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Skills-based hiring: one definition, and three reasons to try it

Thursday 4th January

Skills-based hiring: one definition, and three reasons to try it

Defining skills-based hiring

For today’s recruiters, the challenges are well-documented. Skills shortages. Difficulty achieving diversity targets despite significant effort. Reducing time and cost to hire.

The list goes on. 

And that was before candidate use of GenAI flipped talent acquisition on its head –– driving up the volume of seemingly personalised and high-quality applications, but down the quality of candidates at interview or assessment centres as candidates’ authentic qualities are revealed. 

Today, there’s one solution TA teams are hailing as the answer to all of these challenges. Skills-based hiring.

But the challenge is, everyone has a different definition of what skills-based hiring actually means. And if you and your peers aren’t aligned on what it means, how are you supposed to implement it?  

To make life easier for you, we’ve crawled 10s of resources and definitions to give you our perspective on what skills-based hiring is and where it can make an impact. 

What is skills-based hiring?

As Josh Bersin ponders, is skills-based hiring just hiring people who’ve performed a certain skill “100 times before”? Or is it something else entirely? 

At Arctic Shores, we believe that skills-based hiring means assessing and selecting candidates based on whether they have and can demonstrate the relevant skills for the job –– instead of using experience or education as an indicator of job suitability. While some people might jump to assuming skills-based hiring means solely hiring people based on their hard-skills –– like a person’s ability to code –– many people choose to anchor their skills-based hiring approach in assessing soft-skills –– like a person’s resilience or learning agility. 

This is because hard-skills date quickly and must be constantly refreshed. Most hard-skills have a shelf-life of two and a half years or less. In today’s world of work, we need employees to be able to learn, unlearn, and relearn new skills in a continuous cycle. That’s why many companies are pushing towards selecting based on soft-skills –– because without them, it’s impossible to keep your hard-skills up-to-date.  

Josh Bersin put it best when he said “So much of success is based on ambition, learning agility, culture fit, and alignment with purpose”. He doesn’t mention hard skills, minimum experience, or a particular degree. Instead, he argues that soft skills best indicate a person’s potential to succeed.

We believe that this should be the central premise of skills-based hiring, taking the view that a candidate’s success will be governed by their behaviours – not their bachelor’s degree. 

For many companies, adopting skills-based hiring means scrapping outdated measures, like CVs and the experienced-based hiring approach they represent.

Alternative definitions of skills-based hiring: skills-first hiring and hiring for potential 

Skills-based hiring doesn’t mean completely disregarding a person’s previous experience –– it just means not making that the central or only tenet of your selection process. 

That’s why some companies choose to use the term ‘skills-first hiring’ –– which means evaluating soft skills first, and looking at experience second. For example, if you’re making a senior hire, you’re likely going to want to know they have some experience navigating the types of situations they might come across in their role.

Some companies –– including Arctic Shores –– are also big fans of the phrase hiring for potential. This phrase indicates that –– particularly in roles that are hard-to-fill and facing major talent shortages or for Early Careers roles where most candidates won’t have any experience –– you’re putting the emphasis on a candidate’s future-potential to succeed based on their skills, rather than their past experience. After all, past experience does not always predict future success.

In essence, both skills-first hiring and hiring-for-potential mean more or less the same thing as skills-based hiring. Which definition you choose to use might depend on the objective and mindset shift you want to achieve internally. 

For example, at IKEA, they’ve distilled the new skills-based approach into a five-word maxim: “Look for talent, not CVs”

So why are IKEA (and hundreds of employers like them) relying less on experience, and instead focusing on skills?  

Re-cap: the problems skills-based hiring helps to solve

If you’re already convinced of the merits of skills-based hiring,  you might want to check out our CV-less hiring playbook which sets out a practical methodology for how to embed skills-based hiring in your organisation. 

But if you’re looking for a recap of the main problems skills-based hiring helps to solve either to help you build a robust business case for your colleagues or because you’re personally intrigued, you might want to keep reading for just a couple more minutes. 

By now, you’ve probably seen enough ‘new normals’ to know that the world of work –– and the world of assessment and selection –– are constantly changing. 

And the pace of change isn’t slowing down. The World Economic Forum expects new technology to create 97m “jobs of the future” by 2025. Meanwhile, 52% of CEOs fear skills gaps will hurt profitability. 

