Updated: Jan 8, 2019
In our contemporary business climate, organizations increasingly need to deal with a volatile and changing market. One need only mention VUCA to an executive to start a conversation about today’s business challenges.
As I spent several years working on this challenge supporting my organization, one problem continued to hound me: how to have the right skills available to match our market’s volatility, in short: high skill liquidity. For much of the time it felt like I was experiencing an endless loop: organize for optimal skills, experience market change, organize for optimal skills, repeat.
But how can we make skills more liquid for our organization? The ability to tap into the necessary skills without long delays and expensive transaction costs. But humans are, for better or for worse, fairly complex particularly as they apply their skills in knowledge work and can’t be managed as if they were commodities.
This problem can’t be taken lightly; not having the skill capabilities available to execute can create significant bottlenecks, introducing delays in your market offerings and ultimately showing up as gaps in your competitiveness.
Much has been attempted to address this volatility, particularly adapting concepts from organizational approaches such as Lean, Agile methods, Kanban and TPS to name a few. Interestingly some of these approaches have suggested their own particular solution; such as “Cross Functional Teams” popularized by Scrum practitioners. In examining and leveraging various approaches, I began to observe that many of these methods have a lot to offer, and are not contradictory — particularly if you reframe them as one of many compounding approaches across a maturity continuum.
Introducing the Skill Liquidity Maturity Model (SLiMM v0.5)
In introducing the Skill Liquidity Maturity Model, I chose to use a seven-level scale to allow for easy alignment to existing models, including the recently launched Kanban Maturity Model (KMM). The KMM in particular already being fairly robust in aligning or incorporating from multiple areas including Lean/TPS, Real World Risk, CMMI and Mission Command. As part of that alignment the first Skill Liquidity Maturity Level starts at 0 and the 4th and 5th are labeled 3&4 and 5&6 — this is to map appropriately to KMM’s existing maturity levels.
Skill liquidity is not the only aspect of organizational maturity. My intent is that this is useful to you, by complementing any other models you may already be using.
The maturity levels are intended as building blocks, higher levels leveraging those beneath them as underpinnings for the more mature practice.
Maturity Level 0 — Skills Specialization
At the lowest level of maturity, we start with skill specialization, the practice of staffing your organization with people with the required skills necessary to offer your current services/products. It’s a natural place to begin, and just about every company starts here, and most remain. You can see evidence of it in many company’s hiring process where the primary focus is on the required skills of a candidate for a particular role.
This approach offers several advantages, the hiring process can be relatively simple — assuming the skill you are looking for are readily obtainable. Formal job descriptions can be used to define the expectations and limits of a particular role.
From a personal-employee standpoint it offers the opportunity for long term development of a particular niche set of skills — to the point of craftsmanship.
Limitations & Challenges
The long-term challenge with this approach is in the unevenness of the market demands on your business, both in volume and service type. Where once an organization required a certain number of specialists in an area — they may find themselves quickly over or under allocated.
The over-allocation problem typically manifests itself as bottlenecks within an organization, impeding the delivery to your customers. The under-allocation can be seen as the over investment in non-competitive categories — over serving a particular market.
Skill specialization mindsets tend to propagate to how organizations as a whole get organized. Teams with specializations, departments, and divisions — in short, your typical Matrix Organization. There is nothing intrinsically natural about having an IT, Finance, or HR department; they are simply constructs of specialization-based organizational practices that we’ve gotten used to as a norm. These constructs provide deep expertise, but do introduce bottlenecks.
Maturity Level 1 — Multi-Skilled Individuals
An attempt to address the liquidity limits of skill specialization gave rise to the concept of “T-Shaped” individuals, first popularized by Tim Brown (IDEO) and supported by multiple Agile frameworks. The concept of the T referring to the acceptance of individual specialties along with the development of secondary adjacent skills. In software development, the example would be the front-end software developer who is also able to make changes to the database.
The advantages with this approach is to reduce the frequency of requests from other specialties. Continuing with the Software Developer example, an individual when requiring relatively simple, and possibly frequent, changes to the database does not need to wait for a Database specialist; this reduces a potential source of bottleneck in the organization.
For people whose passion is to develop skills in multiple areas, working in an organization with this approach can be both satisfying and provide for multiple paths for career development.
