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How Businesses Use Applicant Tracking Systems

Sean Peek
Sean Peek

Today, applicant tracking systems are a necessary tool for businesses that need to improve and automate their hiring process.

In the modern business world, nearly every process can be streamlined with technology, including the hiring process. That's why many companies use applicant tracking systems (ATS) to collect, analyze and organize job applications. Instead of spending hours reviewing résumés manually, an ATS scans applications based on the keywords and experience you're looking for and filters out applicants who don't fit the bill. While there are obvious time and cost savings from using an applicant tracking system, it's important to understand how an ATS works and the potential challenges of these systems before investing in one.

What is an applicant tracking system?

Today, when you apply for a job posted online, your application isn't immediately reviewed by a recruiter or hiring manager. Instead, the application is processed by an application processing system and measured against the company's ideal candidate. If a résumé doesn't meet certain criteria, it may never be seen by a human recruiter or manager.

Put simply, ATS is software that businesses use to optimize and improve their recruitment and hiring processes. Each ATS has a different set of features, but at their core, these systems help companies gather, organize and filter applicant data so only the most qualified job seekers enter the interview stage.

How does an applicant tracking system work?

ATS software begins with applicant data. Or, more accurately, when an applicant applies for a job online, they upload their experience, background, education, résumé, cover letter and contact information to the company's database. This information is stored in a central location so that people from multiple departments can review the data at any given time.

Once data is entered into the system, the ATS allows recruiters to review applications, send automated messages to inform applicants of their progress and even deliver online tests. Once a recruiter has checked off all their boxes, they can pass applications to hiring managers, who will then interview candidates and automatically send rejection letters.

Finally, once the hiring manager identifies candidates they want to hire, the human resources department can send offer letters and onboarding documents and start processing payroll.  

What are the key benefits and features of applicant tracking systems?

ATS software saves companies time and money because the system compiles and organizes all of the data businesses need to process and track applications and hire candidates. When human resources departments use ATS software, they no longer have to sort through and file paper documents, send offer/rejection letters through the U.S. Postal Service or require individuals to fill out the same basic information (such as their name, address and phone number) on several forms.

ATS software streamlines the hiring process.

When your business reaches the stage where you hire several employees each month, manually entering data into different software systems or filing everything on paper is no longer feasible. 

"While selecting the best candidates from the rest of applicants may sound like a simple task of scanning through applicants' CVs, it takes a lot of work – and many companies may end up failing," said Sahin Boydas, founder and CEO of RemoteTeam.com. "An applicant tracking system (ATS) tracks candidates, organizes these prospects based on their skills and experiences in their fields and filters for the best."

An ATS can benefit your long-term hiring strategy.

However, an ATS doesn't just enable companies to hire solid candidates. These systems have other, long-term benefits that can help your company improve for years to come.

An ATS "also helps companies plan their entire employment process in the long term," Boydas said. "Remember, your employee is your most important asset, and you don't want to hire them through any 'guessing' processes ... an ATS is the best solution to avoid the biggest issues that come with hiring."

Small businesses on a budget can still implement an ATS.

Many small businesses with limited budgets may be skeptical about applicant tracking systems, believing they are too complex or expensive to incorporate into the hiring process. However, businesses with the tightest budgets can still benefit from an ATS.

"Firstly, there are some 'freemium' and low-budget [ATS] options with solid performance," said Jagoda Wieczorek, HR manager at Bold. "Secondly, based on the size and growth of your company, at some point, you will simply need it. Thirdly, the amount of time and manpower saved by investing in this system is more than worth the cost."

Wieczorek compared an ATS to an online shopping experience: You can go to a physical store to look at a few different items on a shelf, or you can filter out hundreds of mismatched options with a few clicks of a button.

"You're outsourcing the most manual labor to the system," Wieczorek said. "This way, you can quickly weed out the contenders from the pretenders and focus on the nuances of candidate selections, instead of manually sorting the obvious mismatches."

What are the challenges of using an ATS?

Although there are many benefits of implementing an ATS, there are a couple of challenges to consider.

The system will occasionally miss good candidates.

The biggest challenge of any ATS software is capturing promising candidates while filtering out less-desirable applications from the list; these systems are not perfect and may overlook strong applications.

"There's always some risk and opportunity cost involved," Wieczorek said. "Make no mistake about it: At some point, you will lose a few great candidates that didn't make it past the system for whatever reason."

While this reason alone may tempt you to overlook ATS software altogether, the benefits outweigh this drawback.

