3 reasons why today’s HR Tech is flawed?
In the last decade multiple startups have come forward with an aim to bring more technology into HR and solve as one says in the startup world “real problems”. I have often wondered if that was true? If it were true, adoption of HR Tech by companies would have increased significantly. If one looks at the allocation of a CIO’s budget across Technology products in companies, HR Tech would not account for more than 3 percent of the budget. It might not be fair to conclude based on one data point. So, let’s look at adoption of HR tech and where it is used the most. A couple of areas where HR Tech usage is the highest, it is Hiring Assessments, Video Interviewing, ATS, Attendance tracking, HRMS & Payroll and LMS in that order. This is exactly where the problem is.
I have deliberately chosen the word ‘usage’ instead of ‘adoption’. The highest HR Tech usage is around pre-hiring and hiring related processes. Hiring is no doubt the biggest challenge for most companies, as they struggle to find the most suitable talent from the market. The second highest HR Tech usage is around attendance, HR database management & payroll; followed by Learning Management System. So, you must be wondering where is the problem? It all sounds logical for products to be developed in this space.
For a start, let’s explore the difference between the word usage and adoption. Usage would mean, where a tool or system is deployed by an administrator (enrolling targeted users and their data in large volumes) in order to automate a given process for better monitoring and efficiency. Adoption on the other hand would mean evolving a methodology, tool, process or technology that would generate voluntary usage (by targeted users in large volumes); that by its mere methodology of engagement solves the problem at hand. In other words, a “push” product drives usage and a “pull” product drives adoption.
Having worked with large corporations over 25 years and been an entrepreneur myself for more than 5 years, here are few of my observations why importance of usage has overtaken adoption in HR Tech; which is where I think the core problem with HR Tech lies today.
1. Who is the customer?
The single biggest challenge in the HR Tech space is in identifying who is the customer? Most HR Tech firms think the HR function is its customer and the employees or candidates are mere ‘end users’ of the product. If you closely look at the product design and experience, there is minimal focus on the end user, i.e., the employee or candidate. The entire focus is on solving the problem for the employer. This means, making it easier to manage large set of applicants (ATS), assess the candidate accurately (Hiring Assessments), interview the candidate correctly (Video Interviewing tools), manage attendance, leave, performance & employee data base (HRMS) and deliver learning content (LMS). Employee or Candidate experience is a second thought, definitely not the first. Unfortunately, the definition of a customer is one who pays for your product. There is no doubt that the employers pay for the product, so it makes sense to classify them as the customer. So, when employers pay for the product they will drive usage and not adoption.
If HR Tech needs to make the next big leap; it will have to challenge this conventional wisdom on ‘customer’. Unless HR Tech firms change the orientation from employer as its customer to candidate/employee as its customer, it is unlikely to shift the scales from usage to adoption. This concept may defy the conventional norm, as the employee/candidate is not paying for the product; so how can I classify them as customers? For once, if we can ignore who pays for the product and reorient ourselves, we might find a better path. A few startups have tried to do that, but under pressure from VCs to shore up revenues and valuations; they tilted back to employers as their customer.
2. Narrow focused Products
Another big challenge in HR Tech adoption is a cafeteria of solutions. When you look at startup and the VC world closely, there is one mantra that is considered holy and never challenged — Focus on a singular problem and solve it. In view of this mantra; over the last 10–20 years, you would see most startups focus on only one problem and the end result is that most products have a narrow scope. The only reason a few startups may have gone broader is because VCs who come in during Series B, C or D rounds would ask — where is new revenue growth going to come from (to justify the fresh money being raised)? But for this push, startups are expected to have a narrow focus (even if their founders have a huge vision) in order to convince VCs to fund them.
With a slew of products built on multiple technology stacks, with very different architecture, user experience and design, solving problems in a very narrow manner; the biggest challenge is to bring them together to create a unified or consistent experience for the customer. I am not even thinking of the employee or candidate as yet. Even if we look at the employer as the customer, they are also likely to struggle with usage of multiple products solving narrow problems for them. If we were look at the end user as the core customer, the problem of user experience is compounded multi-fold.
Considering the current HR Tech ecosystem, it is now incumbent on the employers themselves to solve this problem by internally creating a ‘digital eco-system’ that brings together a slew of products at the back-end with a singular user experience at the font-end, for both the end users (employers and candidates) and the employers (HR function or data administrators).
3. Data & Analytics
There is an inherent bias in the corporate world about HR professionals being weak with data and numbers. This long held assumption has unfortunately been helped by HR professionals themselves hiding behind the soft stuff, when they were expected to demonstrate their analytical side. HR needs to understand the need for balance between the soft stuff and being analytical; as a necessity to be a credible business partner.
The problem is accentuated with narrow focused HR Tech tools; wherein you are using products from different vendors for products such as ATS, Hiring Assessments, HRMs and LMS. Each vendor would be using not only different technology and product architecture, they would also have data in different cloud or on-premise environments. I know, a few of you could argue that with API integration, one can connect the products, their data tables and create a real-time unified experience. Yes, that’s true when it comes to managing data. However, the question is not about data management. The bigger question is about ability to generate insights from the pools of data that you have got?
If you are using an ATS:
a. What are you learning about the kind of CVs (from the ATS) you are getting?
b. What kind of people are applying to your company?
c. What kind of profiles are being shortlisted?
d. Is there a pattern on who is shortlisting a certain kind of profiles?
e. Is there an unconscious bias somewhere?
If you are using an external Hiring Assessment tool:
a. Who owns your candidate data? The vendor or you?
b. What’s the skill level of people applying to your company?
c. How could you reset the bar?
d. Is there a pattern in the kind of people you are shortlisting?
The above are a few questions one can ask on individual tools. The more complex question is to match data from the ATS and Hiring Assessments to see — Is there a pattern of people we shortlist on CVs who tend to score a particular way in their assessments? Most companies don’t use custom behavioural assessments and when they use global tools (like Hogan or Thomas Profiles), they are simply unable to match it with the behaviours they want inside the company. There is simply no correlation, it’s purely gut-feel based decisions. When you broaden the question to include HRMS and LMS, both the opportunity to run very insightful analytics and unanswered questions gets even bigger.
I am not here to pass a verdict that everything is bad. I am merely attempting to shift the frame a little by questioning a few long-held assumptions in the HR Tech space.
1. Who is your customer?
2. Does narrow focus truly solve the real problem?
3. How will we solve for inter-connectedness of data?
But for product companies like ZOHO, one of the few companies with a broader set of products that could potentially offer inter-connectedness in the future; most other HR Tech firms are operating in a very narrow space. There are brilliant ideas and solutions out there, but they are confined to a singular problem.
I am fully aware that my perspective could also be limited. Hence, I would welcome your views and thoughts, to broaden my own perspective and learn from your experience.
Do share what you think and share your ideas on how we could improve HR Tech adoption (not usage) across the industry?
Director & Advisor | PGC