Why hiring platforms could be limiting the number of well-suited job applicants

Employers struggling to find workers during the current labor shortage might want to rethink their hiring criteria by taking a new look at job candidates who lack college degrees.

American employers have routinely defaulted to requiring college degrees for many jobs, effectively excluding those who possess the required skills but didn’t attend college, according to a new technical note by Harvard Business School Professor Boris Groysberg.

The net result: Millions of jobs have gone unfilled—and millions of people have been left either unemployed or underemployed—due to firms’ excessive focus on college credentials rather than on actual job skills, according to the technical note, “Widening the Talent Pipeline: Skills-First Hiring.”

This entrenched hiring system has penalized workers of color disproportionately. Research shows (pdf) arbitrary degree requirements have routinely disqualified more than 70 percent of Black, Latinx, and rural workers from landing jobs, even though they may have the actual skills to do the required work.

Many companies rely on machine learning algorithms that automatically weed out job applicants who don’t meet certain minimum requirements, such as holding a college degree, so qualified people are often shut out of the candidate pool before hiring managers can get a closer look at them. But especially now, when employers need workers—and workers need jobs—it just makes sense for human resources departments to take a good, hard look at altering these hiring credentials and softening their degree requirements, Groysberg says.

“How to find and hire talented workers needs to be rethought by corporate leaders,” says Groysberg, who co-wrote the note with HBS case writers Sarah Mehta, Annelena Lobb, and Kerry Herman. “Some time ago, we moved to this system of college credentials being required for jobs that simply don’t need college degrees. The bars were set too high—artificially high—and both companies and workers have paid the price as a result.”

Groysberg, who has written extensively on corporate hiring and retention practices, notes that the new HBS note comes at a time of ongoing racial reckoning sparked by the police killing of George Floyd, whose death two years ago shined a light on numerous inequities faced by Black Americans, including uneven access to employment opportunities.

This push for hiring people with college degrees, also known as degree inflation or credentialing, has been particularly detrimental for workers of color who, due to historic inequities, proportionately don’t obtain college degrees at the same rate as whites, Groysberg says.

Several prominent business leaders last year formed OneTen, an organization whose goal over the next 10 years is to advance 1 million Black Americans by closing the opportunity gap. OneTen is pursuing a number of strategies to achieve its goal, including pushing companies to expand their skills-first hiring policies. OneTen now has about 60 corporate participants, including Merck, AT&T, Bank of America, IBM, Johnson & Johnson, Verizon, and Walmart. Harvard Business School partnered with the group to help with research and data collection for additional study.

Tapping a deeper labor pool is a pressing issue right now in the US. Even though employers posted openings for 11 million non-farm jobs as of late 2021, 11.5 million Americans remained either unemployed or underemployed. As the economy struggles to recover from the COVID-19 pandemic, staffing those jobs is of critical importance, Groysberg says.

Part of the problem is that employers and job seekers are out of sync with each other, he says, with companies requiring college degrees for unfilled “middle-skills” jobs, such as electricians or salespeople. Those applicants don’t possess or really need degrees to do those jobs well, he says.

For example, data from 2015 show that just 16 percent of existing US production-worker supervisors had a college degree, but 67 percent of the job postings for the same position required degrees, shows research (pdf) by HBS Professor Joseph B. Fuller, Program Director Manjari Raman, Accenture, and Grads of Life.

“Too many job openings require college credentials,” says Groysberg. “Employers are stipulating four-year degrees in job postings for positions mostly held by individuals without four-year degrees.”

In some cases, employers use college degrees as a barometer for workers who possess not only the hard skills to do technical work, but soft skills, such as communicating and managing, the note asserts. On the flip side, employees who are over-educated for their work tend to leave their positions quickly, creating churn for companies that hire them.

The bottom line, Groysberg says: Companies should realize there are a lot of talented people out there without college degrees who nevertheless have developed and honed their technology, lab, sales, leadership, and other skills via the military, on-the-job training at other companies, community college courses, and intense job-training “boot camps.”

The challenge for corporate America: how to fill key job positions based on skills-based hiring, not credentials-based hiring.

That shift will require corporations to review their hiring criteria for jobs and reword job postings to emphasize capabilities, Groysberg says. An effective job posting will distinguish between skills that are required and those that are preferred and could be taught on the job. Then, human resource departments need to push the retooled job posting to a broad audience.

Corporations will also need to develop technology platforms and programs to test the skills of applicants for various jobs, rather than spending time checking applicants’ college credentials and grade point averages, according to the case study. For instance, hiring managers could try job auditions, take-home tests, or pre-interview screening for certain skills. Apprenticeship programs could also create a new path for applicants.

Some companies are rethinking their hiring practices.

Among major employers that have already started to change their education requirements for jobs are AT&T, IBM, Microsoft, and Walmart. At IBM, jobs that place more emphasis on capabilities than formal education are called “new collar” jobs, as outlined in a forthcoming case study.

Indeed, hundreds of private companies are now working with OneTen and other business entities to provide training and testing for workers determined to move up the career and income ladders, Groysberg says.

“Today’s labor supply-and-demand imbalance has forced companies to rethink their hiring practices,” says Groysberg. “I’m optimistic about the changes underway. They address both the current labor shortage and employment inequities. In the end, skills-first hiring helps everyone.”