It appears that the world of work stands on yet another precipice with

  • Millions of new roles, in which nobody will have direct experience
  • An outmoded hiring system, built to source new talent based on experience, not skills without accounting for the fact that the skills employees need to succeed are constantly changing 
  • AI-enabled candidates make it harder to truly assess a person’s ability to succeed in a role and potentially make it even harder to hire diverse talent

These are the push factors spurring talent teams to try something new: skills-based hiring that selects candidates based on their potential to survive and thrive in the new world of work. So what are the proven benefits of skills-based hiring?

 Three proven benefits of hiring for skills

1. Increase the size of your talent pools (by up to ten times)

As four in five businesses suffer talent shortages, a skills-based hiring approach can broaden your talent pool by helping you attract candidates who have the evergreen skills they might need to succeed in your role, rather than the hard experience.  

McKinsey research suggests skills-based hiring can quadruple application numbers. LinkedIn’s own data indicates that skills-based hiring can multiply applications received by a factor of ten.

And this makes sense. When you remove the educational barrier (sometimes called the ‘Paper Ceiling’) and see beyond experience, you’ll naturally open up your process to more candidates.

For example, when Siemens started hiring for potential, not experience, (with support from Arctic Shores) they increased application volume by 542% for their Project Engineer roles and were able to fill a role they’d previously had open for over 200 days in just 41. 

But skills-based hiring doesn’t just expand your talent pools. It diversifies them too. 

Siemens saw a 50/50 gender split at its shortlist stage, despite operating in an industry where only 16% of employees are female. LinkedIn’s research confirms this effect: they found that a skills-first approach increased the number of women hired in typically male-dominated roles by 24%.

And it’s not just gender, either. By removing the typical barriers to entry, you encourage those of different educational backgrounds to apply, too.

2. Improve candidate quality

As many TA leaders now know,  past experience doesn't always predict future job success. But, with a skills-based hiring approach, you can actually assess whether a candidate has the skills to succeed in a role –– rather than just taking their word for it That’s why TA teams who follow this approach can more accurately identify high-quality talent. 

And that’s not a surprise. Established research suggests that hiring for skills is up to five times more predictive of job performance than hiring based on education level, and twice as predictive as hiring for experience. In our work with the Essex Fire & Rescue Service, 100% of the hires they made when screening for skills (which indicated their potential to succeed in a role) went on to pass their apprenticeship. 

So a skills-first hiring approach won’t just expand your talent pools. It will fundamentally improve them too.

3. Reduce attrition (by up to 40%) and improve speed to competency 

When you hire for skills that indicate future success, rather than the experience listed on a CV, something fantastic happens. People feel seen for their capabilities – not just their qualifications. This has a positive impact on employee satisfaction and retention, but also the likelihood that a candidate will thrive in a role.

2022 research from Deloitte shows that two-thirds of employees would sooner work for organisations that value them for their skills. Meanwhile, nearly 60% felt their current organisations valued experience and degrees over skills and potential.

This shows that there’s an opportunity for employers who put potential first – to both hire better people and earn their loyalty. RSA proves this point. When they dropped the CV requirement, hired for potential instead, and assessed for soft-skills, they reduced new hire attrition by 40%. They saw a 20% acceleration in speed to competency (reduced from 9 months to 11 months) and a significant proportion of their new hires progressed quickly into leadership roles.

How’s that for a case study on the merits of a skills-based hiring approach? 

How Arctic Shores supports skills-based hiring

McKinsey’s research shows that employers’ biggest barrier to hiring for skills is knowing how to validate those skills. In other words, how do you measure them? Until they’re clear on the how, it’s difficult to leave comfortable, established measures like the CV behind.

Arctic Shores helps employers finally measure the skills that matter to them. Our task-based assessment helps companies assess for Personality and Workplace Intelligence (our version of Aptitude testing), measuring things like a person’s resilience and learning agility. Our interactive and engaging tasks are based on decades of neuroscience and can capture over 12,000 data points on how a person thinks, learns and works.   

Unlike traditional psychometric tests, we’re able to uncover candidate potential and reveal their authentic personality and cognitive strengths based on their actions in a task, rather than the answers they give us about how they think they’d behave in a certain situation. This approach is proven to reduce test anxiety for under-represented groups and level the playing field - opening up talent pools. 

This shifts skills-based hiring away from gut feel and guesswork and instead places it firmly in the realm of scientific enquiry. Allowing forward-thinking, data-led TA teams to comfortably scrap the CV, and enjoy all the benefits of skills-based hiring.


Getting started

If you’re convinced of the power of a skills-based hiring approach and if you’d like more advice on how to get started, including a hand-held guide on everything from how to shift internal mindsets to how to re-write your job descriptions, download our free playbook on CV-less hiring.

We’ll hold your hand through the whole process. Good luck!

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