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Ep 541: The Skills-Based Revolution

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The skills-based organization and skills-based hiring have been talked about for several years now. Despite this, many employers are yet to start a shift towards skills or are still at a very early stage of the process.

So why is being skilled-based so important, and what are the implications for companies that haven’t yet started a transition towards skills-based hiring and talent management? Is this another HR fad or a critical re-imagining of how we think about talent in a world of continued disruptive change?

My guest this week is David Blake, CEO of Degreed, a skills-based learning and development technology platform. David is a passionate advocate for the advantages that skills-based organizations will have in our AI-driven future of work.

In the interview, we discuss:

• Why is a skilled-based approach so important, and how does it translate into business success?

• Job titles are not the same as skills.

• Getting the best out of people

• Jailbreaking the college degree.

• Skills versus qualifications and experience

• Evolving the recruiting process to hire for skills

• Reskilling and upskilling

• Why the skills gap will continue to get bigger and bigger

• In-demand skills

• Thinking differently about talent

• How will AI define the future of work?

Listen to this podcast on Apple Podcasts.

Transcript:

Paradox (Ad)
00:00:00
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Recruiting Future
00:00:50
There’s been more of scientific discovery, more of technical advancement and material progress in your lifetime and mind. And at all the ages of history.
Matt Alder (Intro)
00:01:05
Hi there. This is Matt Alder, Welcome to Episode 541 of the Recruiting Future Podcast. The skills-based organization and skills-based hiring have been talked about for several years now. Despite this, many employers are yet to start a shift towards skills or are still at a very early stage of the process. So why is being skilled-based so important, and what are the implications for companies that haven’t yet started a transition towards skills-based hiring and talent management? Is this another HR fad or a critical re-imagining of how we think about talent in a world of continued disruptive change?
Matt Alder (Intro)
00:01:52
My guest this week is David Blake, CEO of Degreed, a skills-based learning and development technology platform. David is a passionate advocate for the advantages that skills-based organizations will have in our AI-driven future of work.
Matt Alder
00:02:09
Hi David and welcome to the podcast.
David Blake
00:02:12
Thanks for having me, Matt.
Matt Alder
00:02:14
An, absolute pleasure to have you on the show. Please, could you just introduce yourself and tell everyone what you do?
David Blake
00:02:20
The briefest introduction I can give of myself is to tell people I’m an education reformer by choice and a entrepreneur by necessity. But that led me to being the Founder and CEO of a company called Degreed, which its mission is to jailbreak the college degree. We help the world to track all of your academic, professional, and lifelong learning and then get credit for it with your employer.
Matt Alder
00:02:47
Fantastic stuff. And tell us a little bit more about the type of companies that you work with and sort of how the company’s evolved.
David Blake
00:02:54
Yeah. You know, we have a story which is maybe a little bit backwards from most startups. A lot of startups start with smaller companies and kind of grow into middle-sized companies and then some sort of eventually grow up to serve very large companies. In our case, our very first client was a global contract with Bank of America. So, Fortune 20 company and one of the world’s largest banks. And so our companies tend to be kind of the large enterprise, blue chip kind of Fortune 100 types. And the company’s now 11 years old. So with time we’ve grown to include smaller companies as well as kind of growth stage, innovative tech companies.
Matt Alder
00:03:40
So skills are very much on the agenda in so many conversations in talent acquisition at the moment, skills-based hiring, skills organizations, all those kind of things. However, I do talk to lots of employers who don’t fully appreciate what that means in terms of where they’re going, how to do these kind of things or why looking at things from a skill perspective is important. Why are skills so important and how should employers be thinking about them?
David Blake
00:04:09
Yeah, I mean, I think maybe let me speak to where I think the conversation is right now and then answer the question as to kind of why employers need to be thinking about skills and why it’s so important. But I mean, I think this is gonna happen a lot like sort of the migration of big corporates and their marketing departments into social media. You know, if you remember circa 2007, there was not a marketing department in the world that thought Twitter was a good idea. You mean we’re gonna let some person in the marketing department operate, unfettered as the voice of the company. And there was a lot of this fear and there was trepidation.
David Blake
00:04:50
