Why Companies Are Turning to Skills-Based Hiring
Some say skills-based hiring emerged at the start of the millennium, when jobs were relatively scarce, leaving some college graduates with few choices other than to apply for work that didn’t require diplomas. But Harvard professor Joseph Fuller wrote that it was the hiring managers who suddenly began to demand college degrees for positions that didn’t call for that level of education. (Requiring degrees, licenses and/or certificates is called credentials-based hiring.)
The thinking at the time seemed to be that “college-educated employees would be smarter, more productive, and more engaged than workers without degrees,” wrote Fuller in Working Knowledge, a Harvard Business School publication. But it turned out that hiring overqualified workers didn’t serve employers because they "cost companies more money to employ, tend to be less engaged in their jobs, have a higher turnover rate, and reach productivity levels only on par with high school graduates doing the same job."
What Skills-Based Hiring Brings to Recruitment Efforts
Skills-based hiring, as Merriam Webster defines it, "asks whether a person is capable of doing the work versus selecting them based on their credentials (testimonials or certified documents showing that a person is entitled to credit or has a right to exercise official power)." The jury is out on how long that lasted because even today some employers ask for bachelor's degrees for positions such as social media specialists, library assistants and office coordinators. It’s work many can do with training and without a four-year college education.
“Requiring a degree, where a degree isn’t mandated (by licensing requirements or law) introduces bias into the (hiring) process,” said Rachel Cupples, a senior recruiter at Textio, a startup whose software helps companies remove biased language from job postings and employee reviews. She explained that requiring degrees where they aren’t necessary doesn’t consider that individuals without degrees may be able to do the work but would never get a chance to interview for the roles because of their lack of credentials. "That’s putting up barriers. It’s not being diverse," said Cupples. She added that not everyone has the opportunity, desire or funds for a secondary education, but that doesn’t mean they can’t do the work. Mind you, she wasn’t suggesting removing degree requirements for engineers, attorneys, physicians and other roles for which degrees are legally required.
Consider that some Fortune 50 company leaders like Microsoft’s Paul Allen and Bill Gates are college dropouts. They would not have even won an interview at the company they founded until 2010 when Microsoft’s degree requirement was dropped. There are also Debbi Fields of Mrs. Fields Cookies, former Whole Food’s CEO John Mackey, Anna Winter of Vogue magazine, as well as many others. While many of these CEOs started out as founders, they learned how to run a company —strategy, finance, marketing, competitive analysis and more, on the job.
According to research, choosing candidates based on their skills can result in better job outcomes compared to relying solely on their educational degrees. However, it's important to note that emphasizing skills doesn't undermine the value of degrees. Rather, it acknowledges that individuals may have acquired valuable skills through their work experience or other avenues, in addition or instead of academic achievements.
Related Article: Stack Ranking Makes a Comeback
Skills-Based Hiring Can Support Diversity Efforts
It's also worth noting that skills-based hiring is often associated with a company’s diversity, equity and inclusion (DEI) strategy, which among other things, aims to recruit, include and support people of different races, ethnicities, religions, abilities, levels of education, genders and sexual orientations. While some may believe that DEI strategies are born of a company’s values and mission to make the world a fair and better place, it’s also a smart business strategy. "Companies that are diverse and inclusive perform better," said Cupples. According to McKinsey, “diverse organizations are more successful at attracting and retaining talent, making high-quality decisions, and pursuing successful innovation.”
Evan Herman, an independent recruiter who has worked for the likes of IBM, told Reworked that skills-based recruitment is the only way to go for the hard-to-fill roles that he recruits for. “I’m a hunter,” he said, "What I want to know is 'do you have the experience needed to do the job?'" Credentials are more superficial, according to headhunters like Herman. “If you’re the best (regardless of where you went to college or what degree you have,) you’re the best,” he said.
Learning Opportunities
Related Article: Is DEI Sustainable in the Workplace?
Implementing Skills-Based Recruitment
Implementing skills-based hiring may seem simple: remove the education and certification requirements (where applicable) from job postings and advertisements and you’ll bring in a wider range of applicants to choose from. But because it’s impractical to interview everyone who applies, some employers look to testing, work samples, or do-at-home-assignments to bring objectivity into the hiring process.
While employers like AWS have hired some elite engineers and developers by testing (sometimes prior to even having a conversation with a jobseeker) it’s likely that they have also lost others to competitors who chose to spend their time wooing recruits instead of testing them. (To be fair, some employers manage to do both at once.) Never mind the fact that the questions and answers are sometimes known ahead of time. Worse yet, even when hiring managers have been shown test results, they sometimes choose to ignore them and go with their gut, according to Discretion in Hiring, a paper written by economists Mitchell Hoffman, Lisa B. Kahn and Danielle Li.
Another approach by which skill-level might be determined is via time consuming do-at-home projects. While some jobseekers might embrace this as an opportunity to strut their stuff, others might flat out refuse to spend their free time doing them. Still others feel used or become suspicious when they never hear back or are not hired, thereby risking the reputation of the employer brand.
A study conducted by Lauren Rivera, professor of management and organizations at the Kellogg School of Management at Northwestern University and author of "Pedigree: How Elite Students Get Elite Jobs" found that the “most common mechanism by which a (job) candidate was evaluated was her similarity to her interviewer.”
That, of course, is the antithesis of what diversity looks like and what experts say that businesses need to thrive in the modern era. So what are employers to do? The good news is it might not be necessary to choose one or the other, or both. What’s important instead is to be fair, to identify whether an individual has the skills to do the job today, and to get buy-in from the team.
About the Author
Virginia Backaitis is seasoned journalist who has covered the workplace since 2008 and technology since 2002. She has written for publications such as The New York Post, Seeking Alpha, The Herald Sun, CMSWire, NewsBreak, RealClear Markets, RealClear Education, Digitizing Polaris, and Reworked among others.
Connect with Virginia Backaitis:
Featured Research
Buyer's Guide
Read Now
Research Report
Read Now
eBook
Read Now
Research Report
Read Now
White Paper
Read Now
Research Report
Read Now
Guide
Read Now
Guide
Read Now
Related Stories
Entries for the 2023 Reworked IMPACT Awards are now Open
