Benefits and Challenges of Skills-Based Hiring

While degrees have historically been fundamental in recruitment processes, their utility is increasingly being questioned in today's evolving job market. Employers are recognizing that a degree does not always correlate with job performance. Instead, there is a growing emphasis on practical skills and specialized knowledge.

That is why skills-based hiring is a clear recruitment trend, but is it already a reality and does it work well? In a highly competitive job market immersed in digital transformation, recruiters are beginning to experiment with this new approach to find employees who, beyond their education and experience, possess a blend of skills that benefit organizations.

In our recent OCC study, Human Resources Trends 2024, three-quarters of the surveyed recruiters stated that skills and competencies are the main aspects to evaluate in a job candidate this year, followed by work experience and stability in previous jobs.

This trend is already evident, as according to a TestGorilla study, a talent assessment software firm from Amsterdam, 73% of employers worldwide used skills-based hiring in 2023, compared to 56% in 2022.

However, this approach to seeking new skills and competencies in employees should not be limited to the hiring process; employers must continue to support the development of employees' skills because in this changing job market, they must remain in a constant state of learning. 

Likewise, to continue this trend, promotions should also be based on skills, as should any decision regarding human talent.

This is why upskilling, training of an employee in new competencies to optimize their performance, is the strategy that OCC study participants would most like HR departments to implement, in addition to having more opportunities for professional development, salary improvement, and a positive organizational climate.

Consulting firm EY also took on the task of analyzing this trend in a study conducted at the end of 2023, emphasizing that the environment of technological change requires employees to undergo upskilling and reskilling dynamically, and that a static university degree is beginning to seem less relevant. Furthermore, it reported that organizations are struggling to find the best talent, so they must explore different ways to fill vacancies.

EY also highlights that in the United States there are 70 million people without bachelor's degrees who are self-taught or who acquired their skills through experience, becoming an important force in the current job market.

Digging deeper into our study, surveyed associates consider soft skills – associated with emotional intelligence and an individual's ability to interact effectively at a professional level – to be the most relevant type of skills for obtaining professional growth or employment, with a 50% preference. Very closely, they consider hard skills relevant (47%), which are technical, specialized competencies for a particular job. These are followed by digital competencies (45%), which allow for safe and efficient use of information technologies, and finally skills for the use of new technologies, such as artificial intelligence and data analytics, (44%).

It is worth noting that from the perspective of companies, soft skills are also considerably more important for a person to be competitive in the job market, with a 70% preference, highlighting emotional intelligence, leadership, and teamwork.

Skills-based recruitment will be driven by the adoption of new technological tools, many of which are based on artificial intelligence, which allow for the identification of the competencies each candidate has developed and match them with those required for the position.

However, it does not happen in the same way for all job positions and business areas, so employers must carefully examine which skills are necessary for each position to decide if a degree or specialization is required, in addition to knowing how to draft job descriptions on digital platforms to detail which capabilities are essential for each position. 

The change lies in not making a university degree the main requirement in job vacancies but rather in the skills the candidate has developed in their career, but also in their capacity and openness to continuous learning. 

For skills-based recruitment to be successful, HR professionals must have a deep understanding of each of the competencies required for a job, for which they can adopt new tools and technologies to evaluate them, such as simulation games and other practical tests for a more objective and accurate assessment.

The big challenge is breaking away from traditional hiring methods and company culture. Despite all the advantages of this type of recruitment, the process can be difficult to implement. It requires a mindset shift from HR professionals and business leaders who have based their decisions on university degrees, universities, and companies where the candidate has worked.

Finally, skills-based hiring is promoting a more inclusive and equitable approach to recruitment, reducing biases and thus helping to diversify the workforce. This contributes to the creation of more diverse and dynamic teams capable of facing challenges and seizing opportunities in a constantly changing work environment.