With the rise of more technical roles across industries and sectors, and a shortage of people to fill them, skills-based hiring could help organizations access new talent pools. This episode of McKinsey Talks Talent explores the opportunities to do so, with McKinsey partners Bryan Hancock and Brooke Weddle in conversation with global editorial director Lucia Rahilly.
This transcript has been edited for clarity and length.
What is skills-based hiring?
Lucia Rahilly: Today we are talking about the shift toward skills-based hiring, which is assessing job candidates based on their skills rather than on college degrees or other, more conventional, credentials. Brooke, let’s start with you. Give us a quick example of what skills-based hiring might look like in practice.
Brooke Weddle: A simple example is if we think of a job posting for a customer service representative at a large company. Many postings use job descriptions that are outdated. So, imagine taking that job description and saying, “We are no longer going to require a four-year bachelor’s degree for this role.” You emphasize instead the skills required for success in that role. That’s a very basic way to implement skills-based hiring.
Lucia Rahilly: Bryan, what’s behind this trend? Why is it happening now? Why is it on the rise at this juncture?
Bryan Hancock: I think there are two things that are coming together to make skills-based hiring something that many organizations are thinking about. One is about creating access to opportunity. Look at a college degree: if it’s not needed for a job, not having one shouldn’t be a barrier to somebody getting the job. If you have the skills, no matter where you learned them, and you can do the work, you should be able to do the work.
Look at a college degree: if it’s not needed for a job, not having one shouldn’t be a barrier to somebody getting the job.
We’re also seeing skills-based hiring come to the fore because organizations in many technical roles are having trouble finding the people that they need. If they can eliminate formal job requirements, they can peel that back and say, “What we need are these underlying skills.”
For example, a video game manufacturer may say, “What I want is somebody with video game experience to help the development of our blockbuster platform.” Well, there aren’t that many people with video game experience; that’s a kind of limited market. But if you look at the underlying skills that are required, like some of the software engineering or programming or storytelling, there are people with lots of those underlying skills who would only need a short boot camp to apply them into the video game construct.
Can skills-based hiring also include soft skills?
Lucia Rahilly: When we talk about skills-based hiring, are we including softer skills? Or are we mostly talking about technical skills like coding? Or being able to use industrial manufacturing equipment and transferring that skill from one sector to another sector?
Bryan Hancock: This is one of the most common questions I get from clients when they’re starting to think through what it means to go to skills-based hiring. Is it just skills? Is it skills and attributes? We encourage people to think more broadly: OK, how do we think about what somebody actually needs to succeed in the job, and then how do we assess for it?
One of the biggest barriers that we see for companies moving to skills-based practices is that they don’t recognize the barriers that they have in place. They don’t know how to assess on the other end and they have trouble thinking through this and saying, “We do need these soft skills.”
I know that if somebody worked in a given role for five years without getting fired, they probably developed the soft skills, whether it’s in customer service or another role. But if they’ve worked there six months, how am I confident that they have those skills? How do we develop the interviews so that we, in a structured way, can test for some of the things that we know are important for the job?
So I think it is possible to test for soft skills, but you have to be very thoughtful in how you’re doing it. Because the soft-skills interview shouldn’t just revert to “the beer test,” or, some of questions like, “What did you do this weekend?” Or, “Do I like this person?”
Lucia Rahilly: What is the beer test?
Bryan Hancock: Would I want to have a beer with this person? Because, too often, the beer test introduces all sorts of potential biases: I’m going to have a beer with people who are somewhat like me.
So, you have to be able to go away from those generalized questions to some very specific questions: “Tell me an instance when you demonstrated X,” but then let the person tell a story about some of their soft skills. It is possible that organizations should think about soft skills as part of their skills-based hiring. But it does require a rigor to how they think about assessing for it, looking for the markers, and interviewing candidates.
There are real challenges, like assessment. The other one I hear a lot of companies talk about is the onboarding and learning development of people who are coming in with more of a skills-based profile versus a signal that would set them on a more structured path that is more recognizable at the organization.
Let’s also include the public sector here. There are at least ten states that have come out pretty boldly in terms of moving to a skills-based approach for some of their public-sector roles. But then there is the change management challenge of making this really work and doing so at scale, versus coming in and not being set up for success.
Do degrees still count in the hiring process?
Lucia Rahilly: Interesting. There was an excellent article in the New York Times, which you probably both saw, about the precipitous drop in the perception of the value of the college degree, particularly among certain demographics. That downtick, however, was confined to the US, I believe, because in many cases, the cost of higher education in the US is so much higher than in other countries. Are we seeing skills-based hiring as a primarily US phenomenon? Or is it broader than the US? Is it global?
