The State and Future of Recruiting - 2023 Report

The landscape of recruiting is ever-changing, driven by a myriad of factors, including technological advancements, socio-economic changes, evolving employee expectations, and business needs. This report delves into the state of recruiting in 2023, exploring significant trends, insights, and predictions for the future.

This report will be divided into two sections, with Part 1 covering the recruiting forecast across all factors affecting the industry. On the other hand, part 2 will zoom into the U.S. recruiting landscape, discussing inefficiencies, technology adoption, and the quest for diversity.

Part I: Recruiting Forecast Across All Factors

Part one will cover the recruiting landscape of 2023, where the recruiting industry will be diverse and dynamic, shaped by factors such as the rise of AI, the evolution of Gen Z’s preferences, the increased importance of soft skills, and the growing focus on DEI, among others. Furthermore, the future of recruiting will be characterized by strategic decision-making, increased collaboration, and a skills-first approach.

Forecasting 1: Recruiting as a Strategic Business Function

Recruiting has emerged as a pivotal business function, driving crucial changes within organizations. As many as 87% of recruiting professionals affirm that talent acquisition (TA) has morphed into a more strategic role over the past year. The importance of recruiting is acknowledged by 70% of TA professionals, who affirm that the recruiting team plays a vital role in strategic business decisions.

Forecasting 2: Pay Transparency and Compensation

With compensation emerging as the top priority for candidates globally, pay transparency is on the rise. However, only 45% of recruiting professionals believe their companies have sufficiently increased salaries to keep pace with inflation. This reveals a growing need for recruiters to have a greater say in determining pay scales to attract and retain talent.

Forecasting 3: Employer Branding to Gain Importance

As the balance of power tilts towards candidates and employees, with 64% of respondents predicting this trend over the next five years, employer branding has gained paramount importance. Despite 53% of in-house recruiters predicting a decrease or no change in their recruiting budgets, 60% anticipate increased investments in employer branding.

Forecasting 4: Evolving Skillset for Recruiters

The future calls for recruiters to harness a more strategic set of soft skills, including communication (78%), relationship building (73%), adaptability (58%), problem-solving (53%), and business acumen (51%). These skills will be indispensable in navigating the dynamic recruiting landscape.

Forecasting 5: Collaboration with Learning and Development (L&D)

The report reveals that 62% of TA professionals are already working closely with L&D. A similar sentiment is echoed by L&D professionals, with 47% claiming increased collaboration with TA.

Forecasting 6: Generative AI for Streamlining Recruiting Process

Generative AI holds promise for revolutionizing the recruiting process, with 68% of hirers expressing hopefulness or cautious optimism about its impact. Top recruiting outcomes expected from AI include automation of repetitive tasks (74%), making sourcing candidates easier (67%), and streamlining candidate engagement (59%). 

Forecasting 7: Continued Commitment to Diversity, Equity, and Inclusion (DEI)

Despite the macroeconomic environment negatively impacting hiring (67% of respondents), commitment towards DEI remains strong.

Forecasting 8: Increased Hiring of Contract Workers

As a measure against uncertainty, employers are increasingly hiring contract workers, with paid job postings for contractor roles witnessing a 26% YoY increase. In comparison, full-time roles only grew by 6% YoY.

Forecasting 9: Catering to Candidate Priorities

Companies are becoming more attuned to candidate priorities. These include compensation, work-life balance, flexible working arrangements, advancement, and skill development. The fastest-growing priorities include flexible working arrangements (+5%), compensation (+4%), supportive managers (+4%), clear goals from leadership (+3%), and job security (+2%).

Forecasting 10: Recalibrating Recruitment Pitches

Recruiting professionals are predicted to adjust their pitches to align with the changing preferences of candidates, ensuring their messaging resonates with prospective talent’s needs and desires.

Forecasting 11: Gen Z Priorities

Gen Z shows a distinctive preference for advancement opportunities (+47% compared to Gen X), skill development (+45% compared to Gen X), and inclusive workplaces (+17% compared to Gen X).

Forecasting 12: Skills-First Hiring

There’s a growing inclination towards skills-first hiring, with a 25% increase in skill-based searches compared to three years ago, and a 50% increase compared to experience-based searches.

Forecasting 13: Discovering Overlooked Talent

With 20% of U.S. job posts on LinkedIn not requiring a four-year degree, there’s a growing opportunity to uncover overlooked talent. The share of such job posts has surged by 30% over the past six months.

Forecasting 14: Mapping Employee Skills

Understanding employee skills is critical for making informed talent decisions, as agreed by 94% of recruiting professionals. However, it’s currently a priority for 84% of companies, indicating room for improvement.  

