What is skills-based hiring?

What is the definition of skills-based hiring?

Skills-based hiring refers to a hiring process that focuses on evaluating candidates based on their skills, rather than their education or work history. These skills may be technical (hard skills such as web development or video production) or behavioural (soft skills such as emotional intelligence or problem solving). 

Skills-based hiring starts with a rigorous understanding of the hard and soft skills required for specific roles, ideally gleaned from multiple sources - Spotted Zebra, for instance, utilises sources including manager surveys, employee surveys, industry data, job specifications and even the input of an occupational psychologist to identify not only the skills required but also the granularity of those skills. 

With these skills identified, job advertisements can focus on skill requirements rather than qualifications and job history. The subsequent interview process seeks to validate applicant skills via assessments, self-evaluation and skills inference. This recruitment method ultimately allows businesses to make data driven, skills-based, best practice recruitment decisions. 

What are the benefits of skills-based hiring? 

Skills-based hiring is the perfect response to the global skills crisis, helping organisations to:

• Widen the talent pool.
• Reduce failed hires.
• Improve talent retention.

At the same time, other benefits of skills-based hiring include increasing workforce diversity. 

Let’s take a deeper look at some of these benefits. 

How does skills-based hiring help to solve skills shortages?

Current methods of finding talent are excluding large proportions of the population who may have the appropriate skills because they don’t have traditionally accepted credentials, education or experience. 

McKinsey has reported that skills-based practices help companies to attract a broader pool of talent, filled with candidates that are a better fit for positions in the longer-term. In one real-world example from its report, one organisation created a skills-based version of one of their job postings and went from receiving one over-qualified candidate for the role to 18 appropriately-qualified applicants.

“A skills-based approach to hiring can help companies unlock new talent pools - with LinkedIn data showing that taking a skills-based approach to hiring can widen talent pools by 10x,” says Becky Schnauffer, Head of Global Clients at LinkedIn Talent Solutions. “So if organisations want to maximise their talent pools, they’ll need to adjust the way they view candidates’ potential, let go of any preconceptions about qualifications and job titles, and take into account the wide range of skills that jobseekers offer.” 

Ian Monk, CEO of Spotted Zebra, adds: “Businesses know they need to cast their net wider to address the skills crisis, but at the same time they want to ensure that they are focusing on the right people. Skills-based hiring gives you that certainty. And the great thing is that it works equally as well for roles where you have lots of applications - allowing you to quickly and accurately identify who would be the best fit.” 

As well as identifying applicants that are a perfect fit, the process can also identify those candidates that don’t possess all of the skills, but have enough adjacent capabilities that they could develop the requirements with some training. 

Perry Timms, founder of People and Transformational HR (PTHR), explains: “We simply don't know, don't have or can't acquire certain key skills and capabilities - skills that are emerging and even unknown. Who'd have thought that this year you might need a generative AI prompt creator? But if you had someone who is an analyst, a programmer/developer and a problem-solving type of person, who is alive to AI and aware of how to leverage it, whatever tool comes into being; you've got one. 

“Skills-based hiring gives you a pool of people to deploy more responsively to work that needs to be done.”

What are the other benefits of skills-based hiring?

Employee retention can improve as a result of skills-based recruitment. 

Over half (56%) of people leaders report that talent retention is a major corporate benefit of skills-based hiring. “A skills-based approach to hiring helps to create a skills-based culture, and we know that this is something which helps keep employees in businesses for longer,” explains Schnauffer. “LinkedIn data shows that companies whose employees learn skills on the job have a nearly 7% higher retention rate at the 3-year mark, so a skills-first approach is key to strong talent retention.” 

Skills-based hiring can also improve workforce diversity. 

Skills-based hiring fosters workplace diversity and equity. Deloitte has reported that 75% of executives say hiring, promoting and deploying people based on skills can help democratise and improve access to opportunities. Perry Timms adds: “Studies on job descriptions looking for biased wording have been proven in tests to deter people of a certain age, ethnicity, educational attainment, social status, disability and gender. So we rule out potential best candidates and that's something we'd never know or be able to track. Skills-based is a much more likely frame of reference for people to apply without feeling deterred by subtle biases in job specs.”

Schnauffer adds: “The labour market has historically been inequitable and opaque. Our data shows that a skills-first approach can help level the playing field for workers who may have been overlooked, including women, workers without bachelor’s degrees, and younger people. Taking a skills-first approach to hiring can widen the talent pool by 10x for women, 10.3x for Gen Z workers, and 9x for those without bachelor’s degrees. Our research also found that in industries where women are underrepresented, the proportion of women in the talent pool would increase 24% more than it would for men with a skills-first approach.”

