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HR Expert Explaining What is Skills-Based Hiring and how it helps a business

Improving Hiring Outcomes with Skills-Based Hiring

Welcome to the first part of our two-part installment on skills-based hiring. In this two-part blog, we're exploring an exciting change in how to discover the best individuals for the job: skills-based hiring.

As industries change and job requirements shift, focusing only on degrees and experience might not be enough. Skills-based hiring offers a fresh perspective, honing in on a candidate's practical abilities.

We'll dive into what skills-based hiring is, the array of benefits, and the challenges that may arise along the way. So, let's start by understanding the essence of skills-based hiring and its impact on the future of recruitment.

CoAdvantage What Is Skills-Based Hiring?

For many years, employers focused on requirements like college degrees or a certain number of years of employment, and so on. In fact, this requirements-based hiring went so far as to extend high-level requirements into low-level roles. For instance, basic entry-level jobs began requiring college degrees or prior experience, a trend sometimes referred to as “degree inflation.

However, as the labor market tightens, employers are changing their tactics and increasingly adopting a skills-based approach to hiring. The Harvard Business Review reports that “between 2017 and 2019, employers reduced degree requirements for 46% of middle-skill positions and 31% of high-skill positions.” 

A skills-based approach to hiring emphasizes a person's skills, capabilities, and competencies instead of degrees or years of experience. As stated by a LinkedIn article from Gopika Maya Santhosh: “Skills, not schools. Performance, not pedigree. Results, not requirements.”

What Are the Benefits of Skills-Based Hiring?

Better predict future performance

Skills-based hiring better predicts future success than requirements- or education-based hiring. One analysis found that, for entry-level jobs, “there was no predictor with validity equal to that of [skill].” Consultancy group McKinsey & Co. writes, “Hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience."

Reduce time to fill

When job requirements aren’t directly related to the role, they unintentionally end up acting as a barrier to those positions. In other words, when a degree is asked for but not essential for the job, it effectively keeps a large part of the workforce from being considered.

In a tight labor market, gatekeeping makes it much harder and slower to fill positions. Dropping those requirements lets employers access a far broader range of potential workers without degrading worker quality, so they can make new hires faster.

Increase retention rates

McKinsey also finds that workers without degrees remain in their jobs 34% longer than workers with degrees. The reasons are a bit complex but partly relate back to better matching between candidate and role. When people are a good fit for a particular role, job satisfaction and engagement tend to increase.

What are the challenges facing skills-based hiring?

McKinsey researched this question and found that validating skills was the main challenge employers face when they adopt a skills-based hiring approach. Following that, finding workers with the right skills comes next in line.

Another challenge: aligning company culture with the new emphasis on skills rather than requirements. In other words, shifting to skills over requirements is about more than just re-wording job ads. It has to do with how the company understands, evaluates, and manages the roles for which they are hiring.

So, given these challenges, what strategies can you employ to effectively overcome them? 

Key Takeaways

Concluding the first part of our two-part installment on skills-based hiring, we've explored the potential of skills-based hiring in reshaping recruitment. As industries evolve and job requirements shift, reliance on degrees and experience might fall short in identifying the best candidates. Skills-based hiring offers a fresh perspective by focusing on practical abilities, allowing a more accurate match between candidates and roles.

Throughout this skills-based hiring installment, we will dive into the essence of skills-based hiring, uncovering its benefits and challenges. Shifting from requirements to skills as the hiring focal point brings numerous advantages. It better predicts future performance, reduces time-to-fill positions, and enhances retention rates by aligning candidates with roles.

Yet, embracing skills-based hiring isn't without challenges. Validating skills and aligning company culture with this approach are hurdles to overcome. In the next blog, we'll explore practical strategies to smoothly navigate these challenges and integrate skills-based hiring effectively.

Stay tuned for the next part on skills-based hiring, where we'll discuss skills-based hiring practices and strategies. Implementing skills-based hiring into your recruitment process is a step toward success.

CoAdvantage is a leading Professional Employer Organization (PEO) for small and medium businesses. We specialize in HR, benefits, payroll, and compliance. If you want to adopt a growth-focused skills-based hiring approach, reach out to us today.