The total addressable market for HR technology is $160 billion¹ — and it continues to surge with thousands of vendors introducing a steady flow of products and services. Inside this segment, the functionality of HR technology has scaled right along with an accelerating demand. Useful tools with advanced capabilities for streamlining and enhancing processes that engage, support and manage the workforce have never been more plentiful.

OWTI ImageThe potential of HR technology to help HR teams more efficiently, effectively and intelligently manage talent is driving market growth. By 2020, 46% of employers plan to update or upgrade their capabilities by either expanding (32%) or replacing (6%) their current technologies, or making both improvements (8%). Their top three drivers include automating processes (79%), increasing employee productivity (54%) and supporting their people strategy (47%).²

Rely on key strategies to direct decisions
While employers may find themselves inundated with HR technology options, staying current on new capabilities and their value for operations is difficult. Deciphering that value requires HR leaders to determine what the organization wants to accomplish, and how those aims fit overall business objectives and the budget. The ultimate goal is to align HR technology with their approach to managing their people. And this requires factoring the voice of the employee — their internal customer — into purchasing and maintenance considerations, along with security needs.

Both established and start-up HR technology vendors are expanding rapidly in the current environment. This trend is propelled by cloud computing and the competitive landscape, as well as significant support and interest in this space from private equity firms. And functionality that was once the exclusive domain of purchasers with a large user base is now within reach of small and mid-market employers. There’s still a need for technology to perform basic transactions like processing payroll, but the promise of strategic intelligence capabilities is starting to draw the spotlight.

For instance, newer platforms can analyze employee behavioral patterns to help determine workforce engagement levels — including microdata that predicts the likelihood of an employee leaving the organization. More powerful functionality like this is enticing employers to trade up from their older systems.

When evaluating HR systems, teams should guard against the natural urge to chase the flashiest and newest options. The most novel or advanced features often have dependencies on other business processes or practices. Product demonstrations can be seamless, but implementation may require significant investments or change management outside of the system. Evaluating dependencies for functionality is essential.

Allowing key organizational and talent strategies to guide changes and inform investments keeps the process grounded from initial explorations through final decisions. Business growth goals, change management needs, the talent management philosophy, and industry and other peer benchmarking requirements are some common areas for alignment. And opportunities for new systems or enhancements that drive business outcomes — while formalizing the business case — can be identified by conducting a gap analysis.

Integrate the voice of the employee
When evaluating HR technology options, a core consideration is the overall employee experience (EX). Many employers connect their workforce to HR services primarily through a computer or mobile device, especially for routine tasks. And most employees are conditioned and literally socialized to expect a well-designed interface, based on their familiarity with online shopping, news delivery and social media. They may instinctively compare encounters with HR technology to these personal experiences. For instance, they could hold subconscious beliefs about the time it takes to complete an HR task, or the ease of accurately entering data to avoid downstream rework. Employers can measure EX through different methods, including focus groups and employee surveys as well as evaluating their own experience as a user of the tool.

Additionally, the candidate experience created by online recruiting systems should be explored. This technology is often the first point of engagement for potential new hires — and may influence their first impression of the company.

Onboarding platforms can promote day-one readiness by providing an experience that goes beyond a collection of required documents. Engaging new hires with informational and educational tools will begin to establish a connection to their team, environment and workplace culture. This often lowers the likelihood of no-shows on the first day or a signed offer that’s rescinded.

Applications are also available that give employees’ career wellbeing a head start — allowing them to pick a mentor, set an opening week schedule and develop an initial 90-day plan before their first day.

Make security everyone’s business

With the expanding scope of cybersecurity attacks, employers are well served to focus additional resources on evaluating protections for employee data. Emerging data privacy regulations such as GDPR and California law create a significant case for data analytics using a security framework.

This sensitive information is sometimes overlooked when enterprise-wide cybersecurity protections are developed, and the risk of fallout from insufficient scrutiny has never been higher. In an era of heightened public awareness, a lack of preparedness can damage employee trust and confidence as well as the organization’s brand if a breach occurs. And regulatory and legal consequences include fines or restitution requirements. There’s a lot at stake for employee and organizational wellbeing.

Risks can originate in peripheral functions and work their way into employee data, mission-critical functions or both. Consequently, non-core technologies and functions such as employee benefits administration should be an integral part of a holistic cybersecurity strategy and program.

When selecting an HR technology vendor, it’s important to focus on the company’s stability and reliability. Many solutions will need to store a large body of private and sensitive employee information — such as Social Security numbers, birth dates and home addresses, as well as banking, health and family member information.

These personal identifiers are vulnerable to external exposure. Outside threats such as ransomware and social engineering could, for instance, direct payments or W-2 information to the wrong person. Rogue or former employees as well as contractors and third-party vendors have also emerged as perpetrators in cybersecurity events.

But by and large, breaches happen when people accidentally allow access to technology, mobile devices are lost or stolen, a phishing email escapes detection, or similar mishaps occur.

It’s important for the HR team to recognize and follow all steps that mitigate risk, and to be fully ready to manage an event whenever it occurs. Protection is only as effective as preparation — and should include developing and conducting organization-wide training, and partnering with the risk management department to put an incident response plan firmly in place. Consulting with risk management professionals about insurance coverage is another important safety measure.

The sophistication of technology appears to be on an infinite upward swing. So it’s likely that the greatest HR technology challenge facing employers will continue to be sorting through bigger and better options to find the right fit. Yet it’s possible to avoid analysis paralysis through a methodical evaluation that distinctly identifies and carefully compares requirements against prospective vendor offerings. Critical to the success of this process is evaluating and regularly revisiting the risk management strategy to make sure options are a match.

Optimizing employees’ experience with HR technology is essential to engagement, and mechanisms should be in place to monitor and collect their feedback. While security poses the greatest concern for both vendors and employers, outside expertise helps mitigate this risk. Assistance with defining requirements, vendor evaluation and selection, implementation and change management — to meet organizational objectives by using the most reliable solutions — can add an extra layer of confidence.

This article is an excerpt from our 2019 Organizational Wellbeing & Talent Insights Report – U.S. Edition. 
Brian Hutchens
Division Vice President, Small Group Practice

Brian leads a team of consultants who specialize in supporting small business clients across the U.S. through the design, implementation, and management of benefits and HR programs. More than 10,000 clients trust this team to help them meet their objectives for attracting, retaining and engaging their employees.

Rhonda P. Marcucci
Vice President, HR & Benefits Technology Consulting Practice

Rhonda co-leads a team of consultants who help clients strategize, buy, implement and optimize HR technology solutions that support organizational wellbeing. The practice is recognized for providing unbiased, well-researched advice and service provider capability audits.

1LAROCQUE, LLC, #HRWINS, “2018 Global HR Tech VC Look-Back,” accessed May 2019
2Arthur J. Gallagher & Co., “2018 Benefits Strategy & Benchmarking Survey,” November 2018