Valuing Skills in the Workplace

As the talent market shifts, companies are redefining work and value and reinventing every part of their talent strategies around skills.

They’re hiring based on potential, aligning development with business objectives, and rewarding employees for the value they deliver. In fast-evolving roles, critical skills now outrank general credentials.

Skills are becoming a new currency of talent. The traditional compensation model tied to job titles, performance, and tenure is giving way to a more dynamic approach. In addition, skills-based pay rewards employees for the capabilities they bring and grow.

A new Korn Ferry survey shows 67% of companies plan to adopt skill-based rewards within the next three years. But many are still asking: How do we begin?

HR leaders don’t need the perfect solution. They can move toward a skills-based reward strategy today with these five practical steps to build the foundation.

1. Identify and Track Critical Skills

Leading companies start by asking a simple question: What skills fuel our competitive advantage, and how do we measure their impact?

Focus on identifying skills that align with strategic goals—e.g., data analytics, AI, leadership, or customer experience. Then, benchmark them and track how they impact outcomes. For example, 41% of companies we surveyed track top talent retention as a proxy for ROI, while 28% measure revenue growth or efficiency gains from skill-building. These are smart, quantifiable approaches to connect learning to business value.

2. Build a Simple Skills Framework

About 67% of the organizations we surveyed plan to adopt skills-based rewards within the next three years. But what will that look like in practice? While 56% favor a centralized, HR-led model to define skills and value levels, 30% prefer giving managers flexibility to reward in-demand skills. Despite the differences, both approaches make reward more dynamic and better aligned with the capabilities that drive performance.

To support either model, build a foundational skills framework—one that categorizes skills (e.g., technical, leadership), sets proficiency levels (from beginner to expert), and assigns value ranges or pay differentials. It doesn’t need to be perfect, but it should have enough structure to guide decisions, guarantee fairness, and offer managers a clear basis for rewarding skill growth.

3. Use the Tools You Already Have

Many organizations lack the infrastructure to support a skills-based approach. In fact, nearly 69% of companies we surveyed say their current systems aren’t equipped for it.

Legacy HR tools and job architectures weren’t designed to track skills, but that’s changing. Modern HRIS and learning platforms now offer analytics dashboards that connect development metrics to business outcomes. Even basic measures—like promotion rates of upskilled employees or project success after training—can show the value of investing in skills.

4. Pilot a Skills-Based Reward Model

Many organizations are piloting hybrid pay models, keeping base salaries in place while adding bonuses for verified, high-impact skills. These pilots often target specific teams, allowing companies to test, learn, and refine their approach before scaling. With modern analytics and compensation tools, early adopters are building agile pay systems that reward real-time skills growth, improving motivation, retention, and continuous development.

To shift toward skills-based reward, start small. Using your skills framework, launch a pilot with a small team where skills influence outcomes. Track results using existing HR tools and support the initiative with clear communication that links growth to tangible benefits. Gather feedback, measure impact, and refine the model to scale a skills-driven reward system.

5. Create a Culture of Learning & Growth

Continuous learning is foundational to any skills-centric model, yet 41% of companies we surveyed struggle to create a culture of growth. Employees may resist change, and managers may not know how to recognize or reward skills growth.

To move toward skills-based reward, HR leaders will need to champion cultural change from the outset. This means going beyond compensation to reshape how the organization values and talks about skills. Make it clear that building new capabilities leads to meaningful rewards, both financially and in their career. Build a culture that celebrates learning, encourages experimentation, and normalizes continuous development as part of everyday work. Empower managers with the tools and language to have ongoing, constructive conversations about skills, growth, and compensation. And make sure employees see a clear connection between their development and business outcomes.

The Future of Skills is Now

Deploying the right skills at the right time is what sets successful companies apart. It’s the difference between those who adapt and innovate and those who get left behind. And the research is clear: skills-based reward is a new frontier of talent management.

Of course, it’s not without its challenges. Retooling HR systems, reworking reward models, and reshaping organizational mindsets take work. Yet, the potential payoff outweighs the effort and investment. Companies that shift to skills-based reward will see better innovation, greater agility, and stronger resilience.

To realize these benefits, HR and compensation leaders will have to balance innovation with pragmatism. This means driving performance through skill-based reward while maintaining discipline, transparency, and equity. When done right, this approach helps people grow, stay longer, and makes companies more attractive to top talent.

 After all, who wouldn’t want to be rewarded for growing the skills that matter most?

Download the full report.

To find out how Korn Ferry helps clients make the shift to skills-based rewards, learn more about our Total Rewards capabilities.