Charlie Muirhead is CEO and founder of CognitionX – a market intelligence company for the AI sector. This is a preview of the CognitionX overview of the Impact of AI on HR
There are three things every business leader needs to know about AI
The AI market is exploding. Our analysis suggests there are now over 10,000 AI products and services on the market. 75% of executives expect to implement AI in their companies within three years (Economist Intelligence Unit).
We’re not talking about one general-purpose technology here. The AI ‘wave’ consists of a number of maturing technologies, largely focused around machine learning, which are now being introduced in industry. Businesses are finding almost limitless applications for these tools, often with very natural, human interfaces.
While the AI charge is conspicuously being led by the financial services and high tech sectors, the rest of industry is catching up. In fact, early adopters are finding that human resources functions are the best suited to AI.
CEOs are discovering the HR department is a perfect choice for early deployments
Why? HR is rules-based, making it a perfect fit for automated solutions; applying policies uniformly and eliminating bias is a key driver for most HR professionals. Most large organisations have already digitised their HR function, an important prerequisite, but still rely on manual processes.
For many businesses people management is a key differentiator, and the risks are as great as the rewards. The Chemistry Group calculate the hidden costs of a wrong hire can amount to between four and 20 times the salary. What’s more, HR can be a good sandbox for pilot AI projects, allowing manageable sizes, visible payoffs and little risk to mission-critical elements of a business.
The market is responding to meet demand for AI in HR & Recruitment
Relative to other sectors, the number of HR AI M&A deals per quarter has been accelerating (CB Insights) and there are now over 300 vendors offering AI-powered solutions to 28 common HR business problems.
AI can be used across the whole employee lifecycle.
For example, companies can deploy AI to support their learning and development programmes. Popular applications are automated onboarding, providing reference information and personalised coaching.
AI is also emerging as a tool for performance management. It’s not only possible to automate goal-setting and evaluation, but also to support wider management decisions, like predicting capacity and team performance. Performance management is being disrupted by the rise of “team fit psychometrics” too – which can assemble high performing teams based on combinations of personalities that work best.
Finally, AI is able to supervise the entire workforce at once. This is useful both for traditional oversight of compliance and performance, but also for more novel applications like evaluating unconscious bias in management decisions.
The single biggest area of activity is recruitment
This makes sense. Recruitment is ripe for disruption. Most companies are providing solutions for candidate sourcing and hiring process automation.
Processes demand a huge amount of labour; recruiters spend 60% of their time reading CVs according to SAP. It’s a system that doesn’t work for anybody – a CareerBuilder survey found that of job seekers who’d had a negative experience, 42% would never apply to that company again and 22% would warn other candidates against applying to that company.
How can AI help? By improving the speed and effectiveness of candidate sourcing. Professional platforms like LinkedIn have made the search process trivial. Finding the right people for the right roles remains the real trick and, coincidentally, the key pain point in the hiring process (KellyOCG). Likewise, AI can automate the most mundane elements of the hiring process too, such as screening and interviewing.
Businesses deploying AI for recruitment need to decide: cultural fit or cultural growth? If you know what personalities and professional experience works in your business, AI can help you find and attract similar candidates. However, if you want something different, AI can search for diversity and bring new perspectives into your team.
The results speak for themselves
Mondal reports that companies using AI for recruitment have seen promising results, such as a 71% decrease in cost per hire and a 3x increase in recruiter efficiency.
A large multinational UK-based FMCG company with over 30,000 employees automated their on-boarding processes and saw up to 70% cost reduction.
What should you do next?
Leading HR & Recruitment corporations are developing AI strategies in the form of a roadmap – deciding where in the HR lifecycle to position initial pilot projects and the sequence of projects to do later.
Inputs to the development of any HR AI roadmap are typically:
- Industry adoption of AI in HR by use case i.e. relative use case maturity
- Tractability of adoption of AI: i.e. is project low risk and do you have the necessary data?
- Expected relative payoff from project success
Your HR AI roadmap should identify an initial pilot project for which you will need to suitable vendors. Experience suggests that developing in-house data science capability is a key success factor and that data quality is a necessary precondition to project success.