Are competencies more important than credentials in the modern Workplace?

As college enrollments decline, have skills become more valuable to employers than credentials?

“From almost any individual’s perspective,” wrote David Leonhardt for the New York Times in 2014, “college is a no-brainer. It’s the most reliable ticket to the middle class and beyond.”

Given the exorbitant expenses of third-level education in the US, Leonhardt’s statement is unpalatable for many, yet hardly controversial. For decades, students and parents have aspired towards gaining college degrees with the widely held conviction that to get a good job, the first thing you need is a good education.

It’s a truism that holds up as well today as ever; but the conversation around what counts as a “good education”, or how it can be gained, is slowly changing.

Changing Times

A key driver of this change is money. Student debt is now the second-highest consumer debt category in the US. At $1.75 trillion, it is ahead of both credit cards and car loans. The shadow it casts is a long one too: as much as 70% of all graduates leave college with a hefty price tag to accompany their qualifications. The average amount owed by a graduate in their 20s is $22,135.

For some, such high costs simply come with the territory. The previously unassailable truths that college graduates earn more, report higher levels of job satisfaction, and enjoy greater career mobility were enough to justify the risk and make it worthwhile to ride out the storm.

This was pretty much the crux of the New York Times piece by Leonhardt, which acknowledges that although college comes with a financial burden and still does not guarantee future success, the active wage disparity between graduates and non-graduates is clear as night and day. In fact, according to him, “Not going to college will cost you about half a million dollars.”

The article’s clear takeaway is that the economy needs more graduates, and students without a qualification face an uncertain future. Yet it’s worth considering whether the piece in question leaned towards a vested interest rather than impartiality given the fact that the piece coincided with sponsored content that the New York Times’ own marketing studio (T Brand Studio) was producing on behalf of Discover, a financial services company looking to promote its own student loans scheme.

Additionally, in the three years since the article’s publication, a clearer picture has begun to emerge. Not only has total overall student debt increased by around $400 billion in that time, but the average amount owed by graduates in their 30s, at $34,033, is actually far greater than for those in their 20s.

Some have even questioned whether mounting student debt might even be responsible for lower rates of home ownership, health problems, or marital breakdowns. No doubt the harsh economic climate this group entered upon graduating exacerbated their financial difficulties, forcing many into taking low-wage positions for which they were overqualified, and yet others to abandon their degree programs altogether.

Yet the risk of indenture that millions of students take is still considered by many to be a favorable option to entering the workforce without a third-level qualification. For most students from lower-wage backgrounds, however, the former is not a realistic option to begin with.

As if the cost of college itself wasn’t enough of an obstacle, the information on financial support that’s available to students is so cloudy and confusing that it acts as a further deterrence. As Rana Foroohar of the Financial Times has pointed out: “The student loan market is hopelessly opaque – only a quarter of students can predict their own debt load to within 10 percent of the correct amount.”

Alternatives to Academia?

With unaffordable fees and unreliable information to act on, what options are left for students from lower-wage backgrounds after high school?

For many, the decision to enter the workforce right away is an obvious one. The Stanford economist Caroline Hoxby argues that this is more likely to occur during periods of economic prosperity: more jobs tend to coincide with fewer college enrollments, which has proven to be the trend for close to half a decade.

Though opting to enter the jobs market without a qualification (or the debt associated with one) is surely driven by practical considerations, the standard result is career paralysis. Traditional routes into the workforce that do not require degrees such as service roles, manufacture, mining, and agriculture – so-called “blue collar” jobs – offer little chance of career progression.

But then the key challenge for educators and policy-makers has never been to help people without degrees to find jobs; it has been to help them develop a career. This is something that a growing number of companies are working towards as more begin to invest in training programs that reward and nurture skills and competencies rather than academic credentials.

Competency-based Training in the Tech Industry

With a notable skills gap in the tech industry, it’s no surprise that technology-based companies are leading the charge in skills-first development.

Perhaps the foremost advocate of the skills-first approach is Microsoft co-founder Bill Gates – a noted college dropout – who in an interview with Fast Company claimed that assessment was key to helping students understand more about what they needed to learn:

“Another dream would be to revolutionize [student] self-assessment, so that in any area – math, psychology, economics, whatever – you could assess your skills and know what you may need to learn. The ideal there is creating a skills-based credential that is well trusted and well understood enough that employers view it as a true alternative to a degree.”

It appears that these are far from empty words: Microsoft recently announced a grant of over $25 million to Skillful, a program dedicated to fostering skills-oriented hiring, training, and education. Brad Smith, Microsoft’s president, also chimed in warning of the consequences of failing to provide fresh alternatives to degree programs: “We need new approaches or we’re going to leave more and more people behind on our economy.”

And there are others too. Another example is Innovate+Educate, a US-based non-profit whose goal is to address the deficiencies of existing hiring and advancement strategies through more in-depth soft skills assessment. Launched in Santa Fe in 2008, the organization has developed a presence in a number of states including Ohio, Michigan, Texas and Arizona.