Bryan Hancock: Skills-based hiring is a global phenomenon. Across the world, organizations are having trouble filling roles—in particular, roles that require some level of technical expertise. We’ve learned a lot about what workers want from their employer, and in some ways the employer–employee contract has significantly shifted.
Increasingly, we want more flexibility and development. That interface with the manager is so important as well. When you think about skills-based hiring, that enables some of that flexibility. Think about the gig economy: if you can start to modulate and break down certain parts of roles and have people fit to those in ways that align with the rest of their life, that is appealing. And you can talk about some of the generational differences in that context that I think are pretty relevant here.
Let’s talk about college for a second. I want everybody listening to this who’s been to college to think back to a time when perhaps it was a snow day and class was canceled. Were you worried that you were wasting your tuition money because that class had been canceled and you were not getting the skill that you needed? Were you desperately concerned that missing that class meant you weren’t getting the return on your investment? No, because you recognized that what you were getting from college, at the end of the day, was a credential that showed you had the “stick-to-itiveness”; the intelligence that got you through school and got you a credential. That credential that then unlocked a career. It wasn’t what was taught on that Wednesday in January.
I don’t want anybody to walk away from this thinking that we think that college is not important or that it doesn’t develop well-rounded people or that it doesn’t advance thought and investigation into the human condition. It does all of those things and is incredibly important.
But if somebody doesn’t have those opportunities or that access, we shouldn’t shut them out of careers that really didn’t require that in the first place. So let’s create those pathways to opportunity for those folks, so we really do have a more inclusive economy.
Can skills-based hiring improve diversity?
Lucia Rahilly: Expanding the talent pool—mitigating the kind of scarcity that we’ve been seeing, particularly in the tight, tight talent market of recent years—is one clear advantage of skills-based hiring. Let’s talk about some of the other benefits of refocusing on skills versus on other credentials. Does skills-based hiring open up the market to nontraditional and potentially more diverse candidates, for example?
Bryan Hancock: Absolutely. Creating a more inclusive economy is part of the reason for moving to skills-based hiring. If you look at who has the skills but not the degrees, those are disproportionately people of color. So if we’re thinking through how to create more equitable pathways to opportunity that really do link to what folks can do on the job, I think that’s one of the reasons people are investing in skills-based hiring.
And it’s one of the reasons why we at McKinsey have partnered with the Marco Foundation and the Rework America Alliance, to work on skills-based hiring and to really develop the fact basis to say, “What are skills-based career pathways? What are the real barriers to hiring? And how can we empower organizations in local communities to better help individuals looking for jobs and help companies—in particular small and medium-size businesses that want to adopt skills-based practice—to actually adopt them?”
Brooke Weddle: This includes taking our own medicine and adjusting our approaches to hiring: we have a partner at McKinsey who does not have a four-year degree. So, up and down the board, there have been changes we have made to reflect this commitment that Bryan is talking about.
A couple of other benefits of skills-based hiring: keep in mind that the four-year degree or even two-year degree was never a perfect signal. So many employers have spent years trying to partner effectively with higher education to try to really fine-tune what the employer needs and what the higher ed institution is cultivating within their pools of talent.
The other angle to this is not necessarily hiring but instead thinking of internal talent markets. Think about people who are in roles and who don’t necessarily have a linear approach to career development, but rather try out different roles at different times across an organization. If you have more of a skills-based approach to creating those talent marketplaces, you can find talent where you might not have previously looked for roles in your own organization. This helps the company, and it also helps talent who want to have this more flexible approach to career development.
Bryan Hancock: One example of companies not being satisfied with what they’re getting out of college graduates and then figuring out their own skills-based program is Boeing in its cybersecurity area. Boeing had challenges hiring for cybersecurity roles. When they looked to get graduates of computer science programs, they found that people who graduated from those programs may have had a theoretical understanding, but they were still at step one on what the day-to-day cybersecurity job involved.
So, they created a cybersecurity apprenticeship program that did not require a four-year degree. For those apprenticeships, there is a very competitive process. Through the application process itself they had a number of assessment steps. For those that were awarded, it’s an apprenticeship, so they are learning on the job. The folks who are apprenticing them are signing off on literally 100-plus individual skills and capabilities that somebody is demonstrating and building over the course of the apprenticeship.
So at the end these apprenticeships, even though they don’t have a college degree, they have been taught the very specific elements that they need to be excellent in cybersecurity.
What are the benefits for employees?
