HR models · By Yan Sen Lu · Updated 10 November 2026

The skills-based organisation: hiring and managing by skills instead of jobs

Why companies are trying to manage work by skills rather than job titles, what changes in hiring, deployment and pay, and why most are still at the start.

A skills-based organisation uses skills, rather than jobs, as the basic unit for deciding who to hire, who does what work, how people develop and, eventually, how they are paid. Instead of matching a person to a job description, it breaks work into the skills it needs and matches people to work through those skills, including people who do not hold the usual job title or degree. The idea gained ground in the early 2020s, helped by a 2022 Deloitte report that described the skills-based organisation as "a new operating model for work and the workforce".

Jobs, skills and membership: three ways to organise people

Membership-basedJob-basedSkills-based
UnitThe person, as a member of the companyThe job, with a description and a gradeThe skill, matched to tasks and projects
HiringGraduates hired for potential, placed laterHire for a defined roleHire for skills, including without the usual credentials
MovesRotation decided by the companyApply for a vacant jobMove to work and projects that need your skills
PayGrade, ability and tenureSize of the job and the marketIncreasingly, the skills a person holds and uses
Typical ofLarge Japanese employers, traditionallyMost of the worldA small but growing number of employers

Japan is debating a move from the first column to the second (job-based employment). The skills-based model goes a step further. In one sense it is closer to the Japanese tradition than job-based employment is: both see the person as more than one job. The difference is that skills are named, measured and visible to the person, not judged privately by the personnel department.

What changes

How companies start

  1. Pick a pilot area where skills change fast and shortages hurt, such as data, technology or engineering.
  2. Build a skills list (taxonomy) small enough to use: dozens of skills for the pilot, not thousands for the company.
  3. Find out who has which skills, from self-assessment checked by managers, project history and assessments. Inferred skills from AI tools need checking.
  4. Use skills in one decision first, such as internal moves or hiring for one role family, and measure the result.
  5. Extend gradually. Most organisations that call themselves skills-based apply it to some decisions and some parts of the workforce.

Why it is hard

In Japan

Skills-based approaches arrive in Japan alongside the job-based reforms and the government's push for reskilling (リスキリング) and internal mobility. The Cabinet Secretariat, the Ministry of Economy, Trade and Industry and the labour ministry's job-based HR guidelines of August 2024 cover internal job posting and career autonomy, both of which a skills-based model depends on. The membership tradition is an advantage here: Japanese employees are used to moving across functions. The gap is visibility. Under rotation, the company decided where skills were needed; a skills-based model asks employees to see, and choose, for themselves.

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Questions

What is a skills-based organisation?

An organisation that uses skills, rather than job titles, as the basis for hiring, deploying, developing and sometimes paying people, so that work can be matched to whoever has the skills it needs.

What is the difference between skills-based and job-based?

Job-based employment organises people around defined jobs with descriptions and grades. A skills-based organisation breaks jobs down into skills and matches people to tasks and projects by skill, so a person can contribute beyond one job.

What is skills-based hiring?

Hiring on demonstrated skills rather than on credentials such as degrees or years of experience. Requirements are written as skills, and candidates are assessed on them, often with work samples or tests.

Is any company fully skills-based?

Very few, if any. Most organisations that describe themselves as skills-based use skills for some decisions, such as internal moves or hiring for certain roles, while keeping job-based pay and structures.

Related guides

By Yan Sen Lu, Managing Director of Makana Partners and Editor of The Hardest Market.

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