Baltimore is the very last place that I’d expect to find groundbreaking technology for the labor market. The metro area hosts the Social Security Administration and is next door to the NSA. There is a deep well of technology, but it is really big tech. Signal processing, security, radar, satellites, sonar, test equipmen, and other electronics engineering disciplines are at the heart of the tech sector.
The heart of Baltimore is the harbor and the shipping industry. In that world, technology is simpler, more brute force. The city is a working-class town with significant discrimination and high murder rates. The tech companies grow way out in the suburbs.
When I was first introduced to Arena and its founder, Michael Rosenbaum, I was expecting another AI claimant with gee-whiz tech and no clear-cut value delivery. Like many others, the company claims to make a difference in the hiring process. Most of the others have a difficult time connecting their process to tangible results for employers. Arena distinguishes itself with an exclusive focus on outcomes and some very lofty ideals.
Rosenbaum is unassuming and congenial. His unpretentious manner doesn’t indicate a bit of his history (London School of Economics, Harvard Law, Clinton-era White House advisor, Harvard Economics fellow). Mike is easy to talk to, quick to understand and wildly curious about the world we live in.
He founded Catalyte, a super-successful talent prediction company focused on software and engineering placements. Catalyte predicts the likelihood that an investment in training will produce the desired result. The company identifies people from non-traditional sources who have the potential to become high-performing software developers. Its nine-figure revenue numbers tell you everything you need to know.
Unlike most HR tech entrepreneurs, Mike cares little about money except as a measure of market-product fit. (Of course, this is helped along by the dramatic success of Catalyte.) He prefers to focus on loftier aspirations. Arena is built to deliver on those ideals.
Once Catalyte turned 10 (in 2010), Rosenbaum began incubating what was to become Arena. The idea was to apply the predictive/big data/matching tools to the problem of workforce stability in healthcare. In many lower-status parts of healthcare, retention is a critical issue that drives profitability. Contract overtime, caused by high attrition rates, sucks all of the margin out of healthcare institutions.
The core idea is that access to opportunity can be significantly improved by paying attention to underlying skills requirements and the many ways they can be met. A core AI process that blends skills extraction, matching, behavioral analysis and outcome data delivers qualified candidates who meet stated business objectives. Early experiments have involved staffing hard-to-fill, lower-level healthcare jobs.
In 2016, the company began to look for serious scale. In the past four years, Arena has rapidly expanded across the country into over 850 healthcare facilities, ranging from acute-care hospitals to long-term-care facilities and academic medical centers. On average, they reduce turnover by 38%.
The key to Arena’s successful deployment of intelligent tools is its focus on outcomes. As a client uses the tool, it gets better and better at predicting objectives by tracking whether the prediction was right and using that data to make better predictions. This is a significant differentiator. Most recruiting and talent acquisition providers steer clear of promising results because the data can be hard to acquire. Arena only takes clients who are willing to contribute outcome data to the mix.
When clients are willing to make employee performance metrics a part of the staffing equation, the real strength of predictive tools can be brought forth. Increasing prediction accuracy is an ongoing conversation that can account for big changes in the world.
As we were talking about the use of outcome data, Rosenbaum told me a story. “I talk to many folks who ask, ‘How do you get the outcome data from your customers?’ It always puzzles me. We would never take a contract that didn’t require outcome data. How else could we ever measure our work?”
On a longer horizon, Rosenbaum sees as much as one-third of the American labor market being facilitated by outcome-oriented intelligent tools. Of course, he imagines that the business will belong to Arena. That will be an amazing shift in the economy: work filled by people who meet business objectives as a condition of hiring with employee performance being pegged to the cost of hiring.
Mike intentionally located his business in Baltimore because that’s the kind of place where Arena can do the greatest good. Currently, the company’s focus amid the coronavirus pandemic is helping to move laid-off hospitality workers into the healthcare industry. Assuming that he’s successful, it will be his second large business that spots talent, quantifies it and uses that process to drive client results while increasing overall access to opportunity.