Why Skills-Based Hiring is Replacing Traditional Recruitment
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How to Implement Skills-Based Hiring (the easy way)

Post Author - Juste Semetaite Juste Semetaite Last Updated:

According to Harvard Business School, only 23% of job postings asked applicants for a bachelor’s degree in 2019-2020. As a hiring manager, you may already know that skills-based hiring is on the rise. But how do you actually put skills-based talent strategies and practices in place?

From understanding the theory to how to implement it, this post has you fully covered like a onesie.

First, we’ll go over the differences between skill-based vs traditional hiring and teach you 6 key benefits to help you achieve your new recruitment goal. And, if you read on further, there may be a few bonus stats and pointers to help you convince the higher-ups of our, ahem, your new hiring plan.

TL;DR – Key Takeaways

  • Skills-based hiring uses skills testing to understand whether candidates have the demonstrated skills to succeed in a given role instead of just relying on CVs and interviews.
  • Restricting job postings to candidates with a relevant four-year degree is an outdated concept that can contribute to skills gaps for organizations by greatly limiting their access to talent. College degree requirements won’t help you find the right talent!
  • A skills-based approach carries numerous benefits: it improves the quality of your hires, reduces the risk of making a bad hire, and can boost retention.
  • To implement a skills-based approach, you’ll need to review your recruitment process, introduce skill tests, and use recruitment software tools.
  • With Toggl Hire, HR managers and hiring managers gain access to a Test Library filled with thousands of questions and pre-built test templates for a wide range of roles, perfect for hiring teams who want to find people with the right skills or plug a skills gap.

What is skills-based hiring?

Skills-based hiring is a talent acquisition approach that systematically focuses on evaluating a candidate’s job-relevant soft and technical skills and competencies instead of prioritizing academic degrees or past work experiences.

In simplest terms, skills-based hiring is when you put what a candidate says they can do to the test. This practice of setting out select goals and tests to assess whether a candidate has the necessary skillset for an open position significantly reduces any room for job seekers to embellish, or even lie, about what they can and cannot do in the role.

Hiring for skills is 5x more predictive of job performance than hiring for education and more than 2x more predictive than hiring for work experience.

McKinsey & Co

The days of candidates padding their resumes with keywords and (often irrelevant) academic achievements or internships just to get a call back from a recruiter are over.

Now, organizations — those committed to efficiency and transparency — focus on what skills candidates actually have. And have become a lot more open when considering how the candidate may have acquired those skills.

This is a huge turning point and a positive moment for those looking for a new job. Especially with the rising costs of tertiary education for college graduates, skills-based hiring offers an alternative to more traditional studies by broadening the legitimate ways a candidate can build their skillset.

And it applies across the full career spectrum.

It gives young people more freedom to choose how they build their careers and the opportunity for anyone to change careers or build new relevant skills like hard skills and other in-demand skills.

📚 Employers are increasingly seeking candidates with meta-skills to adapt and thrive in a world of uncertainty and change.

Skills-based vs Traditional hiring process: what’s the difference?

In traditional hiring, hiring managers screen and select applicants based on their CVs, often yielding a different set of candidates when compared to skills-based hiring, which uses skills tests as a screening method to identify top talent and level the playing field. Let’s see why.

skills based hiring approach vs traditional recruitment process

With traditional hiring, candidates are often selected based on where they went to school, how long they studied for, and which (big) names they worked for. Essentially, looking good on paper becomes more valuable than actual performance or skills – and that’s a problem.

Especially when employers are experiencing talent shortages and struggling to hire skilled workers. The current skills gap and changing job requirements have led to what some call the “degree reset,” where many employers no longer rely on proxy requirements, like college degree completion, to fill positions.

Job roles and training programs that call for specific technical skills, hard skills, and soft skills are better assessed through pre-hiring aptitude tests, or skills tests. This also leads to a more efficient and less biased approach to finding the perfect qualified candidates.

By just looking at their test scores and statistics — and using software like Toggl Hire to help you — you’ll remove any pre-determined bias of who the person is.

To help break this down further, we created this table that compares skills-based and traditional hiring.

