BiGS Actionable Intelligence:
Read the job postings released by some of the biggest companies in the United States, and one might think a college degree is becoming less important in the hiring process. Many companies have eliminated the requirement.
However, a study by Harvard Business School in conjunction with the Burning Glass Institute shows that there is a difference between policy and practice. In short, a few companies that dropped degree requirements have hired more people without degrees.
The study examined more than 11,000 job postings at U.S. firms from 2014 to 2023 and found that hiring of non-degree job candidates increased by just 3.5 percentage points. When researchers took into account the fact that the 3.5% applies only to the small number of jobs where the degree requirement was eliminated, it falls to less than a percentage point. Overall, fewer than 1 in 700 new hires benefited from the no-degree reforms.
In a country in which almost two-thirds of Americans do not hold a four-year degree, college enrollment is declining, and companies are clamoring for skilled workers, the data shows how difficult it is for companies to change corporate culture even when it benefits both companies and workers alike.
At companies that are leading the way in skills-based hiring, non-degree hires have a retention rate that is 10 percentage points higher than their colleagues with degrees, according to the study. Non-degree workers who were hired into roles that previously required a degree saw an average salary increase of 25%.
“We found measurable but pretty modest changes, and that some companies have done better than others,” said Joseph Fuller, a professor at Harvard Business School who led the study. “But overall, removing the barrier that a post-secondary degree poses to hiring more broadly will take a lot of doing.”
Skills-based hiring
Eliminating the traditional credential of a college degree is not a new idea, but the concept became more popular during the COVID-19 pandemic when companies were facing a tight labor market and America was undergoing widespread protests over racial injustice. The idea that employees can be hired for skills and experience, rather than based on a credential, caught on.
Scores of companies and more than 20 state governments loudly proclaimed their adherence to this new ethos, and many made solid progress. For example, Apple, Cigna, ExxonMobil, General Motors, Koch Industries, Target, Tyson Foods, Walmart, and Yelp, as well as government employers like the State of Minnesota and the City of Denver, have succeeded in their aim, on average hiring 18 percent more non-degreed workers, according to the study.
But many more did not. In fact, the study found that almost all of the changes in actual hiring took place in just 37 percent of the companies that were examined.
“When viewed from the vantage point of job postings, skills-based hiring seems to be a juggernaut,” the study said. “However, a deeper analysis of actual hiring patterns suggests a wide gap between intent and impact. Simply dropping stated requirements seldom opens jobs to those who don’t have a college degree.”
Eliminating the ‘paper ceiling’
If companies want to truly put skills-based hiring into practice, they need to do far more than rewrite job postings, Fuller said. They need to change the way hiring managers evaluate applicants, shake up a corporate culture that has for generations created a “paper ceiling,” and implement methods to support applicants from nontraditional educational backgrounds after they are hired.
“Changing your hiring policy is, at best, the end of the beginning,” Fuller said. “Or maybe it's just a plain old beginning if you are aiming to accomplish, frankly, something more than virtue washing.”
Here are some steps that companies can take:
Encourage hiring managers to develop new parameters for evaluating candidates. The people in charge of hiring are not usually from human resources departments. Usually, they are they are senior people in departments that will supervise the new staff, usually called the hiring manager. Especially for entry-level hires, they are accustomed to looking at college-related data, such as the school attended, courses taken, grades earned, and degree attained. Without those types of questions at their disposal, they need a new template for asking candidates what skills they bring, what aptitudes they possess, and what experience they have. They need to think through what skills are required to succeed in the job and how they can assess a candidate’s competency. “If you are doing the hiring and you haven’t been guided through a process of how to assess somebody based on their work experiences as opposed to, say, whether they graduated from Columbia, that is going to be a real challenge,” Fuller said.
Give hiring managers the confidence to take risks. In a pool of four candidates, one of whom doesn’t have a college degree, the people in charge of hiring have good reason to think choosing the credentialed candidate is safer for their own job security, Fuller said. “Hiring managers want to hire somebody who will move into the job and do well right away because that affects their own performance and credibility,” he said. “They’re not interested in social experiments. And in fairness, we don’t pay them to be. What we want to do is remove from them the knee jerk assumption that people with certain backgrounds aren’t qualified, despite evidence to the contrary.”
Support non-traditional hires even after they are on board. Companies need to revamp systems that favor one type of new hire over another. To do that requires changing policies, procedures, attitudes, and biases that are based on previous norms. “It's like the college graduates are those smooth stones in the bottom of the stream,” Fuller said. “The water has been running smoothly over them because organizations have been hiring them for several generations. … Now, we're getting a population that we acknowledge we have always thought of as different. We have to make it smooth for them too.”
Understand that it takes time. Cultural biases will not just evaporate because a CEO issues a press release, Fuller said. “When somebody is looking to hire someone whose performance is integral to ensuring their own quality of life, whether they're going to get their incentive bonus, whether they're going to get yelled at by their boss, you have to recognize there is ra eluctance to change systems that are known and believed to more firmly guarantee good outcomes. It is going to take some time to get that person who has to make that decision—to take a perceived risk-- comfortable.”
The study says that, despite challenges, there is room for optimism when it comes to implementing skills-based hiring.
“Stripping out the artificial constraints of gratuitous requirements both eases recruitment burdens in a tight labor market and substantially increases worker retention – all while creating substantial opportunity and mobility for workers,” the study said.