How Skills Based Hiring Can Transform Your Organization

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Skills based hiring is gaining popularity in the post-pandemic hiring market. With more than 140 million people out of work worldwide, there’s a massive pool of applicants seeking employment. Yet, particularly in logistics and manufacturing, businesses are still struggling to fill their open positions. 

There are many reasons for this discrepancy. But, traditional hiring practices that consider education and degrees as a predictor of success are proving to be a big obstacle for companies seeking to hire talent. Skills-based hiring is the best alternative — and an approach that more and more recruiters are relying on to close skill gaps and retain employees. Here’s how it works.

What is skills-based hiring?

Skills-based hiring is the practice of screening and hiring new employees based on the skills, capabilities, and talent they bring to the table — rather than their educational background or degree. Skills-based hiring considers soft skills and hard skills to screen in candidates, rather than eliminate qualified applicants because they don’t have the right background. 

The easiest way to implement skill-based hiring is through a skills assessment or job audition. Some companies integrate skill assessments early in the screening process to ensure that they’re spending time focusing on those candidates uniquely qualified to perform. Skill-based hiring helps recruiters overcome some of the greatest challenges in the traditional hiring process. 

How is it different from typical hiring processes?

In a typical hiring process, screening tools and tactics look for keywords on an application to verify if the candidate is suitable for the role. These screening practices seek to ensure the candidate is the “right fit”, using education or degree as a proxy for talent. 

However, this approach to hiring can be misleading for a variety of reasons. First, resumes are unreliable at best, since many candidates may inflate their experience or outright lie. And second, a degree doesn’t necessarily tell you if a candidate is capable of performing well. 

Take, for instance, software development roles. A survey by Hackerrank found that in 2018, 73% of developers said they knew JavaScript, making it the year’s most well-known language. But, student developers aren’t learning JavaScript – it’s not taught in most university computer science programs. 

Why is this discrepancy important? Many recruiters look at a candidate’s resume, see the computer science degree, and assume the candidate has the skills required to do the job. Or, a recruiter dismisses an engineer’s self-taught JavaScript skills because they don’t come with the right pedigree or certification. Hiring teams could be missing out on great employees just because a candidate doesn’t get the chance to prove their skills. 

Why more companies are implementing skills-based hiring processes

Hiring people based on skills allows recruiters to see if a candidate is truly equipped to do the job — helping them make the best hire the first time around. And today, many companies are facing a skills gap in their workforce. In manufacturing, the risk of a skills gap may leave an estimated 2.4 million positions unfilled between 2018 and 2028, with a potential economic impact of $2.5 trillion. Skill-based hiring allows companies to consider less “traditional” candidates: a former bartender, for instance, certainly has the customer service skills to work in a call center. 

[Read more: How To Perform An Effective Skills Gap Analysis And Future Proof Your Business

Skills-based hiring processes also allow recruiters to assess soft skills in addition to hard skills. Hard skills are specific technical skills and training, while soft skills relate to traits like leadership or communication. Soft skills are highly valued across industries — but, they can be difficult to screen for during the hiring process. Things like education, extracurricular activities, or leadership positions are often used by recruiters as a proxy for sought-after soft skills. 

However, these so-called predictors of soft skills can be discriminatory, preventing minorities and other diverse candidates from proving their abilities. For groups that are often shut out of leadership positions and traditional institutions, it’s difficult to show soft skills in a two-dimensional application, like a cover letter or CV.  

Manufacturing skills gap
In manufacturing, a rising skills gap could leave 2.4 million positions unfilled, according to Brookings

Benefits of skills-based hiring

Ultimately, figuring out how to adopt skills-based hiring practices allows companies to achieve a number of goals. Skill-based hiring helps lower recruiting costs by ensuring hiring managers bring on the right new employee the first time around — thereby avoiding the costs of a bad hire. It also enables companies to close skill gaps, improve retention, and increase productivity with people who are truly equipped to perform well. 

