Skills-Based Hiring for Diversity, Equity and Inclusion - All You Need to Know

As the talent industry continues to grow and evolve, many organisations are considering or incorporating a skills-based hiring workforce approach to getting work done. In a skills-based organization, candidates are evaluated on their skills and competencies instead of professional titles, previous experience and educational degrees. This approach – on the surface – seems to inherently address a company’s goals for diversity, equity and inclusion (DEI) in their workforce plan. However, this is not always the case.

Skills-based hiring aims to reduce the barriers and biases that often exclude qualified and diverse talent from the labour market, especially in sectors that face skills shortages or require specialised knowledge. Yet, this approach can have pitfalls for DEI practices. Building a skills-based workforce acquisition plan requires companies to create clear and consistent definitions of each role, as well as reliable and valid measurements of assessing and verifying candidates.

If strong mitigation strategies are not put into place, organisations may risk developing new forms of discrimination, inequality or exclusion-based access to training, inherent biases and valuation of required skills.

Why Skills-Based Hiring Needs to Incorporate Diversity, Equity and Inclusion

In several ways, skills-based organisations are already on the path to building more equitable workforce plans. By focusing on the skills of the candidate over credentials and degrees, they widen their talent pools. This approach opens doors to people who may have the skills but not the resources to go to college, or a parent returning to the workforce who has developed new organisational skills, or, perhaps, a young person with sales and marketing knowledge from home-based business opportunities but hasn’t had the opportunity to apply these in a corporate environment.

While the skills-based approach is a great start, it should still be paired with DEI efforts to:

• Expand the pool of talent and increase representation of diverse groups, especially those who face barriers or discrimination based on their educational background, socio-economic status, race, ethnicity, gender, disability or other factors.
• Reduce reliance on credentials and degrees that may not reflect a candidate’s actual skills or potential.
• Recognise and value the skills and experiences that candidates acquire through informal or alternative learning pathways, such as:
  • Volunteering
  • Community service
  • Hobbies
  • Personal projects
  • Entrepreneurial businesses
  • Life experiences
• Enhance the mobility and career development of workers who may lack formal qualifications by providing them with opportunities to demonstrate and improve their skills.
• Improve worker satisfaction and engagement by allowing them to perform tasks that match their skills and interests, while also contributing to the goals and values of the organisation.

In addition to opening access to talent, creating a more diverse and inclusive workforce has proven to be profitable for businesses around the world. Research has shown a 33% increase in earnings before interest, depreciation, taxes and amortization (EBIDTA) for companies with diverse workers. Diverse voices also bring a variety of solutions that can increase creativity and productivity. A Gartner article finds that 75% of companies with diverse and inclusive group of decision makers exceed their financial targets. According to the article, gender-diverse teams outperform non-inclusive teams by 50%.

Potential Pitfalls to Skills-Based Hiring Without a DEI Strategy

Whilst deploying a skills-based strategy, it is possible for hiring managers to believe they are being inclusive, yet simultaneously having blind spots to their inherit biases, stereotypes and perceptions of candidates. Unfortunately, when individuals are not intentional with their DEI efforts, it is very easy to reinforce and reproduce existing inequalities or biases based on the social and cultural capital of candidates, such as their networks, references or portfolios, which may reflect their privilege or disadvantage rather than their skills or merit.

Additional pitfalls for skills-based organisations without built-in diversity strategies include overlooking and undervaluing certain skills and competencies, ignoring or neglecting the role of formal education and training, and creating or exacerbating skills gaps.

Overlooking Skills and Competencies

During the evaluation of a candidate’s skills and competencies, it is common to focus intently on specific skills that seem an obvious fit to the role; however, it is also important to consider adjacent skills and competencies that are not directly related to the tasks or functions of the role. For example, you may review a candidate who may not specify they can work with a team, but collaboration and teamwork are built into other roles they’ve held, such as working for an events management firm. That event planning job may show great abilities to communicate, organise and solve problems creatively which are essential for the success and wellbeing of an organization.

