What’s Needed For Skills-Based Hiring to Take Hold and Transform an Organization

In this article, we discuss:

• What Is Skills-Based Hiring vs. Traditional Hiring?
• Skills-Based Hiring Process: Best Practices for Talent Acquisition and Recruitment
• How to Future Proof Skills-Based Hiring
• Skills-Based Hiring Transformation: No Easy Mode

With companies experiencing an accelerated pace of change in recent years, talent acquisition teams have gone from one extreme to another: From the need to hire quickly to fill vacancies spurred by the Great Resignation, to sifting through a surge of applicants for a limited number of job openings due to widespread hiring slowdowns in many industries.

For recruiting and hiring to be seen as partners driving toward business outcomes, they need a strategy to hire top talent that fuels future growth and creates business impact. This is the exact purpose of skills-based hiring. This article explores why skills-based hiring is a critical component to building an agile workforce, and what’s needed for the value of skills-based hiring to take hold in an organization.

What Is Skills-Based Hiring vs. Traditional Hiring?

For years, it was common for job postings to list a four-year college degree as a requirement—even if a degree didn’t directly apply to the skills or competencies required to perform the job. The approach is a reflection of traditional hiring: using educational degrees, past titles, and work experience as a proxy for future performance.

However, traditional hiring practices proved limiting. In the US, less than half of the workforce has a college degree, so a job requiring a college degree already pares down the talent pool of potential qualified candidates.

While the shift away from traditional hiring has been underway for years, it dramatically accelerated during the pandemic. The talent shortage pushed companies to prioritize skills over degrees as a way to access more talent pools. This approach is known as skills-based hiring. It primarily considers a person’s full range of skill sets and capabilities (including functional skills, technical skills, soft skills, and adjacent skills) for the role, and places less weight on educational or work history.

Skills-Based Hiring Process: Best Practices for Talent Acquisition and Recruitment

As part of a skills-based recruitment strategy, recruiters will need to critically look at how their talent acquisition process brings critical and in-demand skills through the candidate pipeline.

Teams should consider:

• Do job descriptions focus on the key skills and qualifications 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.

• Are 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 leveraging different job boards but also partnering with organizations and institutions that reach new and diverse pools of talent.

• Does your interview process effectively assess required skills and competencies for the role? Questions should revolve around the candidate's competencies and behavioral questions on how they will handle the role. To accurately evaluate skills and avoid bias, recruiters should work with hiring managers to create structured interviews that are consistent and focus on assessing the key skills needed for success in the role. Interviewers should also be prepared on the skills they need to assess and ask questions that do not introduce bias. 

But skills-driven people practices involve much more than just updating job descriptions and changing talent acquisition practices. It’s a skills-first philosophy and mindset that starts at the leadership level, supported by a change management strategy and technology that reinforce what it means to be a skills-based organization.

How to Future Proof Skills-Based Hiring

Companies have always needed to navigate change and seize emerging opportunities, whether that’s by getting new products or services to market faster or redefining how work gets done.

Skills-based strategies have proven to enable greater agility across the organization. This could mean growing a workforce through recruiting (acquiring skills), aligning a team around a strategic business goal (mobilizing skills), or adapting to the changing needs of the customer (upskilling current employees). 

That’s why recruiting and hiring is no longer about replacing headcount as quickly as possible; talent acquisition teams are being tasked with hiring talent that can fuel transformation. 

CHROs and their organizations no longer need to know why skills-based hiring is important. They want to know the how and what’s needed for skills-based hiring practices to drive business outcomes.

Here are three essentials for a skills-based hiring strategy to take hold in an organization:  

1. Implement skills-based hiring through a change management strategy. Legacy mindsets and practices are the biggest barrier to adopting a skills-based model. It makes sense why: hiring talent through a skills-based lens is a shift in thinking. Consequently, that affects how companies execute their talent acquisition strategy, which impacts—and changes—how workers perform their roles.

Change management is a framework for guiding individuals toward adopting behaviors that achieve a desired outcome. In the context of skills-based hiring, change management does more than convey why a skills-based hiring strategy is needed; it also seeks to enable those impacted by the change with the knowledge, training, and support to make skills-based hiring a sustainable and thriving practice in the organization.

