Inside the skills-based hiring revolution

Like many fast-growing tech firms, the UK-based startup Papercup has struggled to find the technical expertise it needs in the past. But the firm, which offers AI-based video dubbing and translation services to major brands such as Sky News and Bloomberg, says the adoption of a new recruitment model is helping tackle the problem.

Instead of focusing primarily on a candidate’s educational and job history, Papercup now takes a skills-led approach when hiring for technical roles in its machine-learning team. This means prioritising someone’s ability to do the job over their pedigree – their educational or career history, for example – which gives the firm access to a much broader range of candidates.

“The biggest benefit of skills-based hiring is access to a wider, more diverse talent pool, which is more likely to bring in candidates with different viewpoints – something that’s critical in an innovation-based sector like ours,” says Ben Shacham, Papercup’s chief of staff. “Whether it's proficiency in specific programming languages, frameworks, or machine learning models, ensuring relevant skills are in place is critical to growing teams effectively.”

Skills-first hiring is a relatively new phenomenon but is quickly gaining traction, as gaping skills gaps persist in industries such as tech. Not only does it allow employers to hire non-traditional talent, consider existing talent that can be redeployed and promote junior workers into mid-career roles earlier than before. It also helps to tear down barriers to work that people face because of discrimination or socioeconomic disadvantage.

‘IQ versus EQ’

Tech is one of the industries leading the charge when it comes to skills-first recruitment and for good reason, says Kate Bravery, a senior partner and global head of talent advisory at consultancy Mercer.

First, the skills-based nature of IT work makes it easier to quantify the need and discuss what skills-spec is required when looking for talent, she says. Tech roles are often also ‘context-agnostic’ when it comes to skills, in that coding needs from company to company, or department to department will not be all that different.

“The nature of [tech] work often means it can be done remotely, which further allows for cross-border, asynchronous teaming,” Bravery adds. “This further extends who can support the work.”

So far, the model has had positive results for employers and staff, according to Mercer’s research. A majority of firms (84%) say it helps attract and retain talent, incentivizes skill development (65%) and incentivizes career progression (54%). For staff, it tends to lead to more varied career pathways and development opportunities, as well as making them more employable.

Yet skills-based hiring won’t suit all roles and can have limitations, such as being unable to identify those who have potential but lack the specific skills sought. The model also suffers from significant brand perception issues due to preconceived notions about what makes a good candidate.

“I think that unfortunately we are living in a world where people favour IQ over EQ [emotional intelligence],” says Jo Taylor, managing director of HR consultancy Let’s Talk Talent. As such, unless talent models change more broadly, skills-first hiring could be seen as a gimmick or a nice-to-have, she says. “If businesses can prove how skills-first hiring has had an effect on driving high performance, retention, diversity and even innovation then CEO and exec teams will take it more seriously.”

‘Fresh skills and perspectives’ 

Indeed many recruitment agencies are yet to adopt the skills-first model, leaving it up to companies to do it themselves which takes time and investment. Developing a proper method to assess prospective employees’ skills can also be a challenge as validation techniques vary widely, so it is important that firms clearly define the skills required for a role and properly assess their current skill gaps.

They should also remember to look inside their firms for talent, not just externally. Bravery says: “While hiring new talent can bring fresh skills and perspectives, don't overlook the potential for internal talent development. Invest in upskilling and reskilling programs to nurture existing employees and retain valuable knowledge within the organization.”

Technical ability may be the focus of skills-based hiring, but it is vital not to neglect soft skills such as communication, teamwork and problem-solving when you are recruiting as these skills are crucial for success in any role. Shacham says completely discounting candidate experience is an “absolute no-no” given the risks involved, while assessing cultural fit is vital.

Ev Kontsevoy, co-founder and CEO of Bay Area-based cybersecurity startup Teleport, agrees. The firm has successfully developed a skills-first hiring model which first gauges how current and fresh a candidate's skills are, then evaluates the candidate's capability to enhance and update their skillset.

But Kontsevoy says personality is equally vital, and he prioritizes “energy and curiosity” in any new recruit. “Staying energetic and eager is vital for continuous skill improvement, while curiosity drives self-directed learning.”

