Paradigm Paralysis in HR Technology, Part 1

It is no secret that many corporate customers of HR solution providers are disgruntled, especially in the applicant tracking market where it has become common to bounce from vendor to vendor every few years despite a lack of significant differentiation in product/service offerings. As vendor-neutral advisors, we're routinely asked to advise organizations on matters that pertain to technology, and can attest that the negative perceptions regarding the plethora of solution providers are both universal and run deep.

For every vendor than can produce a positive reference, the market can produce three that will share some pretty interesting stories behind the vendor's back. In recent months the chiding has picked up, and more and more customers are using words like fraud and deception to describe the business practices of their providers. We agree that the vast majority of products available today s**k — for lack of a better word — but it's not entirely the vendors' fault.

Market Forces at Play

We said earlier that we weren't going to assess blame for the rather sorry state of HR technology today, but that wasn't exactly an honest statement. What we should have said is that all parties are to blame for where we are today, and that what's most important is that we all recognize it, accept it, and move forward. Having met a number of the founders behind today's leading HR vendors, we can attest that many of them set out with grand ideas — concepts for products that would have revolutionized how we manage talent — but found a customer base unwilling to embrace change.

Like all businesses, HR solution providers must walk a fine line; they must create and deliver technology that evolves a space forward, and at the same time ensure that the product will emerge within the boundaries of market acceptance. Market acceptance is tricky in that history is full of examples of companies developing boundary-breaking products to meet consumer needs only to see said customers not embrace the product.

An Ignorant Customer and an Opportunist Vendor

Vendors have done what was needed to survive; they played to the demands of their customers. Unfortunately the vast majority of the customer base has neither the scope nor the depth required to architect the role of technology in their own organizations. In the absence of such capability they have driven vendors down the road of administrative efficiency for so long that almost none of that innovative spirit that could have changed the talent-management paradigm remains. In the early days of applicant tracking, efficiency gains were enough for HR to demonstrate to senior leaders that they were "doing their part," but after years of the same old story, the percentage of improvement in efficiency is so paltry that such efforts are for the most part futile.

Senior leaders expect more from HR these days; they expect HR to propose new models of managing talent with respect to the newly emerging dynamic business environment. They expect HR to understand the strategic objectives of the organization and to be capable of building human capital solutions that not only enable those objectives, but rather contribute to them.

The business world has changed, yet HR continues to cling to the historic notion of what HR was, and not what it could be. Few in the profession make an attempt to truly understand the product lifecycles of their organization, the competitive landscape, or market direction.

As a result, when HR functional leaders draft RFIs and RFPs they focus on what they know best: administration, operations, and compliance. Responding to those requests, vendors prepare generic responses that showcase core features and promise unlimited success. Some vendors go so far as to claim that their solution will "create heroes in the organization." The sales professionals talk a great game, but they too lack the scope and depth needed to understand the client organization and to architect solutions that will impact business objectives versus HR objectives. While vendors use terms like innovation, quality, scalability, cooperation, and integration to sell their products, they deliver technology based on an archaic architecture designed to support centralized management of talent in a process isolated way.

Paradigm Paralysis in HR

In 2001 major companies were aggressively using labor arbitrage to reduce costs. They were shipping work outside the organization to vendors who would do it onshore, nearshore, and offshore. It was the start of a new labor model, one intrinsic to the newly emerging global economy, and it didn't emerge from the function charged with developing systems to manage labor! Early adopters quickly realized that most — if not all — of the human resource systems in existence were relics of an era when staff was geographically concentrated, and that they did not provide the capability needed to manage a massively decentralized, short-term, project-based, diverse workforce. While outsourcing wasn't new, almost no systems existed to support integrated management of the modern workforce.

Fast-forward four years and those solutions still don't exist. Applicant tracking systems designed to enable the electronic handling of recruitment needs still support on one tiny faction of potential labor types available to the organization. While some vendors have acquired or developed capability to manage both professional and hourly recruitment, few have redefined their architecture to enable comprehensive recruitment of all labor types, including:

• Employees (full-time and part-time)
• Contractors
• Temporary labor
• Outsourced labor
• Consultants
• Strategic partner labor
• Automation

By continuing to push forth products and services based on an outdated paradigm of labor, technology vendors and the products they produce have become more of a barrier than an enabler to world-class HR in the modern era.

Back in 1993, a former advertising executive named Joel Barker wrote a book called Paradigms: the Business of Discovering the Future. In that book, he writes that people immersed in a particular paradigm rarely understand the need for a new paradigm, and in fact usually actively oppose the emergence of a new one. We can attest to that. Often in the past when new concepts or emerging ideas have been introduced, the majority of the HR population who are actively engaged (a relatively small percentage) has evaluated the innovation on the grounds of compliance or efficiency — an evaluation that almost ends in negativity. What's interesting is that nearly every efficiency argument introduced against innovation focuses exclusively on cost and ignores benefit. There are two ways to drive efficiency: increase the top line while maintaining expenses, or maintain the top line while minimizing expenses. Trust us: the new era of business is all about the former.

Paradigm Paralysis — An Example

Last week we wrote an article that had to do with using Google AdWords as a means to get in front of truly passive job seekers. While we mentioned that other search avenues existed, we opted to use Google as the example largely due to the current market share and user-acquisition statistics.

The immediate response was an accusation that we had a consulting relationship with Google, and that our reasoning was flawed. The responses also referred back to a case study that was written about the recruiting function at Google and their employee-to-recruiter ratio in particular. The case study argues that to arrive at the ratio of 14:1, someone at Google must have made one hell of a business case. The response to that article was one that balked of inefficiency, but not once was the word effectiveness introduced. The assumption is that any organization that would employ such a ratio is operating with blatant disregard to cost-control measures, shareholder value, and cost-benefit. Is that truly the case, or is it possible that one of the fastest-growing companies in the world looked at its business objectives, looked at the efficiency-driven solutions available, realized they were not effective at enabling their objectives, and invested in a human capital driven process that supports a new workforce model?

Google will no longer publicly discuss its employee-to-recruiter ratio, but one thing is clear: there appears to be little pressure to change the model inside the company, which just so happens to be full of some of the world's leading systems architects!

Moving Forward

The historical paradigm that has guided the development of HR technology, and HR staffing in general, has exceeded its useful life. Current market conditions demand a new paradigm, one that includes real-time, global, workforce management capability that contributes to business objectives versus HR administration. Some companies are almost there in their thinking, but the vendor community is still years away. If you too see the paralysis in paradigm that guides HR, share your insight with us and the community. Post online or e-mail us at [email protected].

Next week we will incorporate your thinking with ours and write a prescriptive article for change.