"Nothing is perfect, but the heavy lifting ATS will do for your HR is more than worth an occasional slip-up," Wieczorek said.

Businesses can mitigate this downside by reviewing the system periodically.

"For some businesses, once there's an ATS, they think there's no need to add extra efforts, so they sit back and allow their ATS to do everything," Boydas said. "An ATS may sometimes eliminate certain candidates, because it can't read their profiles clearly. When this happens, organizations can lose big on great talent if no one actually does a final review of candidates' profiles."

Even the best ATS can't prevent human error.

Finally, regardless of which software your business uses or how effective it is, there is always room for human error.

"ATS, by themselves, are not bad, but what may arise is the human error," Boydas said. "That, of course, comes with every system."

The key to preventing human error in any system is to make sure you train your staff properly, ensure processes are documented and easy to access, and periodically review the system to ensure everything – and everyone – is operating as expected.

What to consider when choosing an applicant tracking system

To implement an ATS into your business seamlessly, consider the following elements before choosing a specific system:

1. Comprehensive features

As you start comparing different ATS software, work with your human resources department to make a list of every feature you would ideally like in your system. Then, pay close attention to the feature sets of each ATS solution to make sure it has everything you need.

Examine your entire hiring process before looking for more advanced or niche features.

"Ideally, you want to be able to get [everything] done all under one roof," Wieczorek said. "Starting from the recruitment stage – for example, being able to submit the same job posting on multiple career sites – to full automation of thank you letters, job offers, as well as the onboarding process."

Once you have identified a system that covers these basics, you can look for more advanced features.

"While a good applicant tracking system should have many features, I think they should have social media recruiting and candidate referral integrations," Boydas said. "Modern-day recruitment has evolved, and some of the best candidates are out there on social media, networking. A good ATS should allow businesses to integrate and use social media as an option to source candidates."

Other great features to look for are referral programs, document management and integrations with other programs your business uses.

2. Ease of use

Once you have compared the feature sets of different systems, take each ATS for a spin to ensure the software is easy to use. The interface should be aesthetically pleasing, well organized and, most importantly, intuitive, Wieczorek said.

Here are some things to look for in an ATS:

  • A user-friendly layout
  • The ability to integrate with other business systems
  • A smooth transition from one recruitment process to the next
  • A thorough knowledgebase and user guide

Make sure existing employees know how to use the software. Ease of use "is all the more important when you're installing a solution for the first time and want as much buy-in and least resistance to change as possible," Wieczorek said.

3. Analytics and reporting

Next, evaluate each system's analytic and reporting capabilities. This may seem like an advanced feature for some small businesses, but proper analytics dashboards can help your business improve its efforts.

"The more info and data you have, the smarter you are moving forward," Wieczorek said. It's "well worth a second look to ensure this aspect of the platform is as robust as the main interface."

Wieczorek added that analytics and reporting tools can help you answer the following questions:

  • Which channels are the most effective at sourcing talent?
  • Where are there bottlenecks in the process?
  • What seems to be the biggest factor in candidates' declining of job offers?

Even for small businesses, having a dashboard that answers these questions will ensure you hire the best candidates in the future.

4. Customer reviews

Taking the time to read user reviews from different sources is always a good practice when you are considering any type of service or software. You may be tempted to purchase an ATS solution after reading one or two positive reviews online, but it's important to dig deep and find more-critical reviews.

You can also reach out to people in your professional network to see which systems they use, which features they find most useful and if they have any complaints about their ATS software.

5. Cost

Finally, your organization should also consider the cost of different ATS software and weigh the benefits against the expense. You may be tempted to implement a free solution, but you'll want to make sure there are no hidden costs to utilize all of the features your business needs.

For example, a free ATS may have the ability to manage the different stages of the recruitment process, such as posting jobs online and tracking individual candidates, but it may not include other useful features, such as automating approvals or starting the onboarding process. In addition, some free ATS software limits the number of open positions you can manage at one time.

With so many ATS available, there are options to fit any budget.

"Price is (still) king for many organizations, so yes, it matters – and with over 200 ATS to choose from, they do vary greatly by price point," Wieczorek said.

Consider your options carefully, and work with your human resources department to identify a solution and price range that work for everyone.

Image Credit: Prostock-Studio / Getty Images
Sean Peek
Sean Peek
business.com Contributing Writer
Sean Peek is a writer, small business owner and SEO specialist. He began his career in digital marketing as a freelance writer in 2013 and has over five years of experience in the B2B space. You can learn more at lightningmediapartners.com.