Lucia Rahilly: That’s super interesting. Brooke, you alluded to this mechanism of the internal talent marketplace. What are some of the benefits for workers of skills-based hiring, beside the obvious, which is being offered a job that you might not otherwise have gotten?
Brooke Weddle: You’re already in the door; we’re not talking about hiring anymore. I think one aspect is this notion of flexibility. I mean flexibility not necessarily in terms of “I work these hours,” but rather flexibility in terms of “What are my options that I have as someone who works at this company?” I start off in customer service, I’m really good at meeting with other people and meeting their needs, understanding their needs. Maybe I could move over to marketing.
That’s a different kind of perspective on how to read, understand, and shape externally facing customer needs. The building blocks could be skills versus just looking at talent in terms of a role, and kind of a straight progression regarding, “Well, that role leads to these two roles.”
If someone’s in those two roles or two people are in those two roles and they’re not leaving, well, I’m stuck, right? I have nowhere to go. From a career path perspective, it opens up all sorts of doors. Managers are able to have a conversation about what kinds of skills you’re trying to develop and where you want to go, versus kind of just hierarchy and role. This also increases the aperture for flexibility, meaning in work, and overall development as well.
Bryan Hancock: It can be tremendous in terms of thinking through and planning your own career: planning what learning and development experiences you want, extra classes and training you take on the side. I’m super excited by generative AI and the potential there to have tools that actually help people navigate where they are. There are some talent management platforms that do it really well now across roles.
Where we’re seeing organizations get stuck is in those with thousands of roles, with lots of underlying jobs to be done, that are at different levels with lots of underlying skills. If we try to attack all of that at once, it can be a little bit challenging, and people can lose sight of what they’re solving for.
Where we’re seeing organizations have the most success are those saying, “OK, let’s focus on the handful of skills-based pathways where we’re seeing the most traction and where we’re seeing the most people move from one area—maybe it’s a nondigital area into a digital area; maybe it’s moving from distribution centers into coding—whatever it is. But let’s look at where there are the top handful of pathways and then double down on those pathways.” Versus the “everything to everywhere” approach, which can be complicated.
Another company that I think is doing something interesting here is IBM; they have moved to more skills-based performance management. IBM is very clear strategically about the skills shift that they need to be competitive going forward. They are now recognizing the skills that people have that are on that forward-looking vision in the performance review process, and they are rewarding people who are investing in developing the skills that are required for the future.
So if we’re thinking about the talent marketplace or thinking about moving people across the organization, that means being focused on, first, what are the skill shifts we need in the future? And are we being very clear on how we’re marking who has the skills and how that connects to jobs?
And then, second, are we very clear on the most common skills-based pathways? If companies can tackle those, that creates a great foundation to move toward the broader vision. Sometimes when starting with the broader vision, people can lose sight of, Why are we doing this? And is this really something people even want? So being specific and how you get started matters a ton.
Will generative AI help in skills-based hiring?
Lucia Rahilly: Bryan, you teed up something really interesting there, which is generative AI and the way that this might enable skills-based hiring or complicate it. How might generative AI be of use or a complicating factor there?
Bryan Hancock: I think generative AI is helpful in two areas: skills-based hiring and skills-based practices. It can help hiring managers write better skills-based job descriptions. If we’re trying to match the skills somebody has to a job that needs those skills, we need to understand what the job really needs.
Generative AI can help, in particular, for well-known roles. Hiring managers can articulate which jobs need to be done and their underlying skills. Generative AI can also help an individual understand, “Given where I’ve come from and the skills that I have, what do I need to do to get into some of those other roles?”
The other thing that I’m excited about is the promise of learning and employment records, or LERs. Think of this as a lifelong transcript that, regardless of where you gained the skill, you have a record of it. So, you could have taken it in a class in college, you could have gotten an online certificate, you could have been named “employee of the month.” When you’re talking about soft skills, that all of a sudden can become part of a credential and a learning record, right?
Those LERs could become interoperable across companies where there’s some common view of, “This is how we think about skills. This is how we recognize them, both hard skills and softer skills.” There’s a real movement to have that record be owned by the employee.
How should organizations get started?
Lucia Rahilly: What do companies need to be thinking about on the learning and development [L&D] side to bring these new folks along who need their skills fine-tuned to be applicable within a given context?
Brooke Weddle: I’ll go ahead and make a bold statement that I don’t know of any kind of L&D organization worth their salt these days that’s not doing a fundamental rethink of their approach. The promise here is that with skills-based hiring you could fine-tune your learning and development strategy to be more specific in terms of addressing the skills gaps that you have, because you’ll have a much clearer view of what those skills gaps are in the first place.
