Small Businesses Aren’t Ready for AI in HR—But They Need to Be

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AI is being integrated into more and more small-business HR software. Here’s how you can prepare.

header image shows a robot and a business icon, with a chat bubble over them.

Enterprises have already realized how beneficial artificial intelligence (AI) can be to HR processes and strategy. Some 88% of businesses globally have used AI in some way for HR, to automate tedious tasks such as resume scanning or to uncover data-driven talent insights they couldn’t have found otherwise. AI is also increasingly found in the HR systems that businesses are already using.

Now, small businesses are getting in on the AI action. According to Capterra’s 2019 Top Technology Trends survey, 41% of U.S. small businesses are already using AI or machine learning (ML) or plan to use it in the next one to two years.

Pie chart showing artificial intelligence (AI) and machine learning (ML) usage among U.S. small businesses.

The excitement around AI’s potential in the small-business space is palpable. But excitement isn’t the same thing as readiness. And when 83% of Fortune 500 chief human resource officers (CHROs) believe there is a readiness gap in their organizations when it comes to AI, one can only imagine how prevalent AI readiness gaps are in their smaller brethren.

We’ll explain why every small-business HR department—even those that have no interest in AI whatsoever—needs to pay attention. Then we’ll offer tips on how you can prepare for AI in HR.

AI is coming to your HR department, whether you want it or not

For many small-business HR departments, adopting AI will seem like a bridge too far. Tech-wise, they have to walk before they can run, which is why many are instead focused on just transitioning from manual processes to software. According to our 2019 Top Technology Trends survey, 80% of U.S. small businesses are now using HR software, or plan to use it in the next one to two years.

Pie chart showing HR software usage among U.S. small businesses.

Be it payroll software, recruiting software, or otherwise, more and more small businesses are purchasing commercially available systems to handle their HR needs instead of using spreadsheets or paper files.

But what many don’t realize is that they are also adopting AI at the same time.

Don’t believe me? Here are just a few examples:

  • Users of Kronos Workforce Ready, a human capital management (HCM) system for small and midsize businesses, get access to “AIMEE”—AI that can analyze HR data to identify top performers and predict which employees are likely to leave.
  • ZipRecruiter, a small-business recruiting platform, added a feature in 2018 called “Candidate Calibration” that allows users to thumbs up or thumbs down different job applicants so the platform’s AI can find better-fit applicants for openings in the future.
  • Just a few weeks ago, Cornerstone acquired Clustree—an AI-driven platform that matches employee skills with specific job roles—which the vendor plans to integrate into its portfolio of products, including the small business-focused PiiQ.

Over time, more and more HR software vendors will add AI to their product portfolios.

What does this mean? It means AI is not something you are going to actively seek out and buy as a standalone tool. Rather, AI will already be integrated into the HR systems you use for everyday processes.

Don’t get me wrong—this is a good thing. As I mentioned at the beginning, AI is already bringing a lot of benefits to enterprise-level HR departments.

But it also means you need to be careful. If it learns from already-existing bad data or processes, the AI in your HR software may serve up poor recommendations (like suggesting you hire the wrong person) or deliver a poor experience (like an employee unable to get answers from an HR chatbot).

That’s a future you want to avoid, so let’s look at how you can prepare today.

4 tips to prepare for AI in HR

If you’ve ever gotten an awful playlist from Spotify or wondered why your Netflix recommendations are cluttered with junk, you’ve already experienced what can happen when AI goes wrong. Implemented in an HR department, the stakes are much higher. What if an AI recommends a job applicant that’s actually a poor fit for your company?

To help you avoid stumbles like this, here are some tips for how you can prepare for when AI makes its way into your HR department:

1. Hone in on one impactful use case.

Setting AI loose on your HR processes and crossing your fingers that good things will happen is the wrong move. Instead, focus on one key area that needs improvement—hiring decisions, or even something like HR service delivery—and be diligent about tracking the outcomes when AI gets introduced. Not only can you better control the scope of your AI implementation, but you can also narrow down software options when shopping around to those that only serve your desired use case.

2. Collect and organize as much HR data as possible.

AI relies on good data to identify trends, make recommendations, or deliver human-like experiences. If you have sparse or incomplete data, you’re going to get bad results. Using either spreadsheets or a human resources information system (HRIS), start hoarding and tagging as much employee data as possible related to recruiting, performance, compensation, and anything else HR-related to get your AI on the right track when the time comes.

3. Mitigate factors that are biasing your HR data.

Once you’ve accrued a large enough HR dataset, use a data analysis tool to understand it. Are performance ratings distributed evenly and fairly? Are you hiring way more men than women? Why is that? Learning where your data is badly biased, and mitigating the factors that are influencing the data to be that way, will help you avoid AI discrimination in the future.

If you want to learn more about AI discrimination, check out this article: “Recruiters Beware: AI Can Discriminate Too.”

4. Ask vendors to open the “black box.”

The “black box problem” with AI occurs when you have no idea what methods or algorithms an AI tool used to arrive at its results. It makes optimizing the AI or understanding its faults next to impossible. When talking to HR vendors about their AI capabilities, cut through the marketing language and ask questions to get a better understanding of how exactly the AI ticks. They probably won’t reveal everything, but you will learn enough to help in your purchase decision.

Need more AI help?

According to a study by Future Workplace, 90% of HR leaders are concerned they will not be able to adjust to the rapid adoption of AI. If this all feels like it’s happening too fast, it’s because it is. Many small businesses simply aren’t prepared.

You don’t have to be among the unprepared, though. Check out these other Capterra resources about AI to become more informed and ready for AI to take your HR department in a positive direction:


Information on Capterra’s 2019 Top Technology Trends survey

Capterra conducted this survey from June-August 2019 among 539 U.S.-based small and midsize business leaders. Companies were screened by size for those with 2 to 249 employees and enterprise-wide annual revenue of less than $100 million. The qualified respondents were required to be involved in purchasing technologies for the organization and to hold a position of manager or above in the company.

Looking for Talent Management software? Check out Capterra's list of the best Talent Management software solutions.

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About the Author

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Brian Westfall

Brian Westfall is a Senior HR and Talent Management Analyst for Capterra. His research has been cited in various publications, including TIME, Entrepreneur, Fast Company, and Undercover Recruiter.

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