Management of talent in today’s unpredictable environment requires employers to think differently. The job market is rapidly and continuously changing, generative AI continues to have an impact on the need for different and specific skill sets and finding and hiring individuals with a diverse range of backgrounds, experiences and expertise is becoming increasingly important to success. These are just a few of the reasons skills-based hiring is gaining traction. According to a Harvard Business School report, non-degreed workers have a retention rate 10 percentage points higher than their degree-holder colleagues. Not only does this offer a benefit to employers, but non-degreed workers hired into roles that previously required degrees experience a 25 percent salary increase on average.
Traditionally, organizations have placed high merit on the persistence, grit, rigor and expertise the college experience is perceived to provide when selecting candidates to fill skilled positions. However, amid the hiring difficulties employers faced leading up to the pandemic and in the post-pandemic recovery, they have had to re-evaluate their hiring criteria to keep positions filled. Skills-based hiring essentially increases the eligible candidate pool by 62 percent.
What is Skills-based Hiring?
Skills-based hiring is an approach to recruitment that prioritizes a candidate's specific skills, abilities, and competencies over traditional credentials like college degrees, job titles, or years of experience. This method focuses on what a candidate can do rather than what they have done or the qualifications they have obtained.
Key Aspects of Skills-Based Hiring
Skills based hiring focuses on competency for the given position. For example, proficiency in software, coding languages, programming, communication skills, etc. are underlying skills needed but may not always require a formal degree. Instead of relying solely on a resume and an interview, there are often assessment measures to gauge a candidate’s skills directly. Job descriptions focus on the specific skills and competencies needed rather than on years of experience or specific educational degrees. This approach aims to align the best talent with the specific needs of the job, potentially improving job performance, employee satisfaction, and retention.
Benefits:
- Wider Talent Pool: By focusing on skills, companies can access a broader range of candidates, including those who may not have traditional qualifications but possess the necessary skills.
- Better Job Fit: Employees hired based on their demonstrated abilities are often a better fit for the role, leading to higher productivity and job satisfaction. According to a CareerBuilder survey, managers stated that they hire the wrong person in 74 percent of cases. Skills-based hiring can help remedy that problem.
- Reduced Bias: Skills-based hiring can help reduce biases associated with education, background, or previous job titles, promoting a more diverse and inclusive workforce. A 2023 article in Built-In reveals that 85 percent to 97 percent of hiring managers rely on intuition to make their hiring choices. This introduces subjectivity to the decision-making process. Skills-based hiring tools introduces objective data to help reduce bias in decision-making.
Challenges:
- Implementation: Skills-based hiring requires companies to rethink their hiring processes, develop new assessment tools, and train hiring managers.
- Assessment Quality: Creating effective and fair skills assessments can be challenging and resource intensive. Poorly designed assessments may not effectively measure a candidate's true abilities, leading to ineffective hiring decisions.
- Soft Skill Consideration: Soft skills such as communication, teamwork, and leadership are essential to ensure the candidate will thrive in the culture and be set up for long-term success but can be more difficult to formally assess.
- Bias: The design of the assessments themselves must be carefully constructed or they could unintentionally reinforce certain biases. For example, the way a task is framed or the language used could disadvantage certain groups.
Ultimately, while skills-based hiring can be effective in many situations, it requires careful implementation and consideration of its potential drawbacks. Balancing technical skills with other important factors, such as soft skills, cultural fit, and long-term potential, is crucial to creating a successful and sustainable hiring strategy.
What types of businesses benefit from skills-based hiring?
Skills-based hiring can be beneficial for a wide range of businesses, especially those in industries where specific technical skills, creativity, problem-solving abilities, or hands-on expertise are critical to success. Technology companies, creative industries, manufacturing, small businesses, healthcare, consulting and professional services organizations are just a few of the types of organizations that may benefit from this hiring approach.
Why should individuals still invest in a college degree if skills-based hiring is becoming the norm?
While skills-based hiring is gaining traction, investing in a college degree can still be highly valuable for several reasons. First and foremost, according to The US Bureau of Labor Statistics, on an annual basis, median earnings for those with a bachelor’s degree are $40,500 or 86 percent higher than those whose highest degree is a high school diploma. Additionally, jobs in certain industries still require higher education, such as engineering, law, and healthcare, to name a few. Here are additional reasons pursuing higher education remains a sound investment even as the job market evolves:
- Networking: Certain aspects of higher education, such as internships, volunteer organizations, and student-led organizations are designed to help you meet people who become vested in helping you reach your career goals.
- Career Advancement: You may be eligible for leadership roles and professional development opportunities that are available only to those with a degree.
- Economic Stability: According to Pew Research Center, individuals who do not hold a college degree are three times more likely to be living in poverty.
- Interdisciplinary Knowledge: A college education often includes exposure to a range of disciplines, which can make graduates more adaptable to changes in their industry or shifts in career paths.
- Future Proofing: While skills-based hiring focuses on current abilities, a degree can help future-proof a career by providing a foundation that can support growth, retraining, or shifts in career direction as the job market evolves.
Balancing Skills and Education
While a college degree offers many benefits, it’s important to recognize that the most successful professionals often combine formal education with continuous skills development. Pursuing both a degree and practical, marketable skills can provide a well-rounded foundation that prepares individuals for the dynamic demands of the modern workforce.
The Bottom Line
Employing a balance of college educated and non-college educated individuals allows organizations to tap into a wider range of talent. This can create a diverse workforce that may collectively offer better solutions, innovation, and connections with a broader range of customers. This is especially important as our work environments continue to rapidly change and become ever more globalized. The simple fact is the best talent might come from unexpected backgrounds and locations.
You Don’t Have to do it Alone
Developing the hiring practices that align with your vision and values and allow you to hire the right people at the right time can be complex. If you find yourself struggling, let’s talk. As an organizational effectiveness consulting company, we have helped many clients navigate the challenges that have resulted both from the pandemic and the rapidly changing organizational landscape. We would love to be part of your journey as you face the successes and difficulties that lie ahead. If you’d like a free consultation to learn more about how our HR expertise, assessments, professional coaching, leadership development training, or strategy planning sessions can help you or your organization, contact us for a no-obligation, free consultation by clicking this link: Innovative Connections or calling us at 970-279-3330.
Our mission is to give voice and action to an emerging future. As a partner in your success, we would love to help you find your voice, see your vision, and imagine what the right action could be for you, your team, and your organization.