The New-Collar Workforce – HBR.org Daily

Idea in Brief

The Problem

Many jobs are inaccessible to workers who have the skills and aptitude to succeed at them—but not the four-year degree that employers often require. This situation is hurting workers, companies, and society as a whole.

The Faulty Mindset

Some hiring managers think that a bachelor’s degree serves as a good proxy for capabilities such as collaborating well, taking initiative, and thinking critically. There’s virtually no evidence to support that notion.

The Solution

A skills-based (rather than a degree-based) approach to hiring, promotion, and development offers companies a powerful means of meeting their staffing needs, advancing overlooked talent, and increasing racial and socioeconomic diversity.

Earning a bachelor’s degree can expand one’s mind, widen horizons, and provide a pathway to a well-paying, satisfying career. Yet for those who don’t complete four years of college, the lack of a BA or BS looms as a barrier. Millions of people are locked out of promising job opportunities because too many companies default to hiring workers with four-year degrees, even for positions that don’t require that level of education. The trend began decades ago but spiked during the Great Recession: Research by Alicia Sasser Modestino, Daniel Shoag, and Joshua Ballance shows that from 2007 to 2010, job postings requiring at least a bachelor’s degree increased by 10%. That number dropped somewhat as the economy recovered, but scores of jobs remain inaccessible to people who have the skills and aptitude to succeed at them—but not a college diploma.

Unnecessary degree requirements don’t just hurt workers. They also deprive companies of talent while yielding little to no benefit. Hiring managers may think that a bachelor’s degree serves as a good proxy for things like collaboration skills, a sense of initiative, and the ability to think critically, but there’s virtually no evidence to support that notion. In fact, when a team from Harvard Business School and Accenture recently analyzed “middle-skill” jobs (which require some education or training beyond high school but not a four-year degree), they found no boosts in productivity when those jobs were done by college graduates.

Companies that use the bachelor’s degree as a filter when filling positions that don’t require it are hiring inefficiently. They’re also overlooking workers they desperately need, particularly in growing fields such as tech, where the demand for people with specialized skills far outstrips the supply. At a time when many employers are struggling to fill vacancies and retain their current workforce, a gatekeeping mechanism with no proven benefit creates a competitive disadvantage.

Moreover, degree requirements undermine organizational commitments to improving racial diversity. Although U.S. Census data from 2021 shows that a majority (about 65%) of Americans who are 25 or older do not have a bachelor’s, the proportions are highest among Black Americans (72%), indigenous populations (80%), and those who identify as Hispanic or Latinx (79%). An unnecessary insistence on credentials is, in short, blocking employers’ access to a diverse, capable pool of talent, and the workers who are taking the biggest hit are those who are already marginalized.

It’s no secret that we’re living in a time of profound economic inequality. Workers and occupations are increasingly concentrated at the low and high ends of the economic ladder. The middle class in the United States is hollowing out, and a raft of research across multiple disciplines has found that this is perpetuating racial disparities, tearing the social fabric, and undermining democracy. It’s time to fix our broken approach to talent management, for the good of not just workers and companies but also society as a whole.

Companies that use the bachelor’s degree as a filter when filling positions that don’t require it are hiring inefficiently and overlooking workers they desperately need.

We three have long been deeply compelled by questions about how companies find, treat, and support the employees who are at the core of any business. Colleen directs Harvard Business School’s Race, Gender & Equity (RGE) Initiative, which aims to eradicate racial and gender-based disparities and other forms of inequality in organizations and society at large. Boris has been researching and teaching about effective hiring and retention, and about managing for diversity, equity, and inclusion, for more than 20 years, and he is a faculty affiliate at the RGE Initiative. And Ginni is a former CEO of IBM who expanded opportunities there for people of diverse backgrounds and who now serves as a cochair of OneTen, a coalition of employers committed to hiring Black workers without four-year degrees into family-sustaining jobs.

Collectively we’ve written several books that address talent, diversity, and effective management, most recently Ginni’s Good Power: Leading Positive Change in Our Lives, Work, and World (Harvard Business Review Press, 2023). Together, we recently interviewed leaders in various industries about their companies’ talent management practices. What they told us confirms our own prior research and real-world experience: There’s a straightforward, practical way that firms can foster prosperity and diversity while also unlocking a huge and capable talent pool. The secret is focusing on skills.

Skills-First Hiring

Ten years ago IBM, like many other organizations, was struggling to fill some key jobs. At the same time, it was increasingly clear that the benefits of the burgeoning tech industry were not accruing equally across society. Indeed, many people were more likely to see technology as a threat to their livelihood than as a field where they could climb the economic ladder. And no wonder: Well-paying tech jobs were largely out of reach for those without a bachelor’s degree. At IBM in 2012, less than 10% of U.S.-based roles were open to such applicants, regardless of their other qualifications. Ginni, who was then the CEO, knew that a different approach was needed.

