Skill-first hiring emerges as a game-changer but challenges remain

Many companies remain resistant to shifting away from traditional degree-based hiring criteria, which poses significant challenges to modernising recruitment processes in line with today's rapidly evolving job market.

The paradigm shift towards skill-first hiring is gaining traction amid companies’ pivot towards a revamp in their hiring strategies but challenges remain.

Organisations are gradually aiming to tap into broader talent pools, curb their hiring biases and use cutting-edge technology in a bid to increase efficiency and bring transparency in the recruitment process. They are laying a greater emphasis on candidates’ skill sets rather than their past work experiences. This approach prioritises candidates' competencies over traditional credentials such as academic qualifications.

However, the methodology faces significant challenges, including entrenched hiring practices and cultural resistance in some sectors.

A recent study by EY and iMocha found that 83 per cent of employees were against a job switch at their respective workplaces that put a premium in skills-first approach.

The study found that typical accuracy rates for current hiring, training, and attrition processes are between 70 and 80 per cent, which can be further improved by up to 20 per cent through skills intelligence.

Tata Projects deals in the engineering, procurement and construction (EPC) sector. Around 20 per cent of its 80,000 frontline workforce comprises skilled labour, another 20 per cent are semi-skilled and the rest (60 per cent) have relevant experience but require upskilling.

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“Our worker upskilling initiative is still in its early stages. So, the quantitative impact is minimal. However, we foresee significant long-term benefits for the industry as a whole. This initiative not only enhances the quality of our project delivery but also contributes to the development of a more skilled and stable workforce in the EPC sector…,” Ritesh Singh, Chief Human Resources Officer (CHRO), Tata Projects, told Moneycontrol.

As job roles evolve in response to technological advancements and shifting market demands, industry experts maintain many positions require specialised skill sets that aren't necessarily tied to formal educational qualifications.

For example, roles in areas such as data science, digital marketing, cybersecurity, and software development often demand practical, hands-on expertise rather than traditional degrees. The pace at which these fields are developing makes it difficult for formal education programmes to keep up, leading to a yawning gap between what is taught in classrooms and what skills are needed at the workplace.

Virtusa Corporation, an information technology (IT) company, hosts several initiatives to support skills-first hiring including hackathons and coding challenges to assess candidates' ability to creatively solve problems in real-world scenarios.

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“We have observed a significant expansion in our talent pool, which has increased 3x, surpassing 500,000 candidates…Our focus on skills-first hiring has maintained a consistent uptick in talent diversity, which fuels innovation and enhances problem-solving capabilities. By prioritising skills over degrees, we have significantly reduced our average hiring time, creating a competitive advantage and strengthening our employer brand,” said Rahul Sahay, Senior Vice-President, HR, Virtusa Corporation.

How does a mixed strategy work?

While hiring solely based on skills works for some companies, others opt for a mixed strategy where skills hold a substantial weight in decision-making apart from traditional checks and balances.

OpenText, a software company, follows a “Quality of Hire”  framework that ensures skill assessment is at the core of the hiring processes through the ‘STAR’ model.

“The objective is to assess the overall fitment of the candidate, where STAR stands for Situation, Task, Action and Results,” said Manoj Nagpal, Managing Director (MD), OpenText India.

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The framework takes into account the industry-recognised skill assessment tools and  two-in-a-box model to ensure cultural fitment of the candidate into an organisation. Typically, a candidate is assessed by skip-level functional leadership over and above the hiring manager. This approach has resulted in a 25 per cent improvement in time-to-hire with a skills-first hiring approach, Nagpal added.

Challenges remain

Many companies are resistant to shifting away from traditional degree-based hiring criteria, which poses significant challenges to modernising recruitment processes in line with the rapidly evolving job market in this day and age.

This resistance often stems from deeply ingrained beliefs that formal education is a reliable indicator of a candidate’s capability, work ethic, and potential for success within a company. Degrees have long served as a convenient, standardised measure to filter candidates, providing a sense of security and predictability in the hiring process.

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WIKA India, a Germany-based manufacturing firm, started focussing more on skills-first hiring over the past couple of years. “This percentage is impressive as per the total number of employees working for us,” said Anushka Sharma, Head, HR & Administration, WIKA India.

However, she agreed that there is the absence of a standardised framework to measure and evaluate the skills of the candidates applying for the position, leading to several other companies not opting for skill-first hiring.

According to Mahesh Krishnamoorthy, MD, Core Integra, a regtech, skill-first hiring for white collar jobs is still at a nascent stage in the country and largely prevalent in the IT and IT enabled services (ITes) sectors, where industry participants are majorly start-ups preferring ability over degrees. He pointed out that beyond the IT and ITes sectors, traditional hiring parametres such as institution, degree, and work experience remain the primary factor of consideration.

Krishnamoorthy suggested that skill-first hiring should be adopted as a regular practice for entry-level jobs. He is all for a healthy mix of campus hiring and recruitment from edtech platforms.

“Candidates with skill but without suitable qualification must be encouraged to pursue courses/degrees in parallel. The exercise will help candidates to upgrade their skills in due course of time,” he said.

Employers and employees need to take into account that qualification and alumni connect have several residual benefits, Krishnamoorthy added.