A Practical Guide for the Operationalization of your SBO Transformation
DATE: MARCH 5TH, 2024
AUTHOR: REMY GLAISNER
For those who enjoyed the concept of Intent-Based Skilling that was recently developed, and awaiting its business-ready release, this document offers practical guidance on implementing Skill-Based Organization (SBO) until then. Intent-Based Skilling is an application of the skill-based organization (SBO). It turns SBO into a practical, scalable, and valuable model by centering it around business intent. That’s why the better the SBO transformation is executed, the more value Intent-Based Skilling applications provide.
The concept of Skill-Based Organization (SBO) holds significant promise, yet mature SBOs remain elusive. Despite the high stakes, there's a scarcity of best practices available for executing this critical transformation. Nevertheless, the hype surrounding SBO continues to surge, placing talent executives under immense pressure to deliver results while grappling with the complexities of operationalizing SBO principles. Integrating these principles will fundamentally alter how talent leaders and organizations operate and manage their business, posing a potential upheaval to current structures, processes, and talent-related classifications.
Although we have yet to achieve a mature SBO, the enterprise is familiar with the challenges of the scale and nature of such transformations. Other functional areas have undergone similar levels of redesign, such as the transition of IT shops from managing siloed applications to digitally transforming business models. This transformation, akin to "Industry 4.0" in industrial sectors, involves a total rethinking of operations enabled by digital capabilities and facilitates new business opportunities.
Here’s the trick - SBO is not a mere shift in perspective for how talent will be managed and optimized, it is a full-on business transformation. A business transformation means it aligns to a business vision and uses business frameworks. Due to its talent-centric nature, the SBO Transformation necessitates oversight from talent executives, although this should not be confused with it being a Talent Transformation.
Becoming a Skill-based organization means embarking on a journey to radically improve the organization’s competitiveness and mitigate risks related to future market demands by adopting new operational archetypes adaptable to the workforce of the future. It can’t be more of a business transformation, and that’s why it must be conducted, evaluated, communicated about, and optimized with a business executive’s mindset. That’s the SBO particularity, and it is mandatory for its success.
This requirement is crucial because the SBO lies at the intersection of two complementary perspectives for the use of skills by the organization. You could think of these two perspectives like the two sides of a coin: while talent and HR leaders primarily perceive one side, business leaders see the other. Both are aware of the alternate perspective but may not fully comprehend it simultaneously.
- In skill terms, it means that talent and HR leaders view skills as units of assets, making skills measurable, quantifiable, and universally applicable across various HR functions. In the Talent leader realm, skills are structured into standard roles within job families, allowing for easy identification, mapping or tracking, and management to determine the best utilization.
- Conversely, in the business leader sphere, skills are seen in terms of the transactions they facilitate. Business teams or units hold accountability over the achievement of performance goals, and achieving these goals depends on how well the application of the right combination of skills is at the right time, each time.
Neither perception is superior; both are necessary. Sometimes, treating skills like assets is advantageous, while other times, focusing on their transactional aspects is more beneficial.
In the SBO Transformation context, the mandate for talent executives is to optimize the transactional functionality of skills while also efficiently managing the organization's skill pool to maximize its overall value. Today, talent executives must navigate this duality effectively, enhancing both the transactional usability and management flexibility of skills.
Now let’s get on with the work and start where it should start -- the “Talent Strategic Planning” …
I. The Talent Strategic Planning – With Business Success in Mind
“TALENT STRATEGIC PLANNING” – IT’S SIMPLER THAT IT SOUNDS, CLEVERER THAN YOU THINK.
A sound business strategy delineates the path to success and outlines key priorities. Similarly, a robust Talent strategy aligns skills, talent data, and digital capabilities with the enterprise's strategic objectives. When the Talent strategy closely mirrors the business strategy, the likelihood of achieving strategic goals increases significantly.
To establish this close alignment, Talent executives must engage in comprehensive strategic planning and link Talent initiatives directly to specific aspects of the business strategy. This involves focusing on three crucial areas:
- Context: Analyzing internal and external factors that shape the operating environment, including business and technological elements, and identifying opportunities and threats to the Talent asset.
