HR technology is a hot space. As an analyst and investor in the industry, I get to see around 500 emerging HR tech companies every year. And I always stay connected to the ventures I meet, which allows me to aggregate data on their performance over time and the outcomes that they eventually achieve (not positive in 90% of cases).
It is always hard to tell why a company went down. Is it the team? The market? Or the technology that was inferior to competition? Some B2B companies claim to have insane sales cycles and not high enough average checks to sustain a direct sales model; others who target SMBs say that there is not enough effective demand and they can’t convert their user base to paying customers, etc. And this all might be true, but there is one thing that I have noticed all of these companies usually have in common – the problem they are solving is just not big enough. They are – in fact – a point solution.
HR is a huge market globally (100s of millions of dollars) and there is no doubt that it is full of inefficiencies and desperate for disruption, but solving these problems usually requires a much more holistic approach than most companies and vendors think. A company that says that it just implemented this awesome employee recognition platform to drive employee engagement and at the same time does not have a proper performance management system in place is not credible. It is like saying, I am driving an old Ford, but my windshield wipers are from Maserati. Cool, but does not make you faster (and your windshield is not cleaner either).
That said, I personally have no doubts there is great value in technology and in this article I would like to share 4 key areas where I believe HR tech is not just a sexy way to keep employees engaged by giving them cool tools to play with, but has real impact on the business (either in terms of cost cutting or helping to increase quality of HR processes).
1. Automation of the Basics
For sure, HR technology has evolved well beyond simple automation of human resources business processes, such as payroll and applicant tracking. And the HR function itself has outgrown the role of support function, but still the main job of many HR professionals is data entry. Companies spend outrageous amounts of employee time to do basic things while technology already allows to give this people more strategic roles and leave systems input to machines. Again, I am talking about basic things here – CV parsing, updating information in databases (time to say Hi to ATSs integrated with professional networks), posting content and vacancies to various communication channels in one click, etc. Or even speech recognition software, for instance, that can make adding comments about candidates to the ATS much more efficient.
Everything that helps to automate small elements of the process and takes out the need for an actual human being can help and I am surprised when I hear that companies still treat their recruiters as database managers. It as well takes time from the real things that they need to do – find and attract the best people.
The end game here is automation of the HR function itself and giving managers the tools they need to need perform all of the HR related tasks. A good example would be an ATS that allows the manager to add comments to the database from his mobile right after a candidate interview or a referral tool that allows an employee to make and track his referrals online without any interaction with the HR department.
2. Communication Channels
Everybody talks about recruiting being broken and probably more than a half of all startups I see are focused on the recruitment industry. And it is fair; 90% of what recruiters do is basically firefighting and has no strategic value for the company, so it is definitely an area for improvement.
Recruiting is probably the industry that gets the most influence from technology, but strangely enough, it has nothing to do with HR tech. LinkedIn, Facebook, proliferation of mobile – all of those things have tremendous impact on HR and have basically transformed the way recruitment is done today.
Social media has become the most significant tool for recruitment. It’s the engine for corporate branding. And the variety of communication channels recruiter can use has increased dramatically. Companies now finally have the chance to transform their recruitment from push to pull philosophy by not doing ad-hoc hiring, but instead nurturing their talent communities and constantly talking to potential candidate via various channels.
This has tremendous value to the business, because it actually make the recruiting process much faster (you do not have to search, you need to convert!) and increases the quality of new hires because they are already connected with the company and tend to have a better cultural fit.
3. Employee Engagement
Engagement is a major problem for companies, but most vendors are focusing on small aspects of it. There are myriads of tools that help companies drive engagement: gamification tools, reward management systems, etc.; but in my opinion what really drives employee engagement is not a set of fancy perks, but a proper performance management or even project management system that tracks and praises actual work that people do.
It is not that those gamification or awesome employee recognition tools do not work, it is just that are secondary to actually creating an effective work environment for all of the employees.
It is also interesting that aforementioned point solutions help to increase engagement just because they are fun for employees to play with and create wow-effect inside the organization. But the results of those unfortunately tend not to be long-term and most likely are just not worth the hustle (unless they are implemented for exactly this reason).
4. HR Data
I am not even talking here about predictive analytics or sophisticated data visualization tools. What companies need is to make sure that they have the data that they can rely on for decision making. Insights into employee behavior, proper reporting and understanding of the key efficiency metrics is what drives most value for the organisation. Business analytics tools that collect, aggregate, and interpret numerous types of data in order to drive more substantiated HR decisions are, in my opinion, the ones that add the most value across the whole HR technology spectrum. These solutions help HR professionals demonstrate and measure the impact talent and people-related decisions have on organizations (= finally quantify!) – something that has always been a problem for the HR function.
Good example here – assessment tools and hiring. I really don’t think that it matters much which type of assessment platform a companies is using or which methodology it fancies (Big 5, MBTI or just IQ tests) – the results of those tests are not valid if they are not linked to the actual performance of the people that are hired with these tests in that particular organisation (or even team).
My advice to both companies and vendors would be to always keep in mind the big picture and understand how a particular piece of technology can add value to the business beyond the WOW-effect that it creates among the employees.
On December 2nd we are hosting an HRTechTank event in the SmartRecruiters San Francisco HeadQuarters. HR Tech Tank is a global series of events tailored specifically for HR Technology startups and investors. The purpose of HRTechTank is to connect, educate and promote innovators in the Human Resource Management & Recruitment software space. What we do is bring top tier HR thought leaders, early adopters and investors together to take a look at what is happening in the HR Tech space and to share their expertise with the most promising HR Tech companies.
I strongly encourage HR tech startups to register and attend; the things that we are talking about in those events are always practical and have direct value to the business; the event is also designed to be a platform for networking, so we facilitate introductions between founders of HR tech ventures, investors and HR thought leaders.
