The Ten New Truths About The HR Technology Market

September 24, 2021 00:26:21
The Ten New Truths About The HR Technology Market
The Josh Bersin Company
The Ten New Truths About The HR Technology Market

Sep 24 2021 | 00:26:21

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In this podcast, I describe The Ten New Truths about HR Technology Market.  This summarizes the presentation I”m giving at the HR Technology Conference this year, and will be the source for much of...
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Episode Transcript

Speaker 1 00:00:13 Hello everyone. Today I'm going to touch on the 10 new truths for HR Technology, and this is the title of the keynote I'm giving at the HR Tech conference next week. It's a very difficult speech for me because it's basically a 45 minute speech that summarizes more than a year of research in hundreds and hundreds of hours. But let me give you the highlights here and it'll get you thinking the first truth employee experience takes over. There's absolutely no question in my mind, based on the revenue of companies and the technologies that are coming out, that the number one thing people are looking for in HR technology is a compelling, productive, and meaningful and useful employee experience. And underneath the covers, of course, whatever the system is, it has to do the right processing and store data in a secure and intelligent way. But that's really kind of secondary, and that's a complete inversion of the way we used to develop software in the past. Speaker 1 00:01:09 We would start at the backend, we would design a database, we would build workflows or processes around that database. Then we would build application functionality on top of that business rules that were used to implement that function. And then we would build a user interface on top of it. And that, of course, is the opposite of the way HR software is developed today. In fact, most software we look at the user's needs first. We look at the various scenarios and personas and use cases, and we design the UI and then figure out how the backend is going to work. And that has really flipped the HR tech market because three quarters of the vendors in the market are transactional processing vendors, payroll companies, learning management companies, companies that manage employee record keeping, even wellbeing companies are to large degree data and application processing systems with intelligent interfaces. Speaker 1 00:02:02 But the front end was never designed to be useful to employees. Whereas today, what companies really want is something that employees can immediately use to become more productive, to become more healthy, to get more work done, to learn what's going on in the organization, to learn about their career, to find somebody to get help with the project, et cetera. So employee experience vendors, witness companies like ServiceNow are bigger than their E R P counterparts. Workday is obviously focusing very heavily on their people experience Stack Success factors is putting most of their energy into H X M and new systems for tele mobility and skills. Oracle just completely revamped Oracle HCM cloud around employee experience with Journey management. And ServiceNow, which is bigger than Workday, is a perfect example of how they're eating into the HR tech market from the top down instead of from the bottom up. Speaker 1 00:02:54 Which leads me to number two, E R p, still strong being redefined. You know, there was an interesting meeting at Workday where Aneel showed a a slide with E R P and a Red Cross through it. Workday is not an E R P. Well then I don't really know what it is to be honest, but I don't think there's anything wrong with being an E R P E R P is what every single company needs. Every company on the planet that has financial processes, human capital processes, IT systems, products, services, logistics, supply chain needs a system for all that. And the idea of E R P was to integrate all that stuff together into a business system, which we all need, and use the human capital element of E R P to optimize what we do in hr. And that is actually a really, really sound idea. Speaker 1 00:03:41 And it makes perfect sense. And by no means has it gone away. But what has changed is the topics and priorities in the human capital part of E R P are very different. Now. We need to do skilling and intelligent assessment and tele mobility and better jobs of agile performance management and measure people on projects and teams. And we need need to look at all different models of leadership and all the different models of organization structure. And we have new jobs being created in new job titles and agile and hybrid work all the time. So the traditional E R P structure is falling behind, but the idea is definitely not. So I still believe there will be a completely transformational vendor that'll come outta somewhere, build on a graph database that will reinvent E E R P again. And I know a couple of guys are working on that. Speaker 1 00:04:31 Number three skills. Taxonomies are the next big thing. I would venture to say that more than half of the conversations we have with HR leaders have to do with skills. How do you develop them? How do you categorize them? How do we store them? What