The last few years have been a boomtime for recruiting technology with record levels of investment and interest as the digital transformation of talent acquisition progresses. So how has the pandemic affected things in the short term and what is the changed future of the recruiting technology market going to look like?
My guest this week is Jonathan Kestenbaum, Co-Founder of Talent Tech Labs. Talent Tech Labs is continuously monitoring the recruiting technology marketplace, and Jonathan has some very valuable insights to share.
In the interview, we discuss:
• The impact of COVID on the recruiting technology market
• Short term challenges and opportunities
• The Talent Tech Ecosystem
• The acceleration in market consolidation
• New categories of technology
• The growth of automation in recruiting
• AI, RPA and Analytics
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Transcript:
Matt Alder [00:00:00]:
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Matt Alder [00:02:01]:
Hi everyone, this is Matt Alder. Welcome to episode 276 of the recruiting Future podcast. The last few years has been a boom time for recruiting technology with record levels of investment and interest as the digital transformation of talent acquisition progresses. So how has the pandemic affected things in the short term and what is the changed future of the recruiting technology market going to look like? My guest this week is Jonathan Kestenbaum, co founder of Talent Tech Labs. Talent Tech Labs is constantly monitoring the recruiting technology marketplace and Jonathan has some very valuable insights to share. Hi Jonathan, and welcome to the podcast.
Jonathan Kestenbaum [00:02:53]:
Thanks so much for having me, Matt. Really excited to be here.
Matt Alder [00:02:56]:
It’s a pleasure to have you back on the show. I think you were on the show probably a few years ago now. Could you just introd yourself and tell everyone what you do?
Jonathan Kestenbaum [00:03:04]:
Yes, it’s actually, it’s definitely been a number of years and there’s been major shifts in my personal life since then and, and in Talent Tech Labs. I think before we spoke I was. I was single and now I’m married with a kid. So lots has changed in my personal life.
Matt Alder [00:03:21]:
Give everyone kind of an overview of what you. Of what you do.
Jonathan Kestenbaum [00:03:23]:
Yeah. So Talent Tech Labs is on a mission to Elevate the state of the art and recruitment technology. And so we’re a research and advisory business. We do that by taking all of our intelligence, putting it into research reports, which we sell to heads of talent and CEOs of staffing firms through a research model. Actually, Matt, when we spoke originally a number of years ago, we had a. The business was a bit different. We looked a lot more like a venture capital fund investing in early stage recruitment technologies than a research firm advising heads of talent and CEOs of staffing firms. And really the reason for that is, as I said, we were on a mission to elevate to state of the art and recruitment tech. We started by helping early stage recruitment technologies go to market a bit more effectively by introducing them to heads of talent and CEOs of staffing firms and sources of capital. And what we realized along the way was actually the heads of talent and CEOs of staffing firms, the buyers of these technologies needed just as much help. And so what we tried to do was create a common language through which we could allow both sides of the process to communicate. And that’s really what that taxonomy, the ecosystem that we put out is. It’s the common language through which we allow the buyers and the builders of talent acquisition technology to communicate.
Matt Alder [00:04:47]:
Fantastic stuff. And I want to talk a bit more about the latest developments with your ecosystem as we get into the conversation. Before we do, obviously, the last few years has been a time of really kind of unprecedented growth for recruiting, you know, and HR technology. So lots of investment, lots of companies expanding their tech stacks, lots of growth. And then obviously we’ve got to 2020. The global pandemic has come along and seemingly changed everything. What are you seeing at the moment? What’s, what’s the market looking like? How are things changing?
Jonathan Kestenbaum [00:05:17]:
Yeah, I mean, similar to everybody, all the technology providers, we had a record banner year last year, you know, grew the organ by 285%. And so we were coming off of that big high, running into 2020, planning to scale the organization as fast as we could. The pandemic hit and things pretty much froze. And I would say, you know, we’re now three, four months into the pandemic, and while sales are still generally slow in the market for folks buying new technology, it’s not because, and I could, I could tell you this as a fact from my conversations with, you know, over 50 heads of talent. It’s not because talent acquisition is no longer a priority, and it’s not because technology is no longer a Priority. It’s just a function of not knowing where business is going to be. You know, I use the word punting. So I, you know, from my understanding, from my conversations, technology is still very much a top priority. I’d say, you know, as I’m sure we’ve all, we all know, we went from the pandemic into the protests and you know, even around the protests and black, the Black Lives Matter movement, you know, the focus on diversity still is touching upon how can technology help us do this at scale? So technology still super important. We do believe as the economy opens up, folks will stop hunting and start buying new technology. I mean, we do know folks that are buying technology today. The second part of that question is, are the types of technologies that organizations, you know, leverage going to change now, now that, you know, the market’s a bit different, or folks are working from home? And the answer is absolutely, you know, there are some short term challenges that exist now. So just to give you an example, some of the challenges. One, courts are closed in the US you can’t do background checks. The job boards don’t have a location. And the way their revenue model works for remote work, so they error out when you try to post a job looking for somebody remote, which is frankly what most people are probably going to start to do. So that needs to be fixed. Now those are, I mentioned those two challenges first because those are two challenges that, you know, one, it’s frankly, one’s an easier fix, you know, allowing and creating a revenue model around how to post remote work jobs. You know, the second is fixed when the court’s open. So these are not technology challenges that someone’s going to have to spend money to solve. You know, it’s like the equivalent of, you know, in, in the past when we’d have these outbreaks of coronaviruses that were, you know, not as contagious. You know, you never get a big biotech company to build a, spend money to build a vaccine for something that they couldn’t see a lot of scale around. So these issues are not going to, you know, warrant new technology. There are other issues that have come up that I think will warrant new technology or companies to spend more, more of a focus on them. I’d argue that that would be around in virtual internships. We’re seeing a lot of folks ask about that, you know, video interviewing’s already been adopted and commoditized. So I’m not, you know, there’s not too much going on there. Assessments going to become a big focus. They’ve always been, but even more of a focus because you’re not going to be able to have as much one on one time with the candidate before you hire them.
