How skills-based hiring leads to fewer mis-hires and helps combat employee churn

The essential metrics for an HR professional are mis-hires and turnover. They became even more relevant to the conversation after the Great Discontent.

Hiring an unsuitable candidate after months of searching is detrimental to your company, and losing a current employee is just as painful.

Maybe there’s a simple way to manage these tricky metrics.

According to TestGorilla’s State of Skills-Based Hiring report, of companies that used skills-based hiring, 91.2% of organizations saw an increase in retention, and 92.5% saw a reduction in mis-hires.

It isn’t magic either. It’s simply a combination of assessing tangible skills, aligning a candidate to company culture, and prioritizing learning and development.

This article discusses the detriment of mis-hires and turnover and the part that skills-based hiring can play in reducing both. 

You’ll learn how skills-based hiring leads to fewer mis-hires and increases employee retention through matching candidates to ideal jobs and assessing personality values.

Skills-based hiring combats the two biggest issues in HR: Mis-hires and turnover

Mis-hires and turnover are more than disappointing, and they’re a lot more than extra work in your schedule.

When these metrics get out of control, it’s a massive detriment to your organization.

One bad hire can have a powerful negative effect on your company, costing thousands of dollars and impacting your current employees.

According to research done by Topgrading, the estimated cost of a bad hire ranges from five to 27 times the amount of the employee’s salary.[1]

Does the price sound pretty steep? That’s because a lot goes into the cost:

• Employee compensation

• Opportunity costs

• Recruitment costs

• Onboarding and training costs

• Negative impact on team performance and team disruption

• Lost customers

• Negative impact on your employer brand

This bad hire affects more than just money. Mis-hires lead to low morale, damaged client relationships, and unhealthy company culture. These are the unseen costs of a mis-hire.

Mis-hires are unfortunately common – 76% of senior managers admit to recruiting the wrong candidate for a role, and 65% say the negative impact is worse than before the pandemic.

According to one study, these are some of the top reasons that hiring managers make mis-hires:

• Candidates lied about their qualifications (33%)

• Had a hard time finding qualified candidates (29%)

• Didn’t focus on personality and soft skills (29%)

• Lacked adequate tools to find the right person (10%)[2]

You can avoid these issues by relying on skills-based hiring practices. Let’s take a look at them:

We’ve discussed mis-hires, so what about employee turnover?

It turns out that these outcomes are directly connected. The fewer mis-hires you make, the fewer people quick quit when they realize the job isn’t for them.

Skills-based hiring helps match a candidate’s skill set and values with the open role, and the better suited a candidate is to a position, the longer they’ll stay and the more satisfied they’ll be.

This situation is why company culture is one of the top job satisfaction factors. Candidates that align with your values and beliefs are more comfortable and confident in the environment.

Many HR professionals are looking for tools like skills tests to help them manage turnover. The top challenge driving HR technology decisions is finding, attracting, and retaining talent.

Adopting skills-based hiring addresses mis-hires and high turnover by matching applicant skills to an open position to find the best candidate for the role.

According to TestGorilla’s State of Skills-Based Hiring report, of companies that used skills-based hiring:

1. 91.2% of organizations saw an increase in retention

2. 92.5% of organizations saw a reduction in mis-hires

And of the companies that reduced mis-hires, 44% recorded a fall of more than 25% in that category.

A separate study found that 78% of HR professionals say the quality of their organization’s hires has improved owing to skills assessments.

This discovery isn’t brand new, either. A study done in 1984 found that hiring for skills is five times more predictive of job performance than hiring for education and two times more predictive than hiring for work experience.[3]

People have known the efficacy of skills-based hiring for years, it’s just now that technology has advanced to the point where we can quickly and accurately evaluate skills.

How skills-based hiring leads to fewer mis-hires and finds the ideal candidate

We mentioned that skills-based hiring benefits your business. It helps find the ideal candidate and reduces detrimental mis-hires – but how?

Here’s a quick summary:

1. Assesses skills where traditional methods can’t

2. Ensures candidates have the right soft skills and personality for the role

3. Uses structured interviews

1. Assesses skills where traditional methods can’t

Unfortunately, resumes are unreliable at best and provenly less than effective at worst.

Here are a few disappointing facts about resumes:

• 32% of Americans admit to having lied on their resumes

• Higher earners are more likely to lie on their resumes

• 80% of those who lied got the job, but almost half lost the job eventually when the offer was rescinded

These points not only show that resumes are unreliable, but they also lead to mis-hires and wasted time.

If you’re brave enough, check out our five stories from resume recruiting hell to see how detrimental resume hiring can be (our hearts go out to the hiring managers in those stories).

Resumes also have a lot of potential for unconscious bias, which strikes without you noticing it. CNBC calls resumes a “breeding ground for biases,” which can stifle diversity and prevent you from hiring the best candidate for the role.

Skills-based hiring bypasses the entire problem with resumes. 

