HR Tech Firms" Popularity Soaring With Venture Capitalists

If you want to secure venture capital for your next business idea, start an HR tech firm — preferably one that offers a new spin on recruiting.

For the past two years, venture capitalists have been pouring money into the HR tech sector, seeding promising young startups with millions of dollars in hopes that their take on benefits, employee engagement or social recruiting will be the next disruptive thing to change the way we manage talent.

As reported earlier this year, 2013 saw a record high in both the number of venture capital deals going to HR tech firms, and the amount those companies received. So far, 2014 is no different. In the past several months there has been a flurry of deals, big and small. A few highlights:

Hireology Inc., a provider of employee hiring and selection management technology, raised $10 million in Series B funding from Bain Capital Ventures in August.

SmashFly Technologies, a recruitment marketing platform technology, secured $9 million in June from OpenView Venture Partners.

YouEarnedIt, an employee engagement app, received $1.5 million in seed funding from Capital Factory, an Austin, Texas-based tech firm incubator, in May.

Work4, a social and mobile recruiting service, raised $7 millionfrom Serena Capital and Matrix Partners, in April, bringing its total funds invested to $18 million.

ZenPayroll Inc. raised $20 million in a Series A round from General Catalyst Partners and Kleiner Perkins Caufield & Byers in February for its cloud-based payroll application.

Why they are interested

“HR tech is attracting venture capitalists because of the growing complexity of today’s workforce,” said Ryan Hinkle, managing director of New York-based Insight Venture Partners, which assumed a majority equity position in Workforce Software this year. Fragmented worker groups coupled with global employment rules and shifting health care requirements make it increasingly difficult to manage talent, he said. And he sees this as an opportunity to change the way HR works.

Rather than investing in software that merely reproduce traditional processes in a technology-based format, his group looks for innovative new workforce software that change and improve the way talent is managed. “It’s about creating HR software that is infinitely configurable,” he said.

Autumn Manning, co-founder and CEO of YouEarnedIt, agreed. “You can’t predict everything people will want to do with your platform, so you have to build technology that is adaptable for the entire organization,” she said.

The rise in cloud-based software has also made it much more likely that a startup can quickly gain a competitive advantage against bigger players and thus be attractive to venture capitalists, Hinkle said. When companies had to invest in on-premise HR tech software, the ramp-up costs for new firms were too prohibitive to get a foothold. But with software as a service new vendors can quickly build revenue and try new ideas without taking on an overwhelming financial risk. “It’s allowing lots of startups to find their own piece of the market very efficiently,” he said.

Why HR Leaders Should Care

Looking ahead, the influx of capital into HR tech companies is likely to continue, especially around recruiting technology, said Holger Mueller, principal analyst and vice president for Constellation Research. “Recruiting is the biggest problem area for companies right now,” he said.

Businesses can put off upgrading performance management or social networking tools without a huge impact, but they can’t put off recruiting, he said. Between the talent crisis and retiring baby boomers, companies need new ways to find new talent. “It’s driving a lot of innovation and a lot of investment in recruiting technology.”

This ongoing flood of capital in HR tech startups could be a blessing or a curse for potential customers. On a positive side, it means the next generation of software will make it to market faster, giving customers a chance to tap into more potentially innovative solutions to their talent management challenges, Mueller said. However, every new tool purchased from an innovative new startup means yet another round of integration projects to make it work with the rest of a talent management system. “That is going to create a lot of headaches down the line.”

via HR Tech Firms’ Popularity Soaring With Venture Capitalists | 2014-09-19 | Workforce.com.

HR Tech Firms" Popularity Soaring With Venture Capitalists

Analytics for Dummies

Workforce analytics may dangle the promise of finally letting companies use data to make better talent management decisions. But there is one big problem: no-one really knows how to do it.

The current generation of workforce analytics tools is still relatively complicated, according to Ron Hascombe, research director at Gartner, an information technology research and advisory company. “Most technologies run ahead of what all but a few HR people are able to utilize,” he said.

Fortunately, that is slowly changing. HR technology vendors recognize that customers want faster, easier, more robust analytics tools, and they are racing to develop or acquire software specifically designed to make it easy for non-analysts to do workforce analytics.

