In today’s tight job market, businesses increasingly find value in looking beyond the obvious candidates. Embracing non-traditional routes and prioritising skillsets over institutions and formal qualifications has multiple benefits, increasing diversity and providing a more reliable approach to evaluating talent.

Skills-based hiring offers an evidence-based approach to recruitment, with targeted questions and tests to reveal competency in specific skills rather than relying on institutions, background experience and certifications as signals of talent.

Companies like Toggl are moving away from CVs and cover letters and towards specific skills-based questions. This format offers a quick and novel application process, promoting a positive candidate experience and equipping the hiring team with the most important information for the role.

Research has shown that a skills-based approach can increase diversity, improve retention, and that those hired using a skills-based approach have a similar propensity to be promoted.

Of course, to be genuinely effective the skills agenda needs to be driven by the business needs, with executive buy-in to the change in strategy. Research from HBR states that ‘for all its fanfare, the increased opportunity promised by SkillsBased Hiring was borne out in not even 1 in 700 hires last year.

Roles in sample that removed requirements, per year

Meanwhile, 2 in 5 HR leaders acknowledge they don’t know what skills they have in their workforce and are struggling to adopt a skills-based approach to hiring.

Although a part of skills-based hiring is undoubtedly a reaction to the degree inflation of the early 2000s, skills-based hiring is much more than removing degree requirements and changing the language of job descriptions. Rather, it is part of an intentional shift to a skills-first workforce that recognises diverse and non-traditional learning paths, self-taught skills, and entrepreneurial experience.

It’s also important to consider that while degrees may not be required in the job description, this is only the first stage of the hiring process - and there is still much in the hands of the hiring manager, who in turn is often under pressure to fill an immediate resource need cost-efficiently.

What does the future hold?

A skills-first approach can also be applied to the current workforce. Mapping your internal skillset can uncover hidden talent, identify potential areas of development, and in doing so, increase agility and reduce attrition. This approach can prevent employees from feeling stuck or siloed in particular roles and reduce instances where valued employees move companies to grow when they have a wealth of transferable skills that could be applied in another part of the business. 

When implemented across the workforce, a skills-based approach to hiring and upskilling current talent offers the opportunity to accelerate growth in highly specialised and emerging fields at a lower investment than pure talent acquisition.

The rapid pace of technological change is shifting the nature of work, not just when and where, but also the very shape of employment. By and large, we live in a world of jobs — one in which a person’s job code or title drives how work is defined, how critical talent decisions are made and most notably, how they are paid. A true skills-based workforce expands the current trend for flat structures. It changes the very shape of work, moving employees into an internal talent market where roles flow freely across projects as and where the skillset is needed. 

Skills enable adaptability, transformation and resilience. Most importantly, they increase agility - enabling organisations to adapt and allowing employees to grow beyond the confines of a job description.

A skills-based approach is cost-effective. While it may require increased resources to implement a new process, it will increase retention and allow you to add hotly desired skills at below market rate. The positive response from candidates and the ability to tap into hidden talent pools, means it also makes acquisition easier where it is required.

A skills-based approach reduces bias in hiring by removing the focus on education and experience and instead focusing on capabilities. This levels the playing field for those who have learnt skills in non-traditional environments, are self-taught or have acquired skills through apprenticeships or on-the-job learning.  

Research suggests employers can save up to $22,500 by avoiding poor hires. According to an SHRM study, "employers will need to spend the equivalent of six to nine months of an employee’s salary to find and train their replacement.”

68% of candidates prefer a skills-based approach, and this rises to 82% for 25-34 year olds.

While there are numerous benefits to implementing a skills-based approach to hiring, embedding this approach beyond surface-level changes to job descriptions can be challenging.

Technology

Hiring managers must choose which skills tests to use, and the organisation may need to implement a new platform to record data. This requires in-depth knowledge of specific skills for each role and time and budget for additional software.

Training

Fully embracing skills-based hiring requires interviewers to be trained in this approach, following through on the focus on capabilities rather than institutions and formal education.

Candidate screening

Evaluating a large number of candidates, particularly in more soft skills where questions have free-text answers, can be time-consuming.

Candidate reluctance

A skills test can provoke feelings of anxiety and may put off candidates who assume this style of application will be more time-consuming than a traditional CV submission. Employers can address these concerns by ensuring the tests set are relevant to the role and clear on the time commitment. Most candidates will view this application route positively when they understand it is a replacement for the traditional cover letters rather than an addition to the process.

Once organisations have implemented a skills-based approach to hiring, the next step is to roll the approach out to current staff by creating an internal talent marketplace. This marketplace approach makes internal opportunities visible, encourages internal mobility, and ensures employees ’ skills are visible to hiring managers.