But what you see happen is the Red Queen’s principle. And so this is a principle from evolutionary biology, which is not the evolution of advancement, but the evolution of parody. If there is another animal that starts getting more aggressive, better, more efficient, the other animals sitting behind it in the Ecosystem can die off. And so what it forces is it forces the other animals sitting behind that animal to evolve just to survive. And if you think about social media, back in the day, everyone was sitting around talking about all the reasons it was a terrible idea, all the things that could go wrong. But then Coke went for it.
David Blake
00:05:32
And once Coke was on Twitter and Facebook, if you’re PepsiCo, you no longer have any choice. You have zero choice in the matter. You can choose, I guess, you know, you can kind of persist in the status quo, but you’ll lose. And and in losing you’ll eventually die. And so, I mean, I think we’re at this moment with the skills based economy, skills-based organizations. We’re kind of in that moment of the conversation where for the, a lot of companies it’s still just like, “Whoa, is this a good idea? What is this gonna screw up? Is this smart?” But I think what’s gonna happen and it’s gonna happen pretty fast just like it did with social media, which is, we’ve already seen the research.
David Blake
00:06:11
The advantages of moving to a skills based hiring, skills-based organization. It’s immense. It’s immense. It’s overwhelming. It’s not like marginally better. It’s overwhelmingly better. And so as soon as your competitor starts operating this way, you will have no choice. Or like social media, you can choose to do nothing but you’ll lose. And so, you know, this moment is coming and there will be some advantages to mobilizing to it quickly, but it’s certainly worth making sure that you’re starting to understand it, prepare for it because it’s gonna come fast. So the second part of your question, why skills?
David Blake
00:06:53
Why is it important? It’s just at the end of the day, think how obtuse it really is. Right now we organize our companies essentially by role. You get hired to do a job. But inside a large company there might be literally hundreds or thousands of people with actually the same job title as you. And we all know, we all know, we all know that across a thousand people, everyone’s gonna have a very different mix of skill sets and experiences and characteristics and attributes, but we’re treating effectively all thousand of those people the same when we put them into this kind of singular job role.
David Blake
00:07:37
So it’s not a very great way of really getting the best out of our people, you know, maximizing their unique set of skills. It’s really quite a obtuse tool. And so what’s gonna happen is as we start to mobilize around skills. It’s going to allow us to treat everyone more singularly and get the best out of them. Leverage them for a more comprehensive view of who they are, what skills they have, what they know, what experiences they have, and how they can bring that to an organization.
Matt Alder
00:08:11
You talked about the overwhelming evidence of the advantages of having a skills play-based approach. How does that sort of directly translate into business success for the employers who are effectively going down this route?
David Blake
00:08:26
It’s a big wave. I believe it’s upon us. It’s here, we’re at the doorstep of it, and we will see more research. That said, this is a topic that’s pretty nascent, fairly new. So we’re just starting to see, I would say really good research kind of on the topic. But one of the ones that really has stood out to me, McKenzie, this is probably now about four and a half or maybe five months old, this research that they came out with, which was the impact or effectiveness of skills-based hiring. And so they looked at three practices of hiring. So hiring based on academic credential, hiring based on work experience, and hiring based on a person’s skills. And Degreed, we say our mission is to jailbreak the degree.
David Blake
00:09:08
And what we always meant by that is you ask someone, tell me about your education, and inevitably they will tell you where they went to college, what degree they have, or that they didn’t go to college. But it’s this inevitability. People answer that question relative to the college degree, the college experience. And in that, there’s kind of this absurdity. If I were to say, “Hey, Matt, tell me about your health.” And you’re like, “Oh yeah, Dave, you know, actually 27 years ago I ran a half marathon.” That would be a silly and absurd way to answer that question. But when I say, “Hey, Matt, tell me about your education.” You’ll be like, “Yeah, you know, I graduated from Oxford and BA in economics.”
David Blake
00:09:48
And it’s not that Oxford is bad, it’s not that BA is bad, it’s not that economics is bad, but that’s an absurd. There is an absurdity to the fact that I ask you that question and you might think to answer that way. I mean, it’s just absurd. And so I would hope that everyone appreciates hiring based on academic credential these days is about the least effective way. And sure enough, hiring based on skills is three and a half times better outcomes. Retention, efficiency, effectiveness. I would hope everyone’s kind of, you know, with what we know today, again, it’s not that college is bad, it’s not that university is bad, it’s not that degrees are bad, but I would hope everyone appreciates that. If you’re hiring, if you still have, if you have a bachelor’s degree required in your job posting, you’re starting to, you know, miss the conversation, you’re starting to miss the mark.
