IVCA Feature: Highlights of IVCA Luncheon ‘Investing in HR Tech Today’

IVCA Feature: Highlights of IVCA Luncheon ‘Investing in HR Tech Today’

July 24, 2019

It was a fascinating and balanced topic at the last IVCA Luncheon, which took place at the UBS Tower in Chicago on July 17th, 2019. “Investing in HR Tech Today” spoke about Human Resource innovation, both inside companies and through vendors. How have businesses been using HR tech to modify their departments? Is there such a thing as “too much tech”? What are the investment possibilities? The discussion was moderated by Joanna Arras, the Principal at Baird Capital, and included the following panel participants...

  • Chloé Rada, Director of Talent Administration, Technology & Branding for Sodexo USA
  • Adam Robinson, Co-Founder & CEO of Hireology
  • Jason Weingarten, Co-Founder & CEO of Yello

Ms. Arras framed the discussion in a Q&A format. Below are the highlights of the event, with vital points expressed on this ever-evolving dynamic.

QUESTION: What are your observations regarding strategic investment in HR technology? Would Sodexo consider investing strategically?

Chloé Rada of Sodexo – a food service and facilities management company – said they do invest in technology since they serve 100 million customers a day (enterprise-wide), with 460,000 employees in 72 countries. It’s about understanding the consumer, and what they want. She emphasized partnerships with other companies in developing technologies rather than direct investment. They do have R&D internally as well.

QUESTION: Are there any HR technologies built in house?

Adam Robinson of Hireology – developing all-in-one hiring and talent management platforms – said that they see it all the time. Custom built on-boarding systems, connections to e-verify and homegrown applicant tracking systems (ATS), for example. It’s because 90% of their market is unsold. But most of the in-house HR tech is for huge businesses with centralized HR stacks. Decentralized companies with limited HR departments have different challenges, and it’s worth funding new tech to give them options.

QUESTION: Jason, what is the mix of homegrown versus outsourcing?

Jason Weingarten of Yello – developers of talent acquisition software – observed that homegrown is very limited, only to the biggest of operators like Microsoft, and in many cases they have too many technologies.

Ms. Rada gave an example of her control of technologies, a tech and innovation matrix. The guiding principles under her auspice is one, potential candidate first. Second, digital innovation with high touch best practices (A.I. and optimization). The third is predictive, balancing the art and science behind talent acquisition and analytics that come out of their department. Mapping these technologies means plugging into those principles in order to start conversations on use.

Mr. Weingarten added that Yello looks to solutions regarding the examples of the guiding principles. He mentioned that Sodexo is ahead of the game, because they usually have to help their large enterprises build resolutions to those principles.

QUESTION: The buzz term of the moment from vendors is A.I. (Artificial Intelligence), which is flashed as a enticer on marketing booths at every conference. How much of this is product truth, how much is marketing hype or how much is just an executive level order to actualize the term?

Mr. Robinson said its all software, no matter what we’re calling it ... a couple years ago the buzz was social mobile. Recruiting technology, he added, is in the first inning of transitioning between administrative platform to a digital retailing solution. Jobs are products, they have to retailed online just like anything else, because the change is that 80% of job searches are done online.

He continued with if a company is retailing their jobs, in competing with others, they have to be really good at response rates and the funnel. With Hireology’s technology, the response time on average is 72 hours. Speed is of the essence. To him, that is A.I. Hireology has a goal of smoothing the friction of anything that slows down that response. It’s smart automation.

With Yello, Mr. Weingarten talked about campus recruiting. A study has indicated that 44% of potential hires on campus chose their job based on the recruiter. With all other things being equal, how is the recruiter able to have the right relationship? In an automation sense, don’t make them do things that are not focusing on that strategy of the right relationship. Something as simple as “does the company have its act together.” Yello doesn’t necessarily market A.I., it’s more about how do you coach the recruiter to make the right decision?

