Another Biz Reporter Rips Applicant Tracking Systems

As many of you know, I firmly believe that HR hiring software--AKA "applicant tracking systems"--, which far too many American enterprises offer job seekers as their only port-of-entry, exacerbate our nation's unemployment problem and detract from companies' bottom lines (and therefore detract from the economy as a whole). So any article I come across that's critical of ATSes gets my attention.

In this article, CIO's Meridith Levinson describes applicant tracking systems as capricious and fundamentally-flawed. She hammers home the fact that the expensive, unwieldy software American enterprises often "employ" as their exclusive employment gatekeepers arbitrarily reject potentially great employees. As you read the article, keep in mind that half of Americans ages 18-29 are either unemployed or underemployed. Think about how younger Americans who have less experience (and therefore have fewer keywords and numbers on their applicant profiles) and who have a smaller professional network (not that that matters much when hiring managers direct applicants to their ATSes) might be at a significant disadvantage under this hiring paradigm. This is, after all, a paradigm in which even the most talented applicants are judged by poorly-designed computer software based on experiential criteria only. Remember, an ATS will always select someone with more degrees or experience over someone with more accomplishments. Why? Because ATSes CAN'T IDENTIFY ACCOMPLISHMENTS.

Lou Adler, entrepreneur and best-selling author, best summarized this phenomenon in an article he recently published on LinkedIn:

“Successful candidate will develop a new approach for reducing water usage by 50%,” is a lot better than saying “Must have 5-10 years of environmental engineering background including 3-5 years of wastewater management."

- See more at: http://www.ecominoes.com/2013/05/the-american-hiring-paradigm-is-broken.html#sthash.KkCw7bIz.dpuf

Lest we forget what Lou Adler, entrepreneur and best-selling author, recently stated on LinkedIn:

“Successful candidate will develop a new approach for reducing water usage by 50%,” is a lot better than saying “Must have 5-10 years of environmental engineering background including 3-5 years of wastewater management."

In this case, ATSes would always choose candidates with more years of experience over those with more accomplishments that would suggest the capability of reaching the goal of reducing water usage by 50%. In fact, many ATSes require applicants to list "responsibilities". Anyone can have responsibilities. Only a select (read: overlooked) few have bona fide accomplishments. But the people most capable of identifying accomplishments relevant to the job, hiring managers, all too often go out of their way to conceal themselves from the applicant pool. Anyway, on to the article:

Applicant tracking systems are the bane of legions of job seekers. These systems, which employers use to manage job openings across their enterprises and screen incoming resumes from job seekers, kill 75 percent of candidates' chances of landing an interview as soon as they submit their resumes, according to job search services provider Preptel.

The problem with applicant tracking systems, as many job seekers know, is that they are flawed. Very flawed. If a job seeker's resume isn't formatted the right way and doesn't contain the right keywords and phrases, the applicant tracking system will misread it and rank it as a bad match with the job opening, regardless of the candidate's qualifications.

Bersin & Associates, an Oakland, Calif.-based research and advisory services firm specializing in talent management, confirmed the weaknesses of applicant tracking systems. In a test conducted last year, Bersin & Associates created a perfect resume for an ideal candidate for a clinical scientist position. The research firm matched the resume to the job description and submitted the resume to an applicant tracking system from Taleo, arguably the leading maker of these systems.

Taleo is notorious for producing ridiculously buggy software. There used to be a great blog that described in detail the numerous functional problems with Taleo's products. Some of these problems have been fixed with recent releases. Many have not. And the fundamental flaws persist, as they do with all ATSes:

When Bersin & Associates studied how the resume rendered in the applicant tracking system, the company saw that one of the candidate's work experiences was lost entirely because the resume had the date typed before the employer. The applicant tracking system also failed to read several educational degrees the putative candidate held, which would have given a recruiter the impression that the candidate lacked the educational experience necessary for the job. The end result: The resume Bersin & Associates submitted only scored a 43 percent relevance ranking to the job because the applicant tracking system misread it.

