A top ten talent management trend for 2025 points to skills marketplaces, characterized by a significant shift towards identifying candidate capabilities and competencies (skills) in addition to traditional credentials to make hiring and staffing decisions. The percentage of companies adopting skills-based practices increased from 40% in 2020 to 60% in 2024 (McKinsey).
Anything that improves the match between skill requirements of open jobs to the verified skills of internal candidates and applicants is a good thing. Skills-based hiring can lead to faster recruitment cycles, cost savings, internal talent mobility and improved candidate quality. Companies using skills-based hiring platforms have reduced their time-to-hire by an average of 25% (Burning Glass Institute) and saved an average of 30% on recruitment expenses (Deloitte).
Key drivers for skills marketplaces are talent shortages, advancements in automation, cost savings, and AI-powered tools that make it easier to assess candidates’ competencies and experiences.
Benefits for your consideration:
Better Hires
Better matching of open job requirements with applicant and candidate resumes. Faster. More cost effective. Better applicant satisfaction with their engagement, whether they get the job or not.
Internal Talent Marketplace:
Organizations are increasingly adopting internal talent marketplaces, which are platforms, practices, and processes that facilitate the movement of employees within the organization. These platforms increasingly use AI-driven tools to identify skill needs and match employees with relevant opportunities, promoting improved internal mobility and career development. Internal mobility offers multiple advantages, including cost savings, improved engagement and retention, and maximized workforce potential. It’s a digital job posting. By promoting employees from within, companies can reduce recruitment expenses and enhance employee engagement and commitment.
All of these are promised benefits of a skills-based approach. Theoretically, what are the benefits? As with all new approaches and systems, time and research will tell the tale of sufficiency and delivery of promised results.
Challenges:
The skills movement is not without challenges. Despite its potential benefits, internal mobility is sometimes under-utilized due to organizational barriers such as limited visibility into internal talent pools, unclear career pathways, and cultural resistance to cross-functional movement. Managers may also hesitate to support internal mobility due to concerns about losing higher-performing team members.
The main challenges in skills-based hiring include:
- Skill Validation: One of the primary challenges is verifying and validating candidates’ skills. Employers often require additional assessments or certifications to verify candidates’ competencies. Self-declaration of skills and level of skills is not very accurate. Before the digitally supported skills movement, providing false information on a resume occurred in 14% of instances.
- Transition Barriers: Some organizations face barriers when transitioning to skills-based hiring practices. This can include resistance to change from traditional resume-focused recruitment methods. It still takes plain, old, ordinary change management.
- Assessment Tools: While advancements in automation and AI-powered assessment tools have made it easier to assess candidates’ competencies, there is still a need for more reliable and accurate assessment tools.
- Sufficiency of defined skills to cover all of the behaviors—knowledge, skills and attributes– essential for performance.
Best Practices
To overcome these challenges, organizations should build a culture that values internal growth, audit the skills they have on board, support cross-functional projects and movement, and create structured internal recruitment processes. The transfer to a skills-based marketplace should be presented with the business case of ROI because of faster hiring and internal movement, decreased cost per hiring or internal staffing event, and decreased turnover due to higher engagement.
The focus on skills in hiring and promotion is not new.
In the 1960s, the emphasis was on matching skills with job requirements. Job requirements were posted using detailed job descriptions. Talent professionals were all trained in breaking down jobs and roles into specific requirements. The focus was on observable and measurable behaviors at a very detailed level. That later turned into larger behaviors and then competencies (new names for old stuff). There were “experts” who did nothing but job descriptions. They were usually attached to the compensation department because the pay systems were driven by the Hay process, which required a detailed job description. Jobs were evaluated through that process and given a score. The score determined pay, level, and title.
Why didn’t we keep doing that?
It was burdensome and wasn’t digitized. Also, some job descriptions had a short shelf life. Because the pace of change was increasing, job requirements changed more frequently, making this an expensive task.
As this approach was utilized, it fed into more complex learnings:
- Do skills alone really predict performance? Or the backwards question, when people fail, how much is due to a lack of skills? It depends upon which skills you are considering, but the answer to the first question is “moderately”. The answer to the second question is “rarely.” Organizations usually fire people because of behavior, not because of a deficiency of skills.
- Because the pace of change was increasing (and still is), it was often more a case of learning new skills on the job than focusing on current skills. Thus, learning agility emerged as a more important element.
As a result, the old skills marketplace faded away. Job posting (an early version of a skills marketplace) has been done forever. Much research has shown that most internal employees wanting to move inside the organization are trying to escape from a bad boss or weak team. Job postings proved severely restrained because line managers wouldn’t use them unless they controlled who could use them. Most bad managers don’t know they are bad. In some organizations, asking your boss for permission to apply for open jobs might have got you fired or punished. Many bosses would not let their higher potential team members enter the internal portal because they didn’t want to lose them. The new marketplaces are helping to curb these issues.
What else is needed and useful?
Given the issues that evolved in a “skills”-only approach, there was the emergence of exploring the knowledge, skills, and attributes essential for a position. Defined as follows:
Knowledge – what you know, exposures, and experiences
Skills – what you can do
Attributes – who you are, how you act, and how you apply Knowledge and Skills.
Research on these factors usually produced the following findings:
| Predicts Performance? | Predicts Failure? | Expense of Acquiring? | Expense of Developing? | Ease of Assessing? | |
| Knowledge | Moderate | Low | Time and Opportunity | High | High |
| Skills | Moderate | Low | Varied but moderate | Low to High | High |
| Attributes | High | High | Comes standard with the applicant | High | Low |
Skills alone would contribute to performance and success in a specific job or series of similar jobs. The summarized research, however, implies more is needed. In examining a few skill definitions and databases, they are mostly traditional hard skills and some knowledge. As such, these don’t address Attributes–things like personality style or type, beliefs, values and emotional management. This research reveals that:
- If the person is a jerk, skills don’t matter.
- If the person doesn’t fit with the culture, skills won’t matter.
- If the person has a problem with authority, skills will not matter.
- If a person doesn’t learn new skills and keep them up to date, current skills will not matter.
So, the skills marketplace is good, but is it sufficient to deliver the performance needed for individuals and organizations to excel? Time will tell.
Open concerns
Definitions of “skills” seem to be expanding from something as specific as knowing how to use an Excel spreadsheet to fostering collaboration on a team. It becomes essential to know what the promoter of “skills” means in any given context. It becomes vital to know how skills are prioritized within a given environment on a given job. We are faced with some perplexing questions:
- Will we be able to define jobs? In the past, this was done by full-time experts.
- Will we be able to validate and verify the skills of applicants?
- How do we define “skills”?
- What’s in the database, and who’s in the database?
- How do the skills profiles fit within the larger talent priorities of the organization?
There is no doubt that skills, however defined, are essential to define and measure and must fit within a larger talent system if they will contribute to performance and the success of any enterprise.
