HR teams are used to following an established process to hire new employees. They advertise the position and provide information about their company and required skills and attributes. Then, they review piles of resumes and fit candidates to a job description by looking for prerequisites such as education, work experience, and references. The candidates who check the most boxes are invited to interview, and the one who makes the best impression gets an offer.
This has worked in some cases, but it is not perfect because hiring “mistakes” cost organizations thousands of dollars yearly. According to the U.S. Department of Labor, a bad hire can cost as much as $240,000, depending on the company, industry sector, and job role. And this does not include the cost of repeating the screening and hiring process to replace the employee.
More and more private and public sector organizations are finding that traditional hiring methods are not as effective as they once were and are transitioning to merit-based hiring—prioritizing skills over education and credentials.
HR leaders in the private sector began prioritizing skills and experience around five years ago. In 2020, the federal government enacted Executive Order 13932 to modernize hiring practices. Federal agencies are now required by law to evaluate candidates’ practical experience and place less emphasis on formal qualifications such as education and job experience.
Why Merit-Based Hiring is a Top Talent Management Trend
Merit-based recruitment, or skills-based hiring, is a talent management strategy where candidates must prove they have the abilities, knowledge, and skills required for a job. This means applicants must complete skills assessments instead of simply submitting a resume or completing a job application.
This strategy enables HR leaders to make decisions based on quantitative data instead of relying on information from resumes and interviews, which could be inaccurate. According to Checkster, a reference checking company, 78% of job candidates admit lying on their resumes or during interviews.
HR teams also know that skills assessments help them measure applicants’ actual abilities. They are not interested in how or where candidates acquired the knowledge or expertise, only that they have it and will be able to perform the job.
Skills-based hiring practices also apply once a job offer is extended and throughout an employee’s tenure with a company. HR managers can use skills assessments to speed up onboarding and ramp-up for new hires and enhance employee development efforts.
Skills test results reveal which topics new hires already understand and pinpoint knowledge gaps. So, onboarding training can be modified to emphasize the areas where the new hire needs more help.
Merit-based hiring is also an ideal talent management strategy for employee development. HR leaders can use skills assessments to identify employees with the necessary skills to be promoted and staff who would be ready for new challenges if provided with additional training. So, by developing personalized training programs, they can help employees succeed in their current job and learn skills that will prepare them for new challenges.
Benefits of Merit-Based Hiring
Industry experts say merit-based hiring is the talent management trend to watch for in the future. Here are some reasons why.
- Attract Top Employees: Top producers want to work in organizations where they know their efforts will be rewarded. If they see hiring and promotional decisions are based on candidates’ skills and abilities, they know they will have the opportunity to work on a top-quality team. They also know they will get the training they need to advance their careers.
- Create a Larger Talent Pool: HR managers find that entry-level positions can be difficult to fill because candidates do not have a college degree or relevant work experience. Recent college graduates also want higher salaries to cover their education investment, but they perform at the same level as their non-degreed colleagues. So, it often makes more sense to widen the talent pool to include non-degreed applicants and leverage reskilling and upskilling once they’re hired.
- Improve Retention Rates: All organizations want to improve employee retention because turnover hurts productivity and damages staff morale. According to LinkedIn, skills-based hiring helps reduce turnover because the hired candidates are a better fit for their jobs and the company. The study also found that employees without college degrees tend to be more engaged and stay with companies 34% longer than their peers.
- Improve Hiring Outcomes: Organizations want to hire the best person for the job and avoid hiring mistakes. They have also learned that the key to making good hires is verifying candidates can do the job and that past work experience and a college degree may or may not be significant. Skills-based hiring helps them identify candidates with proven skills, who can get up-to-speed fast and become contributing team members.
- Decrease Hiring Costs: Implementing merit-based hiring helps HR teams lower hiring costs and reduce time-to-hire. They can complete the screening process quickly and efficiently and spend more time on other tasks that are critical to helping the company meet goals and objectives. Many eSkill clients who have transitioned to a talent management system that leverages merit-based hiring have reduced their hiring costs by 70% and time-to-hire by 60%.
- Avoid Civil Litigation: Organizations must comply with U.S. Equal Employment Opportunity Commission (EEOC) regulations and not engage in unfair hiring practices. Organizations minimize potential liability by implementing skills-based hiring practices because all hiring and promotion decisions are based on quantitative data.
- Create a More Diverse and Inclusive Workforce: Implementing a merit-based recruitment process minimizes the chance that unconscious bias will influence hiring and promotion decisions. When organizations use skills assessments, all candidates complete the same validated skills tests, and the results are scored automatically. If video questions are included in skills tests, they are on-demand. This means applicants listen to recorded questions, record their answers, and have no direct contact with hiring team members. Many organizations disable the video so hiring teams can evaluate responses without seeing the applicants.
Add Merit-Based Hiring to Your Talent Management Strategy
To add merit-based hiring to your talent management strategy, start by evaluating your job postings and descriptions. Identify the skills and abilities necessary for each position and specify whether attributes are required or preferred. You may want to consider designating a college degree as a “preferred” as opposed to a “required” qualification for many of your entry-level positions.
Your next step is implementing an assessment solution such as the eSkill Talent Assessment PlatformTM to measure applicants’ skills and abilities, manage onboarding, and proactively manage training and employee development.
Are you ready to add merit-based hiring to your talent management process? Contact us to request a demo.