Ignoring or Neglecting the Role of Formal Education

In an effort to be more inclusive to candidates without a degree, it is also possible to ignore or neglect the role of formal education and training in the development of skills and knowledge that could make that candidate an asset to the business. People with higher education not only receive those credentials and recognitions, they could also develop social and civic benefits such as personal development, cultural awareness, civic engagement and social cohesion. These skills could enhance relationships with clients as well as internal relationships and company culture. The importance here is to recognize the value in a wider context without over indexing on any particular element.

Creating or Exacerbating Skills Gaps

Another common mistake that skills-based organisations can make is creating or increasing skills gaps by focusing on the short-term needs of the organisation, rather than long-term trends and challenges. By failing to adapt or update the skills requirements and assessments as the context and conditions change, companies risk falling behind their competition and not being able to stay competitive in their markets. Instead, by properly utilising a skills-based approach, whilst avoiding the pitfalls and risks, can align the skills of the workforce with the changing needs of the economy and society, as well as foster innovation and productivity.

Best Practices for Skills-Based Organisations that Embed Diversity, Equity and Inclusion

The above risks and challenges are able to be overcome with best practices for your workforce strategy and internal DEI education and training.

Some best practices include:

• Defining the skills and competencies needed for each role clearly and comprehensively, using a common and consistent framework or taxonomy.
• Using multiple and varied methods of assessing and verifying the skills and competencies of candidates, such as tests, interviews, simulations, portfolios, references or badges. Ensure that they are reliable, valid, transparent and unbiased.
• Recognising and valuing the skills and competencies that candidates acquire through different learning pathways and provide them with opportunities to document and demonstrate them in an equitable way.
• Balancing the skills and competencies that are specific and technical, with those that are general and transferable – and that are relevant for the role and the wider organisation – fosters a culture of lifelong learning among workers.
  • Enhance the mobility and career development of workers by providing them with access to training and education that match their needs and aspirations.
  • Consider the skills of current employees in departments that are already diverse and upskill them to work in less diverse departments, providing more opportunity and greater job satisfaction.
• Monitoring and evaluating the impact and outcomes of skills-based hiring practices on DEI, using quantitative and qualitative indicators and measures, such as the diversity and representation of the workforce, the satisfaction and engagement of workers, the performance and productivity of the organisation, and the feedback and satisfaction of customers.

In addition to these best practices, it is imperative that companies deploy the best technology for evaluating and vetting candidates in an unbiased and consistent manner. These tools should be able to test for soft skills as well as hard skills. However, businesses can’t rely on just one tool, as it is important to consider that various factors impact an individual’s ability to test well and the values assigned to certain competencies need to be weighted in a way that is appropriate to the role and doesn’t hold any biases towards particular groups of people.

The Benefits of Skills-Based Hiring for Diversity

Skills-based hiring is quickly being acknowledged as the future of workforce acquisition. According to McKinsey & Company, campaigns such as “Tear the Paper Ceiling,” “The Business Roundtable’s Multiple Pathways” program, and the “Rework America Alliance” are all leading the private sector towards a skills-based hiring process. And in the public sector, the state of Maryland announced it would no longer require degrees for almost 50% of its positions, which opened thousands of jobs in healthcare, corrections, policing, skilled trades and engineering to a bigger pool of applicants.

With this in mind, organisations need to consider their workforce acquisition strategies moving forward in order to stay ahead of the competition and continue to source new and wider pools of talent. AGS Marketplace DEI Programme Manager EMEA Komal Jethva said, “Innovation in organisations stems from having a diverse workforce that is representative of the communities in which you serve. Providing candidates and employees access to equitable opportunities, development pathways and resources for learning and development of the core skill sets required will drive satisfaction, retention, engagement, performance, development and growth attributing to higher ROI.”

Her comments are incredibly inciteful in an ever-changing workforce landscape with shrinking traditional talent pools. Finding new ways to engage workers from diverse categories such as age, gender and ethnicities is crucial to finding great talent and the future of work.