Competency-Based Hiring: Ensuring Best Fit Talent in Any Economy

DID YOU KNOW… in 2021, the U.S. saw a 21% increase in job postings on LinkedIn that advertised skills and competencies rather than qualifications?

Already facing talent acquisition and retention challenges involving return to work, or quiet quitting, hiring managers in every sector are now also facing the reality that we’ve entered a candidate-driven talent market. At ChapmanCG, we are partnering with our clients as they navigate this unique talent market. Over the past year, we have noticed a trend that leaders who are willing to depart from traditional, legacy hiring or interviewing tactics are better equipped to find the “best fit talent” for their needs. However, it has also become evident that leaders wedded to past ideas around attraction and retention are struggling to find—and keep—the talent they need to move the needle for their organization.

According to research from McKinsey & Company, the talent market has changed; however, many organizations still rely on traditional levers to attract and retain people. While each hiring situation is unique (containing intricacies that contribute, or hinder, the overall success of their talent acquisition efforts), it is worth noting that leaders focused on hiring in a more diverse, impartial, and inclusive way are unified in their use of competency-based hiring principles.

What is Competency-Based Hiring?

If you haven’t yet heard of the competency-based approach to hiring, here are the basics.

• Organizations define competencies for their roles as traits necessary for success. Those attributes are often unique to the job level, but can also be specific to the organization, culture, or business goals.
• Candidate competencies are identified as the behavioral characteristics, personality traits, knowledge, skills, and qualifications they’ve demonstrated or have shown under observation.
• A competency-based interviewing technique has clearly defined criteria for all interviewers, focused on the recognition of established competencies for a position. Prospective candidates are then identified and ranked according to their alignment with those consolidated traits.

Advantages of Competency-Based Hiring

Focusing on a candidate’s competencies throughout the recruitment will ensure a unified, consistent, and un-biased process where an organization identifies winning behaviors that are more likely to deliver on business goals. Fiona Jury, Senior Director, Global Research and Market Intelligence at ChapmanCG, argues that competency-based techniques are the most robust method of assessing skills, capability, behaviors, and personal attributes.

Examining an individual’s competencies, rather than focusing solely on functional experience and qualifications, means that profiles eliminated under less structured interview techniques can be unearthed as top talent.

Let’s look at these advantages in more detail.

Elimination of Unconscious Bias

DID YOU KNOW… 85% to 97% of hiring managers rely on intuition for hiring decisions?

• According to a study published in the Harvard Business Review, many professionals rely on the mental synthesis of information or intuition when processing applications. This can potentially create unwanted bias. The same research shows that a simple applicant tracking system equation is 25% more effective in selecting the right candidates than hiring professionals.
• Unconscious bias is a critical business issue, and the numbers support this fact. The hard costs of bias in hiring practices are staggering. Over the past few years, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced a $3 million settlement with Microsoft and a nearly $8 million settlement with Wells Fargo to resolve allegations of discriminatory hiring practices.

Talent Attraction Benefits

• Standardizing the framework used to recruit candidates most likely to align with pre-determined competencies necessary for success in a role allows for a more streamlined and efficient process. This can help companies deal with the fact that top prospect candidates are off the market in an average of ten days and 60% of job applicants have quit a hiring process midway because of its length and complexity.
• A competency-based hiring assessment will replicate the day-to-day working experience for a candidate and offer them a true representation of what to expect. Hence, the company is more likely to attract candidates set to succeed in the position and as a result job satisfaction is more likely to increase.

Diversity Benefits

• A competency-based style of recruitment presents a fairer, more inclusive and rewarding approach to sourcing top talent in a candidate short market.
• Research from McKinsey & Company shows that the top 25% of cultural and ethnic diverse organizations are 36% more profitable than the 25% lowest scoring companies.
• In addition, the cultural dynamics today indicate that 75% of candidates identify an organization’s stance on diversity as a deciding factor when accepting an offer, while 32% of candidates won’t apply for a job in an organization where diversity is lacking.

Retention Benefits

• By focusing on the competencies necessary for success in a role, or a company, organizations are more likely to hire the best fit talent who will succeed in the position and find alignment within the culture of the company, ultimately leading to greater retention. According to a recent PeopleKeep report, the average cost of training, losing, replacing, and then retraining a new employee for a role can be as much as $15,000 per position.
• Statistics amassed by smallbizgenius shows that 45% of employers say they can’t find the workers with the skills they need; 19% of workers admit they have, at some point, turned down a job after signing an official offer before their first day; and 29% of workers admit to having left a job within the first 90 days. By focusing on the requirements or competencies necessary for success in a role, rather than arbitrary qualifiers, companies are more likely to hire and retain the best fit.
• According to ZDNET, three in five (61%) respondents felt that settling for a candidate whose skills did not match the role requirements was the main component in employing a bad hire, closely followed by rushing the hiring process (56%). Seven in ten businesses reported that the impact of making a bad hire is worse than it was 12 months ago. Small and medium-sized businesses feel the pain more deeply than larger organizations, with 82% reporting "severe negative impacts".

Why Use Competency-Based Interviewing Techniques?

Stewart Angus, VP of People and Culture at Lululemon, agrees that to be successful, talent acquisition and hiring leaders must think creatively and challenge the view of what is considered relevant experience:

I am an advocate of passionate people and active learners with curiosity. When I think about talent, I would bet on a candidate who meets the key behavioral and professional competencies nine out of ten times. I believe that skills can be taught, and in many cases experience can be overrated. However, if I can find an individual with the personality traits of active energy and passion, I believe I can impart the institutional culture and needs.

• The LinkedIn 2022 Workplace Learning Report reveals that skills emerge as the most pressing concern across the world with 72% of surveyed Learning & Development professionals selecting upskilling, reskilling or digital upskilling as one of their top three focus areas in 2022. Focusing on the skills or competencies necessary for success enables employers to increase the size of their talent pool with more qualified applicants, who are also more likely to be well aligned with the position and company values.
• Using competency-based hiring practices provide hiring managers an awareness of the defined competencies for each position, a list of specific traits or behaviors to look for while gleaning that information, and how to equally evaluate candidate responses. Thus, competency-based hiring practices can minimize bias and help companies take the “blinders” off as they assess the true viability of their future workforce.
• Competency-based hiring practices are more likely to uncover the soft skills necessary for success in a position, which according to McKinsey & Company are expected to dominate future business requirements. In addition, they also better allow decision-makers to evaluate candidates for cultural fit, minimizing the risk of hiring applicants who may disrupt company culture.
• A competency-based approach to recruiting is highly likely to eliminate bias. When an organization has a defined, standardized framework of competencies, everyone can identify candidates that meet those requirements regardless of their age, sex, ethnicity, religion, or other considerations that have little bearing on their ability to perform.
• An effective competency-focused interview outline should include open-ended questions encouraging the candidate to answer using the STAR method, laying out their story using the situation, task, action, and result.

Final Thoughts

If attracting and selecting top talent is vital for your organization, and you would like to attract and retain an impactful workforce no matter the economic conditions, it may be time to focus on hiring in a more diverse, equitable, and inclusive way. While there will always be positions fillable via more traditional recruiting approaches, data indicates those criteria are not successful for many roles in today’s world.

Competency-based hiring provides employers and candidates the ability to effectively evaluate and measure positions to allow a wide array of backgrounds a fair chance to prove their abilities and increase the productivity of an organization. With a proven track record for improving employee attraction, retention, and diversity there can be little doubt that there are many benefits of a competency-based hiring approach to find the best talent in any economy.