- Direction: Aligning Talent initiatives with the enterprise's business objectives, goals, and strategic principles to ensure synergy.
- Actions: Identifying Talent-driven actions necessary to propel the enterprise toward its strategic objectives and defining business outcome metrics to gauge the impact of these actions.
Furthermore, it is essential to identify the capabilities required to support the business strategy and assess any existing gaps. Strategic Talent actions should prioritize addressing these gaps. In organizations with unclear or shifting business objectives, the Talent strategy can focus on core business capabilities that are always essential. These core capabilities, whether mandatory, urgent, foundational, or widely applicable, ensure the resilience of the Talent strategy to changes in the business landscape.
EFFECTIVE STRATEGY COMMUNICATION: FROM UNDERSTANDING TO COMMITMENT
Successful strategy communication involves guiding stakeholders through a series of stages: understanding, support, and commitment. These stages are interdependent; without understanding, there can be no support, and without support, there can be no commitment. To foster commitment, Talent leaders must effectively engage and motivate their peers and HR stakeholders by highlighting the value Talent brings to the business.
While the SBO strategy document captures the details and logic of Talent executives' strategic planning efforts, it may not be the most effective communication tool. Instead, Talent leaders should convey the strategy through relatable, engaging, and memorable stories. Different stories will resonate with various stakeholder groups, inspiring and motivating them accordingly. For instance, the CFO may respond to different stories than a functional business leader.
It's crucial for Talent leaders to communicate the strategy and cultivate commitment not only among senior executives but also horizontally and vertically within the organization.
CONNECT STRATEGY TO EXECUTION WITH A PLAN THAT SPECIFIES THE PROJECTS AND INITIATIVES.
The Talent strategy establishes a shared understanding of how Talent functions will contribute to enterprise objectives. A strategic plan bridges the gap between strategy and execution by outlining the initiatives and investments necessary to achieve strategic goals. While the strategy sets the long-term vision for SBO, the strategic plan outlines how Talent functions will realize that vision in the midterm, typically spanning 12 to 24 months.
Like the strategy itself, Talent executives must align each initiative with the strategic goals outlined in the business strategy. This alignment ensures clear accountability for each aspect of the strategy, facilitating cascading of the plan to teams and individuals.
At a more detailed level, the Talent Intelligence leader must develop operational plans specifying projects, programs, and products required in the short term to execute the initiatives outlined in the strategic plan. Operational plans typically cover a period of six to 12 months. This decomposition of the strategy enables Talent functional groups to allocate teams and resources effectively for successful execution. It also allows Talent Execs to swiftly identify Talent initiatives and projects that may need adjustment if the enterprise's high-level strategy changes.
MAINTAINING STRATEGY ALIGNMENT IN A CHANGING LANDSCAPE
With increasing volatility and rapid rates of change, both strategy and execution can veer off course or become outdated. Failures to detect and respond to these shifts promptly heighten the risk of the enterprise failing to achieve its strategic objectives. To mitigate such risks, regular strategy reviews should be conducted as part of an ongoing strategy process. To inform these reviews effectively, Talent executives should establish two types of scanning: context and execution.
- Context scanning primarily examines external factors impacting the enterprise, such as changes in the economy, regulations, competitor behavior, customer preferences, and technology trends. Understanding these factors helps adapt the enterprise's strategy to its evolving business environment.
- Execution scanning focuses internally to assess whether the strategy is being implemented correctly and is delivering the expected results on the enterprise's performance. Metrics defined for each strategic planning horizon serve as the primary source of insights for execution scanning, ensuring alignment between strategy and execution.
THE SKILL OPERATING MODEL (SOM) - ENSURING THAT THE SKILL OPERATING MODEL IS SET TO ACCURATELY DELIVER ON THE TALENT STRATEGIC PLANNING
A Skill Operating Model (SOM) outlines how a skill-based organization fulfills its value proposition by illustrating "how things get done" and how value is generated to achieve the enterprise’s strategic goals. Talent Executives must meticulously design, document, and communicate the target operating model to ensure the Talent group delivers the anticipated value. These components must harmonize to achieve strategic outcomes and fulfill their value propositions, forming an interconnected system with interdependencies. Adjusting one component can trigger ripple effects across others.
