Rise of the Staffing & Recruiting Machines: The Rush to AI-driven HR Technology

Part 1: Ever since John McCarthy coined the term “Artificial Intelligence” in 1955, we’ve been alternately fascinated (“Hello, Siri”) and dismayed (“I’ll be back”) by what AI may offer or foreshadow. How will AI impact the staffing and recruiting industry over the next twenty years?

A new “industrial-age” of AI-based business disruptions?

AI (artificial intelligence) and its impact on staffing and recruitingThe industrial-age leveraged the use of fossil-fueled mechanical power to enable more work to be done by fewer people. It also brought with it major disruptions in virtually every industry. Wherever there was an opportunity to reduce the cost of goods, or speed delivery, or improve quality, machines were invented that were better at performing those tasks and replacing people in the process.

We are now well into the information age, and the use of machines capable of being programmed to emulate even more human-like functions has led to advances that extend those industry disruptions. Intelligent automation is capable of replacing virtually any human activity comprised of repeated steps, as it has in robotized manufacturing. It seems that only in economies where the cost of labor is lower than that of the necessary automation can humans still be found on many manufacturing lines.

But there is more on the horizon. As the cost of computing power decreases, and the power of AI-based software and big-data analysis increases, more and more “human-only” jobs will be targeted for replacement to improve efficiencies and reduce costs. While we may be decades (or even centuries) from a true “Strong AI” capable of human-like thought, “Weak AI” or Applied AI is with is today. Apple’s Siri, Microsoft’s Cortana, and IBM’s Watson are all examples of Applied AI systems.

Siri and Cortana may be pretty good “virtual assistants,” for your smartphone but they pale in comparison to what Watson is doing right now. After crushing top human Jeopardy players, Watson is now focusing on industries where its capability for analyzing unstructured data (a particularly “human” skill) can be put to good use.

Backed by billion-dollar-plus investments, Watson is the centerpiece of a new IBM business unit, Watson Health, that has partnered with Apple and major healthcare players to set the lofty goal of leveraging Watson’s cognitive capabilities to create “new health-based offerings that leverage information collected from personal health, medical and fitness devices” providing “better insights, real-time feedback and recommendations to improve everything from personal health and wellness to acute and chronic care.”

That’s all well and good – we will all be better served with lower cost and more accurate delivery of healthcare – but really, how seriously should we take AI systems?

Really seriously. That business recognizes the potential opportunities that Applied Ai represents can be seen in the investments being made in AI. “The way software is eating the world today, well, AI will do that to software,” says Amir Husain, CEO of Spark Cognition, an AI security startup in Austin, Texas. In 2014 alone, startups developing artificial intelligence systems saw a 302% increase in funding, and since then there has been a constant stream of announcements about new AI applications or investments.

For example, Elon Musk and partners are investing a billion dollars to establish an “Open AI” not-for-profit foundation whose goal is to develop AI system technology – and then give it away to anyone who wants it. And it’s not just startups who are investing. IBM, Apple, Microsoft, Intel, Facebook, Google, and Amazon are among the big players who have announced (or have rumored) big investments in AI.

Applied AI will have a big impact on staffing and recruiting

Similarly, and more relevantly to staffing, recruiting, and HR practices, massive investments in AI and related HR technologies are being made here as well. In 2014 $1.9 Billion was invested in HR technology and venture-backed investments were on track for $2.8 Billion in 2015. Who knows what 2016 will bring?

The promise of AI or similar technologies that might improve the efficiency of hiring is not lost on staffing companies. For example, Recruit Holdings, one of the top staffing enterprises in the world, is investing in technology startups through its subsidiary Recruit Strategic Partners. Its focus is on investing in innovative startups from all around the world to support their companies. HackerRank is one of these startup investments, and HackerRank is using AI to create and develop “gamified” coding challenges for software programmers as a candidate sourcing tool.

Somewhat like Watson, another startup, Connectifier, (recently acquired by LinkedIn) solves the recruiting headaches of out-of-date candidate information, using AI to build meaningful candidate profiles from unstructured data and then matching job requirements to candidates with desired skills.

