We’re driving towards a cliff and HCM vendors are competing over who offers better tire pressure
The mega-trends for the future of work and the Fourth Industrial Revolution create skill shortages, accelerated turnover, and a rise in the contingent and gig economy workforce. They all drive a volatile and disruptive labor market. They compel employers to elevate their game.
In this reality, finding, engaging and retaining the right talent is tough. And tracking the skills and expertise available across an organization’s total talent supply chain of incumbent, contingent, and alumni workforce is even more challenging without access to big data and the latest Artificial Intelligence (AI) technologies.
According to a recent study by Korn Ferry, by 2030 there will be $8.5 trillion in unrealized revenue due to the skills shortage. On the workforce side, even the more conservative estimates say hundreds of millions of workers will see their job being eliminated by AI, machine learning, computer vision and robotics. People will have to switch occupational categories or be left out of the job market.
Companies are throwing money at HCM tools. They’re searching for ways to transform their workforce, to make people more productive and to improve the quality of their hire, skills development, employee engagement and retention. This global landscape is valued at $400 billion. The average large company now has 9.1 core talent applications (up from 7 in 2018) and is spending $310 per employee per year – a 29% increase over last year (The HR Technology Market 2019: Disruption Ahead, Josh Bersin).
HR TECH IS BETTING BIG ON ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING
As AI systems in HR get smarter and more focused on solving specific problems, industry experts expect to see dramatic improvements in productivity, performance, and employee wellbeing. According to IBM’s recent global survey of more than 6,000 executives, 66% of CEOs believe AI can drive significant value in HR.
HR Tech incumbents are investing heavily in AI and Machine Learning functions. Lighthouse Research and Advisory industry analysts found that nearly half of HR Tech venture capital funding events in the last few years went to AI-focused start-ups.
The thing none of us like to talk about is that all this tech is practically useless if the data layer underpinning the labor market remains broken. Individuals’ career history and credentials are key to sustaining labor markets’ efficiencies, and all employment-related processes: hiring, job matching, internal mobility, learning and development, engagement, compensation, benefits and compliance—are based on people’s career history and credentials data.
It has been widely recognized that individuals’ resumes, LinkedIn profiles and any other self-reported career records cannot be taken as a trustworthy source of information, with over 50% of resumes showing misrepresentation in education, references, and credentials. Yet we still rely on self-reported records as the data source that drives employment related processes.
The fact that this data cannot be trusted literally cripples all efforts towards a true digital future for the labor market and poses a risk to the huge investments being made in HR Tech. At the end of the day, notwithstanding all the digital tools and smart algorithms, most employers are forced to use hundred-year-old, manual background check processes that add friction to a market that’s already in dire need of efficiencies. The tight job market requires employers to make an offer and onboard new hires quickly, or risk losing top talent to competitors. They don’t have the luxury of waiting a few weeks to verify candidate and employee credentials. Also, with the new vision of the elastic enterprise, where you bring contingent skills to your team on an as-needed basis, it doesn’t make sense to run a multi-week-long process for a contractor who is only needed for a couple of weeks. We’re talking a $5 billion market for background checks—or $17 billion, if we address the larger resume screening services market—fueled by employers’ need for verified career data on candidates and employees.
The result? The broken data layer that’s currently underpinning the global labor market.
ORGANIZATIONS ARE ALSO STRUGGLING WITH IDENTIFYING THE TALENT THEY HAVE WITHIN
When it comes to the data that employers have on their current employees, the situation is even worse. Organizations have made significant progress in their ability to manage data regarding employees, but individuals may divide their time working for two or more employers, take gig assignments and move between jobs more frequently than before. In this environment no single employer has the holistic picture of an individual employee that is needed to drive personalized solutions and drive value through analytics and AI.
To add to this complexity, as individuals’ concerns about data privacy grow and new regulations such as GDPR are introduced, it is reasonable to expect that we will gradually face a reality where employees and alumni will demand increasing limitations on the processing of their records by employers.
In fact, most of the relevant career-related data needed for more effective analytics and AI is generated and held outside the organization, scattered across multiple platforms and service provider databases. However, proprietary restrictions can make accessing such rich data either difficult or prohibitively expensive, and this data is mostly self-reported, which has been widely recognized as untrustworthy.
A FUNDAMENTAL THREAT TO THE ENTIRE HR TECH INDUSTRY
These trends are a fundamental threat to the entire HR Tech industry. If its value proposition to users is heavily based on intelligent data processing, and this data is mostly locked out of the enterprise, in a broken data-sharing system, there is a real threat to the prevailing vision of smart data collection and processing.
We’re driving towards a cliff and HCM and EdTech vendors are competing over who offers better tire pressure. They all need to join the industry titans at the Velocity Network Foundation and help build the Internet of Careers™. Data could be used in richer and more meaningful ways than today, guiding people as they develop and manage their careers.
No need to drive off a cliff.
We’ll meet you at the launchpad of opportunity. Where we’re going, we don’t need those tires.