It’s the age-old question: Should you hire someone for what they’ve already done or what they’re capable of doing?
Anyone who’s hired a leader has faced this dilemma. In an ideal world, your final candidate would have not only top-tier leadership skills and the ability to grow with your organization but also years of experience applying those skills – and the lessons learned from doing so.
In reality, these candidates are few and far between.
Often, you find yourself choosing between an experienced candidate who may not have the adaptability for a long-term future with you, and a less experienced candidate who is ready to learn but short on lived leadership experience.
What decision should you make in this situation?
In this blog, we help you answer this question by walking you through the differences between hiring for experience vs. hiring for potential, including when to choose each route and the best practices for doing so.
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What’s the difference between hiring for experience vs. hiring for potential?
The difference between hiring for experience vs. hiring for potential is fairly straightforward. When you’re hiring for experience, you base your decision on whether the candidate has:
- A number of years of experience in that function or industry
- Held a position of similar seniority to the one you’re hiring for
- Completed the tasks required or used the same technologies
- Had the same responsibilities – for instance, line management
When you’re hiring for potential, instead of looking for a candidate who has five years of experience in a similar role, you prioritize candidates from diverse careers who have:
- The basic technical skills required to complete the role
- Essential soft skills, like communication, that help them grow into their responsibilities
- The same vision of where the company is heading and how the role fits into that
- The desire to advance their skills
It’s similar to the choice between hiring for the role vs. hiring for progression in a startup. It’s all about weighing your short-term priorities against the long-term view of the position and deciding which one best serves your strategic priorities.
Hiring for experience
Hiring for experience has been the dominant recruitment method for decades, propped up by the king of traditional screening tools: the resume.
The resume’s core function is to summarize candidates’ experience, detailing all the roles they’ve worked in and for how long. We’re willing to admit that before the dawn of advanced recruitment tools, there was an obvious logic to the experience-based approach.
If you don’t have a means of directly observing a candidate’s skills, knowing whether a candidate has performed a very similar role at another company may indicate that they will be a good fit for yours.
But the resume doesn’t stand up as well in 2023 – here’s why.
The problems with hiring for experience
Hiring for experience in all roles made a lot more sense back when recruiters didn’t have a means of observing candidates’ skills directly. It was the best solution we had. But make no mistake, it was still a flawed one.
1. It doesn’t predict job performance
First, there is no way of telling how active a role a candidate has played in the accomplishments listed on their resume, and there are many stories from resume recruiting hell that show the dangers of hiring an overconfident candidate.
A famous study at Google found that a candidate’s work experience only predicts their future job performance with 3% accuracy.
Skills testing, on the other hand, is 10 times as effective.
2. It allows other companies’ biases to affect your hiring
By limiting your search to experienced candidates – for instance, those with five years of experience in a senior role – you’re allowing other organizations’ biases to bleed into your own processes.
This could be especially true in industries dominated by a single gender. The aeronautical engineering space, for example, is 88.8% male; by hiring primarily based on experience, you’re likely to shut out newer, more diverse candidates.
It’s especially problematic when hiring for leadership positions.
You might use diversity, equity, and inclusion (DEI) initiatives to promote fairly and diversely, but if you’re only hiring candidates that other companies have promoted based on experience, it’s likely you’re choosing from a biased selection.
One study found just 54,900 of the 3.9 million managers, directors, and senior officials in the UK are Black – for UK-based companies, that makes hiring Black managers based on experience statistically difficult.
3. This lack of diversity impacts profitability
All of this could have a knock-on impact on your profitability. A 2020 study by McKinsey found the relationship between diverse teams and financial outperformance is only getting stronger over time.
Companies that were in the top quartile for gender diversity on their executive teams were 25% more likely to have above-average profitability than those in the bottom quartile, a lead that has increased year over year.
4. It creates obstacles for internal mobility and retention
These negative impacts for DEI could also affect your ability to promote internal mobility at your organization.
Internal mobility relies on HR leaders routinely looking for the potential in candidates and employees alike, going beyond their direct experience to see how their skills could be applied in a new role.
By prioritizing experienced candidates for all new roles, you likely cut out a lot of promising internal hires, and this could negatively impact engagement and retention.
Research shows employees are happiest when they receive opportunities for advancement. Employees who move around internally are more than three times as likely to be engaged than those who stay in their current roles.
It’s not rocket science that happy employees stay longer in their jobs.
A study by the Society for Human Resource Management (SHRM) found employees who were promoted within three years of hiring were 70% more likely to stay on board, with those who moved laterally being 62% likely to stay.
Those who got neither had only a 45% chance of remaining for the long haul.
5. It’s not an effective way to promote
Routinely hiring for experience also means that the internal hires you do make may be less effective over time.
This is due to a phenomenon known as the “Peter Principle,” a concept from a 1971 book by Peter J. Laurence and Raymond Hull.
