HR talent management used to involve evaluating applicants’ experience and education credentials and making hiring decisions based on who had the most impressive resume and the best education credentials. However, this is changing.
The private sector began moving toward merit-based hiring around five years ago. Recruiters and hiring managers began placing more emphasis on applicants’ skills and experience and less weight on education and information candidates provided on their resumes.
The public sector is doing the same. In 2020, Executive Order 13932 took effect, and agencies are now required by law to apply merit-based hiring strategies when they recruit and evaluate candidates.
Many applicants acquire skills by learning on their own or through work experience. However, they may not qualify for jobs because they do not have a college degree. In studies conducted with Harvard Business School, Accenture, and Grads of Life, three out of five HR leaders and senior executives said they were forced to reject qualified talent because the applicants lacked a college degree. So, organizations are implementing skills-centric talent management strategies to widen their candidate pools.
What Is Merit-Based Hiring?
Merit-based hiring is an HR talent management strategy that prioritizes applicants’ abilities, knowledge, and skills and deemphasizes education credentials. This means candidates must complete skills assessments in addition to submitting a resume or completing a job application. Merit-based hiring differs from traditional hiring methods because HR teams and hiring managers use skills test results to measure applicants’ abilities and no longer evaluate candidates solely based on degrees and work experience. This helps them identify and hire candidates with the best skills and knowledge to do the job, regardless of how they acquired the expertise. The value of merit-based hiring extends throughout an employee’s tenure with an organization because HR leaders and hiring managers can use skills tests to speed up new-hire onboarding and ramp-up and enhance employee development. By reviewing skills test results, HR leaders can determine which skills new hires have mastered, eliminate them from training provided during onboarding, and focus on areas that need more attention. HR teams also use skills assessments to identify employees who are ready for new challenges, or could be, with additional training. By reviewing skills testing results, they can develop personalized training programs that help staff improve the skills they use in their current jobs and learn new skills that will help them advance their careers. For example, eSkill clients use the Management and Emotional Intelligence Skills Test if employees will have direct reports in a new role. If a new position requires implementing new processes, they can use the Leadership Skills and Change Management Skills Tests to evaluate candidates’ ability to train people on new procedures and motivate them to change.Benefits of a Merit-Based Hiring Talent Management Strategy
- Solution to the Talent Shortage: The current talent shortage has made it challenging for organizations in all industries to recruit skilled workers and create a strong talent pool. Since there is no end in sight, organizations see transitioning to a merit-based hiring strategy as an excellent way to close the skills gap. HR teams and hiring managers can consider candidates who have the required job skills but do not have a college degree. This widens the talent pool because these applicants would be out of the running if an organization followed traditional hiring practices.
These are some reasons why merit-based hiring is promoted as the best HR talent management strategy.
- Improve Hiring Results: HR leaders and hiring managers are under pressure to make good hiring decisions. Hiring mistakes can cost their organizations hundreds or even thousands of dollars and result in lost productivity and lower staff morale. According to the U.S. Department of Labor, the cost of a bad hire can be as high 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 hire someone to replace the employee. HR leaders want to hire the best person who can do the job and do not care how applicants obtained the skills.
- Reduce Turnover: All organizations strive to reduce turnover—especially now when finding skilled candidates is so difficult. Merit-based hiring helps organizations retain top employees by keeping them motivated and happy. High-performing employees want to work on a top-quality team. When they see hiring and promotion decisions are based on skills and ability, they know hard work is rewarded and that they have a chance to be promoted. So, they have less incentive to explore other opportunities.
- Minimize Bias and Increase Diversity: Implementing a merit-based hiring system is the best way to minimize the chance that subjective bias will influence hiring and promotion decisions. All candidates complete the same validated skills tests, and the results are automatically scored. All video questions are on-demand, meaning applicants listen to questions, record their answers, and have no direct contact with hiring team members. It is also possible to disable the video so hiring teams can evaluate responses without seeing the candidates.
- Reduce Potential Litigation: According to the U.S. Equal Employment Opportunity Commission (EEOC), thousands of applicants file discrimination complaints annually, claiming employers engaged in unfair hiring practices. Merit-based hiring helps organizations minimize potential liability because hiring and promotion decisions are based on “hard” data instead of hiring managers’ “gut” feelings.
- Decrease Hiring Costs and Time-to-Hire: An HR talent management strategy that applies merit-based hiring practices lowers hiring costs and reduces time-to-hire. HR teams can complete the screening process quickly and more efficiently with better overall outcomes. Several eSkill clients who have transitioned to merit-based hiring have reduced time-to-hire by 60% and decreased hiring costs by 70%.
