Skills-based hiring: The future of recruitment for HR leaders

4 minute read
Skills-based hiring is poised to replace traditional recruitment, according to a report by online pre-employment testing platform TestGorilla. It’s essential for a diverse and innovative workforce and key to attracting top talent. So is this the end of the traditional resumé?
Sian Harrington

Illustration of Skills icon overlaid on CVs on laptop

In a world where adaptability, innovation and soft skills reign supreme, traditional recruitment methods, namely the reliance on resumés/CVs, are quickly becoming obsolete. In a survey of 3,000 respondents, equally split between employers and employees, 70% of respondents agreed that skills-based hiring trumps the efficacy of resuméss while 86% of potential employees feel that an opportunity to showcase their skills directly correlates with their likelihood of securing a dream job.

The study, The State of Skills-Based Hiring 2023, by online pre-employment testing platform TestGorilla, finds 60% of companies experiencing a skills shortage exacerbated by changing work patterns post-pandemic and staff increasingly changing careers. Hybrid and remote companies have tackled this challenge by tapping into global talent pools to find the best candidates, so it’s no surprise to find that these companies are using skills-based hiring more (at 64% and 78% respectively) than in-person companies, which stand at 57%.

Sectors most likely to be using skills-based hiring at some point in the recruitment process were the broadcasting and publishing industry (100%), marketing (100%) and real estate & leasing (83%). The sectors least likely to be recruiting on skills were wholesale, education and transport sectors.

Graph on organisations recognising the value of skills-based hiring

For HR leaders keen on futureproofing their hiring strategies, this is a critical moment to lean into the wave of change.

“We are facing complexity that requires us to think and connect differently. Our ability to do this is not found in our technical skills but in our manner, attitude and mindset,” says Ali Uren, founder at Kiikstart . “Soft skills are often the harder skills to nurture, as they require us to self-reflect and often to make changes to our character. Skills involving creativity and design are high up the list for employers, as are working and connecting with other people. Simply put, we cannot respond to complex challenges and opportunities without a balanced, ever-evolving skillset.”

In light of this the limitations of resumés have become glaringly apparent. Nearly 87% of employers cited problems with this conventional hiring tool. The inherent challenges range from the inability to verify the authenticity of the information provided to struggling with ranking applicants effectively. Most importantly, 43% of employers found it burdensome to gauge a candidate's genuine skills from resumés, leading to potential mis-hires.

The transition to skills-based hiring offers a fresh, innovative solution to these long-standing challenges, according to the research. In particular three areas stand out:

  1. Diversity and inclusion
    This is a key objective for 85% of employers in 2023, up from 77% in 2022. Skills-based hiring plays a pivotal role in this mission. Employers have reported an 84% positive impact on diversity by adopting this approach, with nearly a quarter reporting a ‘very large’ impact. Some 73% of Asian and Arab employees gained access to new employment opportunities through skills-based assessments, while three-quarters of Black employees accessed new employment opportunities through skills-based assessments.

     
  2. Employee satisfaction
    Happiness in one's role has a direct correlation with productivity and retention. The data is striking – 38% of employees hired based on skills reported happiness in their roles in contrast to the 28% of those hired based on experience. Specifically, in sectors like IT and data, the satisfaction rate for skills-based hires stands at an impressive 55% compared to just 17% hired without it.

     
  3. Talent mobility
    The workforce today is dynamic. With 51% of employees switching career lanes in the past year, it's clear that linear careers are a relic of the past. However, 42% felt their mobility was hindered due to traditional resumé screening. Skills-based hiring offers a tangible solution, ensuring potential isn't overshadowed by formal qualifications.

Education and experience are poor predictors of  job performance. The modern workforce is more versatile than ever. Many candidates, especially in rapidly-evolving fields like software development, cultivate the necessary skills through unconventional means such as self-study or specific work experience. A degree or a linear career path isn't the sole testament to one's capabilities. In this context, 91% of employers acknowledged that soft skills have become more paramount than they were half a decade ago.

“Skills-based hiring is transformative. It not only ensures an equitable process but also has the ability to enhance the quality of hires made. When we move past traditional requirements like mandatory college degrees, we empower ourselves as hiring managers. By valuing skills and competencies, we deepen our insight into what a role truly demands, leading to better hiring decisions,” says Eryn Marshall VP, people at global employment platform Oyster, which partnered with TestGorilla for the research.

Graph on how skills-based hiring delivers measurable benefits

However, old habits die hard. The survey's findings suggest a lingering attachment to traditional methods, with 82% of employers still relying on resumés in the past year. Furthermore, 69% of employers retain their faith in resumés' ability to determine a candidate's capabilities effectively.

Yet, this allegiance to resumés might be costing companies top-tier talent. Resumé screening often becomes a game of keywords and qualifications, sometimes overlooking genuine potential. A critical statistic to ponder is that 34% of employers admitted to receiving an overwhelming number of resumés, making it an arduous task to sift through them comprehensively. Consequently, talents, especially women and minority candidates, risk being overshadowed in this process.

Despite a near-consensus about the effectiveness of skills-based hiring methods, three top challenges cited by employers are preventing them from switching out resumés for good. Just under 36% cite adding an additional step to the hiring process (up from 28% last year), 35% cite struggling to evaluate assessments from a large number of candidates (up from 29% last year) and 34% cite being unsure about the quality and integrity of tests and assessments (up from 25% last year). This jump in the percentage of employers citing challenges with implementation goes some way to explain the dissonance between what employers are thinking about skills-based hiring and what they’re actually doing.

Nevertheless, TestGorilla concludes that to create an equitable future for recruitment, where data-driven hiring processes are the norm, time- and cost-to-hire are low, retention is high and mis-hires are a rarity, employers must go all-in on skills-based hiring.

Says TestGorilla co-founder and chief executive Wouter Durville: “It’s important to note that the only reason opinions are changing is because skills-based hiring is outperforming traditional recruitment in every key metric. For the thousands of organisations struggling to find the talent they need these outcomes are impossible to ignore. It’s clear that there’s a massive sea change underway here and we’re very excited to see the momentum towards skills-based hiring grow.”

Published 11 October 2023
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