Practical guide to modern competency-based recruitment

Recruitment, AI and HR in the Hospitality Industry · Post #5 of 90

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Practical guide to modern competency-based recruitment

The use of AI in recruitment has increased dramatically in recent years. Today, around 90% of companies use AI tools, for example, ‘to draft job advertisements, and more than half also use them to prepare for interviews’ or for matching processes. (Source [accessed on 17/03/2024 at 11:41]: https://www.dgfp.de/aktuell/recruiting-strukturen-2025-recruiting-wird-strukturierter-datengetriebener-und-technologischer ?) 

However, many of these systems still primarily use keyword-based rather than skills-based recruiting. I have already written about the differences, advantages and disadvantages in previous blog posts. I have also written about the risks, especially the risk that good candidates are simply overlooked. Today, I would like to provide practical guidance, but not without first considering a few other aspects.

‘Recruiters typically spend less than a minute on each CV when deciding whether it is worth continuing the recruitment process with the applicant. They focus on keywords, and it is almost impossible to ensure a fair selection process.” (Source [accessed 17/03/2026 at 11:49]: [1606.05611] Data-driven HR – Résumé Analysis Based on Natural Language Processing and Machine Learning) 

In contrast, 95% of recruiters surveyed in a LinkedIn report as early as 2023 stated that skills transparency is crucial for making a good decision and therefore for hiring. (Source [accessed 17/03/2026 at 11:53]: The 2023 Future of Recruiting Report | Hiring on LinkedIn)

Between 2020 and 2024, the proportion of companies using skills-based hiring increased from 40% to 60%. (Source [accessed on 17/03/2026 at 12:03]: Skills-Based Hiring for Improved Recruitment) 

However, the results of the aforementioned study also revealed that, at first glance, the opportunities and risks of this skills-based candidate identification process are balanced. However, a skills-centric approach does result in a better fit for new employees (both in terms of suitability for the tasks and responsibilities of the new role and in terms of cultural fit and team integration), promotes diversity in the organisations that adopt it, and shortens recruitment cycles. However, for skills-based recruitment to deliver these results, a clear skills architecture, unambiguous rules on data protection and process transparency, appropriate resources (in terms of staff and the need for suitable tools), and rigorous change management are required.

Nevertheless, the reality on the ground is different, and what many applicants experience today results in a self-inflicted shortage of skilled workers and ‘whinging’ about the quality of applicants. Certainly, both of these concerns are entirely valid in the debate about finding the ‘right’ person for a particular role. But what about the quality of the businesses or companies themselves? What about the skills profile of the departments and managers responsible for selecting candidates? I won’t be addressing this question today, but I will certainly return to it at another time. Today, in response to the many requests I have received via PM, I need to clarify first of all how I can move from keyword-based to competency-based recruitment, and how I can potentially measure success even more effectively than using the familiar metrics that have already been discussed. 

A step-by-step guide:

1. Rethinking roles: competence instead of title

Old: ‘5 years of experience as a Marketing Manager’

New: ‘Able to plan, analyse and optimise campaigns independently.’

Building on this, it is important to define 5–10 core competencies for each role, covering both hard and soft skills. Here are some examples:

• Hard skills: Excel, programming, Python, Project Office, etc.
• Soft skills: communication, empathy, ...

2. Establishing a skills framework (creating a competency framework)

In Step 2, it is then determined which competencies, i.e., skills, are absolutely essential, which are desirable, and which are ‘nice to have’ – i.e., which competencies would be welcome but are not actually relevant for fulfilling the role. Therefore, this involves prioritisation, which is then accompanied by determining the required level of knowledge or proficiency. Here is another example:

• Python
  • Level 1: Basics
  • Level 2: Own scripts
  • Level 3: Production applications
  • ...

This is called a skills architecture. And this needs to be established or developed for each individual competency. 

3. Revise job advertisements

Redraft your job advertisements. Move away from qualifications and buzzwords and focus on specific tasks and measurable skills. Example: ‘You are able to analyse data and use it to make recommendations for action.’

4. Change the selection process

Replace – or at least supplement – traditional CV reviews with case studies, work samples, simulations, structured interviews, or responses to key questions relevant to the advertised role. 

5. Improve matching

The AI – whether it’s the software program, the app, or whatever is being used – now needs to be ‘fed’ with the competencies, i.e., just as in the job advertisement, the concise keywords previously associated with the role and the requirements profile need to be replaced by the competency architecture and corresponding short descriptions. 

6. Redefine KPIs

It is not only important to collect key performance indicators (KPIs), but also to place them within the company context and interpret them correctly. In many companies, the ‘time-to-hire’ KPI dominates. When asked, experienced recruiters consider this very KPI to be irrelevant (on its own). They consider the cost of vacancy to be much more important; however, according to the DGFP study linked and cited at the beginning, only 10% of companies even record this metric. 

What is cost of vacancy?

Cost of vacancy refers to the costs incurred by a company as a result of unfilled positions. These costs include, for example, overtime worked by other employees who have to take on at least some of the duties of the vacant position; sick leave costs resulting from the absence of those same employees who suffer from stress-related psychosomatic or physical illnesses; sales and production shortfalls because there are not enough employees to ensure smooth operations; and the resulting loss of revenue. The factors included in the calculation of vacancy costs can vary significantly depending on the sector and the company. Given the difficulties of comparison, it is therefore almost impossible to establish a guideline or average figure. The calculation clearly shows the financial impact of unfilled positions within the company and therefore helps to inform decisions on possible measures to minimise the damage. 

