According to Fortune Business Insights, the global human resource technology market is projected to grow from $24.04 billion in 2021 to $35.68 billion in 2028, and companies are likely to prioritize investments in AI to optimize business processes and reduce costs.
But in the face of recession, is now a good time to invest in AI solutions to solve your HR challenges? To get our answer, let’s first understand the potential impact and economic downturn would have on HR teams.
Overall hiring, especially external hiring, could remain flat or decline: According to the LinkedIn Workforce Report February 2023, nationally, across all industries, hiring decreased by a modest 0.7% in January compared to December. Hiring is also down 23.0% year-over-year. Additionally, we’ve seen a 25.6% year-over-year decrease in hiring since April 2022, where more than half of that decline happened between April through July 2022.
Applicant volumes could increase, especially if layoffs continue or uncertainty persists
Focus could shift from external candidates to internal candidates
Reliance on contract recruiters, RPOs and other buffers could be reduced
Budget for new HR tools or headcount could decrease
Resources to implement new solutions could be limited
Optimization of existing tools and processes, especially as organizations stress the importance of doing more with less, could become the priority
Solutions with low ROI or long time to value could be postponed, reduced or canceled
Next, let’s examine the benefits of investing in AI for HR, putting the larger economic picture aside for now.
Next, for the million dollar question: why AI for HR in a downturn?
Certainty of impact: AI is no longer a nascent technology in HR. We have seen use cases in automated sourcing, screening, interview scheduling, and more, all providing high ROI as seen in the image below with HiredScore’s AI Sourcing capabilities. Larger systems, on the other hand, take time to implement and provide results. AI projects also supercharge existing systems and workflows whether it’s your ATS, HCM, CRM or others, increasing their impact and adoption. Think of an AI tool as the experience layer on top of your existing HR tech stack that makes the recruiter experience better. It is the first implementation that will do something FOR your recruiters instead of TO your recruiters.
Time to Value: AI focused solutions yield ROI in 90-120 days vs. 9-12 months for larger legacy systems. In an environment of economic downturn where your resources may be limited or there are big budget shifts happening in your business, time to value becomes crucial as your company is trying to buy tools that help adjust to market conditions. Hence, it makes sense to purchase AI tools from vendors with very specific AI use cases to yield immediate gains on top of current processes without any tech stack redesign; while there are larger systems that could have AI embedded in them, they could take much longer to implement.
Amount of Resources Required to implement: A lot of the AI solutions generally augment existing workflows in an ATS, HRMS or other tools that are already in place, and often don't require as many resources as new systems or tools.
Reduced Risk: AI initiatives generally integrate into existing processes versus change existing processes, and don’t require a heavy lift in terms of implementation. During an economic downturn when you are pressed for resources, every tool your company wants to invest in needs to really prove its ROI quickly while not being too capital intensive. Investing in such AI initiatives reduces risk in terms of change management failure and upfront investments.
Employee/Recruiter/Hiring Manager Satisfaction gains: Maintaining employee satisfaction and engagement amid a looming recession is yet another challenge HR professionals are grappling with. If your company has cut down on headcount and now other employees are burdened with more work, investing in tools to help your employees handle the extra work has a direct impact on their job satisfaction, particularly in a time of headcount reductions. AI initiatives yield higher productivity and satisfaction gains, helping people absorb higher workloads and drive results in a time of job elimination.
Change Management: While this may sound counterintuitive, the best time to roll out new tools or processes is when hiring volumes are lower. If you roll out a screening AI tool when req volumes are lower, recruiters will have more time to spend on learning and onboarding with this new solution.
Competitive Advantage: When the economy bounces back, AI solutions will enable: faster scalability, easier and faster onboarding for new recruiters, and faster access to the best talent
Before rushing into buying any AI solution, here are 3 things to consider:
Now that we have established why it’s a good idea to invest in AI solutions even during an economic downturn, let’s get to the next big challenge of considering which AI tools to invest in.
With so many AI solutions in the market, how can you make sure you’re purchasing a system that will empower your team instead of bogging them down?
It can be tempting to opt for the cheapest tool or most popular tool you can find. Or, on the other hand, you may be attracted to a platform with many features that you may never use. But, neither of those may be the right option for your team. If you have very specific challenges that you’re trying to address by purchasing this AI solution, here are 3 things to consider before signing on the dotted line:
Get specific about business impact and ROI: When budgets are tight, every tool that’s a part of your tech stack needs to show clear ROI. While evaluating new AI solutions, assess their business impact/ROI so you can easily get your CFO or CIO’s buy-in. It would be helpful to see their business case studies and ask for references to learn how they solved similar challenges for other companies.
Make sure the vendor can integrate seamlessly with your existing tools: If the AI solution you want to purchase has a great use case but it doesn’t integrate with your current tech stack or become a part of existing workflows, it’s going to be tough to get your HR teams to use the new tool.
Make sure that AI is not a secondary feature: Opt for tools that have specific AI use cases that are tried and tested, and referenceable. In today’s ever-changing global landscape of regulated AI for HR, it is of utmost importance to ensure that the AI solution you decide to go with complies with all governmental non-discrimination standards globally, and is invested in delivering continual and proactive enhancements to remain compliant.
To make this more actionable, here’s an easy-to-follow formula to gauge how successful an AI solution for HR will be at your organization:
What does this formula mean for you? If the vendor promises high certainty with quantifiable results, a short time to go live/ implement the solution, and minimal work required to take the solution live, then you’re betting on the right kind of AI solution for your HR team and overall business, especially amid a looming recession when you cannot afford to work with a vendor who is not going to nail the outcome.
Want to Learn More About This Topic?
Jason Scheckner, HiredScore’s CRO hosted a session on this topic to discuss more about the drivers and values AI can bring not just to your HR teams, but also to your overall business. Watch the full session here!
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