In the last 5 years, companies have adopted HR technology across a variety of functions, from SaaS-based solutions and cloud computing to leveraging data analytics and AI to recruit and manage talent. A number of factors have contributed to this shift, including existing technology reaching the end of its lifecycle, the rapid introduction of new software solutions, and the shift in the generational composition of the workforce. These trends have created new pain points within HR, as well as an opportunity for new entrants to the HR tech industry.
Many investors, entrepreneurs, and corporate executives have written or spoken about HR disruption, trends, and predictions for the industry. Below, we highlight perspectives from top players within the industry.
1. Josh Bersin, Principal and Founder of Bersin by Deloitte
One of the top HR thought leaders, Josh Bersin, principal at Deloitte and founder of Bersin by Deloitte, has written extensively on the disruption in HR technology and advises companies on their HR tech strategy. In his latest research report, he identifies the following trends reinventing the HR software market.
“The human resources profession is at a crossroads. Over the last few years digital and internet technologies have radically changed the way we work, requiring a tremendous change in all areas of human resources.
Our latest global research shows that business and HR leaders have three major challenges: (1) building and strengthening the new and changing leadership pipeline; (2) finding ways to re-engage employees and build a strong global culture in a world of never-ending work; and (3) reskilling the HR function itself, which often feels behind.”
On HR technology specifically, he is bullish.
“The HR technology market is undergoing one of the most disruptive years it has seen this decade. The HR technology industry is on the precipice of a total reinvention.”
2. Wes Bryan, CTO and Co-Founder of OneSource Virtual
Wes Bryan, CTO and co-founder of HR tech company OneSource Virtual, believes HR is leading the way in the adoption of cloud computing. Bryan notes that cloud computing is significantly reducing HR overhead, making it easier for new entrants to get off the ground.
“HR is leading the migration to the cloud. Those legacy systems are going to break down and HR leaders are ready to take chances on where they want to go next. This transition is enabling greater integration between systems, and more robust talent analytics to help these leaders identify talent trends and improve the employee experience.”
3. Zhen Tao, CTO of Paycor
Another shift in technology that affects HR is the rise of mobile adoption. As of 2016, there were approximately 96.2 million mobile workers and growing, according to the latest research conducted by the International Data Corporation (IDC).
Zhen Tao, the CTO of Paycor, a payroll and benefits software company, recognized the growing shift to mobile among customers and determined that Paycor needed to offer a mobile application.
“The world has gone mobile and HR is no exception… We are meeting our customers anywhere they’re at, (which is) on the go.”
4. David Green – Global Director, People Analytics Solutions at IBM
The rise and adoption of data analytics has been swift in most corporate functions except in HR. David Green, Global Director of People Analytics Solutions at IBM, believes that HR should leverage data analytics practices to help inform decisions around hiring and employee engagement.
“21st Century HR isn’t about playing it safe; it’s about being bold and forward-thinking. It’s about capitalizing on technological advances, new thinking and applying a data driven and analytical approach to inform people decisions.”
5. John Schwarz, CEO of Visier
Leveraging data analytics to inform recruiting and retention decisions makes sense because people are one of a company’s most valuable resources. John Schwarz, CEO of Visier, a people analytics software provider, believes that companies have the data they need to make smarter decisions, but don’t know how to use it.
“Most companies don’t know how much people cost, who is leaving, they have no idea how to plan successions—this is really an underserved community, one that sits on an expensive and volatile asset …”
6. Dawn Klinghoffer, General Manager of the HR Business Insights team at Microsoft
Though there is an enormous opportunity to leverage data in HR practices, human resource professionals may lack the skills necessary to analyze these new sets of data on workforces.
Dawn Klinghoffer, general manager at Microsoft and responsible for overseeing HR Business Insights at the company, predicts that closing this knowledge-skills gap could be the greatest change in the HR profession.
“We are going to see the biggest change in the HR profession overall, as analytics start to reinvent the way we work. We are now starting to look for HR professionals that have the capability to understand, interpret, and leverage data — and this is a trend that I believe will continue for a while.”
7. Peter Sonsini, General Partner at NEA
In the workplace, communications have shifted from paper to digital, from in-person to virtual, and from pre-canned to personalized. HR professionals are affected by this shift because they are responsible for managing corporate communication practices.