Forecasting 15: Internal Recruiting

Forecasting 16: The Power of Upskilling

Upskilling is deemed essential for retaining a diverse workforce, with 81% of professionals asserting that upskilling and reskilling will shape the future of recruiting over the next five years.

Forecasting 17: Learning as a Candidate Magnet

Learning opportunities are not just important for retaining employees but also for attracting candidates. Companies that leverage this tool effectively will have a competitive edge in the talent market.

Source: LinkedIn Talent Solutions

Part II: Delving Deeper into U.S. HR and Recruiting Practices

Inefficiency in HR and Recruiting Processes

Intriguingly, 95% of these organizations would have retained their employees had they offered better technology solutions.

Tracking HR Metrics

Regarding how U.S. HR and recruiting teams are tracking their metrics, only a small portion (5%) are doing so manually, while more than half (56%) are using internal dashboards. An additional 39% employ external dashboards to keep track of these important figures.

Metrics for Goal Setting

When setting goals, leaders most frequently focus on the average cost per hire (73%), average time to fill an open role (57%), average time to hire (54%), the number of roles to fill (48%), and the candidate-to-hire ratio (43%).

In the tech industry, HR leaders are more likely to track average time to hire (68%) compared to other industries (52%) and less likely to track average cost per hire (61% versus 57%).

Despite these measures, 90% of U.S. employers are not meeting at least one of their recruiting and hiring goals, with 51% admitting that the average costs of hiring are too high. This number significantly increases at the VP level and above, where 69% report exceeding the cost-per-hire goal.

The Healthcare Industry’s Struggle

The healthcare industry is specifically struggling with filling open positions. In this sector, 43% of HR leaders reported missing a goal for filling a certain number of open positions, compared to just 28% in other industries. Interestingly, healthcare HR leaders were less likely (30%) to report missing goals around the average cost per hire, compared to 55% across all other industries.

Barriers to Meeting Goals

Among the U.S. employers that are not meeting their goals, they cite the following as the biggest barriers:

• 37% inefficient hiring and recruiting processes
• 32% pool of candidates not the right fit
• 16% more automation technology needed
• 12% staffing shortages
• 3% mismatched between the technology they use and their needs

However, note that only 32% of HR and recruiting leaders blame candidate pools not being a fit as the primary reason they are not reaching their goals. In contrast, a majority (56%) cite process inefficiency or technology challenges as the main reasons for failure to meet key metrics.

Diversity Goals in Hiring and Recruiting

When it comes to diversity goals, U.S. employers focus on the age of hires (60%), employee gender (53%), the race of hires (51%), people with disabilities (41%), LGBTQIA+ community members (28%), veterans (27%), and “Fair Chance” hires (26%).

It’s also worth noting that differences exist across sectors. In healthcare, 40% of employers had goals for the number of LGBTQIA+ candidates, and 70% had gender-based diversity goals. Comparatively, only 26% and 49% of non-healthcare employers reported having goals for these categories. In the financial services industry, only 16% reported setting goals around LGBTQIA+ hires, compared to 31% in other industries.

Most Common Candidate Funnel Metrics

Regarding the candidate funnel metrics, the most common ones reported by HR leaders are as follows:

• The number of initial candidates (70%)
• The number of first interviews conducted (68%)
• The number of candidates who make it to the final round (62%)
• The number of offers made (54%)
• The number of offers accepted (51%)
• Interestingly, HR leaders in the tech sector pay more attention to the number of candidates who make it to the final round (74% versus 58%) and the number of offers accepted (65% versus 47%).
• They are less focused on the number of initial candidates (61% versus 72%) and the number of first interviews conducted (60% versus 70%) when compared to other industries.

The Role of HR Technology

In the context of HR technology, 91% of employers agree that technology can help attract, engage, and retain talent. The majority (63%) also believe that investing in technology is a higher priority than investing in people.

Regarding automation technology, 73% of HR leaders in tech are using a partially automated platform, compared to 54% in other industries. Only 8% of tech HR leaders report using a fully automated platform, compared to 16% of non-tech HR leaders. This is surprising given the tech sector’s leading role in automation.

In terms of technology satisfaction, 48% of HR leaders are satisfied with their current technology, with 40% reporting dissatisfaction due to lack of fit with their needs. About 12% are neutral.

Tech HR leaders are more likely to be satisfied with their current technology (58% versus 45%) and less likely to report dissatisfaction due to lack of fit with their needs (31% versus 42%) than their non-tech counterparts.

However, more than half (55%) of employers in the U.S. would prefer more automated processes. Among tech HR leaders, this number increases to 67%, while in non-tech sectors, it falls to 52%.

Technology and Employee Retention

Employers believe that the use of technology plays a significant role in employee retention.

Despite this, only 24% of organizations provide self-service HR technology options to their employees. This figure is slightly higher among tech companies (30%).

