What Is a Skills Inventory (and Why Does It Matter)?

As companies grow and develop, there is an increasing need to build skills to navigate new business challenges. Creating a skills inventory should be the first step for organizations to gain clarity on their current positioning and needs. 

“A skills inventory allows you to identify what skills you have across your organization,” says Andrew Hibschman, VP of Customer Success of SkillCycle. “From that inventory, you’ll be able to assess where gaps exist and where they may occur in the near future.”

Focusing on skills can help companies hire more strategically and develop their existing workforce to cover gaps, making swift progress on building skill capacity throughout the organization. 

What kind of impact can you expect from the shift? Skills-based organizations are 98% more likely to retain their high performers and 107% more likely to place talent effectively, according to Korn Ferry. 

In this article on the importance of establishing a skills inventory, we’ll explore:

• What is a skills inventory (and why do you need one)?
• Why skills are the core of better hiring and succession planning
• In-demand skills to include in your upskilling strategy 
• Where to start with skill building and how to move the needle more quickly

What is a skills inventory (and why do you need one)?

A skills inventory is a compilation of employees’ skills, education, and experiences used to evaluate what skills exist within a company’s workforce at a given point in time. It can be a valuable step to assess if a company has the skills to meet organizational objectives successfully. It should be updated regularly as you hire, promote, and develop your team.

“The skills inventory is a reframe of a traditional competencies-based model for assessment,” says Hibschman. “The focus is on the skills, which in turn builds awareness of how skills and knowledge can be shared through an organization.”

Placing skills at the core of HR planning is top of mind for many organizations: 85% of HR executives are planning or considering a redesign of how work is organized so skills can be flexibly ported across work over the next three years, according to Deloitte. In addition, 77% of business and HR executives say flexibly moving skills to work is critical to navigating future disruption.

A traditional approach to hiring and promoting prioritizes job titles and descriptions. It creates hiring plans with the intent of having the right number of employees with the right work experience. The assumption is that if someone has relevant experience, they’ll be able to carry past successes into a new role. 

Why skills are the core of better hiring and succession planning

What’s missing from the standard formula? A few critical factors. First, companies may not always have the budget to keep hiring and recruiting new talent. They can’t ensure that a new employee will be able to deliver as expected, and if they can’t, the company now has an extra salary to absorb. 

A knee-jerk decision to hire externally to fill new roles can cause companies to overlook talented individuals already working in the organization, driving down employee loyalty and retention.

“Switching to a skills-based process to focus on the skills and abilities required for someone to be successful enables companies to identify existing staff who could be proficient in a role,” says Hibschman. 

Once you’ve identified and built skills internally, you can begin leveraging those skills in new ways, moving from having a few star players to having a team full of skilled individuals who become mentors, trainers, and coaching leaders in your organization. The cornerstone of skills-based hiring includes the strategic transference of skills, so if someone leaves your company, the skills remain behind. 

Proactively upskill training and mapping skills to organizational goals made our list of top HR trends for 2024 and should be on every leader’s radar. 

In-demand skills to include in your upskilling strategy

There may be a list of skills you’ve identified that your workforce should have that are unique to your organization and its objectives. Beyond those, certain skills are rising in demand that are effective in many types of companies and industries.

“Leaders often focus on traditional leadership skills when hiring,” says Hibschman. “Yet, many of the challenges that most CEOs face are solved by communication, emotional intelligence, leadership, and empathy skillsets that are harder to capture in a traditional hiring or promotion cycle.” 

The ten most in-demand skills for the next decade will include: 

• Communication
• Data literacy
• Critical thinking
• Emotional intelligence
• Creativity
• Collaboration
• Flexibility
• Leadership skills
• Time management
• Curiosity

These may not look like what companies sought out and rewarded as top-value skills in the past, but the landscape of work has changed dramatically. Upskill training must reflect these shifts.

Current trends in business and technology show that the way employees work will bear little resemblance to work as it stands today, according to Gartner. Building a workforce that can adapt to change, collaborate as a team, and solve problems in creative ways allows companies to grow and evolve with their existing workforces.

Where to start with skill building and how to move the needle faster

It’s critical to understand where you are today so that you can begin to reinforce and develop skill-building in a targeted way.

A company-wide survey asking employees to rate themselves against different skills you’ve identified as essential for organizational success is a simple way to gather immediate and specific data. 

“The first step is building a careful lens that looks at your skill inventory with an intent for growth, not performance,” says Hibschman. “This process should be separate from performance management and focus on nurturing and supporting future investments in your employees.”

Upskilling to fill skills gaps is critical for companies to navigate future challenges and growth opportunities. Allowing for scalable, targeted development that meets each team member’s skills gaps is foundational to effectively building a skills inventory.

Investing in the development of your existing workforce can be both time and cost-effective, delivering quicker results that strengthen your employees’ commitment to stay and grow with your organization. 

Ready to learn how skills-based hiring can help you assess your current skills inventory and quick ways to fill gaps? Book a demo to learn more.