Many managers are still unable to cope with the demands of qualifications. 4 ways to help companies embrace skills-based hiring

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The need for a degree in employment has become a paradox. Employers complain of a talent shortage while continuing to rely heavily on a college education to screen candidates—which excludes more than half of the US workforce from consideration.

While dozens of CEOs are making strong commitments to so-called skills-based hiring, these announcements resulted in the hiring of an unskilled worker for every 700 jobs in the United States last year, according to a study by the Burning Glass Institute. and the Harvard Business School Project on Managing the Future of Work. In fact, three years ago, 61% of the world's companies actually is raised qualifications and/or work experience requirements for entry-level technology jobs, according to Generation's survey of more than 1,300 companies.

In a tight labor market, clinging to outdated hiring practices is a serious business risk. However, the reason this “paper ceiling” continues is that firms are abandoning hard work to hire managers who see the shift to skills-based hiring as too risky to work.

That message came through loud and clear in a series of more than 90 interviews Generation recently conducted with hiring managers around the world. For them, the risk-reward calculation is skewed. Why take a chance on a candidate you deem less qualified if it could jeopardize their careers? In addition, many interviewees said they believe that hiring and training non-traditional workers takes more effort, adding that those who receive the “proper” education are likely to hit the ground running.

In fact, skill-based hiring works. The Generation 2023 study reported that 84% of global companies found that skills-based hiring performed the same or better than those hired based on their degree. They stay longer, too: Research by the Burning Glass Institute found that skills-based hires stay in their roles nearly 20% longer than candidates with a degree.

How to support hiring managers

Finding new adherence practices will require addressing deeper perceptions of risk on an ongoing basis. Here are four steps companies can take to support managers in adopting competency-based hiring practices:

• Try before you buy. A probationary period for non-traditional hires will allow employers to self-assess their skills and team fit, reducing the risk of sticking to the wrong fit.
• Start small. Rather than betting large sums of money on sudden surface changes, managers can first start a test case in one business unit. The focus that such testing brings will help new practices stick. Meanwhile, after a year of rigorous benchmarking, the company—and its managers—will have built a strong case for implementing skills-based hiring more broadly.
• Don't stop supporting recruits after they are hired. Even for candidates with trusted industry certifications, managers may worry whether they are suffering from other, more important vacancies. To address this concern, companies can also invest in comprehensive programs to ensure that employees develop comprehensive skills and adapt to their specific programs, processes, and cultures.
• Develop undergraduate talent from within. Firms can explore the idea of ​​rethinking their approach to new hires by doing more to encourage existing high-performing non-degree workers. Seeing these employees succeed in new roles can build organizational confidence in a skills-based way.

Now is the time to take these steps before slowing growth and economic concerns create further barriers to change. Managers are more open to trying to hire during boom times, when they are desperate for talent and when letting vacancies take a long time is expensive. But as demand increases, the appetite for taking chances also decreases. Concerns about AI can also dampen interest. By making workers more productive, the thinking goes, AI could reduce the number of new hires needed.

However, companies playing the long game know that talent pipelines do not refill. Failure to change hiring practices, even if the job market is sluggish, puts companies at long-term risk as experienced workers end up leaving or retiring. In an AI-driven future, continued reliance on degrees may prove even more misguided as technology redefines all roles. Professionals of all backgrounds and eras will need upskilling, which helps to mandate qualifications—and discourage firms that fail to adopt skills-based practices.

The time to future-proof your talent strategy is now. This lull before the coming AI disruption is a good time to experiment with skills-based hiring while minimizing risk for managers. Getting this right will also face the biggest risk of all—the risk of losing out to competitors as they discover a large, overlooked talent pool that your hiring managers have chosen to ignore.

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