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Skills-Based Hiring: The Future Of Talent Acquisition

Finding and hiring the right people (and placing them in the right roles) is critical to business success. While this is not a controversial idea, many organizations are still using outdated Talent Acquisition (TA) processes that prioritize previous job titles, years of experience, or educational attainment, rather than the actual (or potential) capabilities of the candidate.

As the VP & Group Head of Recruitment at National Grid, Darren Peiris, recently said on The Talent Blueprint podcast, “Recruitment is the most important thing we are going to do as an organization. It can help change the culture, the people, the performance, what we deliver. So I always say to people, if you’re going to prioritize something, prioritize recruitment.”

In 2023, prioritizing recruitment means rethinking how we identify, engage and attract talent into a business. And, in the increasingly competitive talent market, the businesses that have established a skills-based talent acquisition process will have the competitive advantage.

As organizations embrace skills-based transformation, they are looking at all aspects of the talent lifecycle – including recruitment – through the lens of skills.

What is skills-based hiring?

Skills-based hiring, in short, is a Talent Acquisition approach that evaluates candidates based on their unique and individual abilities and skills, as opposed to assessing them based on more “traditional” measures, like previous job titles, educational attainment, or other more subjective factors. This method is gaining traction as it provides a more objective and effective way to evaluate candidates – and ensure they have the necessary capabilities to succeed in a given role.

Korn Ferry research shows that by the year 2030, demand for skilled workers will outstrip supply, which is expected to cost companies (in the U.S. alone) $1.7 trillion. The competition for talent with highly in-demand skills will become even fiercer, and the skills needed to succeed in many roles is changing quickly. Companies are realizing that they need to deconstruct jobs into the tasks they comprise and the skills required to do them, in order to find agility and speed in a challenging talent landscape.

How does skills-based hiring work?

A skills-first approach to hiring would start with breaking down the “work to be done”, looking at the skills needed to perform the work, and asking who is best placed to deliver the work. While there may be ways to match external candidates with the role in question, there could also be internal staff members who could be redeployed – or even reskilled in one area – to fill the gap more quickly and cost-effectively.

With a skills-based view of your entire talent pool, including previous and potential applicants, silver medallists, alumni, and current employees, it should be easy to identify a shortlist of quality candidates for a given role.

Candidates would be asked in interviews how they have (or would) demonstrate a particular skill, and there would be a standardized approach to assessing the skills they bring to the table. Employers using objective assessment methods will know that new recruits have the skills to succeed: looking at skills rather than more subjective measures, such as “cultural fit”, which commonly introduce bias.

In addition, explainable AI would be applied to the candidates’ skills data to find the matches that may otherwise have gone unnoticed.

At the hiring stage, you could also show people their potential career path with you. With AI, it becomes possible to visualize a range of options and the necessary steps. Someone joining in a junior role could be easily inspired, before they even start: they can see various ways to take on a more senior position in the company, aided by different types of training program, on-the-job learning and willing mentors.

Think about how you can create a logged-in experience for career discovery: a way to engage candidates, gather data from them, and present back the most suitable open (or ‘coming soon’) vacancies. Then look at how nurture programs for suitable passive candidates can be automated, with potential employees receiving job alerts when the ideal role for their skill set has opened up. 

Benefits of a skills-based approach to hiring

With a skills-based hiring strategy, your organization can:

Find the best-fit talent for each role, project or gig

By switching your focus from job titles or experience to skills, you can better determine which candidates are actually best suited to do the work.

Skills-based hiring allows you to better ensure that candidates are a good match for each specific role or project, and that they have the necessary skills to be successful in those roles. By aligning skills to work in this way, organizations tend to make better hires, and employees often perform better and experience higher job satisfaction – leading to lower turnover rates.

This type of hiring process is made much easier with AI-powered tools such as a Talent CRM or skills-based Job Architecture. You need tools that can integrate with your existing HR systems, and can connect skills data across those systems – updating dynamically, as people’s skills change over time.

Increase diversity and inclusion within the business

A key benefit of skills-based transformation in your hiring process is the increase in diversity, equity, and inclusion. When skills are considered above everything else, the candidate pool becomes much larger, and it ensures that everyone who has the right skills is given a fair shot.

When sourcing and hiring is carried out based on a common and clearly defined skills language, with automation or explainable AI helping to identify suitable candidates, bias is reduced – and fairer, more equitable shortlisting and recruitment decisions can be made.

Factors that are often taken into consideration during a traditional hiring process – the university they attended, their nationality, their age, socioeconomic background – can lead to bias influencing the decision. When factors like these are used to make decisions around hiring, qualified candidates who have the skills you need for the role, can be unnecessarily excluded.

Fill skills gaps quicker

A skills-first hiring strategy also allows your organization to be much more efficient and agile with your hiring efforts. With a skills-based approach, it becomes easier to recognize skills gaps, and find candidates (internal or external) who have the skills you need to fill them – allowing you to add a layer of “future-proofing” your business.

When you fill skills gaps quickly, there are also cost savings: the more recruiter hours it takes to fill a role, the more expensive each new hire becomes. If you are not hiring based on skills, you run the risk of incurring even more expenses if you make a “bad hire” – meaning you hired someone for a role, but they weren’t actually a great fit, and now you need to start again.

But, with the right Skills Intelligence and AI-powered HR tools, you can not only better equip your TA team to quickly find and nurture candidates, but you can ensure that the people you are hiring have the skills needed to fill critical gaps – saving the organization time, money, and effort.

The power of AI

Skills-based transformation doesn’t (and shouldn’t) just apply to the sourcing and hiring process – it affects internal talent mobility, talent management, learning and development, and workforce planning. Skills-based talent approaches are very difficult to implement without the right technology.

Organizations need HR tech tools powered by AI to help them in each of these areas. Tools that help identify and define the skills you already have internally, the skills gaps you need to fill, and quickly find the candidates who have those skills – whether they are already within your organization or are brand new hires.

But it’s important to remember that technology alone can’t complete a skills-based transformation. It requires an organization-wide cultural change in the way “work” is viewed and done – and a willingness to embrace new types of data and technology to meet talent-related goals.

As the pace of change continues to increase, skills gaps will only grow larger. In our survey of business leaders, 54% of respondents said that increasing skills shortages/harder to find the skills they need is the biggest talent challenge their organization is facing right now.

With the right technology partner and a solid skills-based strategy, your Talent Acquisition function can operate more efficiently, and effectively – helping you find the best-fit candidates more quickly, and in a fair and equitable manner.

Watch this webinar on demand to learn more about how Beamery can help you make a business case for skill-based transformation.