systems should we use? How do we keep them up to date? How do we organize the company around them? And it's not an L and D topic. Skills relate to jobs. They relate, relate to capabilities, they relate to the organization structure, they relate to the job architecture, and they relate to the design of your whole company. So this thing that was called a skills database or a skills taxonomy, is just started to eat in the whole market. It affects learning, it affects recruiting, it affects career development, it affects pay, it affects succession, it affects the job architecture, it affects the job relationships or the financial relationships you have with employees if they're full-time part-time contract. Speaker 1 00:05:27 All of those things have to do with the skills and capabilities of the person, but also the skills and capabilities that you decide as a business that you need. And you want to differentiate yourself because no two companies in the same industry are exactly the same. One telecommunications company might be very focused on sales, another one might be focused on technology and quality of service. The third might be focused on content. They're gonna need different skills, different capabilities, different architectures around that. And I'll show you some slides on that in the presentation. But this is impacting all of the HR tech vendors. And if you think any vendor is gonna do all of this in one place, be careful. Most of the vendors with skills tools are very primitive. There are a few. They're looking this as a whole integrated architecture, which includes skills, jobs, experiences, job history, external data, but that's a small number. Speaker 1 00:06:19 And I won't mention veteran names here. You can come to the conference and listen to the speech and hear more. Number four, recruiting and internal mobility have merged. And I'll talk about talent marketplaces in a minute. 60% of the jobs filled in, most of the big companies I talked to today are internal candidates. That's a big number. There's two reasons for that. First, of course, it's hard to hire people cuz there's 14 and a half million jobs open in the United States and there's only 155 million people working. So you're competing with a awful lot of people for the people you're trying to hire. So if you can find somebody inside the company who's capable of doing the job, interested in doing the job, or probably could be re-skilled, it's probably a pretty good bet that that's a good way to go. Second thing happening in recruiting is vast improvements in technology, AI and sourcing. Speaker 1 00:07:09 You know, the recruiting tech market goes back to the invention of the applicant tracking system and the applicant tracking system was essentially a transactional database to keep track of candidates. And then somebody had the brilliant idea of coming up with some software that would try to match resumes to job descriptions. And then it became a little bit smarter and it went on on the internet and tried to find people that were good at different jobs. And then we had LinkedIn and Monster and Indeed, and then we had entire business models built around connecting job openings or job postings to potential candidates. And now we have what I would call second order AI that is smart enough to know that even though you've never done this job and it doesn't even look like you're prepared for this job, you probably do have the skills because of the kinds of things you've done and the relationship between the kinds of things you've done and the skills that are needed for this particular job that this company posted. Speaker 1 00:08:04 Even though that company may not have described that job very well, and that technology is getting extremely good, but it doesn't work alone. You need to have access to third party data. You need to build a much more robust process for job descriptions and job architecture. And you also have to think about what the recruiters are gonna do. Are your recruiters gonna be out there interviewing people on the phone and getting 'em to fill out forms? Hopefully not. Hopefully you can automate a lot of that and make that self-service. And the recruiters can really be salespeople and coaches and they can search around in the job market and inside your company to find great candidates. So the recruiting market has really evolved and the vendors in that market, which I'll talk about, are doing very, very well. The fifth area is learning. And let me say this about learning, learning in the flow of work, which I didn't invent the idea of it, but I certainly have popularized. Speaker 1 00:08:54 It is definitely here. It's not an idea anymore. It is a reality. Everybody is so busy from the pandemic that they don't have time for a two hour course all in one sitting. They might do it over pieces, but they wanna learn when they have time and they need intelligence systems that can give them micro-learning videos, recommendations, articles, podcasts, people, developmental assignments as needed when the time is right for them, not for you. Now there's still and always will be scheduled events and synchronous learning where you actually have a learner or an instructor online, obviously face-to-face. But more and more of the learning taking place now