Every American hiring manager should read that last sentence.

Josh Bersin, CEO and president of the firm, notes that since all applicant tracking systems use the same parsing software to read resumes, the results his company found would be typical of most systems, not just Taleo's.

The problems with applicant tracking systems beg the question: If they're so flawed and if they filter out good candidates, why do employers bother to use them? The answer is simple: Bersin says they still make recruiters' lives easier. 

Stop right there. American enterprises don't use ATSes to find the best potential employees. They use them to make recruiters' lives easier.  Let's analyze that in terms of risk and reward: To reduce the workload of their recruiters, organizations spend billions of dollars annually on buggy software that arbitrarily eliminates a significant number of talented applicants. Under that paradigm, up to 50% of new hires "don't work out". Does the end of convenience for HR workers justify a unquestionably broken means of hiring? Levinson goes on:

Applicant tracking systems save recruiters days' worth of time by performing the initial evaluation and by narrowing down the candidate pool to the top 10 candidates whose resumes the system ranks as the most relevant. Even if some good candidates get filtered out, recruiters still have a place to start. 

Better said, recruiters have a good "place to start" with the applicants who are lucky enough to win the ATS lottery and get through to a hiring manager. Those applicants may or may not be the best candidates.

PBS's "Ask the Headhunter" Nick Corcodilos said it best:

Unemployment is made in America by employers who have given up control over their competitive edge -- recruiting and hiring -- to a handful of database jockeys who are funded by HR executives, who in turn have no idea how to recruit or hire themselves.

Seth Mason, Charleston SC

PBS's "Ask the Headhunter" Blasts Applicant Tracking Systems

I recently wrote an article critical of American companies' tendencies to use applicant tracking systems to seek keywords rather than allowing candidates to demonstrate potential added value to their bottom lines. I noted that the current hiring paradigm suffers a failure rate of up to 50%.

Today, ambitious job seekers have scant opportunities to walk into a company and make a pitch directly to a hiring manager. The personable aspect of hiring has been replaced with buggy software programs and cookie cutter online psychological exams that stigmatize creativity and innovative thinking.

Clearly, the American hiring paradigm is broken. PBS's "Ask the Headhunter" Nick Corcodilos has been quite outspoken on the subject. Here's one of his most thoughtful articles:

Last week, I published the 500th edition of my weekly Ask The Headhunter Newsletter, which I started in 2002. (Check the footer of this column if you'd like to subscribe. It's free.) Why does the newsletter keep going? Because America's employment system still doesn't work, and employers are clueless about why.

The emperor still has no clothes, and that's a big part of why over 25 million Americans are unemployed or under-employed. (According to the Business Desk, that's how many Americans say they want but can't find a full-time job.) Meanwhile, according to the U.S. Department of Labor, 3.9 million jobs were vacant in September.

HR executives have a special term for this 6:1 market advantage when they're trying to fill jobs today: They call it a "talent shortage."

Gimme a break.

Human resources executives run around in their corporate offices with their eyes closed, throwing billions of dollars at applicant tracking systems (ATSes) and job boards like Taleo, Monster.com and LinkedIn, and they pretend no one can see they are dancing in circles buck naked. HR keeps talking about a talent shortage, but the only talent shortage is in the HR offices. HR executives need to learn how to match up the 3.9 million vacancies with some of the 25 million under-employed.

What's going on?

The economy is certainly one factor, but businesses, the media and the federal government continue to ignore the structural problems in our employment system. I'll tell you what I think the main problems are.

Companies Don't Hire Anymore

Employers don't do their own hiring, and that's the number one problem. They outsource their competitive edge (recruiting and hiring) to third parties like Taleo, Kenexa, LinkedIn, Monster.com and CareerBuilder. Monster and LinkedIn alone sucked almost $2 billion out of the employment system in 2012. These vendors offer little more than trivial technologies and cheap string-search routines masquerading as "algorithms" for finding "hidden talent" and "matching people to jobs."

