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The U.S. job market continues to defy expectations, adding more than half a million jobs in January and reaching a 54-year low unemployment rate of 3.4%. It’s no surprise that 61% of the U.S. business leaders surveyed by LinkedIn recently say it’s challenging to attract top talent right now.

In today’s uber-competitive talent market, forward-thinking employers are switching up their talent acquisition strategies in order to win more qualified candidates for their team. Highly skilled talent will always be in high demand and skills-based hiring can help you identify, engage, and close these coveted job seekers.

What is skills-based hiring?

Skills-based hiring is a recruitment approach that focuses on evaluating candidates based on their skills, rather than on their education or past work experience. 

Employers have long relied on proxies like education or years of experience in a given role to signal that a candidate was capable of performing a job. Instead, these unnecessary requirements weed out perfectly qualified candidates for seemingly arbitrary reasons.

Skills-based hiring is gaining popularity because it helps employers find qualified candidates with the necessary skills and potential to succeed in the role. This approach works best with entry-level and mid-career positions that don’t require specialized training or credentials. 

4 advantages of skills-based hiring

Skills-based hiring offers several advantages over traditional hiring methods that focus on a candidate’s pedigree. 

1. Increase your quality of hire

Pedigree requirements like degrees and years of experience aren’t reliable proxies for candidate quality, but skills and competencies are. LinkedIn research shows that employers who find talent using skills are 60% more likely to make a successful hire than those who don’t rely on skills as part of their hiring process. 

When employee competencies are aligned with their role, your team is set up for success and more likely to be engaged and motivated in their work. This can lead to higher performance, productivity, and profitability.

2. Expand your talent pool

The talent shortage has reached a 16-year high, with 75% of companies reporting difficulty filling open positions.

Skills-based hiring can help employers identify candidates who may not have formal education or traditional career paths, but have the right mix of skills for the job. For example, a cashier has 79% of the skills needed to be a customer service specialist and 68% of the skills needed to be an office assistant. 

Removing unnecessary job requirements — like years of experience in a specific role or a skill that can be easily learned on the job — may expand your talent pool immensely. This can have a significant societal impact as it removes barriers so more people can access well-paying jobs.

3. Reduce bias and increase talent pipeline diversity 

People from historically marginalized groups are less likely to have a college degree and more likely to be excluded from certain industries and roles. Skills-based hiring focuses on objective criteria that are more relevant to the job so you can reduce unconscious bias in the hiring process and build a more diverse talent pipeline. 

LinkedIn data suggests that adding skills qualification transparency encourages more women to apply to jobs they may not have otherwise applied due to a higher self-qualification bar.

A diverse, skilled workforce can bring new perspectives and ideas to the organization, leading to increased creativity and innovation.

4. Improve employee retention

When people’s skills are well matched with their roles and they feel a sense of belonging at your organization, they’re less likely to leave. LinkedIn data also shows that employees without a traditional four-year degree stay 34% longer than employees with such a degree.

You can boost retention further by connecting skills-based hiring with your employee learning and development program. Identify transferable skills and skill gaps to create an employee development plan to help your team members progress at your organization. Companies that excel at internal mobility retain employees for an average of 5.4 years, nearly 2x longer than companies that struggle with it.

How to implement skills-based hiring throughout each step of the hiring process

Most employers (81%) believe they should prioritize skills over degrees, but 52% are still hiring from degree programs because they believe it’s a less risky choice. 

Skills-based hiring requires a shift in each step of the hiring process, and that can feel like a daunting task — but it doesn’t have to be. Pick an evergreen or hard-to-fill role to start with and make small changes to focus on candidate skills throughout the recruitment process.

1. Update your job descriptions

Skills-based job descriptions focus on responsibilities and the competencies a candidate should have to be successful in the role. 

Invite your hiring manager to a kickoff meeting to discuss the essential skills a candidate should already have and what can be learned on the job. Challenge any unnecessary qualifications like college degrees or required years of experience that may discourage otherwise qualified candidates from applying. Then use this information to craft a compelling job description that will attract and engage top performers.

