Skills Inventories and Budgeting

During the construction of the annual budget, we develop highly detailed estimates for capital expenditures, payroll, operating costs, new product development, etc. Then when planning turns to implementation, we often don’t see the results we hoped for because of human capital misalignment - we don’t have the right people in the right roles with the right skill profiles.

Specifically, many companies limit their human capital planning to payroll (cost) and incremental new positions (bodies). While considerable thought is given to the knowledge, skills, and abilities needed in new positions, we seldom think about how it all fits together by analyzing existing talent and its ability to execute on budgeted initiatives.

Hence, I recommend that a “skills forecast” be established as part of the long-range planning exercise that precedes the creation of the detailed budget. As a reminder, during long-range planning, senior management reaffirms the company’s mission/purpose and determines the top storylines and corresponding initiatives that will keep the business thriving in the intermediate term. The long-range plan is the narrative that supports detailed budget asks for the next immediate planning cycle.

The skills forecast is a list of the top skills necessary to achieve the master goals laid out in the long-range plan. For example, if “turning our data into a strategic asset” is one of the company’s long-range initiatives, then data literacy might be added as a top future skill to the skills forecast.

With the skills forecast in hand, the creation of next year’s human capital budget becomes easier for functional leaders and managers. Leaders can evaluate the skill profiles of their entire team (not just new hires) and have substantive development conversations with existing personnel about #upskilling and/or #reskilling to help them remain relevant and contributing members of the team once implementation of the budget and its initiatives commences.

All this presupposes that leaders know the #skills baseline of their team members and can easily identify talent gaps. Having a living skills baseline for all team members is more rare than it is common in businesses and institutions. Meaningful, ongoing talent development conversations that are part of a natural management cadence are also more rare than common.

So stay tuned for next week’s muse where I’ll talk more about how to bring skill inventories to life in your business.

Have a great rest of your weekend…

Andy