The rise of skills-based hiring and what’s blocking it

In the past, hiring decisions were typically made based on previous work experience and education. Now, more companies struggling with a tight labour market have shifted and placed skills at the centre. They are combining role-specific assessments with personality tests to find and retain the best talent who will match the role and the company culture in the long term.

TestGorilla’s The State of Skills-Based Hiring 2022 report states that 76% of employers now incorporate skills-based hiring to identify top talent, with a significant 55% relying on role-specific skills tests.

Why is skills-based hiring on the rise?

In short, because it works! As Matthew Swinden, Head of People at Starmind says, “You don’t hire purely on previous experience or education, because these things do not survive the litmus test of being in an actual organisation. When we talk about skills-based hiring, what we’re really looking for is that person who has the skills, knowledge and experience to be able to navigate that role in an organisation and make themselves successful,to make the company successful.”

The numbers speak for themselves.

Mckinsey report that “Hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience.” Not surprising therefore that studies have reported that 93% of companies stated they had seen a reduction in their mis-hire rate, with 44% reporting a decrease of more than 25%.

Other benefits reported include:

• There is evidence that voluntary attrition for people recruited using skills-based hiring is up to 50% lower than those recruited via other approaches.
• Skills-based hiring increases diversity. More than 90% of organisations say it has helped in this area. With Pipeline research finding that for every 10% increase in intersectional gender equity, organisations achieve a 1%-2% boost in revenue, incorporating skills-based hiring could help to boost profitability.
• It extends the talent pool to those who possess valuable skills but who may not have pursued traditional academic routes or followed linear career paths.
• It typically leads to a more streamlined hiring process reducing the time to hire.
• The alignment of skills and role requirements leads to increased job satisfaction and in turn higher retention.
• When employees are in roles that suit their skills and abilities, they are more likely to feel that they are part of a team working towards a common goal leading to a more positive culture.

So, if the facts stack up, why are some leaders and companies not embracing skills-based hiring?

Blocker 1- New can feel uncomfortable and feel risky.

When cars were first introduced, they faced significant scepticism and resistance. More recently when the internet first emerged in the 1990s, it was met with scepticism by many traditional businesses. The idea of conducting commerce online was considered uncertain and unproven, and there were concerns about security, reliability, and the ability to monetize online ventures.

At first perceived as risky and a fad, both are now an integral part of modern life, and it's hard to imagine a world without them. We predict skills-based hiring will soon fall into that same category.

Blocker 2- There’s a belief that people can trick the assessments.

Whether it’s getting someone to do the test, or doing it multiple times, there can be a fear that that talent applying using pre-interview testing will game the system. To be fair some poorly designed tests can result in this, but most tests from reputable providers have been designed and properly vetted to combat possible “cheating”.  When you consider that more than 80% of CVs have lies on them, it’s far more likely you’ll making a decision based on an inaccurate CV than on a test that someone has manipulated.

‍Blocker 3- People think it provides a worse experience for candidates

Asking candidates to take pre-interview assessment at the start of the hiring process instead of CVs and even worse covering letters is often cited as a hassle for candidates. However, when you consider the advice is to tailor each CV and covering letter for each role and each CV is scanned for less than 7 seconds, this argument starts to crack. It splinters completely when you incorporate the fact that the assessments are time-bound, guaranteed to be looked at and usually designed to be engaging and stimulating. A report by Equalture that asked more than 4000 participants to rate their assessment experience out of 5 showed an average score of 4.7. Hardly the sign of annoyed test takers.

Blocker 4- It’s not clear which skills are most important for each role

Deloitte research shows that many senior leaders’ misgivings about skills-based hiring models are based on a lack of understanding of the role that different skills play in their business. One quick way round this is to administer skills tests to your employees. This can help you identify the key skill sets for each role and function that align with high performance and help you identify skills gaps to look for when you hire.  These assessments can be combined with other methods such as 360 feedback.

Swinden explains that “At Starmind, we create detailed scorecards to help our hiring managers. We break out certain skills and give the tools to the managers to enable them to ask questions to establish the validity of those skills. It comes down to prep, to making sure you understand the role and ensuring you’re aligned on what the reality of the job will be so that the job description used to hire isn’t just a fantasy.”

Blocker 5- It’s positioned as a way to reduce bias

Whilst there is good evidence that skills-based hiring can significantly reduce bias, when it is given as the key reason to adopt it can make people defensive – as if they are being accused of sexism, racism, classism, or some other ism. This is a simple one to fix. Position skills-based hiring as something that saves time and gives them better data across all applicants to make effective decisions rather than something that stops them from making biased choices. A small tweak in messaging but one that removes any hint of blame and eliminates any need for defensiveness.

While most employers agree skills-based hiring is valuable, not all have adopted it their practices often due to the blockers above which are often based on myth and lack of understanding. They’re keeping qualified talenton the sidelines and out of their businesses at a time when they need this talent to grow.

Skills-based hiring works, and it could be the key to accelerating your growth and making you more competitive. How long will let the “perceived” blockers hold you back from make the obvious move to hiring more fit for today’s world of work?

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