HR executives are spending billions on those systems, so why are almost 4 million jobs vacant? Because these vendors sell databases -- not recruiting, not headhunting, not jobs, not hires and not matchmaking.

Somewhere, right now, the chairman of the board of some corporation is pounding the podium at a shareholders' meeting, exclaiming, "People are our most important asset!"

Meanwhile, HR executives are funding programs that mingle their companies' most important assets in databases shared with all their competitors via a handful of applicant tracking systems that can't get the job done.

Heads-up to boards of directors: Where is your competitive edge? Take control of your hiring again, like it matters!

Employers Don't Know How to Recruit

Here's how human resources departments across America "recruit." They put impossible mixes of keywords about jobs into a computer. They press a button and pay billions of dollars for a chance that Prince Charming will materialize on their computer displays. When the prince fails to appear, they double their bets and keep gambling. (Last year, companies polled said just 1.3 percent of their hires came from Monster.com and 1.2 percent from CareerBuilder. See "Is LinkedIn Cheating Employers and Job Seekers Alike?")

Meanwhile, in the real world, over 25 million people, many of them immensely talented and capable of quickly learning how to do new jobs, are ready to work.

Employers need to get away from their desks, remove the ATS straps from around their necks, and go outside to actually find, meet, recruit, cajole, seduce and convince good workers to come work for them.

The Employment System Vendors Are Lying

The big job boards and the ATSes tell employers that sophisticated database technology will find the perfect hire.

• "Don't settle for teaching a good worker anything about doing a job. Hire only the perfect fit!"
• "We make that possible when you use more keywords for a job!"
• "The database handles it all!"

When matches fail to appear, these vendors blame "the talent shortage" and contend that job seekers lack the specific skills employers need.

Except that's a lie. Job descriptions heavily larded with keywords make it virtually impossible to find acceptable candidates. Wharton researcher Peter Cappelli tells about an employer that got 25,000 applicants for a routine engineering position. The ATS rejected every single one of them. Every day that an impossible job requisition remains unfilled, the employment system vendors make more money while companies keep advertising for the perfect hires.

Millions of jobs are vacant, thanks to the empty promises of algorithms. Ignoring the role of the systems behind this failure is a costly mistake.

If the U.S. Congress wants answers about the jobs crisis, it should launch an investigation into the workings of America's employment system infrastructure, which is effectively controlled by a handful of companies.

Employers Have No Business Plan

Employers claim job applicants lack the requisite skills and talents for today's jobs. But in "Why Good People Can't Get Jobs," Peter Cappelli reports that they are wrong. The quality of the American worker pool has not diminished. Rather, American companies:

• Don't want to pay market value to hire the right workers.
• Don't want to train talented workers to do a new job.
• Are content to keep using ATSes that don't get the job done.

Cappelli points out that employers believe they save money when they leave jobs vacant because their accounting systems track the cost of having workers on the payroll, but they fail to track the cost of leaving work undone. Employers run the numbers, and they seem to come up with junk profitability: Fewer Employees = Lower Costs = Higher Profits.

Employers who believe this are misguided or downright foolish. They should stop regarding workers as a cost, start treating them as investments and ensure that each worker pays off in higher profits.
Employers should get a business plan and make their employment systems accountable.

America Counts Jobs, Not Profitable Work

The federal government tracks the number of people who have jobs and the number of vacant jobs. But tallying jobs to assess the economy is like counting chickens before they hatch. The federal government has no idea which jobs or which work is actually profitable and contributing to a healthy economy.

It's no secret that the weekly employment figures are questionable and misleading. The definitions of jobs and "who is employed" are so manipulated that no one knows what is going on.

It's time to re-think how companies find and pay people to do work that produces profit. A better indicator of economic success would be the measure of how profitable all the work in America actually is -- and how much profit is left behind on the table each month when work is left undone.

People Must Stop Begging for Jobs

It's time for people to stop thinking about jobs, and high time to start thinking about how -- and where -- they can create profit.

