How to Create and Manage a Skills Inventory at Your Organization

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In recent years, the rapid pace of change in business and technology has created a demand for organizations to be acutely aware of all the skills in their organization. Furthermore, there is also a need to understand future skills and how to develop them internally. A skills inventory is the starting point of this journey. 

A skills inventory is not an administrative exercise but rather a strategic business tool that is a must-have for any high-performing organization to succeed. What exactly is it and how do you create a skills inventory?

Contents
What is a skills inventory?
What is the purpose of a skills inventory?
How do you create a skills inventory?

What is a skills inventory?

A skills inventory is a comprehensive list of all the experiences, professional skills, and educational qualifications of employees in an organization. Typically, it is based on employees’ self-assessment, on skills assessments conducted by the organization, or a combination of these methods. Skills inventories help organizations understand if the current employee skills are sufficient to meet their goals and where the skills gaps are. 

It also helps HR professionals guide the organization in key focus areas of recruitment, talent management, learning and development, and strategic workforce planning. A skills inventory provides guidance for leaders and key decision makers on how to invest in an organization’s human capital.

Skills Inventory Elements

What is the purpose of a skills inventory?

A skills inventory gives you a broad overview of an organization’s capabilities. There are multiple benefits to this, such as: 

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Training and development

A skills inventory helps you detect the gaps for employees and subsequently provide the appropriate training. This is hugely beneficial for organizations as they can forecast and budget for any training activities.

As an example, PWC created a digital fitness app. They used the app to assess employees’ technological skills and then provide the appropriate organization-wide training through the same app.

Talent acquisition

Tracking internal employees’ skills will allow you to recruit the right talent to fill the skills gaps you may have in your organization. Hiring managers can make data-based decisions on who to select during the hiring process. Organizations are also able to recruit talent that would be valuable for the future needs of the business. 

Strategic workforce planning

An organization can strategically position and model itself to deal with current and future business objectives. For example, if an organization notices that data analytics is an in-demand skill for their business, they can identify if the current workforce has those skills. If not, they can train employees to acquire these skills and recruit talent to be deployed into critical areas. They are also able to decide if contingent staff would be beneficial for any immediate needs. 

Employee retention

An organization that provides a proactive approach to developing a skills inventory can also ensure they retain employees. The outcome of the skills inventory should allow for increased development opportunities. These development activities could split between formal (studies, formal training, etc.) and informal training (on-the-job learning, mentoring, coaching).

Opportunities for growth are one of the key factors for employee retention, and skills inventories go a long way in understanding what development activities your organization should provide. 

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Internal mobility

A skills inventory also gives you a bird’s eye view of an organization’s capabilities. This facilitates internal mobility, which allows employees to work across departments and projects. It also enables organizations to save money – as the reliance on third-party suppliers is less needed because employees have the skills to do the job.

It further helps identify skill adjacencies, which is the acquisition of employees’ skills in areas closely related to their current position. For instance, if a social media manager specializes in promoting content on Twitter, they will likely develop the skill of promoting content on Facebook quickly. 

How do you create a skills inventory?

Here are seven steps to create a skills inventory in your organization: 

1. Decide the type of skills you want to include

The first step is to decide on the type of skills you want to include in your inventory based on your organization’s strategy. For example, you can categorize these skills into three areas: technical skills, soft skills, and leadership.

The skills listed in the inventory should be relevant, future-fit, and appropriate for the department that employees are in. If you’re not sure how a skills inventory could be useful for your organization, start with one department. An example of how this would look: 

Technical skills Leadership skills Soft Skills
Advanced Excel Strategic Thinking Active Listening
Video Editing Public Speaking Adaptability
Photoshop Vision Teamwork

You can start with more general dimensions and branch into specific skills. How would this look like if you were to drill down deeper on a specific skill? We will use advanced Excel and video editing as an illustration: 

Advanced Excel Pivot Tables V & H Lookups Power Query Advanced Charting
Video Editing Transitions Color Grading Sound editing Motion graphics

2. Assess the current skills level

The second step is to discuss how you would assess these skills. Below are some ways you can test for an employees skill level: 

  • Test – This is the most traditional form of assessment. Employees are asked to complete a test to evaluate their knowledge and skill. This is great for assessing an employee’s knowledge but not always the right method for testing for competency or hands-on skills.
  • Self-assessment – This is a great tool to allow employees to rate their skills and knowledge for themselves. A self-assessment is a great tool to use because it approaches the skills inventory in a collaborative way, which includes input from employees and the organization. Employees can also express which skills they want to work on improving.
  • 360-degree feedback – This is an effective way to get a holistic view of an employee’s skills and knowledge. Co-workers, managers, and any indirect reports provide feedback on an employee’s skill levels gives a good sense of how they are performing. 
  • Gamification – A fresh approach is to gamify the entire process. This means creating various games that test for specific skills that your organization needs. It puts the fun into assessments, and also, employees would feel less as if they are being ‘tested’. 