As HackerRank, Connectifier and other point solutions prove, there are plenty of opportunities for AI to improve on recruiting efficiency, such as providing recruiters with AI “virtual assistants.”

In fact, it’s apparent to some that AI will be a foundation for recruiting with semantic search, people data analytics, real time monitoring of performance and behavior, augmented reality tools to assist during interviews, and decision making aided by “cultural fit” analysis.

And that’s all great to hear. Faster, more efficient, more accurate, better fitting, (and less costly) recruiting and staffing of talent.

But will AI systems replace recruiters, staffing coordinators, sales representatives, or me?

What about all the jobs in a typical recruiting or staffing office? How will AI impact those jobs in recruiting, sales, or even management? Jobs that presumably require more thoughtfulness, creativity, intuition, or people-skills?

AI Disruption AheadFrankly, recruiters and many other recruiting and staffing agency jobs are not safe from the efficiencies that may be delivered by Applied AI systems.

Of course, staffing and recruiting agency personnel aren’t alone as targets for AI replacement. Almost half of all jobs in the Western world (47%) could be automated by computers within the next two decades according to research by The Economist and researchers from the University of Oxford’s Martin Programme on the Impacts of Future Technology. Even management positions are a target for AI-based systems. In just five to 10 years, AI-based systems will likely be able to do many managerial tasks more effectively than humans, says Bob Thomas, the managing director of Accenture Strategy. “We are entering a different kind of technological era,” he says — one in which robots play a much bigger role at work.

But there are caveats. The “low-hanging fruit” for AI systems are jobs that are by their nature repetitive and analytical. As the research points out, human social intelligence is important in a wide range of work tasks, such as those involving negotiation, persuasion and care. These are areas of human capability that are very relevant, but not critical, to staffing and recruiting – as they center on person-to-person communication and relationships. Yet these, too, are valid targets for Applied AI. To aid the computerization of such tasks, active research is being undertaken within the fields.

In analyzing the AI-based job replacement potential, the research indicates that service, sales, and administrative support are most likely to be replaced by AI systems in the next two decades. Not surprisingly, those coincide with the job titles and roles for most of the internal staff at staffing and recruiting agencies.

So, yeah. If you’re working for a staffing and recruiting agency, you may be replaceable (or at least significantly augmented) by an AI system in the future. But there’s a lot more to it. Stay tuned.

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Part two: “Rise of the Staffing & Recruiting Machines: No (Human) Recruiters Needed” explores how AI-based systems might change today’s staffing and recruiting industry model.

Phil McCutchen is a B2B software marketing professional with 25-years of experience in the staffing and recruiting industry. The observations and predictions presented here are based on his own research and future thinking and represent his own opinions.

15 Signs You’re Working With a Staffing Software Leader

Think about the very best staffing software you’ve ever used.

15 attributes of a staffing software leaderMaybe (hopefully) it’s what you’re using today. Maybe you’re a bit wistful about some software you used previously. (I’ll admit that I sometimes miss the simplicity and ease-of-use of MacDraw.) Or maybe you’re fantasizing about (or actively working toward) the NEXT staffing software you’ll buy.

Regardless of what that software was/is/will-be, the very best staffing and recruiting software vendor for your agency will probably have these 15 key attributes.

1. They Share Their Vision

The most important thing a software vendor can do is share with you their goal – vision – for what the software will do for your business now. And in the future. A great software vendor will advocate for something worthy that you, too, can enthusiastically embrace. They will ensure that they communicate that vision effectively and often.

2. They Develop – and Extend – Their Expertise

Nothing is more detrimental to the continuing success of your agency than being chained to a software vendor who doesn’t truly understand your changing agency needs. They have to demonstrate exceptional competency at all levels of staffing, recruiting, agency practices, and how all of that is impacted by technology if you expect them to provide leadership and vision.

3. They Respect Your Time

Great staffing software vendors understand that software exists to solve problems. And the single most important problem to be solved in any staffing and recruiting agency is time management. Every second counts. And how their software works should reflect that thinking.

