How to Adopt Skills-Based Hiring Practices
9 min read
As companies worldwide continue to struggle to find top talent, an overhaul of traditional recruitment is needed. As a result, more and more companies are moving to skills-based hiring to identify and hire top talent. This guide will help you understand and adopt skills-based hiring practices.
In this article, you will find:
It’s no secret there’s still an ongoing global talent shortage.
According to the latest reports on the UK labor market by CIPD, 44% of employers in the private sector have hard-to-fill vacancies.
Across the pond in the U.S., the latest data from the Chamber of Commerce shows there are 8.8 million job openings but only 6.3 million unemployed workers.
Since the term “the war for talent” was popularised in 2001, and the subsequent “war for jobs” began following the Great Recession (2007-2009), there has been a disparity in the job market.
This scarcity means that top talent is in higher demand, and so competition increases between organizations in a bid to attract the best people.
Employers are continuing to look for effective ways to recruit A-players, and recently many are finding great success tackling this ongoing problem by adopting a ‘skills-based hiring’ approach.
What is Skills-Based Hiring?
To put it simply, it’s a shift in hiring practices to emphasize skills over experience and level of education.
Skills are quantifiable and include both hard and soft skills. Simplifying a bit, you can argue hard skills are the skills needed to deliver on the actual tasks of the role, whereas soft skills are the personality traits and behavior needed to succeed in the role. In a skills-based hiring approach, it is equally important to measure both hard & soft skills.
Hiring for measurable hard & soft skills brings many advantages over hiring based on a resume (prior experience and credentials), which we will explore in depth in this article.
Why the Shift?
The limitations of traditional recruitment practices
One of the main issues is that career experience and education requirements have dominated employers’ hiring criteria for many years without much innovation. Over the past couple of decades specifically, “degree inflation” - which is the growing trend of employers insisting on a degree being a job requirement - has been excluding more and more members of the workforce from specific roles. Degree requirements have seemed to function instead as a proxy used to simplify the hiring process wrongfully by introducing biases & exclusion.
So, at a time when employers struggle to find talent, they could be screening out an astonishing 64% of working-aged adults (in the US at least) who do not hold a bachelor’s degree. Working-aged adults who are highly skilled otherwise! Also feels quite at odds with most organisations’ push for more emphasis on DE&I (diversity, equity, and inclusion) too, right?
What’s even more ironic is that data shows University degrees don’t equal superior talent quality. They’re actually a very poor indicator for predicting job success. HBS analyzed 26 million job postings and surveyed 600 businesses, discovering that college graduates have lower engagement levels at work and a higher turnover rate.
Placing less emphasis on the quality and place of education of potential applicants also helps to reduce unconscious bias. Humans are inherently prone to bias, regardless of how well-intentioned we are. A hiring manager may unintentionally favor the “pedigree” of one educational institution over another for example.
We can mitigate the risk of bias greatly by leveraging technology (like ATS tools). Recalibrating filters on these tools - i.e., no longer screening out applicants that do not hold a certain university degree - goes a long way in reducing unconscious bias in the recruitment process.
It’s challenging to attract and retain the best talent, even more so when you’re not even accessing the full, available pool of talent.
An innovative approach to recruitment
Employers need every advantage they can get because making the wrong hire is costly. According to CareerBuilder, the average cost of making a bad hire is $15k, with the average cost of losing a good hire being $30k. These estimates might even be too low, considering that superior talent is up to 8 times more productive.
At a time when employers need to differentiate themselves, skills-based hiring gives them a better chance of finding and acquiring qualified applicants with the necessary skills and potential to thrive in the role.
A study by the American Psychological Association suggests that hiring based on skills is five times more predictive of future performance than hiring for education and 2.5 times more predictive than hiring for work experience.
Let’s dive into the pros of skills-based hiring and then touch upon some recommendations for how to begin implementing it into your recruitment process.
The Benefits of Skills-Based Hiring
More and more data are coming out from organizations that are not only adopting skills-based hiring strategies but also seeing significant success with them. Skills-based hiring is a significant fast-growing trend and potentially revolutionary shift in HR practices, enabling amazing outcomes for employers and employees alike. Let’s find out why…
1. Quicker time-to-hire
Recent research shows that skills-based hiring leads to a more efficient and faster hiring process.
This benefits applicants and employers alike. The best applicants are likely in high demand and may not be on the market or available for too long.
2. Reduced cost-to-hire
Cost-to-hire is a significant metric for recruiters. The costs involved can include job-board fees, PPC marketing spend, internal and external recruiter salaries/fees, and many more.
Since skills-based hiring sifts through applicant applications so efficiently (by deploying multi-dimensional assessments to assess skills), the time/cost of a recruiter is only really brought into play when they’re evaluating which applicants to invite to interview - based on the unique insights into both the hard & soft skills of each applicant. This means recruiters are speaking to the right talent more often and earlier on, shortening the entire hiring cycle.
3. Better quality hires
Mis-hires - where the wrong applicants are appointed to a role - are very expensive. Not just due to the cost of having to hire again but also in terms of the opportunity cost of not having made the right hire in the first place.
Skills-based hiring can keep an organization's mis-hire rate down since the skills-backed assessments are so effective at highlighting true talent. Guesswork and bias are taken out of the equation, so companies can increase their chances of finding the best talent and avoid mis-hires.
So, skills-based hiring reduces mis-hires, by improving the quality of hires! Win-win situation.
4. Better staff retention
Placing less emphasis on education requirements for one thing translates to some amazing outcomes. LinkedIn data shows that employees without a traditional four-year degree stay 34% longer than employees with such a degree.
When applicants are hired based on their alignment with role-specific skills and duties, they’re far likelier to excel long-term. Someone who is high-performing and well-suited to their role is likely to have good job satisfaction.