“Employers are pioneering data-driven approaches to scout and acquire talent,” wrote Innovate+Educate’s CEO Jamai Blivin in a piece for Forbes. “Closing skills gaps, increasing diversity, and driving social and economic mobility.”

In Good Company: From Blue Collar to New Collar

The latter points in the quote above are noteworthy. University may be the “most reliable” ticket to the middle class, but it is also the most expensive. Competency-based training and hiring provide another route to economic mobility. It is affordable for employees and cost-effective for employers.

Given that two-thirds of adults in the US do not have a four-year degree, many companies – including some of the largest in the world – have identified something of an untapped resource. Suddenly millions of blue-collar workers may have the chance to become “new collar” by entering mid-skill-level jobs that are far better paid and offer a genuine chance of career development.

One case in point is IBM. With 5,000 vacancies in the US alone, the company is one of a growing body of organizational giants taking a closer look at the efficacy of competency-based hiring. According to Sam Ladah, the company’s vice president for talent: “It makes sense for our business, for the job candidates and for the communities … Now, we’re recruiting for skills.”

And it is not solely tech companies that are dipping their toes in the competency talent pool. EY, one of the largest professional services and accounting firms in the world, is another that’s showing a strong interest in hiring candidates without academic credentials. The firm’s UK branch removed academic qualifications from its entry criteria in 2016, opting instead to “use a new and enhanced suite of online ‘strengths’ assessments and numerical tests to assess the potential of applicants for 2016.”

The company’s decision to do so was evidence-driven. Having conducted an internal study on 400 employees over an eighteen-month period, EY’s research team found “no evidence to conclude that previous success in higher education correlated with future success in subsequent professional qualifications undertaken.”

“Instead, the research shows that there are positive correlations between certain strengths and success in future professional qualifications.”

The Case for Competency

Others have reported similar findings when it comes to standardized school testing.

In an interview for Scientific American, Robert Sternberg – a venerated psychologist who has spent decades researching intelligence testing – claimed that there is a tendency towards over-reliance on a particular set of academic skills:

“Our overemphasis on narrow academic skills – the kinds that get you high grades in school – can be a bad thing for several reasons. You end up with people who are good at taking tests and fiddling with phones and computers, and those are good skills but they are not tantamount to the skills we need to make the world a better place.”

Sternberg’s position on testing is the result of years spent developing assessments for “creativity, common sense and wisdom” for projects at both Yale and Tufts universities. He estimates that tens of thousands of students took these assessments for college admission.

Designed to evaluate cognitive abilities in greater depth than standard tests did, Sternberg’s assessments afforded a more diverse cohort of students the opportunity to attend higher education:

“We admitted kids who would not have gotten in under the old system – maybe they didn’t quite have the test scores or grades … we followed them through the first year of college. With Rainbow [the assessment project at Yale] we doubled prediction accuracy for academic performance, and with Kaleidoscope [project at Tufts] we could predict the quality of extracurricular performance, which the SAT doesn’t do.”

Asked whether he felt if standard schools tests such as the SAT and GRE might be hurting progress in STEM areas, Sternberg’s reply was telling:

“I think it’s hurting everything. We get scientists who are very good forward incrementers – they are good at doing the next step but they are not the people who change the field. They are not redirectors or re-initiators. And those are the people we need.”

Without the school scores or the finances to attend college, the question is just how many of the brightest minds are slipping through the net to end up in low-skilled positions where their abilities go unchallenged and unused?

It’s a question that more large companies are finally beginning to ask, and one that many are taking steps to address by developing their own means of evaluating a candidate’s cognitive abilities.

One such company is Google. Lazlo Brock, the company’s senior vice president of people operations, offered some revealing insights in an interview with the New York Times in 2013 They are worth quoting at length:

“One of the things we’ve seen from all our data crunching is that GPAs are worthless as a criteria for hiring, and test scores are worthless – no correlation at all [with work performance] except for brand-new college grads, where there’s a slight correlation …”

“What’s interesting is the proportion of people without any college education at Google has increased over time as well. So we have teams where you have 14 percent of the team made up of people who’ve never gone to college … your ability to perform at Google is completely unrelated to how you performed when you were in school, because the skills you required in college are very different.”

Automation versus Autonomy

Into the equation comes artificial intelligence. Automation and AI look set to transform work in the mid- to long-term future. Estimates of the full impact that technology will have on the workforce tend to oscillate wildly, with some reports suggesting that 9 percent of US jobs are at risk while others put the figure closer to 50 percent. However, the simple truth on the matter is that technology’s rapid progress make accurate predictions impossible.

In spite of this, it is still likely that the first to feel AI’s impact will be those working in routine-heavy jobs such as bookkeeping, manufacture, services, and even certain areas of legal work.

Making better training available to those who are most vulnerable would provide one solution to the problem. To safeguard jobs and livelihoods businesses will need to prepare a workforce that is capable of critical thinking, creativity, and problem solving – skills that are at the heart of human innovation. “You learn and grow, you think about things differently,” says Brock. “You want people who like figuring out stuff when there is no obvious answer.”

Major companies in the tech sector are in accord. Now is the time for those in other industries to follow suit.