David Blake
00:10:38
That’s not how the world’s gonna operate. That’s not effective. It’s not good. It’s biased. It’s gonna get you more of the same. It’s gonna leave valuable people out of the equation. It is a good litmus test. If you still have that in your job requirements you’re starting to look like a dinosaur. But hiring now, the majority of the world is hiring based on work experience. And here’s the astounding part, is that skills based hiring is not just marginally better than hiring based on work experience. It’s 2x. Not 20%, 2x. It is twice as effective to hire someone based on their skills than it is to hire someone based on their work experience, which is astounding.
Matt Alder
00:11:20
Absolutely. I was doing the math silently while you were talking there about when I did my degree, and I’m not gonna share the number. But yes, to hire me on the basis of when I did that would be ridiculous. And I couldn’t agree more with the points that you are making. So in terms of a recruiting process that is skills based, that is looking at skills-based hiring, is wanting to get the kind of advantages that you are talking about, what does that look like? How do people hire for skills?
David Blake
00:11:52
Yeah, I mean, you know, a lot of companies are asking this right now because not too many of us have ever operated this way so it’s new. You know, how do you do it? There’s a whole ecosystem of solutions that are emerging. So I mean, the good news is, is that you’re not gonna be alone. There’s a lot of AI driven solutions we’ve seen inside the last kind of year. There’s a lot of assessment platforms, there’s programmatic, sort of micro-credentials. Those can all be one way of having sort of a structured codified view into someone’s skills. But I actually have an approach that people can use tomorrow without spending a dollar on a new technology or any new solutioning, which is, it’s really quite a simple exercise.
David Blake
00:12:34
I’ve interviewed this way for now about, I think 14 years, which is, I simply asked the question, what are the skills required to be successful in this job? And so then put a simple exercise behind it, which is people respond on, “I actually use sticky notes when I do it in person. In a COVID world, I use a website with a virtual whiteboard and virtual sticky notes.” But they respond with each skill one per sticky note, and they get them all kind of written down. I review them. If I see any skills that I think might be important to the job that they didn’t get, I add it to this pool of sticky notes. And then I ask the candidate to rank order each of those skills by which skill are they strongest at, to which skill are they weakest at?
David Blake
00:13:21
And doing that sort of force rank, you know, forces someone to kind of reveal a lot of information. They pick up two skills. It’s this immediate trade off, which one of these am I better at? And they say, “You know, all right, you know the sequence. I’m the best at this skill, then second best at this one, third best at this one, fourth best, and so on.” And then we just talk about it. Where did you develop this skill? How competent do you believe you are relative to others at this skill? It just gives a framework for the conversation. It kind of flushes it out. And I said, no money required, but for the price it costs you to buy a pad of 3M sticky notes. You can be doing a very effective skills-based interview by tomorrow.
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00:15:13
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Matt Alder
00:15:16
So we are living in a world where everything changes very quickly. So particularly at work, which means that lots of organizations, the skills, they need in their business are changing all the time, very often quicker than they can find people, and hire people, and sort of change their workforce around. Talk to us about reskilling in terms of what’s your definition of it and when’s it necessary and how can it happen?
David Blake
00:15:43
I give a quick and easy distinction between learning and upskilling. You know, these days you can get, go online, you can get, go to YouTube, and you can find incredible content training tips strategies. If you look hard, you can find full courses from really literally the world’s best runners. Olympic, you know, cross country ultra marathoners, you can go and find the best runners in the world sharing how they’ve developed their talents, their skills, their regiment. And you can watch that video. You can watch a two minute video, 20 minute video, two hour video, and you will be learning.
David Blake
00:16:23
You are gaining knowledge. But watching that two hour video does not turn you into an ultra marathoner. And so the distinction, the act of becoming an ultra marathon runner is a bigger harder journey that is inclusive of learning, but involves many other components in addition. And that’s the distinction I’d give between learning and upskilling. Learning is watching the course. Upskilling is becoming the ultra marathon runner. And so what that means is organizations over the last decade really have squared off to and tackled personal development, personal learning, creating learning cultures that are empowered and autonomous.