In practice, Talent organizations tailor their SOM to one of three potential outcomes, determined by the business context, model, strategy, and the role of Talent functional groups within the enterprise or business unit. These outcomes are:
- Enable Talent efficiency.
- Enhance business performance.
- Transform the business by creating enterprise-wide competitive advantage or growth.
Talent Executives must select the most appropriate SOM for each Talent group, aligning with business expectations and in collaboration with the senior leadership team. Selecting an improper SOM or misconfiguring its nine components could lead to failure in strategy execution. For instance, if the SOM aims to enhance business performance but is configured for skill efficiency, proactive talent leadership necessary to achieve the outcome will be lacking. Similarly, if the SOM targets business transformation but governance and decision rights adhere to traditional control systems, execution of the strategic plan will suffer.
II. The SBO Story-Telling framework - Business Value Expression of the Enterprise that turned Intelligent about Talent
DOCUMENT THE PRIORITIES OF TALENT’S PRIMARY EXECUTIVE STAKEHOLDERS.
Value lies in the perception of the business stakeholder, not the talent solution provider or Talent department. Talent Executives who effectively communicate the business value of applied talent technology tend to secure higher funding levels compared to their counterparts who fail to do so. However, effective communication is often easier said than done. Talent executives commonly articulate value in terms of talent-related performance or operations, rather than business returns.
To enhance the communication of the business value of SBO, Talent execs must translate talent and skill factors into the language of business outcomes that stakeholders comprehend and prioritize. Understanding how business stakeholders define value is crucial, typically aligning with their highest priority business goals. These commonly include:
- Revenue generation or value creation.
- Cost optimization to improve profitability.
- Risk identification, quantification, and mitigation.
Business leaders may emphasize subgoals falling under these categories, such as competitive differentiation or customer satisfaction. In cases where priority business goals are not apparent or consistent across the organization, Talent Execs can glean insights from corporate mission and vision statements, leadership reports, annual reports, and other relevant metrics.
Once stakeholder goals and their relation to value are documented, they should be validated with the executive/leadership team and revisited regularly, at least annually, as priorities evolve.
LEVERAGE PRIORITIES AND BUSINESS VALUE METRICS TO TELL A SBO VALUE STORY
The second step in communicating the business value of SBO involves crafting engaging narratives illustrating how the Talent function contributes to achieving business objectives. At the highest level, there are two types of value stories: run value stories and change value stories.
- Run Value Stories: These narratives display how the skill-based approach enables the business to operate faster, smoother, or more efficiently. They emphasize how SBO-like models maintain high performance levels and sustain operations, crucial for facilitating business performance, especially considering stakeholders' expectations for uninterrupted availability of critical applications.
- Change Value Stories: These stories highlight how SBO has expanded existing capabilities and delivered new ones, driving business growth or transformation. Talent Execs must demonstrate investments that contribute beyond merely "keeping the lights on," illustrating how SBO has propelled business growth or transformation.
While change value stories may seem more captivating, data reveals that a sizable portion of Talent budgets is allocated to supporting current operations. Hence, run stories play a vital role in representing the overall business value of technology. To ensure these run stories captivate business leaders, Talent Execs should illustrate how a mature, technologically enabled SBO reduces costs or enhances efficiency in critical business activities. Emphasizing large-scale programs with significant impacts and grouping smaller cost and efficiency efforts with broader initiatives is recommended. Consider the following examples of run and change value stories aligned with diverse business priorities:
- Revenue-Related Value Stories:
- Run: Supporting revenue-generating business processes.
- Change: Maximizing platform capacity to support new revenue streams.
- Strategic Cost Optimization Value Stories:
- Run: Reducing manual intervention.
- Change: Implementing technology to improve efficiency and productivity.
- Risk Mitigation Priorities:
- Run: Providing protection for digital assets.
- Change: Implementing measures to mitigate third-party risks.
