Poor hiring decisions are costly and time-consuming - and now there's an acute problem to be solved. How can we make the best recruitment decisions with limited face-to-face interaction?
Soft signals are in short supply. It's tough to judge a candidate's body language, their poise as they enter a room, the personal rapport built over a coffee shared in person. But, as more of the hiring process moves online, we might find new ways to measure talent. Which tools and techniques might give superpowers to hiring managers?
The search for systems of intelligence
As the transition to remote work began, we hypothesised that organisations would seek new forms of intelligence on individuals' potential and performance. Our panelists' experience bore this out. COVID-19 has accelerated startups' traction, with enterprises quick to pilot solutions like NLP-based parsing of CVs and video interviews, new psychometrics, and smart marketplaces to source remote talent.
Looking forward, this presents a large market opportunity. Morgan Stanley, citing IDC, finds that human capital software spend was about $26 billion in 2018, growing to around $40 billion in 2023. Historically, the HR tech category has been hotly contested by good workflow tools, but less so by systems of intelligence that augment the most value-adding decisions such as talent acquisition. We expect to see greenfield spend as enterprises experiment with new recruitment practices, and longer-term reallocation of budgets as legacy HR software fails to meet evolving needs.
A strong theme in our conversation was the need for a scalable approach to high-volume screening and interviewing. This problem might be exacerbated in times of rising unemployment, and rising competition for jobs. We're excited by novel approaches, such as Swyg's peer-to-peer interviewing (is the best person to rate a CFO another CFO, and would they do it?). Such products must sensitively address the risk of algorithmic bias, and considerations about the appropriate handling of personal data.
There's also promise in marketplaces or community-based products which can intelligently match employers with candidates. Kandidate and Screenable are promising early entrants. The sensitivity of advertising interest, for both employers and candidates, presents an obstacle to a fully efficient market. One of the key areas to address is the question of cultural fit: what predictive indicators of working style and team dynamics are tractable in a remote hiring process?
Historically, there have been few products that parse video interviews using computer vision and natural language processing. Products such as Retorio are now enjoying accelerated demand, offering more objective analysis of a candidate's performance. These may enjoy widespread distribution via video tools' app marketplaces, and via integrations with HCM / applicant tracking systems. Either would enable quick adoption, but might present platform risk compared with a standalone video interviewing product. Outside of video, we're excited to see products that use reinforcement learning to increase the efficacy of psychometric tests over time: Alva Labs is showing strong early promise here.
Temporary or lasting change?
One key closing question: how durable are the behavioural changes that COVID has created? We believe that the recent shift to remote hiring will have lasting effects, given some unexpected benefits. We've heard that recruitment processes are now closing faster than ever, with the overhead of physical scheduling removed. More generally, large employers are observing that productivity has remained stable amid the remote transition - not to mention the savings achievable on office space. Our panelists are quickly finding that developers with remote working experience are becoming highly prized, and timezones are starting to replace locations as a key requirement.
So if you're building a company with an elegant solution to remote hiring, we're excited to hear from you.
And, finally, many thanks to the companies who joined us for a stimulating conversation - including (but not limited to) Alva Labs, Daversa Partners, Kandidate, Retorio, Screenable, Swyg, and WeWork.
Chandar and Bart