New research from Top Employers Institute shows that businesses prioritising skills over qualifications are outperforming in retaining high-performing talent – critical to staying competitive in an AI-accelerated economy.
The report, titled Building a Skills-First Workforce, draws on Top Employers Institute data from 2,300 organisations across 26 industries and 125 countries. It reveals how AI and automation are pushing companies to deprioritise traditional ways of hiring and managing employees.
According to Top Employers Institute, a skills-first approach, where employers focus on what potential and current employees can do in practice, rather than on paper, has proven benefits. Highly profitable Top Employers are 4-5% more likely to have adopted a skills-first approach.
Skills-first employers are also 7% less likely to lose high performing employees and are witnessing higher internal promotion rates and improved access to diverse talent pools. With turnover costing between 30-200% of an employee’s salary, skills-first strategies are becoming a critical bottom-line safeguard.
Companies are increasingly using integrated skills data to rapidly redeploy talent to priority projects, avoiding costly external hiring, and retaining high performers by communicating future needs and through meaningful internal opportunities. Adoption of AI-driven talent marketplaces, which match employees to internal roles and projects, is highest in technology progressive sectors like IT (59% adoption), signalling a shift to dynamic, skills-based workforce mobility. It is at its lowest in sectors such as retail (22%) and consumer goods and services (30%).
With 74% of employers globally struggling to find the skills they need – a 36% increase over the last decade, these digital talent marketplaces are becoming increasingly popular for some of the world’s leading global companies. Early adopters of skills-first hiring are also enjoying success: Molson Coors UK, a leading beverage company, experienced a 385% increase in applications for manufacturing roles, with 30% of the final candidates being women in what is a typically male-dominated industry.
Key findings from the report show that organisations taking a skills-first approach, from hiring to employee management, are seeing improved:
- Retention: Organisations sharing future skills needs are 7% less likely to lose high-performing employees
- Productivity: Companies embedding skills data across all HR functions are boosting productivity by up to 15%
- Diversity: Skills-based hiring is strengthening diversity in organisations, by reducing barriers for underrepresented groups
- Internal mobility: Organisations prioritising skills see significantly higher internal promotion rates: late adopters are three percentage points lower than average
- Adaptability: 84% of leading organisations are already using skills data to communicate with employees about future changes to their skills needs, allowing them to upskill and reallocate talent accordingly as AI transforms the world of work
Adrian Seligman, Executive Board Member at Top Employers Institute, commented: “AI and automation are redefining the skills organisations need faster than traditional hiring models can adapt. Employers who embrace skills-first practices are not only future-proofing their workforce, they’re also seeing rapid returns in employee engagement, retention and business performance. This is becoming a business-critical strategy for success in an AI-accelerated economy.”
The report gives recommendations on how business leaders can reap the benefits of skills-first strategies including:
- Commence an audit of hiring practices to reduce reliance on academic qualifications
- Create a comprehensive skills inventory with integrated data across all HR processes
- Share clear information about future skill needs with employees and build scalable reskilling programmes that enable rapid talent redeployment as AI transforms work.
The businesses that thrive in the AI economy will be those that adopt a skills-first model that delivers productivity, profitability, diversity, retention, and engagement.
Sign up to receive the full report here.
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