To widen its excessively narrow talent funnel, the company launched what Ginni referred to as the SkillsFirst initiative: IBM overhauled its hiring practices to create on-ramps for people who were previously overlooked and to build a pipeline of capable nondegreed workers. For any organization with the same goals, the process involves action on multiple fronts.

Building a new taxonomy of skills.

At IBM, HR teams reevaluated job descriptions and worked with business units throughout the company to find out what knowledge and expertise was needed for specific roles. Rather than assume that applicants with college degrees possessed relevant capabilities—and that those without college degrees did not—the teams studied all open positions, identified the genuinely requisite skills, and then rewrote job descriptions accordingly, emphasizing specific abilities over general credentials. For example, a cybersecurity job posting once would have listed the experience and degrees required. Now it lists desired skills and attributes and focuses on the core capabilities needed to do the job, such as being able to develop hypotheses and apply programming languages.

As companies revise job postings, they have to be careful to avoid language that might suggest a bias against applicants who don’t come from privileged backgrounds. “You can remove the degree requirement,” says Obed Louissaint, who led talent at IBM until recently, “but if you include ‘experience traveling,’ that may turn off a candidate.”

Crafting job descriptions is also best done as a joint effort, with input from HR, hiring managers, and experienced supervisors. Mindful of that, IBM created an “enterprise skills team” consisting of a dozen senior and emerging leaders who together identified the most important qualifications for a range of entry-level roles. They included hard skills that were specific to particular jobs and soft skills important in all of them. Developing and maintaining a database of this kind is vital for skills-first hiring, but according to a 2022 report by LinkedIn Learning, only 10% of organizations actually do it.

External experts can help. Cleveland Clinic, for example, worked with the diversity-strategy firm Grads of Life to analyze more than 400 roles, representing 20,000 total jobs, and then revised degree and credential requirements to remove unnecessary qualifications. The effort was so successful that the clinic expanded its skills analysis to thousands of additional roles.

Broadening the talent pool.

To develop a successful skills-first hiring practice, companies should provide on-ramps—such as apprenticeships, internships, and training programs—for people who have aptitude but are untraditional candidates. It can be tempting to frame these mechanisms as altruistic efforts or to consider them the domain of corporate social-responsibility units. But such a view is backward, according to Greg Case, the CEO of Aon, a risk management firm. He says that if business leaders are “asking how we give people access to our companies, that is the wrong question. The real question is, How can we equip ourselves to access this talent?”

Aon offered its first apprenticeship opportunities in finance, IT, and human resources—all departments that were experiencing high attrition. It partnered with City Colleges of Chicago to establish a program in which apprentices combine relevant courses with part-time work at the company, with the goal of earning associate’s degrees and ultimately transitioning into full-time employment. Aon has benefited in multiple ways: It has filled vacancies, brought more people of color into the company, and seen higher retention rates for employees hired through the apprentice program than for those hired directly from college.

One way that IBM grew its tech talent pool was by creating internships for students and graduates of a program known as P-TECH (Pathways in Technology Early College High School). The program enables students to take classes in STEM fields and earn credits toward an associate’s degree in applied science while completing high school. It started as a partnership among IBM, the City University of New York, and the New York City Department of Education and was launched in a single Brooklyn high school in 2011. Since then it has expanded rapidly: In 2022 more than 300 P-TECH schools in 27 countries provided interns, apprentices, and employees to businesses worldwide. Employing students and graduates of P-TECH has been a key element of IBM’s talent strategy.

Reimagining existing relationships.

Assessing how well an organization is leveraging existing educational institutions and talent developers can be just as transformative as starting up a new program. When Cleveland Clinic, the largest employer in its region, embarked on its skills-first journey, it shifted the way it engaged with local training providers to build new pathways into its workforce. Historically, for example, it had hired graduates of health care training programs if they had prior hospital experience. That meant that people might complete such training programs but still face limited job prospects. Today Cleveland Clinic hires graduates with and without prior hospital experience and invests in upskilling the latter.

Retraining managers.

Hiring managers are a critical part of the skills-first equation. It’s crucial to stop them from using traditional degrees or prior work experience as proxies for a candidate’s capability. To help managers effectively assess applicants for jobs that don’t require degrees, companies need to give them appropriate tools—including standardized, job-relevant evaluation rubrics—and train them to recognize interviewer biases.

Companies can also redesign hiring processes to more accurately size up people’s skills. In many situations it’s already common to test for technical knowledge, but softer skills can be evaluated too—with problem-solving exercises, “job auditions” (wherein candidates undertake a task or project), and other innovative methods that help hiring managers focus on someone’s mindset and abilities.

Companies should provide on-ramps—such as apprenticeships, internships, and training programs—for people who have aptitude but are untraditional candidates.

