Is Skills-Based Hiring a Nothing Burger?

In the ever-evolving landscape of recruitment and recruitment tools, a current hot topic that's been buzzing around in 2023 and 2024 is skills-based hiring. But is this trend all it's cracked up to be, or is it just a fad? Or worst still a load of rubbish? Let's dive into the ins and outs of skills-based hiring, dissect its implications, and uncover whether it's a game-changer for TA and HR or just a fleeting fad.

So, What Is Skills-Based Hiring?

First of all, let's get our definitions straight. As far as I can ascertain Skills-based hiring focuses on the specific abilities and experiences relevant to a job, rather than traditional (maybe more paper based) credentials like degrees and past experience in a particular industry or history in a similar role. It's about transferable skills - what you can do, not just where you've been.

However, I must say I’ve been in recruitment over 30 years now and I’ve always hired this way. Yes, qualifications and experience might get you in the door for an interview. But at interview its more about behaviours, cultural fit and those transferable skills or life experiences that get you the role. So, questions like - can you progress within the organisation beyond this initial role. And do you have transferable skills that can be applied to other roles or different projects regardless of industry or qualifications. Do you have the ability to pick up new skills? Many people do. I’ve never just hired on experience or qualifications alone but always looked for these wider and broader competencies, technical and soft skills.

Why the Buzz Now?

1. We have a very tight labour market, especially in Australia where unemployment is running at 3.8% (March 2024 Source: ABS) which is still incredibly low. Most employers are struggling to attract and retain capable staff with the relevant skills or “Talent” as we like to say in Talent Acquisition.
2. A shift in perspective: Employers are increasingly recognising that a degree, TAFE or qualifications doesn't always equate to job readiness. Skills-based hiring (or even Lived Experiences) potentially allows them to tap into a broader or different set of skills and talent pools, with a new range of candidates with transferable skills.
3. The Digital Skills Gap: As technology advances, the demand for digital skills outpaces the supply. Skills-based hiring helps companies also potentially helps find hidden gems with the right skills. Or identify those with the propensity to learn new skills.

The Benefits of Skills-Based Hiring

• Levelling the Playing Field: It opens opportunities for non-traditional candidates, and certainly enhancing diversity and inclusion. Opening up new talent pools or new opportunities for those less qualified, less educated or who have non-traditional backgrounds. Yet still have amazing skills against traditional hiring practices (based on qualifications or the “right” background alone).
• It allows for hiring on transferable skills or on propensity to learn new skills, especially when things change or when new skills can also be learned on the job.
• It tries to focus on what matters most for the role: By concentrating on skills, companies ensure they're getting the right capabilities developed or hired that they need for job or project success.
• It can help unearths hidden gems - allowing companies to discover talent that might be overlooked due to non-traditional backgrounds. ?
• Matches current needs – Organisations taking this approach try to ensure that the skills of the workforce are directly aligned with the company's current and future skills needs, allowing for more flexible, nimble, efficient and productive teams.
• Helps with internal talent pools and resource planning. Being able to see who you have, what skills they have and where there are skills gaps and shortages. This would help internal mobility in the “Talent lifecycle” and training needs analysis of the workforce. And potentially allows for much better workforce planning than most HRIS systems can currently provide.
• Prepares for the future in those industries where the required skills are rapidly changing, a skills-based approach might allow companies to adapt quicker by hiring for emerging skills.

But Does it Work?

While the benefits are clear, there are several concerns and challenges to consider.