Matt Alder [00:09:15]:
Absolutely. That makes perfect sense. And it also kind of, kind of reflects the conversations that I’ve been having with people and some of the interviews on the podcast. TA Leaders are doing a lot of thinking, a lot of reflecting and a lot of planning at the moment in terms of what the future looks like and the different needs they have from their technology setups. And the virtual interns is interesting as well. I’ve got an interview coming up that’ll be publishing the next few weeks with a company that’s actually doing that and their kind of experiences of it. So yeah, there’s, there are a lot of things going on in the, in the, in the technology landscape. Definitely. Just tell us a little bit more for people who’ve not come across it before about your ecosystem. Because I think one of the biggest challenges, and it will remain a challenge as we, as we move forward is there are so many different types of technology solution out there. Sometimes cataloging them and making sense of them can, can be, can just seem impossible. And it’s obviously you’ve managed to do as an organization. So just, just talk us through how you saw the different aspects of talent technology.
Jonathan Kestenbaum [00:10:15]:
Yeah, so. And it kind of goes to our origin story as an organization. So Talent Tech Labs was started inside of a staffing firm in New York. The CEO of that staffing firm was a very progressive thinker, knew that technology was going to be a strategic advantage, was failing at adopting new technologies. And he brought me in to help him try to figure out what technology he should leverage. What we identified during the, you know, I’d call it, you know, the, the discovery period was that he was failing at adopting new technologies for two reasons. One, he was oversold by the vendors and they were under deliverant because they would tell you they do everything or it’s on their roadmap and frankly they still do. And you know, we get death threats because, you know, we put somebody in a category that they don’t think they fit in. You know. The second is that he was not able to operationalize the technologies within his business once he bought them. So, you know, it’s SaaS technology. It didn’t require on prem servers. So, so there was. Because there wasn’t as much of a IT focus and there wasn’t. It didn’t disrupt his business as much to just swipe his credit card. He wasn’t changing his process or creating management to support the new technologies, he was failing at getting effective use out of them. The first challenge was what we went to solve because it was easier. The way that we thought about that was, well, let’s go out and index all the features and functionality and all the revenue models that exist in this space. In 2014, there was maybe 150 technologies. It wasn’t a massive challenge. You know, today there are thousands, you know, I’ve had the unfortunate privilege of demoing probably north of 25, 2500. Right. Of those technologies when we broke it into features and functionality revenue models and looked at where those companies were generating the majority of their revenue. Right. So rather than someone could tell you that they do everything, but if they’re only generating, you know, 4% of their revenue from that feature, you know, it’s really not core to their business. And so that was the beginning of this ecosystem. And what we did was we created names for these categories of feature and functionalities. You know, job boards, job board distributors, video interviewing tools, E staffing companies, social search tools, applicant tracking systems, candidate relationship management systems. And we then put it on a map and highlighted what we believe to be the innovative and influential tools. At first this was a function of, you know, I mean in 2014 we had this on our wall. People would come into our office and stick their logo up on the wall. So it’s a function of who came into our office that made it on the ecosystem. You know, I’d say the next iteration of that was, you know, our teams understanding of the, the company’s ability to execute. You know, we, we, I, I have come from, I’m a lawyer by education. I’m a, I have a background being an entrepreneur building and selling town at talent acquisition technology company. So the next phase of that was do these founders have the ability to execute, you know, will they be around if you leverage them? And so that was, you know, the, the 2015 version. And then we got much more thoughtful and sophisticated with how we rank and rate these technologies. And now we’re leveraging buyer feedback on the technologies. You know, things like revenue, things like amount of money invested, the uniqueness of the feature set. And so it’s become our research process, become much more robust.