The Peter Principle refers to an employee being promoted vertically until they stop being competent in their role. It happens when the employer assumes experience is the driver of development instead of providing supportive training to aid their growth.
When should you hire for experience?
All of the above is not to say that you should throw experience-based hiring out entirely. There are occasions when experience is useful.
Rather, it means that when you must use it, you should combine it with a skills-based hiring approach, using tools like skills testing to ascertain:
- What the core skills requirements are for the role
- All the candidates you invite to interview meet these prerequisites
- That they also have the transferable skills required for growth
This enables experience to be the cherry on top of a full skill set, rather than the be-all and end-all of your hiring approach.
In our view, there are two key scenarios when you should take experience into account.
When you’re hiring for a senior or highly technical role
Let’s say you’re hiring for a very senior or highly technical role.
You want bang for your buck – in other words, a candidate who will not need much training to get up to speed, who will be decisive in their actions, and who already has a defined leadership style.
As we’ve seen, experience isn’t a guarantee of a great leader, but if they perform well on skills tests and also have direct experience in a very similar project or area of business, this could help the candidate hit the ground running.
When you don’t have time or budget to spend on training
Of course, the above need for a candidate to add value quickly isn’t exclusive to senior or technical roles. If you’re hiring for a startup or a time-pressured team, this urgency could equally apply to roles in sales, social media management, and many other functions.
To move through your onboarding process as swiftly and smoothly as possible without needing to stop for basic training, experience can be a bonus. It saves you time if your experienced recruits avoid mistakes.
Best practices when hiring for experience
Here are two best practices to follow on the rare occasions you’re hiring for experience.
1. Use pre-interview testing to screen candidates for skills
Experience is best employed as an additional criterion when hiring, rather than the main one you use to screen candidates.
With this in mind, pre-interview testing enables you to screen based on skills first and experience later, inviting only qualified candidates to interview.
It also helps reduce bias during the hiring process by anonymizing candidates’ data. A study of more than 2,000 successful applicants found the number of women hired into senior roles rose by almost 70% when skills-based hiring methods were used.
For best results, use situational judgment tests to observe the impact that candidates’ experience has on their skills by asking them how they would respond to specific scenarios.
2. Ask behavioral questions in the interview
As well as using situational judgment tests, you should also use the interview to draw a connection between a candidate’s experience and the role at hand.
We recommend a structured interview approach – in other words, asking every candidate the same questions, in the same order, with the same criteria for what a “good” answer looks like.
This helps you keep score of how candidates compare to each other and not let bias over previous job titles or years of experience blind you to a strong candidate.
When writing the questions for your structured interview, make sure to include plenty of behavioral questions. These help you understand how candidates approach problems by asking them to give you examples from their past experiences.
For instance, you might ask “Has there been a time that you gave negative feedback to an employee?”
3. Ask for a work sample
Another way to see the impact of a candidate’s experience on their work, particularly when it comes to senior or highly technical roles, is to solicit a work sample either during the testing phase or after the first round of interviews.
This lets you verify that the skills you’ve observed in tests and discussed in person can be applied directly to the work you need from this role.
Hiring for potential
We’ve seen that hiring for experience – particularly in the sweeping way this approach is adopted in traditional hiring – is a deeply flawed selection method.
It makes broad assumptions about how you can predict job performance and rolls out the red carpet for bias. But is hiring for potential any better?
In a word: yes.
This is because when we talk about hiring for potential, we’re not talking about hiring only for potential. It’s not like when your friend looks at their newborn baby and says, “She could be a rocket scientist one day.” Sure, it’s technically true, but what evidence is there?
Hiring for potential is about using skills tests to identify candidates who meet a baseline skill requirement, but also have the transferable skills needed for further growth.
Here’s why we think it’s more effective.
What are the benefits of hiring for potential?
The open-minded approach associated with hiring for potential rather than experience brings many benefits to your recruitment process.
1. It’s cheaper
Hiring for potential rather than experience is usually cheaper. First, you can offer a smaller compensation package if you’re hiring a less senior professional.
Less experienced candidates also have shorter notice periods and are less in demand from other employers, so you’ll see a shorter time-to-hire.
You can shorten this timeline even further with the use of skills-based hiring, which is in any case essential to hire for potential effectively.
According to our State of Skills Based Hiring 2022 report, 91.4% of organizations saw a reduction in time-to-hire after switching to skills-based hiring, and 89.8% saw a reduction in cost-to-hire.
While you’ll likely incur more training costs when hiring for potential than when hiring for experience, there is much evidence to suggest that investing in upskilling and even reskilling employees is a cheaper alternative.
Think about it – when hiring for experience, particularly without any plans to develop that employee and try to bring out their potential, you expect to repeat the process sooner or later when they cease to be effective or seek opportunities elsewhere.
