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Skills-Based Hiring: Benefits, Challenges, and How to Do It Right

“In today’s 2024 job market, skills-based hiring is a game-changer,” says Winnipeg Partner Jessica Willis to start our conversation about skills-based hiring and its growing role in today’s recruitment landscape.

In TestGorilla’s 2023 State of Skills-Based Hiring report, 88.8% found skills-based hiring more effective for predicting on-the-job success than resumes, while 81.8% said those hired based on skills stayed in their roles longer. TestGorilla’s survey also found that this approach is on the rise, with 73% of companies using the approach in 2023, compared to 56% that utilized it in 2022.

While implementing a new recruitment approach can come along with challenges, switching to skills-based hiring can be a very effective way to attract the right people to your roles. Let’s take a closer look at what this approach entails, its benefits for your organization, and how to utilize it effectively.

What is skills-based hiring?

The essence of skills-based hiring is right there in the name. It means reviewing and comparing applicants primarily based on their skill sets, rather than based on credentials like their degree, certifications, or previous job titles. Or, as Managing Partner Matt Erhard puts it, “Instead of putting all the emphasis on degrees or titles, it zooms in on what a person can actually do.”

To get this information from candidates, employers who use skills-based hiring go beyond the resume. While many still gather applicants’ resumes, assessment tests of the candidates’ skills are utilized alongside them in early application stages. When it’s time to select the applicants to interview, their performance on these skill assessments is considered before the resume.

Assessment tests aren’t the only method used in skills-based hiring. Other materials like a portfolio of past work and work samples, or assessments like test assignments or working interviews, can also be included in this approach. What’s great about skills tests is that they can easily be automated, making them ideal for the first stage in the hiring funnel.    

The benefits of a skills-based hiring approach

One of the biggest benefits of a skills-based approach, particularly for employers that have struggled to fill vacancies, is that it can expand your potential talent pool.

“You widen your net of candidates who do not yet have the proven experience or credentials, but who have the potential to succeed,” explains Mariah Beahen, Recruitment Consultant in Summit’s Calgary office. This can make it an especially great approach for filling entry-level roles that can potentially lead to advancement opportunities, because “you’re hiring for potential, and potential can go a long way.”

One common misconception is that this leads to hiring less qualified applicants. The reality, though, is that it can be more effective at identifying people who will excel in the role by focusing on the specific traits, knowledge, or capabilities they’ll need, even if they haven’t had the opportunity to prove it in an academic context. This makes it an excellent approach for companies that want to improve their workforce diversity. As Matt Erhard says, “It can level the playing field. Whether you got your skills from a degree or learned them on the job, they’re what matter. This opens up the door for a diverse bunch of talented candidates who might have been overlooked in the past.”

Senior Bilingual Recruitment Consultant Melanie McQueen adds to this, saying, “A skill-based hiring approach ensures companies prioritize candidate abilities over traditional credentials, promoting diversity and equal opportunity.”

Another potential benefit that Mariah notes: “You may be able to agree on a compensation structure that aligns with both the candidate’s needs and fits within the organization’s budget.” In the TestGorilla survey noted above, 74% of employers also found that skills-based hiring reduced their cost to-hire.

Using this strategy to fill positions can also help you to keep the talent you hire in those roles longer. As Jessica Willis says, “It shifts the focus from degrees and titles to practical abilities. This approach welcomes diverse talent based on their skill set rather than their formal education, potentially reducing turnover rates and boosting job satisfaction.”

How does skills-based hiring increase employee satisfaction and engagement? Melanie McQueen explains, “It allows for a more accurate match between candidates’ competencies and job requirements, leading to higher employee performance. This approach also fosters innovation, as skills are valued over formal education or experience, and aligns with evolving job markets, enabling organizations to stay agile and responsive to changing skill demands.”

Challenges and drawbacks of skills-based hiring

“One hurdle is convincing everyone on the hiring team to jump on the skills train,” Matt Erhard says. “Some hiring managers are pretty attached to those degrees and certifications.”

Part of why hiring teams might resist this approach is that measuring and validating skills can be more difficult and time-consuming than reading through a resume. Jessica Willis seconds this, saying, “Accurately assessing skills can be tricky. Successful implementation involves thorough skills mapping, clear communication, and fostering a culture valuing diverse skill sets.”

Recruitment Partner Jessica Alcock also sees resistance from leadership as one of the biggest hurdles, saying that shifting to this approach “may be difficult in organizations where stakeholders are not open to moving away from traditional approaches to hiring. Communicating the benefits of skills-based hiring is essential to get buy-in from internal stakeholders.”

Often, the resistance to skills-based hiring isn’t based on the method itself, but stems from a misunderstanding of the process, or a knee-jerk rejection of a new approach. Educating leaders who resist the change is often the best way to overcome these objections. For instance, some see paying for a testing service as an unnecessary, added expense, when in reality it can streamline candidate assessments, ultimately reducing the work time for your hiring team and, in the process, reducing total costs.

Another common misconception is that skills-based hiring creates a worse candidate experience. A common objection is that candidates won’t want to invest the time into an initial assessment, or may find it off-putting to be asked to take a test right away. Ultimately, though, skills-based hiring can speed up the time-to-hire, which means successful candidates spend less time waiting than in traditional approaches. An initial application test may drive some candidates away from your pipeline, but usually the ones who aren’t fully committed to the role, or who lack the skills you’re testing for—in other words, the candidates you likely wouldn’t have selected regardless.

