Insights from Gallagher’s HR & Benefits Technology Consulting Practice
If you’re an employer, odds are you’re contributing to the growth of a 14.5 billion-dollar industry — projected to grow to $22 billion by 2022.1 That industry is the HR technology industry, which currently attracts roughly $1.2 billion in investment funds annually.
Your role in all this is that you most likely rely on technology for one or more HR functions — whether for basic administrative functions, such as payroll or time management, or more complex functions, including talent management, employee engagement or workplace optimization using data or people analytics. Employers increasingly look to technology as a solution for automation, compliance and — here’s the growth opportunity — strategy.
As the driving stakeholder for this industry’s growth, it would be ideal if all employers were smart consumers that understand what they are buying. In reality, however, most believe they are buying just technology, and maybe technology support. The truth is that employers are buying much more; none of which is listed on the investor prospectus.
Employers who fail to understand this are at risk. At the very least, they will struggle to adopt the new technology. Worst case, they realize too late that they have made a poor choice and must decide between incurring the significant cost and disruption of replacement or find a way to live with the repercussions of their choice.
So, before you pull the trigger on your next HR technology solution, consider what you’re really buying.
- Innovation
You’re buying a tech provider’s commitment and capability to innovate. With the speed of tech development and new applications coming onto the market, you need to know your provider will, at the very least, stay current (not everyone needs bleeding edge technology). Otherwise, you will quickly outgrow them.
- Change
With any new tech purchase, you’re inviting change into your life. Embrace that change! Layering your old processes on new technology is a mistake (and one many employers make). To get the most value out of your new technology, adopt the new (improved) processes it supports. Otherwise, you might as well have just kept your old technology or manual processes. Change doesn’t come easily, though, so use change management strategies to prepare and actively manage it.
- A relationship
Entering into a service agreement with a technology provider means that you’re buying a new relationship with an entity that is not your own. The relationship may be surface or deep, but much like a marriage, you’re stuck with these people so you need to work to make that relationship positive and productive by keeping open lines of communication.
- Workforce culture
You’re buying another company’s culture, which may be very different from yours — and, which you likely can’t change. Culture is important. It extends way beyond casual Fridays. For example, think about your risk tolerance. Does your culture value risk-taking or a conservative approach to business? How does that match the provider’s culture? If it’s different, are you OK with the difference? We see a lot of employers make decisions based primarily on culture fit. While culture is an important consideration, it should be one of many factors in choosing a provider.
- A point of view
With new technology you also get a point of view that most certainly will be reflected in the software. For example, think about decision support for benefits enrollment. One point of view is that employees just want to be told what to do and the employer knows best. Another is that employees need to be engaged and understand their options to make the best decision for their needs. These are divergent views (both of which exist in the marketplace). Make sure your view is aligned with the provider you choose.
- Technology and services
OK, you are purchasing technology, but you’re also purchasing a service model, even if only to support you through implementation. Determine if the company has a strong customer support mentality. Understand the level of support you need beyond the initial purchase. Do you need tech support (“I can’t get this to work.”) or customer support (“I don’t understand what this plan includes.”)? Most providers offer ongoing and short-term support, e.g., for open enrollment or temporary back-up for an employee on leave.
- Data security
You are buying a company’s commitment to keeping your data secure. This includes the company’s security policies, processes, ID and password protocols, cyber insurance coverage, commitment to a security audit and more. The weekly headlines of cyber security and data breaches should be enough to convey the importance of data security and the need to consider it as part of your assessment of a risk tolerance fit.
- Third-party integrations
New technologies have made software integration easier and a great way to add value. However, when you ask a benefits administration provider to integrate with a payroll provider, know that there is no contract between these two. In short, you’re buying integration that is not governed by your contracts with the providers and, if it fails, there is no service level agreement (SLA) to rely on for resolution. Find out in advance if a provider has a successful track record of integrating with your existing tools.
- A set of tradeoffs
When you understand all that you’re buying when you buy HR technology, then you can understand that you’re also buying a set of tradeoffs. No single software can do everything you want. Much like buying a house, you need to identify and separate your “must haves” from your “want to haves,” and make a decision accordingly.
Each of these factors are important to the decision-making process when selecting a best-fit HR technology provider, but none should be the sole determinant of the decision. Gallagher’s HR & Benefits Technology consultants work with clients to focus on the “how” — the technology that will support their organizational strategy and objectives. We encourage employers to consider and prioritize each factor in advance of narrowing a list of potential providers.
1 Source: CB Insights
About the Author
Rhonda Marcucci, together with practice partner Ed Barry, co-leads a team of HR and benefits technology consultants who provide unbiased, well-researched and client-tailored HR and benefits administration technology consulting including sourcing advice and service provider capability audits. Her extensive and broad-based experience in finance, accounting, administration, strategic planning, information systems, sales and marketing, and operations is instrumental in helping clients identify a comprehensive strategy and execute against it.
Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.