Skills-based hiring is back on the front burner, thanks to a late June announcement from the White House about an executive order that allows federal agencies to prioritize skills-based hiring over education-based requirements. The federal government employs about 3% of the US workforce, which is no small number. Extend that to the entire government sector including state and local governments and the number rises to a whopping 16%.
This move by the federal government has increased the conversation about skills-based hiring across industries and businesses of all sizes. Skills-based hiring shifts the focus from educational credentials to competencies.
For many years, education has been used as a proxy for ability. Several factors have made it clear that skills-based assessment is more effective for middle-skill jobs:
- Fast skill cycles require continuous upskilling and reskilling
- More channels for informal and non-traditional education (thanks to the internet)
- Uncertainty about everything related to higher education in the short term (thanks to the pandemic)
- Skills pivot of recently unemployed (thanks again to COVID)
- Skills deficits in many new minted college graduates
- Strong potential candidates excluded from pool because of degree requirement
Of course, degrees are required for some positions and certifications for many others. But for middle-skill positions, measurable competencies are the true value. And 74% of hiring managers surveyed agreed that there has been a lack of skilled talent in recent years.
Benefits of Skills-Based Hiring
Employers and employees alike benefit from refocusing hiring on skills:
- Larger candidate pool
- Faster time to hire
- Better competency assessment
- Higher retention
- Greater diversity—people of color, women, people with disabilities
The Cost of Degree Inflation
In search of higher talent quality, many employers began requiring college degrees. Using a degree as a proxy for competence certainly made it easy to cull the list of applicants. However, all too often the result is a dearth of good candidates. And the candidates that do become new hires come at a premium, increasing overall business costs.
- 63% of business and HR leaders surveyed had trouble filling middle-skills jobs—there are more individuals with some college (29%) than bachelor’s degrees (20%) and many more with experience but no college.
- 94% of HR decision-makers say trouble finding qualified candidates is impacting business growth
- 60% of employers select recent college graduates over qualified middle-skill candidates with relevant experience
- 50% of employers pay higher compensation to recent college graduates than non-degree holders in the same job, yet employers perceive degreed and non-degreed workers as nearly or equally productive
- Degreed workers have shorter retention period
The degree gap is wide in many industries and occupations. For example:
- Manufacturing has the most jobs at risk of degree inflation (~850,000). supervisor of production workers is the single largest job suffering from degree inflation.
- Accommodation and food services has 640,000 degree-inflated jobs, including food-service managers.
- Healthcare and Social Assistance is close behind with more than 600,000 degree-inflated jobs.
Businesses that continue to gate their job openings by college degree pay the price in greater hiring costs and higher compensation while shutting themselves off from well-qualified candidates who took an alternative path to acquire skills.
Do Degrees Really Establish Competency Better than Skills-Based Measures?
No. Degrees do not prove that candidates have the hard and soft skills required for the job. Degrees do provide an easy way to reduce the number who apply and proceed to interview. But that is a double-edged sword. According to a Harvard survey of 600 business and HR leaders, 61 percent reported tossing resumes without four-year degrees, even if the applicant was qualified.
Skills-based hiring is a more balanced method of review. Obviously, some positions require degrees or professional certifications/licenses (think doctor, lawyer, nurse). Yet even for those positions, screening for skills provides additional insight into potential fitness for the job.
7 Skills-Based Hiring Best Practices
It may seem daunting to switch recruiting and hiring processes to support skills-based hiring. Fortunately, there are many tools available to hiring managers and business leaders that can help the transition. Here are seven skills-based hiring best practices that can get you on the right path for more efficient, effective hiring.
1: Articulate the Skills Required for Each Open Job
Start out with a conversation with the hiring manager to spell out the skills needed for the job. Divide the skills into those that are required and those that can be acquired on the job. Don’t forget the soft skills, like work ethic, empathy, communication and teamwork.
Once you have defined the required and desire skills, consider how the skill can be proved—through certifications or testing, for example. Skills should be observable, measurable, and assessable.
2: Write Job Descriptions that Focus on Competencies
Now that you know what you are looking for in a candidate, write your job description. There are many job description examples available on job sites like Indeed. Make sure you clearly list the skills required and desired for the job. If certifications, licenses or degrees are a hard requirement, add them as well.
3: Get the Job Description in Front of Good Talent Pools
This step is critical to reaching the broadest pool of talent for your job. Posting it to your website and to 1 or 2 free job sites is not sufficient. There are literally hundreds of job boards and niche sites available to you. The easiest way to access these job boards is by using an application tracking system (ATS) with built-in posting services.
4: Leverage Technology to Pre-Screen and Rank Based on Skills
At this point you may be thinking that by opening up the job description to a wider set of applicants and posting the description to more job boards you will be overwhelmed with applications. The good news is that your ATS can help! Create an application infused with skills-related questions. Use the ATS to assess the resume and application based on skills as well as required licenses and certification.
5: Conduct Skills-Based Assessments
Once you’ve narrowed your candidates through automated pre-screening, conduct a more thorough review of skills. You will not be alone in doing this; nearly 25% of businesses now conduct assessments. Do this early in the process and you will avoid time wasted on fruitless interviews. These skill assessments are needed—even for degreed candidates. Only 10% of business leaders agree that college graduates are ready for the workplace.
6: Quantify Your Interview Feedback Process
As much as possible and practical, structure your interview feedback process so that feedback is measurable. Ultimately you want to hire the best candidate for your organization, and the feedback needs to be collected in a way that makes the choice clear. Set the feedback criteria and use your ATS to collect it so that it is easy for all participants to review and come to agreement.
7: Create Sustainability for Skills-Based Hiring
Sustainability is an important element of skills-based hiring. As a leader in your company, you need to take active steps to ensure that your employees maintain and grow their skills as required by your business. As a leader of people, you also need to help your employees grow and develop. As a member of your community, you can build a talent pipeline from schools and workforce foundations.
Check out how IBM is actively creating a pipeline through its SkillsBuild program. Last year, 15% of its new U.S. hires had nontraditional backgrounds because they were evaluated based on skills, not degrees. While your organization may not be the size of IBM, you can still make an impact in your community and increase your pipeline of qualified, skilled employees.
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