Here is an excerpt from an article written by Bryan Hancock, Nikhil Patel, Chris Higgins, Jonathan Law, Sarah Olson, and Katie Van Dusen, for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.
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A skills-based approach helps both employers and workers
More employers are starting to embrace skills-based hiring practices. Large companies, such as Boeing, Walmart, and IBM have signed on to the Rework America Alliance, the Business Roundtable’s Multiple Pathways program, and the campaign to Tear the Paper Ceiling, pledging to implement skills-based practices. So far, they’ve removed degree requirements from certain job postings and have worked with other organizations to help workers progress from lower- to higher-wage jobs.
The interest in skills-based practices isn’t limited to the private sector. In May 2022, the state of Maryland announced it would no longer require degrees for almost 50 percent of its positions, opening thousands of jobs in healthcare, corrections, policing, skilled trades, and engineering to a bigger pool of applicants.
Companies have recognized that skills-based practices are a powerful solution to challenges that have intensified since the pandemic. Employers have struggled to find the right candidates for important open positions and then keep the talent they hire. Through a skills-based approach, companies can boost the number and quality of applicants who apply to open positions and can assist workers to find more opportunities to advance internally, which can help employers improve retention. It also helps communities by creating more and better job opportunities for a broader, diverse pool of workers.
Attract and keep a broader pool of talent
Skills-based practices help companies find and attract a broader pool of talent filled with candidates who are better suited to fill these positions in the long term. Such practices also help open opportunities to nontraditional candidates—including people without specific or typical credentials on their résumés—as well as women and people of color.
This year, the alliance hosted a ten-week Accelerator program designed to help employers adopt skills-based practices across their talent pipeline. Participants were mostly small- and medium-sized businesses (SMBs)—along with a few larger employers—that were based in the Atlanta, Minneapolis, Denver, and Austin areas. The program consisted of four large workshops and separate one-on-one coaching sessions. During coaching sessions, participants made meaningful changes to their talent strategies to align them with skills-based practices.
These changes often generated immediate impact. Participants indicated that creating skills-based job postings resulted in a substantial increase in applications from a broader set of workers. One participant noted that making a few tweaks to their job posting quadrupled the number of applicants from two or three the previous week to 12 in the week after the new posting was shared. In the end, a successful candidate was hired when previously no applicants had passed the résumé screening.
Another participant created a skills-based version of one of their job postings and went from getting one overqualified candidate for the position to 18 appropriately qualified applicants; one was hired, and the rest were considered for other open positions in the organization.
This experience is shared by employers beyond Accelerator program participants. For example, a case study conducted by the alliance showed how a medium-sized healthcare provider created its own skills-based talent solution to address scarcity. The organization needed nursing assistants with the right skills and qualifications but weren’t getting the right applicants. They decided to train from the ground up, with two key changes: they removed role experience requirements from job postings, and they partnered with a local technical college to create an end-to-end clinical-training program. As a result, 200 new nursing assistants underwent this clinical training.
Improve internal value propositions
Skills-based hiring creates a more resilient workforce and can be an effective strategy for employers to prevent attrition, which is especially relevant in the COVID-19 era. Hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience. Workers without degrees also tend to stay in their jobs 34 percent longer than workers with degrees. Therefore, skills-based practices allow employers to not only find the best workers but also retain them during a time when it is historically difficult to do so. The approach saves time, energy, and resources while fostering a more diverse and better-prepared workforce.
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Here is a direct link to the complete article.
Bryan Hancock and Nikhil Patel are partners in McKinsey’s Washington, DC, office; Chris Higgins is a consultant in the San Francisco office; Jonathan Law is a senior partner in the Southern California office; Sarah Olson is a consultant in the Denver office; and Katie Van Dusen is a consultant in the Ohio office.
This piece benefits from the collective efforts of a wide range of colleagues and partners. The authors wish to thank the following:
For their support on the article: Beth Cobert, Carrie Gonzalez, Matthew McKeever, Jacob Vigil, and Debbie Wasden (from the Markle Foundation); Sergio Galeano, Sarah Miller, and Katherine Townsend (from the Federal Reserve Bank of Atlanta); and Osato Dixon, Bonnie Dowling, Roberta Fusaro, Jacquie Hudson, Najah Mushatt, Carolyn Pierce, Ben Saft, and Petra Vincent (from McKinsey).
For their contributions to McKinsey’s Rework America Alliance team over the past two years: Carla Arellano, Steve Armbruster, E.B. Armstrong, Tim Bacon, Kristin Baldwin, Sophia Boralli, Henry Bristol, Brady Burns, Madeleine Carnemark, Pallavi Chandashire, Lucas Chen, Wan-Lae Cheng, Andre Dua, Brendan Earle, Kweilin Ellingrud, Emily Field, Jason Forrest, Anne-Marie Frassica, Oscar Gonzalez, Garo Hovnanian, Vijay Nattamai Jawaharlal, Raina Karia, Michael Lazar, Thomas Li, Ryan Luby, Kate Luther, Tom Martin, Vidur Nayyar, Shashwat Pathak, Matt Petric, Jose Maria Quiros, Samvitha Ram, Asha Rizor, Halima Said, Athreya Sampath, Saurabh Sanghvi, Srishti Sharma, Mallory Smith, Steven Smith, Ramesh Srinivasan, Sanjay Srinivasan, Liza Tullis, Tucker Van Aken, Stewart Vann, Amit Verma, Marius Westhoff, Edom Wessenyeleh, Claire Williams, Bryson Wong, and Bob Zhang.