The problems are too many to count, but here are two that I find particularly self-defeating when hiring: i) job descriptions that are a copy/paste (and fail to engage any reasonably talented person who knows their worth) and ii) how companies review and respond to applicants. A good ATS should help bring an order of magnitude improvement to this.
Hiring managers today rarely spend the time doing the work of hiring and have outsourced much of it to the recruiter, including something as important as screening/filtering applicants. In-house talent folk/recruiters will put up with these systems because they have to. Early stage and mid-sized companies often don't need much of this complexity.
Hiring therefore has become a painful exercise for all involved, not in the least the candidate. How often have you not heard back on your application? How often has someone dropped the ball on you? How often do you feel you just applied to a black hole?
I'd love to hear your thoughts - especially if you're a hiring manager or in the in-house talent function at a 500-or-fewer person company. What do you suffer from in your current hiring process/ATS? What do you hate (enough to truly desire an alternative)?