The HR tech industry is growing exponentially. In 2016 alone, investors pumped more than $1.96 billion into HR tech companies around the world. As a result, the number of new recruitment, talent management and other HR tools hitting the market is growing by the day. This wave of next-gen HR tech uses data analytics, machine learning, AI, advanced automation and other disruptive technologies to refine existing tools and create innovative solutions with the potential to transform talent management — and, most importantly, give companies a significant edge over their competition.
Forward-thinking enterprises have already undergone digital transformation to take advantage of the cloud; the IoT; and anywhere, anytime, any device access. That’s why for many, purchasing and implementing next-gen HR tech seems like a logical next step. However, before making the decision to invest in new HR tech, it’s essential to gain a comprehensive overview of its potential impact.
the disruptive potential of HR tech: what’s at stake?
Industry 4.0 is undeniably a critical time for HR and procurement. The ongoing skills shortage in a business environment that calls for constant innovation has made it increasingly clear that human capital is key to competitive positioning. Consequently, a growing number of business leaders no longer see HR as simply an administrative function, but as a strategic partner the company relies on to deliver quality talent.
Likewise, with the majority of CEOs focusing on cost reduction, procurement plays a key role in driving profitability and growth. When it comes to investing in HR tech, procurement isn’t just responsible for containing costs and mitigating risk; it also has to ensure that any investments are relevant to the organization’s long-term strategy.
However, next-gen HR tech is already disrupting the HR space and will continue to do so for the foreseeable future. Many HR professionals are afraid that chatbots and other AI-driven tools will take the “human” out of human resources, resulting in an impersonal experience for job applicants. Another fear is that advanced automation will eliminate HR jobs and other occupations, although it’s initially more likely to replace tasks and therefore change job responsibilities.
At the same time, next-gen HR software changes how companies connect with and manage talent, as well as how they create their workforce strategies. It can be used to optimize recruitment processes, enable mobile integration, tap into cloud-based talent pools and enhance employer branding, amongst other things. Yet companies can’t take advantage of new technologies unless they have access to talent with the right skills. Furthermore, deploying these new solutions could trigger unforeseen organizational change — and companies need to be prepared to manage that change.
With so much at stake, the challenge for both procurement and HR is how, in this uncharted landscape, to strategically harness HR tech for organizational success and select the best investments for their companies. Understanding the risks and advantages involved is crucial to this endeavor.
the risks of HR tech
Understandably, all producers of HR tech solutions promise significant business benefits. However, there are risks involved with adopting new technologies — and they aren’t always caused by the software. Companies need to be aware of the following risks:
- security and compliance issues: Privacy protection regulations are becoming more stringent — and with good reason. In 2016, businesses represented almost 45.2 percent of all U.S. data breaches, according to the Identity Theft Resource Center. Additionally, research by the Ponemon Institute showed that globally, the average data breach involved more than 24,000 records and cost $3.62 million dollars. Before implementing new technologies, companies need assurance that they’re in compliance with all applicable regulations and don’t contain any vulnerabilities that could put confidential information of their employees or customers at risk.
- the software could become obsolete: While venture-backed startups have better success rates than those that are self-funded, the chances of failure are still high. Moreover, the tech industry is notoriously fickle, and an app that might seem promising today could be eclipsed by something entirely different tomorrow. To justify the investment required for new HR technologies, it’s important to verify the software producers will be in business for the long term so apps will be upgraded and updated to meet changing technical specifications and evolving business conditions.
- failure to achieve the projected ROI: Even if a new tool works perfectly, it might not yield the desired results. There can be several reasons for this, including a lack of knowledge about the correct implementation of the tool and not having talent with the required technical skills to maximize its use.
next-gen HR tech developments and advantages
Despite the possible risks, next-gen HR solutions also offer significant advantages. This is especially relevant to companies that are looking to expand internationally and preparing long-term talent strategies for the next three to five years. Here are some of the most interesting developments in HR tech, along with their potential benefits:
- gamification apps: Gamified skills tests and psychometric assessments can enhance candidate engagement and improve hiring outcomes.
- automated recruitment and hiring processes: Automating reference checking and other hiring workflows streamlines HR tasks while at the same time ensuring candidate quality, minimizing risks and reducing costs.
- talent analytics: Talent analytics generate insights both at the macro and micro levels. Companies can use these insights to optimize everything from recruitment and engagement efforts to supplier strategies and talent performance. When properly implemented, talent analytics can also be used to predict skills demands and anticipate labor trends, which enables organizations to create viable long-term workforce strategies.
- enhanced recruitment apps: Apps that offer enhanced recruitment features such as employee referral capabilities, online events, networking and talent communities build engagement, improve candidate quality, build talent pools and enhance the employer brand.
- chatbots: Virtual assistants based on chatbots can help hiring managers navigate platforms, find information and put teams together. They can also be used as guides during the recruitment process to improve the candidate experience.
- mobile workforce integration apps: When speed and quality are crucial, mobile workforce integration apps can connect employers to qualified and vetted external talent.
how to leverage next-gen HR tech
Next-gen HR tech will clearly play a pivotal role in the future of talent acquisition and retention. That’s why it’s critical for HR and procurement to make a careful assessment of the organization’s needs and perform a value analysis of the available products before making any purchase decision. Considering the growing volume of new HR apps, it’s also advisable to obtain expert support from a strategic workforce partner that not only screens new tools to select the best ones, but also applies its knowledge of the labor landscape and HR methodologies to help the company make strategic choices that support its long-term operational goals.