{"id":94573,"date":"2023-03-02T21:31:05","date_gmt":"2023-03-02T19:31:05","guid":{"rendered":"https:\/\/factorialhr.com\/blog\/?p=94573"},"modified":"2023-08-22T13:31:23","modified_gmt":"2023-08-22T11:31:23","slug":"skills-based-hiring","status":"publish","type":"post","link":"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/","title":{"rendered":"Skills-based hiring: what talent leaders need to know"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Skills-based hiring is becoming an <\/span><b>increasingly popular recruitment strategy<\/b><span style=\"font-weight: 400;\"> in US organizations. This approach can be a great way to <\/span><b>expand and diversify your workforce<\/b><span style=\"font-weight: 400;\"> and address the <\/span><b>talent shortages<\/b><span style=\"font-weight: 400;\"> faced by many organizations since <\/span><b>The Great Resignation<\/b><span style=\"font-weight: 400;\">. In fact, research into state and local government workers suggests that skills-based hiring could result in <\/span><a href=\"https:\/\/www.americanprogress.org\/article\/the-benefits-of-skills-based-hiring-for-the-state-and-local-government-workforce\/#:~:text=Skills%2Dbased%20hiring%20could%20result,higher%20performance%2C%20and%20better%20retention.\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">more qualified candidates, more equitable hiring, higher performance, and better retention<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But <\/span><b>what is skills-based hiring?<\/b><span style=\"font-weight: 400;\"> And what are the <\/span><b>benefits of skills-based hiring<\/b><span style=\"font-weight: 400;\">?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Read on to find out.<\/span><\/p>\n<p><a href=\"https:\/\/factorialhr.com\/get-started\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" class=\"aligncenter wp-image-89831 \" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2023\/01\/05151547\/FREE-TRIAL-2023-300x103.jpg\" alt=\"free trial\" width=\"772\" height=\"265\" srcset=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2023\/01\/05151547\/FREE-TRIAL-2023-300x103.jpg 300w, https:\/\/factorialhr.com\/wp-content\/uploads\/2023\/01\/05151547\/FREE-TRIAL-2023.jpg 675w\" sizes=\"(max-width: 772px) 100vw, 772px\" \/><\/a><\/p>\n<p><b><div class=\"js-toc toc\">\n<p class=\"js-toc-title toc__title\">Table of Contents<\/p>\n<nav id=\"fac_toc_nav\" class=\"js-toc-nav toc__nav\" aria-label=\"Table of Contents\"><ol class=\"toc__list toc__list--level-1\"><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-1\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#what-is-skills-based-hiring\" title=\"What is skills-based hiring?\u00a0\" data-target-id=\"what-is-skills-based-hiring\">What is skills-based hiring?\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-2\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#benefits-of-skills-based-hiring\" title=\"Benefits of skills-based hiring\u00a0\" data-target-id=\"benefits-of-skills-based-hiring\">Benefits of skills-based hiring\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-3\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#potential-obstacles-with-this-hiring-approach\" title=\"Potential obstacles with this hiring approach\u00a0\" data-target-id=\"potential-obstacles-with-this-hiring-approach\">Potential obstacles with this hiring approach\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-4\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#why-the-shift\" title=\"Why the shift?\u00a0\" data-target-id=\"why-the-shift\">Why the shift?\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-5\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#skills-based-approach-to-hiring-research\" title=\"Skills-based approach to hiring: research\u00a0\" data-target-id=\"skills-based-approach-to-hiring-research\">Skills-based approach to hiring: research\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-6\" href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/#real-life-examples-of-skills-based-hiring\" title=\"Real-life examples of skills-based hiring\u00a0\" data-target-id=\"real-life-examples-of-skills-based-hiring\">Real-life examples of skills-based hiring\u00a0<\/a><\/li><\/ol><\/nav><\/div><\/b><\/p>\n<h2><b>What is skills-based hiring?<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">In the early 2000s, the employment market experienced something referred to as \u201c<\/span><b>degree inflation<\/b><span style=\"font-weight: 400;\">\u201d. This term describes <\/span><b>the increasing focus that was placed on qualifications and credentials in the recruitment process<\/b><span style=\"font-weight: 400;\">. Companies all around the world would <\/span><b>base their hiring decisions on college affiliations and many would only consider candidates with a degree<\/b><span style=\"font-weight: 400;\">. Thankfully, this trend is now reversing and <\/span><a href=\"https:\/\/hbr.org\/2022\/02\/skills-based-hiring-is-on-the-rise\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">skill-based hiring is on the rise<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Skills-based hiring is where a company <\/span><b>prioritizes a candidate&#8217;s skills and abilities over their credentials and educational background<\/b><span style=\"font-weight: 400;\">. They take into account their<\/span> <a href=\"https:\/\/factorialhr.com\/blog\/hr-soft-skills\/\" target=\"_blank\" rel=\"noopener\"><b>soft skills<\/b><\/a><b> and hard skills<\/b><span style=\"font-weight: 400;\"> when they screed candidates, instead of focusing inclusively on qualifications. It\u2019s all about <\/span><b>what a candidate can offer a company<\/b><span style=\"font-weight: 400;\">; the skills they have learned through work experience rather than what they studied and where.