Even though investment slowed down toward the end of the year, 2015 was a banner year for HR technology — the best since 2001 for U.S. startups and a year that included a billion-dollar quarter. Depending on whose numbers you look at, investment in HR and HCM startups was north of $2 billion for the year. What should industry watchers expect in 2016 as this capital begins working its way into the system?
- The race for market share pushes the talent acquisition market toward commodity. Applicant tracking solutions such as Gild, Greenhouse, Lever, Jobvite, Jazz, and Entelo have all generated buzz for powering better candidate sourcing, screening, and selection via data. However, talent acquisition is a crowded category that’s getting more crowded after last year’s financing binge. In any crowded category with little true differentiation based on features, it’s easy to cut price to buy market share, which creates a downward spiral. It’s not just in ATS. Even established, mature recruiting subcategories such as background screening are experiencing the same thing as Sterling Backcheck, First Advantage, HireRight, GIS, and Accurate Background battle for market share. Look for market leaders to try to push out competition by driving down price and forcing acquisitions. The market leaders won’t just be the ones with the most capital. They’ll be the ones with the strongest, truly differentiated brands.
- Data tilts the balance of power in talent acquisition. Recruiting has driven much of the innovation in the HR technology space. As data becomes the currency in HR tech, talent acquisition technologies have again been at the forefront. However, data is beginning to tilt the balance of power toward the internal talent acquisition function. In-house recruiters and companies wanting to avoid paying agency commissions have more options. One example is 1-Page. They can develop a shortlist of high-quality passive candidates along with suggestions about the best current employees who can provide warm introductions and referrals to these candidates.
- The next generation of talent management solutions are gaining traction. If 2015 was the year when the death knell for the performance review reached a crescendo, 2016 will be the year when viable replaces gain headlines in the form of next-generation talent management solutions.
What are viable alternatives? The answer depends on the needs of an organization. Next-gen performance management solutions such as Small Improvements, Reflektive, and StandOut that reimagine the entire exercise already exist. BetterWorks separates goal management from performance using Google’s famous OKR (Objectives and Key Results) approach. However, companies across the talent management spectrum are offering compelling alternatives to the appraisal to improve individual and organizational performance. ClearCompany is approaching better performance from a recruiting and onboarding perspective. Fuel50 believes that career pathing and development is the best route for performance and retention. Glint and HighGround are using pulse surveys and continuous feedback to generate valuable insights into organizational performance.
- Wellness is giving way to well-being. What is the ROI of corporate wellness? It depends on what you’re looking for. If you’re looking to hold the line on rising healthcare costs, you might be disappointed. If you believe that wellness is a vital component in employee engagement, you might be looking at KPIs other than healthcare costs. Already, some of the larger platform solutions within wellness, such as Limeade and Virgin Pulse, are taking more of a well-being/engagement angle. Other companies that fall into this second group are expanding the ideas behind corporate wellness into a broader, more all-encompassing category called well-being. For example, financial wellness is emerging as a critical yet underserved area within wellness, with companies such as HelloWallet and Zebit offering both financial tools and (in Zebit’s case) access to no-interest credit. Within well-being, lighter, app-based solutions such as Fitbit and Shine are giving even line managers within organizations ad hoc tools to create their own wellness initiatives.
- Benefits brokers fight back with technology. The biggest battle last year in HR technology last year was Zenefits vs. Everybody. Although the Zenefits-ADP kerfuffle gained big headlines, the real bout was Zenefits calling out specific benefit brokers by name in one of the most aggressive HR technology marketing campaigns in recent memory. However, what’s going on under the radar is a focus by some HR tech companies — mostly in benefits administration — trying the opposite approach. Instead of fighting, some companies are playing nice with benefit brokers. The broker community certainly needs the help with lots of switching going on, especially at the small-business and midmarket levels. At the enterprise level, companies looking for better benefits technology are driving a lot of the movement.
Lots of providers are finding opportunity in the uncertainty. PlanSource, Maxwell Health, Workterra, Benepay, and Benefit Harbor (among others) are all posting impressive growth numbers by giving brokers tools to retain current clients and generate new business. For a software company, the benefit is exponential growth — not just one client, but dozens (or even more with larger brokers).
- The bifurcation of HR. Whether or not you believe it’s time to split up HR into tactical and strategic functions, the technology is finally here to support a division, especially in the SMB. An example is a company such as Zuman, which is building a platform that supports both HR and finance. Zuman calls this “People Operations” — and supports the tactical HR needs of an organization as well as the strategic insights that COOs and CFOs need.
- SMBs drive growth and change in corporate learning. For a long time, corporate learning was the exclusive domain of large enterprises. That didn’t mean that smaller businesses weren’t interested — just that it wasn’t cost-effective. Today, small and midsize businesses are hungry to adopt e-learning, especially as these tools focus on learning that can be consumed in the workplace, on-demand, and these tools also facilitate collaboration. Next-generation LMS solutions such as Docebo and Mindflash, as well as video-first solutions such as Udemy and LinkedIn’s Lynda.com are opening up training and development to businesses that couldn’t afford or manage these solutions previously.