We’ve just reached the quarter point of this new century and organisations are facing rapid technological change (eg AI) and evolving workforce demands (typified by Quiet Quitting). An innovative response, almost a novel approach to talent acquisition and management, is gaining momentum: skills-based hiring. It represents a fundamental shift away from traditional degree-based recruitment towards a more nuanced and effective model focused on actual capabilities. In this article, Horton International explores the history of skills-based hiring, the newly defined need for this change of approach, and the challenges and benefits inherent in skills-based hiring.
Understanding the Skills-Based Revolution
Skills-based hiring is a complete departure from conventional recruitment practices based on academic credentials and job titles as primary indicators of capability. Instead, this approach focuses on assessing candidates’ actual abilities, competencies, and demonstrated skills, regardless of how these were acquired. It means overhauling both principles and practices in recruitment and retention and it comes at a crucial time, as organisations estimate that 44% of workers’ skills will be disrupted by technology in the next five years.1
Why is this happening? Traditional reliance on university degrees as a proxy for capability has come under scrutiny for a variety of reasons:
- With less 38% of American working-age adults holding a university degree2, companies are confronted by the fact that they may be overlooking a vast pool of talented individuals simply because they have acquired skills through alternative routes.
- DEI approaches require organisations to look at non-traditional routes to skills acquisition, and higher education can be seen as an aspect of privilege that limits DEI talent from shining.
- One of the downsides of AI is its propensity to lie! AI-created resumes often contain university degrees that don’t exist in reality. While HR departments are learning to fact check this kind of information more thoroughly, it can actually be easier to ‘see’ skills acquisition through non-academic routes than through a degree listing on a CV.
As organisations wrestle with persistent skills gaps and low retention rates, a reappraisal of hiring practices can seem relatively straightforward.
The Benefits of a Skills-First Approach
Adopting a skills-based hiring framework offers numerous advantages for organisations and workers alike. By focusing on actual capabilities rather than credentials, companies can:
- Expand their talent pool significantly
- Reduce hiring costs and time-to-hire
- Improve workforce diversity and inclusion
- Enhance job performance and employee retention
- Better align workforce capabilities with business needs
- Create more effective up-skilling and re-skilling programmes, based on workforce input
- Foster greater workforce agility and adaptability
- Improve internal mobility and career development opportunities.
What is Skills-Based Hiring, Really?
Well, one thing we can say is that it’s complicated! At Horton International we know that transitioning to skills-based hiring requires a systematic approach and careful planning, and often a degree of hand-holding and mentoring at the C-suite level. Organisations require a comprehensive skills taxonomy that defines the capabilities (skills) needed across all roles and functions. This framework also needs to be dynamic, regularly updating to reflect emerging skills requirements, technological changes and market movement.
A crucial aspect of implementation involves breaking down traditional job descriptions into detailed skills profiles. This process requires a business to identify both technical and human capabilities required for success in each role – this can be complex, as it means moving the emphasis from credential to what team members should be able to do, and how that ‘doing’ contributes to organisational success.
Technology plays a vital role in enabling skills-based hiring at scale. Advanced AI and machine learning tools can help organisations standardise their skills taxonomy, identify emerging skills gaps, and match candidates to opportunities based on their capabilities. These tools can also help track skills development over time and suggest learning pathways for employees looking to expand their expertise.
Overcoming Implementation Challenges
While the benefits of skills-based hiring are clear, organisations may face severe challenges in implementation. Cultural resistance can be strong, especially in industries with deeply entrenched hiring practices. Managers may feel uncomfortable moving away from familiar degree requirements and job titles as primary screening criteria. Unions may also create blocks to progress, and need to be brought along at an early stage if they are to see skills based hiring as beneficial.
Another significant challenge involves developing accurate skills assessment methods. Organisations need to create reliable ways to evaluate candidates’ capabilities, which may include practical assessments, portfolio reviews, and structured interviews/appraisals focused on demonstrating specific skills. This requires investment in new tools and training for hiring managers.
Data management presents another hurdle. Organisations need robust systems to track, update, and analyse skills data across their workforce. This includes maintaining current skills inventories, tracking development progress, and forecasting future skills needs. The complexity of this task increases with organisation size and the variety of roles involved.
Ownership can be complicated too. Data management need can lead to skills based hiring being siloed off into ‘Administration’, where it will be much less effective than if top management tiers take responsibility. And skills-based hiring can be most difficult to implement at board level, where hiring can sometimes lack transparency.
The Future of Skills-Based Hiring
Skills-based hiring will inevitably grow as artificial intelligence and automation continue to reshape job roles, making traditional job descriptions less relevant whilst highlighting the value of adaptable skill sets. We believe that organisations embracing skills-based hiring are better positioned to navigate change, as they can more quickly identify and develop capabilities needed to remain competitive.