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, what does this mean for recruiters? How can you shift to a skills-based approach to hiring?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The easiest way to implement skill-based hiring is by including an<\/span><b> initial skills assessment at the start of the candidate screening process<\/b><span style=\"font-weight: 400;\">. With the right questions, you can get an unbiased evaluation of the <\/span><b>hard and soft skills<\/b><span style=\"font-weight: 400;\"> that an employee has, such as <\/span><b>communication or leadership skills and emotional intelligence<\/b><span style=\"font-weight: 400;\">. You can also use <\/span><b>work sample tests to evaluate hard skills<\/b><span style=\"font-weight: 400;\">. These are <\/span><b>mini simulations<\/b><span style=\"font-weight: 400;\"> where you ask a candidate to perform small tasks that they would be responsible for if they got the job. This can be a great way to <\/span><b>see what a candidate is capable of rather than relying on their CV<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Benefits of skills-based hiring<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let\u2019s take a look at some of the benefits of skills-based hiring vs degree-based hiring.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Close skills gaps<\/b><span style=\"font-weight: 400;\">. Skills-based hiring enables you to access a larger <\/span><a href=\"https:\/\/factorialhr.com\/blog\/talent-pool\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">talent pool<\/span><\/a><span style=\"font-weight: 400;\"> instead of focusing exclusively on candidates with specific qualifications.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>More accurate assessments<\/b><span style=\"font-weight: 400;\">. With traditional hiring strategies, such as those commonly used during the degree inflation period, most <\/span><a href=\"https:\/\/factorialhr.com\/blog\/talent-acquisition-platform\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">talent acquisition platforms<\/span><\/a><span style=\"font-weight: 400;\"> screened candidates by filtering specific CV keywords. These keywords typically focused on qualifications and universities. However, this was very misleading. Just because someone has studied for a specific degree at a certain university, it doesn\u2019t mean that they have the experience or profile required for a job. Skill-based hiring, in turn, gives you more insight into a candidate\u2019s ability to meet performance expectations.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Equal opportunities<\/b><span style=\"font-weight: 400;\">. Skills assessments can help you overcome unconscious hiring bias and promote equality as you are hiring based on skill level rather than education or job titles. This can help you develop a more diverse workforce, boosting innovation, performance, and productivity.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Reduced retention<\/b><span style=\"font-weight: 400;\">. Because you evaluate the specific skills that an employee can bring to your company, skills-based hiring makes it easier to find the right fit for the job. This is especially true if you also assess a candidate\u2019s soft skills and values. As a result, retention increases and turnover drops.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Reduced hiring costs<\/b><span style=\"font-weight: 400;\">. To the same effect, by reducing your turnover you also spend less on acquisition and hiring costs.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Increased speed to hire<\/b><span style=\"font-weight: 400;\">. Skills-based assessments can help you identify suitable candidates earlier on in the recruitment funnel. You can determine whether someone would be suitable for a role in practice, not just on paper. As a result, you can streamline your recruitment process and boost your speed to hire.<\/span><\/li>\n<\/ul>\n<h2><b>Potential obstacles with this hiring approach<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Although there are many benefits of skills-based hiring, you might encounter certain obstacles when you shift to this recruitment strategy.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some companies that have made the jump cite reasons including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Operational difficulties<\/b><span style=\"font-weight: 400;\"> related to adding an extra stage to the hiring process.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Questions about the <\/span><b>reliability of skills-assessment tests<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Budgetary <\/b><span style=\"font-weight: 400;\">considerations.