Role of technology in re-employing a million Sri Lankans

I’m no economist, venture capitalist or philosopher. But with COVID-19 wrecking havoc across the world right now, it begs the question around work, unemployment and what it means to Talent like you.

In my last post “keeping businesses recession ready”, I wrote about a few things that I was struggling with. This side project that I started a few years ago turned into a fun little collection of businesses. And like most businesses, ‘SeedingAlpha’ took a bit of a valuation haircut over the last few weeks.

Businesses that were expanding into new markets got the rug pulled from under them. Investments we’ve made in infrastructure turned out to be an over-extension and cashflow got tight. Thankfully, there was a silver lining and nothing really fell apart to the point where we had to start over. We decided to take a stand, we were going to tighten our belts and buckle down, incubate vs throw cash and relook at the way things are changing in a new world.

This post takes a deeper dive into one of the things that I wrote about earlier and why our next bet is on exactly that. The intersection between Talent & Technology.

Unemployment and Shift in markets

I live in Sri Lanka, so a lot of examples that are shown here are related to it. I occasionally expand in and out, but I wanted to give a fair warning around it. The reason I do this quite often is that at the crux of it all, people behave in similar ways given the circumstances.

Over the last 6 weeks, COVID-19 has not only taken the lives of 65,000 people across the USA, but also 30 million jobs. With unemployment crossing an all time high, major companies are laying off unprecedented amounts of workers.

Why do we care?

Besides the fact that it obviously sucks, it’s a really good proxy for what’s to come. Unfortunately sitting here in Sri Lanka, the information we have to rely on isn’t as well-structured or real time.

The labor department has some severe penalties around laying or furloughing large groups of people if they fall under the category of “permanent employment”. In my honest opinion, this law is archaic at best and does not really support growth from the point of a country, organization or talent for that matter. It’s a weird safety cushion we’ve built that generates some false sense of security. At the end of the day, if your employer is going bust, they’re going to have to let you go. It’s not a matter of legislature, it’s a matter of cash flow.

Another reason this chart matters is because the data isn’t readily available for us. Let me explain, the department of census and statistics in Sri Lanka hasn’t published an annual report regarding the employment rates in the country since 2018.

The central bank’s quarterly filings on their macroeconomic trends report show a slightly more up to date figure. Let’s look at the employment statistics for a second though, according to the data we have on file, we actually aren’t that bad. I understand that “employment” is a broad term and the quality of employment matters, but for the sake of understanding what’s going on, this will have to do.

As of 2019, our unemployment rate is at 5.1%. It’s not amazing, but its not terrible either. 

We rely on an inflow of foreign currency entering the country to maintain our reserves, stabilize the economy and manage inflation. More is better is a good rule of thumb. But, if you look at where that money is coming from, you’ll start seeing a bleak picture. 

The chart below is from Sri Lanka Tourism and Development Authority’s filings of 2018,
It outlines the main ways we bring foreign currency into the country.

1. Workers’ remittances.
2. Textiles and Garments.
3. International Tourism. 

That’s 60.7% percent of all foreign income and a pretty significant chunk (~20%) of our GDP.

The thing with macroeconomic outlooks is that it has a very real effect on our day to day lives. Majority of “Tourism” revenue is international tourism, something that’s not going to pick up for a while.

Assume that international travel slows down for a period of 6-12 months (which is more than likely). Even if the pandemic has been completely eradicated (think vaccine), there’s going to be a large group of people that will want to push back on international travel.

1. Due to fear of international travel to regions badly affected by COVID-19.
2. Lack of discretionary spending due to job cuts.
3. Potential price surges in air fare as the industry becomes less competitive.

Let’s extrapolate the numbers a little bit. We have close to 400,000 people that are directly and indirectly employed through the tourism industry, according to SLTDA reports of 2018. The apparel sector employs between 300,000-600,000 people according to the EDB and somewhere around 250,000 workers remitting foreign income to Sri Lanka.

This is the story of a million people in industries that’ll be severely affected due to COVID-19. Assuming that 50% of these workers being completely let go is reasonable, with pay cuts across the rest.

This doesn’t necessarily mean that every business is suffering, some businesses (predominantly in technology) are using this as an opportunity to scoop up great talent that just became available in the market. 

