BR Analysis | Startup investors eye further AI integration in HR processes

Artificial Intelligence (AI) is shaping the development of the HR industry across the employee lifecycle, starting from recruitment to training and retention. Investors in startups are seeing further growth potential in adapting AI tools for further efficiency gains in HR operations.

By Ovidiu Nicolae Posirca

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Internationally, 76% of HR leaders believe that if their organisation fails to adopt and implement AI solutions in the next 12 to 24 months, they will be lagging in organisational success compared to those that do, according to a Gartner report.

Initially, AI will lead to new sets of expectations among employees regarding the way they interact with the HR function and HR technologies. Over time, this shift will lead to a rethinking of the purpose and structure of individual HR roles and teams, the report notes.

“AI significantly transforms HR recruitment by enhancing efficiency, reducing costs, and improving the candidate's experience. It automates repetitive tasks like resume screening and interview scheduling, allowing recruiters to focus on strategic activities. AI tools analyse large volumes of data quickly and accurately, providing actionable insights that help make informed hiring decisions. Moreover, AI can reduce unconscious bias by standardising evaluations and ensuring a fair selection process,” says Marius Antonie , Technology Consulting Partner at 安永 Romania.?

At the same time, job seekers have access to similar tools for writing and generating better CVs or letters of intent, all supported by generative AI capabilities. CVs can be better and more quickly tailored to specific open roles.

“Candidates should be very careful with the generated content, to avoid the occasional hallucinations of AI models, and always validate the content before using it,” Antonie says.

Companies using AI tools in their recruitment can save on costs, boost engagement through AI chatbots, and make data-driven decisions.

But there are risks and challenges involved as well, such as potential bias in AI algorithms, privacy concerns, over-reliance on AI, and the need for transparency and trust in AI-driven decisions, according to the EY Romania partner. Many companies have already embedded AI-powered functionality into their IT systems, all with the aim of speeding up the search for the right candidates.

The newly agreed EU AI Act categorises as high-risk AI systems intended to be used for the recruitment or selection of natural persons, in particular to place targeted job advertisements, to analyse and filter job applications, and to evaluate candidates.

"Continuous monitoring and updating of AI systems are needed to avoid perpetuating biases. We have seen a case when an AI system was shut down due to biased and unfair decision that leaded to discriminatory recruitment proposals," George Manea – Counsel, KPMG Legal - Toncescu ?i Asociatii, tells BR.

For companies, AI has the potential to assist in recommending personalised training modules for career mobility. By analysing data on each employee, such as their skills and preferences, AI could tailor their training according to personal goals. It could also have the potential to help HR managers identify hidden talent or identify employees who are ready for promotion, according to an IBM report.

In addition, AI can help analyse the outcomes of recruiting efforts, allowing recruiters and hiring managers to identify and refine their most successful outreach strategies.

“I believe there’s a lot of space for innovation in the AI-driven HR recruitment field, with many new potential functionalities for users, no matter which side they’re on. There are already technology companies that offer technical infrastructure frameworks on which HR use cases can be built, combining technologies like blockchain for secure and transparent candidate verification innovation and augmented reality for immersive interview experiences,” according to Antonie of EY Romania.

EY is already using AI-based tools through its Skills Foundry platform. This includes a live heat map of skills across an organisation, showing both supply and demand and allowing for more rapid decision-making around reskilling investments. It also features a content aggregator EY described as “learning intelligence” designed to add speed and scale to training; and “a validated, secure digital record of employees’ skills and experiences,” which can help rapidly deploy the right person to the right opportunity.

Startup investors looking to expand AI’s role in HR

Generative AI can bring a lot of innovation to the recruiting process, especially in the interaction with candidates, making it more personalised and empathetic, according to Cosmin Ochisor , Founding Partner at GapMinder VC . The fund has invested in SmartDreamers, the provider of an AI toolkit to be used as part of their top-of-the-funnel solution for the recruiting process.

“One simple use case is that candidates who are applying directly through the career page no longer need to fill out a long and time-consuming form. Instead, they just upload their CV, and the AI agent does the magic, filling out the application form and asking questions if it does not have the required information,” Ochisor tells BR.

Elsewhere, Early Game Ventures approaches AI as a horizontal technology ready to be deployed vertically in any industry.

“Cybersecurity, productivity, education, compliance, and any industry may benefit from the advancement of AI. This includes the human resources and recruitment verticals as well. So, from this perspective, we are open to considering startups in HR tech that use AI to make recruitment more efficient. How much more efficient, how disruptive is the new approach to the industry, and what end-user benefits would their solution bring—these are fundamental questions the startups need to answer,” Cristian Munteanu, Managing Partner of EGV, tells BR.

Talking about the HR industry, Munteanu suggests that “there is more to innovate here in terms of better and faster matching, deeper candidate screening, more accurate performance tracking, better team integration, and more complete skill development.”

“There are so many aspects of human resources that can be done better, faster, cheaper, and tech has the potential to address all of these,” he added.

HR specialists back AI adoption in Romania

Approximately 55% of HR specialists in Romania support the use of AI in the companies they represent, according to a regional study conducted by Undelucram.ro . This figure stands at 69% in Bulgaria and 62% in Hungary. Meanwhile, only 41% of HR specialists in Greece support AI-based tools, and in Moldova this figure drops to 32%.

The survey shows that the main reasons HR experts in Romania support AI tools are simplifying employees' work and saving time (41%), automating certain tasks so that suppliers are no longer needed (31%), and reducing recruitment volumes in the organisation (7%).

Moreover, the most used AI tools by HR experts in Romania are ChatGPT (58%), HR-specific applications (11%), internally developed solutions covering multiple requirements (11%), QuillBot (8.2%), Character.AI (6.7%), and Midjourney (5.7%).

Costin Tudor, the CEO of Undelucram.ro , notes that the study shows that HR specialists are not using AI enough in their activities, that the tools being used are not maximised due to the lack of training, and that many organisations do not have a clear plan to optimise work with such solutions.

The survey was conducted between May 15 – June 5, 2024, with responses from 5,250 HR specialists, of which 80% worked for companies with over 100 employees.

AI tools becoming part of daily work

More people are using AI in their daily work routines, with 75% of knowledge workers relying on such tools today, according to a Microsoft and LinkedIn report.

Nine out of ten users say AI helps them save time, while more than three quarters say these tools support creativity and boost work enjoyment.

Additionally, 79% of leaders in Fortune 500 companies included in the report agreed that their organisations needed to adopt AI to stay competitive, but 59% worried about quantifying the productivity gains of AI.

The report further revealed that the use of AI at work has nearly doubled in the past six months. It also provides some hints about the long-term impact of this technology. There is already a growing number of recruiters saying that they’re already creating new roles which are tied specifically to the use of generative AI. “These are signs that AI could be a rising tide that elevates skills across roles and industries. Entry-level workers will take on more strategic projects, while uniquely human skills like management, relationship building, negotiation, and critical thinking will come to the fore for employees at all levels. Organisations that understand this will retain and attract the best talent, and professionals who skill up will have the edge,” according to the authors of the Microsoft and LinkedIn report.