Increasingly, skills, not credentials, are becoming the currency of modern hiring. Skills-based hiring has actually been shown to be a better predictor of job performance than resume- or degree-based hiring. Hunter & Hunter’s seminal 1984 meta-analysis demonstrated that work samples and other job-related skill assessments predict job performance far more effectively than education or experience alone.
Here’s what skills-based hiring does for companies:
Identifies the right capabilities beyond traditional resumes and degrees
Looking only at someone’s resume, which gives a list of experiences and their educational background, will tell you what a candidate has done. It’s a backward-looking proxy for a candidate’s aptitude. Skills-based hiring shifts the focus from credentials to capabilities, making sure the organization is hiring people who have the skills to perform and grow in a role.
A candidate might tell you that they are detail-oriented. They might have previously worked in a job that seems to require detail orientation. But you don’t know how successful they were in that previous role, and you can’t always take a candidate’s word for how skilled they are.
In my previous role as chief HR officer of an intellectual property law firm, all our legal assistants were required to take a proofreading test. Proofreading legal documents is very much a part of the job, and we used the test to assess whether or not they have the skills needed to be successful in a job.
Similarly, after graduate school I applied for a job with a consulting firm. I went through a full day assessment center that included case studies and role -plays that mimicked what I would do on the actual job. I didn’t get that job—but even for the job I would eventually land, I had to sit down with someone at the company and walk through a case study evaluating employee survey results—the same thing I would be doing after I got the role.
Skills- based hiring can include a case study, where a candidate is presented with a real world situation (In my case, the results of an employee survey) and asked to demonstrate how they would approach it. A job sample is another way to assess skills. A software development company might ask candidates to complete a short coding exercise or review real code for errors. This allows the employer to see how candidates think and approach problems.
A final way for employers to assess candidate skills is with structured interview questions. Anytime I’m hiring on my team, I like to give an example of a real problem they might encounter on the job, and ask them how they might handle it. This has the additional benefit of giving the candidate a realistic preview of the job, so they can decide if that’s the type of work they would be interested in.
Creates a more inclusive, diverse, and adaptable workforce
When you focus only on the education and experiences a candidate has, you may be missing out on candidates who could be very successful in the role, despite not having gone to a particular school or worked in a particular industry.
Skills-based hiring opens doors to candidates who’ve had non-traditional career paths. It widens the lens, allowing companies to tap into talent from different industries, backgrounds, and life stages. It will bring in career switchers, return to work professionals, and candidates who built their experience outside formal academic settings.
Companies who look at candidates who haven’t had the exact job title before, but can demonstrate that they have the competencies that matter most for success in the role, will open up untapped market for talent. This will naturally bring in candidates with more diverse experiences.
In addition, when a company hires someone who can show that they can transfer skills gained in one area to another new one, they are better able to respond to market changes by re-skilling, redeploying, and developing talent internally
Yields greater agility, stronger retention, and long-term growth
Companies who use a skills-based hiring method gain more than just good hires. As previously mentioned, when a company is truly focused on what competencies are required for a role, they will naturally be better at giving the specific training needed for the role. Job expectations will be clearer.
Many candidates prefer skills-based hiring, as it gives them a chance to show what they can do, instead of being judged on their resume alone. Skills-based hiring practices may also be perceived as fairer and more transparent. In one sizable survey, roughly half of candidates said they favor hiring processes that include skills assessments, appreciating the transparency and emphasis on what they can do rather than where they studied or worked.
Other research on the candidate experience more broadly shows that applicants respond better to clear, structured evaluations—because they reduce ambiguity and perceived bias in hiring. Employees who had to show what they can do to get the job are likely to feel a lot of pride when joining the company. That was the case at company I worked for where we had to pass a case study to get the job. Everyone who worked there really felt they had earned the spot.
Emerging industry research suggests that organizations which use skills-based hiring practices may see noticeable gains in retention. In some workforce studies, companies reported up to a 25 percent improvement in employee retention rates compared with traditional resume/credential focused hiring.
Companies that prioritize skills are better set up for long term success as well. First, they are investing in people who can grow with the business, not just fill today’s job description. In addition, over time they can develop stronger talent internally, creating a deeper bench and leadership succession. Finally, the company is able to cast a wider net for talent, which is critically important in industries that are struggling to find qualified workers.
Suzanne Hawes is a human resources consultant with a Ph.D. in industrial/organizational psychology. She is based in Washington D.C.
