As the world of work evolves and the workplace changes, some organisations are turning to skills-based promotion as one strategy to keep high-achieving, high-quality employees engaged and motivated.
Skills-based promotion systems are being introduced in both the private and public sectors. The UK Civil Service is among those taking it up, with the introduction in 2018 of Success Profiles, a recruiting and promotion system that takes into account ability, behaviours, experience, strengths, and technical skills.
In contrast to a traditional tenure-based system, which promotes workers based on seniority within the organisation and rewards them for their service, a skills- or merit-based promotion is based on an analysis of the employee's performance.
Promotions based on seniority are a more familiar approach to career progression and can help companies avoid potential charges of favouritism. However, a skills-based promotion model can ultimately be better for organisational productivity, as employees are encouraged to acquire new skills or hone existing ones, while the improved transparency that can come with it helps remove the danger of unconscious bias, according to Lewis Glover, then an HR systems consultant at People First, a UK-based company that produces applications for the human resources sector. Another key advantage is that it recognises what is important to workers and accommodates the changing nature of employment and people's relationship to it.
"Many industries could benefit from adopting this sort of approach, not just finance," said Glover. "Because the shift has been evolutionary rather than revolutionary, many companies have missed it and are wondering why they are struggling to retain talent."
However, in order to implement a skills-based promotion model effectively, companies need to recognise how to change their work culture to ensure buy-in from those used to being rewarded for tenure.
As the demographics of the workforce change, and COVID-19 rearranges the workplace, managers need to understand that it is no longer enough to offer a high salary. Employees and potential recruits are looking for meaning and development in their jobs.
"People research employers online in the same way that they research a product," Glover said. "Companies need to have a fairer approach." That includes not just salary but professional development, promotions, and growth opportunities.
Naeem Arif co-owns a Birmingham, UK-based retail business and consultancy with family members, employing 23 people and managing a team of over 50, including offshore members. His experience leads him to take a holistic view of the way skills fit into career progression. Ultimately, in an environment where many people will work as contractors and have a variety of educational backgrounds, it is most important to understand how different people can fit into an organisation rather than mandating a specific background or degree, he said.
"Some people are good at organising people or motivating them," Arif said. "For me, it's more about what you can do, what are your skills, what are you great at, what are you passionate about. I will promote you based on performance, or I will put you in a position where you are likely to excel."
As an example, he cites two employees who are talented coders and programmers, one with six years' experience and the other with nine. Neither wants to take the next obvious step to a managerial or client-facing role.
"If I made them managers, it would just destroy their confidence, and I would see a reduction in their performance," Arif said. He does not think that pay grades and promotion structures should always be linked because of the need for this kind of flexibility. Instead, they are rewarded with increased salary and skills development opportunities. "Taking someone out of a role where they are doing great is actually a negative thing."
A level playing field
Nicole Lipkin, Psy.D., a Philadelphia-based organisational psychologist and chief executive of Equilibria Leadership Consulting, a leadership and organisational development firm, points out that by levelling the playing field, skills-based promotion gives all employees a chance to excel, which improves motivation at work. Unlike tenure-based promotion, it is also likely to tap into the need for growth.
"It puts ownership on the employee and their desire to be promoted, rather than them saying, 'I've been sitting in this chair for ten years,'" Lipkin said. "I also think when you are looking at skill- or merit-based promotion, it really promotes an opportunity for leadership or management to step up in how they motivate their employees."
Linking promotion to skills creates an environment that is dependent on feedback and development, which in itself encourages longer tenure, according to Lipkin. The practice can also expose organisations with leadership or management teams that lack feedback and development abilities.
"Feedback and coaching are skills that can be trained," Lipkin said. "If you are making the switch, you need to make sure you have the right people in the right places providing the feedback and coaching to help develop others."
Implementing such systems also makes recruitment and retention shared tasks within a company, ensuring that it is not just the job of HR to "guess what 600 people can do", Glover said. Instead, managers and team leaders can input the abilities they require and the skills candidates would need.
"That way, when you roll it out, it's not just a new scary system, but something the wider business has input in," Glover said.