Managers may be more motivated to hire nondegreed workers—and feel that it’s less risky—if they have direct incentives to do so. For instance, companies can provide extra funding or budget lines for such hires. Peer modeling, too, can encourage managers to embrace skills-first approaches. Seeing is believing, after all. After working with the U.S. Department of Labor to design an apprenticeship program suitable for modern information-technology jobs, IBM brought in a cohort of seven apprentices in 2017. A software team leader volunteered to host the apprentices, who quickly became known as strong performers and eager learners. Within months, other teams and business units were requesting apprentices, and demand grew. By 2020 the program had expanded to more than 20 IT roles.

Managers who see the value of tapping into an overlooked talent pool, and who hence demand access to it, are the key to truly embedding skills-first hiring in an organization. As Aon’s Case explains, “Frontline leaders who recognize that there is a source of talent they have not had access to are the engine. The CEO push and the HR push are important, but it’s the managers who are going to create sustainability when they see that they can bring this talent in and do great work.”

Scaling appropriately.

It may be tempting to start small and hire a few people one by one as a kind of viability test. However, the company leaders we have spoken to about their skills-first hiring efforts were unanimous and definitive: A tentative approach is counterproductive.

The cohort experience is critical for both nontraditional hires and the colleagues they join. New employees without four-year degrees need to see that the organization is investing in workers like them, not timidly experimenting around the edges. And in an environment where they may fear being viewed as unqualified or feel out of place, having a community of similar peers can bolster confidence and connection. Hiring a sizeable cohort also reinforces to the company at large that skills-first approaches are integral, not superfluous. One or two people are likely to languish if they don’t seamlessly fit into an organizational culture where their value is underrecognized, but a robust cohort can precipitate changes to the culture itself.

Companies shouldn’t expect workers hired through a skills-first approach to assimilate to their new environment without appropriate support. Leaders should therefore update their corporate norms and practices to embed skills-first thinking throughout talent management. That’s how they’ll get the most from both their new employees and their existing workforce.

A Skills-Based Culture

Fundamentally, a skills-first approach is about building rather than buying talent. Creating entry points and on-ramps for newcomers of varied backgrounds is an important first step. But by taking a skills-based approach to promotion and development for all employees, companies can advance overlooked talent and increase racial and socioeconomic diversity in the entire workforce and the leadership pipeline.

Internal pathways to jobs with higher pay and more responsibility are critical. At Delta Air Lines, frontline employees can train for jobs in the company’s analytics group through a program that sponsors their enrollment in relevant coursework at Georgia State University, or they can opt to pursue pilot training through a program known as Propel. Similarly, Bank of America runs what it calls the Academy, which provides education and skill-building opportunities for all employees so that they can pursue new jobs within and across functions. In 2021 more than 65,000 people took advantage of the Academy’s training and development programs. Career mobility is core to the company’s talent strategy: Whereas about 30% of vacant jobs at the bank were formerly filled by internal hires, in 2021 more than 50% were.

Harnessing the power of a skills-centric approach requires a paradigm shift in how firms think about talent. Maurice Jones, the CEO of OneTen (whose members include all the companies cited as examples in this article), argues that most organizations counterproductively cultivate a narrow and even exclusionary “image of excellence.” Too often that prevents their managers from accurately appreciating the value that people without a four-year degree may bring to the table, especially if they’re Black or from another marginalized and underestimated group. To thwart that tendency, IBM began using the term “new-collar workers” to signal respect for workers who do not have a college diploma but are just as talented and capable as their degreed counterparts.

Skills-first talent management will be successful only if it is undertaken as a companywide initiative. Individual managers can’t be expected to make it happen on their own. They need backing from top leaders who are ready for skeptics and willing to meet them with full-throated support for a skills focus. The OneTen member companies making the most progress toward their shared goal, Jones says, are those “where the CEO is visibly committed and treating it like any other business priority.”

A skills-first approach will yield the greatest benefit if organizations extend it beyond hiring and make it core to how they think about cultivating and retaining talent.

When we’ve talked to chief executives at companies leaning in to skills-first talent management, all have echoed the need to elevate and legitimize what is essentially a cultural transformation. Tomislav Mihaljevic, the CEO of Cleveland Clinic, told us that he’s tried to make sure that everybody in his organization understands the “why.” A skills-first approach, he says, “cannot be ‘mandated’ in the classical sense of the word. It has to be explained. Ultimately the only way for culture to stick and for these changes to become permanent is if they get embraced by the entire organization, not just a chosen few.” Brian Moynihan, the CEO of Bank of America, makes a slightly different point, noting that leaders must ensure that managers have the latitude and support to make the necessary changes to their processes, even if that takes time and involves inefficiencies at first. “I have to drive a culture that embraces this as a way of doing business,” he says.