• Defining the “skills”. What are the skills? Are we talking soft skills, technical skills, Behaviours, competencies, leadership? Or all of the above and how do we measure them? Who judges them?
• Setting and measuring skills is open to subjectivity and bias: There's a risk of subjective judgment in assessing skills, potentially leading to bias. Often tools or systems that offer to help with skills based hiring, or internal talent pools also allow participants (e.g. internal candidates) to self-assess their skill level or their managers. Who’s right?
• Verification and measurement: How do you accurately assess and verify someone's skills, especially soft skills? Are we all measuring the same way?
• Storage and upkeep. We may have a skills database but as with any technology its only as good as the data. Does the organisation have a skills-based mindset. Enough to keep things current. If not kept up to date it will soon become out of date and worthless. Who is to maintain the skills database? HR, the employee, the Hiring Managers?
• Do we need it? Can we make hiring decisions based on transferable skills without a tool or a database (many of us do this already at assessment stage and can still hire for transferable skills).
• Current ATS (Applicant Tracking Systems) have such search or AI already built in re searching or ranking candidates on key words or “skills” or ideal profiles matched against a job profile. So, do we really need a separate or new tool or database to help search, hire or record skills?
• Would skills-based hiring (The skills assessments or database tools on offer) only really work for very large global organisations? Or technical skills not soft skills? Are tools really needed in smaller say less than 5000 employee organisations.
• Overlooks potential – could focusing solely on current skills cause companies to overlook candidates with high potential who could grow into a role through training and development if not identified.
• Can be short-term focused. This method can be short-sighted, favouring candidates who can "hit the ground running" over those who could offer long-term benefits or cultural fit and growth to the company.
• It’s difficult to assess soft skills while hard skills may be easier to evaluate, soft skills like teamwork, leadership, and problem-solving can be challenging to assess.
• What’s the cost? Initially, it might require a significant investment in developing assessment tools, and databases, but over time, it may reduce hiring costs by lowering turnover rates and increasing employee engagement if a better match to role or more flexible workforce and more engagement.
• Possibly only really works for data mature organisations and those with a fluid workforce. Otherwise, hard to manage? It may suit those businesses operating in a more 'agile' or project-based environment more ready than others - think large consulting firms or technology-based (project lead) organisations.
• The Change Management aspect can be huge. To shift the mindset of the organisation and invest in the technology company wide to support skills based hiring and internal talent movements. Research shows that businesses that invest heavily in change management activities to support their skills journey tend to perform better (research TQ Solutions) https://www.dhirubhai.net/pulse/you-skills-ready-gareth-flynn-clklc/?trackingId=ciugccgRSj6WIovnazmyXQ%3D%3D
• Skills based organisations and HR will have to consider success drivers that are far beyond just tech and data. Such as the change management needs, employee buy in, and workforce maturity.

Don’t Believe the Hype?

Marc Effron has said in his released summary paper of his research on #skillsbasedorganisations where he concluded that 'the juice is not currently worth the squeeze' pointing fingers at HR tech vendors and large consulting firms for their overt promotion of the solution.

Josh Bersin also says "Skills are a means to an end. They are not the end itself. Don't just try to become a skills-based organisation; instead fall in love with the problem you are trying to solve”.

The Future of Hiring

Certainly, if you search on Google the first page on Skills Based Hiring is full of vendors pushing their wares. That “Skills Based Hiring” is the answer, its quicker, faster, better. Ah and yes you need their specific software or tool to do this. But is that true? Can you do this on a smaller scale or without a new software tool anyway.

As we look toward the future, it's evident that skills-based hiring is more than just a trend; it's part of a broader movement towards more inclusive and effective recruitment strategies. That don’t rely solely on qualifications, and past role titles.

And when working with transferable skills, that this would allow for a more flexible and agile future workforce. It will definitely help the people mix from different backgrounds and cultures or education – which is a good thing. And certainly, opens up the door for more diversity and inclusion in hiring decisions, promotions and movement. Challenging current thinking of a “set career path” and will also question the unconscious bias of some hiring managers always hiring from the same same “talent pools”, departments or universities.

However, many of us have always hired this way. So, nothing new. The bigger question is do we really need a companywide initiative and skills base mapping database or systems to do this? A new tool in order to see our internal skills mapped out. This might be more about a cultural shift in our thinking of “ what is Talent” about how we move people around, train, develop and promote from within - rather than a specific tool?

When it comes to the “skills base hiring” is a new platforms really needed? If we look at the pace of Tech and AI - things are changing super quick and we may be able to use tools such as AI to review existing HRIS or ATS to analysis our current workforce for skills profiles.

In Conclusion

I love the fact that broader thinking promotes diversity when hiring. Something hiring managers should be trained on (see our courses here ). Skills-based hiring naturally leads to a more diverse workplace. And in a tight labour market removes old barriers such having a specific degree or qualification requirements. Companies can open up opportunities to a wider pool of candidates both externally and internally.

So, is the skills-based hiring trend a load of rubbish? Far from it. While it's not without its challenges, the potential benefits for both employers and job seekers are too significant to ignore. However, I also don’t believe we have to run out and purchase the next shiny new tool. Or that a skills based approach will suit every organisation.

By focusing on skills, companies can uncover hidden talent they might otherwise overlook, people who can drive the culture, innovation and growth strategies and a system which also allows for flexibility and being nimble with Talent.

If you’d like to chat more about your Recruitment tools, how to optimise your current ATS and or Train your hiring managers in spotting "new talent pools" - ?talk to us. DM me via LinkedIn or visit our website at www.hillconsultinghrs.com.au