IDENTIFY TALENT-INFLUENCED BUSINESS VALUE METRICS TO ENHANCE THE STORY - UNDERSTANDING AND MEASURING BUSINESS IMPACT OF SBO TECHNOLOGY REQUIREMENTS
The next crucial step in communicating the business value of SBO technology requirements involves comprehending how Talent activities influence critical business priorities and quantifying both the cost of related Talent activities and the resulting business impact. Unfortunately, many organizations overlook or mishandle this step. While numerous Talent groups claim to collaborate with key business stakeholders annually to determine, define, and validate organizational value, very few formalize this into a standardized process for aligning Talent-related spending with business outcomes and KPIs that measure business value.
Even Talent Execs who map Talent-related spending to business value often make the mistake of prioritizing functional (HR) KPIs over business outcomes. This occurs when they emphasize metrics like time to hire or the quantity of talent activities delivered, such as the number of dashboards produced by people analytics. While these metrics are easily accessible and trackable within Talent's domain, they may not necessarily align with executive stakeholders' priorities.
Executive stakeholders are less concerned with the improvement in time to hire itself than with how that improvement contributes to achieving business goals. Therefore, Talent execs must measure business value in a manner that demonstrates how Talent spending directly impacts concrete business results. Clear and mutually agreed-upon business impact metrics are essential for quantifying and effectively communicating the value of Talent Intelligence.
THE RIGHT METRICS MAP BACK TO THE IDENTIFIED PRIORITIES AND GOALS RELATED TO REVENUE, COST OPTIMIZATION AND/OR RISK MITIGATION
Business-outcome-driven metrics (BODMs) are essential for tracking progress toward concrete business goals. Talent execs should collaborate with stakeholders to identify existing BODMs used for measuring business value or define relevant Talent-related BODMs in partnership with the business. This collaboration is bidirectional, with Talent Execs demonstrating how existing technology-outcome-driven metrics align with BODMs.
When developing metrics, adhere to the following guidelines:
- Identify impact metrics for each Talent area contributing to business goals.
- Prioritize methods for measuring the cost of Talent Intelligence and its resulting business impact, including budgetary implications.
- Include equivalent application service-level commitments, where feasible, to measure the availability and response time of the Talent Intelligence group and its business impact.
It's crucial to recognize that, historically, executives have focused less on the intricacies of talent operations and more on how they enable their teams to achieve goals aligned with their priorities. While the emergence of Skill-Based Organization may shift this perspective, building credibility and demonstrating value may take time. However, with persistence and credibility building, there's potential to change this status quo for the better.
III. Nimble Technology Roadmap. You NEED One.
YOUR TECH ROADMAP IS THE PLACE WHERE YOUR BURGEONING BUSINESS MINDSET RESTS.
A technology roadmap serves as a strategic blueprint, outlining how an enterprise's Talent plans will contribute to achieving its business goals. It typically includes visual graphics and supporting documentation to illustrate the progression from the current state to the desired outcome.
While the purpose of technology road-mapping is straightforward—to anticipate technology trends and needs and map a new SBO pathway to adoption—the process can be challenging. This is particularly true when dealing with emerging technologies like GenAI, where talent leaders may lack experience, or constructing a business-oriented tech stack. Effective roadmaps delineate milestones and deliverables required to translate strategy into execution within a specified timeframe, necessitating a structured and comprehensive approach to describe and plan change.
To develop and evolve roadmaps successfully, consider the following practices:
- Establish a structured approach by identifying templates, taxonomies, and tools to ensure consistency, efficiency, and clarity across roadmaps.
- Tailor roadmaps to specific audiences to provide stakeholders with the right level of detail and generate excitement around the direction.
- Maintain traceability across roadmaps using business outcome metrics to expedite decision-making.
- Facilitate discovery and utilization of roadmaps by publishing and actively promoting them to their intended audience.
As Skill-Based Organization matures, the roadmap evolves accordingly, with each successive model building on the capabilities of the preceding operating model. Therefore, if a skill-based organization transitions to a different operating model (e.g., from Model 1 to Model 2), it should consider that the move:
- Requires a higher level of skill-driven maturity from both the Talent organization and the business.
