What Is Skills-based Hiring & How Small Businesses Can Benefit

Skills-based hiring is the process of finding new talent by focusing on a candidate’s skills rather than education. For decades, most companies required relevant degrees for many jobs. With these degrees, the expectation was that people would be well-qualified for the role and able to start a new job on a solid footing. Unfortunately, that isn’t always true, and many otherwise highly qualified applicants were eliminated from consideration simply because they didn’t have a degree.

More and more companies see the benefits of reducing their focus on education and instead looking for candidates with the skills necessary to be successful. Shifting your focus to relevant skills may give your small business access to a greater applicant pool, better retention, and faster hiring times.

Need help with hiring? Use our step-by-step guide on how to hire new employees.

How Skills-based Hiring Works

When you’re hiring, you probably conduct a pre-employment assessment to gauge an applicant’s proficiency in relevant skills. If you do, you’re already using a skills-based hiring approach, at least to some degree.

Especially for low- and mid-level positions, using pre-employment assessments helps you quickly and effectively screen candidates. And it does it much better than simply looking for a degree on their resume.

Skills-based hiring looks at the individual worker, their skills and experience, and what they bring to your organization. Instead of trying to fit a worker into a very specific and detailed job description, skills-based hiring attempts to highlight the skills of each applicant and isn’t concerned with checking off boxes.

How to Adopt Skills-based Hiring

If your small business is ramping up hiring and you’re considering a move to skills-based hiring, you could see many benefits. But you might be unsure of how to make a change and what you need to do. There are four principal items to consider: job descriptions, pre-employment assessments, interviews, and job boards.

Many of your job descriptions probably have degree requirements, or at least mention that a relevant degree is preferred. Remove that language.

Rewrite your job descriptions to focus on the skills necessary to perform the job. Highlight responsibilities and daily duties. Focus on the results you need from someone in the job. Doing this will give you a larger applicant pool.

When screening candidates before an interview, many employers look to see if a candidate has a degree. If they don’t, the employer rejects the candidate.

Instead of looking for a degree, give applicants a pre-employment assessment. This will test their skill level, showing you their proficiency with each of the key skills required to be successful in the position.

When interviewing applicants, you need to stay focused on the skills necessary for the job. Using a structured interview approach, your questions should focus on the candidate’s skills and experience.

Always keep this single question in mind during interviews: Does the candidate have the skills needed to be successful? That should guide your interview questions and keep them clearly focused on the skills needed for the job, giving you the chance to dive deeper into the results of their pre-employment assessment.

Instead of reinventing the wheel, let a job board help you. Several job boards provide skills-based assessments throughout the hiring process.

Indeed: Allows you to require a pre-employment skills assessment before a candidate applies so you can screen their resume and test results. Indeed has 110 skills tests, so you’re bound to find one that fits the position you need to fill. Indeed will also match candidates resumes with skills posted in your job ad, showing you which workers may be the most qualified.
ZipRecruiter: Offers screening questions that applicants must answer when applying. Choose from open text, multiple choice, yes/no, date, number, and file uploads. You can choose from pre-populated questions or write your own. If you write your own, make sure you don’t ask any illegal questions.
LinkedIn: When posting a job, you cannot require a skills assessment before someone applies. But you can see a badge on an applicant’s profile showing their skill proficiency in a key area for your job. Interested candidates can take hundreds of different skills tests, which will help you find them when searching and show their skill level when they apply.

Check out our guide to finding employees for tips on how to get your new hire.

Industries & Positions Suited to Skills-based Hiring

Nearly any industry can benefit from skills-based hiring. You only have to adopt a slightly different approach to your hiring process. Except for professional positions like doctors and lawyers, which require specialized degrees and certifications, you can adjust your hiring to look for the right skills instead of a degree.

Some industries and jobs particularly suited to skills-based hiring include:

Retail sector
Restaurant and food service workers
Customer service
Information technology (IT)
Entry-level positions
Administrative and secretarial work

Check out our guide to finding new employees for help getting your next hire.

