Hire for Competency, Not Keywords: Moving Beyond ATS'es to find genuinely skilled Talent
Are you losing great talent to outdated hiring methods? Many companies rely on Applicant Tracking Systems (ATS) that filter candidates based on keywords, but this approach often overlooks skilled individuals. Here’s why skills-based hiring is the better way forward:
- Why ATS Falls Short: Keyword matching ignores candidates with relevant skills who use different terminology. It prioritises degrees over abilities, leaving qualified talent behind.
- The Case for Skills-Based Hiring: This approach evaluates real-world abilities through tests and projects, leading to better hires, lower costs, and higher retention rates.
- Proven Results: Companies using skills-first hiring report:
- 89% lower hiring costs
- 91% faster hiring times
- 92% fewer mis-hires
- Key Methods: Use tools like coding tests, project-based challenges, and soft skills evaluations to find the right fit for your team.
Quick Comparison of Hiring Methods:
| Aspect | ATS/Keyword Hiring | Skills-Based Hiring |
|---|---|---|
| Focus | Keywords, credentials | Demonstrated skills |
| Talent Pool | Limited | Broader, diverse |
| Cost Impact | Higher | Cuts costs by up to 30% |
| Retention Rate | Lower | 34% higher for non-degreed |
Switching to skills-based hiring isn’t just about finding better talent - it’s about building stronger teams and saving time and money. Let’s dive deeper into how this shift can transform your hiring process.
Competency-Based Hiring: Developing a More Inclusive and Accessible Candidate Experience
Key Elements of Skills-Based Hiring
In 2024, 73% of employers shifted to skills-based hiring - an increase from 56% in 2022 [3]. This approach is transforming how technical talent is assessed.
What is Skills-Based Hiring?
Skills-based hiring prioritises a candidate's abilities over traditional credentials, making it especially relevant for technical roles.
Here’s how it stands apart from traditional hiring methods:
| Aspect | Traditional Hiring | Skills-Based Hiring |
|---|---|---|
| Primary Focus | Formal education and work history | Demonstrated skills |
| Evaluation Method | Resume reviews and interviews | Skill-based tests and practical demonstrations |
| Talent Pool | Restricted to candidates with specific qualifications | Welcomes diverse backgrounds |
| Cost Impact | Higher recruitment costs | Cuts costs by up to 30% [2] |
| Retention Rate | Varies | Non-degree holders stay 34% longer [4] |
"The half-life of skills is expiring faster and faster. You have to continuously refine and upskill [talent]. We're looking for talent that is eager to learn and excited to grow." - Chris Foltz, chief talent officer at IBM [3]
Skills Verification in Technical Roles
Technical roles require a thorough skills evaluation. IBM, for example, has eliminated degree requirements for nearly half of its U.S. job listings beyond entry-level positions [5], focusing instead on practical assessments.
This verification process often includes:
- Technical Assessments: Tools like HackerRank and LeetCode provide measurable insights into a candidate's abilities.
- Project-Based Tests: Simulated real-world tasks are used to evaluate candidates for roles such as solution architects and data engineers.
- Standardised Skill Frameworks: These frameworks assess both technical expertise and soft skills for a more rounded evaluation.
"You have to be innovative in identifying skills." - Céline Raffray, vice president of talent acquisition at Bristol Myers Squibb [3]
Indeed's research shows that job postings requiring college degrees dropped to 17.8% in January 2024, compared to 20.4% five years earlier [3]. This trend highlights the growing emphasis on practical skills over formal education.
Methods to Test Technical Skills
Modern hiring processes require more than just interviews to assess technical abilities. Research shows that technical skills account for only 10% of recruitment success [7], highlighting the need for comprehensive evaluation methods.
Technical Assessment Tools
Technical assessment platforms offer hands-on tests to objectively evaluate candidates' abilities. These tools bring several advantages:
| Assessment Type | Purpose | Key Benefits |
|---|---|---|
| Live Coding Tests | Real-time problem-solving | Instant feedback, assess actual skills |
| Virtual Environments | Practical skill testing | Simulates real-world scenarios |
| Automated Grading | Accuracy measurement | Consistent results, minimises bias |
| Video Playback | Review problem-solving | Analyse approach and debugging skills |
In addition to these tools, project-based tests provide deeper, role-specific insights.
