The critical role of skills-based recruitment in modern hiring practices

​​Skills-first recruitment involves focusing on a candidate’s skills and abilities rather than simply their qualifications or experience.

The concept has gained significant momentum in the past two years. Record low unemployment, fast-changing markets and shifting role requirements and an even stronger focus on diversity, equity and inclusion (DEI) have pushed companies to review how they recruit. Growing numbers of businesses are focusing on direct, adjacent and/or transferable skills assessments and moving away from traditional evaluations of candidates’ education and career history.​

“…skills-first hiring criteria are five times more predictive of future job performance than educational background and two and a half times more predictive than work experience…and skills-first hiring can mitigate this credentials barrier, making the process fairer for all job applicants…”​​

Bain & Company, 2023

Why skills matter more now

The imperative for adopting a skills-first approach is clear – according to LinkedIn’s data, a quarter of all advertised jobs have different skill sets to equivalent roles advertised in 2015, and they predict that this will increase to around half of all roles within the next five years.

A candidate who has followed a conventional career path may only possess the skills needed for the 2015 version of their role. At the same time, candidates are more open to exploring roles that lie outside their perceived career path. According to Gartner, 56% of job applicants are applying for roles outside their current area of expertise. ​

The benefits of skills-first recruitment ​

Skills-first recruitment not only enlarges the pool of relevant talent but also has positive implications for women and candidates from minority backgrounds. Businesses that adapt their hiring processes will gain the competitive advantage. ​

‘Degree inflation’ is reversing

The degree inflation trend peaked in the wake of the 2008 global financial crisis, as record numbers of employers added degree requirements to roles where none were previously required. Research by the Harvard Business Review shows that between 2017 and 2019, employers reduced degree requirements for 46% of middle-skill positions and 31% of high-skill positions. These numbers reduced further following the first wave of the Covid-19 pandemic in 2020 and have continued to fall.

Change in skill sets

According to LinkedIn data, around 25% of all roles have changed their advertised skill sets since 2015 and this is expected to accelerate to 50% of all roles by 2027. Vocational training and higher education courses may be slow to adapt, and traditional career paths may no longer yield the right skills development. The pace of change is, therefore, likely to affect role design and talent acquisition strategy at every level of seniority. 

Hiring for skills yields better outcomes​

The majority of businesses are still using traditional criteria to evaluate candidates, and a large number still hold out for the ‘perfect’ candidate who meets their educational and experience requirements: ​

Widening recruitment pool​

Only 25% of employers are considering widening their recruitment to hire from a more diverse group. [Source: PwC]​

Work background​

However, according to Bain & Company, skills-first assessment is 2.5 times more predictive of future performance than work background.​

Educational background​

According to the same research, a skills-first approach is five times more predictive of future performance than educational background.​

Impact on your business

The world of work has changed significantly, but the approach of hiring for most businesses hasn’t. However, as we see a continuing global trend for low unemployment, it is crucial that businesses find ways to widen their potential talent pools. 

Data suggests that businesses with a skills-first approach are up to 60% more likely to fill their hiring needs. 

The impact on diversity 

Skills-first assessments also have a major impact on diversity in hiring, not simply because the talent pool is larger, but because traditional assessments are more likely to exclude women and candidates from minority backgrounds who will not have had the same access to education and employment opportunities. The diversity of a company has been consistently shown to be a positive predictor of financial performance. Furthermore, 39% of candidates have turned down a job because of a perceived lack of inclusion within a potential employer organisation. 

Future readiness

To be competitive in the future, companies must not only focus on the skills they need today, but on hiring adaptable talent with the capacity to continuously acquire new skills. Without this growth mindset, and the right talent and leadership across the enabling functions businesses will eventually fall behind and fail.

Competitive advantage 

Despite the advantages of skills-based hiring, the majority of businesses still rely on traditional screening criteria. This gives a clear advantage to companies who are open to embracing a skills-based approach. 

Diversity, equity and inclusion (DEI) and skills-first hiring

Traditional assessment criteria have a major impact on what we can achieve with regards to DEI, especially equity. In the US, for example, requiring a four-year college degree means that you exclude 75% of all black Americans. Women’s career typically break at junior manager stage, when they have their first child. Focussing on work background over skill is selecting these women out of processes later down in their career.

40%​ of employers globally address skills shortages with internal upskilling

According to PwC, a significant number of employers are tackling the skills shortage through internal initiatives to upskill. This could also have a positive impact on retention as The SR Group’s own data suggests opportunity to gain skills is a significant pull factor for talent. Combining internal upskilling with skills-based hiring could have a positive impact on productivity. 

Using skills-first recruitment ​
to increase diversity

Skills-first recruitment has a significant effect on gender representation and social mobility and will therefore diversify your talent pool.

Global tertiary education

Only 45.7% of Americans, 29.5% of Europeans and 40.6% of British people have a college or bachelor’s degree qualification or higher.

Four-year college degrees

75% of black Americans do not have a four-year college degree. Traditional recruitment process will exclude them before shortlist stage.

The childcare penalty – UK

Only 27.8% of women are in full time work 3 years after the birth of their first child. Traditional CV focussed shortlisting will fail to assess their skills adequately.

The childcare penalty – US

A year after giving birth, almost 30% of professional women in the US are not in the workforce according to US census data.

Potential strategies

Skills-first hiring to create equity

Support your hiring managers and talent acquisition teams to design skill and competency requirements and lead with a skills-first hiring approach. Our subject matter experts can share their perspective on the skills other companies are recruiting for, and the current trends in role design.

Use assessment tools to give you confidence ​in decision-making 

Accredited assessment tools can help you benchmark the skills you’re assessing for, as well as help you to identify development potential. We work with established vendors to deliver psychometric testing. We also offer workforce capability assessments to give you a holistic view of your team’s performance. 

Access specialist networks to gain insights ​
into diverse candidate pools 

In order to attract a more diverse pool of candidates, you must first connect with those candidates to demonstrate your approach. Research from the CEB suggests 90% of diverse candidates will turn to personal sources for career leads but most companies still rely on impersonal channels such as job boards and print media. Our consultants work with personal networks developed through years of relationship-building. 

Specialist assessment

Recruitment and search specialists who exclusively focus on the functional skills you are recruiting for can benchmark skills-first sourced candidates and can help you understand the strength of their direct and adjacent skills, as well as help identify development potential.

Interim talent buys time

Transferable skills are widely recognised as a solution to the current talent gap. However, there may be a longer time to productivity for new employees with transferable rather than directly relevant skills. ​

Employers should not sacrifice long-term gains for short term losses in productivity. Interim professionals can help to bridge the gap whilst new employees bed in. 

Upskilling for retention

Used in combination with skills-first assessments, upskilling can still be an effective part of your overall retention policy. Offering existing employees the chance to upskill or reskill is linked to lower attrition and higher employee engagement. Reskilling initiatives also mean employers are able to retain institutional knowledge. Retraining schemes can also be designed with contractual obligations so you ensure you benefit from employees’ newfound skills. ​

Enlarge the talent pool and reduce time to hire

Skills-based recruitment and strong focus on DEI, as well as hybrid working can significantly increase your ​reach for talent.

Treat talent scarcer than capital

According to McKinsey, 90% of top performing businesses have built and or enacted bold action around talent management.