David Blake
00:17:09
And only just recently have companies meaningfully started squaring off to upskilling. And some of this is simply the skills gap is getting bigger and bigger. We can talk a little bit about that, just sort of the, the macro drivers of why now what’s causing this, what’s forcing it? But as companies have come under more pressure. World is changing faster. The skills gap is getting bigger. So all of a sudden there is a global deficit of skills relative to opportunity. And that means that most organizations right now are constrained in the pursuit of growth and opportunity by the skills they have under their roof.
David Blake
00:17:51
And so companies are getting serious about mobilizing to this. And with the labor market being, you know, even in these kind of inflationary recessionary times, we’re in one of the tightest labor markets ever. And that’s gonna be our new reality that even in poor economic times, the labor market’s not gonna ease up because we’re in this global skill shortage. So it means companies have had to not just get serious about skills, but no longer can they just hire everything that they need. And so they’re starting to get finally very serious about developing the capability of upskilling their employees.
Matt Alder
00:18:27
Let’s just talk about that skills gap in a bit more detail. Why is it developing now? And also from your experience, what type of skills are really in demand from employers at the moment?
David Blake
00:18:42
The Thomas Friedman and his book, Thank You for Being Late, kind of gives this , which I have really oriented to and believe that this explains it as simply as anything in the world. And he pins it at the year 2007. And that’s the year at which the rate at which technology could scale outpace the rate at which humanity could adjust and adapt. And if I sort of co-opt it, what I would say is technology is now scaling faster than humanity can learn. And you’ll hear people talk about, we’re living through the fourth industrial revolution. Well, I believe that’s a enormous misnomer. Industrial revolutions were a moment in time where there was a technological breakthrough that redefined society, but society was able to catch up, sort of incorporate it and then move on.
David Blake
00:19:30
The distinction here it’s not about we are having more technological breakthroughs, which we are. The distinction is now when we have a technological breakthrough, it can scale faster than at any other moment in history. And if you look at the time it took the telegraph to reach a hundred million people, the time it took the radio to reach a hundred million people, the time it took television to reach a hundred million people, the time it took the internet to reach a hundred million people, the time it took Facebook to reach a hundred million people, the time it took Instagram to reach a hundred million people, then the time it took ChatGPT to reach a hundred million people, you know, it was effectively days. I mean, it was like overnight practically.
David Blake
00:20:10
And we thought, you know, I mean it’s now just overnight, it’s like almost instantaneous. And I thought that record wouldn’t get broken for another decade or so. Threads broke it literally like two months later. So the rate at which technology scales now outpaces the rate at which humanity can learn. So here’s the really important takeaway, which is this isn’t an ebb and flow of the market. This is fundamentally radically something we have never lived experienced is those lines are diverging. The skills gap is only gonna get bigger every day, week, month, and year and we have no expectation that it will ever close ever again.
David Blake
00:20:57
There is nothing right now that exists that gives us any belief that we will ever be able to catch up. And so we are living through radically fundamental different equation than we have at any other point in time ever in human history.
Matt Alder
00:21:14
And what skills are in demand? What are employers looking for in terms of learnable skills that people can bring to them?
David Blake
00:21:22
I’ve been doing conversations like this for a long time. And you know, I’d say for the last like decade, the answer that I feel everyone sort of believed wanted to hear sort of helped help us sleep good at night was our soft skills are ultimately the most human, they’re the most resilient, and they’re gonna be the last to sort of get taken over by the robots. That is not even true anymore. Which is crazy. I mean, it’s just, you know, the world is changing at such a clip. There’s already now overwhelming research being done. People prefer in a blind scenario. They prefer AI over their doctor bedside manner. We thought artists and creatives were gonna be the last bastion of safety.
David Blake
00:22:07
Well, AI is able to create music, and art, and literature, and full plays at this point. It’s able to write jokes. I mean, it is capable of so much. But I also think, look, we aren’t, there’s an incredible silver lining to all of this, which is in a world where the skills gap is growing, the premium on every skill is growing. So, we’ve got research, yes, there’s an ebb and flow to what skills are sort of on the rise, you know? And while we’re at it, if you want to be specific, a prompt engineer, that job did not exist 18 months ago.
