What is skills-based hiring?

Skills-based hiring involves focusing on a candidate’s actual abilities. Rather than asking questions like, “What does their background suggest they can do?” we ask, “What can this person actually do (and how does this support our needs)?” This strategy assesses candidates based on how their skills align with the specific needs of the position and the company.

And if you haven’t heard of skills-based hiring yet, chances are you will soon. According to LinkedIn’s 2024 report on the future of recruiting, 73% of recruiting professionals now prioritize skills-based hiring.

Why skills-based hiring is gaining ground

There are several benefits to adopting a skills-based approach: It ensures that you make hires based on a candidate’s current capabilities rather than their past experiences. When you take a structured, skills-focused approach to hiring, you create a more efficient and equitable process. You increase your chances of finding someone who’s the right fit while reducing bias and increasing diversity within your workforce. And you hire people who are ready to hit the ground running with a shorter ramp-up time, which can maximize their employee lifetime value (ELTV).

Plus, employers are facing a widening skills gap, especially when it comes to data analysis, project management and AI/machine learning. But it’s not only technical skills that are lacking. During a discussion at SXSW, panelists noted that soft skills like empathy, communication and listening are just as essential – and employees may require extra support to develop them.

According to the Future of Jobs Report 2023, in the next five years, skills gaps and an inability to attract talent will be notable barriers to industry transformation. This underscores the need for organizations to embrace a flexible, skills-based approach to talent management.

Implementing skills-based hiring in your organization

Adrina August, Greenhouse’s EMEA Content Marketing Manager, shared some practical tips on adopting skills-based hiring. Here’s what she recommends.

• Revamp your job descriptions: Have you ever noticed how some job descriptions seem stuck in the past? Due to the rapid pace of change in the business world, traditional job descriptions often lag behind the actual demands of work. “By integrating technology that processes granular data and skill-related information, we can develop job descriptions that are not only reflective but also predictive of the roles they aim to fill – ensuring they are precise and up-to-date with how work is actually being done today,” wrote Adrina.
• Embrace a “screen in” approach: At Greenhouse, we “screen in” candidates, which means we focus on the diverse skills and capabilities of each candidate rather than their background. “This skills-first approach not only broadens our talent pool but also actively drives our DE&I objectives, ensuring our teams are as diverse as the capabilities they bring,” wrote Adrina. “This inclusive approach allows us to tap into a broader talent pool, equally valuing those with non-traditional backgrounds who bring unique skills and perspectives.”
• Evolve your interview techniques: Traditional interview questions tend to be formulaic and uninspiring. Adrina suggested ditching old standbys like “Where do you see yourself in five years?” and embracing practical, skills-based assessments. This approach levels the playing field for all candidates – including those who may not have traditional college degrees. Whether it’s a real-time coding challenge, a strategic planning exercise or a hands-on task relevant to your industry, these assessments can more accurately gauge a candidate’s ability to perform in the role, showcasing their skills directly.
• Use the right tools: Adrina highlighted the fact that hiring software, like Greenhouse, not only helps with organizing and tracking candidates, but also supports building structured interview kits tailored to assess specific skills. This ensures every candidate is evaluated fairly and consistently.

The role of skills-based hiring in diversity and inclusion

One of the major benefits of skills-based hiring is that it can contribute to your diversity, equity and inclusion (DE&I) goals. Focusing on skills rather than degrees allows you to consider a much broader range of candidates who bring different experiences and perspectives to the table. The term “paper ceiling” refers to the difficulty that workers without bachelor’s degrees face when it comes to employment, and initiatives like tearthepaperceiling.org aim to grow awareness of this issue and promote skills-based hiring.

On a panel discussion at SXSW, Jonathan Adashek, Chief Communications Officer & Senior VP, Marketing & Communications at IBM, said, “It’s important to create a shared awareness for the paper ceiling. More than 60% of people over 25 don’t have a college degree. These people think it’s too costly or they won’t get work. But great skills can be found anywhere.” At the same panel, Aneesh Raman, VP & Head of the Opportunity Project at LinkedIn, said, “If you bring a skills-based filter to your recruiting, you broaden your talent pool by 20 times. Your talent pool for women goes up 60%. It equalizes access to the labor market.”

