What Is Skills Inventory? Importance And Steps To Create It

Indeed Editorial Team

Updated 30 September 2022

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Businesses understand the skills and proficiency of employees and use this knowledge to grow the company. It helps organisations make strategic decisions backed by data and devise methods to improve the core competencies of their employees. Learning about skill inventory as an effective process to track and improve employee progress benefits the company and the employee. In this article, we discuss the meaning of skills inventory, its importance and the steps to implement it in an organisation.

What Is The Skills Inventory?

A skills inventory is a dynamic and comprehensive database that contains a list of employees with their professional skills, experiences and educational qualifications. Organisations develop it through assessments that help them identify skill gaps and use the data to strategy their investments in human capital. Companies may use this data to plan learning and development activities, recruitment and strategic workforce planning. Companies update this database regularly to take timely measures that improve team competency to help the business grow.

Importance Of A Skills Inventory

A skills inventory provides a broad overview of the capabilities of the organisation. It is a good human resource practice that benefits the employees and the company. It is essential to an organisation in several ways, including:

Understand employee capabilities

A skills inventory helps identify the competency of the team and their ability to meet industry standards. It allows the organisation to identify gaps in skills and allocate budgets for training sessions. These training sessions may be by the company leadership or external experts. It also helps organisations understand their team better, especially when new members join the company. It allows the firm to identify potential leaders and provide them with resources and training to imbibe the necessary skills.

Related: How To Develop Your Skill Set: A Complete Guide

Talent acquisition

A skills inventory helps leaders and recruiters understand employees and shape their future hiring to meet specific requirements. Recruiters may use this data to make detailed job descriptions, identify essential channels to recruit candidates and improve their hiring process. It aids in making data-driven decisions that may benefit the company in the longer term.

For example, the skills inventory of a company highlights that they have a team of five social media marketers but require a digital media advertisements specialist to cater to a new client. It also highlights the skill gap that the company may use as an insight to hire new employees and expand their business.

Related: Human Resource Planning: Meaning, Importance And Key Steps

Plan workforce

Learning about employee skills allows organisations to improve business results by investing in employee development. Companies work to make their business meet current business standards and guide their employees to become thought leaders in the industry. It helps them gain an advantage over their competition and make the team future-ready. When done regularly, it creates a culture of learning and collaboration within the company.

Related: On-the-Job Training For Efficient Staff Development

Retain employees

Companies that invest in their human capital are likely to provide more growth opportunities to their employees. Maintaining a skills inventory helps leaders guide their colleagues through formal or informal training. Companies may hold workshops and training guides for employees or provide more on-the-job learning opportunities to make employees meet industry standards.

Optimise work

Organisations and team leaders get a deeper understanding of their team and their skills through the skills inventory. It helps leaders provide opportunities to competent employees, and identify training opportunities for the rest. It facilitates a data-driven division of labour that may provide efficient results and allows team members to collaborate and learn.

For example, a marketing research agency working on a real-estate client may evaluate the skills of content writers on their team. The skills inventory may highlight one employee with previous experience in working with real-estate clients, making it a wiser choice to have them on the team.

Related: What Is Skills Gap Analysis? (Definition And Types)

Succession planning

Organisations may adopt a multi-level approach for all roles and identify necessary skills for each position in the hierarchy. Skills inventory helps monitor employee growth in an organisation and may ease skill-based promotions with pre-defined requirements for each job role. These become critical when a company is hiring for senior positions, allocating appraisals or downsizing.

Crisis management

Operating amid a crisis requires quick thinking and the utilisation of the skills of all team members. A skills inventory helps identify potential employees who may help manage the crisis by taking different roles. It allows organisations to find replacements for employees who may not be present during the crisis.

How To Create A Skills Inventory

Creating a skills inventory requires robust systems that are easy to operate and read. Here are the steps that you may follow to create a skills inventory:

1. Create a list of desired skills

Create a comprehensive list of skills necessary for employees. It is vital to create the list across departments, considering the industry standards, trends and future. Evaluate previous projects to identify areas for improvement or skills that could have helped the project. The list of skills may include technical and interpersonal skills that help in the holistic development of the employees and the business. Ensure the list is detailed and specific for each department, including names of essential tools that may aid their growth.

2. Segregate based on competency

At each level in the organisation, an employee requires a specific skill set. For example, someone in a leadership position is technically very strong and possesses interpersonal skills such as negotiation, team-building and delegation. Similarly, a fresher in the company must have strong foundational skills and communication skills. Understanding these vital skills helps formulate the workshops and training programs for employees. Organisations may also use this as a matrix during hiring.

3. Define a method to track

It is vital to develop a system that makes it easy to track skills inventory. The method an organisation adopts depends on the size of the company and available resources. Some companies may adopt a simple spreadsheet to maintain all data, while some may create automated software to track results more efficiently. Complex software may also help the firm to derive insights and track progress.

4. Collect data from employees

Use the established systems to collect data from the employees. Smaller businesses may conduct one-on-one interviews with the human resources department to discuss and collect data, while larger firms may circulate an online form to populate the data in the software. Design the assessment to cover vital details such as technical skills, skill proficiency, certifications, education and education. Organisations may also use it to collect feedback and suggestions that help plan workshops and training programs.

Related: Types Of Workplace Training: Definitions And Examples

5. Assess the current level of skills

While collecting data, organisations may also conduct assessments to reckon skill proficiency. It helps companies understand the current competency of the team. Companies may conduct skill-based tests, self-assessments or even gamify the entire process to evaluate the skill proficiency. Assessment is a part of creating a skill inventory, as it helps make the inventory insightful and comprehensive. Team leaders and top management may use this data to budget and make strategic decisions.

Related: Skills Test: Definition and Examples

6. Regularly update the database

Over time, employees acquire new skills and credentials. Ensuring the skill inventory is regularly updated with their progress is vital. It is also necessary that the database keeps adding information about new employees. Define the frequency of updating information on the skill inventory. For example, it may be a good practice to update the inventory before starting a new project or make it a mandatory practice done every quarter.

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