This article by the New York times shares a good indication of pandemic consumer spending.

But the issue is very real, with each layoff and bankruptcy, there’s a flow on effect. Imagine being an enterprise software company, which is poised to do well. You realize that your customers in these industries are now struggling.

Let’s follow a trail of breadcrumbs if you will:

1. You’re an enterprise software provider that has been growing steadily over the years.
2. The products and services you offer to your organizers are remote, reliable and you have good contracts in place. 
3. 50% of your customers are Hotels, Resorts, Retail Clothing.
4. These businesses that were seemingly well-run with a steady supply of customers suddenly took a turn and cash ran tight. 
5. The hotels can’t pay you because they usually don’t keep large cash reserves. They stop paying their bills and cancel their vendors from their coffee supplier to farms that grow produce. 
6. They say they need you but either they “Pay you later, reduce cost or cancel”.
7. Your “well run business” that was cash flow positive with profitable growth at 35% is now losing money. 
8. You start laying people off, offering pay cuts and cutting that catering service your company hires on Fridays. 
9. Everyone has less cash at hand, things were great a week ago.
10. Your employee falls short on rent.

“Before the COVID-19 virus, 70% of our income went toward rent,” said Vanessa Bulnes, 61, her voice crackling over a Zoom call with housing organizers and media on Thursday. 

Like tens of millions of tenants around the country, Bulnes and her 71-year-old husband, who live in Oakland, California, are out of work.

Business insider: The tenants in the US are planning the largest rent strike in decades

There still is a post COVID-19 world

It’s difficult to fathom what this looks like, even if a vaccine is on the way, COVID-19 would’ve left a deep scar.

Politico had shared an opinion piece around how the world will look like after COVID-19 that is worth a read. It covers a range of topics from the re-establishment of government control to breaking down barriers for digital transactions. It essentially highlights how people, businesses and communities scramble to get online, fast. 

Let’s take the case of my mom. If you don’t know her, here’s an introduction. 

My Mom isn’t the greatest user of technology. However, during the lockdown she had figured out how to set up a delivery app and order food without asking me for help. Don’t get me wrong, I would’ve done this for her. I just found it absolutely fascinating that people who have been pushing back on adopting technology are embracing it with open arms. 

She isn’t the average 60y/o woman living in Sri Lanka. She has spent her life building a great career for herself working as a Maxillo-Facial Surgeon. She’s fiscally responsible, exposed to the world and is one of the 8 million people who have access to a stable internet connection. 

Even embracing technology, when being forced to, is a privilege. 

This is not a choice that many people have, but what the pandemic has done is really accelerate change over a very short period of time. Businesses that needed to be embraced were embraced. Ventures that were funded without cause and no revenue in sight were put out of their misery and we also saw a few bad actors. 

Let’s look at economic recovery.

The unfortunate outcome of any recession is that it’s not easy. Jeffry Frankel, a professor at Harvard University, recently published an opinion piece around what an economic recovery for COVID-19 would look like.

“As recently as March, V-shaped recoveries in individual economies seemed plausible. Once infections and deaths had peaked and begun to decline, the logic went, people would eagerly return to work. Economic activity might even get an extra boost, as consumers released pent-up demand.

This is in line with the pattern of recovery from natural disasters, such as earthquakes and hurricanes, as well as the epidemic of severe acute respiratory syndrome in 2003. Though output in China – the outbreak’s epicenter – did suffer as a result of SARS, it recovered so fast that annual GDP was hardly affected.

Today, China reports that industrial production rebounded in March from its plunge in February. But, overall, it seems clear that forecasts of a V-shaped global recovery from COVID-19 are too optimistic.”

To put things in perspective, recovery won’t be around the corner. Though this is commentary and there are lots of varying viewpoints of this, I’m not going to dive too deep.

Seedtable has a wonderful piece of content around why the golden age of talent is over. It covers some harsh truths about what the world may look like after all of this.

Most people think that a V shape market recovery would cause an outcome similar to this. That’s large groups of people being unemployed, COVID-19 sending shockwaves and eventually us forgetting this ever happened and going back to normal.

But, how likely is that? We will definitely recover from the pandemic, just nowhere near as fast as you think. In fact, it’s far more likely that we will slowly work our way towards “normalcy”.

What does that mean for talent?

