ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

The mismatch between an organization’s people needs and the supply of available talent (or the lack thereof) is by no means a new problem for leaders and their companies. But given the rapid rise of generative AI (gen AI) and longer-term macroeconomic trends, it’s not poised to resolve itself anytime soon. In this current labor market and business environment, how can companies find people with the right skills, technical and otherwise, to succeed in the workplace? This week, we look closely at the merits of moving from credentials- to skills-based hiring and how companies can prepare today’s employees for the jobs of the future.

AN IDEA

Hire for skills, not diplomas

While workers’ preferences and companies’ skill needs seem to be changing at breakneck speed, these issues are not just a pandemic-induced flash in the pan. After analyzing data from 30 advanced economies, McKinsey senior partners Chris Bradley, Olivia White, and Sven Smit and their colleagues explain that the nearly two-decade-long trend of tightening labor markets shows no signs of slowing down. With a dwindling surplus of excess workers, how can employers best address the talent shortages of today and tomorrow? According to the authors, companies would do well to focus on the employees they already have, by creating opportunities for mobility, upskilling, and reskilling and by offering more flexibility. Another just-as-important strategy is hiring based on skills, rather than on a candidate’s bona fides. By focusing on their own underlying skill needs, companies can better source certain skills (especially technical ones) and create opportunities for employees in traditionally untapped pools of talent.

A BIG NUMBER

~12 million

That’s the potential number of job transitions that Europe and the United States each could see by 2030. In a recent report from the McKinsey Global Institute, senior partners Dana Maor, Eric Hazan, and Sven Smit and their colleagues predict that changes in labor demand—due to trends ranging from AI and automation to infrastructure spending and aging populations—will require millions of employees to move from one job, or even one career path, to another. These shifts go hand in hand with changing demand for specific skills: namely, the technological, social, and emotional skills that the authors predict workers will need most in the future.

A QUOTE

“If you have the skills, no matter where you learned them, and you can do the work, you should be able to do the work.”

That’s McKinsey’s Bryan Hancock on the philosophy behind skills-based hiring. In a recent episode of McKinsey Talks Talent, he and senior partner Brooke Weddle make the case for hiring based on the skills needed to succeed in a job, rather than on a college degree or work experience. With skills-based hiring at scale, one important place for companies to start is their approach to learning and development (L&D). “People are hiring for the most critical skill or the hardest-to-find skill. They’re not hiring for all of the skills in a given role,” Weddle says. “There’s a real role for L&D to give you all the other skills you need. There are things you haven’t learned since you haven’t been there for five years. That’s a core part of skills-based hiring, as well.”

A SPOTLIGHT INTERVIEW

In a working world that’s constantly evolving, mindset shifts are critical to success—for employers and employees alike. So says Deanna Mulligan, former chair and CEO of Guardian Insurance, in her book about closing the skills gap. On the employer side, she notes the importance of skills-based recruiting and hiring: “We can’t really rely on job titles and what people have done in the past to give us clues about whether they’ll be able to do jobs that don’t exist yet.” For employees, especially those who are starting out, a mindset of flexibility and resilience is essential to job success and satisfaction. “They’re not going to graduate with a degree in one area and be employed in that area for the rest of their lives,” Mulligan says of today’s youngest workers. “We’re all going to be learning, exploring, adding new skills to our portfolios. Changing jobs, changing careers.”

— Edited by Daniella Seiler, executive editor, Washington, DC

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