Who is this guide for?

This guide has been written with talent acquisition professionals, HR leaders and recruiters in mind. Whether you are looking to shift from a traditional hiring journey towards skills-based hiring, or planning to refine an existing strategy, this guide will help navigate the challenges and best practices for a successful implementation.

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Section 1: Why skills-based hiring?

Skills-based hiring has become something of a buzzword in the talent acquisition and recruitment space. More and more companies sing the praises of hiring for skills, rather than CVs, and report remarkable results in employee performance, retention, and even company revenue. In fact, a report by McKinsey found that “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. Let’s take a closer look at the reasons behind the shift.

Challenges in traditional hiring

Traditional hiring methods, particularly those that rely on unstructured interviews and CV-based selection, may have worked in the past, but the job market has changed. Candidates demand a fairer and more transparent process, and recruiters need an efficient and scalable solution to sift through increasing volumes of automated applications. Let’s break down the key issues:

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1. CVs and unstructured interviews are unreliable

CVs have been the standard first filter for hiring decisions for decades. And while a CV summarises where someone has worked or what qualifications they have, it lacks one key piece of information: how well a person can actually do the job. Research consistently shows that past experience and education alone are weak predictors of future job performance. A meta-analysis published in the Journal of Applied Psychology concluded that pre-hire experience is a weak predictor of future job performance, with a correlation of just 0.06 - essentially random. (For reference, a strong positive correlation is a value between 0.5 and 1).

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Unstructured interviews aren’t much better. When hiring managers conduct free-flowing, unstructured interviews, decisions tend to be based on gut feeling rather than objective evidence. This often leads to inconsistent and unreliable hiring outcomes, where one interviewer might favour a candidate while another might reject them, simply due to differences in personal bias or questioning style.

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2. Unconscious bias leads to unfair hiring decisions

Unstructured hiring lacks standardised criteria, making it difficult to compare candidates fairly. This means great candidates can be overlooked simply because they don’t “fit the mould” of past hires, rather than because they lack the necessary skills. Without an objective way to measure talent, companies risk hiring for familiarity rather than capability, which can limit diversity and innovation within teams.

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3. Poor candidate experience

A long, opaque, and confusing hiring process discourages candidates. Many job seekers invest time filling in applications only to receive little to no feedback, leaving them frustrated and disengaged. A poor candidate experience doesn’t just hurt individual applicants, it also damages a company’s reputation and can make it harder to attract top talent in the future.

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Without clear metrics on what makes a successful hire, businesses struggle to refine and improve their hiring processes over time. Without data, hiring decisions become a guessing game rather than a strategic advantage.

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4. Overwhelmed recruitment teams

In November 2024, the talent acquisition platform Tribepad shared that it registered a 286 percent year-on-year increase in applications per job. This is due to both the state of the job market and to “easy apply” features and AI-generated applications. As a result, recruiters are drowning in CVs. Many companies receive thousands of applications for a single role, making it nearly impossible to manually screen every candidate effectively.

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HR teams are forced to rely on quick filters, like university prestige or previous employers, to cut down the list, which risks excluding highly qualified candidates who simply didn’t follow a traditional career path. The result is missed opportunities for both businesses and job seekers.

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5. Cost per hire and time to hire

Recruitment teams today are expected to do more with less. With smaller budgets and leaner HR teams, many organisations struggle to keep up with hiring demands while also trying to improve processes and maintain a positive candidate experience.

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Traditional hiring methods, especially those that rely on manual screening, multiple interview rounds, and long decision-making timelines are simply not sustainable in today’s fast-moving job market. Companies need hiring solutions that are efficient, fair, and scalable—without adding more strain on already stretched HR teams.

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The Business Case for Skills Based Hiring

If there's one thing that gets the attention of decision-makers, it's data. The evidence in favour of skills-based hiring is mounting:

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Better employee retention: A Deloitte Insights report revealed that skills-based organisations are 98% more likely to retain high performers. The Society for Human Resource Management has also found that companies focusing on skills-based hiring saw a 56% drop in turnover. Why? Because employees are better matched to the position they are hired for.

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Faster hiring: Yes, faster hiring! By leveraging assessing candidates’ skills to determine their job fit, organisations are more likely to lower recruiting costs, with 82% of them reducing their time-to-hire, and 74% reducing their total hiring costs.

