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What skills-based hiring means for the return of standardized testing

Ryan O'Leary
Ryan O'Leary
Ryan O’Leary serves as chief commercial officer for PDRI, where he has worked for the past two decades. He possesses extensive expertise and experience with a wide array of talent management systems and assessment tools. Ryan has a PhD in Industrial and Organizational Psychology from Auburn University, and is a Fellow of the Society for Industrial and Organizational Psychology.

For the last two decades, business and government institutions have pulled away from standardized testing over concerns about bias and a lack of predictive strength. But the trends around standardized testing have taken a turn in the past few years. We’re seeing a return to standardized testing across the board, and for good reason.

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The business world is moving towards using assessments, especially those that have embraced skills-based hiring. Employers like Google, Walmart and nearly five dozen other large companies have initiated efforts to remove degree-based hiring policies that screen out applicants who don’t hold college diplomas. These businesses are realizing that arbitrary degree requirements automatically eliminate a huge swath of potential candidates, many of whom may possess the skills to do the job well. In addition, this “paper ceiling” also affects employers who have been struggling with severe labor shortages.

How big a swath? According to the U.S. Census Bureau, almost two out of three Americans of working age lack a bachelor’s degree, and more than one out of two don’t have an associate’s degree. In the technology sector, many of the industry’s leading figures famously never graduated from college, including Michael Dell, Bill Gates, Steve Jobs and Mark Zuckerberg. What’s more, just like high school GPAs do a poor job predicting college performance, college degrees are poor predictors of an individual’s future on-the-job performance. A large 2022 meta-analysis found that education and even years of experience were not strongly correlated with job performance.

Skills-based hiring trends in the federal government

The Civil Service Exam was abandoned in the 1970s, largely ending the use of standardized employment tests in government. The result, over decades, was a reliance on degree- and experience-based hiring for federal jobs. In much the same way as the private sector, the government recognized the impact degree-based hiring had on the more than 70 million U.S. employees in the workforce without bachelor’s degrees and their economic mobility. They lack access to middle- and high-wage jobs despite having the training, skills and experience to perform these jobs. In 2020, the White House issued an executive order calling for using skills-based assessments for federal hiring to help address the issue.

The currently fractious U.S. House of Representatives recently passed the Chance to Compete Act with a vote of 422-2. This bill would remove degree-based requirements from hiring decisions, which unfairly eliminate candidates who have the necessary skills but don’t possess a degree, and compel the use of assessments for federal jobs. If the bill becomes law, tests won’t be the only factor determining who is hired. However, eliminating a hard requirement for a college degree and requiring skills-based tests acknowledges that, especially in a world where so many skills can be acquired online, setting up an arbitrary diploma requirement creates unnecessary—and discriminatory— barriers.

In short, business and government are all moving toward aptitude and skills-based approaches to hiring, which requires assessment. This need for assessment has been a driving force behind the resurgence of standardized tests.

Types of skills-based hiring approaches

But does an aptitude/skills-based approach with the use of assessments work? The evidence says that it does. According to McKinsey, hiring based on skills is five times more effective in selecting candidates who perform at a high level than hiring for level of education. However, those who want to take a skills-based approach to hiring should note that there are two qualitatively different types of skills.

“Hard” technical skills are likely the type that comes to mind when people think of the skills one needs to do a job: database administration, cloud security, project management and so on. While these kinds of skills are critical, the exact skills that matter are constantly changing. A Gartner analysis of job postings from 2017-21 showed not only did the number of skills required for a job grow by 10% on average, but one-third of the skills in those job postings were already obsolete just four years later.

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With “hard” skills requirements changing so quickly, is it any wonder that a bachelor’s degree alone is a poor predictor of job performance? Even if the curriculum evolves rapidly, it still takes time for an academic institution to update classes to ensure they’re relevant. A computer science major who graduates in 2024 will almost certainly discover that employers are looking for fluency in programming languages, architectures and technologies that didn’t even exist when they began their college journey.

The ephemeral nature of “hard” skills is why the second category of skills is so important to evaluate as part of a skills-based hiring approach. They are often called “soft” skills, though I (and many others) prefer the terms “essential” or “foundational”  because that’s exactly what they are. Essential skills are much more difficult to teach, which is likely why they acquired the label “soft.” But there’s nothing soft about them.

These skills—which include interpersonal communication, creativity and critical thinking—enable people to roll with the punches, work effectively in teams and adapt to the constant, accelerating state of change that is the modern world. In fact, it’s these essential skills that enable employees to see which hard skills they’ll need to acquire to remain relevant and successful and then take action to acquire them.

A new world for assessment

Assessment is a dynamic, scholarly field in which researchers are constantly applying the scientific method to improve the tests so that they accurately and fairly measure key skills and better predict performance. In a fast-paced, ever-changing world, degrees are not sufficient, nor should they be required, to qualify for a job. This is why so many segments of our society are returning to modern, scientifically designed tests. Skills are what matter, and, in a skills-based hiring world, assessments must play a central role.