The latter situation may come sooner than you think. It was one of the top reasons that employees quit their jobs in 2022.
By contrast, studies have shown that retaining a salesperson for just one extra year – when accompanied by better onboarding and management practices – saves a company $1.3m in net value over three years.
2. It prepares you for industry change
“Business as usual” has changed a lot over the past few years with the onset of widespread remote and hybrid working. It’s set to change even more in the coming years as automation and artificial intelligence penetrate more industries.
This will naturally have an effect on which skills employers need. Business leaders in 2020 predicted around 40% of their workforce would require reskilling in the near future.
Hiring for experience in this landscape of rapidly changing skills is, at best, a short-term solution.
Hiring for potential, on the other hand, empowers you to remain agile in a changing skills landscape, hiring adaptable professionals and equipping them with the tools to respond to new business challenges.
Hiring for potential also reduces the likelihood that other employers’ biases might affect your hiring decisions because their inability to spot employees’ potential won’t affect yours.
3. It promotes diversity
This increases the likelihood of creating a diverse workforce in terms of race and gender. It also promotes diversity of thought by opening your hiring process to people outside of your industry or niche.
This boost in diversity brings huge benefits to your workplace: Catalyst research has found higher levels of gender diversity and HR policies focusing on it are linked to better retention.
4. It encourages internal mobility
Where hiring for experience might limit the possibilities for internal mobility within your organization, hiring for potential enables you to identify employees with the potential to take on multiple roles – known as “multipotentialites” – from the very start.
This comes in handy for fostering loyalty with your employees because they can move around your organization not only when times are good, but also in times of crisis.
During a restructuring period, you can limit some of the damage to company morale by avoiding layoffs, instead redeploying existing employees into roles with adjacent skills.
5. It adds to your company culture
Finally, the benefits of the above – embracing employee development, promoting diversity, and encouraging internal mobility – all contribute to a robust and cohesive company culture.
As you give your employees more reasons to stay with you, they form stronger bonds with each other and your company.
Your retention and engagement are likely to improve.
Hiring, when you need to do it, may even become easier because positive company culture is high on jobseekers’ lists when shopping for new roles: 86% say that it’s somewhat or very important when evaluating a new employer.
When should you hire for potential?
In general, if we had to choose one or the other, we’d pick hiring for potential over hiring for experience any day. However, there are a few scenarios in which it is especially useful.
When you’re hiring in a role where there’s a skills shortage
A skills shortage is when a skills gap you observe inside your organization also exists on a larger scale outside of it, whether in a specific region or an industry at large.
Skills shortages are rife around the globe right now, with 75% of companies worldwide reporting them in 2022 – a 16-year high.
With the increasing need for complex digital skills, skills shortages are more common in some fields and functions than others. For example, in 2022, 70% of companies experienced a skills shortage in tech.
Hiring for experience in this environment is very challenging because those with extensive experience are in high demand from employers.
Hiring for potential, on the other hand, opens the field to trainable employees who, with the help of skills development, can be brought up to a sophisticated standard.
When you don’t have the budget to offer an ultra-competitive salary
We’ve seen that experienced professionals working in in-demand functions are able to command higher salaries from employers due to the dearth of their skills.
However, this is also true on a wider scale, as we are in the middle of a candidate’s market in many industries. There are fewer professionals available to fill roles than there are open positions, and this means that candidates across the board have more bargaining power.
A Betterworks report found that not only are organizations taking longer to fill roles, but starting salaries are the highest they’ve been in a decade. Wages and salaries increased by more than 5% in 2022, up from 4.5% in 2021.
If you don’t have the budget to offer a high salary, hiring for potential can be a cheaper alternative because less experienced professionals require lower compensation and benefits and may be more attracted by the prospect of skill development.
Best practices when hiring for potential
Skills-based hiring practices are essential to hiring for potential while also ensuring your new recruits meet a baseline skills requirement.
Here are four best practices to ensure that you do it right.
1. Hire for culture add, not culture fit
One of the most effective ways to ensure that a candidate can grow into their role and grow with the business more generally is to ensure that they are the right match for your company culture.
Traditionally, recruiters have relied on the concept of “culture fit” to ascertain whether the candidate reproduces superficial characteristics of their target team – for instance, in their sense of humor.
This concept allows bias to creep into the recruiting process and can lead to a culture of groupthink and even clique formation.
Skills-based hiring, on the other hand, advocates that recruiters use the more valuable concept of “culture add,” looking at the ways candidates think differently from their team and how this can complement the team’s strengths.
Culture add can be screened for using a Culture Add test and further examined during interviews.
2. Use skills testing to identify transferable skills
As well as using skills tests to identify core competencies for the role, you can also use them to measure candidates’ proficiency in transferable skills that could help them advance.