Limitations & Challenges
The hiring process does get more complicated, in addition to looking for the primary skills sought out, the ability and interest to develop adjacent skills need to be determined. In some cases, highly skilled specialists may not be interested in taking part in a structure looking to impose this approach to everyone. This lack of interest may be rooted in the identities of highly skilled craftsman and can cause cultural challenges if forced. To quote a famous fictional doctor, “I’m a doctor, not a coal miner.” Organizations that work well at this maturity level have figured out to not impose this on all employees and allow for pockets of individual specialization.
Companies at this level of maturity continue to organize around specialization. As in ML0, when observing their organizational structure you will find discrete departments providing specific functions: Marketing, IT, Accounting, etc.
Human limits to the depth and amount of auxiliary skills one can develop introduce either skill-development delays or continued requests for access for more specialists.
At this level of maturity, common sources of adjacent delays to individuals are improved, but team and organization bottlenecks persist.
Maturity Level 2 — Cross Functional Teams
Popularized by methods such as Scrum, the cross functional team is the mix of (preferably T-shaped) people with different skills into a single team. A common example is a software development team that used to hand completed work to a testing team — in the cross-functional configuration a single team would have the capability to both develop and test software.
Cross functionality looks to reduce the frequency in which a team needs to leverage help from outside the team; perhaps from another team, specialist or shared service. Interactions between teams are a common source of delay and so cross functionality reduces the frequency in which this occurs and to reduce delays.
The variety of skills also allows for a team to produce more combinations of possible work. It provides organization’s with increased flexibility with what work they can offer to the market.
In the figure below, you can see this demonstrated.
Limitations & Challenges
As companies work on both an increased variety and volume of work, the ability for single cross functional teams to provide the capacity and variety of skills needed quickly reach their limit.
At some point it is not economically cost effective to develop every possible skill into a single team. For example, a team may need to redesign the UX of their application every 2–3 years; for that low frequency it may not make much sense for a team to invest heavily on UX expertise beyond what is required for regular upkeep.
Team sizes all provide for practical limits to the amount of skills a team can possess. Good team sizes tend to have ranges between 4 to 10 people (“1 to 2 pizza team”), the attempt to sufficiently provide for all the skills needed for complex deliveries would significantly expand on that number.
Cross-functional teams can also allow for the flow of low value work when their skills do not match business needs. A common pattern seen is one where a team’s top priority, limited by their skills, is not the optimal work for the organization. If allowed to persist over a period of time, team tribalism and self-organization patterns can lead to teams developing identities around their skill mix in contrast to the needs of the organization’s customers.
Another implication to the practical limits of cross functionality is that single teams rarely form the entire flow of value for a work product in an organization. Put another way, teams continue to need to receive work from other areas of the organization and in turn hand them off to other teams.
This reintroduces the problem of delays due to hand offs; the delays may even be further compounded by local optimization. Where the effort to improve flow and craftsmanship within the team distracts the organization from improving the overall flow to the customer; at times even impeding the overall flow.
Maturity Level 3 & 4 — Service Liquidity
While leveraging and supporting the capabilities introduced in the lower maturity levels, at this level there is a shift in mindset from thinking mostly about teams and individuals to thinking through the lens of end-to-endservices to your customers.
The scarcity of skills, regardless of your budget, is an accepted phenomenon that needs to be managed; the particular focus is less about ensuring work flows within teams, but flows through the organization.
To do this, people need to be in the right places regardless of their team structure. Team boundaries need to be loosened in favour of organizing around the end-to-end customer service. Internal shared-services teams become both a point of skill leverage but also a way to economically manage scarce skills.
By allowing for this form of value-focused configuration you avoid the implications of high value end-to-end services that are stuck while lower value areas flow. As illustrated below. * Note that how value is determined is not intended to be simply ROI, but may include Cost of Delay, Strategic alignment and a number of considerations beyond the scope of this article.
Feedback loops to inspect the end-to-end service, in some form of regular cadence, need to be established. Skill liquidity in these cadences is managed by understanding where skill bottlenecks are forming and marshaling people there to allow for the flow of work across the service.
Limitations & Challenges
Organizations attempting to get to his level of maturity will likely experience the most push back form existing management structures. Conflicts between existing Matrix department goals vs end-to-end service goals manifest fairly quickly. For example: if you were in the Finance department, do you delay an audit, and face a minor penalty and potential political embarrassment, in favour of confirming the tax rules in a product that if shipped on time will be of much more value to the organization?
