Why Skills-Based Hiring is on the Rise and Should Remain that Way

Even as the economy shifts and layoffs hit the news, hiring is still a challenge. To fill open positions, companies are starting to more closely evaluate how they review applicants and are more willing to overlook educational shortfalls if candidates have the necessary skills.

Skills-based hiring continues to trend.

As you know, skills-based hiring focuses on screening candidates based on their capabilities rather than education or employment history. In today’s hiring environment, if you’re not hiring for skills, you’re missing plenty of potentially high-performing job candidates.

The Benefits of Skills-Based Hiring

When it comes to the benefits of skills-based hiring, the results speak for themselves. In a survey of more than 2,700 employers by TestGorilla, they found dramatic improvements in hiring practices and outcomes when employers shifted to skills-based hiring, including:

• 89% reduction in the cost-to-hire
• 91% reduction in the time-to-hire
• 92% reduction in mis-hires
• 91% increase in employee retention
• 91% increase in hiring diversity

A skills-based hiring strategy also creates a better job-fit for employees, which produces greater job satisfaction, employee engagement, and performance appraisal ratings. Those with high job-fit also tend to better adapt to challenges, seek upskilling, and develop transferable skills.

Shifting Hiring Requirements

In an effort to fill spots in several industries, LinkedIn launched a program guaranteeing job seekers an interview with recruiting teams if they can pass a skills-based test. Look for expansion of this type of strategy in the future.

For years, companies have practiced “degree inflation,” demanding four-year college degrees for positions that didn’t require them. This kept many skilled workers out of the talent pool due to the high cost of higher education. This disproportionately impacted those in lower-income communities, especially people of color, leading to a lack of diversity in the workforce in upwardly-mobile positions. With fewer diverse candidates in entry-level jobs, fewer diverse candidates were being promoted upward in companies.

That’s changing.

A review of job descriptions by the Harvard Business Review showed that employers have started to reduce degree requirements by more than 45% for mid-level employees and about a third for high-skilled positions. Job ads showed a marked shift towards skills rather than specific degrees.

Companies like Google, Microsoft, Apple, IBM, and GM have all shifted their hiring practices and offer some high-level positions to employees without college degrees in an attempt to widen the talent pool and attract different types of candidates. Today, about half of the jobs at IBM do not require a four-year degree.

There’s also a greater emphasis on finding candidates with transferable skills that will help them grow within the organization and upskilling current workers to provide more opportunities for internal movement.

Continuing Need for High-Quality Employees

Employers need workers with the right skills and many are desperate to find quality candidates. Despite some companies cutting back, there are still 11 million job openings in the U.S., according to the Bureau of Labor Statistics. At the same time, turnover continues to be an issue with monthly layoffs, separations, quits, and discharges topping 11.5 million monthly.

Employees Want to Develop New Skills

The Wharton School of Business at the University of Pennsylvania reported that nearly a third of tech workers, for example, say skills and self-improvement are what they value most about their job. 92% of professional says having access to professional development is important or very important.

Current employees are also seeking more upskilling opportunities to stay ahead of changing work environments. A study by Amazon and Workplace Intelligence showed that seven out of ten employees say they do not feel prepared for the future of work.

By providing opportunities for employees to adapt and learn new skills on the job, employers can retrain and retain workers at a higher level.

More Opportunities for Skills Development

One piece of good news for employers and job seekers is that there are more opportunities for skills development than ever before.

Colleges are offering online courses and boot camps in greater numbers than in years past. The number of massive open online course (MOOC) platforms has risen, offering free courses and unlimited participation. Many employers have started their own training and certification programs to attract the next generation of workers.

Skills-Based Hiring Will Continue

Hiring based on skills is on the rise and will remain that way into the future. Employers need to reassess their hiring practices to see whether they are leveraging this growing trend.

Authors

Paul Dughi

Paul Dughi has held executive management positions in the media industry for the past 30 years. He earned his master of business administration degree while working full-time as President of a multistation television group and is the author of two books on marketing and management.