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Digital Transformation of HR

Anik Bose, General Partner at BGV, shares his perspective on the digital transformation of the HR function. Digital transformation is a well-known disruptor in many sectors, but its impact on Human Resources is less broadly understood. The flow of venture capital into HR tech is one good indicator of disruption potential – in 2016 over $1.96Bn of venture capital flowed to HR tech startups according to CB insights. Another indicator is the strategic investment activity of established HR companies looking to revamp their own offerings. Concur, Infor, and Workday had the most combined acquisitions and investments in HR tech start up companies between 2012 and 2016 according to CB Insights. Concur Technologies was the most active investor with 16 investments. Infor, a SaaS HR management company, was the most active acquirer on the same list with 13 acquisitions since 2012. Workday invested in 8 companies and acquired 5 over the same time frame.

BGV Perspective

Digital transformation of HR can be described along three technology dimensions: mobile, analytics, and social, with cloud being an underlying foundation. Mobile has been by far the most visible change driving the “consumerization of HR systems.” Swipeclock offers a workforce management mobile app that is well designed, delivers a great user experience, and is fine-tuned for user adoption. It is used by over 900,000 users for time, attendance, and scheduling. Benefits to enterprises are increased productivity, fewer errors, and obviated non-compliance. Advanced analytics – AI and ML technologies – are another technology that will play a key role in transforming the HR function. Today, Workday’s system can identify employee job changes that are likely to result in high-performance outcomes (as well as what job moves to avoid). Success Factors can recommend specific training employees should have based on their roles and tasks. In the social arena, ZipRecruiter is a job search engine that connects the right people to the right job. Its powerful technology posts jobs to 100+ job sites across the web, identifies the best candidates, and notifies them to apply to the best fit positions.

Digital transformation of HR can also be described along high impact functional areas – recruitment and talent acquisition, performance management, employee engagement, contingent workforce management, and employee training.

Recruitment and talent acquisition – Today’s recruitment and talent acquisition market is enormous—an estimated $240Bn in the United States alone based on research by Bersin by Deloitte. This massive market focuses on tools to help companies find strong job candidates, market themselves, distribute job postings, interact with job boards, conduct pre-hire skill assessments, perform background screening and psychological testing, and interview candidates. Applicant tracking systems need to oversee this entire complex process from end to end. Such tools are highly strategic for many businesses. Fast-growing technology companies, for example, can make or break their business plans based on how quickly they can find the right engineers, marketing professionals, and salespeople. Retailers and seasonal manufacturers need to hire hundreds to thousands of people at critical times during the year, so it is key that they find workers as quickly and effectively as possible at scale.

Personity (www.personity.ai), a BGV portfolio company, is one whose vision is to remove the “bias” from high value business decisions. The company focuses on leveraging AI technology to improve the HR recruiting process by providing personality attributes to improve the screening process, thus reducing cost per hire and the time to fill while reducing turnover. A new breed of platforms, including those from vendors such as SmartRecruiters, Lever, Greenhouse, Gild, and others, have started from scratch, building end-to-end recruitment management systems that handle everything, including sourcing, ad management, analytics, online interviewing, interview management, candidate scoring, ongoing candidate relationship management, and onboarding.

Performance management – 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. Reflektive (www.reflektive.com) is a startup that aims to replace the yearly performance review with a more flexible performance management processes grounded in real-time feedback and a genuine dialogue between supervisor and employee. This tool helps companies embrace the newest trends in performance management by encouraging and enabling continuous feedback especially relevant for Millennials.

Employee Engagement – Technology has the potential to address the employee disengagement problem. Disengaged employees are estimated to cost the US economy $500 billion per year in lost productivity. Customer and marketing teams have been developing innovative ways to measure customer input for decades. Today, companies are starting to do the same with their employees by making use of always-on, pulse-based feedback systems. According to Bersin by Deloitte, the consumerization trend is converting HR into a system of engagement that can reach beyond the territory of HR and really engage employees’ inner work lives, rather than being just one of record (certifications, training, etc.). Highground (www.highground.com) offers a cloud-based employee engagement platform to help companies build deeply engaged and high-performing cultures through continuous feedback, ongoing employee development, and real-time recognition.

Contingent workforce management – Roughly 40 % of workers in the US are contingent in some fashion, according to government sources, and many of them look for jobs on special networks. Employers use those same channels to post jobs and find people with specialized skills. There are two emerging markets that support this new way of working. The first is contingent workforce management systems, such as Fieldglass from SAP, Kronos, Beeline, PeopleFluent, Workday, and many others. The second market is the gig-work networks that match workers to projects. There are dozens of such solutions, some of which include Upwork, Freelancer, Fiverr, and Workpop. These platforms have morphed from job networks to recruiting and skills-management sites.

Employee training – There is a new category of learning products that focus on delivering a “learning platform.” In other words, they are places to browse and learn, and not merely to register for courses. These new platforms bring YouTube-like video experiences to employees and include features for curation, recommended learning, and data-driven recommendations. We believe that this new category of software will become significant as every major company begins to realize that it needs these systems as a complement (or, someday, replacement) for its core learning system. Vendors include Degreed, Pathgather, EdCast, Everwise, LinkedIn Learning, and others.

Adoption Challenges

Technology and HR are not always comfortable bedfellows. Traditional HR functions tend to play it safe and are usually slow to adopt new technologies. But as the HR function is thrust into the limelight given its potential role in transforming employee productivity, HR leaders will need to be forward thinking in their adoption of new technologies and applying data driven analytical approaches to inform personnel decisions. Furthermore, the generational divide in the workforce will increasingly push HR functions to embed new technologies at a faster pace. This is analogous to how end-user driven smart phone adoption drove IT organizations to embrace mobile technologies. Best-of-breed startups that can deliver value along the key HR functions described above while delivering exceptional user experience and providing simple integration with existing systems will be winners in the digital transformation of HR.

  • 21 Aug, 2017
  • Posted by Anik Bose
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