Another challenge Jessica Alcock notes is that “in some cases, assessing skills can be subjective, which can also cause challenges.”

Mariah Beahen adds, “It can be risky in terms of ensuring a candidate will be successful in the objectives of the role.”

Hiring teams often use past titles and degrees as a kind of shorthand, encompassing the specific skills that the role requires without needing to identify them individually. You don’t have this catch-all to fall back on when you switch to a skill-centered hiring process. Instead, hiring teams need to have an in-depth understanding of what competencies are central to the role and how to highlight these proficiencies in the hiring process, which can require more planning and forethought than traditional hiring strategies.

5 tips for effective skills-based hiring

1) Rewrite your job descriptions to focus on skills over credentials.

When writing a skills-based job description, Matt Erhard says, “It’s all about ditching the laundry list of degrees and focusing on the skills needed for the job. Make it clear what you’re looking for and why it matters.”

Toronto Recruitment Consultant Serena Milani adds to this, “When writing job descriptions, prioritize clarity and emphasize key responsibilities and required skills over formal qualifications. Instead of rigid education requirements, express a preference for relevant experience or equivalent skills. Also make sure to use inclusive language and offer growth opportunities.”

Small adjustments can make a big difference here. Mariah Beahen suggests, “When writing job descriptions, use terms like ‘or relevant experience’, or use words such as preferred instead of required. Instead of outlining degrees and certifications, you can highlight specific experience, professional development, or projects that demonstrate a candidate’s ability in certain skills.”

2) Don’t neglect cultural fit or soft skills.

Skills-based hiring doesn’t mean exclusively focusing on the technical aspects of the role. Soft skills are just as important for a candidate’s long-term success, and as Jessica Willis points out, “Are far more difficult to coach and develop.”

Pre-employment personality tests can be used to assess soft skills. Have the top performers among your current team members take the test first, then use their results as a baseline for comparison to identify candidates with that same set of soft skills and personality traits.

The interview stage of the process can be very useful for assessing these aspects of a candidate’s capabilities. Matt Erhard suggests, “When interviewing, get specific. Ask about past projects and real-life scenarios.” Using behavioral interview questions can help you get a sense of how they’ve used their soft skills in the past and how they’re likely to behave in your workplace. You can also use scenario simulations or group exercises to assess and compare the soft skills of applicants.

3) Use standardized skill assessments throughout the process.

Instead of simply relying on the skills that applicants tell you they have, Mariah Beahen advises, “Include skills-based or behavioral assessments in the interview process to evaluate a candidate’s abilities.”

Doing this doesn’t just give you a more accurate sense of a candidate’s abilities. It can also reduce the workload of the hiring team, especially if you use online assessments that candidates can complete independently. You can even include these in the initial application, giving you an early screening for relevant technical and soft skills before you’ve even invested time and effort in reviewing resumes.

Ensuring that every candidate gets the same tests and questions to answer is crucial when you’re utilizing a skills-based approach. Like skills-based hiring in general, standardization levels the playing field, helping you make sure you’re evaluating candidates based on their performance, rather than the set of questions they happened to get from the interviewer.

4) Search outside your typical talent pools.

One key to a successful skills-based hiring process, says Matt Erhard: “Cast your net wide.”

More specifically, says Serena Milani, “Explore niche job boards and network on professional platforms to attract diverse talent. You can also encourage employee referrals to tap into existing networks.”

This is particularly important for those who are considering skills-based hiring as a way to increase their workplace diversity. Your applicants can only be as diverse as the initial talent pool they come from. If you always look for candidates in the same places, it stands to reason that you’ll consistently attract the same kind of people.

Consider searching for candidates in often-overlooked talent pools, such as among military veterans, neurodivergent professionals, or parents and caretakers who are re-entering the workforce. There are also organizations focused specifically on often-underrepresented groups, such as female, LGBTQ+, or BIPOC professionals, that can be an excellent source of highly skilled workers that you may not find through other channels.

5) Communicate the change well both internally and to candidates.

Initially, says Matt Erhard, “Don’t forget to communicate the change to candidates so they know what’s up.” This communication isn’t going to be a one-and-done thing, either. “The job market’s always changing, so keep evolving and tweak your approach as needed.”

Each time you adjust the skills you’re searching for, or the ways that you assess them, all of these changes need to be clearly conveyed to both your hiring team and potential candidates to ensure your search is successful.

This is Jessica Alcock’s tip for thriving using a skills-based approach. The key, she says, is “training the hiring teams on the new processes and ensuring the job descriptions are updated on a regular basis as skill requirements evolve over time.”

As with many aspects of successful business management, staying adaptable and flexible with your skills-based hiring will help you get the most out of it. Take the time to assess the efficacy of your new process and refine your approach over time. As the role and business needs change, the types of skills you’ll look for in candidates will need to change with them.

Maintaining fully transparent communication around how you assess, screen, select, and hire candidates allows you to best refine how you find talent over time—and ultimately help you build a stronger, more loyal workforce.

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