For example, if I run a company, I'll hire you to do work -- if it pays off more than what I pay you to do it. Today, few employers know which jobs actually pay off. That's why you need to know how to walk into a manager's office and demonstrate, hands down, how you will contribute profit to the manager's business. That's right: Be smarter than the manager about his own business. Stop begging for jobs. Start offering profit.

If you can't do that, you have no business applying for any job, in any company. In the book "Fearless Job Hunting: The Interview -- Be The Profitable Hire" (available in the Ask The Headhunter Bookstore), I explain it like this:

A good employer wants to see what you can do. If he doesn't ask, help him out and show him. It'll turn your interview into a working meeting where you both roll up your sleeves, and during which the employer can do a direct assessment of your worth to his business. Here's how to say it:

"Please lay out a live problem you'd want me to handle if you hired me. I'll do my best to show you how I'd do the work so it will pay off for both of us."

Think you can generate lots of profit without working for someone else? Then bet your future on your plan, and start your own business.

What Is Going On

Here's the simple truth: Unemployment is made in America by employers who have given up control over their competitive edge -- recruiting and hiring -- to a handful of database jockeys who are funded by HR executives, who in turn have no idea how to recruit or hire themselves.

American ingenuity starts with the individual who has an idea, blossoms with a plan that will produce profit -- for yourself and your boss and your customer -- and results in more money for everybody.

So to be truly competitive, American employers must themselves do the hard work of identifying, attracting, recruiting, hiring and further training workers who can ride a fast learning curve without falling off. Outsourcing these critical tasks dulls a company's competitive edge.

Business leaders, the media and the government must revisit their assumptions that automated employment systems are the answer and that the problem is with American workers. Until the structural problems with these systems are addressed, those 3.9 million vacant jobs point to the harsh truth that American employers are a leading cause of unemployment.

"Unemployment is made in America by employers who have given up control over their competitive edge -- recruiting and hiring -- to a handful of database jockeys who are funded by HR executives, who in turn have no idea how to recruit or hire themselves." I couldn't have said it better myself. The American hiring paradigm is broken indeed.

Seth Mason, Charleston SC

No Recovery For "Breadwinner" Jobs

Former Reagan budget director David Stockman has been quite outspoken about the Federal Reserve's role in collapsing the economy. Much of his new book, The Great Deformation, explains how the Fed led us into this economic depression and how our central bank is now inflating an asset bubble that will eclipse the mid-2000s housing bubble. This new, larger bubble, Stockman says, will eventually burst and crash the economy once more.
 
In The Great Deformation, Stockman frequently notes that the post-Great Recession "recovery" has been nothing but rampant Fed-fueled asset speculation. In Chapter 31, the former budget director explains that, while the speculation has been a windfall for the wealthiest among us, it's done next to nothing to improve the atrocious job market:

After the US economy liquidated excess inventory and labor and hit its natural bottom in June 2009, it embarked upon a halting but wholly unnatural “recovery.” The artificial prolongation of the Bush tax cuts, the 2 percent payroll tax abatement and the spend-out of the Obama stimulus pilfered several trillions from future taxpayers in order to gift America’s present day “consumption units” with the wherewithal to buy more shoes and soda pop.

But there has been no recovery of the Main Street economy where it counts; that is, no revival of breadwinner jobs and earned incomes on the free market.

What we have once again is faux prosperity. In fact, the current Bernanke Bubble is an even sketchier version of the last one and consists essentially of the deliberate and relentless reflation of financial asset prices.

In practice, this amounts to a monetary version of “trickle down” economics. By September 2012, personal consumption expenditure (PCE) was up by $1.2 trillion from the prior peak, representing a modest 2.2 percent per year (0.6 percent after inflation) gain from the level of late 2007. Yet half of this gain—more than $600 billion—reflected the massive growth of government transfer payments, and much of the rebound which did occur in private consumption spending was concentrated in the top 10–20 percent of households. In short, the Fed’s financial repression policies enabled Uncle Sam to fund transfer payments for the bottom rungs of society at virtually no carry cost on the debt, while they juiced the top rungs with a wealth effects tonic that boosted spending at Nordstrom’s and Coach.

