The job market in India has changed a lot in the last decade. Companies are increasingly adopting competency-based hiring practices. Given the essence of digitisation in business operations today, there is more demand for practical, industry-relevant competencies rather than mere theoretical knowledge, which is influencing the broader education ecosystem in India.
IBM India exemplifies this trend, having implemented a ‘skills-first’ policy in which a college degree is no longer a prerequisite for recruitment. This policy was first introduced by IBM in the U.S. in 2012, lifting the four-year college degree requirement from about half of their job openings. Ten years later, approximately 29% of IBM US staff in hardware, software, and consulting do not have a college degree. However, companies such as Oracle, Intel, and Apple still emphasise degree qualifications, highlighting IBM’s unique approach.
Industry-wide shift towards skills-based hiring
The rise of skills-based hiring is not confined to IBM. Across the industry, a growing recognition of this shift is evident, as the pace of technological change demands a workforce that can adapt and learn continuously. A U.S. study from 2017 to 2022 revealed that employers reduced degree requirements for 46% of middle-skill and 31% of high-skill positions. This trend is also gaining momentum in India, where companies increasingly value practical skills and hands-on experience over formal education credentials.
Impact on India’s education sector
The implications of this change are far-reaching, especially for India’s education sector. Traditionally, the Indian education system has emphasised rote memorisation. However, as companies shift their hiring criteria towards skills, there is a growing demand for education that equips students with the practical abilities needed in the modern workforce. Universities and educational institutions are responding by incorporating more industry-relevant training and competency-based curricula.
Partnerships bridging the gap
Many Indian universities now partner with businesses to offer specialised training in areas like artificial intelligence (AI), data analytics, and cybersecurity. These collaborations bridge the gap between academic knowledge and industry requirements, ensuring that graduates are job-ready from day one. A Boston Consulting Group (BCG) report indicates that such partnerships have increased employability by 25% in specialised fields, underscoring the importance of aligning education with industry needs.
Reshaping professional development
In addition to transforming university education, competency-based hiring is reshaping professional development in India. In today’s technology-driven economy, continuous learning and upskilling are essential for career advancement. Companies like IBM, TCS, and Infosys invest heavily in training programmes focusing on the digital economy. These programmes often include online courses, certifications, and micro-credentials, enabling employees to acquire new skills efficiently.
Government support for skills development
The Indian government recognises that skills development is key to national performance and economic growth. As reflected in the 2024 education budget, significant funding has been directed towards digital projects to prepare young Indians for a digital future. Over the next five years, approximately 2 million young people will receive skills training. Additionally, 1,000 Industrial Training Institutes (ITIs) will be modernised, with updated course content tailored to industry needs. This investment is crucial for India’s ambition to remain a talent hub.
Inclusive opportunities and startup culture
Competency-based hiring is also creating opportunities for diverse groups often excluded from the labour market. In India, many individuals seeking to re-enter the workforce—often in remote or part-time roles—are benefiting from this approach. During the pandemic, many women took online courses in areas such as digital marketing, content creation, and IT services while balancing home responsibilities.
India’s thriving startup culture is also embracing skills-based hiring. Startups, often operating with limited resources, value adaptability and practical experience, placing less emphasis on educational background. As a result, startups are setting the pace in adopting skills-based hiring practices, setting a model for larger corporations.
Challenges in transitioning to skills-based hiring
Transitioning to skills-based hiring comes with challenges, including the need for accurate and unbiased skills assessments. Traditional hiring, reliant on academic qualifications, is relatively straightforward. In contrast, evaluating practical skills requires sophisticated testing and assessment techniques. Additionally, companies must train their HR teams to recognise and nurture talent based on skills rather than credentials.
Despite these challenges, the benefits of competency-based hiring are evident. By focusing on skills, companies can access a broader and more diverse talent pool, including individuals overlooked by traditional hiring processes. This approach not only helps fill critical skills gaps but also fosters a more inclusive and innovative workplace.