Winning the War for Talent with Digitalization

Applying digital solutions to HR recruiting processes

1. The War for Talent Enters Round Two

“Hiring the best is our most important task.” This quotation from Steve Jobs dates back to 1989, and it has not diminished in relevance since then. Ex contrario: Recruiting skilled employees has never been more difficult than it is now, which is why the identification and selection of suitable employees has acquired absolute priority for companies. Demographic change has exacerbated the shortage of skilled employees and manpower. Although these challenges do not represent new events, but instead have shaped the discussion within the personnel sector for years under the rubric “war for talent,” these themes have become highly topical against the backdrop of advancing technical developments and have heightened recruitment industry pressures of competition, innovation, and cost.

One of the central challenges of HR departments in the digital era is the efficient use of digital solutions, in order to succeed in the war for talent and recruit the best employees at a tenable cost. Within this context, a quantitative performance measurement of new HR tools and channels will become increasingly significant in order to justify investments through KPIs. This is a methodology that has not yet been established in many personnel departments. However, it is only in this manner that it is possible to measure efficiency and efficacy over the long term and successfully coordinate the recruitment process.

2. Status Quo of Digitalization in Personnel Departments

As a key value driver, the resource "employee" determines productivity, customer focus, and innovative ability, and with it, the future viability of companies.

Against this background, the personnel department is entrusted with the central task of organizing and administering the company's employees. According to current studies, the human resources sector has a lower degree of digitalization than other corporate functions, despite the fact that digitalization will have a strong impact on human resources management in the coming years. The greatest changes will occur in recruitment, administrative and managerial tasks and functions, and personnel controlling. 

In addition to the aforementioned challenges, HR also faces a paradigm shift in societal values and behavior. With the megatrend of individualization, the demands of employees have evolved from the principles of "living to work" and "working to live" of the baby boomers and Generation X to "living first, then working" and "my life, my work" of Generations Y and Z. This has led to the necessity for human resources departments to make greater efforts to attract employees as innovative and pro-competitive resources. The significant power reallocations between employers and employees - from a demand market to a supply market for employees - have compelled HR departments to refocus from a strategic perspective.

Up until now, recruitment has often been governed by the principle known as "post and pray," under which job advertisements were disseminated across various print channels and, since the 2000s, online channels, in the expectation that suitable candidates would apply. This methodology - short-term, strongly ad hoc and activated only at a late stage - does not consider the radical transformation and increased complexity within the recruiting sector. In this way, recruiters cannot successfully compete for relevant candidates. The technological evolution and increased use of digital formats has displaced long-established recruitment channels into a niche existence.

3. Challenges, Call for Action, and Innovative Approaches

Expert interviews with 12 personnel representatives from a extensive range of companies (different sectors and company size classes) have led to an initial assessment of the current level of digitalization in German personnel departments. A comparison of current and targeted levels of digitization in the HR departments and the recruitment process illustrates the great need to regain lost ground in the recruitment process.

Even though some companies have already digitized standard processes in internal administration, and digital personnel files have become widespread, for example, interviews revealed that significant aspects of personnel work and the recruitment process are still carried out analogously. Many companies surveyed, for example, continue to regularly use manual printouts of applications received by e-mail. These and other circumstances sometimes lead to a very prolonged process with negative repercussions on the success rate if the applicant decides in the meantime for a different offer. The concept "time to market" is also a decisive competitive advantage in recruitment.

Moreover, it can be seen that digitalization has mainly found its way into the internal processes of the recruitment process. By contrast, the interface to applicants has not yet been digitized in many companies to the same extent. Although e-mail applications and digital job platforms are standard, job interviews, assessment centers, and initial interviews are still often conducted analogously.

Yet on the whole, it can be stated that cloud-based solutions or software-as-a-service offerings are also increasingly being used in the area of personnel recruitment. It is not possible to establish a direct correlation between the size of the company and the degree of digitalization in human resources management. Rather, the hypothesis has been confirmed that companies that have made greater strides in their digital transformation also demonstrate a higher level of digitalization in the personnel departments.

The significant deviation between the actual and target status in the recruitment process illustrates the need for action that has been identified by the experts.

When asked about the targeted increase in the degree of digitization of personnel tasks, approximately 60% of the experts surveyed cited the most relevant motive to be the increase in efficiency that results from saving time and/or costs within the scope of automating and standardizing formerly analog processes. In addition, some 30% view effectiveness targets, such as identifying the most suitable employees, as the main driver for digitalizing their personnel and recruitment work in the era of the war for talent.

The topic of artificial intelligence will also become increasingly relevant for recruitment in the future. Whereas smaller companies (< 500 employees) rely primarily on digitalization solutions to identify qualified employees, larger companies are especially in search of support in analyzing and assessing a sizeable number of evaluations. Overall, comprehensive offerings (e.g. job applicant tracking systems, online job platforms, and/or active sourcing tools such as XING Talent Manager) have also taken hold.

A practical approach to innovative recruitment solutions is provided by startups that offer versatile solutions for recruiting employees. A scan of approximately 80 startups revealed a high number of distinct digital solutions throughout the entire recruitment process - including platforms for connecting employees and employers, chatbots for holding selection interviews, and HR process support offerings, such as automated job description writing or solutions for conducting video interviews. A sizeable proportion of the start-ups evaluated offer modular and open platform solutions that offer users the benefit of being able to forego complex and costly in-house developments.

Another important characteristic for companies wishing to use digital solutions for their recruiting process is the target group of proposed solutions, i.e., in this case, the segment of employees being addressed.

The majority of the identified solutions are currently aimed at a broad target group, followed by options for highly qualified employees and digital solutions for freelancers and external consultants. Yet particularly in the area of blue-collar workers a deficit still exists for companies looking to recruit workmen, as an example.

In more than half of the start-ups surveyed, cognitive expert advice technologies are used, for example, to match employers and employees on job platforms based on intelligent algorithms. Other technologies such as Artificial Intelligence, Virtual Assistants, and Machine Learning are used much less frequently by the start-ups in question.

4. Recommendations for Action

Against the backdrop of challenges in HR departments, it becomes evident that the recruitment process also needs to be conceived and operated digitally as well as on an end-to-end basis.

Digitalization offers personnel departments several opportunities to actively rise to current challenges, such as the war for talent. However, this also entails creating the basic prerequisites for the long-term successful use of digital solutions in the recruitment process. Concrete calls for action are thus anchored in processes, organizations, infrastructures, software and system landscapes, and cultures. System and data-intrinsic challenges of digitalization require IT-related measures and can, in some cases, be disruptive for established companies. Digital change thus requires a corresponding investment at all transformation levels in the form of resources (especially IT) and employees (e.g. through continuing education).

• The implementation of the following guidelines helps to achieve the greatest possible efficiency and efficacy in employee recruitment:
• Developing and communicating an HR digitalization strategy
• Planning the recruiting journey along the lines of the customer journey prevalent in the retail industry (end-to-end perspective)
• Developing the understanding of the role in controlling through to active recruiting funnel management on the basis of KPIs (e.g. ROI)
• Using modular and open platform solutions for recruiting
• Establishing a digital culture
• Creating leadership commitment
• Promoting digital business leadership
• Establishing data governance to ensure an end-to-end view for big data, data protection, etc.

Digitalization has already fundamentally changed the recruitment process of many companies and within the scope of increasing possibilities, further significant opportunities will emerge in order to avoid falling behind in the war for talent.