David Blake
00:22:47
Now it’s showing up in most companies. There will be this sort of ebb and flow. The amount of upskilling we’re gonna have to do to be successful in our lives is radically changing. World Economic Forum puts it at a hundred skills every five years that every person is going to have to develop. But the good news is, the good news, the silver lining is that in a world where the skills gap is getting bigger, the premium learning and upskilling is going up. So any person or company that is willing to invest themselves in this, the value of it, the ROI of it’s going up and up and up and up.
Matt Alder
00:23:23
I suppose that does lead nicely to my next question, which was, as we move towards sort of skill-based organizations, what impact does that have on the way that companies think about talent?
David Blake
00:23:37
Yeah, I mean, I think it’s gonna get radical pretty fast. I mean, I would say like a seven year time horizon. Today, you are hiring people and paying people effectively based on job title and geography or job role, and geography. I think that’s gonna just flip. Seven years from now, it will be inconceivable to think that I’m getting paid the same as the person sitting next to me. Just because we have the same job title. You’ll start paying based on skill. As we make skills, the organizing unit of companies and economies, that will be how we hire people, that’ll be how we promote people.
David Blake
00:24:19
That’ll be how we deploy people to tasks. You know, the concept of an org chart that essentially creates a hierarchy of tenure experience and then title and seniority. I mean, it’ll just feel so obtuse because companies that are doing that are saying, “Okay, you have this job role, we’re gonna treat you this way. You have this level of seniority, we’re gonna treat you this way, but it is blind to you have these skills, so we will treat you this way.” And of those statements skills has the power to overtake and be more efficient and effective then you tenure or your experience.
David Blake
00:25:03
And so companies that are drawing org charts the same way, it’s gonna be the evidence that they’re still operating in the old world. Companies that are paying based on role, It’s gonna be evidence that they still are a relic of the old world. You’re gonna organize by circling people based on what skills they have, given the tasks that’s needed, and then you’re gonna pay them for that unique combination.
Matt Alder
00:25:27
As a final question, and really by way of summary in terms of bringing a lot of the things that you’ve already said together. You’ve outlined a bit of a vision for the future of work there and how skills are gonna shape that. How does AI fit into all of this? So, what is the balance between humans and AI in the future? Will we define AI by the type of skills that it’s got? How’s this all gonna shake out, do you think?
David Blake
00:25:53
Let’s see, if I can give a 17 seconds version sort of great 70 minute thread. The US Navy has new class of warship that, well, it’s the same, it’s a new ship in, and this class of warship 70 years ago took 200 people to man. Now it takes 20. And it’s because they’ve essentially oriented, they’ve turned everyone into a hybrid, essentially sailor. You used to have to have specialists for every role and you actually had to have multiples because if a bomb lands and someone dies, you can’t have a single point of failure and so you need multiple specialists. But by cross training people and turning everyone into sort of a hybrid and orienting based on skills, they’ve been able to create this hybrid kind of class.
David Blake
00:26:42
So really compelling. And you know, I think that’s what AI is gonna do. It’s gonna enable us to go further left and go further, right? It’s going to enable us to do a broader range of work. We aren’t going to have to be hold the same level of knowledge and expertise to be useful in the world. I do think the good news here is that the skills gap is growing so fast that I really don’t believe we’re gonna like run out of work. Right now, we have way more work. We have way more opportunity than we have human beings with skills. And so there’s no macro fear of like human displacement by AI.
David Blake
00:27:22
I think it’s just gonna turn us into super TRONS. You think of these sci-fi movies where you can, you know, you step into a metal robot and all of a sudden you’ve got the, it’s like the Matrix number two. You know, they’re fighting in these giant roboid things. You know, AI’s gonna do that to us. It’s gonna make us stronger, bigger, faster than we would be on our own, but it’ll still be a human-driven world.
Matt Alder
00:27:51
David, thank you very much for talking to me.
David Blake
00:27:53
I loved it. Thanks for having me.
Matt Alder
00:27:55
My thanks to David. You can subscribe to this podcast in Apple Podcasts, on Spotify, or via your podcasting app of choice. Please also follow the show on Instagram. You can find us by searching for Recruiting Future. You can search all the past episodes at recruitingfuture.com. On that site you can also subscribe to our monthly newsletter, Recruiting Future Feast and get the inside track about everything that’s coming up on the show. Thanks very much for listening. I’ll be back next time and I hope you’ll join me.

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