Talent Analytics, Skills-Based Hiring and the Potential Disruption of the Degree
It’s commencement season, and a new crop of college grads is entering the workforce. At the same time, there’s also a flurry of articles about how a growing number of bule-chip employers no longer require a bachelor’s degree, raising the question of just how valuable those bachelor’s degrees are today.
Plenty of prominent voices, including IBM CEO Ginni Rometty and U.S. Secretary of Education Betsy DeVos, continue to make the case for alternatives to college and for focusing more on skills than degrees in hiring. Finding skilled talent is an especially hot topic in a U.S. job market that is the strongest in a generation: the pace of hiring is at an all-time high, and the number of job openings (7.5 million) now far exceeds the number of unemployed (6 million).
In this competitive talent landscape—and aided by new technology tools—something different is indeed happening. Employers are beginning to get much more strategic, analytical and nuanced about how they hire and how they set job qualifications and assess skills and abilities. Although it is still early in this movement, the trend bears particular monitoring by college leaders and policymakers. And it also presents new opportunities for edtech firms, alternative-education providers and employers themselves.
HR Gets Smarter: the Rise of Talent Analytics
Historically, most companies—even many Fortune 500 firms—have conducted little analysis on the relationship between educational credentials and employee performance. Even as the application of analytics transforms marketing, logistics, finance and other corporate functions, the human resources function has been slow and comparatively late to drive strategy and decision-making via data and analytics.
Today, the corporate embrace of “talent analytics” or “people analytics” is booming. Leading HR analyst Josh Bersin estimates that as of 2018, approximately 30 percent of HR departments include a person or team dedicated to analytics–up from 10 percent a few years ago. Once a luxury that only major corporations could afford, new cloud-based analytical tools and HR technology systems are making talent analytics more accessible to small and medium-sized businesses. The HR technology market is growing rapidly—and it has attracted around $3-billion in investment in each of the last four years.
In a unique recent national survey of HR leaders, we at Northeastern’s Center of the Future of Higher Education & Talent Strategy found that in a very tight market for talent, employers are getting more rigorous and data-driven about setting educational requirements, optimizing college recruiting and considering college alternatives.
For example, some employers are performing studies of their own hiring data that might show, for instance, that graduates from a small state college outperformed those from an elite private institution, or that certain roles that required a bachelor’s degree could be filled by individuals with only an industry certification or a certain number of years of experience. Our survey found that just 17 percent of employers consider their current process of setting educational qualifications for jobs to be “rigorous and data-driven”—while 41 percent reported that they are beginning to leverage more data and analysis to shape these decisions.
Meet Competency-Based Hiring
Even more significant for education providers and workers are the steps many employers are beginning to take—often informed by data—to explicitly de-emphasize degrees and pedigree in their hiring process. The fact that a majority of employers reported that they either already have a formal skills-based hiring effort underway (24 percent) or are exploring it (39 percent) was one of the more significant surprises in our survey of HR leaders.
This strategy is referred to as “competency-based” or “skills-based” hiring, and it is gaining momentum due to the tight job market and opportunity to consider the large pool of professionals without degrees; the realization that many job roles don’t necessarily require a degree; and for equity and inclusion reasons. Many influential nonprofits, foundations and employers are championing this approach and supporting the development of knowledge and tools to implement it–including Skillful, Opportunity@Work,Lumina Foundation and the U.S. Chamber of Commerce.
One especially promising and potentially disruptive practice within the skills-based hiring category is pre-hire testing or assessment—the direct testing of candidates’ ability over the course of the application or interview process. The approach is increasingly enabled by technology and has led to the development of a growing market. In our national survey of HR leaders, pre-hire testing was seen by employers as the practice or technology that has the greatest potential to pose a near-term challenge to the value of college degrees in hiring–with 40 percent expecting an impact within the next three years. Although pre-hire testing brings a variety of challenges, technology-enabled tests that are higher quality, better-validated and cheaper could well chip away at some of the roles of educational credentials in the employee screening process.
Continued Innovation on the Horizon
It is still early in the application of technology and analytics to hiring. Yet, this is an exciting series of developments that promise to challenge traditional educational providers and approaches and also present opportunities for new technologies and businesses. But the approach also requires continued research.
In a more data-rich landscape that makes skills and educational outcomes more transparent, employers’ embrace of talent analytics and skills-based hiring will likely require colleges to change their approaches to offering credentials, assessing students and engaging with employers.