Technology is disrupting every step of an employee’s journey. From recruitment and onboarding, to training and skills development, venture capitalists are pouring millions into each sub-sector of human resources (HR). According to HRWins, venture firms invested $1.7 billion in HR tech companies in the first quarter of 2019 alone, more than any quarter in 2018 and $677 million more than all of the investments made in 2017. According to HRWin’s Global HR Tech VC report, investments reached $5.33 billion across 238 deals in 2019 – up from the $4.01 billion total invested in 2018.
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As investor interest in HR tech rises, so does the competition. Companies around the world have become inundated with software solutions that promise to help them find the most talented workers and turn them into highly-engaged, productive employees. The HR technology landscape is maturing, but it is also evolving. Nowadays, individual platforms are simply unable to offer all of the functionalities necessary to solve every challenge the modern HR department faces. As a result, new sub-sectors of HR tech are emerging and changing how companies hire, manage, and maintain their workforces.
Here’s a look at just a few of these emerging sub-sectors and the trends in HR tech that we can expect to gain traction in the new year.
1. AI continues to reconstruct the recruitment process
There are plenty of opportunities to expedite the tedious and repetitive steps involved in the recruitment process, and seemingly hundreds of platforms are integrating some form of AI or machine learning to help companies automate these tasks. AI is also being hailed as a way to eliminate unconscious bias during the hiring process. AI software can be programmed to disregard demographic information, such as gender, race, or age, and look instead for primary, job-related details in order to screen, filter, and identify the best candidates.
Freeing up time during the recruitment process allows HR departments to spend more time on tasks where more human judgment or contact is necessary. Of course, there are ethical concerns surrounding AI-powered platforms and the initial data being fed to them and many of these platforms are far from perfect. However, AI’s involvement in the recruitment process doesn’t seem to be going anywhere.
The recruiting market is already crowded, and many AI-driven platforms are drifting into its subcategories for opportunities, including bias reduction, internal talent mobility, and even the identification and recruitment of passive candidates. London-based tech startup Headstart, for example, is using advancements in data science to remove bias from the recruitment process. The startup was founded in 2015 but recently raised $7 million in seed investment. In this time, Headstart claims to have reduced bias by 20% and time-to-hire by nearly 70% for its large organization clients. Meanwhile, Bay Area-based Talview recently snagged $6.7 million for its AI-driven hiring platform that automates routine recruiter tasks and enables anytime-anywhere interviewing. Talview was founded in 2017 and has secured clients like Amazon, Deloitte, and Cognizant, becoming a key player in automating the highly-inefficient recruitment process outsourcing industry, which is expected to hit $40.57 billion by 2027.
Approximately 70% of the global workforce is comprised of passive candidates, and many companies report that tapping into this talent pool is also extremely important and valuable for them, presenting another sub-sector of recruitment ripe for disruption.
2. A rising focus on the employee experience
According to Gallup, only 13% of employees worldwide report being truly engaged at work. When employee engagement is low, it becomes a top concern for HR professionals, and they are expected to ramp up efforts to boost it. Josh Bersin, a leading analyst and thought leader focused on the global talent market, notes in his whitepaper on the employee experience platform market just how unusual it is for a new category to emerge in this world of enterprise software; however, there is clearly a real need for employees to feel more engaged.
Work has become more complex as people are changing roles and jobs more frequently. The average employee now changes jobs every four years (and those ages 25-34 every three years), according to U.S. Bureau of Labor statistics. Employees are feeling overwhelmed and seeking a more simplified, “consumer-like” experience. Employee experience platforms are simplifying the chaos through the use of more automated, intelligent technology that helps employees feel better in the workplace. For instance, IBM Watson’s Career Coach provides employees with career guidance and helps them pursue continued learning opportunities.
Another example is German startup Staffbase, which enables employees – including remote or ‘non-desk’ workers – to access everything they need to get their jobs done as well as find further help when they need it. Staffbase raised $23 million in Series C funding in July 2019, bringing its total to $35 million since it was founded in 2015. Staffbase sits at number nine on the 2019 Deloitte Technology Fast 50 list.
London-based Perkbox is another startup calling itself an employee experience platform. Perkbox helps break down silos between management and workers and gives companies a way to measure employee sentiment. Founded in 2015, Perkbox raised $18 million in April 2019 to continue scaling its platform which now spans across multiple products, including employee benefits and the ability to give and receive rewards that enrich employees’ work and personal lives.
3. Workplace health and wellness is blending into HR tech
Tools and applications for mental and emotional health, stress reduction, fitness, and sleep are everywhere. The corporate wellbeing market is worth an approximate $48 billion alone and has become an emerging focus for companies seeking to attract and retain talent. A 2018 survey by Wellable revealed the top areas where companies are expected to invest in more than the previous year:
- Mental health (65%)
- Telemedicine (64%)
- Financial wellness (61%)
- Mindfulness and meditation (57%)
- Stress management/resilience (52%)
Companies that can provide innovative wellness solutions are going to be better positioned not only to improve worker recruitment and retention but to improve workplace productivity overall. Classpass, which started as a way for fitness-minded people to book classes across various studios, is now working hard to break into the corporate wellness space with a new program announced in November 2019 that only charges employers when employees actually use the service. Even the $1 billion-valued wellness and meditation app, Calm, announced in October 2019 that it’s getting into the corporate perks business. The company wants businesses to view the app as not only a perk to attract talent but as a way to improve productivity and worker retention in the long-term.
Washington-based Limeade, which provides employers with tools for measuring and improving both employee experiences and wellness, announced its plans to IPO on the Australian Securities Exchange in November 2019, showcasing there is still plenty of potential in the corporate wellness space as most programs have failed to deliver on their promises.
The exciting future of HR tech
As the HR technology landscape continues to evolve, new platforms are cropping up as startups continue to identify ways to improve the employee journey from day one. Investments in this space increased over $1 billion in the last year, which is a good indicator that this market will continue to receive more investment. HR technology continues to advance, so we will likely see increased investment from companies who want to continually improve HR processes. And while HR tech is a complex market, it’s evident that there are still limitless opportunities that lie just outside the traditional verticals where so many technology companies have focused their efforts for so long. As technology continues to disrupt longstanding HR processes, there’s great optimism that the outcome will be beneficial for both companies and workers alike.
Jennifer Sethre is the CEO and Founder of Intry, an Austin-based technology matchmaking service for job applicants and employers. Twitter: @j_sethre.
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