The importance of skills taxonomy within the workplace

As the competition becomes fiercer, to ensure competitive advantage, organizations need to shift their focus on tracking the competencies within their workforce and fully take advantage of them. The best way to do this is through skills taxonomy.

This article will cover everything you need to know about skill taxonomy, its benefits, and its role within a skill-based organization. The final section of this article will outline what to look for when choosing the right skills management system for your organization.

What is a skills taxonomy?

A skills taxonomy is a dynamic hierarchical system classifying all of the relevant skills within an organization. The skills are grouped and clustered at the organizational and employee level, identifying the capabilities of a business in a quantifiable way—the heart of the skills-based approach.

Skill taxonomies cover all skills, from soft skills like interpersonal communication to hard (digital and tech) skills like AWS proficiency. They offer insight into what skills organizations and employees possess, and what skills should be acquired next.

For instance, if employees lack proficiency in AWS (Amazon Web Services), they may consider Learning Path for Amazon Certifications to acquire the necessary skills. This certification can help bridge the gap and meet the demands of their roles more effectively.

A skills taxonomy offers a clear skills framework that is the backbone of a data-driven learning strategy. They help organizations unify the understanding of, and language used, to deliver effective workforce strategies.

At an organizational level, using the same language creates a clear objective framework for hiring and talent development. At an employee level, it better aligns career pathing closing the skills gaps on an individual and organizational level.

Skills taxonomies don’t have to be company-wide. There are also country and region-wide skills taxonomies, including:

• O*Net – United States
• ESCO – European Union
• Nesta – United Kingdom
• SkillsFuture – Singapore

Benefits of skills taxonomy within an organization

The ultimate goal of skills taxonomies is to improve your business by helping employees achieve their full potential and using them to stay ahead of the competition.

Better assessment of candidate suitability

Creating a clearly defined skill set necessary to excel in a specific role facilitates the hiring process. Once you know what skills are needed to excel within a specified role, HR professionals or recruiters can more accurately assess candidates’ suitability for the position. This ensures the right candidates are chosen, reducing Time to Hire.

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Skills taxonomy shifts an employer’s hiring process to focus on a skills-based approach. This approach refers to a practice where instead of focusing on a particular role, HR professionals or recruiters focus on recruiting candidates possessing the related skills.

Quickly identify skill gaps

When done right, skills taxonomy gives employers valuable insight into what skills are needed to perform a particular job and to succeed within the company. This knowledge streamlines skills gap analysis, making identifying the right candidates through skills assessments a much quicker process.

Tailored reskilling and upskilling programs

By investing in skill taxonomy organizations gain a better understanding of the specific skills needed within the company. This knowledge can be used when creating educational programs for employees in the form of reskilling or upskilling.

However, not every learning and development program will help you future-proof your business, ensuring both the organization and employees reap the benefits. To succeed, it is crucial to identify:

• What training is essential
• What type of training will be the most beneficial
• Which training will help future-proof your business

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Via rigorous skills and gap analysis, employers can identify the necessary skills needed to succeed and address them through a skills-based approach. Using this insight will help companies maximize ROI on their learning and development programs.

Reduce systematic bias

Promoting from within the company helps employees feel their hard work is recognized and reduces hiring costs and the duration of onboarding. However, it can raise concerns about a lack of transparency and systematic bias, with the organization favoring existing employees.

Skills taxonomy offers guardrails within the hiring process, performance reviews, and promotions, creating transparency around internal mobility plans and reducing overall systematic bias.

Optimizing resource allocation

Skill taxonomy helps organizations allocate the right resource with the right skills to the needs of a specific activity.

The preparation that goes into creating a skill taxonomy helps organizations identify the required capabilities at a granular level by mapping the skills and assessing them. Employers using a skill-based approach can create reports identifying the strengths and gaps within the organization.

During a recruitment process, rather than matching candidates to the role requirements, employers recruit individuals with job-specific skills and levels of competency within that skill set optimizing resource allocation.

The role of the skills taxonomy in skills-based organizations

Skill taxonomy helps companies, especially those operating in the skills-focused organizational model, to attain business goals. It is the one source of truth for all skills-related decisions.

Knowledge is key. By conducting skills taxonomy and skills inventory within the organization, companies can map the existing skills against the skills needed to succeed and make better-informed decisions about whether the skills available are enough to achieve their goals.

Skills taxonomy together with skills inventory helps companies quickly and effectively identify areas that need to be addressed. The introduction of learning and development programs or deciding to recruit new employees can bridge skill gaps.

There is one thing worth being mindful of, and that is the skills lifecycle. IBM reports that today the half-life of a learned skill is around five years and technical skills are even shorter. As a successful skills taxonomy needs to be detailed at a granular level, it can quickly become as outdated as the skills needed.

Therefore, there is a real need for companies to make skill taxonomies more agile.

Making skill taxonomies more agile

One solution is for companies to create a structured list of skills defined at the organizational level. These skills clusters can be based on the key stakeholders in high-impact roles, followed by roles detrimental to the company’s success.

To ensure skill taxonomy is agile, create a skills library with each skill broken down into multiple dimensions, outlining the behaviors related to them. Focusing on the behaviors rather than the skills themselves, employers are ensuring their skill taxonomies continue to be relevant and don’t omit emerging skills.

What to look for when choosing the right skill management software?

 Gartner data shows the total number of skills required for a single role has been increasing by 10% year-over-year since 2017. As skills taxonomy is continuously expanding and the skills data is growing to include emerging skills, creating a skills taxonomy from scratch can be an overwhelming task.

Pre-compiled list of skills

When faced with the task of creating skills taxonomy, solutions like TalentBoost with its pre-compiled list of 3,000+ skills can speed up the onboarding process. TalentBoost recognizes that certain skills are universal, but their use is company-specific. The pre-designed skill clusters within TalentBoost cover the most popular areas of expertise, including but not limited to:

• Software development
• Software engineer
• Software architecture
• IT security
• Organization management

The right skill management software should organize the skills into skills groups and skill sets, support organizations in identifying skill-related needs, and design ways to meet them.

Individualized and aggregated skills data under one platform

As mentioned above, a successful skills taxonomy will cover all contributing skills to the company’s success. Thus, when choosing skill management software, it is important to choose one that helps visualize individual skills and company-wide capabilities at different levels of granularity:

• Employee
• Team
• Company

Guaranteeing skills taxonomy longevity

The skills lifecycle is short and creating a detailed skills taxonomy is time-consuming. Thus, it’s crucial to look for a skills management system that updates the taxonomy regularly. We understand how important this is, and as part of our update policy, we regularly update the taxonomy, except for custom areas.

Concluding thoughts

Skills taxonomies are a hierarchical system of classifications of skills that organize employee and company capabilities into groups and clusters. Investing in skills taxonomies will help companies make the most of their skills and understand which skills are needed to achieve their business goals. Creating skills taxonomies from scratch can be a challenging process, but tools like TalentBoost with its 3,000+ pre-defined skills can streamline the entire process.

Photo by Scott Graham on Unsplash