Project Tests and Portfolio Analysis
Project tests allow candidates to demonstrate their technical expertise in a practical context. For instance, in data engineering roles, assessments might include:
- Dataset Challenges
Candidates work with datasets containing intentional gaps or errors to test their ability to:- Identify and resolve data quality issues
- Manipulate and join complex data structures
- Use appropriate analytical methods
- Solution Architecture Projects
Candidates design system architectures to solve specific business problems, with evaluations focusing on:- Scalability
- Security measures
- Integration strategies
"A take-home project can provide a more complete and accurate assessment of a candidate's skills and abilities than an in-person interview alone or even a skills test." - Nikita Goldovsky, Author at Towards Data Science [6]
These technical evaluations can be complemented by assessing soft skills, which are equally important for team success.
Soft Skills Evaluation
Google's Project Aristotle emphasised that psychological safety is critical for effective teams, making soft skills assessments just as crucial as technical ones. Common methods for evaluating soft skills include:
| Method | Focus | Approach |
|---|---|---|
| STAR Interviews | Problem-solving strategies | Structured situational questions |
| Role-playing | Communication and teamwork | Simulated collaboration scenarios |
| 360-degree Feedback | Leadership and adaptability | Multi-perspective evaluations |
| AI-driven Analysis | Behavioural tendencies | Analyzes responses and body language |
Implementing Skills-Based Hiring Steps
To enhance hiring outcomes, follow these structured steps focused on skills-based hiring. In 2024, 81% of employers adopted these methods, with 94% reporting better employee performance [9].
Skills-Focused Job Posts
Job descriptions that emphasise specific skills attract more applicants, with an 11% higher view-to-apply rate [8]. Here's how to craft them effectively:
| Traditional Approach | Skills-Focused Approach | Why It Works |
|---|---|---|
| 3 years customer service experience required | Demonstrated customer service skills required | Expands the pool of qualified candidates |
| Bachelor's degree in Computer Science | Proficiency in Python, SQL, and data modeling | Zeroes in on actual expertise |
| 5+ years management experience | Proven track record in team leadership and project delivery | Highlights real-world accomplishments |
Skills Assessment System
Using a structured skills assessment ensures more objective hiring decisions. In fact, 90% of companies report better hires when they prioritise skills [9].
1. Define Core Competencies
- Identify the key technical and soft skills needed for each position.
- Develop rubrics to measure skill levels and refine them using data.
2. Design Multi-Stage Evaluation
- Evaluate technical skills through hands-on projects.
- Conduct structured behavioural interviews.
- Include role-specific problem-solving tasks.
- Incorporate peer review sessions for additional insights.
3. Standardise Scoring
- Use consistent metrics to evaluate candidates.
- Regularly review and adjust scoring methods for accuracy.
Skills Development During Onboarding
With 60% of workers needing additional training [1], onboarding programs should focus on closing skill gaps.
| Development Area | Strategy | Benefit |
|---|---|---|
| Technical Skills | Offer structured training modules | Increases efficiency |
| Industry Knowledge | Pair new hires with mentors | Builds domain expertise |
| Soft Skills | Facilitate team collaboration projects | Improves communication |
| Tools & Systems | Conduct hands-on workshops | Enhances day-to-day operations |
For long-term success, create personalised development plans that:
- Address specific skill gaps identified during hiring.
- Align with company goals.
- Set clear, measurable milestones.
- Incorporate regular feedback to track progress.
Tracking Skills-Based Hiring Results
According to data, 94% of employers believe skills-based hiring better predicts job success compared to traditional methods [10].
Team Diversity Results
Research indicates that 91.1% of companies implementing skills-based hiring saw an increase in workplace diversity, with 28.7% reporting notable improvements [12].
"If the group applying for a position is more diverse than it was before a skills-based approach was introduced, then it's clear that the previous approach excluded certain candidates." - Monica McCoy, CEO and founder of Monica Motivates [12]
To measure diversity progress, regularly track metrics such as candidate pool composition, team demographics, promotion rates, and retention rates based on hiring methods. These diversity improvements often align with broader business benefits.
