Talent is the most important strategic asset for any company and even amid layoffs and a cooling labor market, many C-Suite leaders are still consumed with a vexing question:
Where do I find talent and how do I keep it?
The answers are not getting easier, especially as businesses are faced with shrinking recruiting budgets and forced to do more with less.
But this challenge represents a compelling opportunity for the 35 companies and 45 investors that recently assembled at Jefferies’ HCM Tech Summit in New York.
As I listened to the panels and joined in some of the hundreds of 1x1 meetings we hosted, it became clear that the most value creation, the most growth and most accretive transactions in HCM tech are likely to occur at the intersection of a few key trends fueling the sector in 2023 and beyond.
- Upskilling and Reskilling: In the U.S., there are still almost ten million job openings, 1.7 for every unemployed worker. The skills shortage is even more acute among frontline worker positions, where there are three openings for every non-college person in the U.S.
This means upskilling and reskilling will be the preferred route for many companies to address their talent shortages in the months and perhaps years ahead. Some of Jefferies’ HCM clients enable their customers to identify and address skill gaps in real time across their entire global workforce. Others provide content, training modules or learning tools that close these gaps, bringing enterprise-grade technology and content to companies that otherwise lack the budget, bandwidth or know-how to develop on their own. We are increasingly seeing immersive and engaging training experiences rooted in the deep science of how people learn. It’s often easier to remember what you experience than to remember what you read or hear, which is why virtual, augmented and extended reality – often enhanced by AI – is quickly becoming such an integral component of the on-the-job learner’s experience.
- Retention: We’ve all read about the post-COVID “Great Resignation” and the costs are adding up: It can cost anywhere from 50-200% of an employee’s salary to replace them. That’s why we are seeing such a proliferation of software companies with tools that can help promote employees’ health and wellness; measure, achieve, and sustain workplace equity; solicit, process and respond to employee feedback; and accommodate more flexible work arrangements.
- Generative AI: At many companies, HR teams are overwhelmed by an escalating number of responsibilities and business challenges. At our HCM Tech Summit, one of Jefferies’ HR professionals lamented it felt like a full-time job just responding to the “pray and spray” marketing appeals from different HCM software vendors. Generative AI tools have the potential to streamline and automate talent workflows, especially when it comes to:
- Identifying potential biases in job descriptions or applicant screening processes or analyzing large datasets to make the hiring process more inclusive.
- Offering guidance on HR policies and assisting with routine inquiries.
- Generating compliant and effective job requisitions, postings and candidate engagement.
We are still in the early innings of the AI revolution in HCM software, but we already see many compelling use case and product prototypes emerging across our client base. Much more to come here, and soon!
- Global Employment: As the war for talent intensifies and multinationals face a global talent shortage of over 85 million workers by 2030, companies are increasingly looking to find skills beyond the borders of their original domicile. A new generation of global employer of record (EoR) businesses enable their clients to compliantly hire and retain workers virtually anywhere in the world. But that’s just the beginning. Soon, EORs will more beyond HCM and transform into comprehensive systems of record and transaction enablers for their global customers.
Given companies’ urgent needs to find and retain talent, it is not surprising that most HCM leaders Jefferies’ has spoken with expect to increase their spending on innovation and to buy where it is prohibitively expensive, or time consuming, to build.
In a rapidly changing world, time to market is critical, and every vendor, whether an incumbent or a high-growth startup, will also look to augment their go-to-market and product through acquisitions. As a result, we expect continued consolidation and capital raising activity in our space. Finding and keeping good people has rarely been this challenging or more important. That means the opportunity set for innovative HCM tech companies has never been this promising.