Offsetting the organization’s existing norms requires significant commitment from leadership in challenging existing structures in favour of service orientations. In short, the maturity of leadership across the organization will need to match the maturity level of this approach to skill liquidity. Coupled with this, any existing reward and recognition process would need to be adapted to balance contributions to the end-to-end service in contrast to contributions to department or team.
Maturity Level 5 & 6 — Organizational Liquidity
Building on the previous maturity levels, at levels 5 & 6 the perspective of managing your skills focuses on the whole organization’s health. This is a view across all end-to-end services in the company focused managing risks towards company fitness and long-term survival.
Managing this risk also accepts that not all services in the company are of equal value at any given time. Your liquidity strategy needs the ability to adapt to the promotion and demotion of existing services along with the creation of new ones. And often overlooked, the timely removal of ones that no longer make sense.
Feedback loops need to go beyond the view of a single end-to-end service but all services as a whole. Organizational strategy will need to be visualized along with how service prioritization aligns with it. Using this visualization will help support regular calibration of where skills need to be marshaled.
The following is an example of a simple visualization for enterprise initiatives across 2 risk dimensions: Market Role and Strategic Segment. Each organization would obviously need to develop their own based on their strategy.
With capacity allocation being managed by alignment to strategy, the skill liquidity is managed similarly as in ML4,5 with the added layer of marshaling skills across a number of end-to-end services. The boundaries around team and individuals are further loosened, no long necessarily having affinity to a particular service but to where the need is most beneficial to the organization in any service.
Virtual teams can be created as required to span across and entire service workflow or to specific parts requiring their skills. Teams and shared services can support multiple services, limited only by the team’s capacity and skill limits. In this environment of highly leveraged liquidity, the promotion of individual and team skill liquidity is reinforced allowing for even more organizational flexibility.
The concept of permanent teams is diminished if not removed entirely in favour of dynamic organization for end-to-end service flow.
While this may appear to be similar to maturity levels 0 and 1, the key difference is the adoption of the end-to-end service lens at an organizational level, unlocking talent in all areas. Companies at this maturity level have experienced the success of service orientation and may only hold on to the permanent team concept as a relic of previous ways of working.
Note however that more permanent communities for purposes of sharing and developing skills will continue are likely to be amplified.
In this environment the distinction between shared-services teams and cross-functional teams is eroded, as all groups begin to have characteristics of a shared service. Some to a greater degree (multiple end-to-end service flows supported) or lesser degree (just one end-to-end service flow supported). Where a team is on that spectrum will be an outcome of the combination of their skill variety and the strategies of the company.
Limitations & Challenges
This maturity level inherits the same challenges as in ML3,4 and amplifies them further. All the political boundaries in an organization need to be crossed in order to organize an entire company around end-to-end service flows. Existing power structures historically around functional silos will need to be eroded, requiring significant leadership maturity starting at the top of an organization and supported at all level. Having success at ML3&4 for a time may be a pathway to developing the necessary leadership capital to move to ML4 & 5.
Feedback loops and visibility can be challenging across the whole organization, particularly getting all the data for all the work that is being committed; no work commitments can be hidden or incremental. With that visualization also comes the adoption of objective strategy-aligned decisions — if an organization has been traditionally making decision by gut, feeling, relationships or another subjective means it may be difficult to make this shift.
The SLiMM in Context
Skill liquidity is not the only aspect that needs to be addressed to improve business outcomes. As mentioned previously, I chose a 7 point scale to be able to connect this to more robust models such as KMM (Kanban Maturity Model), which in turn also maps to further models. I encourage you to explore the implications and other practices that match each skill liquidity level.
Here is how SLiMM connects to KMM:
The Skill Liquidity Maturity Model was intended to offer you some pragmatic thoughts on which approaches may suit your organization. Each level offers a set of advantages as well as challenges. Some businesses may find the risk acceptable to operate at lower levels of maturity, and this should be respected.
My advice to you is to not to pursue adoption to the highest level, but to reflect on how your organization aligns to each level. And from there determine what level would be appropriate for your organization that makes sense for your market challenge and is reasonably achievable from where you are at today.
The Skill Liquidity Maturity Model is still in it’s development phase, currently its first published version at v0.5. I’d like to improve it further by hearing from you. In what ways are you solving skill liquidity challenges in your organization?