Creating a Skills-Powered Organisation
The ultimate goal of skills-based hiring begins with hiring practices but extends to creating a truly skills-powered organisation. This involves integrating skills-based approaches across all aspects of talent management, from recruitment and development to promotion and succession planning.
In this model, skills become the primary currency of work, with traditional job titles and hierarchies, degrees and qualifications, becoming less important than actual capabilities and contributions. This shift enables greater workforce flexibility and creates more opportunities for career development and growth.
Success in this transformation requires strong leadership commitment, clear communication of the benefits and expectations, and consistent application of skills-based principles across the organisation. It also demands ongoing investment in learning and development to help workers continually expand their capabilities.
Skill Based Hiring Practices – Fad or Future?
The shift towards skills-based hiring represents more than just a trend in recruitment; it signifies a fundamental transformation in how organisations think about work and talent. But is it a permanent alteration to hiring philosophy? We say yes, for two reasons:
- Technology, especially AI, is the main driver currently reshaping the business landscape: this means that the ability to identify, develop, and deploy human skills effectively will become increasingly crucial for organisational success.
- Significant skills-based hiring benefits; talent acquisition, retention and company agility have already been demonstrated by skills-based hiring. In a 2022 survey in the USA, 92.5% of companies responding saw a reduction in mis-hires.3
The AI Revolution: Reshaping Skills and Work
The impact of artificial intelligence on skills-based hiring cannot be overstated. According to recent research, AI is fundamentally transforming how organisations approach talent acquisition and development. Business executives overwhelmingly identify AI and automation as primary drivers pushing their organisations toward a skills-based approach, with 61% citing these technologies as the main catalyst for change.4
This technological revolution is creating a fascinating workplace paradox. While AI is automating certain tasks, it simultaneously generates new opportunities that require uniquely human capabilities.
What does this mean for talent recruitment and retention? First, by 2030, half of all employers plan to redesign their business models in response to AI, with two-thirds intending to hire talent with specific AI skills. However, 40% also anticipate reducing their workforce in places where AI can automate tasks, highlighting the critical importance of continuous skill development in the workforce.5
In this evolving landscape, analytical thinking remains paramount, with 70% of companies considering it essential. However, the rising importance of AI and technological literacy must be balanced with distinctly human capabilities.Creative thinking, resilience, flexibility, and curiosity for lifelong learning are becoming increasingly valuable, creating a new paradigm where technical and human skills must coexist and complement each other.
The Evolving Nature of Work
The traditional concept of fixed job roles is rapidly becoming obsolete. Research suggests nearly three quarters of workers already perform tasks outside their formal job descriptions.6 This fluidity is further emphasised by the fact that 81% of business executives acknowledge that work increasingly crosses functional boundaries.
Workers themselves are adapting to this new reality. Over half now expect to switch employment models throughout their careers, moving more or less fluidly (and more or less confidently) between permanent positions, project-based work, freelancing, and gig work. This shift suggests that the very concept of a ‘job’ may be becoming less relevant as a way to organise work.
Skills in Transition
Looking ahead to the next decade, workers can expect approximately 39% of their existing skill sets to be transformed or become outdated.7 However, this ‘skill instability’ has actually decreased from previous years, possibly reflecting the increasing number of workers who have already undertaken training and up-skilling initiatives.
The challenge for organisations is clear: they must create environments where human skills can flourish alongside technological advancement, while continuously adapting their skills-based hiring practices to reflect this evolving reality. Success in this new landscape requires a delicate balance between leveraging AI capabilities and nurturing the uniquely human attributes that cannot be replicated by machines.
Whilst all transitions present challenges, including the movement towards AI, the potential benefits in terms of improved performance, increased diversity, and enhanced adaptability make skills-based hiring a compelling strategy for forward-thinking organisations. And companies that begin this transformation now will be better positioned to thrive in an increasingly unpredictable and competitive business environment.
Resources:
1. World Economics Forum Future of Jobs report 2023 – https://www.weforum.org/publications/the-future-of-jobs-report-2023/digest/?_gl=1*l3f9ql*_up*MQ..*_gs*MQ..
2. USA Census Data 2022 – https://www.census.gov/newsroom/press-releases/2023/educational-attainment-data.html
3. Test Gorilla blog – https://www.testgorilla.com/blog/why-skills-based-hiring-delivers-better-candidates/
4. Deloitte Insights – https://www2.deloitte.com/us/en/insights/topics/talent/organizational-skill-based-hiring.html
5. World Economic Forum Future of Work report 2025 – https://www.weforum.org/stories/2025/01/future-of-jobs-report-2025-jobs-of-the-future-and-the-skills-you-need-to-get-them/
6. Deloitte Insights – https://www2.deloitte.com/us/en/insights/topics/talent/organizational-skill-based-hiring.html
7. World Economic Forum Future of Work report 2025 – https://www.weforum.org/stories/2025/01/future-of-jobs-report-2025-jobs-of-the-future-and-the-skills-you-need-to-get-them
