Skills-Based Hiring: Benefits, Future & How To Implement?

Replace the traditional talent acquisition processes with skill-based hiring to reduce the time, money, effort going into mis-hiring and increase the quality of hire.
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Until about the late 2010s, recruitment globally was mainly focused on something known as degree-based hiring models. Employers used to post job vacancies and screen candidates based on their educational qualifications and experience rather than their skills.

However, by the end of the second decade of the century, the recruitment industry gradually started shifting towards a new model called skill-based hiring.

What is Skills-Based Hiring?

Skill-based hiring is an advanced hiring process that primarily focuses on hiring employees based on their employability skill set, rather than their academic qualifications or prior experiences.

So, if you want to hire a marketing person, you won’t be looking at his degree in marketing or management. Rather, you would be more interested in knowing the innovative marketing ideas that a candidate can put on the table to market a certain product or probably his communication skills.

So, most employers have started linking certain job-specific skills with their vacancies and then evaluating the candidates based on these competency models. These skills include the “hard” skills (which are the technical skills required to get a job done, such as coding, accounting, researching, etc.) as well as the “soft” skills (such as empathy, communication, agility, etc.).

With the availability of a plethora of online certification courses and the easy importation of education in the digital age, acquiring skills for a particular job, that a candidate is passionate about, is just a matter of a few months or a year.

Therefore, it makes more sense for you, today, to replace the traditional talent acquisition processes with skill-based recruitment to reduce the time, money, and effort going into mis-hiring. 

Why Skill-based Hiring is on the Rise?

In this digital era, technology grows almost every year, and so do the recruitment models. More than two decades ago, recruitment was either degree-based or informal in certain sectors. Then gradually, after the Great Recession of the late 2000s, recruitment was totally shifted towards qualification-based hiring. And now, after COVID-19 hit the world, recruitment is slowly making a move towards a skill and competency-based hiring model.

The key basis of these shifts in the recruitment models has always been the skill gap. The skill gap can be defined as the inconsistency between the skills that you would expect the employees to possess and the ones that they actually have.

When technology was developing slowly in the 1900s, the skill gap was seen to arise in a matter of years or even decades. However, technology today is advancing at a pace like never before. Thus, the skill gap is bound to become larger very quickly now.

For example, a graduate who completed his academic degree in Artificial Intelligence (AI) just a year ago, won’t have enough knowledge of the “hard” skills required to get his job done, as much as a graduate who has just received his degree. So, that means the technical competency gained from the academic qualifications will not be relevant for a very long time now.

Hence, it’s time you start choosing a candidate with future-ready skills and great agility in learning new things and technology and implementing them throughout his or her job.

Another reason why skill-based hiring trends are on the rise is that this model helps get a quality of candidates to choose from, minimizing the cost of mis-hirings.

When you go with skill-based selection, you advertise the job vacancy with a skill checklist. Only the candidates with the defined skills will probably apply for the job. This helps you in ditching hundreds of worthless applications from the pool.

Moreover, it is also seen among the candidates globally, that they prefer honing skills only that they feel vehement about. Thus, employees working on skill-based performance metrics tend to perform far better than those recruited through traditional degree-based hiring methods, reducing the cost of employee retention for the companies.

Benefits of Skill-based Hiring

Now, you know why companies are shifting to skill-based hiring globally. But, are there any numbers to support this theory? Well, according to a survey, 73% of companies are using the latest skill-based hiring model in 2023, with a good 27% of them having adopted this method in the last 12 months alone. Let’s see what benefits are these companies reaping in return.

Quality Candidates

According to Topgrading, the estimated cost of a mis-hire ranges between 5 times to 27 times the basic compensation of the mis-hired employee, depending on their position. Hence, there is a desperate need to reduce mis-hires to cut the extra cost of companies.

Skill-based hiring is an easy solution to implement. When you roll out a job vacancy for your company with a clear set of hard and soft skills that it needs, it becomes highly probable that only genuine candidates will apply.

