To move organisations through disruption, HR must sit at the helm of workforce agility, actively redesigning work and embracing the skills-powered organisation to stay ahead, says Mercer’s global advisory leader Kate Bravery.
Gone are the days of the ‘loyalty contract’, built upon the exchange of an employee’s time and output for pay and benefits.
Today’s world of work is more accurately characterised as a lifestyle contract: employees seek work designed around their lives, but recognise that to sustain this they need a clear value exchange where their contribution is rewarded in skill development opportunities to ensure their future employability.
However, the career pathway strategies we’ve relied on for decades are falling short of keeping our workforces engaged and relevant.
Last year, 42 per cent of employees reported that their employers were not meeting their needs, according to the Global Talent Trends 2024–2025 report – research my team and I conduct at Mercer with more than 12,000 executives, HR leaders, employees and investors each year. It’s no surprise then that two in five people believe work is broken.
Added to this are the momentous transformations enabled by AI. McKinsey’s Generative AI and the Future of Work in Australia report (2024) estimated that 79 to 98 per cent of task hours could be automated by 2030.
Staying relevant in a shifting landscape requires continuous upskilling and reskilling as the lifespan of fixed roles diminishes and the opportunities for acceleration increase. We also need to be realistic about expectations, given 95 per cent of organisations report getting minimal return from their AI investments.
If we want to guide our organisations through successful transformation and support our workforces to thrive in the long-term, organisations need to reimagine the formula for talent development – one that speaks to skills rather than job-centric strategies, and cultures that recognise the need for more dynamic careers that intentionally blend learning and earning.
Currency of skills
A skills-powered approach relies on matching employees to tasks via their capabilities, skills and experiences. Rather than locking individuals into outdated roles, which may be made obsolete in a few years, organisations will secure increased returns by designing more flexible roles, where a proportion of workers’ time could be deployed on internal projects/gigs, or even have certain roles that are entirely fluid – where talent is deployed enterprise-wide to meet specific business needs as they emerge.
Done well, this means learning and development opportunities are transparent and equitable, internal mobility is more intuitive, and the employee experience feels more personalised and career-enhancing.
With upskilling/reskilling representing the top business risk identified by C-suite executives last year, the commercial benefits are also obvious.
Our research found that high-growth organisations, defined as those that experienced 10 per cent or more growth in revenue in 2023, were more likely to already be practising skills-powered strategies than their lower-growth peers, most notably in the areas of developing skills (1.3x more likely), matching people to internal job opportunities (1.3x) and rewarding critical skills (1.8x).
The benefits on the company side are also evident. One organisation achieved $1.3 million in savings through internal gigs by adopting skills-powered processes, unlocked over 50,000 hours across internal projects and filled 45 per cent of job openings internally, all within a year of embracing an internal talent marketplace powered by skills intelligence.
Five progress levers
The good news is that many businesses are already beginning their journey to becoming skills-powered, partly due to flattening budgets and ongoing skills shortages. The organisations making the most progress on jumpstarting their skills engines in a way that empowers their people are harnessing these levers:
- Building an investable strategy
They are identifying the high-value skills needed for future growth and mapping these to the business’s long-term objectives – that is what will help get your board’s attention and investment.
For instance, if organisational sustainability and resilience is a long-term priority, analyse skills gaps and map these against your existing workforce’s skills and motivations.
Next, quantify the cost savings generated through taking a skills-powered approach, such as through reskilling and redeployment initiatives, as opposed to external hiring and training.
- Cultivating manager readiness
As the pace of transformation accelerates, HR leaders must navigate supporting a fatigued workforce through the magnitude of upskilling and reskilling that is required.
Integral to easing the transition is coaching managers through what a skills-powered approach looks like on a day-to-day basis. This might involve equipping them with frameworks for effective upskilling and career mobility conversations. Getting this right is critical, with our research revealing only 30 per cent of employees believe their manager can coach for future skills.
- Figuring out their skills measurement strategy
When skills, not jobs, are the currency of work, how you match skills to jobs and tasks matters. But for more mature companies, how you measure people’s skills and aspirations also matters.
Today, organisations are increasingly integrating diverse skills data – including inferred, rated, validated and, in some cases, demonstrated skills – to make more informed talent decisions. These insights help identify employees who are best suited to specific roles, temporary assignments or project-based gigs, and those with the potential to step into positions of greater complexity.
In an era of increased AI regulation and the need for defensible decision-making in talent management, it’s important for companies to know what type of data is most suitable for different types of applications.
Inferred skills (such as those scraped from people’s LinkedIn profiles) or rated skills are effective for initially matching talent to potential roles, or maybe to find a skills coach internally, but might be a little light if you are deploying talent to a client project or want to reward skill deployment.
- Building the enabling infrastructure
A skills-powered organisation relies on a robust infrastructure to support its model. At the core is a well-defined skills taxonomy or ontology, providing a common language that makes capabilities visible and comparable across the organisation.
On top of this, many are building talent marketplaces or enhancing HR platforms to turn skills data into actionable results for individuals and leaders. These systems match people to projects, roles, and learning, while visibility into workforce capacity. When integrated with learning and career frameworks, they also can create a cycle where skills insights drive development.
In practice, the right infrastructure turns skills into a dynamic currency of work – powering workforce mobility, growth, adaptability and resilience.
- Ensuring benefit realisation
When transitioning from a role-based structure to a skills-powered organisation, the need to demonstrate tangible benefits for different segments of the workforce, such as individuals, hiring managers and executives is critical. This requires a clear understanding of what will be different when people are hired, developed and deployed etc., and empowerment to take clear actions when the change is not being realised.
Integrating skills-powered practices within your total rewards strategy to incentivise skills development and/or to recognise skill deployment can also help keep benefits on track. Last year, we found that 45 per cent of HR leaders reported rewarding skill acquisition as a significant driver in effectively closing skill gaps – a significant leap from prior years.
Creating future-fit teams
In the face of AI-enabled transformation and ongoing talent crunches, organisations and HR leaders must champion continuous workforce reinvention to stay relevant.
Getting this right includes actively redesigning work, knowing the skills required for future success and using both talent and reward leavers to reinforce behaviours that actively drive agility.
Above all, building a skills-powered organisation is not just about lifting productivity. It’s about enabling our people to thrive in an era of constant disruption.
Kate Bravery is a senior partner and global leader of talent advisory at Mercer. She is passionate about driving human-machine teaming and her expertise lies in people strategy, talent management and HR process design.
A version of this article first appeared in the October/November edition of HRM Magazine. To hear more from Kate Bravery, listen to her episode of AHR’s podcast Let’s Take This Offline.