Here are some other ways in which skill-based hiring can help organizations grow and succeed. 

Benefits of skills-based hiring
Benefits of skills-based hiring

See how someone performs before you make the offer

Skill assessments are the easiest way to practice skill-based hiring. Skill tests provide an unbiased, validated evaluation of a candidate’s ability to perform the duties listed in the job description. Using a series of questions in different formats, candidates are able to show how they would approach the role. Questions can be immersive, such as a coding challenge or job simulation, or target soft skills: things like motivation, communication, and emotional intelligence

Skill assessments level the playing field for all candidates. More so than resumes or job interviews, a skills test can assess the true potential of a new hire to go the distance with the company.

More intense skill assessments, like job auditions, are another great way to predict job performance. Job auditions can take a few forms. Some organizations utilize a case study; others will host a group interview or event. Auditions are another type of skill assessment that helps candidates and companies evaluate one another more equitably. 

[Read more: Why Job Auditions Are The New, Predictive Way To Hire]

Improve diversity hiring

Research shows that skill-testing can help companies overcome unconscious bias and improve diversity hiring. Rather than using shortcuts like education or job titles, skill assessments allow companies to tap into a wider, more diverse talent pool. 

Focus on the results you’d like to see, rather than the type of qualifications that you think could deliver them,” Harvard Business Review said. “Highlighting the desired skills — the candidate’s ability to perform certain tasks — gets to the same results without creating an unnecessary barrier to entry, like a requirement for a four-year degree.”

Skill testing can help companies reach their diversity hiring goals, which leads to a whole other host of benefits including increased innovation, productivity, and profitability. 

Improve employee retention 

Skill-based hiring aims to replicate, as closely as possible, the experience of working in the actual role the candidate will be hired for. For example, a marketer may be asked to present a strategy proposal. A UX designer might be asked to review a user flow within a product. A sales representative might be asked to pitch a product to a panel.

For new hires, skill-based hiring provides the opportunity to try the role on for size. Candidates can then self-select out of the hiring process if they feel they aren’t a good fit. Inevitably, the candidate who is hired is not only a better fit for the role — they’re also excited to take on the day-to-day responsibilities and grow with the company. 

More diverse candidates who are hired via skill-based hiring also tend to stay longer. “Employees without a traditional four-year degree stay at companies 34% longer than those with such a degree, according to LinkedIn data,” Harvard Business Review said. 

Candidates, too, enjoy the opportunity to show their skills. Recruiting teams can improve candidate retention by adding a skill assessment to the hiring process. At Vervoe, we’ve found that candidates are more than eager to showcase their skills. Companies that use Vervoe’s assessments experience a 97% candidate completion rate, which is among the highest engagement rates in the industry. 

Skills-based hires
Skills-based hires stay longer, according to LinkedIn data shared in Harvard Business Review

Hire at scale

Vervoe’s skill assessment empowers companies to hire at scale, saving recruiters time while helping to close skill gaps. Many HR teams receive hundreds of resumes for a single open position. It’s nearly impossible to give every candidate’s application careful consideration, which leads many recruiters to simply select the candidates whose backgrounds seem most familiar or similar to theirs.

Vervoe uses machine learning to screen candidates in, not out. Vervoe’s AI tool uses a unique, efficient multi-layered approach to match candidates with the preferences of the employer. The algorithm allows HR teams to evaluate 10,000 candidates in the same time it takes for an individual recruiter to assess one. Recruiters receive a shortlist of top candidates who performed well related to the entire application pool — and no one is disqualified from continuing on in the process. 

Final thoughts

Skill-based hiring doesn’t require a huge investment in time or resources — on the contrary, skill-testing can actually save recruiters money and effort. Skill-based hiring is an easy way to fill skill gaps in an extremely competitive hiring market, enabling candidates who may not have a traditional background to shine. By considering factors other than education, skill-based hiring allows recruiting teams to find the right combination of hard and soft skills to fill every open position.

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