The benefits of skills-based hiring clearly outweigh the challenges, and the model is likely to come into its own as skills gaps persist. According to Mercer, despite executives being bullish on growth this year, 36% believe that they cannot meet current demand with their existing talent model.

Kontsevoy says skills-first hiring is already a must-have in the fast-evolving tech industry, where previous experience and sometimes even formal education can quickly become outdated. “This fast pace of change de-emphasizes the value of past experience compared to skills-based recruitment. I'd even go so far as to say that companies who don't adapt to skills-based hiring risk falling behind competitors who do.”

As the global population continues to grow and inequality rises, there is an urgent need to ensure that people are equipped to access well-paid jobs that enable economic mobility. Yet barriers to work and training mean that many lack the skills they need, leaving them at greater risk of unemployment and hardship.

According to consultancy Korn Ferry, more than 85m roles are expected to go unfilled by 2030 due to a lack of trained workers. And this skills gap could cost businesses some $8.5tn in unrealized annual revenues, translating to a direct hit on economic growth and prosperity.

What can be done to make sure workers have the skills they need to transform their lives and those of their families? And how could a skills-first approach to recruitment help tackle the skills gaps perpetuating inequality around the world?

Skills over pedigree

A fast-changing jobs market has brought urgency to these questions. Artificial intelligence, digital transformation and the shift to green energy will drastically change our economies, requiring workers to develop a host of new skills to fill the jobs created.

But educational systems are struggling to keep up, while many face barriers to work due to discrimination on the basis of gender, race and socioeconomic background. That makes it hard to gain the experience employers require.

“Too often, good-paying jobs – the foundation for income stability and long-term wellbeing – lie out of reach,” says Dr. Mona Mourshed, founding chief executive of Generation, a global non-profit network that upskills and helps people find well-paid work.

Outdated approaches to recruitment are not helping the problem. Employers continue to prioritise a candidate’s pedigree – their educational and career history for example – when hiring over actual skills, which stops them accessing a much wider talent pool of workers able to do the job.

According to Generation’s research, some 61% of employers have increased education or work experience requirements for entry-level tech roles in the past three years, despite struggling to fill the roles they have. However, a small but growing number are starting to embrace a skills based approach, realizing it is both the right thing to do, and that it makes good business sense.

“In our research we saw that the small number of employers who had dropped education or experience requirements received more applicants and the vast majority of those hires performed as well, if not better, than employees hired under more stringent requirements,” Mourshed says.

‘Strong return on investment’ 

Generation’s work is helping drive a much-needed shift towards skills-first hiring, while supporting people to achieve economic mobility in 17 countries. The organization delivers free, cutting-edge training courses online and in person, designed in partnership with employers. It also offers career mentoring and helps place alumni in jobs through a network of more than 16,000 employer partners around the world, from small businesses to Fortune 500 companies.

To date, more than 100,000 people have graduated from Generation courses, and 86% of alumni find work within six months of program completion.

“Our programs are global and offer a strong return on investment. We reverse pervasive unemployment, and our graduates have earned more than $1bn in salaries to date,” says Mourshed.

Typically those who take its courses come from under-represented backgrounds, with only 25% having a university degree, and some 89% are unemployed before they start their program. The courses teach students the technical and soft skills required for the careers of tomorrow, in areas such as technology, healthcare, green jobs, sales and customer services.

“People do not need prior experience to enroll, just basic numeracy, literacy and a desire to get into a field,” says Mourshed.

Why investing in talent pays off

Corporations and philanthropic organizations increasingly realize the impact that investment in skills and recruitment has on economic mobility. More than 90 organisations currently back Generation’s work, with approximately half of its funding coming from philanthropy and half from employers and government organisations. Donors include Google.org, the Hg Foundation, MetLife Foundation, and Workday.

Generation closely measures the impact of its work both to improve its programs, as well as give donors a clear picture of how their money is put to good use. In 2023, Generation surveyed more than 3,100 alumni across 14 countries and found overwhelmingly positive outcomes in employment, financial health, wellbeing and community engagement – with those results holding true across professions, genders and socioeconomic backgrounds.