Elsewhere, skills-based hiring is also beneficial for job performance. 

Research from McKinsey has indicated that 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.

Who is adopting skills-based hiring? 

A growing number of major brands including IBM, Boeing and Walmart are utilising skills-based hiring. 

The discipline has in fact been around for decades - Josh Bersin points to energy, pharma and telecom companies that have been using it for years. However, it is gathering particular momentum at present due to one very important development: the skills crisis. 

“Skilled labour shortages are hampering economic growth across the globe,” highlights Ian Monk. “In the UK alone, the Office of National Statistics has reported a record 1.2 million job vacancies, with more than half of those with a worker shortage stating they are unable to meet the demands of their customers.”

Because of its potential for tackling the skills crisis and improving social equity, conversations about skills-based hiring are now taking place at the very highest levels. 

In his first State of the Union address, the US President announced that the administration would keep the economy strong and support workers by hiring staff “based on their skills, not degrees”.

Meanwhile, it was a topic of discussion for the World Economic Forum at Davos recently, where it was suggested that focusing on skills “could democratise access to economic opportunities and pathways.”

With expectations that the skills crisis will worsen by the end of the decade if left unchecked, costing companies trillions of dollars in unrealised revenue, skills-based hiring will continue to gather momentum. 

How can Spotted Zebra help?

Spotted Zebra empowers organisations to respond to the skills gap crisis through our skills-based workforce management platform. By using the Spotted Zebra solution, organisations are able to make high-stakes, skills-based decisions about their people at scale. In doing so, they are able to achieve key industry goals such as greater workforce diversity, reduced staff attrition and improved job performance and satisfaction. 

As part of the Spotted Zebra platform, we provide a skills-based hiring app that enables organisations to identify and focus on the behavioural and technical skills that are key to success in specific roles. We then provide support so that candidates can be assessed and rated according to their fit for a particular role skills profile. 

Our data shows that high performers on Spotted Zebra assessments reach competence 20% faster, and are 2x more likely to be rated as top performers in their role.

If you'd like to review your strategic workforce plan, our experts are available for a Skills Strategy Lunch and Learn. Click here to learn more and reserve a session for you and your team.

FAQs

1. How does skills-based hiring specifically help companies address the global skills crisis and widen their talent pools?

Skills-based hiring helps companies address the global skills crisis by focusing on the actual capabilities and competencies needed for a job, rather than relying on traditional credentials such as degrees or specific job titles. This approach opens up opportunities for a wider range of candidates who may have the necessary skills but lack conventional qualifications. For example, LinkedIn data shows that a skills-based approach can widen talent pools by 10 times. By eliminating unnecessary educational and experience requirements, companies can attract a more diverse and capable workforce, including those who have acquired skills through non-traditional pathways such as online courses, boot camps, or on-the-job experience.

2. What practical steps can organisations take to transition from traditional hiring practices to skills-based hiring?

Organisations can take the following practical steps to transition to skills-based hiring:

• Identify required skills: Clearly define the specific hard and soft skills needed for each role by consulting multiple sources, including manager and employee surveys, industry data, and input from occupational psychologists.
• Revise job descriptions: Rewrite job descriptions to emphasize skills rather than qualifications or work history. Focus on what the candidate needs to be able to do rather than where they have worked or studied.
• Implement skills assessments: Use tools and platforms like Spotted Zebra to assess candidates' skills through tests, self-evaluations, and skills inference rather than relying solely on resumes.
• Training and awareness: Train HR personnel and hiring managers on the principles of skills-based hiring and the importance of reducing unconscious bias in the recruitment process.

3. What evidence or case studies are available that demonstrate the impact of skills-based hiring on employee performance and retention?

Several studies and case examples illustrate the positive impact of skills-based hiring on employee performance and retention:

• LinkedIn: Research from LinkedIn suggests that companies using skills-based hiring can increase the proportion of women in underrepresented job titles by 24% more than it would for men. Additionally, companies that adopt this approach see a nearly 7% higher retention rate at the 3-year mark.
• IBM: IBM removed degree requirements for half of its US jobs, resulting in a more diverse and underrepresented talent pool. This shift has helped IBM recruit people with different backgrounds and experiences, contributing to higher innovation and job satisfaction.
• McKinsey: Research from McKinsey indicates that hiring for skills is five times more predictive of job performance than hiring for education and more than twice as predictive as hiring for work experience. This demonstrates that skills-based hiring leads to better job performance and employee fit.
• Real-world Example: A McKinsey report highlighted a case where an organisation switched to a skills-based job posting and saw a dramatic increase in qualified applicants - from one overqualified candidate to 18 appropriately-qualified applicants. This change improved the quality of hires and reduced time-to-fill for open positions.

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