July 8, 2025

Top 8 mistakes in skill-based recruiting in regulatory industries – and how to avoid them

Skill-based recruiting in regulated industries: Avoid these 8 common mistakes and improve your candidate selection effectively.
Person uses tablet and digital pen to review virtual candidate profiles with checkmarks – symbolizing skill-based recruiting and structured selection.
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Why do regulated industries such as finance and legal have so much to lose when they fail at skill-based recruiting? Because there is more at stake than just an empty desk.

Compared to less regulated sectors, hiring mistakes are not only linked to performance, but often also to compliance issues, liability risks, and loss of trust. At the same time, pressure is mounting: competition for qualified professionals is becoming tougher, traditional resumes are becoming increasingly irrelevant (and that's a good thing!), and digital recruiting tools promise efficiency but often fail because of the wrong processes.

Skill-based recruiting can help – if implemented correctly. However, many companies underestimate how profound the change is. As a result, well-intentioned initiatives come to nothing, sometimes with costly consequences.

In this article, we highlight the eight most common mistakes – and what you can do to avoid them.

Mistake 1: Lack of cultural change within the company

Many companies start skill-based recruiting with the best of intentions – but without a genuine rethink, aka change management. What is billed as a modern method often gets stuck at the operational level: tools are introduced, processes are adapted, and perhaps new job descriptions are written. But as long as the attitude within the company does not transform, all this remains cosmetic.

A traditional mindset is particularly strongly anchored in regulatory industries such as finance, legal, and real estate. Decision-makers rely on familiar evaluation criteria: degrees, employer brands, years of experience. Skills are asked about, but rarely prioritized consistently. Those who focus on skills anyway often have to fight against old patterns. This slows down the process and undermines its effectiveness.

Skill-based recruiting only becomes truly successful when it becomes part of the corporate culture – supported by leadership, HR, and specialist departments. It requires a willingness to share responsibility, objectify evaluations, and break away from seemingly safe selection criteria.

Without this cultural change, every skill project will be nothing more than a facade (Deloitte 2023; HR Morning 2024).

Mistake 2: Overestimating tools – underestimating the process

The market for digital recruiting tools is booming. Matching software, skill tests, automated shortlists – everything seems measurable, efficient, and scalable. But in regulatory industries in particular, this leads to a dangerous fallacy: that technology can replace cultural change.

The tools help when they are applied to clear processes. In reality, however, they are often introduced without defined skill profiles, without the involvement of hiring managers, and without a common understanding of how skills should be assessed. This does not lead to objectivity, but rather to algorithmically accelerated gut feelings.

Skill-based recruiting is not a tool upgrade. Again, it is a process and structural change. Without clean skill mapping, without an evaluation framework, without feedback loops, the effect of even the most modern platform will fizzle out. This is especially true when compliance requirements or legal regulations must be taken into account, such as in the financial or real estate sectors.

Digital tools don’t replace a strategy – they need a clear, well-thought-out strategy to reach their full potential (TestGorilla 2023; BankingHub 2024).

Mistake 3: Lack of compliance integration

Skill-based recruiting sounds progressive – but without integration into existing compliance structures, it can also become a risk. Strict requirements apply, especially in regulatory industries: documentation requirements, traceability, equal treatment, data protection. Anyone assessing skills in this area needs robust processes and legally compliant structures.

Many companies overlook this. Skills are assessed, but not systematically documented. Assessment criteria remain vague. Interviews are weighted individually, but not made comparable. This not only jeopardizes fairness, but also the legal security of the selection process.

A professional focus on skills can even help to strengthen compliance – if it is implemented in a traceable, standardized, and transparent manner. This requires structured assessment systems, clearly defined roles in the selection process, and ideally digital tools that are compatible with existing governance requirements.

In highly regulated markets, skill-based recruiting is not a creative freedom – it is a set of rules with potential (BankingHub 2024; Deloitte 2023).

Mistake 4: Unclear competency profiles and assessment frameworks

Without precise competency profiles, skill-based recruiting remains a buzzword. But this is precisely where the problem lies in many companies: there is a lack of clear definitions of how a role can be translated into measurable skills – and how these skills should be assessed fairly and comparably.

Instead of structured competency catalogs, vague requirements dominate: “teamwork,” “strong communication skills,” “analytical thinking.” But without operationalization, such terms remain open to interpretation – and therefore open to attack. What does ‘analytical’ mean in the legal field? How is “communication” assessed in real estate valuation?