A practical example:

A hotel business is taking a very long time to fill a vacant position in the kitchen. They are looking for a junior chef. The remaining team is already working part shifts, although this was ruled out at the time of recruitment or defined as an absolute exception. A six-day week has now become the norm. A chef from the already reduced team falls ill. Due to the high level of stress and the ongoing split shifts, their immune system is compromised, and a mild cold develops into full-blown flu, or even pneumonia. The chef is out of action for at least six weeks. It is impossible for the remaining team members to cover for him, especially since they are also unwell. For a short period, the business tries to keep its head above water by using catering services and orders the lunch buffets from a local company. For the evening service, the business tries to ease the workload by increasing the use of convenience products. Both catering and convenience products increase the cost of sales and cause it to skyrocket. Dissatisfaction spreads among the remaining team members – they joined the company to cook creatively, not to open packets and tins. At the latest, when the first staff member wants to take the holiday they requested and were granted months ago (and which they also need after weeks of extra workload), this makeshift arrangement collapses. Losing another team member either leads to (mental) resignation, if the chef in question is told that the restaurant would be grateful if they postponed their holiday. In the short or medium term, at least one more position will then be vacant. Hired chefs are far too expensive and, moreover, scarce. The hotel restaurant has to close on certain days or evenings, or is no longer able to accommodate conference groups for lunch. This example could certainly be expanded to include other aspects and consequences as desired. 

How are vacancy costs calculated?

The above example shows how diverse the factors that can be included in the calculation of vacancy costs can be. At this point, therefore, we will consider the basic formula. However, every company should ask itself what other costs need to be taken into account – for example, cancelled conferences or lost revenue in the evening service, as well as increased costs of goods sold – in order to get a clear, concrete picture in black and white of how much a vacancy really costs a company or business.

The basic formula is:

Cost of vacancy (COV) = (gross annual salary in euros ÷ average number of working days in Germany) × importance factor of the role × number of days to fill the role (time to hire)

Here, the importance factor refers to the significance of the role within the company, based on criteria such as strategic relevance, (managerial) responsibilities, etc. In a simple system (which, again, needs to be tailored to the specific business context and adjusted accordingly), a distinction is typically made between three factors:

• Factor 1: Entry-level positions and/or unskilled roles
• Factor 2: Full-time positions without managerial responsibility
• Factor 3: Managers and specialists

Sample calculation:

The junior chef position is budgeted at EUR 3,750 gross per month. This gives an annual salary of EUR 45,000. According to the list above, the importance factor is 2. The position cannot be filled for more than 130 days. 

EUR 45,000 ÷ 250 working days (current average in Germany; 248.1 days to be exact) = 180

€180 x (factor) 2 = €360

€360 x 130 days until the position is filled = €46,800

Therefore, in this simplified example, the 130 days during which the position remains unfilled cost the company €46,800, i.e., €360 per day. This is in addition to the losses caused by the restaurant closure, increased cost of sales and the cancellation of conference bookings, and potentially further resignations because the rest of the team cannot cope with the stress. This also includes costs incurred to ‘compensate’ dissatisfied customers (quality of the food served, time from ordering to service, etc.).

Applying this to the practical example above, you should now, as already mentioned, take a more focused look at the relevance of the individual roles within your own business, possibly also defining additional factors, and thereby carefully consider which roles the business depends on in what way. However, this also means expanding and scrutinising the individual roles and their importance within the business, taking into account the structure, focus, target group and team composition (and possibly other relevant factors). This, in turn, provides a clear picture of the skills required, which brings us back to our initial topic. 

However, we have also touched on another issue: that of salaries in the hospitality sector. I will also address this topic in greater depth in this blog, but in more detail elsewhere. Just a brief food for thought in this immediate context: if I have a candidate sitting in front of me who wants to earn €250 gross more per month, and I turn them down because their salary request does not fit my budget, then I am not thinking about the issue broadly enough. In that case, I am not keeping the COV in mind; as a manager, I am not sufficiently aware of the consequences of not filling the position; and I have not calculated the daily financial loss caused by the vacancy. 

Finally, a word on the applicability of this to small and medium-sized businesses.

Yes, the effort required to find workers today – and not just skilled workers – is greater than it was a few years ago. This is probably why many employers pull job descriptions out of a drawer that – to put it bluntly – were drawn up twenty years ago. It is likely that they spend no more than a minute selecting or reviewing applicants and their applications in advance – significantly less time than they spend choosing the ingredients for the dishes on the evening menu. Yes, increased bureaucratic burdens in the hospitality sector also tie up resources. However, cutting these costs in the recruitment process is probably the least effective approach. And it is important to bear in mind that the effort required on the part of applicants is also significantly greater. Today, writing a CV and a suitable cover letter or statement of motivation is often reminiscent of website optimisation, SEO discoverability and similar areas of activity. Here, too, a lot has changed (thanks to AI). AI can be a useful tool; ultimately, it makes our personal and professional lives easier in many areas. However, it is always only as good as the input we, as humans, provide. Conversely, this means that we can also carry out many processes in a different way – manually – but not quite as efficiently and effectively as a high-performance computer. Small and medium-sized businesses do not have to purchase their own apps or software programmes. They can use freeware or rely on the tools that major job portals already have in place. Or they can simply rely on their own experience, intuition and the necessary focus.