Ms. Rada expressed that her team has bought some of the A.I. tech, but it still requires a lot of work to train that piece of technology. She likened it to “building the plane while they were flying,” which isn’t necessarily a bad thing. But you can get vexed with pitches that the tech will work right off the shelf. The tech product itself is a tip of the iceberg, with all other in-house integrations as the foundation below the product.

AUDIENCE QUESTION: Is A.I. technology at the point in which a machine can analyze data and actually pick a most likely candidate for hire?

Mr. Robinson made an interesting point ... that your performance as a assessor of talent goes down as you introduce more software. From his point of view, an investment in tech resources that automate a hiring decision doesn’t work, because of the politics of inclusion over exclusion. Automation of hiring decisions would enhance the possibility of that political quagmire, and open up a company to legal ramifications ... it can work, but it can also lead to lawsuits. Imagine class action lawsuits based on software program management.

Mr. Weingarten added there there is another risk involved, how whole swaths of potential college hires can reject a company based on one lawsuit that could arise from automated decision making.

QUESTION: To circle back to an earlier point, if there is too much technology, can tech start-ups penetrate this crowded landscape effectively? And do you observe that you customers prefer one vendor or multiple vendor consolidations?

Ms. Rada pointed out that you cannot be everything to everybody, she personally manages several technologies, and cannot vouch that one provider could give her everything Sodexo needs. What is becoming most important is how we can get our technologies to talk to each other. The primary need is for a vendor to be at the top with a core product, and if that specialization keeps working and that they continue to follow through.

Mr. Robinson said if you are a player in HR Tech you’ve got to have distribution. Phase two is to start creating solutions from other vendor’s products, and that becomes the mid-market playbook.

Mr. Weingarten added that in investing in this space, the due diligence should include not whether people will buy it necessarily, but will the product provide value? Then consider how they can quantify that value, and how can that new tech position themselves to maintain that value moving forward.

QUESTION: In a budget cutting scenario, what technologies will be the first to go?

Mr. Robinson opined that the culture tech would be the first to go ... employee engagement, performance management ... anything that is not so critical. The key is to be critical to the HR needs of a business, to get into the ecosystem wiring as fast as possible.

Ms. Rada offered that the technologies that are going to stay are going to help us move through and help to bring potential candidates on board. Anything that can shorten the “time to fill” are the technologies that are going to stay. Anything on top of that is subject to be cut, like brand management or branding statements. Mr. Weingarten added marketing to that list.

QUESTION: For investors, cyclical concerns has been the major excuse for declining funding this space. What are your perspective on the cycles?

Mr. Robinson expressed that if you take the long view, it’s the best time to build business in this space. Mr. Weingarten was surprised that cyclicality was an excuse, because deals are happening. Robinson added in this business, that job loss starts showing up early, but the exact opposite thing is happening right now. There are more jobs that people looking for work, and there is no downward pressure right now. Ms. Rada said budget is her concern, and moving the pieces around and spending those dollars so that she can maintain that budget for the next fiscal year.

AUDIENCE QUESTION: What are the operational metrics in a product that can assure retention?

Mr. Robinson observed for Hireology that the metrics are basic, and usage related ... are potential hires looking for jobs in a timely fashion? Have they closed a hire? It’s like a ticker on your laptop. Mr. Weingarten spoke of NPS, or Net Promoter Score (customer loyalty assessment), in both executive sponsors of their product and end users. Net retention is also a key metric, as to having their products “land and expand.”

QUESTION: What are your predictions for the HR Tech space going forward?

Adam Robinson predicts that Google will be adding jobs in the next six months, and when it happens there will be $8 billion dollars to spend up for grabs in the recruitment marketing business.

Chloé Rada is excited about about tech that can help her determine when potential hire indicators that they are on the move, and Sodexo can react to it in an automated way, along the line of predictive analytics. That, she believes, is the future of automation and streamlining processes.

In the next six to twelve months, Jason Weingarten sees a lot of consolidations between “big strategics” businesses, as they get off the sidelines.