This reduces mis-hires in the company and subsequently, the cost of mis-hiring goes down a lot. As per a recent survey, as many as 88% of companies claim to have reduced their mis-hiring costs after adopting a skill-based hiring model.

Moreover, about 70% of employers believe that skill-based hiring tools like WeCP are way more effective than traditional hiring models and tools.

Reduced Time and Cost in Hiring

A survey results claim that about 82% of companies in 2023 have decreased their total hiring time. Since the job applications are more relevant, thanks to the clearly defined critical skills for the job, skill-based hiring helps you evaluate the candidates early on in the recruitment cycle. This reduces the total time that is required to fill in a job, minimizing the effort as well as the costs associated with hiring.

Increases Employee Retention

When employees are hired based on their skills, they are less likely to leave a company. This is supported by McKinsey when it says that when an employer hires for skills, the employee is five times more likely to perform well in the job compared to hiring for education and more than twice as likely compared to hiring for prior work experience.

It also asserts that employees hired based on their skills tend to stay in their jobs 34% longer than those hired based on their degrees. Therefore, skill-based hiring clearly increases employee retention for a company.

Access to Diversified and Skilled Labor

The cost of education is rising at an extremely fast pace, making it difficult for more and more people to pursue a four-year degree course at a college. According to Education Data, the annual growth in college tuition fees was recorded to be an average of 12% from 2010 to 2022.

However, it is both financially feasible as well as convenient for a student to learn different skills that a job requires online through certification courses or freely available videos on different platforms.

On the other side of the table, you have an ample supply of a diverse workforce when you go with skill-based hiring. Some of these people may not have had the financial ability to pursue a degree earlier, but they now have all the skills that your job demands.

Reduced Requirement for Training

When you hire based on the core skills that a job needs, the employees are mostly already trained. So, the efforts and resources that were traditionally needed to get a new employee onboarded are generally not required at all or are at least minimized to a great extent.

For example, if a company hires a sales rep to sell capital equipment in the automobile industry based on his skills, he would already be an expert in communication skills, convincing skills, and sales tactics, and would know about the domains of capital equipment and the automobile industry.

Thus, you can easily onboard such an employee with just the basic notes about the company policies. In return, the employee can be expected to be productive from day 1 for the company.

So, Are the Degrees Outdated Now?

That said, the biggest question that an employer thinking about making this shift might have is “Are the degrees outdated now?”

Well, time and again employers globally have been dependent on the educational qualifications of their employees. Not that the “hard” skills acquired by other means are worthless, but universities can still serve as a means for you to provide the increasingly demanded soft skills in a job.

Skills such as problem analysis, problem-solving, decision-making, the ability to perform under pressure, team performance, effective communication skills, prioritizing, etc. are some of the soft skills that are required by almost all job profiles.

And, you are not the only one to believe that most graduates possess these soft skills, thanks to the four years of rigorous education that they undergo. This is also evident from the fact that most companies who consider the skill-based recruitment model tend to add more detailed requirements of soft skills.

So, this concludes that those adopting skill-based hiring tend to describe the soft skills required for their jobs explicitly, making applicants increasingly aware of the need to develop these skills.

Therefore, as an employer, it’s important to note that universities and degrees will still be important to serve as a proxy for you to develop the soft skills that your jobs demand.

However, it’s also not incorrect to say that if students ever decide to ditch the four-year degree course and learn a specialized skill through other means, it’s important that they also acquire these soft skills online or through certification courses.

Implement skills-based hiring in your Recruitment Process

Take your technical hiring to the next level. WeCP is not only have a vast question library that caters to all kinds of technical roles for your organization, but we also tackle unconscious bias using AI that can significantly accelerate your technical hiring and increase the the quality of hire.

Contact us for more information or schedule a demo with us.

Abhishek Kaushik
Co-Founder & CEO @WeCP

Building an AI assistant to create interview assessments, questions, exams, quiz, challenges, and conduct them online in few prompts

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