5. Better diversity in your workforce
Skills-based hiring is intrinsically inclusive. By prioritizing an applicant's skills and ability over their educational pedigree for example offers applicants from varied and disadvantaged backgrounds a fairer chance.
Only 26% of African Americans and 19% of Hispanics aged 25 and older hold bachelor’s or post-graduate degrees, compared with 40% of non-Hispanic Caucasians and 58% of Asian Americans, according to the U.S. Census Bureau.
At a time when the talent pool is shrinking, rethinking the use of a simple blunt filter like degree attainment is an easy way for employers to not only expand the talent pool available to them but also prioritize DE&I, helping these “hidden workers” to be discovered and to prosper.
Steps to Implementing Skills-Based Hiring Practices
Who doesn’t get excited by all those potential outcomes, right?
If this is truly a revolutionary change to global talent acquisition best practices, it clearly requires making some significant changes to current, outdated hiring processes. It also asks more from applicants, which we’ll get into…
1. Recalibrate Applicant Tracking Systems (ATS) filters
The more advanced employers remove filters that screen out resumes that don’t list higher-education credentials. This simple shift levels the playing field almost entirely, and eliminates bias, ensuring a much fairer, competence-based system to emerge.
Drastically increasing the size of the available talent pool is not at a detriment to quality, since all applicants now have the opportunity to show evidence of their skills relevant to the role.
2. Re-assess the fundamental skills required per role
To be able to deploy relevant and comprehensive skills-based assessments, recruiters and hiring managers need to have an extensive understanding of the role in question. This involves taking stock of the hard, technical, and soft skills required to succeed in the position.
What responsibilities are core to the role? Which skills are required to perform those responsibilities well? What characteristics and personal qualities do the top performers in this role possess?
It’s thought that softer skills and cultural fit are harder to assess for, but that’s actually not the case. Take a Sales Development Representative (SDR) for example: Research shows that personality factors such as extraversion & agreeableness are key to high performance in the role, with characteristics like achievement-orientated, resilience, and politeness sitting top within those traits.
Effective skills mapping forms the backbone of skills-based hiring, acting as a compass that guides the search for the perfect match. And so, employers should collaborate internally to define the blueprint of what an ideal candidate should bring to the table. HR functions could interview team members, brainstorm ideas with leadership, and engage with industry experts/mentors to fully understand what makes a great x, y or z (the role in question).
3. Refresh job descriptions
Traditionally, job descriptions have been an extensive wish list focusing almost entirely on qualifications, experience, and education.
The focus needs to be shifted instead to a limited list of “must-have” soft and hard skills that strongly correlate to high performance in the role.
Doing this will attract the right type of applicants and set clear expectations about what the role entails and what the hiring manager is looking for.
4. Map the skills of every applicant
Assessing applicants’ skills in a skills-based hiring system is done by asking them to complete a multi-dimensional skills assessment as part of the application process. As mentioned earlier, a resume is no longer a sufficient or fair tool from which to gauge applicant potential.
Multi-dimensional skills assessments should focus on the hard and soft skills required to succeed in the role. Usually, soft skills can be traced back to desired personality traits. Therefore, you can use a personality assessment to assess soft skills effectively. Hard skills are the on-the-job skills required to succeed in the role. When a well-designed hard skills assessment relevant to the role is leveraged correctly, it can significantly improve hiring accuracy.
5. Restructure interviews
In a skills-based hiring system, applicants who are invited to the interview stages are chosen based almost entirely on merit - on how well they match the skills of the role (based on their assessment results).
Therefore, the interview becomes a great opportunity to restructure the conversation to focus almost exclusively on skills. For the most critical hard and soft skills, how did the applicant perform? Let them know and discuss how they could practicably implement those skills in the role. For the required skills that the candidate scored low in, how do they intend to improve on these skills?
6. Expand your sourcing channels
A skills-based hiring approach allows applicants from more unconventional corners of the job market to be considered for new positions. However, if the top talent doesn’t come across an employer's job advertisement, how else are they going to be found and considered for a role?
This is where hiring teams must think creatively to gain an advantage. Could potential applicants be active in niche online forums? Could they be attending workshops or webinars? Are they members/alumni of an industry-relevant accreditation body?
By diversifying sourcing channels, employers cast a wider net, ensuring no potential talent slips through.
7. Build the skills you need
Hiring for skills is transformational, but there is also value in re-skilling or up-skilling your workforce.
An alarming report from Korn Ferry titled ‘The $8.5 Trillion Talent Shortage’ found that by 2030, more than 85 million jobs could go unfilled because there won’t be enough skilled people to take them.
Professional apprenticeship programs are fantastic at building the skills an organization needs right from the ground up. This approach also furthers DE&I efforts by giving opportunities to non-University-educated young adults.
Re-skilling and up-skilling existing employees is also a forward-thinking means to plug any skills gaps.
Both initiatives complement conventional skills-based hiring extremely well and share many of the same benefits such as improved employee retention, increased job satisfaction, and increased employee diversity.
It’s evident with 75% of recruitment professionals predicting skills-first hiring will be a priority for their company in the next 18 months, that the world is moving beyond resumes as the basis of hiring decisions.
Today’s hiring systems are still founded on a mid-20th-century legacy model that has not been exposed to significant innovation.
With a growing, chronic skills gap and shrinking global workforce, employers have been forced to seek out alternatives to traditional talent acquisition practices to retain and attract key people.
Skills-based hiring strategies seem to have amassed sufficient success stories to warrant becoming the dominant method of recruitment going forward. Employers and their HR departments would be wise to pay attention to this growing movement.
Philip Berg Frederiksen
Co-Founder, COO at TalentMesh