Australian firms shift to skills-based workforce strategy

A recent report by Workday highlights a strategic shift among Australian organisations towards skills-based workforce management to bridge the growing talent gap.

According to "The Global State of Skills" report, 93% of leaders are comfortable with hiring individuals based on skills profiles, with 69% identifying role-specific skills as the most critical hiring criterion.

Additionally, 95% of organisations surveyed report that possessing digital skills, such as AI literacy, is crucial today, with 65% projecting it will become vital for success over the next five years.

Social skills, specifically teamwork and problem-solving, are reported by 34% of respondents to be the most impactful areas where current skills shortages are felt. In response, more than half of the organisations (53%) are initiating mentorship and coaching programs to fill these gaps.

Jo-Anne Ruhl, Vice President and Managing Director, Workday Australia and New Zealand, remarked, "Australian organisations are recognising that a skills-based approach is not just about hiring differently, it's about building a more agile, resilient workforce that can adapt to rapid change."

She further noted that as digital transformation accelerates, businesses valuing skills will find themselves better positioned to innovate, compete, and drive long-term economic growth.

The study reveals that 60% of leaders consider skills shortages the primary reason for transitioning towards a skills-based organisational framework. Despite their efforts, 46% of Australian leaders admit to having limited visibility into their workforce's existing capabilities, highlighting the challenges posed by traditional talent management systems that focus heavily on job titles and formal credentials.

The report indicates a shift in organisational strategies towards data-driven, skills-based talent management, facilitated in part by advancements in AI technology. AI is praised for its role in enhancing productivity by automating repetitive tasks (58%), thus allowing organisations to concentrate on developing and deploying talent based on skills over traditional job qualifications.

Ruhl stated, "AI is further amplifying this shift, helping businesses unlock talent potential and scale workforce development faster than ever before."

Despite these advancements, the transition to a skills-based model is not without its challenges. 57% of business leaders highlight the time required for reskilling employees as a significant hurdle, while 51% face resistance to change. Overcoming these obstacles demands a fundamental change in organisational mindset, including articulating the advantages and objectives of skills-based strategies.

The report finds that 67% of leaders believe this communication is necessary for accelerating an organisation's transition, and 80% agree that a skills-based structure can enhance economic growth potential.

The findings of this study draw on a survey conducted by Hanover Research, encompassing over 2,300 business leaders globally, including 151 from Australia.

These insights are drawn from leaders at the director level and above in organisations of at least 100 employees across varied regions, excluding Workday employees.