If 100s of millions of people are going to be out of a job (yes, that’s a big scary number) and the economy won’t bounce right back, what does that mean?

Besides the standard drop in consumer prices and resorting to a deflationary economy, it means that re-employment will be slow. This chart shared by the world economic forum outlining historic unemployment statistics in the United States is a good indicator.

Averaged out, there’s a difference of negative 0.5-1% in unemployment per year. If this number crosses over 20% (we’re almost there) it’s not something we bounce back from effective immediately.

Though it’s likely to climb up faster than the 2008 crash, it’s a steep climb.

Getting back to talent and employment, the one key change that happens is the shift of the power dynamic between employers and employees. 

1. Before COVID-19, Hiring has been a Sellers’ Market. More businesses wanted good talent, than good talent wanted work (Understanding this is important).
   
2. As good talent was scarcely available/competitive, buyers (businesses)  would pay a premium to attract them.
   
   Fun reading from Quartz:  Startups could raise a lot less if their expenses weren’t so lavish
   
3. Talent had pricing power, talent could dictate the terms of the engagement, and always be on the lookout for new opportunities.
   
4. As businesses lay off larger and larger quantums of people, the supply of talent increases.
   
5. Enter a buyers market. More people need jobs than jobs need people. 

Now, if you’re a business that’s managing to navigate the economic impact, you should be going “hurrah! I get to pick the team I want” Hold on for a second.

When more talent is available in the market, that also means there’s more mediocre talent out there as well. Partially because they’re just not the right fit for your business and partially because they’re just bad (sorry). Because of the competitive nature of talent, they’ll do whatever it takes to make it in through the doors.

And as far as talent loops are concerned, good talent gravitates towards good talent. Bad talent gravitates toward the bad. You can be in for a bumpy ride building out an organization and a culture that’ll have you circling down the drain. 

There’s an entire ecosystem of businesses that have been built around the recruitment industry from special C-level recruitment services to job boards like Monster. They’re all struggling.

I mean, if businesses aren’t hiring right now, there’s less need for dedicated businesses and complex HR organizations to make hiring decisions. 

This all transitions smoothly into what SeedingAlpha has bet heavily on. 

Is re-employment infrastructure ready?

ZipRecruiter (one of the front runners in the recruitment technology space) shared some brutal statistics of how they’re laying off nearly half of the team. These aren’t badly run organizations but good tech companies that are just in the wrong place at the wrong time.  

If you’re familiar with recruitment, ATS is something that you’ve heard of. ATS stands for Applicant Tracking System. An organized way for employers to hire talent. It’s kind of like a CRM for hiring and if you’ve been hiring without an ATS, it’s a game changer. 

While they aren’t necessarily new, it’s crazy to think that the majority of the businesses actually don’t use one. SMEs in particular (unless you’re really large).

What’s crazier is that as you move away from markets like the US and into emerging markets, the usage of these systems become even more scarce.

There’s a reason for that as well, a fairly large amount of these products are being sold to enterprise level organizations at enterprise price points. 

Two to three weeks ago, I was on the phone with  “Highly funded ATS Startup”.

They are a fairly robust applicant tracking system and they’re one of the new kids on the block taking out the old. I wanted to see what it would cost to implement it on Surge, the digital marketing company I started 5 years ago where I spend 80% of my time.

The conversation started fairly well, they mentioned how their product was designed for businesses of any scale and process and touted a fairly large amount of startups that were using it for hiring. We had mentioned our hiring process. It’s not too complicated. 

We had 3 specific interviews during the hiring process.

1. A conversation with HR.
2. A technical interview with a team lead.
3. The final interview with management.

It’s not over-engineered, we’re a 40-ish person team and we had mentioned that we were looking to hire anywhere between 10-20 people over the next 12 months. I liked the tool, it had a few nice bells and whistles, not all of which we’d wanted, but they were nice to have. 

The price came in at $6,800/year. Now, I get that software isn’t necessarily cheap. But don’t get me wrong, that’s a lot to dish out on software, especially if you’re not used to paying for an ATS. 

And this is what I believe is the thinking of most South-Asian startups, we’re not going to throw this kind of money away unless we really have to. 

Locally, the way we hire is through a combination of ads, word of mouth and local job boards. The job boards aren’t necessarily pretty. The oldest one (which still stands as the market leader) is this company called Top Jobs. 

