Skills-Based Hiring 101: Your Ultimate Guide to Modern Recruitment

A survey revealed that 74 percent of the time, managers admit to making hiring errors. This raises a critical question about the impact of hiring decisions on a company’s performance. 

The problem of skill gaps in the job market has led to a needed change in how companies hire. And as industries evolve at an unprecedented pace, it has become clear that traditional degree-based hiring often falls short in addressing the specific skill needs of employers. So, organizations are now shifting to focus more on assessing candidates’ skill sets and natural abilities, rather than just their academic qualifications.

Given that we are in the midst of a demanding talent market, big names like Google, Apple, and IBM are few of those to have gained worldwide recognition by placing high importance on skills. This focus has helped them drive innovation and secure a dominant position in today’s competitive market.

But why are these companies, along with plenty of others across industries, placing their bets on skills alone and moving away from relying solely on degrees? In this article, we’ll explore the ins and outs of skills-based hiring, breaking down the key questions and reasons behind this shift, making it easy to understand.

Understanding Skills-Based Hiring 

Skills-based hiring is more than meets the eye. It’s a smart shift from just looking at degrees to focusing on what a person can actually do. It starts by understanding the technical and soft skills needed for specific jobs. And this knowledge comes from sources like feedback from managers and employees, industry information, job descriptions, and insights from experts. 

For instance, in the case of an AR/VR developer, the role demands them being good at using virtual reality tools (a technical skill) and solving problems creatively (a soft skill). This approach ensures the right fit for roles in tech and other fields.

Once the required skills have been identified, recruiters and HR managers can place greater interest on those qualities than on academic credentials and previous work experience alone. In the next step, candidates undergo skills-based pre-employment assessments to determine if they have the right skills. This helps businesses make informed decisions based on skills and industry standards when searching for the most suitable candidates for the job.

Apart from finding the right candidates, this process can also identify people who may not have all the needed skills but have similar abilities. With some training, they could meet the requirements. This approach also helps keep employees on board and gives them a chance to advance within the company.

Decoding the Catalysts of this Shift to Skills-Based Hiring

Deloitte conducted an extensive research, surveying 1,000 workers and 225 business and HR leaders from all over the world and different industries. They found out that companies using skills-based hiring are 63% more likely to do well compared to those who don’t.

With even major companies moving away from the traditional degree-centric hiring approach, skills-based hiring is becoming increasingly popular. Here are some key factors driving this shift:

The Changing Nature of Work

The way work is changing is a big factor in why more companies are hiring based on skills. Jobs are often about specific tasks, some people work remotely, and tech is always evolving. Employers now value skills more than degrees because it helps them match people to the fast-paced and results-focused business world.

The Diversity Factor

Diversity is another key driver in the transition to skills-based hiring, a topic that has gained significant momentum post-COVID. It helps counter biases often associated with certifications, backgrounds, and degrees. This approach levels the playing field, ensuring that hiring is based on candidates’ skills, not their past experiences or formal qualifications. This also leads to a more equitable and diverse workforce.

According to a Deloitte study, 80% of business executives support the idea that hiring, pay, promotions, succession, and deployment decisions should be based on people’s skills rather than their job history or personal connections. They believe this shift would reduce bias and make the process fairer.

Bridging the Talent Shortage Gap

In the current tight labor market marked by talent shortages, the shift to skill-based hiring is crucial for both recruitment and retention. With fewer available candidates, employers need to scan through the market to identify individuals who can immediately contribute. 

Skills-based hiring helps employers find candidates with the exact skills they need, making the hiring process faster and more effective. This way, we not only find the right people faster but also keep them longer because their skills match the job well.

What Comes With Skill-Based Hiring?

We’ve certainly evolved from the “degrees are all that matter” mentality. In the past few years, employers have been reconsidering their hiring methods. Today, the spotlight is on skills. It’s time to delve into the benefits of prioritizing skills – let’s discover why skills have taken the lead on resumes.

