Building Skills-Based HR with AI: Skills vs Competencies

Why Skills Are Gaining Attention

The term skill has long been used in HR and HRD, but the concept still lacks a clear theoretical definition. Competency is also commonly divided into knowledge, skill, and attitude. In practice, however, separating and managing these components has often delivered less value than the effort required.

This may explain why skills are gaining attention as clearer and more manageable units. This does not mean organizations are simply isolating skill as one component of a competency framework. The broader trend is a shift away from the complex concept of competency toward skill as a more specific unit of workforce management. Here, skill refers not simply to one component of competency, but to a distinct way of defining and managing what people can do.

This article examines the concept of skill that underpins the shift toward skills-based HR by comparing it with competency, the traditional unit of management.

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The Complexity of Competency

Competency emerged from practical needs before it was formalized as a theory. White first used the term in 1959 and defined it as an individual's ability to interact effectively with the environment.

The concept gained attention after David McClelland discussed the limitations of intelligence and aptitude tests in his 1973 paper. He described competency as a set of characteristics that distinguish superior performers from average performers and enable successful performance in real work situations.

In 1993, Spencer and Spencer provided a more detailed definition. They described competency as underlying personal characteristics, including motives, traits, self-concept, knowledge, and skills, that lead to effective or superior performance when assessed against specific standards in a particular role or situation.

National institutions also expanded the definition. In 2007, New Zealand's Ministry of Education defined competency as a complex combination of human qualities, including knowledge, skills, values, and attitudes, required to meet specific demands successfully. In 2008, the UK Qualifications and Curriculum Authority defined it as a broader capability that includes not only observable behavior but also cognitive, motivational, ethical, volitional, and social factors. (Adapted from Ji-won Heo's 2021 doctoral dissertation at Korea National University of Education.)

As new perspectives emerged over time, the definition of competency continued to expand. This accumulated complexity makes the concept difficult to understand at a glance.

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Skills vs Competencies: Why Competency Is Harder to Manage

The challenges of managing competency become clearer when compared with skill, a more specific unit of execution.

A skill refers to a specific ability that can be observed and measured through performance. Competency is broader and more abstract because it also includes underlying personal characteristics such as motivation, attitude, and self-concept.

Traditional competency-based training also has two clear limitations. First, it may include innate qualities that are difficult to develop through training, reducing efficiency. Second, it may place too much emphasis on theory rather than real work experience, creating a gap between learning and practice.

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Clearer Units for Skills-Based HR

In 2016, a report analyzing 433 million LinkedIn members drew significant attention. Its title directly challenged the limitations of traditional workforce classification: “Farewell, Job Title. Hello, Skill Set.”

According to the report, searching for candidates under the job title "data scientist or analyst" returned 84,000 people. When recruiters searched for the skills required for the role, such as Python, the available talent pool expanded. The search identified 6.8 times as many candidates with at least five relevant skills, roughly corresponding to an intermediate level, and 1.2 times as many candidates with at least eight relevant skills, roughly corresponding to an expert level.

For recruiting teams, skills-based hiring enables a more precise search across a broader talent pool by focusing on the capabilities each role requires. The same applies to HRD Managers, who can use data on employees' Skill-sets to identify specific gaps and prioritize training for the skills that need improvement. A skills-based approach to talent management gives both HR and HRD a clearer unit of management, with each skill representing a specific capability rather than combining multiple attributes and perspectives within one broad concept.

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The Shift from Competency to Skill in Job Analysis

Josh Bersin, a well-known HR thought leader, presents a clear perspective on job analysis at the skill level. In a 2022 article, he emphasized the relationship between skills and job analysis and illustrated it through a visual framework.

Under this view, jobs consist of roles, and skills serve as the units for managing what each role requires.

This shift also reflects social and technological change. Even when a job title remains the same, advances in digital technology and AI change the tasks people perform and how they perform them. As a result, some capabilities become obsolete while new capabilities become essential.

Entirely new jobs also continue to emerge.

The 2022 book Work Without Jobs, written by two global HR experts, explains this shift. As the title suggests, work is becoming detached from fixed jobs and job titles. As this change accelerates, organizations need to manage work through specific skills rather than fixed job titles.

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Career Change Through Current and Future Skills

The same principle applies to individual careers.

McKinsey’s 2022 report, Human Capital at Work: The Value of Experience, examines career change by comparing the skills people currently have with those required in their next role.

The report also suggests that bolder moves can support career growth even when the gap between current and required skills is somewhat wider. These moves are not reckless when people can identify the required skills and develop them through work experience or training.

So far, we have explored the difference between competency and skill, and why skills are reshaping jobs and careers. In the next article, we will examine why skills matter from an organizational perspective.

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A System for Bold Moves

The "bold moves" highlighted by McKinsey become planned growth rather than reckless decisions only when people can identify the skills they need. The same applies to organizations.

When an organization can identify each employee's current Skill-set and define the future skills required by its business strategy, it can support bold moves and manage growth in a structured way.

Telta is an AI-powered competency assessment and HR intelligence platform that makes this possible. Using data and AI, Telta builds a self-reinforcing system that turns uncertain potential into predictable outcomes.

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