AI and the skills-first approach

Three-quarters of employers worldwide are struggling to find the skills they need – a crisis that’s grown 36% in just a decade. With 92% of companies planning to increase AI investment over the next three years, entire sectors are being redefined faster than traditional hiring models can adapt. British businesses competing in an AI-accelerated economy are already struggling to keep pace with rapidly shifting skill demands.

 

For too long, recruitment has defaulted to education and credentials. But as AI transforms roles and creates demand for new, fast-changing capabilities, traditional qualifications alone cannot tell the full story. Employers who focus on what people can do through their proven skills, not just the qualifications listed on their CVs, are proving far better equipped to compete in this changing landscape.

 

The writing is on the wall: we need to fundamentally shift how organisations hire, train and retain their people. That shift is a skills-first strategy.

 

 

Building the workforce of the future

The global economy could gain an estimated $6.5 trillion over seven years by closing workers’ skills gaps, according to the World Bank. For UK firms, where 51% of working-age adults lack degree-level qualifications, skills-first hiring offers a strategic advantage in tapping underutilised talent whilst addressing persistent productivity challenges.

 

Our research found that companies prioritising skills over qualifications are already seeing the pay-off: higher internal promotion rates, stronger diversity and greater employee retention.

 

The business gains from this strategy are clear – firms embedding skills data across HR functions have seen productivity rise by as much as 15%. Those that share future skills needs with staff are 7% less likely to lose their top performers, and highly profitable employers are 4–5% more likely to have adopted a skills-first model. These are not minor gains; they are increasingly becoming business-critical advantages for organisations.

 

Early adopters prove that this model works. Molson Coors UK saw a skills-first approach to manufacturing recruitment result in a 385% increase in applications, with improved candidate quality and enhanced engagement among new hires. In addition, 30% of final candidates were women – marking a major shift in a traditionally heavily male-dominated sector. Skills-first hiring is broadening talent pools while delivering diversity gains many companies have long struggled to achieve.

 

 

Sharing your skills roadmap keeps top talent

Beyond recruitment, leading employers are using transparency about future skill needs to drive trust and retention.

 

By openly communicating the capabilities their business will need tomorrow, organisations can give their employees the knowledge and investment to upskill, retrain and grow in ways that align with both their careers and company strategy. Ignoring this shift can have a marked impact: replacing an employee can cost between 30% and 200% of their salary – a margin no business can afford to waste. This approach is about more than filling current vacancies. The businesses that take skills seriously will build a resilient and adaptable workforce that can evolve alongside technological shifts.

 

 

Implementing a skills-first approach

For HR and business leaders, the message is clear: the qualification-first model is outdated. Labour markets are being rapidly reshaped by AI, and the organisations that thrive will be those that put skills at the centre of every people decision.

 

Organisations must act now by: auditing hiring practices to reduce reliance on academic qualifications; building a comprehensive skills inventory and integrating data across the employee lifecycle; communicating clearly about future skills needs; and investing in scalable reskilling and redeployment programmes.

 

The companies that take these steps, shifting to a skills-first approach in practice, will reap the rewards in their workforce as the impact of AI continues to accelerate.

 

 

Looking ahead

The data makes the imperative clear: companies that embed skills-first practices across hiring, transparency and integrated management aren’t just filling roles more effectively – they’re building competitive moats. These organisations report higher profitability and lower regretted attrition.

 

For business leaders, the question isn’t whether to act, but where to prioritise. Start by auditing where degree requirements in job descriptions could be replaced with skills assessments. Implement transparency about your three-year skills roadmap, giving employees the clarity to invest in their own development. Pilot digital talent marketplaces in one division to prove the ROI of internal mobility before scaling enterprise-wide.

 

The organisations that move decisively now, while competitors remain paralysed by traditional hiring models, will secure a significant advantage in accessing overlooked talent. In five years, the workforce landscape will be defined by those who recognised that credentials signal the past, while skills predict the future. The skills-first revolution isn’t coming; for leading employers, it’s already here. The only question is whether your organisation will lead it or be left behind.

 

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Adrian Seligman is Chief Commercial Officer and Executive Board Member at Top Employers Institute

 

Main image courtesy of iStockPhoto.com and miniseries