No-one really argues about where HR technology is heading – unified, streamlined talent management suites, sharing datasets with other business functions, powered by predictive analytics and accessible everywhere.
The last few years have made this future clear – cloud-based talent management suites are now the gold standard in HR technology. Suppliers who have not been traditionally cloud-based have muscled their way into the market. Oracle gobbled up Taleo. IBM took on Kenexa. SAP acquired SuccessFactors. Workday, the poster child of the HR cloud era, has noticeably bulked up its offering.
Now that the battleground is set, it’s the nature of the battle that’s important. 2014 will see suppliers compete on two main grounds: complexity and simplicity. The behemoths of the internet – Google, Amazon – are incredibly complex, but they’ve proven that simple front-ends create scale. This lesson hasn’t been lost on HR suppliers with keen appetites to grow their market share.
1. Predictive analytics will emerge as the year’s must-have technology
The biggest driver of greater complexity will be predictive analytics. One of the big points of confusion in 2013 was HR professionals talked about predictive analytics when they really meant reporting. (Reporting showcases historical trends in organisational behaviour, while predictive analytics asks pertinent questions of suitable datasets to forecast future outcomes.)
In a study by The Economist Intelligence Unit global executives ranked predictive analytics third on a list of the technologies they would prioritise over the next three years – after mobile and cloud-based services. As far back as 2012, Paul Hamerman, VP and principal analyst at Forrester Research, said that cloud had already become a pre-requisite for companies choosing HR solutions.
Uncertainty over the future business environment and the need for more powerful differentiation will no doubt drive demand for predictive analytics – their use in 2014 will be embryonic, but we’ll move into 2015 with more advanced capabilities in sight.
"Early forays by organisations and HR functions into predictive modelling have largely focused on predicting best hires given various candidate, job and employer factors, and also predicting retention risk which is fairly straightforward and logical in terms of analytics frameworks (e.g. tying to planned changes in compensation or benefits),” said veteran HR technology advisor Steve Goldberg, strategic advisor at SBG Consulting LLC.
“The next step in this evolution will perhaps be looking at things like 'if this employee was paired with that team or manager, they would be a star performer.' These type of predictive frameworks require more advanced skillsets in statistical analyses than what resides in most HR functions today, but this is truly about mining employee potential."
2. The methodology of predictive analytics will fall on the supplier’s shoulders
While HR directors are keen to get their hands on the power of predictive analytics, they are understandably wary. If we interpret data poorly, we make poor decisions.
Goldberg gave me the following example: losing more employees to direct competitors than they are losing to you may not be an issue if it’s mostly bottom-quartile performers that are leaving.
How can HR managers select the right technology supplier?
- Analyse existing HR processes and create a vision of where you want to be
- Talk with references about how easy they found it was for people to adopt post-implementation
- Focus program design on simple steps, shorter workflows and fewer options
There is a real risk that poor data analysis could lead to catastrophic decisions. So HR departments must get data analytics right. But we won’t see them rushing to hire scientists. Predictive analytics is unproven. That budget can’t be justified.
According to Professor Stefan Strohmeier, an HR technology researcher from Saarland University, technology that can ‘hide’ the methodological and technical complexities of data analytics will be a driver for its successful, widespread adoption. Predictive analytics will be pushed by suppliers looking to gain competitive advantage in this emerging field.
3. A shared experience to implementation and development
At HR Tech Europe 2013, a conference for HR and IT specialists, one of Workday’s senior executives, Amy Wilson, took to the stage with flagship clients HP and Diageo.
Catriona Mackie, global first point director of Diageo, said the global drinks manufacturer would be providing Workday with feedback on the implementation process to guide future software iterations. Because the Workday solution is cloud-based, Diageo will benefit from any improvements made. It’s a win-win situation for both parties.
The future of cloud-based HR technology development will be increasingly driven by this close working relationship between supplier and client. HR technology is sailing through unexplored territory and will continue to do so; ‘real-world’ experience is invaluable to the suppliers who must innovate to very short timescales.
But the nature of the relationship will define its success. Jason Averbook, Chief Business Innovation Officer at Appirio, which advises businesses on cloud computing, highlighted three key qualities: expectation setting, communication and on-going transparency.
“Remembering that both customers and suppliers have responsibilities towards meeting and exceeding expectations will give both parties more confidence. This in turn will help create collaborative processes that will drive software development based on real-world needs,” he said.
4. The increasing importance of self-service
Self-service allows HR departments to reduce the administrative burden by transferring responsibility for data-collection tasks from HR staff to employees.
If we demand more from dashboard reporting and predictive analytics, we’ll need to put more data in to get samples that we can trust. This will increase the self-reporting burden on employees and portals will have to be designed to ensure they are easy to use.
The challenge for suppliers will be maximising the amount of data absorbed while minimising workflow steps and ensuring the user journey is as fluid as possible. Customisation must also be strong because companies will not want to invest in pushing employees through workflow steps that aren’t mission-critical.
Simplicity is crucial. Graham Salisbury, Head of HR at poverty relief organisation ActionAid, said: “User adoption in self-service often causes headaches due to simple things such as browser compatibility. We need to have confidence these types of issues won’t be a problem.”
For Salisbury, complex self-service also ramps up the implementation budget.
“Intensive training in a system that employees and managers need to use daily is not a good start,” he said. “If a system’s complex, and every one of your 5000 employees needs to use it every day, that’s a pretty tough place to be.”
5. Business integration will become a deal-breaker…
Executives are fully aware of the power of integrating data and functionality across disparate business functions. HR will continue to own the talent management implementation, but downward pressure will push them towards solutions that can most easily integrate with core technology, such as CRM systems.
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This problem will get more acute as predictive analytics ramps up the size of datasets and other functions want their slice of the analytics pie. This will increase the number of stakeholders who need targeted dashboards.
Too much information creates a mental gridlock where decisions become painful. Research from Bersin by Deloitte suggests that the more effective organisations provide single-purpose charts to managers – one for turnover, one for compensation comparison and so on.
Under the bonnet, greater analysis can be undertaken, but stakeholders just need to see the information that’s pertinent to them. This will be essential in driving the reflective, daily uptake that creates long-term value.
Jason Averbook said: “There are no more silos in business systems in today’s enterprise. The ability for the HR function to realise that their people processes and data truly create a hub of intelligence that needs to be consumed by other parts of the enterprise makes or breaks organisational success.
“Any HR system project today should be seen as a workplace initiative and tightly integrated into the overall enterprise experience for the workforce.”
6. ..but ROI against HR’s basic goals will remain the primary driver
There are some sexy new developments in HR technology, but the biggest driver remains the same: to help attract, reward, motivate and retain an effective group of employees.
Suppliers will need to remember that their solutions will live or die by the decisions of the HR department – it’s tempting to market talent management suites to the chief marketing officer or the finance diretor, hoping to entice them to convince HR, but HR will make the final decision. And delivering value throughout their own department remains their primary concern.
Steve Goldberg estimates a 20-30% variation in functionality among suppliers, but the differences most relevant to HR are ease-of-implementation and ease-of-use. Both of these drive core value in HR.
HR directors will talk to other companies who have been through the implementation process. If it’s laboured, drawn out, and does little to address HR’s core aims, that supplier won’t be making the shortlist.