and competencies.

Why you need skills management

Skills management is all about empowering the organisation and its people. When done right, it can optimise all of a company’s processes, from talent acquisition and retention to training and leadership development. Here’s how:

Benefits to organisations

1. Right person for the right job

Skills management gives organisations the ability to identify the  skills that are required to reach their business goals as well as the skills their employees possess. With this clarity, they can match the right people with the right jobs. When employees have essential skills and competencies, they not only perform the task they are entrusted with but also excel in it.    

2. Bridging the skills gap with targeted training

Skills management makes companies aware of the core skills and competencies they are missing, which are critical to organisational success. Addressing the skills gap in time will ensure workflow disruptions don’t get in the way of important jobs and projects. While hiring skilled individuals is one way of bridging the skills gap, there are considerable costs associated with recruiting, onboarding, and training newcomers. Upskilling and reskilling existing employees is more cost-effective. However, a lot of companies waste time and money training employees in skills they’ll never use. This calls for targeted training, which assumes greater importance in the face of studies like this one by Gartner, which points to how quickly must-have skills become irrelevant. By pinpointing the exact skills and competencies needed at a given time, skills management helps companies deploy targeted training, giving greater meaning to their learning initiatives.

3. Productivity boost

By assigning jobs to people with the right skills and by investing in the learning and development of their workforce, organisations can guarantee that their productivity will go up. When people are good at what they do, they perform their tasks efficiently. Workforce optimisation reduces errors, prevents delays, and improves employee motivation and satisfaction. And when productivity rises across the organisation, it is that much easier to achieve business goals.

4. Recruitment and retention success

Skills management can greatly optimise recruitment and retention, two processes companies cannot afford to bungle at a time when a) employees are still quitting their jobs in record numbers, and b) the talent market is struggling with a crippling shortage. Organisational consulting firm Korn Ferry estimates a global talent shortage of 85 million people by 2030. Gaining a bird’s eye view of the skills your organisation possesses and those it lacks will improve your hiring decisions considerably. You might even realise you don’t need to hire externally as there are internal candidates who can fit the role with a little training. Furthermore, helping your employees learn new skills and showing them that you are invested in their growth and development will improve retention. After all, the top reason employees surveyed by McKinsey cited for quitting their jobs during the Great Resignation was because they did not feel valued by their employers.

5. Leadership development

A big advantage of skills management is that it helps organisations create future leaders. By using tools such as skills mapping, competency mapping, and skills gap analysis, companies can identify employees with the qualities and attributes required to become leaders. These potential leaders can then be provided with the training, work experience, and other support they need to reach their potential. If there is anything the Covid-19 pandemic has taught us, it is that organisations must always be prepared for the unexpected. That includes unanticipated resignations and unplanned retirements that ruin succession plans. Implementing skills management allows organisations to develop leaders from within the ranks and make long-term succession plans. The 2021 Global Leadership Forecast emphasises the importance of effective succession planning, having found that only 11% of the organisations it surveyed had a strong leadership bench. The Leadership Transitions Report 2021, meanwhile, promotes leadership development, reporting that the success rate of leaders hired internally is 25% higher than for external hires. 

Benefits to individuals

1. Opportunity to learn and grow

Opportunities for skill development and career growth are top concerns for employees when it comes to staying in a job. According to the University of Phoenix’s Annual Career Optimism Index 2022, 49% of surveyed employees wanted to develop their skills while close to 70% said they would stay with their employers for their entire career if given opportunities to upskill and reskill. Sadly, 43% said they did not see any clear path to advance in their current jobs. Their employers might consider investing in skills management, which empowers employees through targeted training. With the new skills and competencies they are proficient in, employees can fill a number of diverse roles within the organisation, and not necessarily in their own departments. This internal mobility ensures that ambitious employees don’t hit a wall within their own organisations that forces them to look elsewhere to advance in their careers.