According to the research, within two to five years of program completion:

• 70% of global graduates were able to meet their daily financial needs, up from just 33% before the course.
• 58% of graduates in low-to-middle income countries were earning a living wage, with that rising to 98% in upper-middle income countries.
• Alumni wellbeing and engagement remained high for years after graduation, with 86% now confident in their ability to achieve their goals and optimistic about the future.
• 84% of alumni wanted to give back to Generation in some way, by recommending someone to a Generation program, giving a testimonial about their experience, hiring Generation graduates at their organization, mentoring learners or supporting the alumni network.

“At Generation, we believe in the power of employment to change lives. Millions of people around the world struggle to make ends meet, much less to save money that can transform their lives and those of their families. And barriers to good jobs are a major part of the problem,” Mourshed says. “We are proud of Generation’s results, but we know that we can do more. Donor contributions help us expand our reach and make a lasting difference in the lives of those who need it most.”

Boosting skills and employability is key to improving people’s lives and philanthropy can play a huge role in achieving this goal.

UK software services business Zartis had always considered itself an ethical company, but when it found itself struggling with an industry-wide skills shortage a few years back, it struck upon a radical idea.

“We realized that people want more than a paycheck from the company that they work for. They want to work for a company with a sense of purpose,” Zartis’ CEO Padraig Coffey says. “This was what initially led us to look into supporting social initiatives like Level Up, which upskills refugees and asylum seekers with scholarships and access to mentoring and training.”

Those early efforts quickly gained momentum and garnered “overwhelmingly” positive feedback from staff, prompting the business to expand its CSR initiatives further.

Today, Zartis supports a host of programs from training aspiring female software engineers in conflict zones, to working to offset its carbon footprint in Spain. It also credits such work for helping it to attract quality staff while achieving an impressive 90% retention rate.

“Our social initiatives aren’t just something we ‘do’, but prioritize,” says Coffey. “This is what makes us stand out to top industry talent.”

Appealing to gen Z 

Firms realize that corporate philanthropy isn’t just the right thing to do, but also that it makes good business sense, be it in terms of developing talent pipelines, building their brands or contributing to the local economy in a way that feeds back into their own bottom lines.

It is especially important to members of generation Z. According to research by Deloitte, 77% of gen Z employees believe it is vital for them to work for a company whose values are aligned with their own, and CSR can play a huge role.

“It demonstrates commitment to making a positive impact and creates a work environment that fosters purpose, engagement and long-term loyalty,” says David Wreford, a partner in the career business at Mercer, a global management consultancy.

However, making sure a company’s philanthropy succeeds at boosting both ethical and business goals is not always straightforward. For one thing, firms risk being accused of tokenism if they aren’t truly committed to their CSR efforts or if they seem to contradict them in other parts of their business. To avoid this, they must instill ethical approaches at the heart of the company’s operations, while ensuring their impact is measured and shared transparently in corporate results or the annual report.

Lucy Klinkenberg-Matthews is head of ESG at Paragon, a communications and business process outsourcing company. As part of its ESG commitment, she says the firm ties its corporate sustainability targets to United Nations Sustainable Development Goals. It also implements ethical standards across its entire supply chain, partnering with the NGOs MSDUK and WEConnect to help it access a more diverse range of female and minority-owned suppliers.

Klinkenberg-Matthews says these relationships are about opening up opportunities and helping to level the playing field, but they also have clear benefits for the firm.

“We already see the value of working with younger and minority-owned businesses. They tend to bring more innovation and a more diverse problem-solving approach. This also demonstrates to our stakeholders that we take our social responsibility seriously.”

Aligning with local needs

Firms should think carefully about the initiatives they support to ensure they reflect the company's purpose and values, says Wreford, who has seen a shift in approach recently. “We are seeing more partnerships with good causes for mutual gain. So, less painting local schools and more skills-based volunteering and more time out dedicated to those causes. There are also more programs aligned to corporate sustainability improvements.”

Companies should also ensure that their CSR efforts align with local needs. Take for example Red Sea Global (RSG), a property developer owned by the Public Investment Fund of Saudi Arabia which is building luxury eco-tourism resorts across the kingdom.

Skills shortages have blighted Saudi Arabia in recent years, but RSG is investing in a wide range of training programmes to build its own and broader local talent pipelines. The firm partners with local education institutions to deliver its training, with 430 students graduating from these courses last year. Some 40% of them came from communities close to RSG’s destinations on the west coast of the kingdom, and all were guaranteed jobs at the firm, says Tim Williams, the group’s head of people strategy and culture.