The Fed’s post-Lehman money printing spree has thus failed to revive Main Street, but it has ignited yet another round of rampant speculation in the risk asset classes. Accordingly, the net worth of the 1 percent is temporarily back to the pre-crisis status quo ante.

Conservatives often scoff at the phrase "1 percent". But it's absolutely true that Fed liquidity pumping has been great for the wealthiest Americans but bad for the rest of us. The reason is simple: 1) inflation--a natural byproduct of liquidity pumping--is good for most investment classes but bad for nearly every other sector of the economy, and 2) the wealthiest among us have the majority of their net worth in investments that benefit most from inflation: equities, commodities, and real estate.

Needless to say, successful speculation in the fast money complex is not a sign of honest economic recovery: it merely marks the prelude to another spectacular meltdown in the canyons of Wall Street next time the music stops.

In the following subsection, Stockman details the sunset of American "breadwinner" jobs:

The precarious foundation of the Bernanke Bubble is starkly evident in the internal composition of the jobs numbers. At the time the US economy peaked in December 2007, there were 71.8 million “breadwinner” jobs in construction, manufacturing, white-collar professions, government, and full-time private services. These jobs accounted for more than half of the nation’s 138 million total payroll and on average paid about $50,000 per year—just enough to support a family.

Breadwinner jobs also generated more than 65 percent of earned wage and salary income and are thus the foundation of the Main Street economy. Yet after a brutal 5.6 million loss of breadwinner jobs during the Great Recession, a startling fact stands out: less than 4 percent of that loss had been recovered after 40 months of so-called recovery.

The 3 million jobs recovered since the recession ended in June 2009, in fact, have been entirely concentrated in the two far more marginal categories that comprise the balance of the national payroll. More than half of the recovery (1.6 million jobs) occurred in what is essentially the “part-time economy.” It presently includes 36.4 million jobs in retail, hotels, restaurants, shoe-shine stands, and temporary help agencies where average annualized compensation was only $19,000. This vast swath of the jobs economy—27 percent of the total—is thus comprised of entry level, second earner, and episodic jobs that enable their holders to barely scrape by.

The April jobs report exemplifies the dearth of good jobs. While April is historically the strongest month for hiring, this April saw a woefully insufficient number of jobs created, more than half of the new jobs in either the hospitality industry (think: bartenders, waitresses, etc.) or temp jobs. Again, that was in the strongest month for hiring 5 years after Lehman.

The balance of the pick-up (1.1 million jobs) was in the HES Complex, which consists of 30.7 million jobs in health, education, and social services. Average compensation is slightly better at about $35,000 annually and this category has grown steadily for years. Its increasingly salient disability, however, is that it is almost entirely dependent on government spending and tax subsidies, and thus faces the headwind of the nation’s growing fiscal insolvency.

When viewed in this three category framework, the nation’s job picture reveals a lopsided aspect that thoroughly belies the headline claims of recovery. A healthy Main Street economy self-evidently depends upon growth in breadwinner jobs, but there has been none, even during the bubble years before the financial crisis. The Bureau of Labor Statistics (BLS) reported 71.8 million breadwinner jobs in January 2000, yet seven years later in December 2007—after the huge boom in housing, real estate, household consumption, and the stock market—the number was still exactly 71.8 million.

Stockman is saying what I've been saying all along: the economy hasn't been "right" since the Fed's tech bubble burst in the early 2000s. He's saying that all we've seen in the new millennium has been cycles of artificial booms and busts built on shaky fundamentals that have never allowed a full recovery of the job market. Stockman elaborates on the shaky fundamentals in the concluding paragraphs of the subsection:

The faux prosperity of the Fed’s bubble finance is thus starkly evident. This is the single most important metric of Main Street economic health, and not only had there been zero new breadwinner jobs on a peak-to-peak basis, but that alarming fact had been completely ignored by the smugly confident monetary politburo.

