Lean Thinking, Skills-Driven: The Quiet Reshaping of the Service Landscape

Skills-based Talent is not about Learning. It’s about Leaning your production service capacity.

When discussing skills-based talent, we often hear, “Are skills replacing competencies”? This makes sense; the word skill is used, along with knowledge and abilities, as the sub-components defining what a competency is.  Competencies are a Talent framework that traditionally organizes L&D and, at times, performance management efforts.

In this case, I think the word ‘skill’ may be confusing. I would encourage you not to think of Skills-based Talent as a talent framework at all but as an operational system for a service-oriented business.

St. Charles Consulting Group has its roots in the professional services industry. Born from the collapse of Arthur Andersen, St. Charles has been advising and enabling the performance of leading professional services firms for over two decades. We know intimately how professional service firms are organized, how they grow, where they make margins, and how they operationalize their business. In a Service Organization, Skills is Your Product

In a Professional Service firm (and in the Service industry more broadly), you are selling skills. If you are in a Big Four professional service firm paid to provide a service to your clients, the advice you offer and the expertise you make available to your clients are skills developed throughout your career. Unused skills are inventory, sitting in your warehouse, incurring storage charges, and slowly gathering dust. You want to ship those skills out to the market, get those skills employed working with clients – then those skills are earning money. If you are in the professional service industry, skills are the product you develop and sell.

For context, skills-based talent is not quite the same in the services industry as in a manufacturing or retail environment. It is still relevant, still important, but different. In a manufacturing organization, talent is a resource that produces your product. In a professional service environment, it is your product. We’ve heard the phrase “skills as currency,” mainly in the context of a gig economy talent marketplace, to capture the notion that skills are the medium of exchange between skills buyer and skills seller. Technically, in a gig economy, the medium of exchange is still money, but the product being bought and sold is skills. If my skills are rare or in high demand, I can charge more for my skills in the talent marketplace. Skills are the products changing hands.

Skills-based Talent is like LEAN manufacturing for the Service Industry

What skills-based talent really represents is a redefinition of the production systems for your core product. Historically, your unit of production has been the person, the FTE. You hire people; you staff people on projects; you plan work at the FTE level with headcount projections.

Skills-based talent is dropping your standard planning unit down a level of granularity to facilitate more efficient and flexible flow through your production system, down from the FTE level to the skill level.

The analogy to manufacturing is LEAN manufacturing. Before LEAN, US manufacturers primarily produced giant inventories of products based on demand projections (MRP), and some of us still do. We do this to leverage economies of scale. The factories were slow to set up and change over from one product line to another. The economies of scale neglected the warehousing charges to store all that unused product while it waited to be sold and the spoilage if it went bad while waiting. Most importantly, the time it took to fulfill a single order was slow because you had to wait until there was a large enough batch worth producing. You might have to order more than you need to initiate the process.

LEAN manufacturing advised us to turn that process on its head. It advocated employing principles of “flow” and “pull” into the production system. Proponents recommended “lot sizes of one” – designing production processes capable of fulfilling small orders, even an order of one. Production would not be triggered in advance of expected demand – to warehouse, but only once the order had come in, produced to ship immediately (i.e., pulled rather than pushed through the system). The benefits? Quicker to fulfill orders, less inventory costs, faster to set up and changeover to different/new product lines, elimination of demand planning. Overall, it delivered a quicker-to-market, more flexible, adaptable production system.

Skills-based talent is the identical analogy for a service operation. Your inventory is skills. Skill-based talent brings the planning unit down to the task level. You hire skills, staff skills to tasks, develop skills to order. In fact, leading professional service organizations are upskilling in real-time in response to client demand today – as part of the resource management process. As client projects are sold, the skills-based resource management system identifies skills matches in the skills inventory db. If there is no direct match, a skills-adjacency algorithm determines close matches and identifies upskilling training to close the gap. For workforce planning, aggregate skill gaps are being strategically sourced – certain skills are already in-house, others need to be hired, internally developed, contract/outsourced, or off-shored (bought, build, buy, borrow, base elsewhere) – based on the economics of each type of skill. The Big Four have been doing this for years at the organizational/planning level; what’s new is trying to pull it through the system in response to an individual project need. “Find me, hire me, upskill me, contract me in a talent marketplace, someone who can x for a few months.”     

Think of the traditional job-based planning system like MRP and the new Skills-based planning system like Lean.

Traditional vs. Skills-based

The skill-based system allows for more just-in-time resource planning and upskilling. Demand for skills (orders) is pulled by customer demand, not built in advance in large-scale training events. It also allows for more personalized and immediately relevant training options. It creates a more flexible and adaptable talent pool for the organization and provides more choice of career direction for the individual. The whole talent system is based on the skill level as its unit of production. Hence, skills-based talent.


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One more thought …

One thing that is unique and deviates from the lean manufacturing analogy is that traditional inventory doesn’t have a career. An unused product sitting in a warehouse doesn’t decide to up and join your competition because it’s tired of waiting. It also cannot independently decide which product features it would like to add, or which customers it is willing to be sold to. People can. And since skills are tied to people, your inventory can. In fact, in professional service firms today, it routinely does. Turnover is a perennial challenge in professional service firms, and in certain sectors today, talent scarcity is at an all-time high. Think of it as a unique form of spoilage – you have to keep your inventory happy; it has a mind of its own.

Happily, skills-based talent can help with that as well. Talent marketplaces offer a unique opportunity for talent to proactively seek out opportunities for growth which inspire them most. It can also provide access to non-traditional talent pools that have been historically left out of the system due to a lack of degrees or other job criteria. The potential solution depends on transparency.

The vision is that talent has the ability to look up the roles they desire most or are in most demand and then have access to JIT upskilling opportunities, which can qualify them for those opportunities. Unlike traditional job boards which often require expensive degrees and years of experience difficult to acquire, a skills-based system requires only that you can demonstrate performance of the desired skill – a “credential.” Many leading professional service firms are already working at credentialing systems and internal talent marketplaces that can enable this kind of transparency in the hope they will not only drive efficiency in resource management but provide enhanced voice and choice of career mobility for individuals which will benefit retention and attraction of talent in tight labor markets.