Skills-Based Hiring: Benefits And Best Practices

To do well at a job, one must possess the skills necessary to carry out the duties of that job. Sounds obvious, right? And yet, companies around the world continue to ignore skills-based hiring practices and focus on degrees and formal qualifications.

The latter is often not the best indicator of on-the-job competency and results in excluding skilled applicants who may not be advantaged in terms of education.

However, trends are evolving, and employers are beginning to screen candidates based on the skills that people may have picked up at other jobs, through self-education, or simply through their unique life experiences.

Here, we offer a brief guide to skill-based hiring and its relevance. But first, let us get the basics out of the way:

What is skills-based hiring?

Skills-based hiring, as the name suggests, refers to the process of hiring candidates for a job based on certain predetermined competencies and skills as the main criteria. These skills could be technical, cognitive, physical, or soft skills, depending on what the job calls for.

The idea is to ensure that all job candidates have precisely what it takes to perform the daily requirements of the job, regardless of their education, background, or other factors.

It also allows employers to write clear job descriptions that inform the applicant pool of what to expect. A prerequisite is that employers have a legally compliant process by which they define the set of skills and abilities that a job calls for.

Skills-based hiring versus degree-based hiring

The concepts are quite easy to distinguish - skill-based hiring emphasizes people’s abilities, whereas degree-based hiring focuses on education.

And traditionally, HR would sift through resumes and shortlist the ones that exhibited the most potential in terms of degrees and qualifications.

Post-pandemic, however, there has been a revolution in favor of upskilling and reskilling as more and more people began pivoting in their careers.

In particular, it was found that many skills were highly transferable across jobs, even if the candidates were not aware of it themselves. Waiters and other members of the hospitality industry, for instance, were found to excel at customer service roles.

That being said, there are, of course, several jobs that do require formal training and education from their applicants.

However, the main takeaway is that HR need not restrict itself to degree-based hiring to find the best candidates, as demonstrable skills are often a far better measure of job excellence.

Benefits of skills-based hiring

There are several concrete benefits to hiring based on skills. Let us talk about them one by one.

1. Larger talent pool

Most HR teams continue to expect at least an undergraduate degree even from their entry-level applicants. However, they also have to contend with the higher salary expectations of graduate students, which means many entry-level jobs remain unfilled.

By widening the potential candidate pool to include people who may not have college degrees but do have the necessary skills, you can fill up vacancies much more quickly.

2. Reduced time-to-hire

In the traditional hiring scenario, HR managers review skills much later in the hiring process, which wastes time if they have hitherto been considering candidates with good degrees but without the necessary on-the-job chops. Skill-based hiring changes that for the better.

3. Reduced costs

By selecting candidates on the basis of skills from the get-go, employers can save a great deal in training costs. Candidates can also assume regular duties sooner.

4. Higher diversity

Today, 70% of Americans over the age of 25 do not have a college degree. Many of these are people from racial minorities, or those with disabilities or veteran status, or those otherwise disadvantaged socially.

By emphasizing skills and not college degrees in their job descriptions, employers encourage more applications from such candidates and thus create a more diverse and inclusive workforce.

5. Greater retention

When people join jobs that fit their skill sets, they are more engaged in the day-to-day requirements and more motivated to give back to their employers. Companies thus benefit from high retention rates and more productive workforces.

Skills-based hiring today: Proven initiatives

Companies worldwide recognize that skills matter just as much on the job as credentials or certifications. Accordingly, they are changing either the way they approach recruitment or the opportunities they give their employees, or both. Some of the new initiatives in this regard include:

1. Designated skills boards

Prominent job boards are investing in special platforms that enable skilled candidates, even those with non-traditional backgrounds, to be matched with the jobs where they will perform best.

LinkedIn, for instance, recently piloted Skills Path, a platform that identifies the core skills for each job and then matches candidates to those jobs by means of skill assessments and courses.

The goal is to create more opportunities for talented people who may be missing out because of a lack of degrees or connections while also helping employers find the perfect fit for every role. Ziprecruiter and Indeed are investing in skill-based recruitment too.

2. Skill-learning pathways

Several companies are building comprehensive learning pathways to help their own employees and the population in general pivot to career paths that best suit them.

IBM, for instance, launched its SkillsBuild initiative to provide digital learning pathways and, in 2021, announced a new collaboration with 30 global organizations to help boost employability and skill levels among the underserved.

Walmart has also collaborated with Western Governors University and 40 organizations to build an accessible repository of skill-based learning resources.

Other major companies like Amazon, JP Morgan, Verizon, Google, and Accenture are also creating comprehensive learning universes where employees can upskill themselves, even potentially replacing traditional post-secondary education for many.

