Skills-based hiring: The way of the future

College enrollment has been declining for the past decade, decreasing 8.5% from 2010 to 2024. But experts say the trend will soon be even more pronounced, predicting college enrollment numbers will “fall off a cliff” in 2025.

This phenomenon is one of many factors fueling the swift rise of skills-based hiring. More than 70% of employers leveraged skills-based hiring in 2023, an increase of 17% compared to 2022.

But what exactly is skills-based hiring? What are the benefits, and how can CEOs experiment with this new hiring approach? Let’s dive in.

What Is Skills-Based Hiring?

Skills-based hiring is a recruitment technique that emphasizes a candidate's skill set and abilities rather than focusing on work experience, educational background, and other traditional qualifications.

For example, a marketing company might hire someone entirely based on their ability to write compelling copy and craft creative campaigns instead of looking at their previous job titles or degrees. Likewise, a software developer might hire a self-taught coder with an in-depth understanding of a specific coding language rather than requiring candidates to earn a bachelor’s degree.

How Does Skill-Based Hiring Work?

It’s a logical concept — hiring someone based on what they can do, instead of where they went to school or where they’ve worked. But how do employers put the idea of skill-based hiring into practice?

Here are a few common methods:

• Skill-based job postings: Job descriptions emphasize technical skills, cognitive abilities, or interpersonal skills needed to succeed in the position rather than requiring specific degrees or work experience.
• Skill assessments: Candidates take tests or go through a simulation to demonstrate proficiency in a specific skill.
• Competency-based interviews: Employers ask interview questions that reveal how a candidate demonstrated a specific skill in the real world.
• Inclusive hiring: Recruiters seek candidates with diverse backgrounds who might not have traditional qualifications but have mastered skills relevant to the job.

What Are the Benefits of Skills-Based Hiring?

There’s a reason skills-based hiring is quickly gaining traction. It offers countless benefits, giving employers a more diverse talent pool, more effective workers, higher job performance, and increased employee retention. Everyone wins by choosing candidates who are truly capable and qualified for their roles.

Here are some facts highlighting the perks of this hiring style.

1. Increased Likelihood of On-the-Job Success

“Skill-based hiring is more than 5 times more predictive of on-the-job success than hiring based on work experience,” said David Blake, CEO of Degreed. “And that should blow your mind. [It’s] out there available today to anyone. Just shift how you're hiring people, and you're going to get a three times better outcome and process. I mean, that's huge.”

2. Higher Employee Retention Rates

Skills-based hiring ensures the right candidate lands in the proper role. Unsurprisingly, the result is happier employees. Among companies that hire based on skills, non-degreed workers have a 10% higher retention rate than their degree-holding peers. Better yet, non-degreed workers typically enjoy a 25% salary boost when hired into positions that used to require a degree.

3. Increased Workplace Diversity

When employers require a college degree, they automatically eliminate roughly two-thirds of all workers from consideration. Because this practice disproportionately hurts Black and Hispanic workers, it hinders diversity in the workplace.

4. Increased Emphasis on Life-Long Learning

Technology is advancing at lightning speed, and workers are having a hard time keeping up. In fact, experts predict that 50% of all workers will need to reskill by 2025 in response to technological advances. A skills-based hiring approach embraces this inevitability, encouraging employees to maintain and grow their skills over time to stay relevant.

Hiring for skills is the way of the future. It’s more predictive of job performance than hiring based on educational qualifications or work experience, and it leads to happier, more productive employees. What are you waiting for if you haven’t given skills-based hiring a chance?