Investing in the careers of employees is a surefire way to increase engagement and retention, and a culture of such investment positively impacts all workers, regardless of their degree status. At the height of the Covid-19 pandemic, Delta found that Black employees, including those in mid- and senior-level jobs, were leaving at higher rates than others. According to Ed Bastian, the CEO, the company had tried to diversify its pipeline prior to the pandemic by bringing in experienced Black talent, but those workers were less invested than longer-tenured employees. When the pandemic threw the industry into turmoil, they felt little motivation to stick with the company. Today Delta focuses not just on diversifying its overall workforce but also on cultivating internal talent, paying particular attention to members of groups that historically had limited advancement opportunities. In addition to its analytics and Propel offerings, the company maintains an apprenticeship program to offer existing employees on-the-job training in 74 different roles. The program has seen enormous demand from workers eager to expand their skills and advance.

Bank of America also offers internal training opportunities to help employees move up. To track the outcomes of its learning and development programs, the company is assembling a dashboard of turnover and promotion rates by cohort that allows leaders to see race and gender patterns as well as overall trends. “Measuring how many people go through a development program is one thing,” Moynihan says, “but what you really should be measuring is how many people who went through that program are being promoted to the next level.”

Not all upskilling needs to be done in-house. Through robust relationships with community colleges and other talent-development institutions, companies can help ensure that people who pursue such training and education are learning the right skills. Aon’s partnership with City Colleges of Chicago includes updating and adapting curricula so that apprentices’ coursework is job-relevant. Bank of America provides a career-development curriculum to community colleges, workforce development organizations, and other nonprofits, enabling students to be hired more quickly into professional jobs.

A skills-first culture is also about understanding what workers need to be successful and achieve their full potential. That might include easy access to their workplaces and flexible scheduling. Individual companies may not be able to remedy societal problems like deficiencies in transportation infrastructure and shortages of childcare facilities—which are especially likely to be barriers to employment for nondegreed workers—but they can look for creative solutions. For instance, Merck realized that for the primarily Black Philadelphia residents whom it wanted to hire, commuting via public transportation to its manufacturing facility in suburban West Point was challenging and probably unsustainable. To improve access to the city’s talent pool, as well as meet other business needs, the company opened a new facility in Philadelphia.

Ultimately, a skills-first approach will yield the greatest benefit if organizations extend it beyond hiring and make it core to how they think about cultivating and retaining talent. At Aon the success of apprenticeships for back-office roles spurred the addition of apprenticeships in risk management, actuarial science, and investment consulting—jobs at the center of the firm’s mission. The Chicago Apprentice Network, which Aon formed in 2017 with Accenture and the insurance company Zurich North America, has grown to include more than 90 companies that understand the merits of an apprenticeship approach.

A Skills-First Future

The need for skills-first talent management is clear. Capable employees are out there, sometimes with a sight line to a satisfying, well-paid job but often with no realistic way to get there.

Consider Tony, who in 2018 was working at a coffee shop at IBM’s Durham, North Carolina, location. Every day he served the office employees who streamed onto and off the campus. It was dispiriting but also inspiring. “Coming to IBM every single day,” he said, “I’m thinking, Man, it would be nice to actually work for IBM. Instead, I have to work in this coffee shop. But there’s probably no way unless I go to school for four years.”

A high school graduate and the father of young children, Tony simply didn’t have time for that. Then he learned about IBM’s apprenticeship opportunities from a customer. He applied, did a yearlong apprenticeship, and ultimately landed a full-time technical position in customer support. He now has a sense of future possibilities at IBM. “My manager started out as an L2 engineer,” he told us, “where I’m at now. Maybe one day I can climb my way up and become a manager—someone that’s able to lead the team or lead a few different teams. Building up as high as I can go.”

For too long, four-year-degree requirements have been easy, if ineffective, shortcuts that made managers feel they were weeding out less-qualified talent. Data and time have proven this assumption false. What’s more, it artificially constrains companies’ efforts to advance racial diversity, cultivate employee engagement, and generate strong performance.

Companies can do better—for workers and themselves—by embracing skills-based talent management. Making the switch takes time and investment, but the costs are worth it. A skills-based approach promises better matching between job candidates and jobs, dramatically expands talent pools, improves internal mobility and employee commitment, and incentivizes HR departments and business units to stay aware of what each job actually entails. This approach also holds the potential to mitigate the economic and racial inequalities that are fracturing U.S. society and compromising the health of its institutions and economy.

Organizations do not exist apart from the communities and regions in which they are situated. Mihaljevic highlighted that idea when describing why he and his team have adopted a skills-first approach: “Unless the community around us thrives, Cleveland Clinic cannot thrive. It is essential for Cleveland Clinic’s success and sustainability in the future that we create opportunities for the people who live here.”

A version of this article appeared in the March–April 2023 issue of Harvard Business Review.


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