With skills-based hiring you could fine-tune your learning and development strategy to be more specific in terms of addressing the skills gaps that you have.
One of the things that I’ve seen in the skills-based hiring world is that people are hiring for the most critical skill of a given role or the hardest-to-find skill of a given role. They’re not hiring for all of the skills in a given role.
So, if you’re hiring for the critical skill or for the hardest-to-find skill, there’s a real role for L&D to create the boot camp to give you the other skills that you need. Because you may have most of what you need for the job, but there are things that you haven’t learned because you haven’t been there for five years. Being thoughtful about asking, “What are those boot camps?” to fill in the gaps: that’s a core part of skills-based hiring, as well.
And on that notion of boot camps, we’re seeing this not only in large, global organizations but also on the factory floor, on the deck plate. Think of foremen as a critical role, think of welders as a critical role. This is about bringing those folks in who are not ready to work but are ready to learn. A lot of organizations are seeing value in doing it that way because it is such a critical gap right now.
Lucia Rahilly: Are there elements of culture-building that leaders need to think about? Kind of a difference between folks who don’t have a traditional college degree or the traditional credentialed proxy and those need to undergo boot camp or particular kinds of training? How do you think about integrating those different cohorts culturally?
Brooke Weddle: I think it is a challenge. When you think about diversifying your pools of talent you’re, by definition, going to get different talent in the door. One of the things that struck me recently was a statistic that I think LinkedIn put out, stating that 70 percent of people get hired into an organization where they already know someone.
So if you’re moving to a situation where you’re not going to have that almost automatic cultural cohesion with new kinds of talent coming in the door, I think the onus is on the organization and the onboarding experience to really be as much about the hard elements of getting up and running as the soft elements, right?
For example, what are the values of this company? What do we stand for? What does it mean to be a leader at this company? What are the behaviors we look for? What are the mindsets? What are some of the norms that we practice? These are things that perhaps could be slightly taken for granted in situations where your talent flows were more homogeneous.
There’s probably a little bit more that we need to say and do up front to make sure that we are getting people understanding in a cultural context, and being open to where we need to push that culture in ways that are new because of this diverse talent. It’s got to be a two-way street. Organizations that are intentional about thinking that through are having a much better go at integrating this diverse set of talent.
Bryan Hancock: As part of that, the managers in those organizations need to be upskilled into how to onboard people with different backgrounds: How do I think about early stages of coaching and performance management? How do I meet people on the team where they are? And how do we convince our managers that this is worth it?
What we know is that organizations that use skills-based hiring practices see lower turnover in their skills-based hiring cohorts. So the response from people is, “Hey, this is great. This is a job that fits, that works, that lines up for me.” And they’re more likely to stay.
Lucia Rahilly: Both of you are not only engaged in research on this topic but also talking to clients every day. Where do you see leaders struggling most as they shift toward a skills-based hiring approach?
Brooke Weddle: A couple things. I do think assessment is hard. I’ve heard that from multiple organizations that I’m working with. The other issue is that there’s all sorts of throwing spaghetti at a wall and saying, “Let’s try out skills-based hiring, do some experimentation; that’s probably a good thing.” But there’s not necessarily a clear strategy for how to take that forward. Meaning, what do you do with that talent once it comes in? And how do you think more broadly about building skills-based pathways?
There’s almost a lack of understanding of how to really do this at scale. To be clear, I think there are some good examples out there. But an organization that is doing this end-to-end, at scale, in a truly effective way—there’s a scarcity of those examples at this point.
Lucia Rahilly: Is there any specific counsel for folks who are thinking about developing at-scale programs? They’ve started with something small perhaps, but they are thinking about how to lay the foundation for an at-scale skills-based program. What advice would you give to them?
Bryan Hancock: Be very specific in the problem that you’re solving. Let’s figure out the biggest skill pools within your organization where those folks could have roles, and let’s problem solve from that. Some companies will say, “I’m solving multiple problems.” Great, let’s prioritize among them. But getting very specific on the problems to solve is the key for how to get going.
Lucia Rahilly: Is there anything you want to add before we close?
Bryan Hancock: We’ve got great research from our colleagues at the McKinsey Global Institute that looks at what is coming in terms of skill shortages in the US. There is going to be a huge number of jobs in the skilled economy that we’re going to need to find people for. And if you build onto that what we need in healthcare, and we build onto that continued need for technology and other work, we’re seeing all of these folks in skilled areas where there are shortages. I think our clients are seeing the need to widen the aperture of who they’re hiring just because it’s tight now and it’s going to be tight for a number of these roles in the future.
