What is skills-based hiring?

Skills-based hiring is a type of hiring practice that involves prioritising a candidate’s skills over formal qualifications. This hiring process goes against more traditional forms of hiring which consider the prestige of someone’s educational background, as well as their years of experience, to be a key indicator of how suited they are for the role.

The case for hiring for skills

Instead of taking the traditional route into employment, plenty of candidates are learning skills via online courses. This could be self-taught or via an instructor. While they might not have the years of deep knowledge that someone with a degree might have, candidates who have focused on learning specific skills may be better suited to some jobs due to a better technical understanding of certain tools, systems and software. Furthermore, skilled candidates may still have a degree, and may have kept their skills up-to-date over the years with refresher courses and additional certificates.

Skills-based hiring is also useful when sourcing entry-level or mid-level candidates who don’t require specialised knowledge gained through a degree. Particularly in competitive job markets, skills-based hiring can open up a much broader talent pool. Sometimes a person has simply had a change in their career and has learned new skills to do so.

According to Indeed’s hiring trends report, hiring demands have been softening to pre-pandemic levels. But this doesn’t mean that recruiters are any more relaxed – 89% of HR professionals claim that retention is more difficult than ever. Another issue for recruiters is what is known as the ‘unqualified applicant overload crisis’, which happens when too many applicants apply for one job. Receiving a high volume of applicants may sound good, but sometimes this can be to an employer’s detriment.

With these hiring challenges in mind, hiring for skills is useful as it can mean that candidates who make a better fit are prioritised (and aren’t ignored simply for their lack of formal qualifications).

Digital transformation and prioritising skills

Broadly speaking, AI has affected many industries, as well as HR or operations teams. As Indeed’s CEO Chris Hyams explains: ‘students might now find themselves learning skills in college that are obsolete by the time they graduate’. AI uses a range of different skills such as prompt creation to programming, while background knowledge requires a different set of skills to use than the ones employees may have been taught during their degree. This can be the case even when a candidate has a computer science or information technology (IT) degree.

For this reason, skills-based hiring can be used to help fill digital skills gaps in the workforce. Being able to identify when they are hiring in a ‘shortage industry’ for example can also help focus employers’ minds on what skills they need to hire for.

Considerations when hiring for skills

When hiring for skills, there are certain considerations for employers to make first. These are:

• Honing down the daily, weekly and monthly responsibilities of the employee (employers could ask for information from managers or senior staff to find out what the role would involve, as well as any gaps in team knowledge that could be filled)
• Incorporating skills-based assessment into the interview process itself
• Writing skills-based job descriptions
• Considering alternatives to CVs such as applications or recent portfolios that demonstrate a candidate’s skills
• Creating competency frameworks which help to define the skills required for the role and its responsibilities
• Utilising anonymous hiring, which can involve screening CVs anonymously to avoid unconscious bias (instead, the reviewer looks at the applicant’s skills and competencies)

Benefits of skills-based hiring

There are many benefits to skills-based hiring:

• It can help businesses to tap into a wider, more diverse talent pool.
• It may help remove unconscious and/or cultural bias during the candidate selection process.
• It may improve retention by hiring candidates who are a better fit for the role.
• It can increase productivity due to candidates being a good fit and understanding responsibilities from day one.
• Skilled candidates may be quick learners who are agile and able to adapt to business changes or transformations more easily.

In a time when retaining quality employees can be challenging, skills-based hiring helps to find a better fit for teams and may even provide a ‘culture add’. Identifying key skills gaps and solving them with the help of new recruits could be a good strategy when a company is undergoing a digital transformation, for example.

Challenges of skills-based hiring

Alongside benefits, there are some challenges to consider when using skills-based hiring:

• Some professions require a degree to practice safely, such as being an architect or a doctor.
• Some senior-level roles may be difficult to hire for without a degree.
• Since skills-based hiring is not considered ‘traditional’ hiring, some senior managers may be resistant to using it instead of traditional hiring practices.
• Working out the exact skills required for a role might be more time-consuming.
• It can be harder to define or taxonomise some skills over others.

Resolving many of the challenges above can be done with strong planning and communication skills. As some senior staff may be resistant at first to skills-based hiring, persuading them that it is a good option may be done by planning a new strategy for skills-based hiring, including how to test for skills and whether the role can still be performed well without a degree or qualification. There may also be certain circumstances where skills-based hiring wouldn’t work, such as hiring for a doctor or an architect. In the UK, these professionals typically require several years of training to register in their profession.

Skills-based hiring can be an excellent solution to finding candidates who are suitable for a role. This hiring technique can be particularly useful when hiring for new, competitive skills such as familiarity using AI technology. However, there are a few considerations to make before using it, such as honing a description of the skills necessary for the job, as well as considering whether qualifications are necessary for someone to practise in the field.