How to build the business case for skills-based hiring
Win support for a skills-based approach to the hiring process by following these steps - and soon you'll be able to identify best-fit candidates quicker and reap the benefits of a workforce with higher performing employees.
A recent paper published by PwC estimated that, on average, it can take anywhere between 24 to 36 months to obtain the necessary stakeholder buy-in, investments and technology partners to embed a skills-first approach in an organisation. But it needn’t be such a laborious process - and at Spotted Zebra we’ve been able to get clients started with a skills-based approach within a matter of weeks.
One of the keys to accelerating the timeline is to ensure that you have a robust business case for skills-first talent management from the outset. Most businesses will take an incremental and pragmatic approach to becoming a skills-first organisation, starting their journey at one of three areas - skills-based hiring, talent mobility / reskilling, or talent development / succession planning.
So let’s take a look at one of these, and explore how you can build a robust and convincing business case for skills-based hiring.
What needs to be in a business case?
Before we dive into the minutiae of supporting evidence for a skills-based project, let’s quickly summarise what needs to be in a comprehensive business case.
- An executive summary. A short explanation of what you’re proposing - the context behind your skills-based initiative (i.e. your organistion’s skills challenges and/or the global skills crisis), its goals (i.e. widening the talent pool, increasing hiring success, reskilling success, succession planning, increasing talent mobility, improving employee engagement, reducing staff attrition, etc) and the financials. Although this will be the opening of the business case, it is usually written last.
- Project summary. Define what you’re proposing and why. Outline the challenge or the opportunity that your skills-based programme is looking to address. Include ‘do nothing’ as an alternative option, so that you can compare and contrast options and potential outcomes.
- Market/opportunity assessment. Explain why the skills-based initiative needs to be done now.
- Goals and objectives. Aside from the overall objective, will a skills-based approach support other existing strategies and goals? For instance, a skills-based hiring programme which is proposed as a way to mitigate the skills crisis can also help the organisation hit diversity goals along the way, as well as bringing attrition down. These smaller objectives will help to demonstrate that the overall goal is more achievable.
- Project scope. The meat of the business case, this details what it is that you propose will be done, breaking it down into tasks that will be undertaken, milestones that will be hit and ultimately the outputs that will be achieved.
- Budget and finances. What are the costs associated with the initiative and how will the initiative pay for itself? This is where you should justify the investment in monetary terms.
- Schedule. Explain the project timeline and outline when you anticipate key achievements and milestones will be achieved.
To help you build a robust business case, let’s dig a little deeper into a few of these components to share examples of the kinds of supporting data that you can use to produce a convincing outline.
Outline the challenge
Consider your current situation - what is the challenge you’re trying to address?
If you’re keen to adopt skills-based hiring, you’re probably already using some kind of assessment already, so list the problems or limitations that you are experiencing with your current approach.
For instance, some of our customers told us that prior to using Spotted Zebra they had found that assessment use across their organisation was inconsistent, leading to costly inefficiencies. It is not uncommon for off-the-shelf assessment approaches to lead to Hiring Manager and candidate dissatisfaction, low solution adoption and limited improvement in hiring quality. Other common challenges related include failing to hire the right talent or long time-to-hire, which means roles are unfilled.
Wherever possible provide specific statistics that demonstrate the problems, as this will help you to associate a cost with the challenge. As an example, in Spotted Zebra’s award-winning work with AWE, the company was able to provide hard figures to demonstrate that its pre-existing assessment process was broken:
- 7% of new hires were leaving within five days of starting the role.
- 35% of people were leaving in year one of the apprenticeship scheme.
These kinds of figures will help you create an estimate of the cost of failed hires, as well. For instance, the industry standard cost of a failed hire is 2x salary, so if an average salary in a particular sector is £60,000, the cost of a failed hire would be £120,000.
Also ensure that you do some exploratory work to identify why these problems are occurring in the first place. If you are building a business case for a skills-based hiring solution, for example, ensure you also speak with Hiring Managers and other stakeholders to get their feedback on what they think the existing challenges are and why there are problems with the current system.
For instance, AWE was able to report that:
- They were hiring people who did not have the behaviours required for success.
- Higher quality candidates were dropping out of the process before the final stage.
- It was not educating and guiding young people towards a role that would suit them.
Other common issues related to hiring that are often reported include:
- Assessment stages being too long and complicated.
- Assessment content being too generic and not allowing them to predict the candidate’s performance against the specific skills required for success.
- The processes failing to predict likelihood of being hired, or success in the role.
Goals and objectives
With the challenges detailed in the business case, you can now outline the goals and objectives that you want to achieve. These are often counterpoints to the challenges.
AWE, for example, set out the following objectives for a new skills-based hiring assessment programme:
- Each stage should be as quick and simple for candidates to complete, and the recruitment team to evaluate.
- The assessment should be specific to each role within the scheme – with a complete removal of the generic approach. It should enable candidates to be fairly assessed for multiple roles.
- The solution should promote inclusivity by focusing on skills, and should not lead to adverse impact.
- It should engage candidates, encouraging them to want to apply to AWE.
- It should predict job success and therefore deliver ROI to the business.
Also try to provide some specific but achievable targets in the business case, which again will allow you to estimate ROI. For instance, AWE set out two key objectives for skills-based hiring which would deliver strong ROI to the business:
- Reduce time and cost of rejection at offer stage from 32% to 20%.
- Reduce Year 1 attrition from 35% to 10%.
Demonstrate the financial opportunity
You’ve baked the challenges into your business case, and you’ve outlined the goals. So based on those two areas, you can now elaborate on the opportunity presented by a skills-based investment.
Here are some examples of some results that one of Spotted Zebra’s Hiring solution customers reported, to demonstrate some of the opportunities you could detail in your skills-based hiring business case.
- The retention of high-quality candidates in the recruitment process that would otherwise have been rejected, which is estimated to have saved the business over £200,000.
- The identification of “best match” candidates which significantly reduced drop out on the programme, with a projected cost saving of £1.05m in year one of implementation.
- A much higher success rate of hires, preventing an estimated seven failed hires and saving the business £840,000.
- The assessment solution saving recruiters six hours per hire on screening candidates, equating to 5,700 hours per year, or 3.5 full-time recruiters - a ballpark cost of which would be £300k.
Other opportunities that can be factored into the plan to provide estimated ROI include:
- Reducing time-to-hire from six months to four months.
- Reducing attrition on the apprentice programme from 35% to 10%.
- The solution reducing candidate rejections at offer stage from 32% to 16%.
As a final recommendation, when communicating the business case for skills-based hiring, be sure to emphasise the bigger picture as well. Because not only are you outlining a programme that can deliver value right from the outset, addressing an area where you currently have business challenges, but once skills-based hiring is in place, you also have the foundations ready to develop into a fully skills-based organisation.
With a SkillsCloud implemented, and skills profiling underway, the organisation can easily scale skills-based approaches to reskilling and succession planning, opening the door to even greater talent management rewards.
Good luck with building the business case!