This data emphasizes the fact that, while HR leaders acknowledge the importance of technology in their processes, there is still a significant gap between this recognition and the actual implementation of automated, efficient systems. The lack of full automation in HR platforms, particularly in the tech sector, also suggests a surprising area of improvement.

It is worth noting that process inefficiency and technology issues account for over half of the challenges (56%) faced by these leaders.

Average Response Rates

Among employers that track response rates, the reported averages were:

• 11-25% response rate (20% of companies)
• 26-50% response rate (49% of companies)
• 51-75% response rate (28% of companies)
• 76% response rate (3% of companies)

Only 31% of companies reported response rates above 50%, implying potential room for improvement in candidate targeting or outreach strategies.

Average Acceptance Rates

For companies that track acceptance rates, the breakdown is as follows:

• 10% or less acceptance rate (3% of companies)
• 11-25% acceptance rate (24% of companies)
• 26-50% acceptance rate (27% of companies)
• 51-75% acceptance rate (33% of companies)
• 76% acceptance rate (13% of companies)

Role of Background Checks in Hiring

Background checks appear to be a prevalent practice in the hiring process, with 95% of employers using them before hiring a candidate.

Reasons Behind Rejected Job Offers

The reasons candidates who received an offer did not accept it include:

• Interview scheduling issues (53%) 
• Slow screening and evaluation (42%)
• Candidates found too late (41%)
• Inefficient communications (34%)
• Process takes too long (28%)
• Misalignment with hiring manager (12%) 

Notably, HR leaders in tech (90%) and financial services (84%) pointed to inefficient recruiting and hiring processes as the cause of missing out on key hires.

The Importance of Technology in Hiring

HR and recruiting leaders see the value of technology in hiring as follows:

• Increasing the volume of candidates (57%)
• Increasing awareness of open roles (47%)
• Improving the quality of candidates (45%)
• Driving more diversity in the candidate pool (41%)
• Improving team coordination (39%)
• Streamlining the background check process (29%)
• Reducing the time to hire (28%)
• Reducing bias in the hiring process (23%)
• Screening candidates (17%)
• Scaling up and down operations (13%)

Given the range of reasons for using technology in hiring, it’s not surprising that 86% plan to invest more in technology next year.

Technology Investment Plans for 2023

Organizations have the following technology purchase plans for 2023:

• Applicant Tracking Systems (38%) 
• Candidate sourcing tools (34%) 
• Outreach and engagement tech (29%) 
• Recruiting marketing tools (22%) 
• Referral/reference software (19%) 
• Scheduling and coordination tools (16%) 
• Analytics and measurement software (8%) 
• Contact Finder tools (3%) 

Moreover, 90% of financial services respondents plan to purchase technology next year, with candidate sourcing tools being their top priority (44%).

Burnout Among HR Leaders

Burnout is a significant issue among HR leaders, with 73% experiencing burnout directly caused by recruiting and hiring. Of this group, 51% report regular signs of burnout, with 22% experiencing it nearly daily. Misalignment between hiring managers and HR is the primary cause of burnout (50%).

The top factors causing burnout are:

• Misalignment between a hiring manager and HR (50%)
• Handling manual, repeatable tasks (43%)
• Finding quality candidates (42%)
• Pressure to meet hiring and recruiting goals (37%)
• Candidate screening and background check processes (30%)
• Pressure to reduce time-to-hire expectations (29%)
• Low volume of qualified candidates (25%)
• Trying to reach goals viewed as out of reach (14%)
• Candidates dropping out of the hiring process (10%)

Among those who quit, 88% blamed inefficient and ineffective recruiting processes. Almost all (95%) who’ve previously quit a job and blamed ineffective hiring processes would have likely stayed if their employer had provided more or better technology.

Response to Economic Uncertainty

Despite economic uncertainty, 62% of U.S. employers have added to their recruiting and HR teams in the last year, compared to 24% that have lost team members. Only 14% say that current economic conditions have no effect on their HR and recruiting workforce size.

Just over half (52%) report recruiting more people in the current economic landscape, compared to 28% that have pulled back recruiting efforts. In contrast, tech HR leaders were less likely (42%) to report recruiting more people than those from other industries (54%).

In response to the challenging economic landscape, 83% of HR leaders have made changes to their recruiting processes. Changes include:

• Speeding up the hiring process (53%)
• Adjusting pay and benefits (44%)
• Offering more flexible schedules and remote work (38%)
• Making more use of technology (37%)
• Hiring more contract workers (21%)

Financial services were the most likely (63%) to offer more flexible schedules and remote work compared to other industries (42%). Tech HR leaders were the most likely (42%) to speed up the hiring process compared to other industries (33%).