These might be more advanced hard skills, which would help you identify how much training they would need before promotion, or soft skills like communication, which could help them work with other teams.
This helps you create a transferable skills checklist for each candidate, creating an overview of skills, usually including:
- Leadership skills
- Social skills
- Creative skills
- Word and communication skills
- Data skills
- Time-management skills
Identifying how many boxes a candidate can tick – and how proficient they are – not only helps you choose the candidate with the most potential, but also to craft an effective development plan for them when they become an employee.
3. Input skills test results into your internal talent marketplace
Once you’ve used pre-interview skills tests to judge:
- What a candidate’s core skills are
- What transferable skills they have that could apply to other roles
… you need to store this knowledge to effectively manage that employee’s career.
The best way to do this is by inputting the results of their tests into an internal talent marketplace: a spreadsheet or a dedicated piece of software that shows you the skills available in your business.
You can use an internal talent marketplace to find internal talent for promotions and to plan training initiatives. This improves your development initiatives and promotes internal mobility, helping you realize the potential you hired candidates to fulfill.
It also prevents talent hoarding, the phenomenon of managers “hoarding” talented individuals and stopping them from bringing their skills to other teams and projects. This is a win for efficiency all around.
4. Use skills testing to develop employees as well as hire them
The next step after skills-based hiring is skills-based learning: using the tools you employed to hire a candidate to nurture their skills after they join your organization.
One way to do this is to use skills tests to track candidates’ performance as they progress through skills training.
For instance, you might send an employee on a leadership course if they showed promise in their leadership skills during hiring; after three months, you could retest them and compare their scores to assess if they are growing into a new role.
Is there a middle ground between hiring for experience and hiring for potential?
In many cases, you won’t be facing a black-and-white decision of hiring for experience vs. hiring for potential. Instead, you’ll be weighing candidates who simply score more highly in one area than another.
But how can you tell which skills are more important for candidates to have already versus the skills you can afford to develop?
Hire for experience in soft skills and potential in hard skills
While hard skills and soft skills are both equally important in hiring, which ones candidates bring into a role has implications for their development.
With the rapid pace of change in the digital sphere, many employers are scrambling to find candidates with sophisticated technical skills, but we’re not sure this is the best use of their resources.
Complex digital skills are in short supply, and the goalposts are constantly shifting. In the US, one-third of workers already lack the digital skills to succeed in their roles.
It may make more sense, therefore, for employers to take upskilling workers in hard and digital skills as a given for all new hires.
Think about it: If you’re going to have to upskill a proficient digital candidate in a few years anyway, you may as well lower the entry barrier for the role and invest more consciously in upskilling.
Meanwhile, it is also true that soft skills are becoming increasingly important. By some estimates, two-thirds of all jobs by 2030 will be soft skill intensive.
There are also fewer avenues for soft skills training than there are for hard skills – and soft skills are what make training effective in the first place.
Skills like resilience, confidence, responsibility, and self-efficacy are all necessary in order for an employee to get the most out of skills training.
With this in mind, it is often best to prioritize candidates with strong scores in soft skills and a demonstrated history of applying them. You can then look for potential in hard skill areas like data analysis by testing for supporting skills, such as numerical reasoning in this case.
This may be especially prudent when hiring for leadership positions since soft skills are some of the strongest predictors of performance.
One study conducted by McKinsey found there are 20 leadership traits that correlate with organizational performance, all of which are related to four key soft skills:
- Insight: for instance, offering a critical perspective on a business problem
- Integrity: giving praise and role modeling organizational values
- Courage: championing desired changes and remaining calm in the face of uncertainty
- Agility: motivating teams and recovering from failures while maintaining positivity
Use skills-based hiring to find a balance between hiring for experience and hiring for potential
Like with many things in life, there’s no clear-cut answer to whether it’s better to hire for experience or potential. It depends on the role you’re hiring for, your strategic priorities, and your organization.
However, by using skills-based hiring techniques, you can ensure that your candidates all meet a baseline skill requirement, and you can reduce bias when you assess their applications.
We also recommend reading our guide to talent planning to learn how you can align your overall talent plan with your unique business goals.
And if you’re grappling with hiring for experience vs. potential as a startup leader, your next stop should be our guide to HR for startups.
But if you’re ready to hire a leader and want to know whether they’ve got what it takes to grow with your organization, you should use our Motivation test to see if your visions align.
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- Josebachvili, Maia. “How to understand the ROI of investing in People”. (August 29, 2016). LinkedIn. Retrieved April 21, 2023. https://www.linkedin.com/pulse/how-understand-roi-investing-people-maia-josebachvili/
- Ritter, Ron; Ruggero, Ed. “Leadership in innovation needs innovation in leadership”. (October 2, 2017.) McKinsey & Company. Retrieved April 21, 2023.