is in the flow of work. And if you look at what degree has done in EdCast and LinkedIn with the new learning hub and Microsoft, Viva and all of these new learning tools, they're all intelligent enough to serve up content as needed. Speaker 1 00:09:46 And the content market is exploding with growth. The companies like you, Udemy and Coursera and Skillsoft and all the rest of 'em are just growing at double drip. In fact, some of 'em are growing at triple digit rates because this in the flow of work idea creates much more consumption of learning. In fact, some of the statistics I've seen on learning consumption in companies over the pandemic is that it has grown by three or four times massive growth rate of consumption of learning, albeit in a smaller chunks over the pandemic. So as I'll talk about in the vendor presentation, this is a huge theme. It is coupled with the theme I just mentioned earlier of building skills taxonomies, because most of you aren't gonna get that much return out of just producing a bunch of learning and letting people take whatever they want. We need to be directive and send people toward what I call capability academies to build the capabilities that we know are critical for our company and our organization. Speaker 1 00:10:42 And that is all coming together. Number six, the talent marketplace has become a legitimate software category. Now, I go back on this market for quite a while. Before I left Deloitte, one of the research reports I worked on was the 2016 Human Capital trends. And in that research we asked companies, is it easier for you to find a job inside your company or is it easier to find a job outside your company? In almost three quarters, more than two thirds of the companies said it was easier to find a job outside the company than inside the company, which is completely insane. But that's what was going on. And so for years we've been writing about the need for mobility, the patterns of mobility, the models of mobility, the tools, the culture, et cetera. And there have been little vendors hacking around with this and none of them were very successful. Speaker 1 00:11:30 Well, they're all becoming big companies now. One of the early pioneers of this is this company Fuel 50, and I was on the board for a little while there, fuel 50 gloat, EdCast, agreed Workday, Oracle, SAP Success Factors, introducing this Iims Avature, every company is building an internal or external talent marketplace. And then you have vendors like Eightfold that are applying massive amounts of AI and data to this to make it even more intelligent and more deterministic and more interesting than ever before. So this is now, as you'll see in some of the slides, a completely legitimate part of the HR technology infrastructure. And even though you may buy it from a new vendor over time, it will be part of your end-to-end infrastructure. And I don't think, frankly, talent marketplace systems will be around for a long, long time, but those vendors are certainly building great things. Speaker 1 00:12:20 It will eventually be part of the whole infrastructure. Number seven, employee listening explodes with growth. Now the employee listening market is old. It's been around, really goes back to industrial engineering. I think a lot of, you've seen my slides on this. It goes back to Frederick Taylor when we were measuring the movement and weight that steelworkers were carrying in manufacturing plants. It goes back to engagement surveys by companies like Gallup and Towers Watson, and then pulse surveys from companies like Piney, tiny Pulse and Glint, and now end-to-end listening platforms from vendors like Glint Medallia, Perceptyx Pecan, and many others that listen to all sorts of signals coming from your employees. And I think most of you know that during the pandemic, you badly needed this. We didn't know how employees were feeling in a particular city or state. We didn't know if they would come back to work if we had this policy or that policy. Speaker 1 00:13:16 We didn't know why they were leaving or why they were burnt out. So we needed to open up these listening channels in a very significant way. So this market of small standalone survey tools has turned into a market of experience, engagement and listening platforms. Now, Qualtrics likes to call this experience design. I I don't really think that's what it is. What it really is is many, many sources of information you're capturing from employees and capturing that data and storing it and correlating it and connecting it to many, many other things going on in the company. ServiceNow, for example, just introduce something called listening posts, which allows you to get feedback on individual cases and individual journeys. This is gonna happen in all areas of HR and it's a very big category and you really wanna look at it as an entire system, not just a whole bunch of tools that you try to bolt together. Speaker 1 00:14:09 Number eight, performance, talent and learning converge. You know, there's been a 15 or 20 year effort from venture capitalists and other people to invest in next generation performance management companies. And there are some vendors here that are doing pretty well. Companies like BetterWorks, Workboard, lattice, culture Amp, I mean Success Factors