This is what a sample assessment for a graphic designer might look like:

• Adobe Photoshop for Designers test

• Adobe Illustrator test

• Communication test

• Attention to Detail test

• Culture Add test

All of these tests and many more are available in our test library.

There’s no lying about skills or qualifications when your process can accurately and objectively evaluate capabilities.

Skills tests help hiring managers find candidates that can get the job done and do it well.

2. Ensures candidates have the right soft skills and personality for the role

A candidate needs more than technical skills for every job role. Soft skills, personality, and culture match are all components of a great hire.

According to a recent study from Leadership IQ, 89% of mis-hires are due to the wrong soft skills.

It isn’t surprising because soft skills and personality are impossible to assess through traditional hiring methods. A resume could say “great communicator,” but that isn’t exactly a guarantee.

These are the crucial soft skills mentioned in Leadership IQ’s study:

• Coachability: The ability to accept and implement feedback

• Emotional intelligence: The ability to understand and manage your emotions, as well as empathize with others

• Motivation: The drive to achieve one’s full potential and excel at your job

• Temperament: The attitude and personality suited to the role and culture

Skills-based recruiting methods help ensure a candidate has these skills and behaviors before day one. Soft skills like emotional stability have even been shown to give teams a competitive advantage.

Personality and culture tests like The Big 5 test enable hiring managers to evaluate a candidate’s emotional intelligence and stability and our Motivation test measures the extent to which a candidate’s expectations align with your offer and role.

3. Uses structured interviews

Skills-based hiring doesn’t end at the skills tests. Structured interviews are a big part of a skills-based hiring process.

What’s a structured interview?

Traditional job interviews are known as “unstructured interviews” and leave results down to reaction and luck, leaving a lot of room for mis-hires.

Let’s take a look at a quick comparison between structured interviews and unstructured interviews:

The predetermined criteria and script mean that structured interviews give a fair chance to every candidate. 

Goldman Sachs revamped its hiring processes to include structured interviews. Dane E. Holmes, the global head of human capital management, says the result is a fairer, more inclusive process and the firm’s most diverse entry-level class.

But it’s more than that: Structured interviews are also a better performance indicator.

Structured interviews predict 26% of job performance, whereas unstructured interviews predict only 14%. That’s why Google stopped using them.[4]

These interviews focus on specific role-relevant questions and stay on track, enabling you to evaluate candidate skills and capabilities more effectively and improve the quality of your hires.

How skills-based hiring reduces turnover and increases retention

Turnover and mis-hires are directly connected, so it makes sense that better hires naturally increase retention.

But skills-based hiring also actively contributes to increased retention. 

Here’s a quick summary:

1. Matches candidates’ skill sets to roles

2. Aligns candidates to company culture

3. Creates a healthy, inclusive culture

4. Prioritizes learning and development

1. Matches candidates’ skill sets to roles

Happy employees are more likely to stay at their companies – and our report found that 72.1% of people hired via skills-based hiring are happy in their roles.

Why are candidates hired through skills-based hiring happier?

Candidates are objectively assessed during hiring, which means their skill sets match their new roles. Matching skills mean that candidates have the right skills to complete their responsibilities smoothly.

And when employees are confident and comfortable, they’re more satisfied.

A study in a customer service call center found giving their reps the right skills to handle new tasks and resolve more customer complaints on their own improved both wellbeing and job performance.[5]

In a skills-based environment, employees use their skills and are recognized and valued for them. This focus on capabilities over background and pedigree creates a healthier environment and improves employee satisfaction.

It’s worth noting that focusing on skills over background increases retention in another way. One study found that employees without traditional higher education tend to stay 34% longer with companies than their counterparts.[6]

Prioritizing skills is one of the reasons why candidates prefer a hiring process with skills tests versus one without. For more insights, read our article on skills-based hiring from a candidate’s perspective.

2. Aligns candidates to company culture

Culture is a factor in hiring, although too many companies still rely on the archaic practice of “culture fit.”

What’s the alternative? We believe culture add is the way forward.

Culture fit strongly emphasizes “fitting” a candidate into a pre-established, rigid culture. If the candidate doesn’t fit the specific criteria, they get a rejection.

For example, a 2021 study found that only 15% of hiring managers across seven countries believed that workers older than 45 applying for an entry-level position were a “fit.”

Culture fit can also leave candidates feeling discriminated against.

Discrimination is what happened to Sandra Okerulu, who applied for a role at a New York-based company, had a resume that matched their requirements, and had an interview that went “perfectly.”

They then sent her an email saying she wasn’t a “fit,” and all Sandra could think was that it was her gender, skin color, or sexual orientation that wasn’t a match.

On the other hand, culture add compares how a candidate’s values align with the organization’s values and adds similar yet unique individuals to your company. You can achieve culture add using our Culture Add test.

This practice nurtures a healthy culture where employees feel like they belong and employees stay longer in a culture they identify with.