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Higher Productivity: Employees hired for their skills, rather than their credentials, are 2.8x more likely to be high performers. Overall, the productivity of skills-centric companies tends to be higher thanks to better alignment between skills and role requirements.

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A broader talent pool: Skills-based hiring enables companies to access a wider and more diverse talent pool, ensuring candidates are better matched for long-term success in their roles. According to Accenture, companies that make a conscious effort to uncover hidden workers are 36% less likely to face talent shortages.

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Fairer hiring practices: By reducing or removing the reliance on traditional qualifications, skills-based hiring opens doors for individuals with non-traditional backgrounds, such as career switchers, those re-entering the workforce after a break, or those from lower socio-economic backgrounds that may not have access to higher education. And building diverse teams pays off: companies with diverse teams are 35% more likely to outperform their competitors, and diverse management teams lead their companies to 19% higher revenue.

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Future-ready: The benefits of hiring for skills, rather than credentials, extend beyond the recruitment phase. Companies that assess and track employees' skills are better positioned to identify opportunities for upskilling, reskilling and promotions. This boosts employee retention and builds a workforce that is more adaptable, engaged, and ready for the future of work.

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Section 2: Transitioning to skills-based hiring

Before making any changes, you need a clear picture of what your hiring process looks like today. You must identify gaps and inefficiencies, which will enable you to then measure the success of any new skills-based hiring process you are aiming to introduce. It’s important to use both quantitative metrics and qualitative feedback to paint a complete picture of where improvements are needed.

1. Assess your current hiring practices

Transitioning to a skills-based hiring approach requires thoughtful planning and alignment across your organisation. This section outlines the key steps to ensure a smooth and effective implementation.

Common pain points to address:

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High turnover: Are new hires leaving within their first year? Studies show that misalignment between candidate skills and job expectations is one of the top reasons for early attrition. The 2025 Work Institute’s annual Retention Report highlights that poor job fit is one of the leading causes of voluntary turnover.

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High rate of offers turned down: If candidates are declining offers, your hiring process may be too slow, unclear, or uncompetitive. According to CareerPlug, 66% of candidates say that a positive recruitment experience influenced their decision to accept a job offer. By contrast, poor experiences, such as lack of communication or unclear job expectations, led 26% of job seekers to decline offers in 2024. Competitors with streamlined, skills- based hiring processes often have an edge in securing top talent faster.

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Poor performance: If new hires struggle to meet expectations, an over-reliance on CVs and unstructured interviews could be the culprit. Research from LinkedIn’s Global Talent Trends report shows that structured interviews and skills assessments are far better predictors of job success than traditional resume screening.

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📊 Gathering Evidence:

Use quantitative data (e.g., time-to-hire, offer acceptance rates, first-year attrition, hiring funnel conversion rates). Collect qualitative insights (e.g., hiring manager feedback, candidate experience surveys, recruiter observations, new hires performance evaluations).

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Benchmark against industry standards to determine if your hiring outcomes are competitive.

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2. Set clear goals

Once you've identified key gaps, define what success looks like. Your hiring objectives should align with broader company priorities and be measurable.

Some common hiring goals and their benefits:

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Hiring faster and more efficiently: A streamlined hiring process reduces candidate drop-off rates and improves the candidate experience. According to a report on the state of skills-based hiring by TestGorilla, 81% of companies agree that its introduction has reduced their average time to hire.

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Lowering cost per hire: According to the Society for Human Resource Management (SHRM), the average cost per hire is around $4,700. By automating initial screening with skills assessments, organisations can reduce reliance on manual CV screening, saving both time and money while increasing efficiency.

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Improving diversity, equity, and inclusion (DE&I): Research from McKinsey shows that companies with more diverse workforces outperform those with less diverse teams. Moving away from degree-based hiring and implementing structured skills assessments can help level the playing field and attract a broader talent pool.

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3. Engage stakeholders and create buy-in

Skills-based hiring can’t be limited to an HR initiative, it requires all other business functions on board. Engaging key stakeholders early on is the best way to set up a new hiring programme for long-term success.

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1. Identify internal champions

HR leaders, recruiters, hiring managers, and senior executives all play a crucial role in driving this change. Identify internal advocates who understand the value of skills-based hiring and can champion the shift within their teams. Consider forming a working group to oversee the implementation, gather feedback, and troubleshoot challenges.

2. Address Common Objections

Anticipate and counter resistance with data and real-world examples:

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“Isn’t skills-based hiring expensive?”

