Adopt skills-based approach to mobilize talent now

EY
EY Canada

Multidisciplinary professional services organization

6 minute read 04 Jul 2025
Related topics
Corporate culture

Authored by:

Lindsay Falkov, Associate Partner, EY Canada
Marvin Reyes, Compensation Consulting Leader, EY Canada

In brief

  • Adopting a skills-based approach enables workforce agility and helps Canadian organizations respond to disruption and shifting priorities.
  • Skills-based talent decisions support internal mobility, improve productivity, and close skill gaps critical to long-term business sustainability.
  • Integrating AI and dynamic job architecture empowers real-time skill insights and enables flexible, scalable workforce transformation.

Business sustainability now depends on workforce agility. Canadian organizations that adopt a skills-based approach as the new currency for talent decisions can generate the workforce flexibility necessary to respond effectively to micro changes and disruptive forces that continuously reshape markets. Get started by exploring the benefits of a skills-based organization and putting people at the heart of transformation planning.

Make talent decisions based on skills, not roles

Employers are facing strong economic headwinds, with inflationary pressures, growing trade barriers and unprecedented economic policy and geopolitical uncertainty. This makes improving productivity, managing costs, and attracting and retaining key talent critical priorities for Canadian C-suites. But achieving those goals requires a broader understanding of employee experiences and opportunities. Organizations will need to unlock talent pipelines by reimagining careers, internal mobility and upskilling all at once. That’s a big ask in today’s skilled talent landscape.

In fact, EY research shows 70% of employers will need new skills to meet changing business demands. For example, 91% of Canadian tech leaders are struggling to find qualified candidates.[1] A further 63% see skill gaps as the biggest barriers to transformation, with 73% aiming to prioritize workforce upskilling by 2030.[2] Longer term, 44% of workers’ skills expected to be disrupted in the next five years, and the global talent shortage expected to exceed 85 million people by 2030[3],.[4]

This reality builds a strong business case for a skills-based approach to talent management. Modernizing talent pipeline and adopting skills as the currency for talent decisions can help Canadian organizations overcome these hurdles.

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What is a skills-based organization and how can it help Canadian employers thrive?

Thanks to AI and other emerging technologies, it’s now possible to emphasize workforce skills and capabilities over specific roles. By integrating skills into all human resources processes — including recruitment, performance management, learning and development — organizations build a taxonomy and job architecture that allows for flexible talent allocation and internal mobility. This approach fosters borderless and dynamic teams that move easily across functions, organizations and geographies so you can deploy talent when and where it’s needed most.

 

That’s different from typical talent models, in which role-based structures and workforce planning support stable work and skill requirements. In a skills-based organization, decisions are based on a dynamic view of employees’ full skillsets. Talent is dispatched to different projects, work assignments or teams — in many cases alongside their regular roles — enabling organizations to simultaneously develop new skills, backed by emerging technologies like AI, and ingrained adaptability. This can benefit productivity and a host of other priority areas, including innovation, cost savings, culture and more.

 

In fact, skills-based organization report:

  • 3x increase in productivity
  • 2.5x greater likelihood of successfully navigating external pressures
  • 5.5x greater effectiveness in managing change
  • 26% reduction in employees likely to leave within the next 12 months

 

Total rewards and compensation are crucial factors

Of course, organizations that move in this direction must also consider the related impacts on rewards and compensation. Skills-based pay rewards employees based on their capabilities, knowledge and competencies. This is different from traditional approaches, which are tied instead to position or tenure.

 

While this brings new employee benefits — like encouraging employee development, improving job flexibility, and attracting and motivating high-performing talent — it can also present challenges. Skills-based pay requires a robust structure for evaluating, measuring and assessing employee skills — along with the ability to manage costs, deploy the change effectively and align to legislative requirements; think pay equity and transparency.

 

Organizations that evolve to become skills based can address these aspects of rewards and compensation in diverse ways. One might split an employee’s base salary into core and skill components, with upward adjustments for those who add skillsets and increase proficiencies to deliver business value. That said, the organization will need a visible and dynamic job architecture and skills taxonomy to guide employees and help them understand these expectations.

 

All of this must be considered as the organization embarks on the transformation process.

 

How can organizations begin shifting towards skills-based model?

There’s no one-size-fits-all approach.

 

At one of North America’s largest retailers, management adopted skills-based hiring and learning to provide more equitable opportunities. They eliminated college degree  and introduced new internal educational. Layering AI into that evolution allowed the business to hire more efficiently and transform the candidate experience for the approximately 400,000 people hired in just four months.

 

In another example, a global pharmaceutical giant invested in AI-driven talent marketplace and learning experiences to support employee development and growth linked to priority assignments, projects and teams. This shift to skills-based thinking expanded workforce development and mobility to improve drug innovation and business growth, all while strengthening the long-term sustainability of the new, skills-based approach.

 

At a consumer-based product organization, establishing flexible, AI-backed work options enabled an internal talent marketplace to address talent shortages linked to employee retirements. Using an internal platform, the business posted project-based work opportunities and used AI to match employees’ skills with job needs. When they were given the chance to work on projects alongside their regular roles, employees grew their experiences and skillsets at a much faster pace, creating additional resources. This approach helped reprioritize 500,000 worker hours towards more than 3,000 business-critical projects.

 

Whether taking a targeted or enterprise-wide strategy, people must always come first for change to succeed. Ground your strategies in business and human needs and expectations and then engage them in the change. These investments are foundational. You cannot become a successful skills-based organization without anchoring your transformation in these principles.

 

With that thinking as the guiding principle, embrace a framework that enables you to move in this direction:

 

  1. Develop a business-led vision.
    Your plan should address key business problems, explaining the employee experience and the impacts it will deliver.

  2. Create a dynamic, market-benchmarked job repository, architecture and skills taxonomy.
    This is how you define the right jobs, provide a common language for skills, meet business needs, establish the right level of detail and support universal adoption. Using AI, analyze industry trends, emerging technologies and company growth plans to forecast future role and skill requirements. Starting by creating a job repository helps you understand what roles exist and how they’ve evolved over time, potentially without proper documentation, to inform next steps.

  3. Provide a view of employees’ skills.
    You need accurate, high-quality data to support data-driven insights and real-time evolving skills intelligence.

  4. Determine how skills-based pay will work.
    For this shift to succeed, organizations must determine which skills are most relevant for the business, who will be eligible for skills-based pay, what the evaluation framework looks like and interdependencies with other aspects of HR, from leaning and development to performance management, talent acquisition and succession planning.

  5. Use AI and other technologies to scale and improve.
    Drawing on AI to create more accurate employee skills assessments and gaps helps generate data-driven talent strategies.

  6. Select technology to enable skills taxonomy, intelligence and use cases.
    Decisions should help you identify gaps in current tech and engage the market on the latest AI tools.

  7. Continuously review and iterate.
    In successful skills-based organizations, teams manage and maintain skills data, establish feedback mechanisms, set the skills strategy and continuously review and iterate approaches across the talent lifecycle.

Summary

Organizations have to be able to shift people and teams easily across business priorities. Shifting towards a skills-based approach to talent decisions can create greater flexibility in the workforce. This can empower your organization now to pivot effectively — and even proactively — in the face of big, disruptive forces and everyday micro shifts.

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