Skills-Based Hiring: The Essential Guide

Published by:
Joe Caccavale
July 26, 2022
min read

The Ethical Hiring Guide

What is skills-based hiring?

As its name suggests, skills-based hiring focuses on candidates’ key competencies and skills sets rather than credentials.

Whilst your typical process looks to test for relevant experience and academic achievement, skills-based hiring assesses the skills learned through experience, rather than for the experience itself.

Below, we'll outline a predictive, repeatable process for identifying genuinely skilled candidates.

Organizations using this process tend to see:

  1. Up to 4x improvement in diversity
  2. 3x as many suitable candidates
  3. 66% reduction in time spent hiring
  4. 93% retention rate

Why make the switch?

Hiring for skills is a more ethical and empirical means of growing your organization…

Testing skills is fairer

Unconscious bias plays a significant role in your traditional recruitment process.

Anything from a candidate’s name, address or gender can trigger biases that lead to unfair outcomes.

We, humans, have a natural tendency to resist the unfamiliar and gravitate towards those most like ourselves. 

As a result, candidates from underrepresented backgrounds are disproportionately overlooked.

Nobody likes to think of themselves as being biased but the research speaks for itself… bias is very much unavoidable unless designed out of your hiring process.
% extra CVs needed to receive a callback (by country)

If we know that those from minority backgrounds face discrimination in the hiring process, how can we then expect them to meet extremely specific and demanding experience requirements?

Unless we break the cycle by overlooking people’s backgrounds, systemic inequality will only be perpetuated.

Anonymization isn't a necessary part of skills-based hiring, but is absolutely best practice for improving diversity and finding the best possible talent.

Skills-based hiring enables organizations to completely anonymize applications so that a candidate’s ability is the only thing being assessed.

Every candidate gets a fair shot, no matter how or where they acquired their skills.

And is also more predictive

Moving to skills-based hiring isn’t a compromise for the sake of fairness.

In fact, it’s the complete opposite!

Education and experience have some correlation with someone’s ability.

But it’s not as strong as you think.

When put to the test, these proxies have been shown to be pretty weak predictors of performance. Instead of making assumptions about candidates’ ability through these proxies, skills-based hiring tests this ability upfront.

Predictive validity of assessment methods (chart)

Instead of making assumptions about candidates’ ability through these proxies, skills-based hiring tests this ability upfront.

Moving away from candidates' backgrounds and credentials can feel like a leap of faith...

However, this information is more likely to negatively impact your decision-making rather than inform it.

By removing this ‘noise’, we’re able to be more objective and more accurate in our judgment.

You’ll also tend to find that shifting your focus to skills allows you to tap into an otherwise hidden talent pool of people who possess the skills but not the background you usually look for.

Here at Applied, for example, we’ve found that +60% of people hired through our skills-based process would’ve been missed using CVs. 

How to test for skills using data

Should you still be using CVs?

100+ years of research tells us... pretty clearly... that CVs are ineffective.

A candidate's education and previous work experience might tell you something about their actual skills...

But this is not nearly as predictive as simple testing for these skills directly.

And this background information is heavily influenced by socioeconomic factors.

Although they're far from ideal, sometimes CV are necessary.

If you're hiring for a role beyond your expertise or looking for an exec-level hire and need that extra safety net, you may still feel the need to use CVs.

Whilst not as predictive or fair as other assessment methods (which we'll show you shortly), there are ways of making CV screening a more scientific process.

Give yourself a set list of questions to score CVs against - does this person's experience show the skills you're looking for? Have they been promoted in past roles?

One of the core problems with your typical CV review is that it's completely unstructured.

We look for anything that 'jumps out' at us.

So, by focusing on a structured list of questions, you'll be able to compare candidates against the criteria needed for the job.

Structured CV reviewing alone isn't enough to see dramatic spikes in the quality or diversity of your candidates. However, if you're you still require CVs as part of your process, this is the most fair and accurate means of reviewing them.

Need help automating this part of the process? The Applied Platform now includes our CV Scoring Tool. By lazer-focusing on the things that are predictive of future job performance, you'll make better hires, with less bias.

Applied CV Scoring Tool

The secret to predictive skill-based hiring: work sample questions

The most effective way to assess skills is to use ‘work sample tests’.

In essence, work samples are mini simulations of the job itself.

Instead of asking candidates about their skills, work samples simply get candidates to perform small parts of the job.