4. They Set Priorities

When your staffing and recruiting software vendor tries to focus on everything, they’re probably not focusing on your business. Just as your own staffing agency can achieve higher profit margins with a focus on niche staffing, so too will you benefit from a staffing and recruiting software vendor who is focused completely on your industry.

5. They Share Information

With some staffing and recruiting software vendors, it seems that the only time you hear from them is when they bill you. Or when you call for support. It seems like they’re keeping you in the dark about their business and how it might impact yours. There are legitimate reasons to control the timing of information sharing, but overall the more transparent a staffing software vendor is, the better it is for the partnership and relationship.

6. They Make Decisions

Frequently, staffing and recruiting software vendors may explore new technologies that seem appropriate for your agency, yet be slow in the development of the new tech. Regardless of the reasons (and there are many that can impact development), a great staffing software vendor will recognize when it’s time to act and go all-in or fold ‘em on some new tech.

7. They Demonstrate Empathy

Great staffing and recruiting software vendors are able to see things through your eyes. They will seek to truly understand the things that keep you up at night. And will want to fix it. ASAP.

8. They Offer Thanks

Building a culture of gratitude starts at the top. If your staffing and recruiting software vendor doesn’t take time to offer thanks to you for your ongoing business, why should you continue to do business with them?

9. They Pull Everyone Together

A great staffing and recruiting software vendor recognizes the talents, skills, and expertise of customers like you, and strives to work with you in a way that maximizes your combined effectiveness and ultimate success.

10. They Ask Smart Questions

Staffing software vendors that double-check their assumptions sends the positive message that they know that they don’t know everything. They aren’t willing to accept that things should be done a certain way just because that’s how they’ve been done in the past.

11. They Sell Thoughtfully

Let’s face it; your agency may not be the best fit for a particular staffing and recruiting software. After all, most can trace their development roots to a staffing and recruiting agency with a particular focus or mind-set that just might not fit your agencies’ business model. The great staffing and recruiting software vendors will let you know that before you’ve wasted much time trying to convince yourself otherwise.

12. They Accept Blame

Principled staffing and recruiting software vendors accept blame for their failings. Maybe they don’t dwell on it, but they accept it. Great staffing and recruiting software vendors look to change their software and/or business processes to fix the problem(s) and move forward.

13. They Communicate Effectively

No mumbling, no backpedaling, no long awkward silences. Great staffing and recruiting software vendors find the words to explain what they mean — and they back up what they say.

14. They Model Ethical Behavior

Trust is the single most important currency between people – and businesses. Great staffing and recruiting software vendors demonstrate an iron-clad adherence to ethical and moral business practices and processes.

15. They Strive for Excellence

Because really, who wants their staffing and recruiting software to simply be adequate?

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© Phil McCutchen, 2016 | Phil McCutchen is a B2B software marketing professional with 25-years of experience in the staffing and recruiting industry.

Three Tips to Help Staffing and Recruiting Agencies Ride the Market Coaster

The markets have been on a roller coaster of late. Mostly down. Maybe even a little scary.

3 tips to help staffing and recruiting agencies ride the market roller coaster successfullyIt has some thinking that a bear market, or worse, a recession, is near. For staffing and recruiting agencies coming off a very good year and looking forward to another, it may be a big concern. Especially as the staffing industry tracks the ups and downs of the economy closely.

But whatever is happening in the market, it’s your attitude, preparation and action that determine your ability to succeed in staffing and recruiting. A positive personal attitude and culture within your agency arguably plays the most important role in your success. Even so, here are three areas to focus on that can help you and your agency weather the ups and downs of business.

ONE: Review Often and Build Efficiency into Your Staffing and Recruiting Operations

When orders are plentiful and your profits are solid, it’s often easy to tolerate business practices and workflows that deliver only marginal profitability. But when incoming orders slow to a trickle, poor business practices can hurt profits.

