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theskillsrevolutionisnow22Evolvinghowweuse,validate,developandrewardskillsisbeingintegratedinbusinesspractices.Howthatlooksforyourcompanydependsonyourstrategies.The2022PayforSkillsSurveyresultsarein!Gaininsightstoacceleratetheskillsconversationinyourcompanyandbenchmarkyourprogressagainstyourpeerstogetstarted.InMercer’s2022PayforSkillsSurvey,morethan650organizationsfromaroundtheworldsharedtheirsuccessesandchallengeswithattracting,retaining,andrewardingthedesiredskillsthatadvancetheirbusinessstrategies.Approximatelyhalf(47%)ofcompaniesreportthattheyareyettodevelopanapproachtoclassifyingskillsatanyleveloftheircompany,whichisaminimalchangesince2021.ThiskeystatisticsupportsMercer’sexperiencethatmanycompaniesarestillattheverybeginningoftheirskillsjourney.Whatisdrivingorganizationstoprioritizeskills-basedtalentstrategies?Withmorecompaniesprioritizingskillsovereducation(e.g.,IBM'swell-documented"SkillsoverDegrees"initiative),morecompaniesneedlscapability45%ofcompaniesreportthattheirthanforothers,makingtalentsearch(andretention)evenmorechallenging.Astheneedforcertainskillstakestheforefrontinthehiringprocess—evensometimesaheadsbasedpaypracticesareoftendeployedtoattractnewtalent.Eventhoughorganizationsareassessingskillswithaviewtoachievingthatgoal,over44%ofcompaniesreportthatnoformalskills-basedrewardsareinplacetorecognizeongoingskilldevelopment.Ofthoseorganizationsthatdoincorporateskills-basedpay,57%indicatethattheyarenotconsideringimplementingcomplementaryskills-basedprogramsatthistime.Arecompaniesover-dunderfocusingonbuildingandretainingtheskillsthatwilladvancetheirbusinesspriorities?Fivekeyquestionsbeingaddressedbyorganizationswhoareleadingthetransformationtoaskills-focusedtalentstrategyWhatskillsdoweWhatskillproficiencyoreachrole?HowdoweassesstheHowwillwerewardHowwillweoperationalizeourIsitmorecommontobuildacustomskillstaxonomyoradoptataxonomyfromaskills-basedprovider?Ofthe53%whohavesomeformofskillstaxonomy,82%reporthavinganin-housecustomizedskillstaxonomy,withtheremaining18%usingeitheranopensourceskillsframeworkoronepurchasedfromathirdpartyprovider.Thisimpliesthat44%ofallrespondentshavedevelopedanin-housecustomizedskillstaxonomytomanageatleastaportionofeirworkforceGiventhatincorporatingskillsintoanorganization’stalentstrategyhasonlyrisentoprominenceinthelastfewyears,thedatasuggeststhatatremendousamountofworkhasbeendoneinarelativelyshorttimetodevelopcompany-relevantskillstaxonomies.Clearly,leadingorganizationsrecognizethatafoundationalinfrastructureisthecoretothellsbasedlearningandinternalskillsdevelopment.Doyouwonderifyouneedtoimplementaskills-basedapproachonlyforcertainjobfamiliesoracrosstheentireorganization?Ifsoyourenotaloneas5%ofthecompaniesthathaveaskillstaxonomytrackskillsacrossllemployeegroupswhiledistributionacrossjobhathaveamorefocusedapproach.legnWhilethedatashowsthatonlyhalfofrespondingcompaniestrackskillsacrossallhirerolecanquicklyevolveandaffectvaryingrolesinyourorganization.