Workforce Segmentation:
A Skills' Based Approach

Workforce planning is more effective when your workforce is segmented according to skills value and skills uniqueness


What Is Workforce Segmentation?

Human Resource professionals separate the various components of their organization's workforce in order to tailor their human resource policies and practices to each segment. Such customizations impact recruitment, training and development, compensation, succession and outsourcing, to name but a few practices. Many segmentation models are based on job evaluations or salary levels. These approaches generally result in workforce planning problems.

Skills Value and Skills Uniqueness

A more effective approach to segmenting your workforce is one based on skills. After all, skills are the new currency in the 21st century workplace. A skills' based workforce segmentation approach takes into account both the value and uniqueness of skills for a particular role to the organization. Value and uniqueness are ubiquitous dimensions that differentiate most, if not all, human capital.

Various roles or jobs within an organization can be classified according to four possible employment roles or skills quadrants. These four skills quadrants are:

  • Criticals
  • Professionals, Skilled or Semi-Skilled
  • Doers
  • Specialists

The four quadrant diagram below illustrates example roles for each quadrant.

Workforce Segmentation Model

What Are Valuable Skills?

Valuable skills are those skills that improve the efficiency and effectiveness of the organization, exploit market opportunities and/or neutralize potential threats. Valuable skills can be created in eight ways through:

  1. Sales and Revenue – maintaining sales to existing customers, securing new customer sales, optimizing prices, increasing sales to existing customers
  2. Stakeholder Relations including customer satisfaction
  3. Costs – efficiencies in production and delivery of products and services
  4. Quality – maintain or enhance the quality of products and services
  5. Innovation – research and development, strategy, design, capital expenditure, securing resources, feasibility studies, marketing research, etc.
  6. Organizational Capability – organizational efficiency, recruitment, development, and the engagement and retention of people
  7. Reputation and Brand – client relations, public relations, risk management and compliance
  8. Financial Performance – cash flow, borrowings, ROI, tax management

What Are Unique Skills?

Unique skills are rare and specialized, or organizational specific. They are unlikely to be found in the open market, hard to replace and hard for competitors to imitate or duplicate. These skills need to be nurtured over time, given that they are not developed and acquired overnight. Firms are more likely to invest in the education, training and development of these skills.

Uniqueness has two dimensions:

  1. Specific uniqueness (e.g., operation or maintenance of specialized equipment or in-house systems, unique procedures or processes, specific product knowledge, etc.), and
  2. Generalized uniqueness, which is the tacit knowledge about the organization and its environment, including the supply chain (e.g., organizational systems, processes and procedures, products, markets, competitors, customers, suppliers, etc.)

How Are Unique Skills Acquired?

Unique skills may be acquired either through:

  • intensive initial training programs (e.g., police, armed forces), which is more likely to relate to specific uniqueness, or
  • on-the-job experience (more likely to relate to generalized uniqueness)

Whatever the case is with respect to the type of unique skills appropriate to a role, the end result is that both time and investment in training and development are required to attain these skills in order to achieve a satisfactory level of performance. This is the reason why a higher turnover multiple applies to these jobs or roles when calculating the cost of turnover. In other words, when people occupying roles with unique skills leave, then the investment in their training and development is wasted.

How Is the Skills' Based Model Relevant to Strategic HR?

The skills' based workforce segmentation model is directly relevant to:

  • the identification of critical roles (i.e., the roles that incorporate higher skills value and uniqueness)
  • outsourcing and determining "make" versus "buy" employment decisions
  • acquiring human capital, including differentiated recruitment strategies, psychological contracts/Employment Value Propositions (EVPs) or "deals"
  • developing, engaging and retaining human capital, including differentiated HR policies and practices and levels of investment in people
  • calculating the cost of turnover (i.e., different turnover multiples for different quadrants or segments)
  • the reporting of human capital data

In summary, this model lies at the heart of managing human capital, providing a framework for organizations on how they can:

  • align their workforce and business strategies
  • "have their cake and eat it", and
  • configure and develop a workforce that is flexible, accessible, skilled, motivated and efficiently deployed

These practices lie at the heart of business performance and financial success. They are the key differentiators for leading organizations wanting to maximize their human capital. A skills' based workforce segmentation model forms part of this framework for the analysis and reporting of human capital.

Expert View Author: BA(Hons), BEng(Hons), MBA, Managing Director, Advanced Workforce Strategies.

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