This “go to” job portal in Sri Lanka isn’t necessarily a sight for sore eyes. I Recently found out that one of their competitors seemed to have been gaining some traction and had gone to the point of raising a fair bit of cash. 

But being a leader in the industry, the traffic stats that have been generated here are still a bit crazy to look at. 

We felt like the current job portals and systems available in the country weren’t up to the task of re-employing millions of people who are now more connected than ever. 

Our bet on the hiring market

I don’t really think it’s as straightforward as building a job portal, we have enough of those as is. Something really has to change. Personally, we (I’ll get to ‘we’ in a sec) think it’s the workflow around recruitment. 

Let me explain, the current hiring process is something like this,

1. You open multiple jobs on job portals.
2. Submit your CV hazardous to every possible opportunity that may fit.
3. You get calls from different employers (at completely random times).
4. You go to some interviews (again, no real coordination).
5. And you eventually get shortlisted and hired. 

But wait. 

6. Oh, you just got a call from the company that you wanted to work for.
7. But you already accepted another offer.
8. So what? You ghost him and go to where you wanted to go in the first place.
9. The initial business is now left confused and frustrated.
10. It’s a shit-show (it really is). 

The communication chain between the employer and candidate is really messy, and we started working on this problem a while back (it was coincidentally pre COVID-19).

Our software development team at Paladin had several projects pushed back and we had a few hands on deck. Our pipeline was pretty solid and wanted to hire more developers, so we started building our own products to fight these challenges. 

Our end result Rooster, an applicant tracking system that’s simple enough and affordable enough for anyone. And I’m not saying that because I want to sell it to you (if you need it, it’s free just fill out this form). 

1. The “Careers” page on your website is the most logical place to hire, so we integrated it to that.

Through a wordpress plugin, or a navigation bar redirection by giving you a sub-domain. Eg: “your-co.rooster.jobs”

2. We looked at the way the majority of SMEs hired. It’s usually no more than five interviewers screening candidates.

So we built an interview workflow that allowed each interviewer to evaluate and approve the candidate to the next stage of the process.

3. Built in tagging, keywords and search to keep your CVs organized

A shocking amount of businesses misplace CVs or get them at the wrong time. You need to be able to recall, search and re-contact.

4. We set up lots of automated messages. This is what we believed was the breaking point.

Your candidates need to be kept up to date. When do you read the CV, when do you short-list or reject. They need to be constantly kept informed and there needs to be a certain level of accountability on both sides.

We set up personalized canned responses so you don’t have to have that awkward conversation every time.

5. Every time you create a job, we know its current and available. We took all these into a real-time, live job board that’s 100% free.

We don’t really feel like its something that’s worth charging for and the value is more work flow than content aggregation.

We were initially going to sell the product at $20/mo per business. We believed that this was great value as most platforms charge per job/per user or something that makes it prohibitively expensive.

Then, COVID-19 happened and we kind of threw that out the window.

We wanted to help the eventual systematic re-employment process that needed to happen.

We decided to make a “free forever version” for startups, but also make all the features completely free during COVID-19 (fill out this form, or leave a comment we’ll get you set up).

When we say “during”, we want to be true to the economic impact and not just the lock-down.
So we decided to make it one hell of a free trial and changed the normal 7 day trial to a year.

The software team at Paladin is fortunately well capitalized to the point that they can hold on to running, building and improving the product without having to look for cash.

We’re betting big on this one because it just makes sense. Paladin will need to hire, and we’ll look out for developers. Surge is currently hiring marketers.

Whether you’re in Sri Lanka, the states or anywhere else in the world, we wanted to figure out how we could help improve the matchmaking process of connecting a potential 100 million people with the right type of employment. 

Making sure that candidates spend as little time as possible in limbo is critical to a better economic recovery and that’s what Rooster is set up to do. 

Why did we call it Rooster? Who knows. I really don’t have a nice story to tell around that. 

Post Script:

1. We have started alpha testing the product, comment if you’d like access.
   The general public gets access end of May
   
2. We’ll most likely raise some cash ($100-500k), if you’re an investor (email me) 
   
3. If you’re a non-profit, we’ll give everything free forever. If you want to partner in different regions or to deploy to your customers reach out 🙂