Skill-based hiring is now creating a new shift in the talent landscape!

Highlights

• In the past year alone, there has been a 12 per cent increase in the adoption of skill-based hiring.
• In blue-collar jobs, hiring has traditionally been based on skills. However, this shift is now becoming more predominant in white-collar jobs, especially in roles related to technology, marketing and data analysis.
• As of May 2024, 28 per cent of job postings are focused on skills rather than specific educational requirements.
• Industries that prioritise hiring employees for ‘skills over degrees’ are IT, Manufacturing, Media & Entertainment, Fintech, Design & Creative, Digital Marketing & Advertising, and Startups.
• As organisations grow and face fluctuating hiring needs, scaling skill-based hiring while maintaining quality and consistency has been quite demanding.
• Developing comprehensive testing methods that accurately measure a candidate's abilities without bias is complex. Also, identifying the specific skills required for each role adds another layer of complexity.

The primary criterion of completing graduation is not at all a check box in the hiring strategy of companies these days. This shift in the changing talent landscape to ‘skill-based hiring’ is majorly reflected in the job descriptions and job screening process these days. Data from WorkIndia says that over 831,000 employers, including small and medium-sized businesses (SMBs) and micro, small and medium enterprises (MSMEs) are now prioritising skill-based hiring and over 10 lakh candidates have been hired in the past year based solely on their skills rather than their educational background.

Ranaq Sen, Head of People, WorkIndia, says, “In the past year alone, there has been a 12 per cent increase in the adoption of this hiring approach. In blue-collar jobs, hiring has traditionally been based on skills. However, this shift is now becoming more predominant in white-collar jobs, especially in roles related to technology, marketing and data analysis.”

A report from foundit also reveals that nearly 80 per cent of employers are now emphasising skills over formal qualifications. In India, the trend of hiring based on skills has been particularly pronounced in the tech industry and startups. As of May 2024, 28 per cent of job postings are focused on skills rather than specific educational requirements. As per the report, the industries that prioritise hiring employees for ‘skills over degrees’ are IT, Manufacturing, Media & Entertainment, Fintech, Design & Creative, Digital Marketing & Advertising, and Startups.

The figures and trends indicate a significant shift towards skill-based hiring, driven by the need for specific competencies and the recognition that traditional educational pathways may not always align with industry requirements. “Rapid advancements in technology and the digital economy have created a demand for specialised skills not always covered by traditional degree programmes. Employers increasingly seek candidates with specific skill sets for roles such as coders, cybersecurity experts, data analysts, digital marketing professionals, content creators and UX/UI designers. It is becoming hard for companies to find the right talent to match the demand and are becoming hard to fill,” says Sekhar Garisa, CEO, foundit.

“The rise of entrepreneurship and the startup culture in India has emphasised the importance of skills. Startups often face resource constraints and need individuals who can adapt quickly, learn on the job, and possess a diverse skill set. This has led to greater appreciation for candidates demonstrating relevant skills and practical experience, regardless of their educational background,” Garisa says.

Additionally, the availability of coding challenges and skill assessment platforms has enhanced employers' ability to identify and hire candidates based on their demonstrated competencies and practical abilities, rather than relying solely on formal qualifications.

In this context, ETHRWorld reached out to HR leaders of the companies across sectors that have adopted skill-based hiring to understand the trajectory of this trend and the challenges they have undergone while implementing this.

More on-ground knowledge than theories!

L’Oréal India has a media lead who has a degree in Psychology and a Master’s in Film and Digital Video production. And its Insights lead is someone with a Master’s in International Relations (typically, for such a role, the candidate would have an MBA in Marketing).

Rasika Malhotra, Director - Human Resources, L’Oréal India, says, “L’Oréal India encourages employees to explore different roles, functions beyond traditional expectations of someone’s educational background. So, you can be a graduate of economics or film production and play a role in media! These examples indicate that academic qualifications are not the only marker of someone’s potential to succeed in the workplace. What one needs is a thirst for learning and taking risks.”

For the sales role at Pramerica Life Insurance, just a twelfth pass is the educational qualification. Recently, the company administered competency-based tests and hired more than 800 people in the frontline salesforce.

Relaxo Footwears prioritises hiring based on expertise for its manufacturing and production units.

“As a footwear manufacturer, this practice of hiring has always been crucial for us, as it requires more on-ground knowledge than theories. Though skill-based hiring comes with its own challenges, which include developing effective methods to accurately assess candidates' practical skills and ensuring that skill-based hires receive the necessary training to meet our standards, this method of hiring allowed us to better meet industry demands,” says Ashish Srivastava, VP and Head of HR, Relaxo Footwears.

In FY 2023-24, Relaxo achieved 100 per cent skill-based recruitment for staff positions, filling close to 472 open positions. For workmen positions, more than 97 per cent hiring (1,317 out of 1,354 open positions) was totally based on the candidate’s competence. Some of the job roles hired on the basis of skills are Machine Operators, Quality Control Inspectors, Production Line Workers, Process Controllers, Product Development Operators and Lab Technicians.