was essentially a performance management tool. Really were invented to try to build a better employee manager experience so that the employees and the managers could set goals. You could compare goals between employees, you could collaborate on projects. And then at the end of the period, the end of the quarter, you could have a developmental conversation, give people people feedback and decide what people's ratings were and decide how much to pay them. This is a extremely complex area, and we've gone from cascading goals, which is the old 1990s, 1980s GE model to OKRs, which is goals set by the team and then connected to each other through goal alignment processes to products like 15 five that are really more coaching and development systems for coaching and management collaboration around projects as opposed to filling out goal forms and filling out all sorts of CAD and goal systems. Speaker 1 00:15:26 Well it turns out it's been a pretty bloody battle. A lot of the vendors in this market have been acquired, some of them have gone out of business. And the reason is it really isn't a standalone market. Performance management is one of the important business processes and the entire end-to-end process of managing people. And it makes a difference and it's important. And some companies like Google take it very, very seriously because it can have enormous impacts on pay if that's the culture you have. And it does presumably help people make sure they're working on the right thing. But those days of having a standalone performance management pro application are probably over. Now what companies want is really a management system, a system that will capture goals and objectives and development plans and feedback and kudos and rewards, and help the HR manager and the business manager figure out who's performing well, who's performing poorly, if we're gonna have a bonus program, how do we allocate it fairly and really get a lot of data on how work is getting done. Speaker 1 00:16:29 And that market is really forming into a new space. And I'll talk more about the vendors of that market at the speech. Number nine, Microsoft changes the HR technology market forever. Now, I hate to talk about one vendor as the disruptor. You know, it was Workday 10 years ago who really changed everybody's opinion about what HR software should be. Now I think it's Microsoft, and this is a funny story because Microsoft sort of tripped across this market by accident, but is now totally committed to it. The new platform called Viva, which is a set of applications built in conjunction with Microsoft Teams, is really going to revolutionize many of the things you do in hr. First of all, because the Microsoft systems are application development tools and creator tools, Viva and all of its manifestations are much more flexible and customizable than most HR systems. Speaker 1 00:17:24 You get second teams, which now has roughly 70 to 75% of the Fortune 1000 adoption, and I think it'll continue to go up, is a place to embed applications. So all of the HR tech vendors, regardless of what part of the category you're in, are building applications to fit into teams. Third, Microsoft is basically building an employee experience platform and a workflow system. Most of the tools Microsoft sells are development tools, infrastructure, AI and workflow management tools. And if you look at all of the things in the Azure Cloud, all of those application areas and all those functionalities are going to become available to Viva. So over time, some of you who have rather large or well invested IT departments are gonna look at Viva and they're gonna say, huh, we just bought this fancy dance learning tool from vendor A, but we have this kind of low-cost Viva learning app here. Speaker 1 00:18:19 We can connect it to all of our SharePoint sites, we can tweak it, we can modify it, we can add things to it. Why don't we just use that? And I hate to tell you this, but that's gonna happen in every part of hr. It's gonna happen in employee listening, it's gonna happen in skills management, it's gonna happen in content, it's gonna happen in learning. It'll probably happen in onboarding. So all the other vendors in the market have to kind of look at Microsoft as a Frey, a company they need to partner with to create a great user experience, but also a company that could possibly take over their space. Now, Microsoft doesn't wanna do everything. They're a very focused company and they know what they're good at. But two years ago we didn't have Microsoft in this market and we've been working with Microsoft a lot and I think you'd be surprised how serious Microsoft is getting about HR tech. Speaker 1 00:19:03 The 10th new rule I want to mention is the creator economy. And this was gonna be the keynote of the speech, but I decided to make it one of the rules. The creator economy is a fascinatingly important thing. If you look at YouTube or Instagram or Facebook or TikTok or you, to me, those are what are called creator platforms. Anybody in the world can create content, produce it, and share it and monetize it for others. And they are explosive. They're growing at double to triple digit rates because everybody in the world wants to be a celebrity and everybody in the world has something