The Burning Glass Institute and Harvard Business School recently released a study on skills-based hiring. It contained both good and bad news about employers’ evolution into a more equitable and productive way to hire talent.
The good news
- From 2014 to 2023, the annual number of roles from which employers dropped a degree retirement increased 4X.
- Non-degreed employees had a 20% higher retention rate over a two-year period than their degree-holding colleagues.
- Non-degreed workers hired into roles that previously required degrees experience a 25% salary increase, on average.
The bad news
- Almost half (45%) of all firms surveyed made skills-based hiring changes in name only, with no meaningful difference in actual hiring behavior following their removal of stated requirements from job postings.
- Another 18% backslid further than when they announced a switch to skills-based hiring and are now hiring a smaller share of workers without degrees.
In looking at this data, I see a disconnect between executives understanding the importance of skills-based hiring and executives providing the entire organization the incentives, processes, tools and technology needed to fully implement and reap its benefits.
While it’s not an easy transition by any means, there are a few practical, concrete steps any organization can implement to align its skills-based hiring rhetoric and practices.
Change hiring incentives
The incentives of an organization are what ultimately drive behaviors. If the incentive for a hiring manager (what they are tracked and rewarded on) is to fill a seat as fast as possible, they are not going to worry if the candidate is the right person for the job. They are going to focus on hiring someone fast, using the tools and processes they know best for candidate evaluation. This often means falling back on resume reviews, giving preference to heuristics like degrees.
For skills-based hiring to work, organizations need to change incentives to focus on HR metrics like retention and long-term performance. This shifts hiring managers’ mindset from, “I need to find someone now,” to, “I need to find someone who will stay here and outperform others.”
As shown in the survey, changing these hiring incentives and implementing skills-based hiring results in a 20% increase in retention rates. With the cost of replacing an employee ranging from one-half to two times their annual salary, that 20% increase could result in millions of dollars saved that organizations can invest back into growth.
Give employees the right tools
Changing incentives is part one on the path to skills-based hiring. The other important part is to give employees the right tools and technologies to make informed, data-driven and fairness-aware hiring decisions.
The promise of skill-based hiring is making better decisions and getting more high performers into your organization. But, without the proper tools, hiring managers and others involved in talent screening and selection can’t change their current processes.
This process starts with putting better data into the hands of hiring managers so they can make more informed decisions when they’re working with the “top of the stack,” or the pile of resumes they need to review for an open position. If you don’t start here, then everything down the line will end up being more of the same.
We use an AI-based applicant screening as part of our skills-based hiring process. This fairness-aware model doesn’t take degrees into consideration. It looks for someone’s ability and tenacity to be a high performer in a given role. From there, our hiring managers can apply their extensive knowledge to candidates, looking at criteria that AI doesn’t currently do a great job screening for, like cultural fit with a client.
It’s this combination of technology and personal connection that unleashes the full potential of skills-based hiring.
Work with partners who understand skills-based hiring
We’re lucky at Catalyte to have 23+ years of data and experience when it comes to the technology needed to implement skills-based hiring. Not all companies have that luxury, or the ability to quickly revolutionize their HR departments to develop skills-based hiring tools.
Just as with data storage, marketing automation or other critical business functions, organizations can work with partners to jumpstart their skills-based hiring journey. Many of these partners can leverage their own data and technology to help you make skill-based hiring decisions.
The best partners can deeply integrate with your existing data, creating custom models that ensure not only skills alignment, but cultural fit. This combination is what drives the best results, not just for retention, but consistently opening your hiring process to a much broader and better performing level of talent.
I’ve seen skills-based hiring deliver amazing results
Prior to Catalyte, I was chief customer officer at Twitter (before its switch to X). My experience with skills-based hiring and actually looking beyond college degrees led me to the conclusion that every organization should hire this way.
As a business leader, I saw an incredibly expansive amount of talent, with broader and deeper skills and diverse backgrounds that added to the culture of our company and our teams. Tapping into that talent set us up for success. This wouldn’t have happened if we went with the same old way of doing things.
So, I speak from experience. With skills-based hiring, not only do you get the right people in the seat, you know they’re staying longer and you’re setting your organization up for a long-term, sustainable competitive advantage. You can get there with the right incentives, technology and partners.
This post is adapted from a Sourcing for Innovation podcast. You can watch a preview of and listen to the whole conversation below.