You’ve probably worked hard to build efficiency into your organization. But a regular re-appraisal of your operations and how you might be able to tighten up your practices can help wring more profit out of every transaction.

Begin by making it an action item to get your team together on a recurring basis to review the steps of successful sales and order fulfillment transactions.

Your sales process is probably the first place to look for inefficiencies. Dave Stein, CEO and Founder, The Stein Advantage, Inc., a sales training firm, says, “When we ask sales leaders, general managers and CEOs whether they have a sales methodology and if sales people are compliant in its use, the answer is often disappointing. Many respond saying they have no methodology; but that’s really not the case. Their situation is, in fact, far worse. What they have is possibly the same number of methodologies in place as the number of sales people.” If your staffing and recruiting firm has similar inefficiencies, you can almost certainly figure out how to cut a step or two out of the sales process or execute faster or with better service to the customer.

Perhaps most importantly, become a believer in running your business “by the numbers.” Your key performance indicators (KPI’s) on all your agency operations and your staff should be measurable and actionable. Get a deep understanding of what your agency costs are for everything from sourcing candidates to billing customers. Develop a culture that focuses on quantifiable levels of staffing and recruiting service quality and your customers will look to you to fill their orders.

TWO: Build Long-Term Value into Your Staffing Agency

Building a staffing or recruiting agency is somewhat like building a well-performing stock portfolio for your retirement. Strategically speaking, you don’t focus on next month or next quarter, you focus on highly consistent performance over five years, ten years, or more. If you make your portfolio choices based on that consideration, odds are that you can rest easy in its long-term performance.

Likewise, your staffing and recruiting “portfolio” should focus on delivering similar long-term performance and value. Jim Childs, of Childs Advisory Partners, a veteran of the staffing industry as a CEO and investment banker, notes five strategies for value building:

  1. Develop niche leadership. “Niche companies are always more valuable than generalist companies,” Childs says.
  2. Focus on specialties and higher gross margins. Childs points out that, “The specialty players can have gross margins well over 30 percent due to their specialty focus and their mix of permanent placement revenue.”
  3. Avoid customer concentration. Childs notes that having a big account can be “a high-class problem to have. The trick is to create urgency in the organization to build around this anchor account.”
  4. Build a deep management team. Childs says, “It’s vital to build a deep management team that can drive the business so that it is not overly dependent on one or two people, including the owner.”
  5. Keep building real client relationships. Childs states, “Over time, your model needs to have deep, long-term client relationships to really get a premium in the marketplace.”

THREE: Stick to Your Business and Focus

What, exactly, is your business? How, exactly, do you differentiate yourself from every other recruiting and staffing firm out there? Does every member of your staff understand and believe in the answers to these two questions? You must clearly define the very specific core competencies that are at the heart of why you’re in business.

If you haven’t done so already, write down your business purpose your mission. Frankly, you should be able to put this on the proverbial napkin. Analyze what it means and what it takes to support your mission successfully.

Let’s say that your mission statement is: “We find and place skilled information technology professionals into contract assignments with Fortune 1000-level businesses.” If this were your mission, you would list everything you must do to support the success of the mission. Things like recruiting IT talent through college and university programs and related business and social networks. Then you’d make a second list that includes everything else you have to do that doesn’t really support the mission; like cleaning the office or having staff to maintain an on-premise IT system or handling all of your own payroll and billing.

You must focus on your core competencies. That means that everything that is not central to the success of your business are things that you should consider eliminating, streamlining, or outsourcing. Remember also that focus means NOT chasing every order that might come along. I know, the desire to fill any order from a valued customer is strong. But if it dilutes your ability to deliver on your mission, it also dilutes your ability to maintain quality service and higher profit margins.

Continuous Improvement Equals Continuous Profitability

W. Edwards Deming, the statistician credited for helping Japanese businesses become powerhouses of quality, performance and profitability, said that “Long-term commitment to new learning and new philosophy is required of any management that seeks transformation.” Savvy staffing and recruiting agency owners and managers will take those words to heart and reap the rewards. Equally importantly, you may just learn to enjoy the coaster ride.

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