A professional assessment framework creates comparability. It separates must-have from nice-to-have skills, offers scales instead of gut feelings, and allows objective decisions to be made – even across different locations or departments. Not only is this fairer, it is also auditable and compatible with modern tools. (PALTRON 2023; Deloitte 2023).

Mistake 5: Job ads without a focus on skills

If you are serious about skill-based recruiting, you have to start with the job ad. But this is precisely where the focus on skills is often undermined. Instead of transparent competency requirements, you will find long wish lists, rigid training profiles, or irrelevant benefits.

Many ads are not focused on skills, but on career milestones. They are looking for “the ideal candidate” – with x years of experience, a degree from a specific university, and industry knowledge, often without any reference to the skills that are actually required.

This not only deters suitable applicants, it also contradicts the goal of equal opportunity. 

If you want to focus on skills, you need clarity: Which skills are critical for success? Which ones can be trained? And how do the requirements for senior and junior roles differ?

A skill-based ad can be recognized by the fact that it is inviting, differentiated, and comprehensible (PALTRON 2023; TestGorilla 2023).

Mistake 6: Incorrect expectation management among hiring managers

Skill-based recruiting often fails not because of HR, but because of the specialist departments. This is because hiring managers are used to focusing on degrees, career paths, and previous positions. The shift toward skills requires them not only to develop a new understanding of assessment, but also to trust a changed selection process.

A lack of coordination between HR and specialist departments leads to friction. HR provides skill profiles that are not understood or accepted. Specialist departments ignore them, make decisions based on gut feeling – and the new system loses credibility. In regulatory industries in particular, this can lead to serious delays if compliance requirements or internal approval processes are affected.

If, on the other hand, expectations are clarified at an early stage, roles are redefined, and specialist departments are actively involved in defining competencies, a common understanding emerges. This is precisely what determines whether skill-based recruiting is supported or undermined.

Without appropriate training and involvement of hiring managers, cultural change will fall by the wayside (HR Morning 2024; Deloitte 2023).

Mistake 7: No diversity filter in skill selection

Skill-based recruiting promises greater objectivity. However, this effect only occurs if the selection of skills itself does not reproduce existing prejudices. This is exactly what often happens – unconsciously and structurally.

Example: If a company defines “presentation skills” as a core competency for a role without checking whether this skill is really critical to success, it automatically favors extroverted, linguistically dominant candidates. Such requirements appear neutral, but they are not. They often reflect existing team structures or personal preferences, not actual requirements for the position.

In highly regulated industries with little diversity in top management, there is a particular risk that skill profiles will reinforce existing biases rather than reduce them. Without conscious review – for example, through diversity checks or external sparring partners – the promised equal opportunity remains a theory (Deloitte 2023; TestGorilla 2023).

Mistake 8: Lack of evaluation & feedback loops

Many companies introduce skill-based recruiting – and leave it at that. What is missing is a real system for monitoring success. Which skill profiles have proven themselves? Which skills were prioritized incorrectly? Which tools work – and where are the blind spots?

Without feedback loops, the process remains rigid. Departments do not report back on how new colleagues are performing. HR measures time-to-hire, but not long-term fit or development. And so mistakes are repeated – systematically, but unintentionally.

This gap is particularly risky in regulatory industries. Bad hires are expensive, legally tricky, and damage internal acceptance of new approaches.
Those who rely on skill-based recruiting need not only good processes, but also robust mechanisms for continuous improvement.
Skill focus means not only selection, but also reflection – repeatedly, data-driven, and structured (HR Morning 2024; Deloitte 2023).

Conclusion & outlook: Using skill-based recruiting as a competitive advantage

For regulatory industries, skill-based recruiting is an opportunity – but also a risk if implemented half-heartedly. The eight mistakes described above show that failure often begins where you think you are already modern.

Those who take the focus on skills seriously stand to gain a lot – companies gain transparency, increase accuracy and promote genuine equal opportunities.

But the key does not lie in tools or templates. The decisive factor is attitude – and the willingness to rethink recruiting. This means involving specialist departments, clearly defining skills, considering diversity and making processes measurable. Those who succeed in doing so turn recruiting into a real lever for value creation.

This becomes a clear advantage, especially in complex, regulated markets.

Skill-based recruiting requires more than tools—it requires industry knowledge, compliance expertise, and digital precision. Numeris Consulting brings all of this together. For companies that don't delegate responsibility, but fill positions in a targeted manner. Contact us.

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