- Delivers higher levels of strategic value to the business.
- Demands increased engagement with business stakeholders.
AVOID COMMON COST MANAGEMENT ERRORS IN TECHNOLOGY SPENDING
During economic challenges, organizations inevitably focus on cost reductions. However, it's crucial to avoid common cost management errors that can compromise the organization's financial health and growth. Here are three scenarios your board won't want to encounter when reflecting on today's cost decisions:
"Our costs continued to rise with inflation, leading to unsustainable margins."
"We slashed costs excessively and couldn't meet demand when it rebounded."
"Increased product pricing resulted in permanent loss of market share."
To steer clear of these pitfalls, Talent Execs must approach cost reduction strategically, mindful of minimizing damage to the business's mid- and long-term health while addressing short-term financial constraints.
ANTICIPATE POSSIBLE COST CONTAINMENT REQUIREMENTS, AND SHOW YOU MEAN BUSINESS - ANALYZE VENDOR PROPOSALS THOROUGHLY.
Vendor negotiations are inherently challenging, especially amidst inflation and economic uncertainty. Managing Talent vendors (e.g., Data-as-a-Service, talent SaaS platform, features of HRMS, etc.) demands keen attention to determine if apparent price increases and renewal costs are justified by economic factors.
Many vendors maintain high selling margins regardless of sales performance, indicating that profit margins extend beyond product units or service volumes sold. It's imperative to understand the underlying reasons for the requested price hikes; blindly accepting "inflation-related increases" may not be prudent. A streamlined four-step approach for analyzing and negotiating multiyear software and SaaS deals has proven effective:
- Engage stakeholders to forecast usage and implementation.
- Request vendors to provide pay-as-you-go (PAYG) proposals for comparison with multiyear prepay options.
- Calculate the net present value (NPV) of PAYG payment streams to evaluate prepay options.
- Utilize NPV-to-prepay analysis models to negotiate better pricing and terms.
Despite the complexities introduced by inflation, technology proposals should always offer detailed insights for Talent execs and their teams to assess terms and uncover hidden costs. Employing tools and financial models is essential for effectively evaluating new and renewal acquisitions and negotiating intricate deals.
IV. Bottom Line - Self-Accountability is the Rule.
The Skill-Based Organization represents a seismic shift in how enterprises manage and optimize the new value-generating interdependencies between the Talent and business functions.
The path to operationalizing SBO is fraught with challenges, and early movers have notoriously vocalized their disappointments.
Do not mistake a handful of stumbles for the end of hype's signal. Talent-scoped transformations will keep struggling, business transformations are delivering.
By embracing the principles of SBO, you're not just undertaking a talent transformation—you're embarking on a profound business transformation that will fundamentally reshape your organization's competitiveness and future-readiness.
This is your moment.
I'm Remy Glaisner, an enthusiastic member and active contributor of the Talent Intelligence Collective. My ambition is to propel the broad Talent Intel field into a defining and disruptive business moment. Changing the world of talent as we know it, in many positive ways. I was formerly with AWS (Amazon Web Services) as an early joiner of the Global Talent Intelligence team. I embraced the Talent world with passion when I joined AWS, which makes me a relatively recent addition to the Talent arena. My background spans various business functions and regions. I served as a Research Director at IDC, overseeing their "Worldwide Robotics" and "IT/OT Convergence Strategies" research and advisory practices, along with their associated P&Ls. Prior to this, I founded and ran Myria Research, focusing on thought leadership and advisory services for Operations executives in F500 organizations, particularly in scaling intelligent robotics technologies. Notably, I coined concepts like "Robotics as a Service" (RaaS), now a standard in 80% of the industry.
Earlier, I spent seven years at Gartner, honing my business skills and acumen while exposing myself during real-life C-suite briefing deliveries.
Originally a trained automation engineer, I'm proficient in envisioning technology's applications and potential.
Remy Glaisner
A: Austin, TX, U.S.A
P: +1 (857) 500-2171
@: remy.glaisner@gmail.com
LI: Remy Glaisner @ LinkedIn
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