CriteriaSkills-based HiringTraditional Hiring
FocusEmphasizes skills and competenciesPrioritizes education and work experience
How talent is evaluatedSkill assessments, practical tests, and performance-based evaluationsResumes, cover letters, and interviews
Hiring biasReduces unconscious bias by focusing on skills rather than backgroundProne to biases based on education, work history, and personal factors
Diversity & InclusionIncreases workforce diversity by considering a wider range of candidatesMay limit diversity due to focus on traditional qualifications
Candidate PoolLarger pool of potential candidates as non-traditional applicants are consideredSmaller pool due to focus on specific qualifications and experience
Speed of hiringPotentially faster due to more streamlined evaluation processMay be slower due to extensive background checks and evaluation of qualifications
On-the-job performanceHigher correlation with job performance as hiring is based on skills needed for the roleLower correlation with job performance due to reliance on formal credentials
Employee RetentionHigher retention as employees are better matched to job requirementsLower retention due to potential skills mismatch
Skills-based hiring vs Traditional hiring: main differences

6 Benefits of the skills-based hiring approach

Now onto the juicy part! Let’s dive into the benefits of skills-based hiring for your organization.

1. Increase the quality of new hires

Less of a focus on college degrees and more of a focus on skills means the candidates you end up progressing with are of a higher quality. Skills-based hiring involves creating an experience that simulates the job to ensure a good fit.

Rather than relying on interview questions to gauge candidates’ competence, hiring managers can now stress-test those skills with role-based tests and assignments.

Besides, by allowing candidates to test out the skills needed for the job before accepting an offer, companies can hire better-fitting candidates who are enthusiastic about joining and learning more about the company.

2. Expand and diversify your talent pool

By removing the requirement for a college degree or other tertiary education, you are able to access a much broader and more diverse talent pool.

For example, it’s common for many video game developers to take Udemy courses or learn their trade by watching YouTube channels rather than obtaining a computer science degree (especially when it comes to niche game engines).

This means that your candidates won’t have cookie-cutter and identical skills to one another.

Due to skill shortages, recruitment might shift its focus from roles to specific skills.
Due to skill shortages, recruitment might shift its focus from roles to specific skills.

3. Increase hiring speed and efficiency

As a recruiter or hiring manager, your goal is to find the candidate you’re most confident can do the job. Skills-based hiring helps you get there faster by focusing on actual performance from day one.

Automation simplifies the hiring process by reducing manual work. Pre-recorded interviews, pass-score thresholds, and email templates streamline the screening process, saving time, cost, and effort.

Data-driven decisions allow hiring managers to reduce time-to-hire and associated costs.

4. Reduce the risk of bad hires and save money

A bad hire is an employee who isn’t a good fit for their role or the company.

Skills assessments not only demonstrate proof of competence but also help both parties determine job role fit, reducing the risk of an expensive bad hire.

5. Improve employee retention

Broadening your pool of candidates to include employees without a college degree can improve employee retention, as they feel like their employer has taken a chance on them and is committed to their success.

In fact, according to LinkedIn data, such employees tend to stay with a company 34% longer than their peers who have a degree.

6. Create a stellar candidate experience and boost your brand

Skill quizzes and assessments give candidates immediate feedback, helping them pinpoint their strengths and weaknesses and increasing their chances of securing the right role.

Furthermore, by emphasizing skills over traditional qualifications such as education or job titles, opportunities are opened up for those who may have acquired their skills in other ways.

16 Skills-based hiring statistics to keep you convinced

Don’t just take our word for it. Here are 16 important stats about skill-based hiring.

  1. 81% of employers prioritize skills-based hiring rather than looking at degrees, yet 52% remain cautious and prefer to hire candidates with college degrees.
  2. 40% of companies used skills-based hiring this year, an increase of 20% from the previous year.
  3. Job postings on LinkedIn that don’t require a four-year degree increased 33% year over year, rising from 15% to 20%.
  4. A whopping 60% of workers over the age of 25 in America do not have a degree.
  5. More than 40% of HR managers find it challenging to fill entry-level positions because of unnecessary degree requirements.
  6. 82% of organizations use some variation of pre-employment skills assessment.
  7. Recruiters who use assessments in their hiring process report 36% higher satisfaction than those who don’t.
  8. Up to 78% of job applicants lie on their resumes, and 66% of employers are willing to overlook it.
  9. Over a third of recruiters think assessing soft skills will become increasingly important in the next 10 years.
  10. Over the past year, LinkedIn has experienced a 21% surge in job postings requiring skills and duties instead of qualifications in the US.
  11. A bad hire can cost 5 to 27 times more than their salary.
  12. Skills-based hiring practices are 5 times more effective in predicting job performance than hiring based on education and more than twice as effective than hiring based on work experience.
  13. College tuition has grown 25% in the last decade, making 4-year college degrees unaffordable for many Americans.
  14. A skills-based hiring approach to recruiting significantly increases the eligible talent, yielding a 2.3x growth. Moreover, a search based on skills or interests results in an even larger growth in the population of underrepresented candidates, including 3x more veterans and 3.5x more women and Black students.
  15. Global firms such as Amazon and JPMorgan Chase have spent millions on reskilling and upskilling their employees — Amazon devoted $700 million in 2020 and JPMorgan Chase $350 million over five years in 2019.
  16. The top developer at Apple is up to 9x more productive than the average software engineer, while the best sales associate at Nordstrom generates 8x more revenue than their retail peers.