Working with Hiring Managers

Other issues include:

• Misaligned expectations around pay (32%)
• Inefficient background check process (26%)
• Lack of clarity on role requirements (20%)
• Misaligned expectations around experience (17%)
• Slow decision-making (12%)
• Unprofessional behavior (5%)

Financial services HR leaders (60%) were most likely to report misaligned expectations around experience compared to other industries (40%). In contrast, tech HR leaders (55%) were the most likely to report inefficient background check processes as a source of misalignment compared to other industries (36%).

Despite these issues, 95% of HR leaders feel confident in their ability to overcome challenges with hiring managers. However, 90% of financial services HR leaders report feeling confident in their ability to overcome these challenges, compared to 84% of HR leaders in the tech industry.

Hiring and Recruiting Expectations for 2023 

HR leaders have set their expectations and challenges for hiring and recruiting. They include:

• 62% expect to hire more people by the end of 2023
• 45% expect the number of open roles to increase
• 44% expect to hire for new types of roles
• 32% expect the number of open roles to stay the same
• 23% expect to hire fewer people in 2023
• 22% expect the number of open roles to decrease
• 10% are unsure about their hiring expectations

In terms of industry, 76% of HR leaders in the financial services industry expect to hire more people in 2023, only 48% of HR leaders in tech share this expectation.

Industry Specific Challenges

For industry-specific challenges, HR leaders point to the following:

Tech Industry

• Recruiting (48%)
• Diversity and Inclusion (42%)
• Onboarding (40%)
• Engagement (38%)
• Training and Development (34%)

Financial Services

• Recruiting (54%)
• Training and Development (51%)
• Onboarding (45%)
• Diversity and Inclusion (43%)
• Engagement (37%)

For both tech and financial services, recruiting and onboarding are the most significant challenges, followed closely by training and development.

Recruiting Process Improvement

Regarding improvement areas, HR leaders are focusing on the following:

• Better alignment between HR and hiring managers (67%)
• Increasing efficiency in recruiting and hiring processes (65%)
• Investing in better technology (61%)
• Improving the candidate experience (59%)
• Better alignment between HR and the C-suite (53%)
• More focus on diversity and inclusion (51%)
• Reducing bias in the hiring process (48%)
• Increasing the volume of candidates (46%)
• Reducing the time to hire (42%)
• Improving team coordination (37%)

HR leaders in financial services are more likely to focus on increasing efficiency in recruiting and hiring processes (70%), while those in tech are more likely to focus on better alignment between HR and hiring managers (69%).

Burnout Mitigation Strategies

To mitigate burnout, HR leaders are implementing the following strategies:

• Investing in better technology (64%)
• Reducing manual tasks (60%)
• Improving communication with hiring managers (58%)
• Streamlining recruiting and hiring processes (57%)
• Better alignment between HR and the C-suite (53%)
• Focusing on wellness and self-care (51%)
• Providing more training and development (49%)
• Increasing HR team size (45%)
• Offering flexible work schedules (43%)
• Allowing for more remote work (41%)

Financial services HR leaders are more likely to focus on streamlining recruiting and hiring processes (63%), while tech HR leaders are more likely to focus on investing in better technology (68%).

Widespread Adoption and Concerns About AI

AI is increasingly being incorporated into HR and recruitment processes, with 81% of HR leaders now using AI-powered tools to aid their hiring and recruiting.

Among the AI use cases in the hiring and recruiting processes, the study finds:

• 62% use AI to screen candidates for relevant experience
• 58% use AI to power background checks
• 57% use AI to source candidates for specific roles
• 56% use AI for automating routine tasks
• 23% use AI to reduce bias in candidate sourcing

In terms of AI’s perceived benefits:

• 65% find AI makes sourcing candidates more efficient
• 65% use AI to expand their team’s reach without adding to it
• 62% believe AI improves the speed of the hiring process
• 19% use AI to automate repetitive tasks

Interestingly, the report finds that support for regulations around AI use in recruiting and hiring is high, with 83% supporting such measures. This support grows to 91% at the VP level and above.

Source: Findem and KarmaCheck

Conclusion

The recruitment industry’s challenges revolve around process inefficiencies, unmet goals, and technological gaps, as highlighted in “The State and Future of Recruiting – 2023 Report.” The promise of technology, particularly AI, can potentially streamline these processes, even as it surfaces concerns about HR burnout from intensive recruitment activities.

The emphasis on diversity in hiring reflects proactive inclusivity steps across different sectors. However, economic uncertainties have prompted employers to expand HR and recruiting teams, apply more stringent candidate evaluations, and invest in future candidate nurturing.

To sum up, the future of recruitment involves strategic adaptations, leveraging technology, and learning from data. The path forward points to more efficient, effective, and future-oriented recruitment strategies to address these challenges.