Why Skills-Based Hiring Is so Revolutionary

In this article we discuss:

• What Is Skills-Based Hiring?

• How to Adopt Skills-Based Hiring Practices

• Embracing the Future of Skills-Based Hiring

In recent years, talent acquisition teams have faced a tumultuous job market, including multiple talent shortages and hiring slowdowns. According to the FlexJobs “2025 State of the Workplace Report”, 69% of US workers changed or considered changing career fields in the past year. To combat this chaos, hiring has had to become less rigid—that's where skills-based hiring is proving revolutionary.

Rather than prioritizing bachelor's degrees and college graduates, many enterprise companies are now hiring with a focus on skills. In fact, two-thirds (64.8%) of employers surveyed by NACE research reported that they use skills-based hiring practices for new entry-level hires.

The premise driving this shift is simple: People have more to offer than paper credentials. By assessing the full range of each candidate's experience, companies are providing opportunities to a wider pool of talent than ever before. But how is that change affecting the hiring market, and what can companies do to stay ahead of the curve?

What Is Skills-Based Hiring?

Skill-based hiring is an approach to recruitment that prioritizes a candidate's capabilities over their education history. Rather than relying on degrees, candidate screening digs into specific competencies which may otherwise be overlooked. These can include hard skills, such as coding and accounting, and soft skills, such as problem-solving and effective communication.

The benefits of taking a hiring approach based on skills include:

• Greater talent diversity: By removing biases in the hiring process and focusing on each candidate's abilities, you create a more diverse workforce.
• Improved job fit and retention: Matching employees with the right skills to the right role ensures greater employee engagement and retention.
• Continuous learning opportunities: A company culture based on skills encourages employees to seek out development opportunities, improving internal mobility in the process.
• Enhanced business performance: Hiring employees with the skills to make an impact from day one leads to higher productivity and company performance.

Skills-Based Hiring vs. Traditional Role-Based Hiring

For years, it was common for job postings to list a four-year degree as a requirement—even if a degree didn’t directly apply to the skills required to perform the job.

This approach is a reflection of traditional role-based hiring: Using educational degrees, past titles, and work experience as a proxy for future performance. Conversely, skills-based hiring favors assessing employees on the basis of their abilities, gathering real data about their skills.

In recent years, traditional hiring practices have proved increasingly limiting. In the U.S., only 36% of the workforce has a college degree, while the average across the EU is 30.9%. Enforcing university education requirements quickly reduces the list of potential qualified candidates by well over half.

As of 2024, a majority (52%) of U.S. job postings on Indeed did not mention any formal education requirements. Instead, many organizations are implementing skills assessments, practical tests, and performance-based evaluations. With many employers believing that degree programs no longer align with the needs of the modern workforce, the decline of traditional hiring seems likely to continue.

How to Adopt Skills-Based Hiring Practices

To make sure that your organization is part of this skills revolution, implementing best practices is key. Recruiters looking to create a robust skills-based hiring strategy need to rethink their processes at every stage, from posting job descriptions to onboarding. Here are five key questions for recruitment teams to ask when adopting skills-based hiring practices:

    1. Do your job descriptions focus on the key skills necessary for the job? A job description should list necessary and preferred skills, and use inclusive language to attract a diverse range of qualified candidates. College degrees should be included only if it is absolutely necessary or a regulatory requirement to perform the role.

    2. Are your job postings promoted in channels that widen the talent pipeline? A skills-based job description alone won't be enough to attract top candidates. Companies will need to proactively source talent through other channels, such as leveraging different job boards while partnering with organizations that can reach new and diverse pools of talent.

    3. Does your interview process effectively assess the required skills? Questions should focus on a candidate's competencies and personality to anticipate how they will handle the role. To avoid bias, recruiters should work with hiring managers to create practical assessments that enable candidates to display the key skills needed for success.

    4. Are you providing new opportunities for existing employees? While businesses often look externally when filling a role, that can mean missing existing talent with the right skillset. By creating a skills database, you can better understand the skills you already have at your company that aren't being utilized, and set your employees up for success.

    5. Are you highlighting your employee success stories? Tackling biases is about more than just asking the right questions during interviews. Highlighting the successes of your employees without degrees can further combat prejudices around credentials. Then, by promoting the positive impacts of skills-based hiring, you encourage an even more diverse range of candidates to apply in the future.

Skills-based hiring involves much more than just updating job descriptions and changing talent acquisition practices. To succeed, business leaders must build a HR strategy that prioritizes the needs of employees and candidates. Only then will your organization be able to attract and retain top talent.

Embracing the Future of Skills-Based Hiring

Hiring a workforce with the right skills is the only way a company can remain responsive to emerging opportunities and the changing business landscape. Organizations that stick to traditional hiring methods will find themselves out-paced and out-performed by their competitors.

As with many other strategies and processes, the future of skills-based hiring is being shaped by artificial intelligence (AI). AI has already led to huge new developments in the skills-based hiring space, including:

• Stronger skills matching: Where traditional systems perform basic keyword searches, AI can understand the intent of a word much more clearly. That means it can surface relevant skills much more effectively.
• Hiring bias mitigation: Despite our best efforts, humans always introduce some measure of bias—even when using AI tools. With the right approach, however, it's easier than ever to use AI to identify when certain demographics are routinely being overlooked.
• Real-time market insights: Hiring strategy has to change with (or even anticipate) market trends, but it's easy to overlook certain factors. AI ensures that key insights are surfaced as and when they're relevant—not when it's too late.
• Adaptive candidate journeys: AI can also respond in real-time to candidates and employee input. That means assessments can scale in difficulty to match a candidate's skill level, and existing employees with relevant skills can be flagged for jobs in different departments.

Over half of business leaders are concerned about talent shortages—and only 32% are confident their organization has the skills needed for success. Find out how AI is helping drive positive change in skills management.