How start-ups are conquering the HR industry

On the one hand, there is a shortage of skilled workers, but on the other hand, companies are still sending out boring job requests on Linkedin and Xing. Many founders see a gap in the market here: HR startups are booming.

A recruiter posts a job ad on Xing, he is looking for a Senior Java Software Engineer. Competition is fierce, because currently one in three open positions in IT professions remains unfilled, as a study by Kofa has shown . If you want to convince a good developer, you have to make an effort.

And yet the text of the application seems very generic. "You stand for innovation and modernization of business processes and want to work in a company, which (sic!) is the key to success?" That's the first sentence. Exactly which company it is about is not mentioned in the job advertisement. There is talk of "above-average compensation" - but exactly how high is left open.

Boring Xing inquiries

Will this be enough to arouse the interest of a highly sought-after IT specialist? Probably not. But job advertisements like this abound, and boringly worded e-mails from recruiters constantly land in the Linkedin and Xing inboxes of sought-after specialists. It almost seems as if companies have capitulated in their search for suitable employees. Founders have recognized this weakness - and are founding HR start-ups. The perfect candidate for a job is now no longer sought by humans, but by algorithms. But experts warn against this trend and urge people not to rely solely on software.

In the U.S., AI-based HR consulting has been around for some time, explains Guido Friebel, professor of human resources at Goethe University in Frankfurt. "But the experience there was that it is not good to rely only on the algorithms," he says. "Companies otherwise lose their HR competencies and thus control over who they hire and who they don't."

Currently, HR departments are capitulating to the wealth of data that now exists because of platforms like Linkedin or Stepstone.

Guido Friebel, professor of human resources at Goethe University.

Instead, companies should hire more data scientists for their HR departments and evaluate data on current and future employees themselves. "Currently, HR departments are capitulating to the wealth of data that now exists because of platforms like Linkedin or Stepstone."

German startups like Talentwunder have recognized the problem of this data jungle - and turned the solution into a business model. Founded in 2014, the company has developed software that reads publicly available data from more than 30 portals - including job platforms such as Linkedin and Xing, but also networks such as Researchgate and Github, where professionals tend to exchange information. Applicant profiles are then compiled from the various data. If a company now searches for the right new employee on Talentwunder, it is directly shown a ranking list of possible candidates.

Talentwunder searches for capable candidates

"Whether a candidate is a good fit for the company depends primarily on his or her skills," explains Steffen Tröger, who has been managing director of Talentwunder since the beginning of 2020.

If, for example, a company from the gastronomy sector were looking for the right sales manager, the search engine would also suggest candidates to him who have a different job. "A restaurateur, for example, also has sales talent, knows the industry, is articulate and can multitask."

"Matching candidates are often written to very generically because the goal is to reach as many applicants as possible."

Steffen Tröger, CEO of Talentwunder

Most companies would not think around the corner like this when searching for employees on Linkedin. Another mistake that Tröger often observes: "The suitable candidates are often written to very generically, because the goal is to reach as many applicants as possible."

However, he says, it is more purposeful to contact a few - but suitable - professionals as individually as possible. Talentwunder would also help its customers, which include Deutsche Bahn, Liebherr and Allianz, with this. Talentwunder has been operating profitably since 2020, and Tröger now emphasizes that the company no longer sees itself as a classic start-up.

Making recruitment cheaper

Another HR start-up has also recognized that companies are overwhelmed with employee searches on networks such as Linkedin and Xing: Moberries wants to make recruiting cheaper for companies and automate it. "We want to help as many people as possible in their career search while providing the best experience," promises co-founder Terence Hielscher.

To do this, Moberries has developed a neural network, a kind of artificial intelligence. Its goal: to bring companies together with the right applicants. But unlike Talentwunder, Moberries does not collect data from other job portals. Anyone who wants to be considered for a job must register in advance, which can also be done via Whatsapp or Telegram.

Network learns from feedback

After that, users can submit their resumes and answer questions - "the more the better," as Hielscher emphasizes. The registered companies get candidates suggested to them that the algorithm recognizes as suitable. If they reject it, they have to click on a short feedback field and explain why. That's how the network learns - and so does the employee.

"Thirty percent of the candidates the algorithm suggests move on to the next stage - in other words, have an interview," says Hielscher. Moberries also helps with Linkedin searches for employees - companies can hire so-called virtual recruiters, whom Moberries has trained.

Algorithms can also be discriminatory.

Terence Hielscher, co-founder of Moberries.

2,000 companies are currently customers of Moberries, he said, including Ionos, Bertelsmann and Volksbanken. The concept seems to be working. And yet even the founder himself warns: "Algorithms can also be discriminatory. They are only as good as the input they receive." Only when they receive a lot of data, he says, are they less discriminating than humans.

It's an assessment he shares with experts like Michael Kramarsch. He is the founder of the consultancy Hkp and has focused on HR startups, including Talentwunder, as an investor. "If an AI were to take over the selection process for a board position using data from the last thirty years, you can be sure it would choose an older, white male," he says.

Therefore, he says, it must be ensured that AI is based on high-quality data. In addition, HR departments would also need to be able to understand such tools if they relied on them. "Otherwise, there is also a risk of a certain loss of autonomy," he warns. HR managers would then rest too much on results or recommendations from the technology.

But used correctly, digital technology speeds up the recruiting process, he says. "People with the appropriate skills are found more quickly, and the selection process is potentially more non-discriminatory."

Discrimination against young mothers

But discrimination can become a problem not only during the application process, but also afterwards - especially for employees with family commitments. Sandra Westermann had to make this experience in her old job as a TV production manager. She was fired in the middle of her parental leave - even though that wasn't even in compliance with the law.

She then looked for a job that was compatible with her new family situation - for example, because of a flexible working time model and the possibility of working partly from home. "There was a job board for everything at the time, but not for family-friendly jobs," she says. That's why she decided to build her own job portal at the end of 2018, she says. The target group? Primarily mothers, but also young women without children. Ten percent of users are male, says the founder.

"Superheldin," as the start-up is called, earns per job ad placed. "We also advise companies on recruiting women," Westermann says. She and her team would review each ad and decide if it met the requirements. This would include not only the working conditions, but also wording.

Women are put off more quickly

"Women are put off more quickly by high requirements than men," says the founder. One example, she said, is "business-fluent English" - often companies just mean that they are looking for employees with solid English skills. "We then report back to the companies what they can do better."

Many of the customers - which also include the Deutsche Bundesbank - would gratefully accept that. After all, he said, companies are desperately looking for female employees because of the shortage of skilled workers, but also because of the women's quota. Generic job ads on Xing and Linkedin are no longer enough.