Fewer Barriers: Benefits of Skills-based Hiring

Companies now see the benefit of reducing barriers to employment. A degree does not guarantee that someone will be prepared to do certain jobs or will be better than someone without a degree. Reducing the barriers and focusing instead on a candidate’s demonstrated skills and competencies opens up opportunities to an expanded applicant pool. This benefits both employers and employees.

Expanded Talent Pool

Skills-based hiring is used by many small businesses because it vastly expands the applicant pool. Specifically for entry-level positions, a degree is rarely required. According to the Bureau of Labor Statistics, more than 60% of working adults over age 25 do not have a four-year college degree. By requiring even an associate degree, let alone a four-year degree, companies are backing themselves into a corner and reducing the available applicant pool.

College degrees generally demand higher pay yet do not guarantee a job-ready skill set. By eliminating the degree requirement or at least making it preferable instead of required, small businesses open up many new doors to expand their talent pool and get someone on the job with the skills necessary to be successful.

Reduced Costs & Faster Hiring

Hiring a lawyer requires an advanced degree and passing the bar. It’s clear that this should be part of your job description and requirements for any applicant. However, the vast majority of jobs don’t require these specialized degrees and certifications. By focusing on the skills needed for a job, you can reduce the time to hire, also reducing your costs.

When you’re hiring, HR or the hiring manager will need to dedicate many hours to reviewing resumes, interviewing candidates, onboarding, and training the new hire. If you hire someone who has the skills necessary to do the job, eliminating or reducing degree requirements, you can get through the hiring process faster and reduce the amount of training you need to provide. This lets all workers get to work faster and more efficiently.

Upskilling Opportunities Through Skills Testing

Sometimes, pre-employment skills testing can open your eyes to other skilled workers you might need to fill other positions. You may have a worker apply for your open position but another candidate is the better fit. That doesn’t mean you simply reject the less-qualified candidates. Instead, review their skills, analyze their skills assessment, and you just may find that they’re a great fit for a different role with your company.

Many workers don’t even realize how their skills may be transferable to another career or job. According to LinkedIn, food industry workers have skills up to 71% similar to customer service specialists. During the initial months of the pandemic, food service workers could have changed to customer service roles. They continued to make money, and businesses filled much-needed positions as a result. Keep an eye out for these upskilling opportunities.

Increased Retention

Attracting and retaining top talent presents challenges for all companies, especially small businesses. Anything you can do to help keep employees at your company will reduce your overhead and increase employee morale and productivity.

Hiring someone with a degree often seems like a worker who will stick around. However, an older yet oft-cited study from Harvard Business School found just the opposite. Workers with college degrees have a shorter retention time than colleagues without a degree. By reducing or eliminating the degree requirement, you could increase your employee retention.

Skills-based Hiring: An Evolution

Traditionally, companies would post a job that required a degree in a relevant field. Even if the job was relatively less skilled, like an administrative assistant or general office administrator, there would be at least an associate degree requirement. Hiring managers would use this arbitrary requirement to screen candidates and eliminate those without a degree, even if they were otherwise qualified.

However, that focus on education over hard skills has been changing. According to a 2022 study from The Burning Glass Institute, between 2017 and 2019, nearly half of all middle-skill job postings reduced or eliminated degree requirements. High-level positions also saw a drop, though to a lesser degree. And the COVID-19 pandemic exacerbated this shift in hiring that was already happening. While the pandemic shift may reverse course, it’s clear that companies are shifting their focus from degrees to skills, in part because of a reduced supply of workers.

Not that every company should abandon degree requirements, as there are some jobs which require degrees and certifications. However, where a degree isn’t required, a skills-based hiring approach can reap rewards for small businesses.

Bottom Line

Skills-based hiring is perfectly suited for entry-level and middle-skill based positions. Most of the time, a degree isn’t required and only complicates and slows down your hiring process. Skills-based hiring can cut your costs and increase your employee retention rates, making for a more enjoyable and profitable business.