Here’s an example for a Product Manager role:

Question: Our engineering team has been working towards the big release of a new tool. The planned release date is the end of the day tomorrow, but there are a number of bugs in it.

What would you do?

Skills tested: Prioritization, Collaboration, Agile, Project Management

Instead of asking candidates ‘tell me a time when x happened and how you dealt with it’, work samples pose scenarios hypothetically so that the emphasis stays on skills and not experience.

You’ll notice that the work sample above has skills attached to it.

This is because we start by outlining the core skills we’re looking for and then come up with tasks or scenarios that would test these skills so that we’re able to build a clear map of where each candidate’s strengths and weaknesses lie. 

Your work samples can test a single key skill or a handful of skills like in the example above.

Here’s another example of a more creative task (for the same Project Manager role):

Question: How would you go about designing a ride-sharing app for blind people?

(note: we're interested in the process and your approach, not features)

Skills tested: Curiosity, Prioitization

These questions can be used at both the screening and interview stages:

Screening work samples

  • Use 3-5 work samples instead of CVs/cover letters.
  • Since these should be anonymous, avoid any questions that require candidates to give away their background.
  • If you’re tempted to ask about past experience, ask what candidates would do, rather than what they have done. 

Interview work samples

  • When it comes to interviewing, you can have candidates work through larger, more strategic work samples.
  • You can present candidates with a real-life project or high-level challenge that needs to be tackled (or a hypothetical one of you’d prefer) ask them how they’d approach it.
  • We’d recommend simply framing your questions as follows: Given everything you've heard about our company and our journey so far, how would you spend your first 3 months?
  • You could also use job simulation tasks - get candidates to role-play relevant parts of the job. This could be anything from a sales call to a presentation.

Although candidates with experience may have an edge over their competition, this framing allows every candidate to showcase their skills.

Experience can and often does forge the best candidates.

But this isn’t always the case.

And it’s not always industry-specific experience that makes this so.

An outsider perspective can often make someone the best person for the job.

Skills-based hiring is about leaving assumptions at the door to find genuine talent instead of screening people out simply because they don’t meet precise, proxy-based requirements. 
Benefits of work samples

Data-proofing your process

Whilst there’s not much room for debate over whether or not someone has a specific degree, skills-based hiring could be subjective if not properly data-proofed.

For each of your work samples, give yourself a scale and review guide to score against.

At Applied, we use a 1-5 star scale and a simple bullet point guide.

Here’s the review guide we used for one of the work samples above:

1 Star 

- Vague, little or no effort made

3 Star 

- Some of the below points

5 Star 

- Clear reference to the current context and how to build on it. 

- A view to the big picture and how to support it

- Clear activities to get themselves up to speed, and support the mission  

As you can see, this doesn’t need to be anything overly detailed, just an overview of what a good, bad and mediocre answer might include.

If every screening and interview is given a number score, then at the end of each stage you can simply average out candidates’ scores to decide who to bring through.

For the most objective scores, we recommend having a three-person review panel at each stage.

Even when using a skill-based hiring process, individuals can still have biases.

Having multiple team members score candidates will negate these biases and has also been proven to result in more accurate judgment.

This is what the review process looks like here at Applied:

Applied scoring template

The case for anonymization

Whilst you can start using work samples to test for skills without anonymizing candidates, this simple change could make a significant difference to diversity.

If making your hiring process more fair and ethical is a priority for you, then we'd urge you not to overlook this step.

Simply being aware of biases doesn't result in any tangible difference in outcomes - this is why unconscious bias training doesn't work.

If we look at one of the biggest studies on bias training and its effect on behaviour change, you can see that the companies focused on training actually saw less diversity in terms of black women in management positions.

Training effect on management diversity (chart)

The only way to make real change is to change processes, not individual humans.

In one of the earliest, most famous examples of anonymization, orchestras were able to double the number of women making it through auditions just by doing them from behind a curtain.

Start by removing:

  • Name
  • Photo
  • Date of birth
  • Address
  • Hobbies

What about testing for culture?

Instead of culture, we'd recommend testing for mission/values alignment.

Culture is often subjective and depends on the demographic of your organization.

This often means that in order to 'fit in' to this culture, candidates may be (albeit subconsciously) penalized if outside of the norm.

And as we can see looking at the study below, culture fit is actually a lousy predictor of both job performance and retention.

