Skills-based hiring: A comprehensive guide for talent acquisition leaders

A rapidly evolving workforce demands expertise that traditional education and career paths often don’t provide. As AI and other technologies reshape industries, talent acquisition leaders must adopt agile hiring strategies to find top candidates.

Skills-based hiring prioritizes candidates’ abilities over degree requirements and job titles, allowing businesses to tap into a diverse talent pool with the right competencies to drive success.

What is skills-based hiring?

Skills-based hiring practices move beyond conventional markers of candidate suitability, such as education and tenure. When you adopt this hiring methodology, you focus on the capabilities candidates acquire through various experiences—certifications, personal projects and mentorships.

A 2024 report by the National Association of Colleges and Employers (NACE) found that nearly 65% of employers already use skills-based hiring practices for entry-level applicants. While common for entry-level positions, this approach benefits hiring at all levels.

The business case for skills-based hiring

Data shows there are numerous benefits of skills-based hiring for both employers and job candidates. According to the McKinsey Global Institute, GDP in 2023 could have been 0.5 to 1.5% higher if employers were able to fill excess job vacancies.

And the Pew Research Center found that 40% of Americans say a college degree is not very, or not at all, important to get a well-paying job.

Skills-based hiring significantly broadens your applicant pool. A 2025 LinkedIn study found that U.S. companies could increase their talent pool by 15.9 times by adopting this approach.

Beyond diversity, this method improves retention. Harvard Business School research indicates that firms using skills-based hiring see a 10% higher retention rate for employees without college degrees compared to college graduates with degrees, helping lower hiring costs in the long term.

How to implement skills-based hiring: A step-by-step guide

1. Gain organizational buy-in

Building the business case for skills-based hiring practices can be challenging for some talent acquisition leaders. According to NACE, 50% of respondents say getting buy-in from hiring managers is a roadblock to implementing skills-based hiring practices.

A common concern is that skills-based hiring lowers standards. In reality, it enhances them by prioritizing proven competencies and technical skills over traditional credentials. When you’re securing the support of your business leaders, present a data-driven case for the benefits to job performance, retention, and hiring costs.

2. Redefine job requirements

Many roles list college degrees as essential—even when they’re not. For instance, Harvard Business School found that while 76% of job postings for logisticians require a college degree, only 46% of working logisticians actually have one.

Your job postings and job descriptions should focus on key responsibilities and technical skills rather than arbitrary credentials. Using the word “responsibilities” instead of “requirements” can increase job applications by 14%, according to LinkedIn.

3. Source qualified candidates

Expanding your recruitment channels by leveraging an applicant tracking system (ATS) helps attract a wider talent pool. AI-powered ATS platforms can infer candidates’ skills based on experience, even if acquired through unconventional pathways.

4. Improve screening and assessment

A skills-based hiring process often increases application volume, so updating your screening and assessment techniques is vital. Consider adopting high-volume hiring software that uses AI to surface the most skilled applicants. 

During interviews, structure your questions to evaluate skills. For example, provide candidates with real-world scenarios to assess problem-solving, leadership, and adaptability.

5. Make Fair job offers

Rather than basing pay on seniority or job titles, encourage your hiring managers to link compensation to demonstrable skills and impact. This motivates employees to continuously upskill and contribute meaningfully.

Overcoming challenges in skills-based hiring

Hiring the most skilled people is a goal for most companies, but actually implementing skills-based hiring has its pain points.

One major challenge is institutional inertia—companies may remove degree requirements but still default to traditional screening methods. Research from Harvard Business School found that for every 100 job postings where college degree requirements were removed, only four additional non-degreed workers were hired.

Lacking standardized skill definitions, hiring managers fall back on culling candidates based on familiar metrics, such as seniority and degree attainment. To break this habit, your talent team should partner with hiring managers to not only identify what skills are necessary for a role, but how those skills will be assessed throughout the hiring workflow.

Skills-based hiring across industries

Depending on your company’s industry, implementing skills-based hiring may look different.

Technology: Tech companies, needing rapidly evolving skills, already emphasize hands-on assessments like coding challenges and industry certifications over degrees.

Healthcare: The healthcare sector is expected to have a shortage of one hundred thousand critical health care workers by 2028, according to the American Hospital Association. Fortunately, skills-based hiring is well-suited to the healthcare industry, where practical skills are often a better predictor of success than academic qualifications.

Manufacturing and skilled trades: Flexibility is key in skilled trade sectors, with headcount needs consistently shifting to accommodate peak seasons, part-time work, and overtime. Employers can apply skills-based hiring concepts in their hiring software to identify candidates with the requisite skills, and keep those candidates top of mind as roles or schedules change.

For example, OHLA USA, a global construction company, was able to connect their iCIMS applicant tracking system to LinkedIn RSC. That integration enabled hiring managers to more easily identify top candidates—including those who previously applied for a job but weren’t the right fit at the time.

Integrating skills-based hiring with talent management

To reap the full benefits of skills-based hiring, your organization should extend these strategies beyond hiring to career development.

Skills-based talent management transforms the entire culture of your company, providing new opportunities for innovation and growth. For instance, basing leadership succession decisions on skills rather than tenure ensures the most capable employees advance.

A report by the World Economic Forum found that 39% of workers can expect their existing skills to be transformed or become outdated by 2030. In this way, continuous learning—through workshops, certifications, and mentorships—further strengthens a skills-based talent management approach, benefiting both employees and employers.

Measuring success in skills-based hiring

There are a variety of key performance indicators (KPIs) that indicate whether or not a skills-based hiring initiative is succeeding. Some of the top talent acquisition KPIs to track include:

• Higher employee retention
• Increased applications
• Lower time-to-hire
• Improved candidate satisfaction scores
• Increased workforce diversity
• Decreased hiring costs
• Enhanced productivity

Robust hiring software can track these metrics, allowing organizations to refine their strategies continuously.

Embracing the skills-based hiring revolution

Skills-based hiring is a game-changer for your talent team, ensuring the business hires the best candidates while offering employees more options for career growth. Overcoming institutional resistance requires buy-in from hiring managers and leadership, but the benefits far outweigh the challenges.

Ready to implement skills-based hiring? Learn how iCIMS applicant tracking system can streamline your hiring process. Get a free demo today!