Alas, the latter was blithely tracking a feedback loop of its own making. Flooding Wall Street with easy money, it saw the stock averages soar and pronounced itself pleased with the resulting “wealth effects.” Turning the nation’s homes into debt-dispensing ATMs, it witnessed a household consumption spree and marveled that the “incoming” macroeconomic data was better than expected. That these deformations were mistaken for prosperity and sustainable economic growth gives witness to the everlasting folly of the monetary doctrines now in vogue in the Eccles Building.

To be sure, nominal GDP did grow by 40 percent, or about $4 trillion, between 2000 and 2007. Yet there should be no mystery as to how it happened. As has been noted, total debt outstanding grew by $20 trillion during that same period. The American economy was thus being pushed forward by a bow wave of debt, not pulled higher by rising productivity and earned income.

Indeed, the modest gain of 7.5 million jobs during those seven years reflected exactly this debt-driven dynamic and explains why none of these job gains were in the breadwinner categories. Instead, about 2.5 million were accounted for by the part-time economy jobs described above. On an income-equivalent basis these were actually “40 percent jobs” because they represented an average of twenty-five hours per week and paid $14 per hour, compared to a standard forty-hour work week and a national average wage rate of $22 per hour. Thus, spending their trillions of MEW windfalls at malls, bars, restaurants, vacation spots, and athletic clubs, homeowners and the prosperous classes, in effect, temporarily hired the renters and the increasing legions of marginal workers left behind.

Likewise, another 5 million jobs were generated in the HES (health, education, and social services) complex. Here the job count grew by 20 percent, but it was mainly due to the fact that the sector’s paymasters - government budgets and tax-preferred employer health plans - were temporarily flush.

However, these, too, were “debt-push” jobs that paid modest wages. While the steady 2.6 percent annual growth of HES jobs during the second Greenspan Bubble did flatter the monthly employment “print,” it was possible only so long as government and health plans could keep spending at rates far higher than the growth rate of the national economy.

Fed-fueled rampant asset speculation inflated the housing bubble, which burst and crashed the economy, making the prospect of securing a "breadwinner" job but a dream for many intelligent, educated, perfectly employable Americans. Now, the Fed is enabling what notable economist Nouriel Roubini is calling the "mother of all bubbles".

Seth Mason, Charleston SC

April Employment Increase: Nothing But Menial Jobs

Readers of this blog know that Washington's employment data should be scrutinized. The Bureau of Labor Statistics is notorious for crushing down the labor force participation rate in order to make it appear that the unemployment rate is falling, and the agency's survey methodology is fundamentally-flawed, according to a former BLS leader. But, even if you take the government's word on unemployment as the "Gospel truth", a 50,000-150,000 monthly net increase in jobs--as Uncle Sam has been reporting for years--is woefully insufficient. At this rate of increase--with the unemployment rate dropping by a tenth of a percent each month--, it would take until 2017 to get back to the lower end of the "full employment" range. And that's IF the economy has no additional difficulties and WITH the help of a crushed-down labor participation rate. And, that's if you consider 5% unemployment and 10% underemployment "full employment".

But the raw jobs numbers don't tell the full story anyway. What does it matter if 50,000 or 150,000 or even 1,000,000 jobs are created each month if the jobs are menial in nature? And make no mistake: we've been seeing for years little but a monthly increase in low-wage, low-skill jobs. The April jobs report showed more of the same.

The overwhelming majority of jobs created last month were in leisure and hospitality (waiters, bartenders, hotel employees, etc.) and temp jobs. Industries that actually produce something, whether it be information or physical goods, actually lost jobs:

There was a net decrease in jobs for Americans of prime working age, i.e. there was a net decrease in "career" jobs. But there was a net increase in jobs for Americans of prime restaurant worker and Walmart greeter ages:

In fact, the number of jobs for Americans of prime working age (i.e. career age) has been flat since the economy collapsed:

Seth Mason, Charleston SC