The Death of Degrees and the rise of Company Universities

Welcome to this week’s edition! 👋

We’re going to cover:

• Traditional importance of degrees in the job market

• Companies are dropping Degree requirements

• How to adapt: a Candidate’s Perspective

• Rise of Company Training and Universities

Enjoy and let me know in the comments what you think!

Traditional importance of degrees in the job market

In recent years, there has been a significant shift in the way employers view college degrees and their necessity for certain jobs. Google famously took a big stand on this by announcing its launch of Google Certificates, which it said would be sufficient as a replacement of degrees.

What is degree inflation? In the 1980s, there was a noticeable rise in job postings requiring college degrees. This shift was influenced by globalization and automation, which placed a higher emphasis on "soft skills" and social interaction, fostering the perception that a college degree was indispensable. This was largely a response to a labor surplus, with employers raising educational requirements as a way to filter candidates.

Therefore, we’re now seeing a reverse of this trend, but it’s interesting to dig deeper and understand what’s been driving it.

Correlation with Unemployment rates - As we can see from the graph below, there seems to be a positive correlation between the unemployment rate and the education requirement in job postings. When unemployment rates are high, the share of job postings requiring higher education also tends to be high.

Some more stats:

• 46% of middle-skill and 31% of high-skill occupations experienced material degree resets from 2017 to 2019.

• Only 27% of the changing occupations were “cyclical resets,” or short-term responses to the pandemic.

• 63% were “structural resets” that began before the pandemic, indicating a permanent shift in hiring practices.

Is it science backed? Research has shown that many workers without college degrees are just as productive as their college-educated counterparts. Moreover, degree inflation disproportionately affects job applicants from Black and Hispanic backgrounds, highlighting the importance of addressing this issue for greater inclusivity. This indicates that in times of uncertainty, it’s used as a barrier to entry.

Is there any difference between skill-levels? Yes, in times of uncertainty, it seems companies have been inhibited to hire for higher skill roles as you can see from the chart below.

These changes are not universal; an occupation does not go from generally requiring a bachelor’s degree to having no such requirement overnight. Instead, some employers may retain such a requirement while others dispense with it. This evolution can become marked over time.

For instance, the degree requirement for Insurance Sales Agents decreased by 33% between 2017 and 2019, but the demand for communication skills in this field increased by over 5 percentage points. 81% of E-Commerce Analyst postings required a bachelor’s degree in 2017. In 2020, only 62% required a degree.

Role of Diversity and Inclusion: Recent changes in hiring practices around degrees can also be attributed the increased awareness of diversity and inclusion. This has been driven by both societal changes and research that has shown the benefits of having a diverse and inclusive workforce (diverse and inclusive workplace has been shown to foster innovation, improve decision-making, and lead to better financial performance).

What about Masters and MBAs?

Interestingly enough, there seems to be a different trend with Master and MBA degrees, with the former seeing year-over-year growth, and the latter in (almost) constant decline. Strongest drivers would be a) decreased mobility of students (due to Covid) b) economic context (the better the economy, the more jobs, the less higher degrees needed as we’ve seen) c) cost of programs (rise of prices, inflation) as well as the rise of MOOCs and mini/nano-degrees.

MBAs have been the weapon of choice for students to improve their soft / managerial skills, as shown by this chart:

So the question is: is there a way to substitute this? Is the online version of MBAs the same experience, and are mini-degrees going to do the same for soft skills?

Companies are dropping Degree requirements

Many companies say they have changed their requirements, by not requiring degrees. Some of the most notable have been: Google, Penguin Random House, Costco Wholesale, Whole Foods, Hilton, Publix, Apple, Starbucks, Nordstrom, Home Depot, IBM, Bank of America, Chipotle, Lowe’s.

Chart below shows how the BA+ (Higher education degrees) dropping from 2017 to 2021:

Why are they dropping this requirement:

a) They’re already hard to get in: one could argue that regardless of the university degree, getting hired at these companies can be hard.

a) They use more technology and AI to evaluate : The hiring processes can be very long and thorough, but we always need to keep in mind that the first stage of the company/candidate matchmaking happens in the application process, which is often (and increasingly) automated through the use of AI tools (inside Applicant Tracking Systems, as part of Recruiters’ sourcing tools and so on). In this initial stage, companies use technology to scan resumes and applications for specific skills and experiences that are relevant to the job, rather than focusing solely on the candidate's educational background. In today's rapidly changing business environment, the value of practical skills and hands-on experience has significantly increased and a degree does not necessarily equate to a candidate being the best fit for a position.

Also, during the hiring process, various tests and simulations are becoming increasingly common in the tech industry, as they allow employers to evaluate a candidate's technical abilities directly. Similarly, virtual reality assessments and gamified tests are being used in various industries to simulate real-world scenarios and measure a candidate's problem-solving skills and ability to work under pressure, for example:

• Gamification can be used to create simulated work environments where the candidate experiences the tasks they would do if hired. This allows recruiters to see their skills in action and get an idea of how they would approach the challenges the role presents.

