The skills-based movement is gaining momentum, but we have not yet reached the critical mass needed to make skills-based practices the norm in corporate America. As one of the leading consulting firms helping employers adopt and implement competency-based practices, Grads of Life recently partnered with Morningstar Sustainalytics to offer a webinar focused on the business case for skills-based transformation.
Leading cross-sector investment leaders came together to become more informed about the what, why, and how to implement and measure skills-based practices. They heard from business representatives who have experienced the importance of a skills-based approach, ranging from a broader ability to decrease turnover and increase efficiency. For those companies, measuring knowledge and accountability has been a critical component in deepening their skills-driven transformations, as it allows them to articulate pricing well for key stakeholders.
Following the webinar, Grads of Life spoke with Enrique Figallo, Chief Engagement Officer at Morningstar Sustainalytics, to continue the verbal exchange on skills-based skills control and how investors can drive the movement.
How did you first get introduced to skills-first talent management strategies and what inspired you to want to learn more?
We started thinking deeply about the future of painting in 2020. I became specifically interested in painting, forced to make plans, and saw a lot about learning and progression. The first encounter I had with competency-based technique, originally called competency-based, was more about skill progression and skill progression. From there, I understood that this was actually aligned with strategic paintings, making plans, making transparent what skills you have within your organization today and what skills you want tomorrow. As I started digging deeper, I learned that the technique was also about inclusive hiring perspectives. Then it was just a matter of connecting all the dots and becoming aware of the tough dynamics of this skills-based movement.
How do you think skills-based transformation fits into the broader debate about human capital control in ESG?
If we take a step back, ESG is all about sustainability, taking a long-term approach, and staying in the game longer. And, in my opinion, sustainable corporations want to attract, retain, and expand capacity to remain competitive in the future. . Across ESG, if you look at environmental, social and governance aspects, it’s all about the future. Traditionally, human capital is not exactly compatible with the “S” in ESG, as it is viewed through a human rights lens. Lens, however, would describe the control of human capital from the attitude of people’s sustainability.
I believe the challenge is that human capital is traditionally seen as a backbone function rather than a strategic, business-oriented one. I think that’s shifting. The COVID-19 pandemic was a catalyst of change for human capital management and really accelerated trends that were underway. The rise of generative AI in the last year also has specifically accelerated the conversation around skills-first, because it demands that businesses think more about skills and how they can enhance work and productivity.
We want to adopt a more holistic technique to manage other people from an attitude of sustainability and translate it into the future. And the skills-based attitude is an important component of that: looking to other people for what they’re capable of doing, rather than looking for what they’re capable of doing. Where they come from, highlights endless probabilities of what you can do as a company and as an employee.
Are you, investors and companies, aware of the business value of skills-based practices?
I would say no, most investors and companies are not aware of the business case and, going back to the previous question, they do not consider human capital control as an ESG issue. But when the business case is presented, it makes a lot of sense. If we look at it from the attitude of “a company is just an organization of people”, then it all depends on how people are taken care of. I think the challenge is that we want to create more awareness, but in order to increase more awareness, corporations that use this technique want to communicate more openly. They want to tell their story and percentages about how they are employing competency-based technique.
Today there is a challenge, specifically in the ESG area, where human capital control reporting criteria are not as complex as environmental criteria and lag behind other criteria. So, from a compliance perspective, corporations may simply disclose what they’re supposed to disclose, but they don’t proactively analyze their human capital metrics.
This creates this chicken-and-egg problem. As investors, we care and want to know what corporations are doing, but because they don’t tell us about it, we don’t know what they’re doing. Second, because investors who ask or tell corporations what they want to disclose are not telling their story. So how do you break this cycle? I believe this is a fundamental challenge because there is no one-size-fits-all solution. We can’t compare that, for example, to reducing carbon emissions. This is not an unusual move, everyone knows that. We have a goal: By 2050 we want to reduce the temperature by 1. 5 degrees or reach net zero, so that’s a clear goal. People are different. It depends on the context. For example, global corporations face this challenge: what works in the U. S. doesn’t work in Europe, and vice versa. “So how do we proceed? The criteria are not as advanced. I think this is a time when corporations want to test, experiment, and see what happens.
Can you touch a little bit more on the image of competency-based conversation?
In terms of geographical distinctions, I would like to emphasize that cultural awareness is very vital. What I’ve learned from looking into the facets of diversity, equity, and inclusion, i. e. , diversity, is that demographic diversity is more about representing the market. in which you are operating. That’s an important rule of thumb and I think it helps. What’s happening in the U. S. , which is demographics, is very important and you might want to look at some parameters that in Europe probably wouldn’t work in the same way. With a lack of cultural awareness, it’s possible that what works in the U. S. will not be able to do so. The U. S. is also able to operate in Europe.
One aspect I liked about the skills-first technique is that when you look at human capital management from a skills perspective, you can eliminate this challenge and see other people for who they are. what they can do and the skills they bring. This technique can be very universal for breaking down barriers because it’s not about where you’re from, what language you speak, where you grew up, or what degree you earned, but what you can do. For example, in Europe, the European Commission is updating the requirements criteria for migrant painters. You see it in other countries, in Germany, in Spain, they are cutting back on the need for foreign personnel to come to their country because they realize that they want those other people. We also see that in Africa, where this is emerging very quickly, we say we have the skills of the future. So that’s an attractive component of how we can work with this. For example, generative AI does not see countries, it does not see borders, it does not see geography, so in this case it becomes a global vision. Globalization is virtual today, so how can we solve it? I think a skills-based technique can be a tool that corporations can use.