Updating education requirements in job descriptions is a common practice to overcome a talent shortage. Employers reduced college degree requirements for 46% of middle-skill positions and 31% of high-skill positions between 2017 and 2019, when hiring was extremely competitive. We saw a similar trend for intensive-care and critical-care nurses during the early COVID-19 pandemic, as the share of jobs requiring a bachelor’s degree declined from 35% to 23%.

2. Expand your candidate sourcing channels

Job ads will only yield a fraction of the qualified candidates available. Proactively sourcing talent will help you build a more robust, diverse candidate pipeline.

Expand your candidate sourcing channels and search parameters to focus on skills over pedigree. There are many different ways people can learn new skills and build expertise. For example, source candidates who have attended boot camps or completed skill certifications. You can partner with the Black Professionals in Tech Network in addition to sourcing computer engineering candidates from historically black colleges and universities (HBCUs). Or meet people at in-person industry conferences and networking events. Candidates who have gained skills in less traditional ways can be a great source of hire.

3. Focus your candidate screening process

When recruiters spend just seconds on application and resume reviews for each candidate, unconscious bias can easily creep in. For example, a Harvard graduate or Google alumni might be moved to the next stage without regard for skills, while a top performer without well-known institutions or organizations listed may be quickly passed over.

Develop screening criteria and match it against the candidate’s skills, as well as the achievements that speak to their mastery of your role’s required skills. If your hiring software allows you to mask elements like the candidate’s name, address, past employers, and education information, use that feature to ensure those often irrelevant details don’t cloud your judgment.

It’s also important to keep in mind that space on resumes and applications is limited, and candidates may not list every relevant skill. Keep an open mind around candidates who fulfill most of the job requirements — particularly if they list adjacent skills or if any missing skills can be learned on the job. 

4. Build a structured interview process

Effective skills-based interviewing requires some preparation, but it has the upside of reducing biases and helping you identify the best candidates for the job.

Develop a structured interview process for phone screens and in-person interviews that assesses candidates based on the required skills and competencies for the role. Each candidate should be asked the same questions, in the same order to ensure they’re all being evaluated on the same criteria.

Use behavioral questions that ask candidates to provide specific examples of how they’ve demonstrated the required skills and competencies in the past. For example, when interviewing a candidate for a customer-facing role, you could say, “Tell me about a time you provided exceptional customer service.”

5. Conduct skill-based assessments

Skills-based hiring is effective because candidate qualifications can be objectively measured through pre-employment skill assessments. This candidate evaluation method certainly isn’t foolproof, but demonstrating skills is certainly more indicative of future success than pedigree qualifications.

You can use an online skill assessment platform or an internally developed tool to measure a candidate’s mastery of the required skills for your role. For example, you might ask a software engineer to complete a coding challenge to assess their programming skills, while a sales candidate might be asked to role-play a cold call.

6. Revisit background checks

Modern background checks are quite comprehensive. Some of the information gleaned may not be applicable to the job and shouldn’t be used to make — or unconsciously influence — the decision-making process. For example, education verifications shouldn’t be used for jobs without a degree requirement because they can lead to biased hiring decisions.

Revisit your background check package to ensure it focuses on verifying information that’s required for the job — and nothing more. 

Reference checks can be a great tool to verify a candidate’s skills, responsibilities, and accomplishments. Ask to speak with a former manager, a peer, and (when applicable) a direct report to get a well-rounded view of the candidate. In lieu of formal work experience, you might also consider references from former instructors, classmates, or freelance clients.

7. Make fair job offers

The way you pay employees reflects what you value. Review your compensation strategy to ensure it aligns with skills-based hiring.

Job offers should be based on a candidate’s skills and expected impact rather than years of experience and level of education. For example, a top performer with no formal education may earn more than an average performer with a master’s degree in the same role.

Leave room in the salary range for employee growth and development and explain to your candidates how they can earn higher levels of pay over time. As your employees improve their skill sets, reward them with higher compensation and opportunities for advancement to encourage continuous learning.

Final thoughts: A skills-first labor market is emerging

LinkedIn data shows that 40% of companies rely on skills to source and identify job candidates, up 20% over the previous year. And the number of job postings on LinkedIn that don’t require a four-year degree has risen from 15% to 20% year over year, a 33% increase.

Skills-based hiring is gaining traction as more employers realize the advantages of adapting their talent acquisition strategies for the modern world of work. Give it a try to see how your own organization could benefit.

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