The best approach is to use a combination of several of these techniques. Of course, the skill that you are testing for should determine which assessment techniques are appropriate. 

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3. Create a skills matrix to get an overview of the skills and levels

A skills matrix can be represented in various formats. A technology solution is a great option to display the skills matrix for an organization. Such a solution allows for tables, charts, and dashboards to be created, which enables faster decision making. 

You can evaluate skills and competencies on a scale, making it easy to create a skills matrix. For instance, an organization may determine that a 10-point scale is suitable, where 0 represents no skill, and 10 represents ‘expert skill’. An example of how this may look in the end is something like this:

Skills Matrix Example

A quick look at this table would show that the organization lacks in ‘procurement’ as a skill, whereas on average, they are good at auditing. In this case, TT has the lowest score for procurement, whereas ZR has the highest score. In this situation, implementing an informal learning intervention would allow TT to coach and mentor ZR in the skill of procurement. 

The organization may also decide to deploy large-scale customer service and procurement skills training, as those were the two lowest scores. The organization’s needs and strategy would also determine this and whether that skill will be relevant in the future.

4. Identify opportunities to develop skills

Now that there is a clear indication of skills gaps, you need to work on identifying opportunities for developing these skills. A skills inventory’s goal is to help you optimize the skills you have on board and spot opportunities for improvement. The opportunities to develop the skills can be (online) courses, mentoring, micro-learning, etc. Here is an example of how to identify opportunities to develop skills: 

Skill Opportunity for Development Formal Training Coaching and Mentoring On the Job
Advanced Excel Work, on an upcoming project, on training via LinkedIn Learning.  x   x
Digital Marketing A book on digital marketing, learn from a colleague, get involved in social media activities at work.  x x x
Video editing Edit a video for the workplace onboarding programme, attend the ‘introduction to video editing seminar.’ x   x

As employees realize their skills gaps, employers and HR’s responsibility is to provide opportunities to develop them. A great way to look at development opportunities is the 70-20-10 model. This splits learning into 70% experiential learning, 20% to social learning, and 10% formal training. 

5. Make your skills inventory a living document

To make your skills inventory useful, you have to update it regularly. That will help you tackle potential skills gaps and effectively plan your training. You may opt for a live organization dashboard, which is updated periodically as employees gain skills.

Employees should also be granted access to their dashboard to track their skills and how they are developing. To take it a step further, it would be useful to add a gamification element to encourage employees to develop themselves continuously. 

6. Consider creating a separate leadership skills inventory

You may want to create a separate category for leadership. Although it is important for all employees to self-lead, not all of them are managers or hold decision-making power. A separate leadership skills inventory will allow you to measure your current leadership base’s strengths and measure them against other departments and across industries.

Another reason to create a separate inventory is that information for leadership is not collected in the same way as other skills are. A leadership inventory would require in-depth feedback of leadership competencies from direct and indirect reports and may entail a 360-degree approach. Based on the leadership skills inventory outcome, you can come up with leadership development plans for your employees and build a solid leadership pipeline.

7. Share the skills inventory with relevant stakeholders

After all, data is collated and appropriately actioned; it is important to share the results with the relevant stakeholders within the organization. A good approach would be to share the results with the leadership team and management. This would allow them to understand where the organization’s skills are relative to the skills of the employees. As management is largely responsible for sitting in performance and development discussions for employees, it also gives them tools for these conversations. 

Employees also require in-depth feedback on the entire process. It should be clear that it is not a punitive process but rather a purposeful effort to develop employees’ skills. You should also present it as a collaborative process, where employees alongside management and HR create development plans tailored to their situation.

Not everyone has the same skills gap, so a blanket approach to development would not be suitable in this instance. Instead, a more personalized approach would act as a catalyst for the organization to fill its skills gap. 

Over to you

If your skills inventory is updated regularly, it is a valuable tool for planning your learning & development, recruitment, and workforce optimization activities. To sum up, implementing a process to keep your inventory up to date and making it accessible to the relevant people will help you make most of it.

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