The Future of TA 2022 - 2023

It can be tough to keep up. First there was the pandemic, then an upsurge in hiring along with massive employee resignations, followed by large increases in U.S. jobs despite two quarters of negative GDP growth and high inflation rates!

So, what happens from here?

No one really knows. It’s hard to predict the future of hiring amid such turbulence, but we do know that events are fast-paced and constantly evolving. And, we know that—whatever the economy ultimately does—there will continue to be workplace changes driven by new technologies, changing business paradigms, evolving societal needs, and more.

Many of today’s employees and job candidates continue to prioritize flexible work arrangements, work-life balance, and ethical work practices. They also want fair compensation rates so that they can keep up with inflation.

Today’s talent acquisition (TA) professionals need to take all these factors (and many more!) into account in order to perform their jobs well. To help them keep abreast of what’s happening, the HR Research Institute conducted this study on the current state and near-term future of talent acquisition. More specifically, this report delves into topics such as:

• the capability and maturity of today’s talent acquisition functions

• the drivers and challenges facing TA

• TA metrics and analytics

• TA tools and technologies

• predictions of what may happen next

• characteristics and practices that differentiate the organizations that excel at TA from the organizations that don’t

Major Findings

1. Most organizations view talent acquisition as critical to the business and bottom line, but relatively few of them truly excel at it

• Half of respondents say talent acquisition is an essential or pivotal human capital issue in their organization, and 80% say it is at least among their top 10 human capital issues

• However, just two-fifths (39%) say their TA capabilities are above average and a mere 8% say their capabilities are “top notch”

• Meanwhile, just one-fifth describe their TA functions as “world class” or “advanced,” though 44% say their TA function is “established

2. The majority of organizations struggle to find skilled candidates to replace workers who have exited

The top factors influencing the TA strategies or activities include:

• the need to backfill to replace workers who have exited (70%)

• increased competition within their market or industry (57%)

• voluntary and involuntary employee attrition (53%)

• the need to hire for newly created positions to support future growth (52%)

The top challenges facing the TA function include:

• a lack of candidates with required skills or experience (60%)

• just-in-time, reactive hiring approaches (49%)

• compensation and total rewards that are below the market rate (46%)

• ineffective and time-intensive hiring processes (35%)

3. Most invest in paid tools and technologies in a bid to make TA more efficient

• A majority (65%) of organizations utilize 2 to 5 paid recruiting tools or technologies

• A smaller proportion (17%) utilize more than 6 paid recruiting tools or technologies

• About one in three (30%) organizations spend $25,000 to $100,000 on dedicated talent acquisition tools and technologies, including recruitment advertising

• More than a quarter (27%) spends $100,000 to more than $10 million on dedicated talent acquisition tools and technologies, including recruitment advertising

• The most popular talent acquisition technologies or recruiting tools utilized include: applicant tracking systems (62%), job posting tools (60%)

• Of course, technology usage varies by size of organization; for example, 76% of organizations with 1,000 or more employees use an ATS, compared with 67% of mid-size and 48% of small organizations

4. Organizations lack consensus on the most preferred TA metrics, though quality of hire is most widely cited

The most widely used metrics used to quantify the impact or relative success of the talent acquisition function include:

• quality of hire (42%)

• offer acceptance rate (41%)

• employee tenure and/or attrition (41%)

5. Respondents are most likely to say that the near-term future of TA will focus on predictive analytics and strengthening the employer brand

• Most respondents (67%) say hiring needs will increase a little (37%) or a lot (30%) over the next two years

• Over half (57%) say their overall TA budget will increase a little (44%) or a lot (13%) over the next two years

• Over half (55%) say the headcount in their TA department will increase a little (40%) or a lot (15%) over the next two years

• Over the next two years, organizations are most likely to invest in these TA-related capabilities:

• -people analytics and data-driven recruiting (49%)

• -compensation equity and competitiveness (47%)

• -internal mobility and employee retention (45%)

• -diversity sourcing and hiring (45%)

• Over the next two years, these are most likely to be key goals of the TA function:

• -strengthening employer brand and employee value proposition (58%)

• -creating an improved candidate or applicant experience (52%)

• -ensuring a robust pipeline of talent for future hiring needs (47%)

• -increasing employee referrals (44%)

• Over the next two years, these TA technologies are predicted to be most impactful:

• -talent intelligence/predictive analytics (62%)

• -artificial intelligence/machine learning (39%)

• -conversational intelligence/chatbots (34%)

6. Compared to organizations that do not excel at talent acquisition, those that do are:

• 4x more likely to use software for the purpose of talent pipeline management

• Over 3x more likely to say that TA is the most important human capital issue for organizations today

• Over 3x more likely to use an employee referral platform

• Over 2x more likely to use offer acceptance rates and employee attrition as key TA metrics

• Over 2x more likely to use an applicant tracking system (ATS)

• 2x more likely to believe their talent acquisition budget will grow over the next two years

• 2x less likely to say their TA processes are ineffective and time intensive

• 2x less likely to say their organization struggles with a “just-in-time, reactive hiring approach”

Key Takeaways

1. Leverage internal talent in the talent acquisition process. As we noted previously, internal hires are often more economical, become productive more quickly, have better knowledge of organizational culture, and are more likely to refer others. Internal hires also serve the organization by retaining organizational knowledge and increasing engagement. Naturally, organizations depend on external hires in many cases when looking for specific skills that are not available internally, or when the organization is looking to diversify its culture. However, some organizations may want to adopt a “hire internally first” mindset to match internal talent to available roles.