“Iaminthemarketlookingforskills,buttrackingtrendsinanyformalwayisarealchallenge.”Despiteindicationsthathalfofcompaniesdonothaveaskillstaxonomyinplace,amajorityofcompanies(69%)reportthattheymonitorthemarketdemandoravailabilityofskillseitherinformally(60%)orformally(just8%).Informalmonitoringisbyfarthedominantmarketpractice,suggestingthatmanycompaniesarestillbuildingtheirfamiliaritywiththeskillstrackingplatformsandtherelateddatasetsthathaveemergedandarestartingtomature.Thisimpliesthatmanycompanies,particularlytheincreasingubiquityofskillstaxonomiesarestillstrugglingtoleverageskillstaxonomiesfully,especiallywithrespecttomoretechnicalcationsandexternalvendorskillsdataandplatforms.Monitoringskillsacrossallemployeegroupsisasound,competitivestrategy.4The%ofcompanieswhoreportformallymonitoringthemarketdemandforskillshasremainedstaticoverthepast2years(9%in2020vs8%in2022)Theskillsrevolutionisnow5Proficiencyscalesandskillsassessmentsremainamainpriorityandarestillhighlysubjective“Weareinthenascentstagelassifyandidentifyskillsintermstowardskillsrewardssolutionsthatmakessensetous.”Developingaproficiencyscale,definingthecyofaskillperroleandusingeachemployeesskillhescaleenablesskillsbasedpaytobeobjectiveanddeployedinafairmanner.Themajorityofrespondents(78%)withaskillstaxonomyhaveadefinedproficiencyscale.Thisstronglysuggeststhatthecreationofskillsproficienciesdefinitionsistypicallyeitherperformedaspartoftheskillstaxonomyimplementationorthenextlogicalpost-implementationstep.Althoughproficiencyscalesareapriority,thereisabsolutelynoconsensusinthemarketontheoptimumnumberofproficiencylevels,withafairlyevendistributionbetweencompaniesthatreportthreelevels(9%),fivelevels(7%),fourlevels(6%)andsixormorelevels(6%).Interestingly,anoteworthy(28%)portionofrespondentsreportthatthenumberofproficiencylevelsvarieseitherbyskillorbyjobfamily—companieswhohaveafixednumberoflevelsacrossthewholepopulation(28%).henitcomestoproficiencylevelscompaniesoverwhelminglyopttodesignthemsubjectively,whichmaycreateabarriertodefiningproficiencylevelsbasedonmarketbenchmarks.Whenaskedwhethercompaniesassesstalentagainsttherelevantskillexpectation,themostwerwasnofollowedbyyesbutonlyasneeded’(22%).Amongcompaniesthatdoassessforproficiency,themostcommonplaceoyeeselfassessmentandmanagervalidation’(62%)followedby‘managerassessment’(40%).Overonethirdofcompaniesreporttheassessmenttobepartofyear-endevaluationsorcareerdevelopment,withonly8%indicatingthattheyassesstheiremployeesonacontinuousbasis.Relatedtothis,onlyonefifth(21%)ofcompaniesreportusingaformalproficiencyassessmenttool—afindingalmostcertainlylinkedtothefactthatsuchtoolsarerelativelynewtotheworld,potentiallychallengedbythelevelofcustomizationseeninthemarketplace.Giventhatthetopicofassessmentoftenenterstheskillsnarrativeduetothedesiretohaveastrong,formalmethodtoperformassessmentsacrossemployeepopulations,havinganassessmenttoolthatistiedtotheproficiencyscalesiscriticalngproficiencyratingsinanobjectivequantitativefashion.Thisseemsparticularlypertinentgiventhatoverthreequartersofcompanies(77%)indicatethatindividualemployeeabilityisthemostsignificantcontributingfactortoproficiencylevel.However,with82%ofcompaniesbuildingtheirskillstaxonomyasacustomframework,itwouldseemthatassessmenttoolswouldalsohavetobeatminimumhighlyconfiguredorperhapsevencustombuilt.Inlieuofsuchdeepplatformflexibilitytoday,assessmentremainsapredominantlysubjectiveprocessconsistingofself-assessment,managerdcorrespondinglyispossiblyatriskofhumanerrorsinjudgementandindividualsubconsciousbiasesthatareinherentinsuchapproaches.66PayforskillsisimportantstrategicallybutdifficulttooperationalizeacrosstheorganizationWhatisdrivingskills-basedrewardsinpay?Inacontinuationofthetrendseeninour2021sultsalmostexactlyhalfofrespondentsrshipviewsskillsbasedpayaseitherimportantorveryimportanttoensuringoptimalcompensationplansatcompanies.Thisalignswellwiththedatathatconfirmsoverhalfoftherespondentshaveestablishedanapproachtoclassifyingskills.Forthevastmajority(80%)ofcompanies,themainobjectivewhenlinkingrewardstoskillsisattractionandretention.Nearlyhalfofcompanies(46%)donotdifferentiaterewardsforficskillsversusthatdifferentiateardskillsforleadershipskills24%forsoftskillsand24%forqualifications.ItisperhapsunsurprisingthatthehardskillsarethemostcommonskilltypeuponwhichrewarddifferentiationisbasedastheyaretechnicaljobsorfunctionsandareeasiertoobjectivelyassessthansoftuesoftwareprogramminglanguagessuchasPythonandRfallintothisskillcategory.Strategicpurposesforusingskills-basedpay52%52%42%Implicitneed42%tostrategicgoals30%30%29%Aggressive29%new27%27%tegicplanTheskillsrevolutionisnow7Ofthe41%ofcompaniesthatlinkrewardsfornewjoinerstotheirreportedskills,89%dosointheirstartingsalary,equatingto36%oftotalrespondents.Forcompaniesthatuseapayforperformanceapproach,andwithrespecttotheirthree-yearplan,37%indicatedthatcriticalskillswillgiveaccesstohigherpaylevelsbutperformancewillstillbethemaindriverofsuccess,versus31%ofcompaniesindicatingthatsalaryreviewswillbedrivenequallybybothfactors.18%ofcompaniesindicatedthatskills-basedpaywillbeusedononlyalimitedoras-neededbasisduringthesalaryreviewprocess,andonly4%oftthatskillsbasedpaywillbecometheprevalentdriverforsalaryreviews,whichshowsthatperformancewillcontinuetobeakeydriverofpay.Significantly,44%ofcompaniesreportthattheydonotlinkrewardstotheongoingdevelopmentofskillswhich—particularlyforthosewhodofactorskillsintopayattimeofhire—hasthepotentialtocreateequitygapsintheorganizationovertime.TraditionalTraditionalpayforperformanceapproachesarenotgoingawayanytimesoon,butmanyofthemoreskills-maturecompaniesarelookingforwaystoweaveskillsintotheirestablishedperformance-basedapproaches.Theskillsrevolutionisnow8Operationalizingaskills-basedapproachetheneedforaskillsbasedapproachinthefuturebutitisalongroadwithalotofchangemanagementtogettothefinishline.”Whilethemajorityofcompaniesunderstandtheneedtoincorporateskillsintotheirstrategytocompetefortoptalent,operationalizingskillsprogramspresentsmanybarrierstolaunchwithminimalbestpracticeguidancefrompeers.tytooperationalizeaskillsbasedapproach,companiesfeelmostconfidentabouttheirabilitytopayfortheskillsthattheyneed(39%ratingthemselvesaseffectiveorveryeffective)andtheirabilitytocommunicateskillsexpectationswithindividuals(34%givingthemselvesthesamerating).Ontheflipside,companiesfeelleastconfidentabouttheirabilitytotracktheavailabilityofinternalskills(42%ratingthemselvesasnotveryeffectiveornoteffectiveatallfollowedbytheirabilitytotrackavailabilityofskillsintheexternalmarket(39%).Ofcompaniesthathaveaskillstaxonomyinplace,lessthanhalf(41%)havea(purchasedorin-house)technologythatenablesusage,collaborationandeasyupdates—whichisnearlyidenticaltoourdatalogyExceloraninternallydevelopeddatabaseproachtopay58%Toocomplex/toomuchchangemanagement49%Requiresmanagementdevelopment49%ifficulttomanageThedataconfirmsthatorganizationsarestillassessingtheROIinskillsenablementtechnologyinvestmentsandthatplatformvendorsarestillinnovatingtofindatrueproduct-marketfit.Theskillsrevolutionisnow9Wheredoesthemostup-to-datedataaboutyourskillsexist,ifanywhere?Only6%ofresponde
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