2. Happiness and motivation

Skills management is a key driver of employee happiness and motivation. It increases job satisfaction by matching skills and jobs. People are happier when they are confident in their skills and are sure that they will be able to do justice to the tasks they are assigned. They also appreciate the fact that their organisation is invested in their growth and development. Naturally, this is good for the organisation because happy employees are 12% more productive, according to recent research by the University of Warwick.

3. Clear expectations and goals

Not only does skills management match the right people with the right jobs, it also helps employers and managers set clearly defined goals for employees. Thus, not only does a person have the skills and competencies to perform a job, they also have a clear idea of what is expected of them, leaving no room for ambiguity. When leaders and managers make expectations and responsibilities explicit, employees can focus their energy and attention on doing the work that matters instead of wasting their time and effort on unnecessary activities and guesswork. This not only improves employee performance and happiness but leads to favourable business outcomes too.

How to use skills management

It’s not that difficult to use skills management in your organisation. Just follow these steps:


1. List your core skills and competencies – Create a skills taxonomy

What are the skills and competencies that are integral to how your business functions and success? An effective skills management initiative starts with defining the skills and competencies your organisation absolutely needs to be successful. The process of defining these skills and competencies is known as a skills taxonomy. These core skills can be role-specific – knowledge of a computer language for information technology department employees, for instance. Or, they can be company-specific – for example, a firm that manufactures products with unique, market-leading designs will likely list innovation and creativity as core skills. Drawing up this list not only gives you an idea of the skills you have but, more importantly, draws your attention to the skills and qualifications you are missing. 

2. Map your existing skills via a skills matrix

Now that you have a list full of all the skills you need to be successful, you’ll need to assess whether you have those skills in your organisation. This calls for a skills/competency  mapping.  If you’ve read our previous blogs (here and here), you’ll know that this can be done with the help of a skills matrix – also called a competency matrix – which is a  visual representation of the skills and competencies available in an organisation. This exercise will tell you exactly who is qualified to perform a specific task and who isn’t and needs further training/upskilling. It will also enable you to identify versatile employees with diverse skills who can fill more than one position. You can discover how to build a modern skills matrix with MuchSkills.

Skills management tips 

If you want skills management to really pay off, it cannot be a one-off project. Skills management works best when it is infused in your organisation’s daily activity and, in fact, becomes a part of its culture. Here are some tips on optimising your skills management initiative:

1. Review and evaluate

With skill, competency, and proficiency requirements changing constantly, your skills management programme cannot remain static. To keep up with the hectic transformations, it needs to change and adapt. Holding periodic and regular reviews will ensure your skills matrices are always up-to-date and relevant. Check in with your employees every now and then to see how they are coping. Ask them if they are happy with the way their careers are progressing. Their honest feedback will go a long way in helping the organisation optimise its skills management processes.              

2. Spread the word

It’s not enough to come up with a skills management plan. It’s equally important to communicate it to your employees. Make them aware of the skills they need to do their jobs efficiently, what is expected of them, and what learning and development opportunities are open to them. A transparent process will ensure your employees are never in the dark about matters that affect their performance and growth. Furthermore, they will not have a reason to complain when they are evaluated on the basis of strictly laid down standards and proficiency levels.

3. Use a competency management tool

Given how data-heavy skills management can be, it makes sense to use technology for the job. A skills management tool can do the heavy lifting for you, from assessing and analysing all of your organisation’s skills and competencies to tracking and managing them. This makes even more sense if your growing business is working with scalable skills matrices. MuchSkills is one such skills management platform that can help take your skills management program to the next level. It can help you list your workforce’s core skills and competencies, spot missing links with its skills gap analysis feature by creating a modern skills matrix whose visual presentation of data makes reading, understanding, and analysing information much easier.


Given the workplace transformations taking place around us, there is a growing need to adopt a more skills-based approach to working. Most organisations are aware of this reality. In a 2022 Deloitte survey, 89% of executives agreed that skills were becoming more important in the way companies define work, deploy talent, manage careers, and value employees. So, in order to be a forward-thinking, agile, and skills-based organisation, the first step is to implement an effective skills management programme.

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