Impact of culture fit (chart)

By looking for alignment in mission/values, you're essentially asking:

  • Does this candidate believe in our mission as much as we do?
  • Are they aligned on the ways we work day-to-day to get there?

You don't need an entire interview round to test for mission/values...

When building your assessments, start by listing 6-8 core skills needed for the job.

Then, add one or two of your organization's most relevant values.

A salesperson may need integrity. A product manager may require empathy for users. A marketer might need to be data and evidence-driven.

If you're a mission-driven organization, you can simple include 'passion for mission' as a skill or dedicate an interview or screening question to asking candidates what motivated them to apply.

Then, when you're creating your scoring criteria, be sure to emphasize that you're looking for candidates who naturally embody your values and who are bought into the mission.

Example review guide

By incorporating mission and values into your basic skills list, you'll be able to see who genuinely cares about your mission and works in the same way as your team, rather than testing how fun or personable someone seems.

Attract more diverse candidates by looking at skills, not background

If you're making the transition to skill-based hiring, you'll want to tweak your job descriptions to match this.

We know that specific education and experience requirements aren't ideal, but what should you do instead?

Well, here at Applied, we simply list the skills and characteristics we're looking for.

Since our assessment process will be able to tell us who has the skills needed to do the job, we don't need to use strict background requirements.

Here's what this looks like for a role in sales...

A bit about you and the role

We believe that diverse and inclusive teams both perform better and make for a richer work life. As such we’re open to candidates wherever they’ve derived their skill and passion for this role. We’re looking for someone who’s impatient to deliver and keen to get stuck in and exhibits the following characteristics:

  • Empowered by an entrepreneurial environment - you’re a self-starter, can work autonomously but can motivate and influence other teams when required.
  • Resilient and determined, able to pick yourself up after a set back, work out what went wrong and have another go.
  • You will be energised by the prospect of talking to customers and enjoy working out what makes people tick.
  • Passion for improving workplaces - whether it’s diversity and inclusion or culture, you’ll love what you do and want a world where everyone is free to be their true selves in a job they love
  • A love for learning - in a startup, none of us have all of the answers, so an openness and willingness to constantly learn is essential.
  • Driven and proactive - following up with clients to keep the momentum of conversations going, and not letting things slip through the net.

Your skills

This role will allow you to be involved in interacting with clients at all stages of the sales process. From initial research and outreach to building relationships and helping onboard new clients. Here’s a taste of what you’ll be involved in on a day-to-day basis.

  • Using a scientific and data-driven approach to sales to work out what is working and what is not.
  • Reaching out to potential new clients in creative and scalable ways.
  • Understanding customer challenges and introducing our solutions at the right time.
  • Working with the marketing team to refine and follow up on new outreach campaigns.
  • Representing Applied at industry events and using your fabulous networking skills.
  • Working with the product and engineering team to feed back customer insights into product features.

Overview: using work samples to assess skills

Decide on the skills you’re looking for

  • This can be a mix of 6-8 soft and technical skills - can include mission/values.
  • Be sure to list these (instead of background requirements) in your job description.

Think of scenarios or tasks to test these skills

  • These can either be everyday tasks or rarer changes that may come up. 
  • You can draw on things that have come up in the past or that are on the horizon.
  • You can test multiple skills with one scenario.

Pose hypnotically to create work samples

  • Instead of ‘tell me a time when’ questions, lay out the context and ask candidates how they would approach the task.
  • You can ask candidates to explain their approach, prioritize from a list or simply perform the task is possible (most relevant for writing tasks).

Give yourself scoring criteria 

  • You’ll need to create a scale to score against.
  • Write a few bullet points for each end of the scale.

Use multiple reviewers

  • Three has been proven to be the magic number.
  • The more diverse the panel, the fairer the scores will be.

Do you need specific software to implement a skills-based hiring process?

No - everything above can be done manually, without spending anything.

However, platforms like Applied will make this a quicker, easier and more data-proofed process by automating things like anonymization and scheduling.

Applied was built to reduce bias and hone in on what matters... skills!

Our assessments have been designed using behavioural science to reliably identify the very best talent - with all data you'll need to prove you made the right decision.

Applied platform

Applied is the essential platform for debiased hiring. Purpose-built to make hiring empirical and ethical, our platform uses anonymized applications and skill-based assessments to identify talent that would otherwise have been overlooked.

Push back against conventional hiring wisdom with a smarter solution: book in a demo