Eliminating Misfits in Hiring

As per a report, companies face an average cost of $14,900 for each poor hired candidate.  The survey also found that 76% of senior managers admitted they had hired the wrong person.

Moving towards skill-based hiring has a big advantage: it reduces the chances of hiring the wrong person for the job. This often happens when someone looks great on paper but struggles in the role. Skill-based hiring is like finding the right match for the job, making it more likely to hire people who can do the job well. This saves the company from the problems that come with hiring the wrong person — and ultimately making the workforce more effective.

Cutting Down on Cost-to-Hire Expenses

According to data from the Society for Human Resource Management (SHRM), filling a job costs almost $5,000, which covers internal and external recruitment, job board ads, and branding to attract candidates.

With the ongoing economic challenges, where saving expenses is imperative, focusing on skills when hiring not only makes recruitment more precise but also helps save costs strategically. It lets companies find and hire talent faster, cutting down recruitment expenses and reducing the overall cost of hiring.

Shortening Time-to-Hire Cycles

Traditional hiring processes can be slow and costly. Degrees, resumes, cover letters, unstructured interviews, outdated HR practices, and selective DEI initiatives can all act as speed bumps, eventually slowing down the hiring process. Skill-based hiring, however, simplifies the process by focusing on the key skills required for a specific job.

To speed things up, pre-employment assessment tools are incredibly helpful. A study conducted by Glassdoor found that businesses using skill-based assessments can reduce their time-to-hire by 50%. And our tool is just the support you need to gain a substantial advantage. With Dismania’s versatile pre-built test library, you can swiftly initiate assessments, streamlining your hiring process to fill the vacant role. This provides you with data-driven insights and unbiased evaluations, making sure you hire the right people quickly. 

As we go through the upcoming tips, we’ll talk about how you can easily switch to skill-based hiring to make your recruitment process better.

Switching to Skill-Based Hiring

Navigating the Skills Gap Assessment

The first step in moving from degree-based recruitment to skill-based hiring is to identify the skills needed for the vacant positions and job roles. This step provides the foundation for the transition.

• Analyze job roles: Examine job roles to identify specific needed skills, involving relevant stakeholders for insights.
• Build a skills framework: Develop a framework outlining key skills, knowledge, and abilities for each role.
• Assess employee skills: Evaluate employees in similar roles to find areas for improvement, which can help them grow within the organization and stay engaged. For a cloud engineer, you can set tests to evaluate their expertise in cloud platforms like AWS, Azure, or Google Cloud, as well as their knowledge of infrastructure as code, networking, and security in cloud environments. These tests encourage skill growth and provide opportunities of upskilling within the workplace.
• Keeping up with industry trends: Stay updated on industry skill trends and align with them.
• Set feedback channels: Establish regular communication channels to adapt skill requirements as roles evolve or new skills become essential.

Giving a “makeover” to the job descriptions

After identifying the needed skills, plan to upskill your current workforce or hire new talent that matches the identified skill requirements. Many organizations focus on upskilling and aligning hiring practices to attract the right candidates. Shift job descriptions from degrees to skills, detailing job tasks for a precise and successful hiring process.

Customized interviews and assessments 

In the step of customizing interviews and assessments, it’s all about creating questions and tests that check if candidates have the right skills for the job, fitting your skill-based hiring approach. 

Here’s where we come into the picture — at Disamina, our pre-employment assessment tool subtly complements this process. It includes talent assessments covering various aspects like aptitude, behavior, and technical skills. We also offer coding tests for tech roles and a tool for campus recruitment across multiple locations. This simplifies your move to skill-based hiring and streamlines the assessment process.

Conclusion

As the landscape of work continues to evolve and adapt to the demands of a dynamic world, one thing remains clear: skills are essential. And as jobs and industries shift, having the right skills is crucial. All in all, skills-based hiring is more than a passing fad, it is a smart response to the changing world of work. It lets your core team focus on what really matters — getting the job done. So, in this new era, embrace skills-based hiring to make your organization future-ready, and successful.