“It is critical that we continue to simplify how customers turn the vast amount of people data… into insights,” said Leighanne Levensaler, vice president of human capital management products at Workday, a Pleasanton, California-based software producer. “There is a lot of hype and hyperbole when it comes to big data and workforce analytics, yet there is still a dearth of people with advanced analytics skills in the industry.”

Doers and Dreamers

Most companies fall into one of two categories when it comes to workforce analytics. There are companies that want to collect and interpret basic internal metrics – but don’t really know where to start. Then there are the advanced organizations that are already doing some analysis of internal and external data, and are ready to move into more predictive reporting. These companies are usually larger, and have some level of analytics expertise on the HR team.

For the time being, most companies fall into the first category, said Hascombe. Gartner research predicts that by 2017, only 15 percent of organizations with more than 5000 employees will be doing predictive analytics using internal and external data.

Fortunately, most vendors in the human capital management industry are focusing on the needs of the many by creating ever-more sophisticated analytics tools that use visualization strategies, preset queries, and simple report generators that allow managers to choose a combination of metrics and rely on the technology to do the rest.

“The vendors will continue to invest in this subset of tools for the next three years,” Hascombe said.

The most recent upgrades suggest that vendors are focused on making analytics less technical and more user-friendly.

For example, SuccessFactors, an HCM software producer, recently launched ‘Workforce Analytics: Headlines,’ an automated tool that reviews employee data, interprets and prioritizes findings, then sends relevant information to managers in the form of news stories.

“It strips away the obscure analytical terms and just tells managers what’s happening with their teams,” said Mick Collins, principal consultant of workforce analytics and planning for San Francisco-based SuccessFactors. “It supports a more self-serve model for workforce analytics.”

And last fall, Workday rolled out a new tool designed to help customers combine various sizes, sources, and structures of internal and external workforce data to give them greater flexibility in the kinds of information they explore. Customers can answer business questions by building unique scenarios merging data from multiple sources, or they can leverage pre-built analytic templates to tackle common scenarios such as market compensation comparison or retention risk and impact analysis, Levensaler said. “It is about providing people with easier access to insight.”

There are also stand-alone vendors, like Visier, which focus entirely on workforce analytics and helping clients transition from interpreting past data to predicting future trends. Visier’s cloud-based platform unifies customers’ workforce data from multiple sources and allows users to get answers to hundreds of workforce-related questions.

Visier, which is based in both Vancouver and San Jose, rolls out new updates every quarter, and is focused currently on building more robust visualization tools, said Dave Weisbeck, chief strategy officer for Visier. “Employee data has a lot of complexity that simple charts can’t capture, which is why visualization is so important.”

For the more advanced clients, both tech vendors and human resource consulting firms, like Mercer, PWC and Gartner, offer ‘analytics as a service’ models, through which consultants set up custom models to analyze masses of workforce data and provide analytics support.

Hascombe points to IBM’s launch of IBM Workforce Analytics, which provides a mix of applications to help companies do predictive workforce analytics.

Good Data Is Good Enough

Many vendors are striving to help clients achieve the ultimate goal of predictive analytics, but there are still many obstacles to overcome – both in what the technology can deliver, and how HR thinks about data.

Most of the current workforce analytics tools available are still limited, preventing companies from mixing and matching complex metrics or customizing their reports. “In most cases, to get predictive analytics still requires consulting support,” Hascombe said.

HR leaders also need to get more comfortable diving into the analytics world – even if they have limited analytics skills and imperfect data sets, Weisbeck said. “The biggest obstacle for us is the fear HR departments have about their data not being good enough to do analytics.”

Weisbeck encounters many companies that are so focused on perfecting their data and rooting out all errors and anomalies that they never actually get to the analytics process. According to Weisbeck, those companies are missing opportunities.  “You can get amazing insights from imperfect data if it is analyzed properly.”

Workforce analytics will continue to be an important part of the talent management process, and the sooner companies embrace these processes the sooner they will be able to use employee data to make meaningful decisions, Hascombe added. “In the meantime, clean up your data, invest in governance and work with your organization to determine the critical metrics that you will want to track.”

via Analytics for Dummies | 2014-08-06 | Workforce.com.

Analytics for Dummies