Visionet follows the Talent Management philosophy of ‘Hire for Skill, Train for Role, and Coach to Perform.’ “This approach is significant in both Business Process Management (BPM) and IT services, where adaptability is crucial. With this strategy, we have seen a growth of more than 200 per cent in hiring volumes and enhanced the quality of talent,” says Suvarna Nikam, HR Head, Visionet Global.

The company has brokedown the hiring numbers over the years that outlines its shift in hiring trajectory:

In the BPO segment
2019-20: 60 per cent of hires were based on educational qualifications (250/700).
2021-22: 70 per cent of hires were evaluated primarily on practical skills (450/800).
2023: 80 per cent of hires were based on skill assessments (800/1000)

In the IT Services segment
2019-20: 50 per cent of hires focused on technical skills and problem-solving abilities (50/100).
2021-22: This increased to 65 per cent with robust competency assessments (90/140).
2023-24: 75 per cent of IT hires were based on skills (120/160).

Logistics sector

Over the years, for more than 85 per cent of the roles in Allcargo Gati, the company has been hiring candidates whose skills and abilities match more closely with the job requirement. Some critical roles that the company has hired on the skill basis are Unit Head - GDW Manager, STC Manager, Network Managers, and Quality, Solution Designing & Implementation.

“These roles require the employee to supervise and control overall logistics processes and services in coordination with vendors and Gati Associates. We have been continuously striving to match the rapid pace of technological interventions in the logistics space, evolving employee expectations, and the influence of societal changes which has resulted in an approach that has emerged as skill-based hiring,” says Indrani Chatterjee, Group CHRO, Allcargo Group.

Like any other organisation, Allcargo Group also faced several challenges transitioning from traditional hiring methods to skill-based hiring, of which Chatterjee shares the following:

• Sometimes the hiring managers are resistant to implementing skill-based hiring methods which may lead to hiring defects and have a direct impact on the quality of hire.
• Another aspect is integrating skill-based hiring into existing recruitment modules. This requires more time and resources to develop and administer assessment and also train employees from time to time.
• Also, as organisations grow and face fluctuating hiring needs, scaling skill-based hiring processes while maintaining quality and consistency has been quite demanding.

Employees hired on the basis of skills stay longer

About 80 per cent of the hired employees in the last few years were predominantly skill-based at Unimoni Financial Services.

According to Rathish R, Chief People Officer, Unimoni Financial Services, 799 and 808 people were hired at the company on the basis of their skills in FY 2022-23 and FY 2023-24 respectively. “As the employees are hired based on their skills, they are more likely to remain satisfied and stay longer with the organisation. This reduced our turnover rates and the associated costs of hiring and training new employees, says Rathish.

Rathish further says that skill-based hiring is particularly suitable for roles where specific abilities and competencies directly contribute to job performance. Being in the Financial Services industry, most of their hiring is for people who are skilled in Customer Relationship, Sales and Marketing. The Customer Service and Sales and Marketing staff require adequate communication skills, problem-solving abilities, empathy and proficiency in using sales and customer service tools and systems, sales techniques, digital marketing strategies and analytics proficiency.

He points out that skill-based hiring is also suitable for roles in technical positions like software engineers, data scientists, IT support specialists, and for creative and design roles like Graphic designers and content creators.

Talking about the challenges faced while shifting towards skill-based hiring, Rathish says that the perception and bias of hiring managers sometimes still align towards traditional hiring by preferring graduates over non-graduates. “Convincing them of the validity and effectiveness of skill-based hiring can sometimes be a significant challenge. Also, assessing the skills of the candidates accurately due to a lack of standardisation of skills is also a challenge for organisations,” he shares.

“Besides this, the scope of the Apprenticeship Act has been extended to include fresh non-engineering pass-outs and organisations like ours have to adhere to such regulations as well while making hiring decisions,” Rathish adds.

Allows to tap into a diverse talent pool

At SAVA Healthcare, people for multiple roles, including field sales representatives, administrators and creative designers, were selected on the basis of specific skills and practical experience of the candidates rather than any degree or higher qualification.

Biswajit Mohapatra, HR Head, SAVA Healthcare, says, “For these positions, the ability to perform job-specific tasks effectively and adapt to the dynamic demands of the pharmaceutical manufacturing industry is paramount. Over the last five years, we have seen a significant shift towards skill-based hiring practices. Initially, only about 60 per cent of our hires were skill-focused, with the remainder primarily selected based on educational background. However, as we refined our hiring processes to emphasise skills assessments, this percentage has steadily increased.”

“In the past year, 75 per cent of our new hires (100 people across various departments) were selected primarily based on their skills and relevant experience, rather than solely on their educational qualifications. This approach allows us to tap into a diverse talent pool, including candidates who have gained expertise through non-traditional paths such as vocational training, online courses and hands-on experience,” says Mohapatra.

