Does a skills-based hiring approach reduce employee turnover?

Inevitably, employees who stay with their employers for a longer period tend to be the most productive. But does their better productivity lead to them staying longer, or does their staying longer lead to them being more productive? In other words, is there a causal or merely coincidental effect between tenure and productivity?

Spoiler alert: there are certainly many, many examples of employees with long tenures who are unproductive, employees with little tenure who are highly productive, and in between. But the more experience required to do a job well, the more likely it is that employees with longer tenures will do that job well, which points to a causal effect. So, if you want your employees to be productive, you’re going to want to do whatever you can to reduce unnecessary turnover. Can a skills-based hiring approach lead to reduced turnover and, therefore, increased productivity?

In the quest to understand the impact of skills-based hiring on employee retention, we’ve gathered insights from CEOs and business psychologists, among other experts. They share their perspectives on whether this method leads to a decrease in turnover, from enhancing team fit to the role of predictive analysis in retention planning. Explore these seven expert opinions to see how a focus on skills might transform your team’s dynamics and longevity.

Skills-Based Hiring Enhances Team Fit

Absolutely! In my company, we ensure candidates possess not only the right skills to do the job but also the right ones to fit within the team. As we’ve been steadily growing, our hiring needs have become more specific. 

Although we’re still a young team, the few of us with hiring management experience have noticed tangible differences overall in our new hires’ results following their first six months with us, as opposed to those hired through a more traditional hiring process. We monitor employee engagement and satisfaction biannually and have since found higher employee satisfaction across the board.

That’s why I firmly believe a skills-based approach has helped us minimize the risk of our team members feeling a mismatch between their capabilities and the job’s requirements. Additionally, being stronger fits culturally has allowed them to strengthen our team’s work culture and interdepartmental collaboration.

Since implementing this approach, we’ve successfully retained all of our new hires, who in turn have helped create an environment where everyone feels confident and fulfilled in their roles.

Sebastian Morgan, Senior Content Specialist, CV Genius

Modest Impact on Turnover Expected

Despite being an ardent advocate of skills-based hiring, I believe its impact on employee turnover will be modest at best. 

The primary reason to implement skills-based hiring is to improve the quality of hire, particularly from a performance and potential perspective. The question is, does improving the quality of hire help or hinder employee retention? 

On one hand, organizations will be far less likely to encounter capability issues with staff, reducing the number of employees who are fired based on performance. On the other hand, higher-performing employees are a valuable commodity in the employment market and may be more likely to jump ship when the opportunity presents itself. 

Consequently, I would expect modest improvements in employee retention, but not a dramatic improvement over time.

Ben Schwencke, Business Psychologist, Test Partnership

Skills Alignment Boosts Job Satisfaction

A skills-based hiring approach can reduce employee turnover, as per my experience. When you hire employees based on their skills, you add them to a suitable workplace that can give them plenty of opportunities or projects to utilize their skills. They will get the chance to capitalize on the maximum potential of their talents. 

Moreover, they will be able to handle work-related challenges with the help of their aptitudes. It will enhance their skills further. They will also feel more interested in doing their work. As a result, their job satisfaction will increase, and they will be willing to stay with the company for a long time. Some may even want to spend their entire career at the same company.

Adrian Hall, Business Development Manager, Pharmacist Schools

Skills Matching Lowers Turnover Rates

Absolutely, using a skills-based hiring approach can significantly reduce employee turnover.

When people are chosen for their skills, they fit their roles better and feel more satisfied with their jobs.

For example, the Society for Human Resource Management found that companies focusing on skills-based hiring saw a 56% drop in turnover. This shows that understanding and matching the actual skills needed for a job can create a more stable and happy workforce.

Tobias Liebsch, Co-Founder, Fintalent.io

Values and Willingness Trump Skills

While skills are important, aligned values and a desire to succeed are far more important. Many skills can be learned by candidates who have a basic foundation for the role. However, the emotional value attached to a willingness to perform as well as possible, as well as sharing the values that drive an organization, would require a heavy emotional burden for someone who isn’t already there. 

So, think of all but the most essential skills as optional, and take note of the expected timeline for upskilling each potential hire. Then, pay the most attention to whether the person has the will to succeed and a passion for your company’s mission that would make them excited to come to work each day. Do that, and you’re likely to curtail employee turnover and hold onto people much longer.

Dennis Consorte, Digital Marketing and Leadership Consultant for Startups, Snackable Solutions

Core Competencies Reduce Early Burnout

When getting a fish, it is usually good to make sure it knows how to swim. A skills-based approach to hiring is a way to reduce turnover, as employees will likely feel significantly less stressed if they only have to learn the office culture and procedures, rather than also having to pick up core competencies at the same time. Less chance for burnout early means less chance for employee turnover later. That said, this is only the tip of the iceberg and the minimum you should be doing. 

Overall job fit is the key goal for reducing turnover, which includes not only skills but also cultural fit and other factors. It is why so many companies that have tight delivery timelines invest heavily in psychological analysis of incoming hires—some will thrive in the environment, and some will not, despite all having the requisite skills.

Dragos Badea, CEO, Yarooms

Predictive Analysis Aids Retention Planning

A skills-based hiring approach can be an effective way to reduce employee turnover. One example is leveraging data from predictive analysis models. These models—using various sources of available data (like current job postings)—can help identify the appropriate skill sets that employers need for successful retention. 

With entry-level positions, it can even have a long-term impact on personnel planning and succession initiatives because the types of skills required can often stay constant over time. This type of deep analysis of “hard” and “soft” skills helps companies better understand not only whose qualities meet the job requirements but also who best fits the company culture. 

By hiring individuals with superior qualifications, knowledge, leadership abilities, and motivation—through this data-driven approach—businesses can find satisfied employees with commensurate experience and keep them longer.

Tasia Duske, CEO, Museum Hack