Business Impact Analysis
Organisations adopting skills-based hiring have reported measurable business gains. Here's a breakdown:
| Impact Area | Reported Improvement |
|---|---|
| Time-to-Hire | 91.4% faster [12] |
| Hiring Costs | 89.8% lower [12] |
| Employee Retention | 9% higher retention [10] |
| Innovation | 87% growth [10] |
To track and maximise these outcomes, consider the following strategies:
- Define Clear Success Metrics
Use both quantitative and qualitative indicators, such as performance reviews, project completion rates, and team feedback, to measure progress. - Calculate ROI
Monitor cost savings from reduced turnover, quicker onboarding, and improved productivity. Many companies report a 90% drop in mis-hires with skills-based hiring [10]. - Collect Qualitative Feedback
Conduct surveys and interviews to evaluate team satisfaction and cultural shifts. These insights can complement numerical data and highlight areas for refinement.
"It's important that you have a clear understanding of how your organisation looks and functions before you make the switch to skills-based hiring… This is a really good opportunity to evaluate roles and role descriptions in a focused and intentional way to ensure they actually correspond to company needs." - Monica McCoy [12]
Conclusion: Skills-Based Hiring Delivers Results
Shifting to skills-based hiring has reshaped how companies find and retain talent, offering clear, measurable benefits. According to TestGorilla's survey of 2,700 employers, this approach leads to an 89% cut in hiring costs, a 91% reduction in time-to-hire, and 92% fewer mis-hires [14]. By focusing on competencies instead of keywords, businesses are seeing real results.
Companies adopting this method are 107% more likely to successfully place talent and 98% more likely to retain top performers [15]. Interestingly, workers without degrees tend to stay in their roles longer, with retention rates 10 percentage points higher than their degree-holding peers in positions that previously required degrees [16].
"Skills-based hiring represents a strategic shift from traditional credential-focused recruitment. Organisations embracing this approach not only discover qualified talent overlooked by conventional methods but also create more diverse and well-rounded teams primed for innovation and adaptability." - 24 Seven [11]
The benefits go beyond hiring metrics, influencing team performance and innovation. Companies using this approach report notable gains across key performance areas:
| Performance Indicator | Improvement |
|---|---|
| Cash Flow per Employee | 2.3x higher [17] |
| Market Capture | 70% improvement [17] |
| Decision Quality | 87% better outcomes [17] |
| Workforce Flexibility | 42% improvement [17] |
These numbers highlight the broader organisational impact, from stronger employee engagement to enhanced innovation. Additionally, non-degreed workers see an average 25% salary increase when hired into roles that previously required degrees [16]. Employers are also achieving hiring equity, with 76% reporting success in meeting diversity goals [13].
The move from keyword-based hiring to focusing on skills is more than a trend - it's a smart strategy for building adaptable, high-performing, and inclusive teams in today’s fast-changing business world.
FAQs
How can companies shift from relying on ATS keyword matching to focusing on skills-based hiring?
To move from ATS keyword-based hiring to a skills-focused approach, start by clearly defining the key competencies needed for each role. Update job descriptions to emphasise skills over credentials or buzzwords, ensuring they reflect both technical and soft skill requirements.
Next, incorporate practical evaluation methods like skill assessments, project-based tasks, or portfolio reviews. These tools give a more accurate view of a candidate's abilities than keyword filtering ever could. Additionally, consider de-emphasising degree requirements and instead focus on certifications or relevant experience that demonstrate expertise.
Finally, invest in upskilling and reskilling programs to build a pipeline of qualified talent within your organisation. This not only supports skills-based hiring but also fosters employee growth and retention.
What are the best ways to evaluate both technical and soft skills in candidates?
To effectively assess both technical and soft skills, consider using skill-based assessments, project simulations, and portfolio reviews to evaluate a candidate's expertise and practical abilities. These methods provide insight into their problem-solving skills and hands-on experience.
For soft skills, techniques like the STAR method (Situation, Task, Action, Result), role-play simulations, and psychometric tests can help gauge communication, teamwork, and adaptability. Additionally, 360-degree feedback and AI-driven assessments can offer a comprehensive view of a candidate’s interpersonal and professional competencies.
By combining these approaches, you can make more informed hiring decisions and identify truly skilled talent beyond what an ATS might highlight.
What are the long-term advantages of using a skills-based hiring approach for team diversity and business success?
Adopting a skills-based hiring approach helps businesses build more diverse and high-performing teams. By focusing on a candidate's abilities rather than traditional credentials, companies can tap into a broader and more inclusive talent pool, including individuals who may have faced barriers in conventional hiring processes.
This approach fosters workplace diversity, which has been shown to drive greater innovation, better decision-making, and improved financial performance. Additionally, employees hired for their skills are often more engaged and productive, leading to higher retention rates and a more agile workforce capable of adapting to evolving business needs.