Why do you think investors are interested in understanding the return on investment (ROI) of skills-based practices?What are the benefits?
When it comes to human capital management, my favorite mantra to compare a company’s technique to is “How do you keep a fit, engaged, and productive workforce?”When you untangle that, you can communicate about anything. ” “Healthy” includes intellectual fitness, wellness, physical fitness, and safety, all similar facets of holistic fitness. Then, when we communicate about engagement, we’re communicating about growth, attraction, inclusion, equity, and breaking down barriers. And productivity is first and foremost about generation and that’s where, whether it’s in terms of engagement and productivity, we think about the question, “How can corporations be more competitive, more agile, more resilient?
Ultimately, looking for recent investments in skills-based practices can help investors understand how companies are cutting overhead costs or increasing productivity and engagement. Understanding the return on investment of competency-based practices is challenging; There’s no one-size-fits-all solution or measure that everyone uses, but finding the metric that can help you assess whether you’re making progress is the most important part. Companies have the opportunity to play, experiment, and figure out what that metric is, and then come back to investors to share the percentage of the metrics they’ve decided on and why.
What, if any, risks do you anticipate for investments that do not incorporate a skills-first approach into their talent management strategy?
I would say the threat is not being able to keep up with the pace of change. Change happens very quickly, so it’s about resilience and agility. Many corporations talk about being agile, innovative, artistic and competitive. There are many studies on the lifespan of a company in today’s market and the lifespan of a company has been reduced from 30 to 50 years to 10 to 15 years. So if we keep that in mind, it’s about how to stay competitive. And it’s interesting, I think we can learn a lot from startups about where the team is what makes a startup successful. It’s about other people. Having the right team is what helps a business move forward. If you don’t know who you have today and are constantly looking to recruit from outside, you will eventually face a skills shortage problem. What will you do next? If you can’t recruit other people and you can’t retain them, it’s very expensive. In this case, it is possible that at some point you will be out of business if you do not have the ability to innovate and evolve.
What does Morningstar Sustainalytics have to advance this work, and what does it plan to do in the future?
At Morningstar Sustainalytics, we offer guilty control to institutional investors. These come with engagement, a tool that institutional investors use to discuss environmental, social, and governance (ESG) issues with companies. The reasons why you rent a business can vary. The focus of our human capital control program is to assess how corporations are proactively implementing human capital control practices and diversity, equity, and inclusion (DEI) efforts in line with emerging trends. Here, we inspire corporations to reap the benefits of a skills-based system. approach.
If you could wave a magic wand, how would you want these paintings to move forward?What are the obstacles? What resources/support are needed to achieve the goal?
I would say that the biggest challenge we face now is a mindset challenge. Many of the challenges we see in the area of human capital control are due to an outdated mindset. We approach today’s challenges with the mindset of the 1990s. What worked before COVID doesn’t work anymore and probably won’t work in the future. That’s why we need to have the ability to reconsider how we look at this new world of work. It requires an open and inquisitive mind, necessarily thinking like a scientist. You have a hypothesis and then you pass out and experiment. So it’s about being open to learning and turning your concepts based on evidence.
And this is an attractive component because the control of human capital is very complex. In the past, I was a transactional decomposer, guilty only of hiring and firing people, and that’s it. But today it is a very strategic function. You want to perceive the commercial desires and trends that affect the business, which requires a lot of information, experimentation and control of stakeholders. To challenge and overcome this obstacle, we want greater awareness and to do this we want more dissemination, more knowledge and more case studies demonstrating the benefits of this technique. This is a long-term adventure and procedure and the challenge is that today we cannot demonstrate the effectiveness of this technique from a short-term perspective. With the quarterly results of many companies, it is practically very unlikely that this will produce long-term effects at this time, but time will tell. In fact, I like and will share a quote I used a lot in 2020 from Alvin Toffler, a futurist: “The illiterate of the 21st century will not be those who cannot read or write, but those who cannot read or write. ” InformedArray not being informed and being informed again. Array” I think this is what we want in this area to deal with the complexities we face today and tomorrow.
Is there anything else you’d like other people to know about the skills-prioritizing technique or what do you think about it?
I would like to emphasize that the “skills first” technique is not just a tactic to address diversity, justice and inclusion. Today, when we think about human capital management, we only think about DEI and, more precisely, demographic diversity. They do not look at it from an attitude of justice and inclusion. Therefore, we will have to be very careful not to use demographic diversity to accommodate the entire spectrum. Here I would challenge you to see from a holistic attitude. This is another example of why I love the question “How do we maintain a healthy, engaged and productive workforce?” This demonstrates the holistic and sustainability-focused attitude of other people that is so important. Skills-based technology is not only helping corporations think about diversity, fairness and inclusion, but also how they can become more agile and competitive. And this is where we can see the true advantages of this technique, because if you only recruit, you are missing out on a lot. You miss the forest when you look at the trees. So it’s about how to maintain that broader mindset as you zoom in and out. This is a strategy that I think HR or others working in this box will benefit from.
The developing skills-based movement has already caught the attention of HR leaders, employer coalitions, academics, and think tanks around the world. Investors are a largely untapped audience that has a vital role to play in accelerating adoption by integrating skills-based measures. in existing measurement frameworks. As the skills-based strategy continues to gain traction, investors should be vigilant about how leveraging best-in-class equitable skill methods can create innovations in worker experience and business outcomes.