By Elliot Clark
There are hundreds of aid organizations for victims of abuse and neglect, yet none have attended to the tragedy that the investment community has foisted on HR leadership. The HR executive teams have been stranded in the technology jungle for the past few years and no path of escape is evident. Who has abandoned them to the beasts of the wild? Private equity firms.
The plethora of new software technologies for “human capital” (yes, I feel degraded being called “capital” don’t you?) For recruiting, engagement, communicating, content distribution and other “problems” has left even the analyst community confused. Most of the products solve one tiny piece of the process chain in any of the overall processes of HR. One I just was contacted by is just for grievance reporting using mobile phones in the healthcare sector. That’s a bit narrow. HRIS professionals, OD and TA leaders are scratching their heads trying to figure out how to create a coherent infrastructure from all of these different competing products and many are just buying Workday or Employee Central and foregoing the headache.
Why is this happening? The early stage investment community is investing in “business solutions,” using a simple formula. If it sounds like something that is out there it must be good. Now, they may look at other things but I am not kidding. I joked at one of the HRO Today Forums that I was forming a new company called “Me Too HR Software” and I had unlimited access to funds. This is not new. When we were raising money at the old Kenexa company (now IBM) we were consistently asked, “Who are you like?” When we answered we were unique and we were shown the door by most investors. Everyone talks about boiling the ocean, but no one wants to bring a hotplate.
The truth is I just watched this. I have been very transparent about our company’s portfolio investment program and we invested in the predictive analytics company, Joberate, which won our iTalent competition in 2014. It is a new way to use publicly available social media information to predict the likelihood of an employee making a job change, which is valuable for recruiters and employee engagement issues in real time (rather than annual survey time) and valuable for OD to know. It works, and I used it myself before investing. A number of recruiting firms, large technology firms and financial services firms have bought into the system. However, I watched the CEO, Mike Beygelman, bang his head on the wall trying to raise money because the system “wasn’t like anything out there.” I guess if Edison had tried to raise money for the lightbulb in modern day Times Square, it would have been a bit late.
The investment community foists a host of these Me Too products on the market while ignoring true innovation. Joberate was, finally, able to raise institutional money from the venture fund of the Corporate Executive Board, CEB Ventures, and I believe it is specifically because CEB Ventures does not operate like a classic venture fund but as an extension of the solutions-driven culture services of the Corporate Executive Board. Otherwise, a very innovative product would not have had its chance to challenge the market with a new paradigm.
Myth and pop culture tell us that the last unicorns died out because people stopped believing in them. Actually, the unicorns probably just could not raise the money to sustain their existence from the investment community. So here are some suggestions for both sides of the problem because we find ourselves in this quagmire of products and sales calls from software vendors fighting for survival.
For the point solution software companies, stop selling HR on the problems you will solve. It’s insulting. CHROs and other leaders know what the problems are, so telling the “why” wastes everyone’s time. Get right to “how,” and for HR leaders, make them show how their product can do more than one thing. If it cannot, you probably should not use it because you’ll have dozens of systems to integrate.
For venture funds, news flash, you’re not that smart or you wouldn’t have helped create this mess and launching a hundred companies hoping 50 get bought out doesn’t do the industry any good. Do we really need another employee survey tool or ATS system? My favorite example is Branchout, which came in second at our first iTalent competition in 2010. It lost to Smart Recruiter which is doing well. Branchout was a Facebook information scraping app. They had raised $17M just before iTalent and I asked them what would they do if Facebook closed their access and they responded it was ‘unthinkable.’ Then in 2014, Facebook closed their access and the business died and the assets were sold to 1 Page. Oh well, what is $17M between friends. People in the recruiting and sourcing community understood the risks better than the investors. Venture firms need to spend more time with the HR community really understanding what is unique and innovative, and you need to comprehend the “why” as well as the people you hope buy from your investment portfolio companies.
Otherwise, we are not just driving HR people crazy but we are actively slaughtering unicorns and someone should hold a telethon for both victimized groups.
We will discuss this issue of HR investment and other topics at the HRO Today Forum in Chicago, May 2 to 4 (visit www.hrotodayforum. com). We hope to see you there.