• Companies are introducing interactive quizzes, company-related quests, behavioral tests, and other industry challenges to make the screening mechanism more conversational, entertaining, and meaningful.

Still, they haven’t dropped it completely: At least from the last available data (2021, not recent, but still significant) many of the big names seem to still have a prevalence of degree requirement for IT occupations. Significant differences for some roles at Amazon, Microsoft and more widespread for Accenture and IBM. Could be driven by the nature of more ‘consultant’ DNAs?

How to adapt: a Candidate’s Perspective

The shift towards skills-based hiring provides opportunities for individuals without traditional degrees or backgrounds. How can candidates leverage this trend?

Developing skills and building a strong portfolio: I wrote about this extensively in the ‘Delete your CV and join a DAO instead’ article

Network by attending industry events, participating in online forums, and connecting with professionals: Also covered in the ‘How to make Networking work for you’

Leveraging Credentialing: Super-interesting interview with the founder of Velocity Global, talking about the ‘Internet of Careers’

Company Training and Universities

Most companies are realizing the urgency and benefits of having dedicated learning and training programs, and they’re implementing them with the help of Learning Management Systems (LMS)

Lifelong learning and adaptability in the modern job market is key to stay up to date with the pace of change, but also to retain employees.

Usually this content is provided by third party experts, so it may be not fully customized and tailored to the specific company. So that’s where some have taken a further step, and started to create their own certifications, one of which has been most notable Google with its Grow with Google certifications. These include:

• Design and Development: Google Web Designer, UX design, Android development

• Project and IT Management: Google Project Management Professional Certificate, IT support, Project management, Google IT Automation Professional Certificate, DevOps Engineer

• Cybersecurity: Google Cybersecurity Professional Certificate, Cybersecurity

• Data Analysis and Business Intelligence: Data analytics, Advanced data analytics, Google Business Intelligence Professional Certificate

• Marketing and Advertising: Google Marketing Platform, Google Ads certifications, Content marketing, Digital marketing

• Google Specific Tools and Platforms: Google for Education, Applied Digital skills, Mobile

However, some are taking a bolder approach: they breed their employees in their own “Corporate University”.

A corporate university is an educational institution within a corporation that provides learning and development activities tailored to the company's needs. These universities can be online or have physical facilities just like a university campus, and employees can even obtain professional certifications at different levels by enrolling in a corporate university. Corporate universities differ from traditional training programs by providing employees with cutting-edge information to keep the company competitive. Many corporate universities are beginning to partner with traditional universities to award employees their degrees. Corporate universities represent the fastest-growing segment of the adult education market and are a response to the need for an alternative, yet efficient way to train and retain employees. There are a variety of corporate university models ranging from those that have built physical facilities to those that exist only virtually. Corporate universities help bring structure to internal training efforts and assist in aligning the training arm of companies with the organizations' strategy and vision. There are many different types of training that can be used as part of a corporate university, including apprenticeship programs. Some examples of corporate universities include Charles Schwab University, Disney University, General Electric’s Crotonville, McDonald’s Hamburger University (yes, you read that right: over 275,000 people have graduated with a degree in "Hamburgerology”), Motorola University, Oracle University, and University of Toyota.

Key benefits for the company include:

• Increases leader retention. Keeping leaders in-house is an issue almost all growing organizations face. A corporate university gives learners the chance to progress to leadership positions. The institution is also a statement that the organization is serious about grooming leaders and promoting them from within.

• Reinforces culture. An organization might be a great place to work, but onboarding and other training initiatives often don’t match the culture. A corporate university aligns with the brand and culture and helps solidify them across employees.

• Supports innovation. Corporate universities are breeding grounds for new thoughts and ideas. Why? Because their structure fosters natural discussion and collaboration among students.

• Provides complete control over how users experience content. Learners have different learning styles—some learn best through videos whereas others prefer microlearning updates sent to their phone. Because a corporate university is not outsourced, it can choose the content delivery methods that suit learners best.

TLDR;

• The current statistics highlight disparities in educational attainment among racial groups, emphasizing the need to base workforce diversity on skills, aptitude, and commitment rather than educational background.

• Some employers are beginning to reevaluate their hiring preferences, but more need to abandon outdated assumptions and assess applicants based on more nuanced criteria.

• Eliminating barriers to good-paying jobs that don't require a four-year degree is crucial for reducing labor market inequality.

• Lowering degree requirements can create a more diverse and inclusive workforce, particularly in middle-skill positions that many non-degree holders can excel in based on their experience.

• There is obviously still a strong case for degrees being vital because they can show you can stick with something, not just what you learnt, and can be the best way to build soft skills (something online and micro-degrees can’t)

• Credentialing and proof of work will be increasingly important in the future