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Skills-based hiring: What is it, what are the benefits, and how to do it right

April 10, 2024
A neon sign saying 'game on'.

As businesses are reshaping hiring practices to ensure speed and predictability, skills-based hiring has become a staple in their arsenal. Instead of depending on job experience, academic background, or unreliable CVs — 78% of job seekers were found to misrepresent themselves on their résumé — a skills-based approach ensures you hire the candidate that can do the job best, and not the candidate who had better luck, means, or confidence.

But what actually is skills-based hiring? Why are so many companies shifting towards it? And how can you incorporate it into your own recruitment strategy?

What is skills-based hiring?

Skills-based hiring is the practice of mainly relying on a candidate’s skills, rather than other elements (such as experience, qualifications, or education), in making recruitment decisions. This is because CV-based hiring can often be biased and inaccurate, leading to wrong hiring decisions.

Businesses that opt for skills-based hiring will structure their process around desired skills that are relevant to the role at hand, ensuring every stage of the hiring process will try to find out to what extent the candidate possesses these capabilities. This can be done through specific questions in interviews, work samples or tasks, and, of course, skills assessments.

What are the benefits of skills-based hiring?

As mentioned above, CVs can be extremely unreliable when it comes to hiring, which often means excellent candidates are screened out because they don’t have a good degree, or their career path wasn’t conventional enough.

With a growing skill shortage — by 2030, 85 million jobs could go unfilled due to talent shortages — it’s vital that businesses don’t filter out skilled applicants due to prejudice or inaccurate methods, but rather rely on tangible data that is relevant to the company’s ethos and the role in question.

Here are some benefits organisations are seeing when switching to a skills-based approach:

Improve performance and productivity

Hiring the right person for the job means higher productivity and performance. According to McKinsey, skills-based hiring was found to be five times more predictive of job performance than using education history, and twice as predictive as recruiting based on work experience.

Expand your talent pool

With the current talent shortage, organisations can’t afford to pass over skilled candidates. By removing unnecessary gatekeepers such as education and years of experience, you’ll be able to expand your relevant applicant pool.

Combat unconscious bias

While securing a stellar degree from a highly rated university is undoubtedly an achievement, we all know that your background impacts your ability to attend higher education. According to the House of Commons, lower income pupils are less likely to continue to higher education, while an LSE study examines the racial bias in elite universities. By relying on objective data regarding abilities, you can open your gates to a diverse pool of candidates, and reduce bias in your selection decisions.

Identify better candidates & boost retention rates

The cost of a bad hire is three times the employee’s salary. By removing irrelevant criteria from your hiring process, you can focus on the truly predictive factors that determine role suitability and company fit, ensuring the candidate you end up hiring is truly compatible with the job — which in turn reduces turnover rates. In fact, LinkedIn data shows that employers who find talent using skills are 60% more likely to make a successful hire than those who don’t rely on skills as part of their hiring process.

How to adopt skills-based hiring practices?

We established why skills-based hiring is so important: it can support your business through higher performance, better role match, and lower employee turnover. But how exactly can you deploy a skills-based approach to your recruitment? Here are six steps to help you do this right.

1. Define the skills necessary to the role

A skills-based approach, like the name suggests, revolves around the necessary skills to complete the everyday tasks in any given role. This means that the first step to any successful process should be to identify those relevant skills and then define how they’ll be measured. This is often referred to as a ‘competency framework’ or ‘skills and competency matrix’.

This is the basis upon which your entire process will be built, so it’s paramount that you get it right. Really drill into the role — what do you expect an excellent worker to be able to do? What are the skills that would be absolutely essential for this? Are there any competencies that would make a candidate shine, but aren’t a must-have?

2. Remove unnecessary information from the job ad

Sometimes, businesses like to write long winded job descriptions, making it difficult for candidates to assess whether they’re suitable for the role. With a skills-based approach, best practice suggests that you should make job descriptions as succinct and focused as possible, highlighting the necessary skills in particular, rather than irrelevant information.

Of course, you still want your company culture to shine through, and you still need to ‘sell’ your organisation to potential applicants — however, remove any job requirements that aren’t going to help you predict performance or fit. This can be anything from years of experience — does it really matter if a candidate worked as a Sales Rep for ten or two years if their skill level is the same? — to education.

3. Re-imagine CV screening

Once you start receiving CVs, it’s vital that you look at them from a new perspective. Instead of skimming through for titles and education, you’re now trying to assert what skills an applicant has. Look through the CV for clues — how does the candidate describe their experience? Are they using jargon that only a skilled employee can understand? What are they highlighting? Does their CV give you the sense they are comfortable with certain skills or requirements? If they’ve never worked in a similar role before, what kind of transferable skills might they have?

You should also consider reading CVs blind — anonymising the résumés you receive can help add another layer of professionalism and combat unconscious bias.

4. Create a hiring process that targets skills

The same logic of hunting for skills on a CV should apply to every single step of your hiring process. Try to keep your recruitment procedure short and concise, and really consider the benefit of each stage — what knowledge are you gaining from it? Is it really necessary? And if so, what’s the best way to learn this information?

For example, while we always believe in the power of an interview, it’s important to contemplate your method. Opting for a structured interview — where you ask focused questions, giving the candidate space to answer these specific queries, rather than allowing them to talk about whatever they feel like — is crucial, as it gives shape to the interview and allows for more accurate data collection. Standardising your interview is also useful: you write down a predetermined set of questions that you’re going to ask all candidates, to ensure your scoring is accurate. These questions should all be decided with the particular skills you’re looking for in mind.

5. Incorporate skills assessments

Whatever structure, order, or evaluation points you opt for, we recommend considering incorporating a skills assessment into the process. These are tests that gauge an applicant’s abilities in a real-world context, rather than relying exclusively on their own appraisal of their skills.

To do this, you can simply deploy a practical task imitating the duties of the role, or a more thought-out skills assessment such as the one Thrive offers, which allows you to choose a few key skills and test for them using an evaluation rigorously developed by our occupational psychologists.

6. Make a data-backed decision

When you complete your process, it’s time to review how your candidates did, and compare and contrast their results. Of course, this can’t rely exclusively on their hard skills — you also want to hire candidates who fit the company culture, that align well with the team, and share your business ethos — however, in a skills-based hiring process, abilities are the main factor that should inform your decision. Instead of depending on hunches, look through the results with your data hat on, making your final selection based on tangible evidence to the suitability and capability of your successful candidate.

Want to learn more about how Thrive’s market-leading skills assessments can help inform your decision? Book a demo with us today.

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