The degree requirement in hiring has become a glaring paradox. Employers bemoan the shortage of talent while continuing to lean heavily on college credentials to screen out candidates—effectively excluding over half the U.S. workforce from consideration.

While scores of CEOs make bold commitments to what’s often called skills-based hiring, these pronouncements resulted in less than one new hire of a non-degreed worker for every 700 total hires in the U.S. last year, according to research from Burning Glass Institute and the Harvard Business School Project on Managing the Future of Work. In fact, in the past three years, 61% of global companies actually raised degree and/or work experience requirements for entry-level tech jobs, according to a Generation survey of more than 1,300 companies.

In a tight labor market, clinging to outdated hiring practices is a critical business risk. Yet, the reason this “paper ceiling” persists is that firms leave the hard work to hiring managers who see shifting to skills-based hiring itself as too risky to be practical. 

That message came through loud and clear in a series of 90-plus interviews that Generation recently conducted with hiring managers around the world. For them, the risk-reward calculus is skewed to the downside. Why take a chance on a candidate they perceive as less qualified when it might jeopardize their own careers? In addition, many interviewees said that they believe recruiting and coaching nontraditional hires takes more effort, adding that those with the “right” educational attainment are more likely to hit the ground running.

In reality, skills-based hiring works. A 2023 Generation study reported that 84% of global companies found that skills-based hires performed the same or better than candidates hired for their degree qualifications. They stick around longer too: Burning Glass Institute research has found that skills-based hires stay in their roles nearly 20% longer than degreed candidates.

How to support hiring managers

Getting new practices to stick will require addressing deep-seated risk perceptions proactively. Here are four steps companies can take to support managers in embracing more skills-focused hiring practices:

• Try before you hire. A trial employment period for nontraditional hires would allow employers to evaluate their skills and team compatibility firsthand, minimizing the risk of being stuck with a poor fit.
• Start small. Rather than bet big stakes on an abrupt top-down overhaul, executives can first launch a test case in a single business unit. The focus that such an experiment brings will help new practices take root. Meanwhile, after a year of rigorously measuring performance, the company—and its managers—will have built a stronger case for implementing skills-based hiring broadly.
• Don’t stop supporting recruits after hire. Even for candidates with trusted industry certifications, managers may well worry whether they suffer from other, more fundamental gaps. To address these concerns, companies can invest in comprehensive onboarding programs to ensure new hires develop a full slate of capabilities and adapt to their organization’s specific systems, processes, and culture.
• Promote non-degreed talent from within. Firms can test out the concept of rethinking their approach to new hires by doing more to promote top-performing existing workers who lack degrees. Seeing these employees excel in new roles can build organizational confidence in a skills-based approach.

Now is the time to take these steps before slowing growth and economic anxieties create further disincentives for change. Managers are more open to experimenting with hiring during boom times, when they are desperate for talent and when allowing vacancies to linger is costly. But as demand eases, the appetite to take chances declines as well. Concerns about AI could also diminish interest. By making workers more productive, the thinking goes, AI may well lower the number of new hires needed.

Yet, companies playing the long game know that talent pipelines don’t refill themselves. Failing to evolve hiring practices, even when the job market is slack, exposes companies to longer-term vulnerabilities as experienced workers eventually move on or retire. In an AI-driven future, continued reliance on degrees could prove even more misguided as technology redefines entire roles. Professionals of all backgrounds and tenures will need upskilling, helping render obsolete the prerogatives of a degree—and disadvantaging firms that fail to adopt skills-based practices.

The time to future-proof a talent strategy is now. This era of relative calm ahead of the coming AI disruption is an opportune moment to experiment with skills-based hiring while reducing the risks to managers. Getting this right will also address perhaps the biggest risk of all—the risk of losing out to rivals as they capitalize on the vast, overlooked talent pool that your hiring managers have chosen to ignore.