Think of your skills as a portfolio that needs to be managed

Skills are at the center of the human capital development. They are the connective tissue that connect people to performance. At the turn of the year, it is worth thinking about skill transformation in 2020.

What questions should you be asking about skills in your organization? There are two ways into this question.

First, ask yourself what skills will be needed to achieve your goals in 2020 and the decade that follows.

Then, think of your skills as a portfolio that you need to invest in and mange.

We make a lot of use of Roger Martin’s Cascading Choices at Ibbaka-TeamFit. We find it a powerful way to frame strategic conversations. Normally, skill are seen as a lower level choice, down at the capabilities layer. This is where both skills and competency models (the organizational frameworks that organize skills) are integrated.

That makes sense in overall strategy work, but when your focus is the transformative power of skills it makes sense to apply cascading choices to your skill strategy.

(Do you have a strategy around skill development? Given the importance of skills to strategy development and execution, you are going to need one. Claude and Karen’s webinar will give you context for why this is important and how to do it.)

Here is a skill-centric approach to cascading choices. Winning Aspirations starts with the capabilities needed to deliver sustainable growth. These will depend on your strategic Where to Play and How to Win choices. Capabilities are the bundle of the human skills and competencies available to your organization, the processes and frameworks used to organize and direct these skills and competencies, the physical assets and software that enables these frameworks and processes, the data you collect and how it is used and the relationships that exist within your organization and with other organizations.

There are different strategic choices as to how you build the capabilities you need for sustainable growth.

• Develop internal talent (and promote talent mobility)

• Hire in new people (talent acquisition)

• Partner with organizations or people that have the needed skills

• Acquire companies for the capabilities they will add

All four of these choices have a role to play.

The 70:20:10 framework provides a way to think about the strategic choices to make around capability development. This approach argues that approximately 70% of learning comes from work experiences, 20% from social interactions and 10% from formal learning. Given the skills and competencies you need to develop, this provides a rough guide to how you should allocate your investments (and which is why project management platforms such as Asana, Basecamp or Wrike) are included in the Systems choice (Have you thought of using Basecamp as one of your learning platforms?)

Once you have made your Where to Play and How to Win choices you will need a granular skill model on how to develop them. A simple list of skills will not do the trick. One needs to map skills to roles and possibly even have a job architecture describing the current, emerging and future jobs in your organization. We also need to recognize that each individual has, and should have, a unique skill set, as unique as their DNA. Managing the tension between organizational level frameworks and individual differences is part of what a good skill model does. If the model is only top down, or bottom up, it will not be able to perform this function.

The questions that inform your skill strategy

Here are some of the key questions that you can use to build your skill strategy.

1. Understand your differentiated value
   How does your organization create value for customers in ways that are different from the competitors and alternatives?

2. Build the capabilities that will increase your differentiated value
   What capabilities are becoming commoditized?
   What skill gaps do you need to fill?
   What skills will you need in the future to maintain and enhance your differentiation?

3. Build a skill portfolio
   What are the time horizons for skill and capability development? (What skills do you need now? What skills will you need in the next year? What skills will you need in the next five or ten years?)

Building a skill portfolio

There are many types of skills, they require different levels of investment, they decay at different rates and have different levels of return. The standard way to manage assets like this is with a portfolio strategy. The concept comes from finance, where it is defined as “Simply put, portfolio strategy is a roadmap by which investors can use their assets to achieve their financial goals.” (See 5 Elements of a Successful Portfolio Strategy). A good portfolio considers the following:

• The potential return (developing skills requires an investment and investments should have a return)

• The timing of the return (some investments have an immediate return, others require years to payout)

• The level of risk (not all skills will generate a return, but you cannot know in advance which will have a return)

• The potential for synergies (combining skills from different domains can increase returns by orders of magnitude)

• The rate of decay (some skills decay over time)

A robust portfolio, the type that can support sustainable growth, takes these five factors into account. Begin your portfolio strategy with a skill inventory (just as you would inventory your other assets). You can use this little table to get you started.

The most difficult part here for many people in talent management or learning & development is to understand how investment in skills will drive value differentiation. This is beyond the scope of this post but it central to the approach that Ibbaka-TeamFit is pioneering. Simply put, the skills that you apply that your competitors also use are commoditized skills. They may be necessary as table stakes, but they will not give you a competitive edge or drive sustainable growth. Differentiated skills are those that you need in order to deliver more or different value than your competitors. They come in economic, emotional and social flavours and are defined in terms of the impact on your customer. This is the big change for many of us, defining skills in terms of the impact on customers and what they make possible for customers, rather than from an internal perspective. One way to get insight into this is to add skills to a customer journey map.

Make sure your portfolio is diverse. There are several dimensions along which one can measure diversity.

• Do you have good coverage across the seven skill categories?

• Do you have some skills that will offer a quick return on investment, others that will have a longer return?

• What is the risk/return ratio distribution (you should have some investments that are ‘sure things’ others that are ‘long shots’)

• Are there interesting potential skill combinations in your portfolio (if not, then you need to add additional skill investments that can drive those synergies)

Your skill inventory will show where there are holes in your portfolio and it may also uncover areas where you are over-invested. Do not invest too much in commoditized skills or skills with a very short half-life. Make sure you are making some long-term investments in skills that will only pay off in future years. The companies that do this will dominate the future. So will the companies that take risks. If your learning and development plan is to only invest in areas where there is an assured return in investment then you are on the road to commoditization. Developing skill differentiation requires some risk taking.

Start your skill transformation with a skill inventory and then test if your skill portfolio will deliver the sustainable growth your organization needs.