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The Ultimate Skills-Based Hiring Guide: What You Need to Know

For decades, career-building and employee recruitment have been focused on education and experience that creates an impressive resume to impress upper management in a specific industry. The message suggests that hard work (and a lot of it) pays off. 

However, with the speed of changing technology, today's competitive job market, and the lingering effects of a global pandemic, recruitment strategies must change. 

The skills gap across industries is not new, but it's growing, and organizations are aware of the problem. Nearly nine in ten leaders say their organizations face skills gaps already or expect gaps to develop within the next five years. 

As the nation struggles to recover from the effects of the COVID pandemic, a startling equation has been revealed to employers. There are 10 million job openings, but only around 8.4 million unemployed people actively looking for work, according to McKinsey. 

Now, employers not only face a competitive job market but a market that gives workers the power of choice. As millions of baby boomers continue to retire each year, there is speculation that more individuals will eventually return to the workforce. Yet, among younger generations entering the workforce, higher education enrollment is dropping to new lows.

So, how can employers face these drastic changes and hire the employees they need to fill crucial roles while preparing companies for the future? Many experts and organizations agree that skills-based hiring may be the answer. 

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What is Skills-Based Hiring?

Skills-based hiring is a term that describes hiring candidates based on their skill set rather than education and industry experience. 

In many vacant roles, requirements for a specific degree automatically create a barrier for otherwise qualified candidates - talent may be qualified, but not necessarily credentialed. The result is a diminished candidate pool when employers are already struggling to fill vacant roles amid major labor shortages. 

An executive order signed on June 26, 2020 gave the skills-based hiring practice more steam. While the order technically directs the government to reduce the use of minimum education requirements for filling federal job opportunities, it sends a message that the government is shifting hiring focus to skills instead of education. 

This is an important distinction since the government is the nation's largest employer, with more than 2 million civilian workers.

What Are the Benefits of Skills-Based Hiring?

The benefits of skills-based hiring are obvious for employees facing an education barrier, but are there benefits for employers? In many cases, the answer is likely yes. 

Seventy-six percent of millennials think professional development opportunities are one of the most important elements of company culture. These employees expect positions to include training for future roles within the organization. Skills-based hiring aligns with upskilling expectations, given that employees begin in one role and upskill to transition to another.

Skills-based hiring offers many benefits for employers and employees alike.

Larger Candidate Pool

By limiting potential employees to those with a four-year degree, employers eliminate many of the candidates they could employ to fill vacant roles. 

Nearly 90% of postings in growing industries like technology, healthcare, and business management require a bachelor's degree, even though many of these jobs can be viable options without advanced education. 

By opening options up to all qualified employees, organizations have more candidates to choose from.

Utilizing AI to Identify Adjacent Roles

It's not surprising that certain skills are useful across multiple roles. Similar to the way upskilling allows employees to be considered for future roles, cross-skilling considers how employee skills can be used across different roles in an organization. 

Employees with skills that can be adapted for alternative roles can help companies respond to emergencies. In light of the way businesses were forced to adapt during the pandemic, it's easy to see how adaptive skills are useful. 

In the same way that Crosschq Recruit uses AI to analyze a candidate's skillsets for dynamic job matching, a new study suggests AI can be used to assess how existing skills can be adapted for other positions. By using these methods, employers can assess potential candidates for multiple roles instead of a single vacant position.

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Accelerated Time-to-Hire

Educational requirements can seem like a good way to eliminate under-qualified employees from the candidate pool. However, there are many ways that depending on qualifications can backfire and lead to a slower recruitment process. 

Sixty percent of candidates say that the hiring process should take less than a month from the time they submit an application, and 56% say they'd discourage others from applying due to a bad recruiting process. 

Yet, many employers wait until the latter part of the interview process to review relevant skills. By assessing skills early in the process, time-to-hire can be accelerated.

Increased Diversity

A focus on diversity has shown that diverse companies reap a variety of benefits. Yet, a focus on education and experience-based qualifications often reinforce unconscious biases that keep underrepresented groups from being considered for leadership roles. 

By focusing on skills, employers have access to the 62% of candidates over 25 who don't have a college degree.

Avoiding Costs Related to Degree Inflation

Companies that measure talent quality by a college degree tell potential employees they must pay tens of thousands to get the education for the position. Consequently, employees facing substantial student loan debt expect to see higher paychecks to pay off the debt. 

The expectation is understandable, and, as a result, 50% of employers pay higher compensation to recent college graduates than to non-degree holders in the same job, according to the Harvard Business School. While some positions have certain education requirements and will continue to require degrees, degree inflation describes roles that can be performed without such requirements. 

For instance, HBS shares that 67% of employers request a college degree in postings for positions where only 16% of the current workforce has a college degree. In the long run, these types of practices cost both laborers and employees.

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Why Companies Would Prefer Skills-Based Hiring

Although skills-based hiring offers some clear benefits for companies, changing recruitment strategies is a significant undertaking. 

Instead of jumping right into what seems like a new trend, many businesses are likely wondering if the effort will be worth the reward. As organizations and employees adapt to the rapidly changing pace of business, companies may prefer skills-based hiring for long-term solutions that consistently produce improvement within the organization.

For instance, since skills-based hiring works in conjunction with upskilling and cross-skilling, the practice can lead companies to adopt long-term talent acquisition practices instead of short-term hiring goals. 

By hiring employees that can prepare for leading roles in the future while filling current positions, companies gain the following advantages:

  • Decreased recruitment costs with regard to filling challenging roles
  • Increased employee engagement since workers have the option for upward career movement
  • Improved collaboration with more diverse teams
  • Decreased turnover since 94% of employees would stay at a company longer if it invested in their career

Why Skills-Based Hiring Begins with the Job Description

Your job description introduces the position to potential candidates. When the wording for this description isn't carefully considered, it can act as a barrier that prevents talented candidates from applying for the position. 

Job descriptions with specific hiring conditions eliminate a large number of candidates - think twice before you look for a “rockstar”, “guru”, or other antiquated terms in your JD. If your job description doesn't ensure that only the most qualified candidates will apply, the process may work to eliminate the most qualified choices. 

Job descriptions that reflect skills-based hiring focus on the results you'd like to see instead of the person you think could deliver those results. Consequently, candidates who see themselves in the job description are more likely to apply.

How Skills-Based Hiring Can Create Equity

While education has long been an indicator of potential in the workplace, there has been little consideration for the barriers that prevent many groups from receiving such an education. In light of at-home learning during COVID, many states are seeing that education inequity begins as early as elementary school.

These gaps have always been noted in the education system. For instance, the percentage of Black individuals who attain bachelor's degrees is lower than the percentage of White and Asian degree completers. This gap widens at each level of education and is transitioned to the workforce when education is a job requirement.

Skills-based hiring begins by eliminating barriers in job descriptions which encourages more individuals to apply; skills-based hiring can create equity within businesses and organizations. 

Since skills-based hiring focuses on foundational and transferrable skills more than technical skills, qualified candidates can fill roles they hadn't previously considered. When upskilling is introduced to the equation, groups that were previously excluded based on education requirements can move up within companies to fill leadership roles.

Arguments in favor of skills-based hiring come from workers and companies alike. While changing talent acquisition and recruitment practices will require companies to create new hiring procedures, we’re confident the effort will pay off. 

Partner with Crosschq

Using automated HR solutions like the ones offered by Crosschq is an excellent way to integrate skills-based qualifications into your talent pipeline and job matching processes. Contact us to request a demo today to learn more about how Crosschq can benefit your business.

Kelsey Peterson

by Kelsey Peterson

Head of Customer Success

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