An internal talent market allows a flexible approach to career development that benefits employees and employers. It enables employees to gain new experience and increase motivation through a more engaging and varied workload while enabling employers to move talent to where skills are needed and on a more flexible basis than a permanent move or formal secondment allows. This is a vision of talent moving seamlessly between tasks, projects and assignments across the business, increasing agility and productivity.

Practical considerations

Budgeting

Where traditional role costs land in departmental budgets, businesses may need to find new ways of managing hard employee costs across an organisation, charging on a project or day rate basis or removing the staff costs from individual departmental budgets altogether.

Integrating new hires

Successfully onboarding a new employee is vital. Therefore, leaders may consider a qualifying period for new employees, delaying their visibility in the internal marketplace until an agreed point.

Line management responsibility

While employees move from project to project, a consistent line of oversight is essential in overseeing the effectiveness of the employee and providing support where needed.

Employee experience

While a consistent point of contact will mitigate risks, employees should also have opportunities to review and provide feedback for the projects and tasks they move through.

Creating psychological safety

78% of employees say they are ready to reskill, but as with any significant change, there is risk in altering the shape of work for employees. (Source: Mercer)

One of the risks of implementing an internal talent marketplace is that employees lose a sense of ownership and don’t see the full impact of their work. They may also feel less connected to their colleagues and the wider business when jumping from team to team. Creating psychological safety is key to ensuring a successful outcome for employers and employees.

The impact of these changes can be mitigated by providing employees with a choice of projects, giving them a say in the people and projects they work from to ensure they are both relevant to their interests and career path and are enjoyable.

Employees also need to see the return on a commitment to learning. This can be through opportunities to use new skills, opportunities for sideways moves, promotions, pay or other recognition.

It’s critical that employees feel they are rewarded and supported, not burdened by an increasing workload when using their new skills. 

1. Define the vision - where do you want to get to? What is the ideal scenario for your business to work towards?
   
   
2. Identify high-priority skills & choose a test case.
   Choose one area to work with as your starting point. This will help focus your energy and demonstrate the advantages of moving towards a skills-based approach.
   
   
3. Develop the use case for the skills you identify.
   How will they be used? How will improving the skill level improve the customer experience, productivity and/or profitability.
   
   
4. Map the skill level in your existing workforce.
   This requires a deep dive into your workforce using a range of methods. A starting point is to reference application data and LinkedIn profiles. This information must then be validated through conversations with line managers, employee validation and, ideally, through self-assessments and skills testing.
   
   
5. Identify gaps in the skill set.
   Use the information you have gathered to identify where gaps exist now and where they are likely to emerge in future.
   
   
6. Identify any opportunities to upskill current employees.
   This may include skill transfers through shadowing and more formal online and classroom-based learning.
   
   
7. Develop a skills roadmap.
   Consider how the needs of your organisation will change in the future. For example, are there areas where staffing will reduce as the organisation implements digital technologies?
   
   
8. Identify where fresh talent is needed to support growth.
   Conversely, new technology may create new opportunities to support implementation and optimise effectiveness once in place.
   
   
9. Develop new roles and job descriptions with the specific skill profile in mind.
   
   
10. Benchmark roles against matching skills profiles.
    
    
11. Map the skill profile of candidates and test capabilities where appropriate.

Building a skills infrastructure

Even at an early stage, it’s important to consider how you can develop a searchable system with a record of each employee's skill set. This should be able to record examples of skills in use and successful outcomes for future reference, which would benefit employee career development and the employee talent market.

To make this an effective exercise, employees will need to be able to access their skills profiles to validate information and provide updates, while employers contribute taxonomies and definitions of skills appropriate to the business needs.

Don’t neglect ‘soft skills’

Be careful not to devalue so-called ‘soft’ skills in the digital transformation race; these areas will add real value as AI displaces more transactional skills. 

• Project management
• Collaboration
• Line management
• Leadership
• Creativity
• Innovation
• Strategy 
• Self-management
• Resilience

Agree your approach to skill level

What constitutes obtaining a skill? How do employees demonstrate competency and different levels of skill? Agreeing this as a business will help employees understand what is needed when looking to progress and provide hiring managers with an understanding of competency.

A skills-based approach to talent has many benefits, enabling greater diversity of talent, better hiring decisions, a more agile workforce and a more loyal team. But there’s so much more to skills-based hiring than removing degree requirements from role profiles.

We can support your transition by undertaking research that leads with a skills-based approach:

• Mapping the market for talent with your required skillset
• Benchmarking reward against a specific skills profile
• Identifying existing role titles that fit your required skills profile
• Comparing responsibilities and workload in similar roles

Our project-based fee structure means you can gain a cost-effective view of the market with no placement fees should you choose to hire. Our experienced team can handle the approach or hand over our research to an in-house team to manage directly.