Peter Sonsini, General Partner at NEA, which invested in a $22.2M Series C to workplace communication tool GuideSpark, believes the shift has a bigger impact on how employees work. He notes:
“The explosion of video and mobile in the consumer world is now also changing how employees consume information at work. With the connected employee infiltrating the workplace, this trend is taking off from traditional paper, seminar, and text-based employee communications.”
8. Hrach Simonian, General Partner at Canaan Partners
Technology is changing not only where and when companies interact with employees, but also how they provide feedback to employees. With millennials the largest generation in the workforce as of 2015, according to the Bureau of Labor Statistics, there’s a sense that this generation may not be satisfied by the traditional annual review process. In keeping with this, Dell, Microsoft, Accenture, Adobe, and even General Electric are getting rid of their legacy review systems in favor of continuous performance reviews.
Canaan Partners recently participated in a $7M Series A round to Zugata, one of a crop of new HR tech companies that offer platforms for employee development, coaching, and facilitating a continuous performance review process.
Hrach Simonian, General Partner at Canaan Partners explains how existing HR tools don’t appeal to the new workforce:
“The paradigm shift from annual to continuous feedback is talked about by a lot of companies. But most of the big HR platforms are really gimmicky.”
9. Brian Kropp, Head of Human Resources at CEB
HR professionals also believe they may not have the proper tools to effectively implement a new performance management program. Brian Kropp, head of HR at CEB, a corporate research and advisory firm that advises on HR practices, revealed that only 4% of HR managers think their system of assessing employees is effective at measuring performance and 83% say their systems need an overhaul. He noted that he was not surprised by this statistic.
“It’s no wonder, since the way we work has changed so much. A lot of our performance management systems don’t do a good job of capturing ideas or insights. They capture hours or things that come off an assembly line, and the world just doesn’t work that way anymore.”
10. Reid Hoffman, Partner at Greylock
Another characteristic of younger workers is that they change jobs more frequently than previous generations. As of 2016, the median employee tenure of workers ages 25 to 34 was 2.8 years compared to 10.1 years for workers ages 55 to 64, according to the Bureau of Labor Statistics.
Reid Hoffman, partner at Greylock, chairman and founder of LinkedIn, and author of ‘The Alliance,’ has written extensively on talent management. Reid believes companies need to stop passively planning and start actively managing talent.
In his book, Reid describes his approach to retaining talent through active talent management and uses the following metaphor to describe how employers should treat employees.
“We have entered a world where workers are like professional athletes. They work for a company and contribute for a while, but when needs change, they move to another team, taking their skills and expertise with them. So the concept of a ‘job’ has changed and organizations have to manage their teams in a world of a rapidly changing, mobile, contingent working economy. Companies now have to move beyond ‘succession management’ to putting in place what we call programs for facilitated talent mobility.”
11. Ryan Drant, Founder and Managing Director of Questa Capital Management (Former General Partner at NEA)
Human Capital Management (HCM) is imperative to all companies, regardless of size. Yet, Ryan Drant, founder and managing director of Questa Capital Management (formerly a general partner at NEA), believes there is no scalable solution for mid-size companies. NEA invested $16M in a Series A to HCM software provider SyncHR.
“HCM is an incredibly hot space that continues to grow, and mid-size enterprises especially are lacking robust solutions.”
12. Stacey Bishop, Partner at Scale Venture Partners
The gap in the market is not going unnoticed and investors are continuing to fund companies. Stacey Bishop, partner at Scale Venture Partners, believes despite the spike in investments to HRM software, there is still a ton of opportunity for investors in the market.
Scale Ventures recently participated in a $50M Series D to Namely, an all-in-one HCM that competes with Gusto, Justworks, and Zenefits.
“We finally got the chance, and we think there’s still a ton of opportunity.”
13. Jeff Liberman, Managing Director at Insight Venture Partners
HR technology is going through a technology renaissance and the competition has never been steeper. The last 2 years have seen a record number of deals and financing to new HR tech companies.
Jeff Lieberman, Managing Director at Insight Venture Partners, which participated in a $30M Series C investment to SmartRecruiters, a hiring platform that incorporates candidate video recordings into the recruitment process, explains that a surge in competition does not mean there aren’t opportunities.
“The space is large enough for multiple players since countless companies need help with hiring.”
Recruitment in particular is highly profitable because it is cyclical and forecasts that for investors, it could mean
“Billions of dollars of potential annual recurring revenue.”
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