Consider this: In the U.S. public sector, federal agencies have been implementing skills assessments developed by subject matter experts as part of job applications, giving an opportunity for candidates to demonstrate their skills instead of solely relying on self-reporting of skills, college degrees, or educational background. 

Implementing these changes took communication, policy alignment, holding listening sessions, and technical support—all of which are part of a change management strategy, as described in the article “Applying Change to Federal Hiring: A Case Study at Interior.” The formula for success in moving toward skills-based hiring practices is, according to the article, “50% the technical solution and 50% the change management piece.”

It’s a perspective also reflected in SHRM article “Skills-Based Hiring Requires Commitment to Change”: “The change management piece will be the hardest part," a McKinsey consultant tells SHRM. 

2. Anticipate critical skills with integrated workforce planning. Hiring for future needs isn’t a novel concept—it’s wrapped into the scope of workforce planning. Workforce planning means having the right workers by your side to achieve your strategic business goals.This process includes the modeling, forecasting, and budgeting of the headcount of a company’s workforce. After all, headcount is the largest expense of any organization, so the foundation of workforce planning requires visibility into the projected financial impact.

But for talent acquisition teams to align with the business strategy, a workforce planning solution needs to do more than fill open positions, a perspective that tends to be finance driven. Workforce planning should include anticipating the skills needed to support current and future business initiatives.

That’s why an integrated workforce planning solution is needed to achieve a skills-based hiring strategy. Workforce planning typically involves headcount and compensation data to forecast the financial impact. But for skills-based hiring to be sustainable, an integrated workforce planning solution must be able to leverage job profile data to anticipate critical skills needed for future headcount. These insights can be leveraged for talent planning, which includes skills gaps analysis, sourcing headcount through internal mobility, new hires, or contractors. 

Put another way: integrated workforce planning helps to connect a skills-based hiring strategy to the overall business strategy by leveraging a single source of data used across finance and HR.

3. Acknowledge recruitment and retention as two sides of the “employee experience” coin. By definition, talent acquisition and talent management are distinctly different. Talent acquisition focuses on sourcing talent outside of the organization, and it involves everything needed to recruit, interview, hire, and onboard talent. Talent management, on the other hand, focuses on nurturing talent from within the organization and providing employees with skills development opportunities, as well as measuring their performance. 

But as the market has evolved, the lines between talent acquisition and talent management have blurred. As a result, a greater partnership is now needed to effectively hire and retain talent in an agile market. It’s a reflection of a growing recognition that both are two sides of the same coin that fuel the employee experience, which is defined as the perception an employee has of their professional journey at each stage of the employee lifecycle. For example, there are organizations creating “centers for excellence” that pairs talent acquisition and talent management teams to build programs focused on hiring and developing internal talent.

Consider this: According to McKinsey research, skills-based hiring is an effective strategy to prevent attrition. “Hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience,” McKinsey authors say.

But while it’s a start, skills-based hiring doesn’t automatically turn a company into a skills-based organization. Leaders need to ensure their talent management processes—such as internal mobility—also follow a skills-based approach. 

That continuity is possible with an enterprise wide AI and ML-driven skills intelligence foundation, such as Skills Cloud, a technology powered by Workday AI. That means talent acquisition and talent management teams have access to the same data on skills within the workforce. Skills Cloud across the Workday platform, including Workday Recruiting and Workday Talent Optimization, enable recruitment and talent management teams to cultivate the employee life cycle through a skills-based lens.

Skills-Based Hiring Transformation: No Easy Mode

For skills-based hiring to take hold, companies need a holistic approach toward transformation. That includes implementing a change management framework to drive toward skills-based hiring outcomes, having technology (such as solutions embedded with AI) that delivers insights on skills, and cultivating the value of skills-based hiring by ensuring continuity with skills-based talent management programs.

While implementing a skills-based hiring strategy doesn’t have an easy mode, what does come easy is the reason why organizations need a skills-based approach toward talent: hiring a workforce with the critical and desired skills is how a company will be responsive to emerging opportunities and the changing business landscape.

Read “The Future-Ready Talent Strategy” ebook, and start developing a talent strategy that’s ready for whatever tomorrow brings.