RSG also supports NGOs that upskill local businesses and support the local agricultural economy, and Williams is open about the virtuous circle such programs create. “These initiatives support our business goals by providing a ready supply chain of goods and produce for our hotels and guests.”

It is hard to quantify exactly how much corporate giving boosts a business’s bottom line, but research has shown that companies which perform well in terms of profit, growth and sustainability outperform those that perform well just on profit and growth.

One of the biggest benefits is in terms of brand perception, which can be enhanced through other complementary measures such as having a company reclassified as a B-Corp to demonstrate it meets high standards of verified performance, accountability and transparency.

“This can lead to enhanced reputation, increased consumer trust, access to conscious consumers and talent, differentiation from competitors, and opportunities for collaboration and growth,” says Wreford. “It aligns the brand with a global movement of businesses that are using their power to create a positive impact on society and the environment.”

‘Lasting legacy’

Similarly a firm can set up its own charitable foundation which allows it to have a direct and lasting impact on the causes it cares about – although this requires careful planning, legal compliance and ongoing administration.

“It provides an opportunity to create a philanthropic identity that can be carried on for generations, ensuring that the founders' values and commitment to social good continue to be upheld. It can also offer tax advantages,” Wreford says.

Klinkenberg-Matthews believes the current focus on CSR is part of a wider shift to a more purpose-driven way of doing business that benefits multiple stakeholders for the long term.

“If society thrives, then businesses thrive as well,” she concludes. “If society is more equal and people can spend more with our clients, then that's going to mean more work for Paragon as well. From a purely business perspective, it's not completely altruistic.”

For companies that have a strong sense of their own purpose and long-term objectives, building a philanthropy strategy is not only good, but good business.

In every country, across every industry – even in the current economic climate – employers struggle to find and recruit entry-level tech talent, which can have a direct impact on productivity and profit levels.

Yet while most senior executives recognise something needs to be done, it is clear many companies must go much further to tackle the problem.

Outdated recruitment models are still used by many firms with most employers requiring prior experience for junior positions, even though a majority of candidates don’t have relevant previous experience. Millions of candidates with the right skills but the wrong work and educational experience are excluded from well-paid jobs that could transform their lives.

Now, a pioneering minority of employers are seeking to change this by embracing skills-based hiring techniques, which prioritise aptitude over pedigree – giving them access to a much wider talent pool.

Research by Generation, a global non-profit which promotes skills-first recruitment and training, has found that about a quarter of employers have removed education or work experience requirements for entry-level tech roles, replacing them with demonstration-based competencies. The result has been a more inclusive recruitment process that attracts more candidates, with comparable candidate quality and performance on the job.

“There is a common misconception that to enter technology-related roles you have to have a computer science or related degree in order to have the right skillset for these jobs,” says Dr. Mona Mourshed, Generation’s founding chief executive. “This is not the case, and our training programs, which take between  four and 16 weeks, show that these are skills that everyone who wants to can acquire if provided with the right support.”

Generation trains and places a diverse set of learners into tech careers in just a few months. Its programs focus on practice of the most critical skills for a specific role, with a curriculum that integrates the technical skills, behavioral skills and mindsets that are needed.

Program outcomes are strong and sustained, with 88% of its tech graduates remaining in paid work two to five years after completing their Generation program. Of those employed graduates, 73% are hired by repeat employers,  a testament to the skills Generation alums bring to the job.

The need for a sea change in the recruitment of tech roles is urgent. Nearly two-thirds of employers surveyed by Generation are investing in entry-level tech talent pipelines  through methods like onboarding, mentorship and internship programs. Yet 52% of these employers are still struggling to hire.

“Tech layoffs have dominated the headlines recently , but tech careers remain a growth area,”  says Mourshed. “This moment of industry reset is the perfect time to take stock of hiring practices in anticipation of the next boom.”

Companies should transform their hiring practices to create pathways into tech jobs for people without university degrees or technical backgrounds. By focusing on skills-based hiring methods that enable people to showcase their relevant job skills rather than their degrees, they will access a wider, more diverse pool of talent that helps them to grow their businesses and boost innovation.