that they're good at and something they'd like to share with others. Now in the consumer market, the creator economy vendors make money through advertising. So that's not really relevant to HR tech, but think about what goes on inside of a company in the learning industry. Speaker 1 00:19:56 For example, when you have a product specialist or a sales specialist who's figured out something new and wants to share it, or you have a manager that wants to give coaching to their team and they want to create a video and put it online, or you have an HR person who wants to build a new onboarding program and tweak it so that other people can take advantage of it. Or you have an executive that has a really important story that they wanna put together in the employee communications system, but they don't have time to write an article, they just want to do a podcast and the use cases go on and on and on. They hit recruiting, they hit learning, they hit talent management, they hit leadership all over hr. And what this means to us in the HR tech market is that we don't wanna buy tools that are all locked up like E R P systems. Speaker 1 00:20:42 We want tools that are more like development tools where we can customize and create the content, the journeys and the experiences we want. And so as I'll talk about in the speech, the creator economy is really changing the nature of the vendor market and more and more of what you're gonna look for in the vendors you select are not just great interfaces and systems and great AI on the backend, but your ability to customize, configure, and create solutions for your company in these platforms. Now I know I just covered a lot, and for those of you going to the conference, you'll see more on this and I will produce a pretty good size slide deck later. Let me summarize again that the 10 new truths for HR Tech number one, employee experience takes over. Everything's gonna be evaluated by the quality of experience for employees. Speaker 1 00:21:33 Number two, e r p, still strong being redefined. We still need E R P systems, but the E R P applications have to look at growth, development, mobility, and a whole new set of financial and business applications. Number three, skills taxonomies are the next big thing. All of you are gonna have to build a skills taxonomy for your company. You're gonna have to decide what tools you use for that, and you're gonna have to decide how you rationalize your job architecture to do that. Number four, recruiting and internal mobility have merged. Not only are you going to be recruiting like crazy in the outside market and adding all sorts of benefits and perks to get people to come to your company, but you're gonna do some serious recruiting and development internally. And so in many ways, the recruiting function, which sits on one side of HR and the learning function, which often sits on the other side of hr, have to get bolted together. Speaker 1 00:22:28 So that's a big truth. Number five, learning in the flow of work has arrived. Don't think about it as a theory. Think about it as the paradigm for learning in your company and you'll find that that coupled with the Capability Academy model will be a breakthrough solution for our employee learning. Number six, talent marketplaces become a category. You really shouldn't ignore this, a lot of the vendors will shake out, but this is something that every company will use and need and need to define the functionality that fits you in one of the application vendors in your stack. Number seven, employee listening explodes. You need a listening platform. It may be embedded into your E R P, but probably not. You probably need a dedicated system for multi-channel listening that collects data and sends it to different places and creates action platforms and actionable data for call center agents, for managers, for leaders, and for HR business partners. Speaker 1 00:23:23 Number eight, performance talent and learning will converge. You can still shop around for new performance management vendors. There's plenty of them out there and some of them will be very interesting to you. But over time, that will become an integrated market with learning career and talent management and your model of performance management is really up to you. There is no one best practice that works for every company, so you get to decide how you want to do performance goals, pay rewards and succession in your own company. Number nine, Microsoft. Watch Microsoft. Take a look at Viva. Pay attention because unless you're an all Google company or an all Salesforce company, which I'm not sure there are any of those, you will be impacted by the technology directions that Microsoft's making with Viva and number 10, the Creator Economy. Look at all of these tools as not only something to buy and roll out and deploy, but as a platform for creation, for creating journeys, for creating content, for creating experiences, and for creating new solutions for your employees. Okay, there you go. 10 important things to think about in HR Tech. I'll see you guys all next week, those of you that are coming. And if you're not, stay tuned. There'll be more to come on this topic over the next couple months. Bye for now.

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