Values are important, and when your beliefs and goals match your company’s, it leads to long-term relationships and increased retention.

3. Creates a healthy, inclusive culture

Another point linked to culture: Skills-based hiring cultivates a positive company culture where employees feel safe and accepted.

Toxic company culture is one of the largest contributors to high turnover. MIT Sloan found that a toxic organizational culture is the greatest driver of attrition and is 10.4 times more likely to contribute to turnover than compensation issues.

How does skills-based hiring help? Hiring employees with personality tests, such as the DISC test, assesses factors like conscientiousness and empathy. Assessing personality traits means you hire more positive candidates and fewer toxic ones.

Use this tip to reduce the amount of “asshole geniuses” you hire and increase the overall feeling of psychological safety in the workplace.

Destaney Wishon, the founder and chief executive officer of BetterAMS, says in his post that you can teach skills but the damage a toxic employee can do to your culture could be irreparable.

Employees stay at a company when they feel they can make mistakes, ask questions, and learn. When they feel one wrong move will put them on the chopping block, it raises tension and eventually leads to walking out the door.

For more information on this subject, read our guide on psychological safety in the workplace.

It’s all well and good to say these things, but does skills-based hiring create an inclusive culture and contribute to employee wellbeing, or is this an empty claim?

We have our example in John Kim, one of our awesome sales team members.

John left TestGorilla to pursue other opportunities: a great job with good compensation and tasks he could handle. But he soon realized that he missed TestGorilla’s inclusive culture.

“There was nothing wrong with my new job, but it was lonely. I had no one to laugh with, no one to vent to. I missed the company culture, and so I came back.”

To read John’s full story, check out our 10 stories that show the power of skills-based hiring.

4. Prioritizes learning and development

Skills-based organizations prioritize professional growth and development. Continuous improvement is a cornerstone of skills-based practices.

Lack of career development directly affects turnover and was one of the drivers of the Great Reshuffle.

One study found that 70% of employees who get a promotion within three years stay with their employer, compared with just 45% of those who didn’t get a promotion.

A separate report found that 48% of workers would switch jobs if offered upskilling opportunities.

Skills-based organizations prioritize the upskilling and reskilling of their people. They provide learning opportunities, focus on feedback and mentoring, and offer support wherever they can.

Career growth opportunities are what employees want. No matter which position an employee is in, they want to develop and learn new skills.

Beyond that, learning and development also expand your talent pool to candidates with most of the requirements for the role but not all. These candidates can expand on their skills with upskilling, even if they’re missing a few qualifications.

Use skills-based practices to hire and retain the best talent

Mis-hires and high turnover can be scary metrics, but with the right strategies, you can secure the best talent and keep it in the long term.

Skills-based hiring leads to fewer mis-hires and reduced turnover through hiring the best candidate for the role and letting them use their skill sets for a job they love.

And if they’re in a suitable job they do well, they’re going to stay.

To read more about preventing mis-hires and lowering turnover, check out our article on skills-based hiring and the Great Reshuffle.

If you’d like to start nurturing a healthy organizational culture, check out our Culture Add test to hire candidates that identify with your company.

Sources

1. “The High Costs of Mis-Hires Are Higher Than You Think”. (June 25, 2019). TopGrading. Retrieved April 21, 2023. https://topgrading.com/resources/blog/the-high-costs-of-mis-hires-are-higher-than-you-think/ 

2. “Nearly Three in Four Employers Affected by a Bad Hire, According to a Recent CareerBuilder Survey”. (December 7, 2017). Career Builder. Retrieved April 21, 2023. https://press.careerbuilder.com/2017-12-07-Nearly-Three-in-Four-Employers-Affected-by-a-Bad-Hire-According-to-a-Recent-CareerBuilder-Survey

3. Hunter, John E; Hunter, Ronda F. (June 30, 1984). “Validity and Utility of Alternative Predictors of Job Performance”. SciSpace. Retrieved April 21, 2023. https://typeset.io/papers/validity-and-utility-of-alternative-predictors-of-job-4am9glr47g

4. Bock, Laszlo. (April 7, 2015). “Here’s Google’s Secret to Hiring the Best People”. Wired. Retrieved April 21, 2023. https://www.wired.com/2015/04/hire-like-google/ 

5. Holman, David; Axtell, Carolyn. (December 7, 2015). “Can job redesign interventions influence a broad range of employee outcomes by changing multiple job characteristics? A quasi-experimental study”. PubMed. Retrieved April 21, 2023. https://pubmed.ncbi.nlm.nih.gov/26641482/

Santhosh, Gopika Maya; Lewis, Greg. (February 22, 2021). “Why Skills-Based Hiring Starts with Your Job Descriptions”. LinkedIn Talent Blog. Retrieved April 21, 2023. https://www.linkedin.com/business/talent/blog/talent-strategy/why-skills-based-hiring-starts-with-job-descriptions