The global economy is shifting in dramatic ways, necessitating the upskilling, and reskilling of employees. The Coronavirus has accelerated this economic shift, leaving millions of people out of work. To overcome the challenges these shifts create, employers will have to re-evaluate how they hire and train their workforce.
At the same time as jobs are lost, new positions will be created in growing industries as the economy shifts labor demands to meet these new realities. Changing from an experience-based approach to a skills-based approach is a viable corporate strategy for managing this shift in economic realities.
Both employees and employers are often unaware of how easily skills can be transferred. For several industries, there is a significant overlap of skills that can be used to bridge otherwise insurmountable labor shortages. Understanding where this overlap of skills exists within a corporate structure is essential to maintaining efficiency. To maximize employee’s efficiency, companies should prioritize evaluating employees based on skills and not just experience. Skills-based hiring not only increases the likelihood of finding the right candidate, it also allows companies to better organize existing talent.
This strategy is the future of hiring and employee development. To keep pace with this trend, companies will have to start implementing skills-based hiring into their work cultures. Companies that are too slow or resistant will be left behind and forced to deal with unsatisfied or underutilized employees.
Creating a work culture that prioritizes skills can help motivate and retain employees. By combining a skills-based approach with an open learning work culture, companies can position themselves to attract top talent with greater retention.
Traditional Hiring Practices and Corporate Structures
Traditionally, corporate culture has had a rigid hierarchy that emphasized experience and age as barometers of professional expertise. Managers in the past equated more experience and age with more ability, and therefore gave opportunities and promotions to people with these characteristics. Interpersonal considerations, like loyalty or familiarity, also contributed towards an employee’s likelihood of success instead of the aptness of their skills.
These work practices evolved during a time without access to modern technology, limiting the ability to quickly reach qualified, skilled employees. More traditional industries, like law and healthcare, developed in this environment and relied on intricate professional networks and educational requirements to source their employees.
However, the introduction of the internet into the mainstream has led to the development of new industries, and new paths to acquiring the skills necessary to succeed. New jobs, like software engineering or digital marketing, did not exist before, and have developed in a new economy that is starting to prioritize the need for appropriate skills instead of strictly considering experience.
The Rise of Tech Companies and Skills-Based Hiring
Technology’s prevalence in the economy has significantly altered the way companies hire and train employees. Software engineering, data analysis, network security and other modern careers entered into the market quickly, and in some cases faster than the education system could keep up.
Because of the quick development of these technologies, few people were trained through traditional education (four-year degrees) to take full advantage of them. This led to a shortage of employees that could meet corporate requirements. Companies had no choice but to reduce or remove educational requirements if they wanted to keep pace with the market.
Companies needed individuals with skills that were in high demand, and were willing to make adjustments to hiring and training practices to meet these needs. These adjustments led to giant improvements in productivity and employee retention. As these tech industries have continued to prosper, other industries have begun to recognize the advantages of skills-based hiring and have started to incorporate these practices into their own corporate culture.
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What Are Transferable Skills?
Not only does focusing on skills provide benefits for the intended roles that employees are filling, but there are also many skills that can be transferred to other areas within a company or industry. Transferrable skills are talents and abilities that can be used in many different career paths. They can be acquired through self-learning, employment, school, internships, or volunteer experience.
Transferrable skills can be either soft skills, like time management, or hard skills, like having fluency in several languages. These skills can be used within the same organization. For example, an employee with great time management and fluency in another language could be qualified to work in international business development or supply chain management.
Traditional experience-based employee evaluation would limit an organization’s ability to flexibly manage their talent and cause them to miss out on an employee’s abilities to succeed with these transferrable skills.
Transferrable skills can be broken down into several categories: general, interpersonal, management, clerical, research and planning, and computer skills. By evaluating employees based off of these categories, companies can better understand where their labor force has significant overlap and where it’s lacking. Having this knowledge will enable any organization to be better equipped to quickly and flexibly adapt to economic shifts, like the shift caused during the Coronavirus pandemic.
A company that evaluates talent based on their number of years in a particular position instead of what skills they have will miss opportunities to increase efficiency, as well as leave many talented people unsatisfied with their career progression. Although employees with education and experience are valuable in their role, many people are not even working in an industry that is related to their college major. An analysis conducted by the Federal Reserve Bank of New York found that only 27 percent of college graduations are working in a job related to their major. This is a clear indication that skills learned during college can be largely transferrable, and that highly capable people are able to make transitions to new responsibilities with these skills.
Tips to Start Developing a More Skills-Based Approach
Despite an unemployment rate of 5.8%, according to the U.S Bureau of Labor Statistics, there are over 8 million jobs in the United States that remain unfilled (Federal Reserve Bank of St Louis Economic Research Facility). One of the many reasons for this is that many of those jobs are technical positions and companies are still sourcing these employees using a traditional approach that focuses on education and experience.
Implementing Objective Measures
Many business leaders tend to take bachelor’s degrees as proxies for both hard and soft skills, and therefore filter their hiring practices to match this perception. This can unnecessarily shrink the pool of qualified candidates. Implementing objective measures of an applicant’s suitability for a job can help employers understand the full range of a candidate’s qualifications.
Although this may seem like common sense to some, many firms do not assess a candidate’s skills until the final round of interviews. By this time in the process, candidates without the educational requirements, but with the necessary skills, are already disqualified. According to the VP of talent at IBM, Joanna Daly, nearly one-third of employees working in high-tech jobs at the IBM Rocket Center don’t have bachelor’s degrees. What these managers understand is that they need a candidate who has the skills, like coding in C++, and not just the four-year degree.
With any company that has already invested resources into the traditional method of talent acquisition, there will certainly be some push back from within the company. HR managers will have to make adjustments to several mechanisms in the hiring process. But these obstacles can be overcome. For example, there are several online tools that can help with manager training, evaluating competencies and skills, writing job descriptions, and using inclusive interviewing techniques.
Once they have acquired the necessary tools, upper management can begin discussing with HR and other managers about the core competencies for each position. Once these competencies have been accurately defined, they will need to be validated. For companies with traditional hiring practices, this will mean a complete reversal of the hiring process. This step is essential to making the transition to a skills-based method, as only those individuals who meet or pass the requirements in the skills assessment will be allowed to move onto the next step in the process.
There are many ways to evaluate a candidate’s proficiencies. For example, HackerRank is an online service that helps determine proficiencies in coding. By validating these skills early, companies can decrease the time it takes to find the right candidate and improve their suitability to that particular position.
This process will not remove the necessity of interviews or verifying someone’s references, but it does reverse the order and prioritizes skills. As with any new business practice, a switch to skills-based hiring will require management to buy in. For those companies new to this practice, it may be best to start with a trial run, using a very technical position. It is best to start a trial run with a technical position because identifying and validating skills is more easily accomplished than with a more general position. Managers and HR can use this trial to familiarize themselves with the process and begin implementing it in a broader context within the company.
To succeed in implementing a skills-based approach, stick to what has been shown to work. Do not try to make these adjustments individually. Find a local chamber of commerce or business group and use online tools and resources that can facilitate this process.
You do not have to implement skills-based hiring all at once. Start small to familiarize staff with the process. Finally, clearly identify the skills that are needed for each position and assess a candidate’s abilities early in the interview process instead of at the end.
By following these steps, companies will be able to flexibly and accurately adjust to changes in the labor market. Using skills-based hiring practices will prepare any organization to stay ahead of industry trends and react to unexpected market fluctuations in ways that will allow them to not only survive but thrive.
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