3. Signaling skills

The DeBruce Foundation recently released the Essential Skills Report, highlighting the importance of certain core competencies in the workforce. These include communication, interpersonal skills, critical thinking, collaboration, proactivity, and executive function.

The report stressed on the need for employers, educational institutes, and job boards to provide opportunities for candidates to learn and grow these signaling skills, given that they are necessary across sectors and durable over time.

What the future holds for skill-based hiring

The business world is ready for a significant change, especially in the aftermath of the pandemic. Skill-based hiring will become a vital feature of the recruitment landscape as businesses seek to build back stronger with the proper talent force.

As skilled candidates who have hitherto been overlooked by recruiting systems now get their chance to shine, here are some milestones we can expect to see:

1. Enabling a systemic change

The pandemic exposed, like never before, how employment and growth opportunities often bypass those from marginalized or underprivileged backgrounds.

Often this takes the form of intersectional discrimination, in which people face multiple types of discrimination at once on grounds like race, gender, sexual orientation, class, nationality, and so on.

Other forms of discrimination single out people on the basis of life challenges such as poor access to education, criminal records, or employment gaps.

Many companies are seeking to create more equitable workforce environments by approaching recruitment based on skills and by specifically reaching out to candidates with challenging circumstances, such as women who may have been forced to choose family over career when the pandemic hit.

The idea is that quality skills are the first and foremost determining factor when considering someone for a job, regardless of what their past or background looks like.

2. Making a commitment

Skill-based hiring cannot be seen as merely a trend or a thing of the moment. It requires a serious, sustained shift in mindset from top leaders as well as middle and line managers.

We can expect to see recruitment take on a more holistic view of employees that encompasses skill and talent as well as diversity and inclusion. Only then can hiring be genuinely in line with and fulfill business outcomes.

3. Creating a sense of belonging

A key complement to diverse hiring is the sense of belonging that candidates from all backgrounds feel once they join a company.

There are four main aspects to this: decision autonomy, psychological ease with speaking up, respect from managers and peers, and growth opportunities.

Companies must keep tabs on how these factors affect those who may have experienced intersectional discrimination.

4. Ensuring continuous learning and development

Learning and upskilling opportunities within a company need to be treated like the must-haves they are. Such opportunities are not only attractors for prospective joiners but also great ways to ‘re-recruit’ existing team members by carving out new pathways for them to grow.

This requires new systems and cultures to be built, often at the expense of old ones, but it is vital to keep pace with the demands of today’s workforce. Moreover, the more a company invests in its team’s skills, the greater the productivity and goodwill it can enjoy.

How to adopt skill-based hiring

If you have been following traditional degree-based hiring processes at your company, you are not the only one. And do not worry; you do not need to overhaul all your processes in one go either.

Like anything else, a transition to skill-based hiring needs to take place strategically and in a phased manner that has all stakeholders on board at all times. Here are some best practices to implement when you are making the change:

1. Start small

When you are new to skill-based hiring, start by examining the jobs that have the highest turnover rates. Are skill gaps the problem? If so, start with bringing a skill-based approach to filling up those jobs. Treat it as a hypothesis test.

2. Work on job descriptions

One of the easiest ways to attract more candidates based on skill is to rewrite job descriptions to focus on competencies and day-to-day requirements rather than formal degree requirements.

For instance, you can highlight actionable KPIs that you expect from the candidate at the end of a month or quarter. This brings in a more relevant set of applications and tells applicants precisely what they can expect in a day on the job, which means only the truly motivated will be applying.

3. Have a clear picture of the different stages in your recruiting funnel

This is the first step to speeding up the time-to-hire, and your Applicant Tracking System (ATS) will help you out by giving you instant data on where each candidate is. In a pinch, you can use Excel to store this data too.

4. Emphasize skills throughout the recruitment process

When conducting assessments to shortlist candidates, test for relevant skills. Gear your interview questions around skills and practical requirements, and keep as little emphasis on college degrees as possible.

Use a candidate-friendly assessment platform like Adaface to gauge the candidates based on their on-the-skills. Also, assess and identify key personality traits for hiring the right cultural fit. It is that simple.

Over to you

At the end of the day, every HR department wants the right person for the right job. And in many cases, the right person may not be the obvious candidate in terms of qualifications but may possess all the essential skills nonetheless.

By adopting skills-based hiring practices, companies can fill their entry-level and middle-level positions with people who can prove themselves every day and are motivated to keep honing and building their skills, regardless of their background or past experiences. The end result? Employees who know what they are doing and are happy doing it.