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Time management concerns<\/b><span style=\"font-weight: 400;\"> as a result of receiving more applications, especially if you are hiring for and <\/span><a href=\"https:\/\/factorialhr.com\/blog\/managing-global-teams\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">managing global teams<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For example, according to <\/span><b>TestGorilla\u2019s 2022 State of Skills-Based Hiring survey<\/b><span style=\"font-weight: 400;\">, <\/span><a href=\"https:\/\/www.testgorilla.com\/state-of-skills-based-hiring-2022\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">38.2% of hiring managers are concerned that adding this extra step will slow down the recruitment process<\/span><\/a><span style=\"font-weight: 400;\">. However,<\/span><b> 55% of surveyed candidates claim that skills-based hiring has enabled them to access career opportunities that would otherwise have been out of their reach<\/b><span style=\"font-weight: 400;\">. The key to overcoming this obstacle is understanding that skills-based hiring is not an additional step in the traditional recruitment funnel. Instead, <\/span><b>it is a replacement for time-consuming and ineffective resume-based screening<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, some employers are worried about the <\/span><b>quality and integrity of skills-based assessments<\/b><span style=\"font-weight: 400;\">. Assessment processes can also be time-consuming if you don\u2019t have the right tools and systems in place. However, standardized testing actually makes it easier to sort through your applications, saving you time in the long term.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Finally, 28% of participants in TestGorilla\u2019s survey claimed that they are worried about the <\/span><b>cost of administering and reviewing additional assessments<\/b><span style=\"font-weight: 400;\">. However, it\u2019s important to remember that <\/span><b>skills-based hiring helps you find more suitable candidates for your organization. <\/b><span style=\"font-weight: 400;\">Not just in terms of hard skills but also soft skills like<\/span><b> communication, collaboration, critical thinking, interpersonal skills, proactivity and executive function. <\/b><span style=\"font-weight: 400;\">This means that you are likely to retain employees and <\/span><b>recover these additional costs in the long run<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><a href=\"https:\/\/factorialhr.com\/templates\/recruitment-dashboard-template\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" class=\"aligncenter wp-image-76637 \" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2021\/09\/17134209\/recruitment-dashboard-template-banner-1-300x103.jpg\" alt=\"recruitment-dashboard-template\" width=\"746\" height=\"256\" srcset=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2021\/09\/17134209\/recruitment-dashboard-template-banner-1-300x103.jpg 300w, https:\/\/factorialhr.com\/wp-content\/uploads\/2021\/09\/17134209\/recruitment-dashboard-template-banner-1-768x263.jpg 768w, https:\/\/factorialhr.com\/wp-content\/uploads\/2021\/09\/17134209\/recruitment-dashboard-template-banner-1.jpg 900w\" sizes=\"(max-width: 746px) 100vw, 746px\" \/><\/a><\/p>\n<h2><b>Why the shift?<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A number of factors have influenced this <\/span><b>shift to skill-based hiring<\/b><span style=\"font-weight: 400;\">. For one thing, the <\/span><b>Covid-19 pandemic disrupted supply chains and demand curves and created a more competitive environment<\/b><span style=\"font-weight: 400;\">. This was further fueled by <\/span><b>The Great Resignation, economic uncertainty, and increasing inflation rates<\/b><span style=\"font-weight: 400;\">. Plus, <\/span><b>employees are demanding fairer working practices and a better work-life balance<\/b><span style=\"font-weight: 400;\">; they have become more selective about the companies where they work. As a result, there is more demand than supply.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">All this has led to<\/span><b> talent shortages and skills gaps<\/b><span style=\"font-weight: 400;\"> in a range of industries.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To overcome this issue, employers have been forced to <\/span><b>rethink their approach to talent management and acquisition<\/b><span style=\"font-weight: 400;\">. They need to widen the net they throw into the talent pool and <\/span><b>consider candidates based on their merits, not just their formal qualifications<\/b><span style=\"font-weight: 400;\">. In other words, they need to define the skills required for each role and evaluate the active skills that each candidate could potentially bring to the business.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In fact, this <\/span><b>shift in employment supply and demand<\/b><span style=\"font-weight: 400;\"> has been growing for some time now, the pandemic just sped up the process. The employment market has been <\/span><b>shifting since the 2008 recession<\/b><span style=\"font-weight: 400;\">, and by 2019, employers had already <\/span><a href=\"https:\/\/hbr.org\/2022\/02\/skills-based-hiring-is-on-the-rise\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">reduced degree requirements for their middle-skill positions by 46%<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Ultimately, hiring processes are facing a<\/span><b> structural reset<\/b><span style=\"font-weight: 400;\"> and businesses need to adapt their strategies in order to<\/span><b> attract talent and fill essential skills gaps<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><b>Skills-based approach to hiring: