There are countless articles and white papers highlighting the importance of adopting a skills- first approach in today’s organizations. Creating a skills framework to enable a consistent way of defining, assessing, and talking about skills is certainly a good start. However, one key question remains: What do organizations do with all the skills data they are collecting?

Simply gathering data isn’t enough. To truly leverage a skills-first approach, organizations need to establish meaningful Key Performance Indicators (KPIs) related to employee skills. These KPIs should align with broader business objectives and support operational workforce planning, enabling companies to make informed decisions, optimize resource allocation, and drive performance.

Why Skills-Based KPIs Matter for Workforce Planning

Skills-based KPIs help organizations move beyond traditional metrics like headcount, role titles, or years of experience. Instead, they focus on the actual capabilities of the workforce. By tracking these KPIs, companies can gain a clearer understanding of their talent landscape, identify skills gaps, and make proactive decisions about training, hiring, and resource allocation.

When integrated into operational workforce planning, skills-based KPIs can offer insights into questions like:

• Do we have the skills needed to meet our project demands?
• Where are our critical skills gaps, and how can we address them?
• Which skills are becoming obsolete, and which are increasing in demand?

Let’s dive into some practical KPIs related to employee skills that can support effective workforce planning.

Skills Utilization Rate

• The Skills Utilization Rate measures how effectively employees’ skills are being used in their current roles. It evaluates whether the workforce is fully leveraging its existing skill sets or if there are underutilized capabilities.
• Formula: Utilization Rate=(Skills Required for Project Role)/(All skills in your ontology)
• Why It Matters: Low skills utilization can indicate a misalignment between employee capabilities and job requirements. It may also suggest opportunities for role adjustments, project realignment, or additional training.
• Application: This KPI can help leaders identify employees who may be ready for new challenges or who could benefit from reskilling programs. It also supports succession planning by highlighting skills that may be better utilized in other roles or projects.

Skills Velocity

• Skills Velocity measures the rate at which new skills are acquired within the organization. It tracks how quickly employees are learning and adopting new skills that are critical for the business.
• Formula: Velocity=Number of New Skills Acquired Time Period
• Why It Matters: In fast-changing industries, the ability to acquire new skills quickly is a key indicator of organizational agility and resilience. A high Skills Velocity indicates that the organization is keeping pace with industry trends and technological advancements.
• Application: This KPI should be trended and can help HR leaders assess the effectiveness of training programs and identify areas where the organization may need to accelerate upskilling efforts.

Skills Retention Rate

• The Skills Retention Rate focuses on the organization’s ability to retain critical skills over time, considering employee turnover and changes in skill relevance.
• Formula: Retention Rate=(# of Critical Skills Retained)/(# of Critical Skills Identified)
• Why It Matters: High turnover of critical skills can lead to disruptions in operations and increased costs due to rehiring or retraining. Monitoring this KPI helps organizations understand the impact of employee retention on their skills inventory.
• Application: This KPI is useful for evaluating the effectiveness of employee retention strategies, identifying potential areas of risk, and planning for succession.

Conclusion

By developing and tracking KPIs related to employee skills, organizations can turn raw skills data into actionable insights that drive better decision-making in workforce planning. Skills-based KPIs help businesses stay agile, address skills gaps proactively, and align talent strategies with business objectives.

While building a skills framework is an important first step, the real value lies in using this data to measure, plan, and adapt. With the right KPIs, organizations can move beyond simple skills tracking and create a dynamic, skills-first approach to workforce planning that delivers real, measurable results.

Call to Action

Are you ready to take your workforce planning to the next level? Contact Galante Talent Strategies today to learn how we can help you build a skills-first organization that drives business success.