Keep it simple
In developing a skills culture, organisations need to ensure that they do not make the perfect the enemy of the good. Many executives make the mistake of spending time trying to develop a system that is perfect for their company. "They tend to overinvest and overthink it, get into too much detail, and most of the time it ends up being complex and hard to use or [overly] technological," said Martin Boutges, head of product at Clustree, a Paris-based human resources consultancy that builds artificial intelligence to help companies identify talent.
If HR departments want to collect information on employees that they can use to match skills to jobs, they need to give them an incentive. Rather than expecting staff to complete an online profile in the hope that they "might show up on the radar" of hiring managers, Boutges said, it is more effective for the HR department to ask employees to fill in their skillset in exchange for receiving notification of three positions for which they may be eligible.
Changing an organisation's promotion culture requires a number of significant shifts in corporate approach. It is a way of making HR more transparent, which in itself will have an impact on HR processes and alter the way people work. Practitioners need to ensure that they introduce change in an incremental manner and avoid looking for an overly tailored solution.
One of the biggest mistakes to avoid is trying to employ an automated skills-based system before the company is absolutely ready to do so (see the sidebar, "Tech Support"). Smaller businesses and those that have less-developed HR systems are generally less able to make good use of a more complex skills-based system. When a workforce exceeds 100, most companies are of sufficient scale to put one in place, Glover said.
At the same time, organisations switching will need to deal with workers who have significant tenure and have been waiting for an upward move for an extended period. Helping these individuals understand what they may need to do to get a promotion will be a key aspect in the process of bringing the workforce on board.
"The culture shifts, and you are triggering a part of people's brains that needs to change," Lipkin said. "You need to figure out who can come along and who might struggle." Understanding the psychology around change resistance is key, she said.
It is in the interest of organisations to continue to reward loyalty. Indeed, one thing that managers need to keep in mind is the importance of retaining institutional knowledge.
"Just because you are swapping culture and systems, you don't want to alienate people or marginalise them," Lipkin said. "Really good employees that have been around forever will also probably have very valuable skills."
Companies can turn to technology to help build skills-based promotion systems. In one such program, the People First software system, launched in 2017, corporate clients provide their skills requirements, and employees build their own detailed profiles into the software.
Employees can update their profiles regularly with new project experience and skillsets, as well as use the system to compare their qualifications to those of others on their team and sign up for further training programmes within their organisation. An automated process provides HR managers with a percentage score indicating a person’s suitability for a given role, and the company can get a 360-degree view of each individual’s attributes, professional qualifications, and achievements.
“The system can empower people to take control of their own careers,” said Lewis Glover, then an HR systems consultant at People First. “If you adopt this system internally, you can allow people to align the values of the business to their current profile. These systems can make intelligent suggestions about who is ready for promotion.”
French company Clustree helps employees identify their skills and provides recommendations about roles they could occupy and the skills they should develop to make them better candidates for those jobs. Martin Boutges, head of product at Clustree, describes the firm’s system as a “career coach powered by AI”.
“When we talk to a client, what we are seeing is that they have always tried to do skills-based promotion — tenure-based was usually a proxy,” Boutges said.
UK-based accounting firm Page Kirk has used the “check-ins” feature of People First’s system to keep up a regular dialogue with employees about progress and development opportunities, said John Wallis, a partner at the firm.
“We’ve ensured we can fast-track the most suitable candidates for any vacancy or role, irrespective of seniority,” Wallis said. “It has transformed our promotion practice and ensured we have a constant injection of fresh talent and new thinking.”
Having a clear vision of their prospects for progress and training within their organisation also makes employees less likely to look elsewhere for the next step in their career, Wallis said.
- "4 Tips for Managing a Remote Workforce", FM magazine, 29 November 2019
- "How to Manage High Achievers", FM magazine, 24 June 2019
- "Preparing the Next Generation of CFOs", FM magazine, June 2018
- "7 Ways to Reduce Talent Turnover", FM magazine, 30 March 2017
- Competency and Learning, competency.aicpa.org
Andrea Chipman is a freelance writer based in the UK. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.