Businesses are facing new pressures when it comes to closing skill gaps and attracting talent in today’s economy. But could their own outdated strategies be partially to blame for persistent labor shortages?

While a college degree used to be a nonnegotiable hiring requirement in many fields, recent Cengage Group research found that nearly one-half of recent college graduates still feel underqualified for entry-level jobs in their field. This means that employers must focus on candidates’ skill sets — not their formal education level — to evaluate employability.

By removing degree requirements from entry-level positions and investing in continuous upskilling, employers can broaden their talent pool and set their business up for success. Let’s dive into the outcomes of adopting a new, skills-focused approach to finding and developing talent.

Bringing In Diverse Perspectives

Simply put — relying only on degree requirements exclude many candidates that businesses would otherwise want to attract. Currently, 60% of American workers over the age of 25 do not hold a four-year degree and adding a four-year degree requirement automatically screens out 76% of African Americans, 81% of Americans in rural communities and 83% of Latinx workers.

With the cost of tuition steadily increasing, as well as inflation bumping up prices in our daily lives, not everyone will choose to attend college. The COVID-19 pandemic has spotlighted the value of alternative education paths that enable learners to take more affordable courses on their own schedule and earn stackable credentials that provide them with employable skills.

Graduates from these programs aren’t always the traditional 21-year-old entering the job market for the first time. Instead, they also include working parents and caregivers reentering the workforce, people hopping into a new career and those who know that a traditional two or four year degree is not the right choice for them right now. Regardless of their race, ethnicity, background or socioeconomic status, these candidates can bring new, diverse perspectives and life experiences into an organization.

The good news is that employers are starting to become more accepting of these educational pathways in the labor market. In our Cengage Employability Report, we surveyed U.S. employers about current hiring practices and mindsets, finding that of those who don’t require a degree, about one-half (48%) say it’s because they think candidates can gain the skills they need through hands-on experience, skills training credentials and internship programs. By dropping degree requirements, employers can create more inclusive work environments that welcome people from all walks of life.

A research report published by Bain & Co. and non-profit Grads of Life show that when hiring for skills, employers see equal if not greater gains in productivity, fit and retention. And in fact, even results to the bottom line given that some employers pay up to 30% more for college graduates, despite seeing no difference in job performance between graduates and nongraduates. IBM has seen noteworthy results including consistent increases in diverse and underrepresented talent, both across the company and in managerial roles.

Driving Employee Retention With Professional Development

While focusing on existing skills in hiring can benefit recruiting, so does a focus on skill development for current employees. In a Wiley report, majority of respondents (77%) agree that tuition assistance programs have a positive impact on retention and can set themselves apart in a competitive labor market. In addition to attracting employees, these types of training programs are also critical to retain a workforce and ensure productivity given the continuous demand for new skills.

Today, workers are hungry for new learning opportunities, and they believe these costs should fall on the employers. However, many employers aren’t willing to cover education costs with no strings attached due to fears that employees may immediately move onto another employer once they complete their studies. This view is outdated and research shows that the risk is worth the reward.

Employers who make continued skills training a key component of the employee experience – and not just a part of onboarding – can prove their commitment to the workforce. For example, industry leader H-E-B has built significant training initiatives for their employees and it has paid off: 53% say they would not leave even if they were offered a job with better pay and 79% say they are excited to go to work every day.

Investing in employees’ skills and professional development can help make employees feel valued and fulfilled at work, leading to greater trust in their employer and longer tenure. And research has shown that investing in upskilling pays off —  79% of L&D professionals say it’s more cost effective than acquiring new talent in addition to cutting back on attrition costs.

Creating an Agile Workforce To Meet New Business Demands

Many employers are currently struggling to fill job positions and in today’s market, many companies are finding that their hiring needs are changing. In the rapidly changing economy, businesses need to be agile enough to quickly respond to new business demands — and their greatest “hidden” asset could be their current talent pool.

By launching reskilling and upskilling programs, employers can close skill gaps and ensure the organization has the talent to meet real-time business needs. According to the World Economic Forum, companies estimate that by 2024 nearly 40% of workers will need up to six months of upskilling. Learning leaders should strive to build a workplace culture that prioritizes continuous learning and development (L&D), and allows employees to gain new skills. These upskilling opportunities can also help employers determine the exact skilling profile they need for success and can be a competitive advantage.

Workers’ appetite for education is at an all-time high, especially since online learning platforms can make it easier to pursue flexible, short-term programs. In addition to reimbursing the cost of continuing education, employers should also give employees time during the workday to pursue them.

Looking Ahead

As the economy continues to throw curveballs at employers, adopting a new skills-based initiative to hiring and employee engagement can help future proof their business. Adjusting hiring requirements and professional development initiatives cannot only allow human resources (HR) and L&D leaders to better attract and retain talent, but it can also create an inclusive workplace, drive staff fulfillment and improve business agility, all key factors for improving the bottom line.