The skills-based economy is here to stay

Human capital management has experienced a tumultuous three years. When the pandemic hit in 2020, workers were laid off en masse. By 2021, however, we saw the lowest unemployment rate in more than 50 years and the biggest war for talent in over a decade. Then, in 2022, high-profile tech layoffs sent shockwaves through the industry. Now, the future is hard to predict, with rising interest rates dampening investments; a burgeoning war in the Middle East and ongoing war in Ukraine creating global economic instability; and a divisive U.S. presidential election on the horizon.

In the midst of all this uncertainty, one thing is for sure: the skills-based economy isn’t going anywhere. According to data from LinkedIn, today’s recruiters are 25% more likely to search by skills than they were in 2019, and 50% more likely to search by skills than by years of experience. Recent research shows that 70% of organizations believe skills-based hiring is more effective than resumes, with 89% of companies enjoying increased retention rates when they hired for skills.

Resoundingly, employers understand that the success of their organizations hinges on skills: the skills required to do the job today and the ability to learn how to perform well tomorrow. They are selecting candidates with the specific expertise required for a role, rather than traditional credentials such as job titles and educational attainment. They’re looking for hard skills, such as technical programming and data analysis; engineering; scientific and regulatory knowledge; and manufacturing experience. Savvy employers also understand the importance of soft skills, including leadership, communication, problem-solving, and flexibility.

As employers shift to this more holistic view of talent, they are thinking beyond the candidate who is right for the job today. They’re looking for the one who is right for the job of tomorrow, as well. Here’s how employers can make sure they have the right talent with the essential skills to drive business forward in 2024 and beyond.

A step-by-step guide for employers to recruit, hire, and nurture talent with the essential skills to drive business forward in 2024

Invest in your team today and reap the rewards tomorrow

While unemployment numbers remain historically low, compared with the fever-pitch hiring of 2021, demand for talent has cooled. Now is a great time to build your team for the upcoming year. Whether you’re looking for tech, engineering, or biotech talent, or creative and marketing candidates, the time is ripe for hiring the best and brightest to fortify your bench. If you anticipate business expansion in 2024, you’ll need talent to help drive that growth. Waiting until the need is upon you will strain your workforce short-term and impact retention negatively in the long run.

Capacity plan so you hire – and retain – the right talent to support growth and innovation

Capacity planning makes certain you have the right talent with the required skills to meet current and future business needs. It will help you prepare for upticks in demand well in advance of them happening so your organization completes projects and longer-term initiatives successfully. Done well, capacity planning will prevent you from overworking or under-utilizing your workforce. It will highlight potential staffing gaps, keep you on schedule and on budget, and decrease the risk of burnout (or boredom), thereby increasing employee retention.

Consider contract and temporary talent

Even with comprehensive capacity planning, you might be dealing with budget uncertainty, short-term project needs, or otherwise be reticent to invest in direct hires. If so, consider bringing on a contractor or contract-to-hire model. Doing so will give you an opportunity to try out talent at very low risk, enabling you to assess cultural fit and soft skills that can be more difficult to ascertain in the hiring process. It also gives you time to assess and match your workforce with longer-term business needs.

Focus on soft skills

The ability to lead, empathize, communicate, and adapt to new situations are key factors in determining whether a candidate will succeed in their role. When evaluating candidates, look at soft skills such as attitude, emotional intelligence, communication, time management, and teamwork. Research from IBM shows that the number one skill – hard or soft – that CEOs ask for is “willingness to be flexible, agile, and adaptable to change.” Partnering with a recruiting expert that has close relationships with talent will help you rapidly evaluate which candidates have the soft skills your organization needs.

Optimize your recruiting and hiring process

“Necessity is the mother of invention.” Almost every tech employer experienced this general truth during the frenzied hiring of tech talent in 2021. They shortened their recruiting and hiring timelines to be as fast and decisive as the market demanded. Those that did not lost out on top-performing talent.

Now is the time to take stock of your recruiting and interviewing process so you are ready when hiring picks up again. Is there room to streamline the process so you can make faster decisions? For example, how many people really need to interview different candidates? Can you leverage technology to expedite your reference checks process? By staying-forward thinking, you’ll be sure you can attract and retain the right talent, regardless of market shifts.

Think twice before mandating a return to office

As the pendulum swings from a candidate’s market toward an employer’s market, we’ve seen more CEOs mandate a return to office. Some argue that employees aren’t as productive when they work from home. However, data from the Bureau of Labor Statistics casts doubt on this assumption. Productivity increased 4.4% in 2020 and 2.2% in 2021 before declining in 2022. This year is on track to see another increase, with productivity already up 3.5% in Q2 2023.

Perhaps reflecting this ambiguity, a more measured approach toward hybrid work is on the rise. The number of employees who worked in the office full-time decreased 49% to 42% in Q2 versus Q1 2023. Offering hybrid or fully remote jobs will attract a wider pool of high quality talent to your organization while giving current employees another reason to stay. You might even scoop up some of the talent who are being forced to return to the office. Offering hybrid or remote working arrangements shows you trust your workforce and says much about your corporate culture.

Make sure your reference checking process is airtight

Reference checks like ones built for staffing firms, help verify employee skills and experience, and ensure a cultural fit with the organization. In more extreme cases, the reference checking process also protects your organization from falling victim to employee and candidate fraud. Consider working with a recruitment partner to help protect your organization from such scams.

While the economic outlook is uncertain, your recruiting and hiring process shouldn’t be. With Q1 quickly approaching, position your organization for success in 2024 and beyond with an adaptable recruitment strategy. Contact a Cypress client partner to discuss how your organization can help scale your talent base in 2024 and beyond.