Matt Alder [00:13:58]:
Obviously an ecosystem is a, is a living, breathing thing and the market’s evolving and changing all the time and as we said at the start of the conversation is likely to change significantly in the, in the coming months. So I know that you’re kind of always sort of reviewing and Adding new categories and subdividing older categories. What’s the latest stage of the evolution? What are the newer things that you’re spotting is as key trends rather than just one off things that vendors are trying to sell?
Jonathan Kestenbaum [00:14:25]:
Yeah. So I’d say the largest macro trend unfortunately accelerated by the pandemic is consolidation. So we have 34 sub verticals. Those are the bubbles on the ecosystem. We’ve, we’ve always known there was going to be consolidation. That’s actually been our thesis all along, is that, hey, look at all these point solutions. It’s noisy, it’s messy. There needs to be consolidation. Let’s be the, let’s be the guiding light, you know, in the space that helps to make sense of this information. So we always knew there was going to be consolidation. The pandemic’s going to accelerate it because these companies are going to fail much faster because the market’s just not as frothy, as fruitful as it used to be. So that being in mind, you know, we, I do, you know, have a vision for what that ecosystem looks like in five years and frankly, it’s going to look a lot more like eight bubbles than 34 because there’s going to be significant consolidation. Now in the short term though, as you suggested, we do update the ecosystem. So we are updating the, we’re constantly out in the market, demoing technology companies globally. We have a team of researchers that are doing this. We’re constantly rethinking how we structure the ecosystem. We’ve been lucky that it’s been relatively stable, the structure, the taxonomy we’ve created. And it changes maybe once a year, twice a year, we’ll add a new category, remove a category, depending on where things go. So in the short term, some of the new changes and this will be reflected on the ecosystem that we release next year. I believe you’ll see a new category, two new categories. And don’t hold me to this because we have to have a debate about this as a research team. But directionally, I think there’s a category for recruitment marketing platforms, which are separate from CRMs, focused on recruitment marketing. I also think there’s a category for robotic or recruitment process automation and that will split off of the bots category. So in the short term, you know, next 12, you know, I’d say three months for us because we’re, we’re deep in the weeds of updating the ecosystem. I do believe you’re going to see a few new categories pop out. So you’re not going to see that consolidation quite yet in the, in the long term, five years, significant consolidation in the space for sure.
Matt Alder [00:17:04]:
It’s interesting that you mentioned automation there because certainly what I was finding anyway, but I’ve certainly found this to be the case in the last few months, is there’s tremendous interest out there from companies in terms of automation and what’s possible and where recruiting automation is, is, is, is going to go. It seems to me though, that we’re still right at the start of that journey. What, what’s your sort of view on the potential of automation in recruiting?
Jonathan Kestenbaum [00:17:33]:
Yeah, I mean, it’s kind of funny, right? So every chro we speak to, every head of talent says we want to leverage AI. I mean, that’s, you know, top priority, always one, two or three. I mean, diversity now is a hot topic. You know, for a while it was college recruitment, you know, now AI, AI, AI. Five years ago, every pitch deck that we looked at said big data. Now every pitch deck that we look at says AI. It’s just not possible that all these companies are leveraging artificial intelligence. They can’t afford the really good artificial intelligence developers that Google and Facebook can afford. So as an organization, we went out to the market and surveyed all the talent acquisition technology companies that we knew. So all is relative, right? I know I would argue that we see more than anyone else globally, but we definitely don’t see everything. So we demoed all the talent acquisition technology companies that we knew. We asked them if they’re leveraging AI. Over 75% of them said they were. That’s not possible. We dug deeper. What type of AI are you leveraging? What we found was they were leveraging machine learning, natural language processing, deep learning and neural networks. When we map that, first of all, when we looked at the percentages, less than 1% were using neural networks and deep learning. When we map that to what functions that AI could solve in recruitment, natural language processing and machine learning map themselves well to matching engines, prediction engines, recommendation engines, where neural networks and deep learning are required for much more complex, you know, contextual language understanding, conversational AI, things like that. So you know, when we took that data and, and went to advise our clients, really the lowest hanging fruit technology that was actionable today for them to leverage was matching. And so, and I still very much believe that, that matching is the lowest hanging fruit for, for leveraging AI today. So, and, and that we’re very far away from conversational AI. So you know, a few minutes ago we talked about the ecosystem and how that’s evolving. You Know, I didn’t touch upon some of the directional trends in the space because across the ecosystem there’s obviously trends that are happening and trends that happen, you know, high volume, low volume, different industries, et cetera. Matching and specifically matching around AI is one of the trends that we’re seeing in the market. One, it’s, it’s a way a TA leader can tell their chro that they are leveraging AI because they all want to be able to say that they are. Two, it actually can make a meaningful difference in the recruitment process.