2. Align TA with strategic business priorities. Talent acquisition strategies must be built on business goals. This requires business goals to be well communicated to all members of the organization and to be understood by the TA team. We think it also requires HR to be a strategic business partner involved in setting the strategic direction of the organization. This involves making a list of critical skills for the business, analyzing skills gaps, planning for attrition, meeting diversity objectives, etc., all of which must match organizational goals.

3. Be proactive instead of just reactive. Being proactive in talent acquisition involves building a strong network of potential candidates even before the need to acquire talent arises. This helps facilitate a smooth recruitment process. This can be done through building an online presence and growing a network to ensure a pipeline of talent is available. This also helps in slotting new hires into appropriate positions and enabling seamless integration into the company culture.

4. Focus on metrics to improve the TA process. TA-related metrics and analytics can help professionals understand, manage and enhance the TA process. Insights from metrics can also help to align TA with the organization’s goals. A clear understanding of metrics helps HR professionals understand the impact of TA strategies and make the required changes that help them remain competitive. Good measurements also help in communicating with the other functions and top management of the organization since it helps translate TA-related efforts into numbers that are readily understood and make business sense. Of course, the process of making sense of metrics via excellent analytics is equally crucial. Having too many metrics may make it harder to make sense of all the data. Organizations may be better served by determining which specific metrics are most important to their particular business model and then building excellent analytical tools and approaches to those specific particular metrics.

5. Invest in TA tools and technologies. Appropriate tools and technologies are indispensable in TA and help in reducing cost and improving efficiency of the talent acquisition process. Analytics tools, for example, allow TA professionals to access a wealth of relevant information that helps them make data-driven decisions. Of course, the most commonly used technology for recruitment tends to be the applicant tracking system. These days, many TA professionals expect more of an ATS than just tracking applicants. Some of the features they may desire are helping with candidate sourcing, managing interviews, leveraging candidate relationship management tools, reporting via dashboards, DEI recruitment and more. There are many other technologies as well. For example, the use of appropriate technology such as chatbots can help improve candidate experience through offering more personalized and flexible offerings. The future of TA may increasingly include sourcing technologies such as social listening, the automation of interviews using real time video interview solutions, using more gamification in skill assessment tools, and more.

6. Offer a customized compensation package. Compensation is always important but, in the current era of inflation, it may be more important than ever. Organizations must be able to provide compensation and benefits that not only make employees feel secure but also valued. This can be done through benchmarking market compensation rates and researching employee needs. When designing compensation packages, organizations must consider the skills, education, and experience of the candidate. They may also need to consider the cost of living in different geographic locations. Other offerings that create a good compensation package include paid time off, a signing bonus, performance-based raises, tuition reimbursement, childcare subsidies and more. Today’s organizations have multiple ways to personalize and create flexible compensation offerings that meet the unique needs of each employee.

7. Focus on holistic offerings based on employee needs. Employees today are looking for more than just a paycheck. Employees can also be attracted by more flexible work arrangements, more positive corporate cultures, greater opportunities for learning and development, and more. Further, employees today may expect personalized HR offerings that are designed to match their unique circumstances. Organizations that are able to offer an enhanced employee experience tend to be better able to attract and hire top talent.

8. Focus on hiring a diverse set of employees. There are various studies indicating that organizations tend to perform better financially and in terms of innovation if they are more diverse in terms of ethnicity and gender. Organizations should ensure that at least some of their hiring metrics keep diversity in mind, not just as a way of complying with laws but as a way to boost organizational performance. Another type of diversity can be found in the idea of “hidden workers.” These include prospective employees who are willing to work but often overlooked by organizations in their TA efforts. They include caregivers, veterans, immigrants and refugees, those with physical disabilities, and relocating partners and spouses. They can also include people with mental health or developmental/neurodiversity challenges, those from less-advantaged populations, people who were previously incarcerated, and those without traditional qualifications.17 Recruiting these “hidden workers” could be an important way to gain competitive advantage in the tough labor market and improve diversity within the organization.

9. Strengthen the employer brand. Many employees today would like to be associated with an organization that has a purpose, is ethical, provides a great work experience, and has a strong employer brand. A strong employer brand will help organizations stand out among the competitors who are vying for the same candidate. Leveraging social media and making sure candidates know the “purpose” of your company are ways to strengthen the employer brand. Further, prospective employees may be interested in your key benefits and perks, commitment to a positive culture, work life balance, etc. Utilizing employee testimonials and stories to show real experiences of employees in your organization can help build the employer brand.

10. Leverage proven AI tools. AI has gotten mixed reviews in the area of talent acquisition. On one hand, advocates say that AI can help identify a candidate’s potential. AI can be used to score candidates based on pre-determined metrics, thereby ensuring fair competition for roles. On the other hand, there have been highly publicized cases in which AI-based systems were trained on biased data sets, resulting in biases in selection. So, organizations need to be careful when using AI for recruitment, using solutions with a proven track record and ensuring that the people using those solutions know how to use them well and wisely.

11. Align TA with other HR functions. TA requires a shift in thinking from talent providers to primary advisors to other HR functions. Aligning TA with other functions such as L&D can help organizations develop more of their employees to fit newer roles. This can be done through using a talent management system that integrates aspects of talent acquisition. By aligning L&D, talent acquisition, payroll, and workforce management, the employees’ journey from hire to retirement can be visualized and managed more efficiently. This also requires HR professionals and managers to be well trained in all functions so that they may understand how they are interdependent. For instance, L&D professionals must be able to translate TA needs into training programs that develop internal employees. Accelerated training programs can be utilized to cultivate hard-to-find skills among internal employees who are already a good cultural fit. Further, working in collaboration with TA, succession planning can develop the leadership skills of current employees to ensure continuity of leadership and talent pipeline.