A bad hire can cost up to 30% of an employee’s annual salary (Source: U.S. Department of Labour). Investing in better assessments reduces turnover, improves retention, and ultimately saves money.

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“Removing degree requirements might lower candidate quality.”

Research shows that skills-based hiring leads to better performance and retention. Instead of relying on credentials as a proxy to tell us if candidates meets the requirements of a role, structured assessments and job simulations actually test whether they possess the necessary skills to succeed.

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“Our hiring managers still prefertraditional methods.”

The deployment of a new, skills-based hiring programme will always involve an initial phase of training. Additionally, a solid skills-based hiring strategy will involve a pilot phase to ensure the validity of the new approach.

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“It’s harder to compare candidates without standard credentials.”

Skills-based hiring doesn’t remove benchmarks, it just rethinks what “good” looks like. It actually makes it easy to compare candidates objectively based on structured skills frameworks, designed to predict success in a certain role.

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3. Train hiring teams

Ensuring recruiters and hiring managers are comfortable using skills assessments is critical for adoption. Training should include:

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👉 How skills-based hiring improves fairness and objectivity.

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👉 How skills assessments help identify hidden talent beyond traditional resumes.

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👉 How skills assessments enhance the candidate experience by allowing applicants to showcase real abilities, rather than relying solely on past job titles.

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4. Share success stories

Demonstrate the tangible benefits of skills-based hiring with real-world case studies, e.g.:

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👉 Nationwide has found skills-based hiring 89% accurate at identifying high performers.

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👉 Google has shifted towards skills-based hiring to screen the 2 million people who apply to work there each year, of which 7,000 are hired.

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👉 IBM has ditched degrees and credential in favour of skills-based hiring and has made a commitment to review and rewrite job descriptions to ensure they are open, inclusive, and skills-based.

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By securing buy-in from key stakeholders and demonstrating the benefits of skills-based hiring, your organisation will be well-positioned for a smoother, more effective hiring process that leads to stronger business outcomes.

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4. Selecting and implementing your skills-assessment partner

Once you’ve secured buy-in and defined your hiring goals, the next step is selecting an assessment solution that aligns with your needs. There are two primary options:

Pre-built/Out-of-the-box skills assessments:

These are ready-made assessments developed by experts and validated across a wide range of industries and job families. Designed to evaluate the core skills required for specific roles and career stages (e.g. customer service, early careers, or management), they offer a fast and efficient way to implement a skills-based hiring process. Benefits of using pre-built assessments include:

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✅ Speed and scalability: Pre-built assessments can be deployed quickly, making them ideal for high-volume or urgent hiring needs.

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✅ Benchmarking: Because they are used across industries, they come with built-in benchmarks that allow you to compare candidates against a broader talent pool.

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✅Proven validity: Developed and refined over time, these assessments are grounded in psychometric science, reducing risk and ensuring fairness.

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✅ Minimal setup: With no need for custom configuration, teams can start assessing candidates immediately.

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Deployment:

Pre-built assessments are typically selected based on the job role and added directly into your hiring workflow, either via an ATS integration or a standalone platform. They require minimal input from internal teams and can be ready to use within weeks.

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Tailored Skills Assessments

These are custom-built assessments developed to reflect your organisation’s specific skills, behaviours, and values. They are designed in partnership with you to ensure alignment with your success criteria, culture, and long-term goals.

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✅ Precision and relevance: Customisation ensures candidates are measured on what truly matters to your organisation, not just generic role requirements.

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✅ Cultural alignment: Including your values and preferred behaviours helps identify candidates who are not only capable, but also a good fit for your team.

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✅ Strategic differentiation: Tailored assessments can reinforce your employer brand and demonstrate a deeper commitment to fair, thoughtful hiring.

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✅ Data-driven optimisation: Custom assessments can evolve over time based on performance data, helping you refine hiring criteria as your business grows.

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Deployment:

Creating tailored assessments typically involves a discovery phase with IO psychologists or talent experts to define your success profiles. From there, the assessments are built, validated, and integrated into your recruitment process. While this takes more time upfront, it results in a more strategic, future-proof solution.

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3. Conclusion

The shift to skills-based hiring isn’t just a trend, it’s a smarter, fairer way to find the right talent. Whether you start with pre-built assessments or invest in a tailored solution, the key is to stay focused on what skills drive success in your business. Start small, scale fast, and keep refining.

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