Matt Alder [00:20:25]:
Absolutely, that makes perfect sense. And I think it’s going to be, yeah, it’s going to be really interesting to see how things develop. One question I have is obviously there’s a whole lot of technology out there that’s established. You mentioned big data a second ago and to me, data analytics is still woefully kind of underused in talent acquisition. And I think that, you know, more companies should be embracing that to understand their strategies and how they’re working. What, in your view is being missed by TA leaders currently? What’s the, what’s, what’s the thing that you think everyone should be doing, but not many people are?
Jonathan Kestenbaum [00:21:03]:
It’s a tough question to answer, but I’m going to try to answer on, you know, with the context of a maturity map. So, you know, organizations are at different points on a journey of digital transformation. And so, you know, as, as an organization, Talent Tech Labs is on a mission to help an organization going through a digital transformation in TA do it successfully. And that’s all about helping them plan, select the right tools and then optimize the tools they have, get the most out of it and stay on this, you know, lean loop. Because you always have to be looking at what’s new. Because as artificial intelligence makes its way more generally into the organization, not just in ta, but in every department, the skills needed within the organization are going to change. And TA is going to have to be way more nimble than they’re used to in that regard. Companies are at, are on different points of their journey. Some companies are just starting, some companies are in the middle of a ATS selection. Some companies have the most open ATS and CRM out there and are looking for what’s the next leapfrog move we can make to make TA more effective and efficient. And so depending where you are in that journey, you know, we would make suggestions as to what types of technologies you should be looking at. Look, you need to start with really good anchor systems, applicant tracking systems, CRM you know, I believe that every organization is going to need a recruitment marketing platform. That to me is like the thing you got to be thinking about. But I would argue that one, the technology is not mature enough yet for, for folks to leverage it in a meaningful way. And two, if you don’t have an ETS and a CRM that work well, that are open, that integrate, you’re, you’re going to have an issue you shouldn’t even waste your time on, on a recruitment marketing platform. I would also argue that as you stated, analytics are super important. You know, I don’t think companies are leveraging them in a meaningful way, but frankly, I think it’s because the systems are so separated and don’t integrate with each other. And so I do believe that as recruitment process automation makes its way into the space, that’s where you’re going to start to see the analytics. Rpa, which is going to span out of the bots category, is going to connect the dots between all the systems. Imagine I’m going to explain to you why I think things are going to morph in that direction. If you have a bot that is the communication layer, the medium through which you communicate with me, there’s no reason why that bot couldn’t take me across the whole hiring process. You put the job on the job board, tell me, you know, ask me the knockout questions, connect with the assessment system and give me the assessment. Connect with the video interviewing system and give me the video interviewing, you know, you know, to take the video interview to take, you schedule my, my, my interviews. Now in order to do that, it needs to integrate with those platforms in order to, because it’s integrated with those platforms, it has access to all the data. So in this ecosystem of the future that I mentioned, five years from now, we believe you’re going to have an analytics and automation layer that cuts across the entire ecosystem. And so that’s further from, you know, rp. RPA right now is going to pop out of bots in the future. RPA is going to, going to cut across the whole ecosystem as this automation and analytics layer.
Matt Alder [00:24:36]:
Final question. Where can people find the ecosystem and where can they find Talent Tech Labs?
Jonathan Kestenbaum [00:24:41]:
So Talent Tech Labs, we have a website, talenttechlabs.com we actually give away the ecosystem for free. We, we consider it a marketing piece. But in our research library, we go deep into every single bubble on that ecosystem. We have reports, five reports deep for every bubble in that ecosystem which talk about the, the features, functionality, the business problems that you should have if you’re thinking about leveraging that technology and all. You know, we actually do what we call provider resumes which are write ups of the talent acquisition technology tool. So you can even get a write up or, or benchmark the tools against each other. So you know, if you’re interested in in getting the ecosystem free download on our website, we actually have great, you know, resources that we give away for free. And actually right now to support the Black Lives Matter movement and really try to push push companies to leverage technology to help them hire diverse talent, we’re actually giving away one of our research reports that sits behind our paywall for free on diversity technology. And I highly suggest you guys download that and really try to embrace technology. And I would argue that technology is not the only answer. It’s a piece of it, but it’s what we do. It’s how we can make a difference. And making that free, we believe we can help organizations hire more diverse talent.
Matt Alder [00:26:09]:
Jonathan, thank you very much for talking to me. My thanks to Jonathan. You can subscribe to this podcast in Apple Podcasts or via your podcasting app of choice. Please also follow us on Instagram. You can find the show by searching for recruiting future. You can also listen and subscribe to the show on Spotify. You can find and search all the past episodes at www on that site. You can also subscribe to the mailing list and find out more about working with me. Thanks very much for listening. I’ll be back next time and I hope you’ll join me.
