The employee-centric evolution of HR software

humanresources

You may have heard the term “consumerization of IT” to describe how enterprise software decisions are moving beyond the purview of the chief information officer to the division leader and/or end user. I believe that we are now seeing a similar trend in human resources software. Forward-thinking employers are giving employees the tools to influence and take responsibility for a variety of HR functions, while entrepreneurs are leveraging the cloud to build great products to accelerate this shift.

This trend is being driven by fundamental changes in how we work, including the increased use of mobile devices and expansion of virtual teams. In addition, enterprise software buying patterns are changing as division leaders are gaining more authority in purchase decisions, and then being held accountable for the software they select.

A review of 100 promising private human capital start-ups highlights this trend. Within each of the primary HR categories (talent acquisition; performance and development; benefits and compensation; and workforce management) we see new ventures that are redefining how employees can participate in functions that were traditionally in the domain of the core human resources team.

Outlined below (and on the accompanying landscape) is an overview of some of the most promising companies in each category, followed by the implications for entrepreneurs who are building this new generation of employee-driven apps. These startups complement larger HR SaaS players, including Workday, Cornerstone OnDemand, SuccessFactors and WageWorks. In the landscape, the companies in the outer circles represent more employer-driven use cases, while those companies in the middle are applications that tend to be more employee-driven.

Evolution_of_HR_Software_Chart_-_Color copy (1)

Within the talent acquisition category, new tools are helping HR and managers speed up hiring decisions by tapping into employees’ social networks. Jobvite, Work4 and The Resumator, for instance, all offer social recruiting features that let employees make referrals and send direct invitations to candidates. Meanwhile, BraveNewTalent, Avature and GetTalent provide talent communities and recruiting platforms that allow employees to build and manage relationships with potential future employees.

Looking at performance and development, new applications are helping employees drive their own learning agenda. Everwise, GoodRevu, RiseSmart, and Springshot increase employee engagement by providing ongoing recognition, mentorship, coaching, and/or personalized training. Some of these apps are accelerating the migration from oft-dreaded annual performance reviews to continuous, social driven feedback and rewards systems. These products give employees the resources, knowledge and motivation to build the right skills. In addition, Bloomfire, Kaleo, WhoKnows, CoTap, and BranchOut create social learning environments by helping employees connect with colleagues or employees from other businesses who have knowledge they need to get their jobs done.

We have also seen a wave of companies created to help employees understand benefits and compensation and take responsibility for wellness. Keas, Limeade, Castlight Health and Welltok encourage employees to take ownership over their wellness goals and make educated healthcare decisions by using gamified point-and-rewards systems, financial incentives, team challenges, and detailed analytics. These programs can boost morale, improve productivity, reduce sick days and build community around shared fitness challenges. The management of benefits has moved from an annual election period to a year-round opportunity to help employees manage their well-being.

While workforce management (e.g. back-office solutions for managing payroll, time and attendance, and compliance) still requires an employer-driven product in most instances, we have seen a few examples of companies that have created much-appreciated mobile software. For example, Replicon, Employtouch, and PayrollHero have introduced mobile apps that employees can use on their own devices to track hours, simplifying an onerous task for most hourly employees.

What does this trend mean for HR software entrepreneurs?

From a sales perspective, with over 100 new HR applications in the market, entrepreneurs may have a tough time getting the attention of the senior HR execs who traditionally have made the software buying decisions. Fortunately, the evolution of HR software mitigates this challenge, as employees have a greater say in what is getting used in the workplace.

Employees are not only bringing their own devices to the workplace, but they are also bringing their own applications to work. Forward-thinking HR teams are surveying employees to find out what they are already using to help drive broader corporate adoption. And savvy entrepreneurs are building virality into their applications, letting employees drive usage within a company. Data-driven entrepreneurs may be able to spot company usage trends before the HR departments, thus making it easier to sell enterprise subscriptions. (“Hello VP, did you know that over 300 people at your company are registered with our service?”)

Entrepreneurs will also find it necessary to put a greater emphasis on usability and customer success as they build out their companies. Consumers have grown accustomed to mobile and cloud apps that work on first touch, so entrepreneurs are wise to build an app that requires little-to-no training. In addition, companies HR software vendors may find it is important to establish a customer success team that can interact directly with employees as questions arise. These customer success associates may be the first to truly understand the various employee use cases in each organization.

It may take employers some time to get used to a world in which HR software is more distributed, but ultimately, companies will celebrate the benefits of helping employees help themselves.

Sean Jacobsohn (@sjacobsohn) is a Venture Partner with Emergence Capital. SuccessFactors, CoTap, Welltok, and Replicon are Emergence portfolio companies.

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