Read more about this topic in “Driving DE&I through skills-based hiring.”

Upskilling and reskilling for future success

All this emphasis on skills shouldn’t end once someone is hired. Because skills are so important in the modern workforce, employers also need to commit to upskilling and reskilling their current employees.

If you’re not familiar with these terms, upskilling refers to the process of acquiring new skills or enhancing existing ones, while reskilling involves learning a completely new set of skills to transition into a different role or industry. Forward-thinking companies invest in learning and development to upskill and reskill their employees to boost employee engagement, retention and productivity. If you offer training that allows an employee to grow their skills and adapt to changing job requirements, they’re much more likely to stick around – and be successful.

There’s also a DE&I component to upskilling. “When done right, upskilling can also help advance equity at your company,” said Micah Gebreyes, Senior Content Marketing Manager at Greenhouse, on a panel at SXSW. “Upskilling and reskilling employees provides an opportunity for advancement for those that might not get it elsewhere. Without it, businesses are potentially putting individuals from historically underrepresented groups at an initial disadvantage, but also putting their business at risk because studies have shown that diversity at every level drives business success.”

Upskilling and reskilling are often part of a larger internal mobility initiative. The idea behind internal mobility is that you already have the right people within your company – they just might need to apply their skills in a slightly different way. Maria Culbertson, Senior Manager, Internal & Executive Communications at Greenhouse, said, “As companies continue to scale, the likelihood of finding talent within the walls of your own organization grows significantly. You have entire talent pools of candidates on hand, fully bought into your mission and ramped on your company. So why not go there first?”

Here are a few tips to create successful upskilling initiatives at your company:

• Be transparent about learning and growth opportunities

If your company already offers professional development opportunities, clearly communicate them to both current employees and candidates. Make sure interviewers are also prepared to answer questions about what growth opportunities look like at your company since candidates may bring these topics up during their interviews.

• Don’t dictate – make it a partnership

People feel more invested in learning when they have agency to choose what, when and how they learn. Have conversations with your team about what they want. Rather than dictating a career path for them, work in partnership with them to figure it out.

• Create psychological safety

Admitting you don’t know something can make you feel vulnerable, and many people won’t feel comfortable doing this if you haven’t created psychological safety on your team. As a manager, you can model and encourage this behavior. Share your origin story and ask your team members to do the same. When you explain why you are who you are, you create a deep connection and develop the trust that’s necessary for having difficult conversations.

Leveraging AI in skills-based hiring

You might be wondering how artificial intelligence (AI) can come into play with skills-based hiring. There are a few ways AI can help support your hiring efforts.

One of the top benefits of AI is speed. AI can quickly parse resumes or profiles to evaluate candidates’ skills, which helps streamline the hiring process. For example, a recruiter can outline the skills they’re looking for and an AI tool can surface hundreds of candidates in a fraction of the time it would take the recruiter to comb through their resumes or profiles.

In skills-based hiring, AI also has the potential to assess a candidate’s skills objectively and accurately. AI can mitigate bias and reduce the impact of human error. Some tools, like resume anonymization, use AI to redact personally identifiable information such as first and last name, gender and candidate photo, so recruiters focus on a candidate’s skills instead of their biographical information. Learn more about resume anonymization features in Greenhouse here.

But it’s important to note that AI is not immune to bias. AI algorithms are only as effective as the data they’re trained on. If the data used to train the AI system is biased, it may result in biased outcomes. And while AI can easily assess hard skills, it often struggles to assess soft skills like creativity or emotional intelligence.

If you choose to use AI tools, make sure you conduct regular audits and assessments to identify any biases or inaccuracies. You will likely also want to consider how you’ll communicate your use of AI with candidates, especially since some cities and states are now requiring employers to disclose this information. Read more about how Greenhouse approaches this in our Guidelines for using AI in our interviewing process.