As the workforce evolves, the way employers find skilled talent should too.
Key Takeaways
- Skills-based hiring (also known as skills-first hiring) shifts the focus to job seekers’ skills and aptitude rather than less effective proxies for job performance, such as degrees, prior positions or years of industry experience.
- Hiring managers who practice skills-based hiring find it twice as easy to find qualified candidates than hiring managers who do not.
- Benefits of skills-based hiring for employers include expanding and diversifying the talent pool and building human equity. Job seekers want a skills-based approach too: 64% of employees say that if they don’t learn new skills or enhance existing skills over the next 5 years that they won't be able to progress their career.1
Making the right hire is a multifaceted proposition. Pay, benefits, location and culture all matter, but a person’s ability to do the job should come first.
In my role as the Vice President of Social Impact and Sustainability, my team and I help all of Indeed break down bias and barriers in hiring so that more people find meaningful work. Since 2021, we’ve helped nearly 7 million job seekers around the world facing barriers get hired. By 2030, we aim to help 30 million. Skills-based hiring is a critical part of our efforts because it breaks down many of the barriers job seekers face during the hiring process. It’s also a necessary change for employers who want to find qualified and diverse talent.
Caption: Abbey Carlton, Indeed’s Vice President of Social Impact and Sustainability, leads global efforts to break down bias and barriers in hiring.
What is skills-based hiring?
Skills-based hiring – focuses on sourcing and evaluating candidates based on skills rather than proxy requirements like degrees, prior positions and years of industry experience. The term 'skills-first' also acknowledges that in some industries skills are just as significant as formal education and certifications.
When I say skills, I mean all skills that can be applied to a work setting – from programming and data analytics to adaptability and communicating effectively. Interestingly enough, despite the recent advancements in AI that require more job seekers to have some technology knowledge, the skills companies desire most aren’t technical; they are communication, teamwork/collaboration and critical thinking and problem solving.2
If you look at a traditional resume, recent work experience and formal education are typically listed at or near the top. A skills-first mindset flips this, and the data backs up the approach. Did you know that hiring managers who practice skills-based hiring find it:
- 107% more likely to place talent effectively.
- 98% more likely to retain high performers.
- 98% more likely to have reputation as a great place to grow and develop.3
Skills-based hiring isn’t simply another recruiting trend; it’s a recruiting superpower.
Why shift to skills-based hiring now?
More than one in four CEOs and senior executives rank talent shortages as the most damaging factor on the outlook of business, over inflation and recession.4 Australian organisations are having trouble finding talent, in fact 69% of employers are experiencing talent shortages, in addition to meeting their diversity, equity, inclusion and belonging (DEIB) goals.5 Skills-based hiring also allows organisations to be more focused on internal mobility – 28% have higher rates of inclusion, 33% have higher levels of trust and 30% have higher rates of engagement.6 The bottom line is that hiring is taking too long. Many sectors are still recovering from the pandemic, non-traditional career paths are more prevalent and the workforce is ageing.
AI is changing the hiring landscape for both job seekers and employers. For job seekers, the introduction of AI in the workplace means that the skills they need for future roles are currently being rewritten – so no one has them all yet. For employers, AI technology can now help hiring managers find qualified talent easier and quicker by helping to curate great job postings and sorting for skills before other qualifications. Skills-based hiring offers a path forward that meets the needs of employers, job seekers and an increasingly dynamic labour market.
But how?
For one, recruiting and hiring with a skills-based approach extends your reach to a wider, more diverse pool of talent you may have previously overlooked. Within Australia, post-school qualifications are essential in today’s job market:
- Almost 90% of jobs currently advertised require post-school qualifications.
- Almost 40% of jobs currently being advertised require a Bachelor degree or higher.
- Around half of jobs currently being advertised require a VET qualification.7
Too often, a lack of degree is equated with lack of skills and degrees are the primary measure of capability. In reality, there are 'Hidden Workers' that have untapped talent who should be considered. These job seekers, skilled through alternative routes, like military service, are caregivers, immigrants, refugees and people without traditional qualifications. Also included are those with physical disabilities, mental health challenges and from less-advantaged populations.