Facility management

Since implementing skill-based hiring, Technique Control Facility Management (TCFM) has seen a significant increase in the number of hires based on practical skills, and specifically for soft services categories like janitors, pantry staff, horticulture maintenance, housekeeping staff, office boys and drivers have grown to about 6,500 to 6,700 employees.

Transitioning from traditional degree-based hiring to skill-based hiring posed several challenges for the company. Firstly, it required a cultural shift within the organisation to value practical skills and experience equally, if not more than formal educational qualifications. This change necessitated extensive training for the HR teams to evaluate candidates based on their skills and hands-on experience.

Also, since facility management is not necessarily the first choice of anyone who wants to build a career, the onus is on the company to keep the employees engaged and show them how enriching this industry can be for the beginners.

Another major challenge was that clients preferred to have trained employees who already knew the job and were experienced. Therefore, the company has a robust Learning & Development team supported by five state-of-the-art learning centres, known as Gurukul, located across four major cities in India. The firm also has structured training programmes, mentoring systems and performance evaluation metrics focused on skills rather than just job tenure.

Additionally, communicating this shift to potential candidates and the market at large required a concerted effort in employer branding and outreach. Thus, ensuring that candidates understood the value the organisation placed on their skills and experience was essential to attracting the right talent.

Robotics and automation sector

Titan Engineering & Automation Limited (TEAL) identified the necessity to transition to skill-based hiring in 2017.

“Back in 2017, only 70 per cent of our hires (50 people) were evaluated based on their skills in the organisation. However, by 2023, this percentage had grown to 90 per cent and above (225 people). With the rapid progression in robotics and automation, it became clear that practical experience and specific technical skills were more vital for job performance than traditional degree qualifications,” says Lakshmi Toshniwal, Associate General Manager - HR, Titan Engineering and Automation.

“Skill-based hiring is particularly suitable for roles in application engineering, programming and design within the robotics and automation sectors. These positions require a high level of technical proficiency and the ability to solve complex problems, which can be more effectively assessed through practical skills tests rather than traditional academic qualifications,” she adds.

Toshniwal points out that roles that involve maintaining and troubleshooting automated systems benefit greatly from candidates who have hands-on experience and practical knowledge of the latest technologies. Specifically, skills in conceptualisation, design, PLC, SCADA and IIOT are in high demand and are critical for the success of these roles.

According to Toshniwal, transitioning from traditional degree qualifications to skill-based hiring presents several significant challenges. One of the primary hurdles is ensuring the objectivity and fairness of skill assessments. Developing comprehensive testing methods that accurately measure a candidate's abilities without bias is complex. Also, identifying the specific skills required for each role adds another layer of complexity, especially when verifying non-traditional educational paths or self-taught skills.

Additionally, gaining support from senior executives can be difficult, as they may be reluctant to abandon established hiring criteria. “Resistance from hiring managers, who may be comfortable with conventional methods, further complicates the shift. The transition also demands a cultural change within the organisation, as it alters long-held perceptions of qualifications,” she says.

Beyond textbook qualifications

At Target Publications, 63 people among the total 300 employees were hired on a skill basis. For sales roles, the company goes beyond textbook qualifications. It assesses a candidate's ability to craft a compelling pitch note - a skill that directly translates to driving sales. Similarly, for creative designers, it's not just about artistic talent, the role demands a person who can translate design concepts into visually appealing and impactful marketing materials.

Some of the job roles that the firm has hired on the skill basis beyond the sales roles are logistics manager, assistant manager dispatch, online sales executive, administration executive, back office executive, DTP operator, warehouse manager, inventory in-charge and dispatch coordinator.

“An impressive academic background (MBA, PhD) is great, but demonstrably effective skills that have demonstrably grown businesses - that's what we value most. We've seen diploma-holding engineers, with no formal training in SEO or online marketing, excel in their roles because they possess the core skills to secure new clients and boost revenue. It's all about identifying and nurturing that raw talent," says Tushar Chaudhari, Director - HR, Target Publications.

The pandemic induced this hiring trend

AJAX Engineering recognised the need to shift to skill-based hiring post-2020, coinciding with the broader industry trend influenced by the Covid-19 pandemic. By 2022, the company started implementing skill-based hiring, initially for roles where specific technical skills outweighed formal educational backgrounds. At the firm, the skill-based hiring is particularly suitable for roles in Research & Development (R&D), Supply Chain Management & Purchase, and Quality Assurance.

Commenting on the initial hurdles faced while shifting the hiring strategy, Joseph Peeris, Chief People Officer & Corporate Affairs, Ajax Engineering, says, “Developing reliable and valid assessment tools to evaluate candidates' skills accurately is a complex task. It involves creating standardised tests, practical assessments and simulations that can objectively measure a candidate's abilities relevant to the job.”

Another challenge is the initial time and resource investment required to implement skill-based hiring processes. This includes training HR personnel and hiring managers on new assessment methods and continuously updating these methods to keep pace with the evolving job requirements. Moreover, ensuring fairness and reducing potential biases in skill assessments are critical.