research<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Here are a few examples of recent studies into skills-based hiring practices:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Research shows that <\/span><a href=\"https:\/\/psycnet.apa.org\/record\/1984-30168-001\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">selecting candidates based on skills and performance rather than formal degrees can lead to increased productivity<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">McKinsey conducted a recent survey on skills-based practices. The survey suggests that the need to address skill gaps is more urgent than ever. As a result, <\/span><a href=\"https:\/\/www.mckinsey.com\/capabilities\/people-and-organizational-performance\/our-insights\/building-workforce-skills-at-scale-to-thrive-during-and-after-the-covid-19-crisis\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">companies have made a significant shift toward skill-building and skill-based hiring<\/span><\/a><span style=\"font-weight: 400;\">. The three biggest reported challenges associated with this shift are sourcing, validating skills, and scaling skills-based practices across the organization.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A Grads of Life report highlights that skills-based hiring is a key driver of equity in employment. The report also claims that employers are recognizing that <\/span><a href=\"https:\/\/gradsoflife.org\/articles\/skills-based-hiring-transforming-employment-outcomes-to-the-nth-degree\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">an overreliance on college degrees has created unnecessary barriers and prevented companies from recruiting candidate profiles that could potentially benefit them the most<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<\/ul>\n<h2><b>Real-life examples of skills-based hiring<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Increasing numbers of employers are now <\/span><b>embracing the benefits of changing to a skills-based hiring mindset<\/b><span style=\"font-weight: 400;\">. In fact, even major players are now <\/span><b>favoring skills and practical experience over formal qualifications<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here are a few <\/span><b>real-life examples of skills-based hiring<\/b><span style=\"font-weight: 400;\">:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Major companies including <\/span><b>Boeing, Walmart, and IBM <\/b><span style=\"font-weight: 400;\">have signed up to the <\/span><b>Rework America Alliance, the Business Roundtable\u2019s Multiple Pathways program, and the campaign to Tear the Paper Ceiling<\/b><span style=\"font-weight: 400;\">. All three initiatives <\/span><b>promote the use of skills-based practices in business<\/b><span style=\"font-weight: 400;\">. As a result of this pledge, all three companies have removed degree requirements from certain job postings. They are also working with other organizations to help employees progress to higher-wage jobs. For example, IBM has partnered with 29 other organizations to launch an initiative known as <\/span><b>SkillsBuild<\/b><span style=\"font-weight: 400;\">. The program aims to <\/span><b>reskill 500,000 people for new in-demand roles<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The City of Philadelphia has launched a <\/span><b>Tech Industry Partnership<\/b><span style=\"font-weight: 400;\"> based on skills-based hiring.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The <\/span><b>State of Maryland <\/b><span style=\"font-weight: 400;\">has announced that it will no longer require degrees for up to 50% of positions. This is <\/span><b>opening up roles in healthcare, corrections, policing, skilled trades, and engineering to larger applicant pools<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">All these organizations recognize that skills-based hiring practices can help them<\/span><b> overcome recent challenges in the employment market<\/b><span style=\"font-weight: 400;\">. This approach can be a cost-effective way to fill<\/span><b> skills gaps <\/b><span style=\"font-weight: 400;\">and <\/span><b>retain talent in a competitive market<\/b><span style=\"font-weight: 400;\">. It is also benefiting local communities by<\/span><b> creating job opportunities for a more diverse pool of workers<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Skills-based hiring is becoming an increasingly popular recruitment strategy in US organizations. This approach can be a great way to expand and diversify your workforce and address the talent shortages faced by many organizations since The Great Resignation. In fact, research into state and local government workers suggests that skills-based hiring could result in more<a href=\"https:\/\/factorialhr.com\/blog\/skills-based-hiring\/\" class=\"read-more\"> [&#8230;]<\/a><\/p>\n","protected":false},"author":80,"featured_media":94576,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[348],"tags":[],"class_list":["post-94573","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-culture-engagement-2"],"acf":{"topics":"talent-career"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.5 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Skills-based hiring: what talent leaders need to know | Factorial<\/title>\n<meta name=\"description\" content=\"The benefits of skills-based hiring. 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