3 Steps to Implement Skills-based Recruiting Practices

Now that you have some hot stats in your pocket to justify your new hiring approach, it’s time to see how to implement skills-based practices into your hiring workflow.

Step #1 – Review your recruitment process

The first step to using skills-based recruitment is to review your current hiring process. You could start by conducting a job task analysis to fully understand what competencies the role requires.

Once you know the necessary skills and experience, you can update your job descriptions to focus on those rather than qualifications like education or job titles. This will let you reach out to a wider range of applicants, including those who may have acquired their skills in different ways.

Across a wide array of occupations, demand for skilled workers nowadays far exceeds supply. This supply-demand imbalance appears to have encouraged employers to suspend the use of proxies, such as degree completion, in order to expand their pool of prospective candidates. That appears to have been most true for occupations requiring specific skills or competencies that can be evaluated accurately through mechanisms like pre-employment aptitude testing.

The Emerging Degree Reset, research by The Burningglass Institute

As well as updating your job descriptions, you can explore more sources to attract potential candidates. Don’t just rely on job boards and recruitment agencies. Leverage the power of creative recruitment campaigns to connect with the best new talent.

You should also think about updating your screening process. Instead of the usual phone screens, try skills tests and pre-recorded video interviews. This can give you a more accurate assessment of a candidate and save time in the long run.

Step #2 – Introduce skills assessments

Once you’ve made changes to your recruitment process and widened your candidate search, it’s time to introduce talent assessments. Combining structured interviews with various pre-employment tests can give you a more comprehensive view of a candidate’s skills and experience.

Skills assessments can come in many forms and be used to test both hard and soft skills. Technical skills, such as coding and data analysis, can be evaluated through skills tests, while soft skills like communication, teamwork, and problem-solving can be assessed through homework assignments or potential paid projects.

skills test threshold

At the same time, assessments can vary depending on the role and company. For example, skills tests may be used to show skill gaps or check a candidate’s technical expertise, while homework assignments or potential paid projects may offer insight into how they can apply their skills in a real-world setting.

On top of this, soft skills assessments can offer a deeper understanding of a candidate’s interpersonal skills, work ethic, and other intangible qualities.

Using skills assessments in the recruitment process may require more effort, but the long-term benefits of hiring the right candidate make it worth it.

Step #3 – Use purpose-built recruitment tools

Using purpose-built recruitment tools can simplify your skills-based recruitment process and lead to better results. Rather than starting from scratch, leverage a recruitment assessment tool that has been specifically designed to evaluate candidates efficiently and accurately.

One such tool is Toggl Hire, which can provide pre-built assessment templates tailored to different roles and industries and the flexibility to create custom tests to suit your exact needs. Additionally, its anti-cheating tracking feature can give you confidence in the results of the assessment.

skills based hiring
Head over to our Assessment Library to browse pre-built assessment templates.

On top of its assessment capabilities, Toggl Hire has a visual candidate pipeline and team collaboration features, allowing you to easily keep track of candidates throughout the hiring process and work with your team to make more informed hiring decisions.

By utilizing purpose-built recruitment tools, you can bring your entire skills-based recruitment process together in one place. This can help you save time while improving the candidate experience and ensuring that you select only the best-fit candidates for your organization.

Skills-based hiring is transforming recruitment

If you’re looking for a way to differentiate from other employers, reach out to more candidates, and reduce the risk of a bad hire, then skills-based hiring is a good start.

Focusing on a candidate’s ability to do the job instead of an outdated degree requirement can make your recruitment fairer, faster, more efficient, and cheaper!

Choosing the right technology is essential when assessing candidates’ skills. Skills-based practices and testing platforms like Toggl Hire can make the process easier, saving you time while helping you find your next superstars.

Juste Semetaite

Juste loves investigating through writing. A copywriter by trade, she spent the last ten years in startups, telling stories and building marketing teams. She works at Toggl Hire and writes about how businesses can recruit really great people.

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