90% of executives surveyed believe qualified candidates are vetted out of the process because they don’t match the exact job criteria.
Gartner, CEO and business executives survey.8
Hiring for skills builds a workforce that reflects our increasingly diverse communities and makes better work more accessible to all.
While Australia is still developing its approach to skills-based hiring, globally there is a noticeable shift in how talent leaders evaluate candidates. We are starting to see companies relaxing or eliminating qualification requirements from their job ads to access deeper talent pools.
How to get started with skills-based hiring
Define: Rethink your job requirements
Many of us are guilty of including a laundry list of required skills in our external-facing job postings. But to find the best talent, we must make sure the job posting is a true statement of the job requirements. I encourage hiring managers to take a step back and think through: Which skills does the candidate need on day one? Which skills can they learn once they’re in the door? Which skills are desired but not critical?
Employers should consider relaxing degree and tenure requirements. If a university degree or a specific number of years’ experience aren’t required for the job, remove them.
Think of the skills you use every day at work. Did you learn them at school, on a job or on your own? Barring industries that require specific education and certifications, it doesn’t really matter, right? What matters is that you have them. The same goes for the people you hire.
A job posting is often the first encounter a job seeker has with a new opportunity, and potentially with your company. Remember to use inclusive language, highlight a commitment to employee benefits like parental leave and encourage applications from underrepresented groups. Try to avoid industry jargon and desired traits that can imply a preference toward younger candidates, like 'energetic' or 'enthusiastic'.
Screen: Find candidates with the skills to do the job
Once your job postings are refined, the next step is to find job seekers with the skills you’re looking for. Those skills may have been developed in a different field or role than the one you’re hiring for; you’ll be well served by considering transferable skills. A customer service representative may have the same fundamental skills as a bank teller, for example – like persuasive speaking and retaining detailed product knowledge. A marketing specialist might make a great UX designer based on shared skills like understanding customer needs and producing creative content.
A great example of transferable skills in action comes from the National Health Service in the UK. In 2021, we helped the healthcare system make 4,000 job offers to qualified candidates from a variety of backgrounds – 40% of those hired, though they had the suitable skills, were new to patient care.
AI technology will make it even easier to find candidates with the skills needed for the job. For example, Indeed’s Smart Sourcing tool can immediately match you with a shortlist of candidates with the right skills from millions of active job seekers.
Assess: Evaluate candidates based on skills
After screening for candidates who have the appropriate skills on paper, there are a number of ways you can see those skills in action, including skills tests, work samples and job simulations. By asking a predefined set of competency-based questions in the same order and using a standardised scoring guide, hiring managers reduce bias and instead rely on data to support their decision making. Check out Indeed Assessments for a range of pre-employment job assessments, ready-made and customisable, to help you evaluate candidates in a practical way.
Advance: Go beyond the hire
A skills-based approach will not only help you make great hires, it will help you engage and upskill your employees to future-proof their careers and your organisation. What are the skills or roles that are mission-critical for your business going forward? Maybe it’s understanding how to use AI; maybe it’s project managers with knowledge of a certain product. Those are the skills or roles that your organisation should pay special attention to, whether through a formal upskilling program or by being more intentional when training employees.
At Indeed, we recently set up BOOST, a pilot apprenticeship program that trains non-technical employees to become software developers.
"I never realised there was a career path outside of sales until I got to Indeed and learned about the world of tech troubleshooting, among other opportunities.” Ashley Duan, a participant, said. “I’d always wanted to pursue a more technical role and I’m so happy BOOST gave me the chance. Finally, an open door.”
I’m proud of the work we’re doing to not only support our colleagues’ development and present a path of economic mobility for their futures, but to cultivate a world where people’s skills will lead them to better, more meaningful work. Read Indeed's latest report, Skillfully Aligned: Closing the gap for a future-proofed workforce for further insights.
Sources:
1-2 Indeed x YouGov, Skillfully Aligned, April 2024
3 2022 Deloitte – The skills-based organization.
4 2023 Gartner CEO and business executives survey.
5 Indeed x YouGov, Skillfully Aligned, April 2024
6 2022 Deloitte – The skills-based organization.
