The Complex HR Tech Landscape Requires a Gardener’s Strategy

It’s not your imagination — the HR tech landscape is really complicated right now. According to research from advisory firm Sapient Insights Group, there are six different HR system categories, 55 application areas and at least 2,750 vendors.

A big reason for this is HR tech is essential for supporting HR’s increasingly strategic role in organizations. Fifty percent of the 2,310 companies (most of them in North America) polled in Sapient Insights’ 26th annual HR Systems Survey research report said HR is viewed as a strategic partner. In 2021 and 2022, that figure was 46%.

During a webinar titled “The HR Tech Landscape According to the Voice of the Customer,” Cliff Stevenson, the company’s director of research and a former HR practitioner, commented: “A lot of that is due to our ability to mature as an organization and … being data-driven, while at the same time still being human … understanding our own impact and how we’re viewed within the organization.”

However, the number of systems needed to be a data driven strategic partner can be overwhelming. For example, Stacey Harris, the chief research officer at Sapient Insights, presented these averages compiled from the study’s small- to medium-sized business (SMB) respondents:

• Seven to nine HR tech systems are included in the annual budget
• Four different systems are in the integration process, and
• 13 systems are in use.

Managing the HR Tech Stack

“The systems are very good at talking to each other, but that cross talk has to be managed. And you have to be able to understand where your information is going, where there’s bottlenecks, where there’s incomplete answers … Being able to keep up and maintain all of that … in a central environment is part of how you manage all these applications, rather than seeing them as separate entities,” Stevenson said.

Harris likened it to managing a garden. There has to be careful selection and integration, monitoring for healthy growth, and maintenance.

“Most conversations aren’t starting just with functionality. They’re starting with: ‘What data do I need? What strategy do I have?'” she said. “And they all have to integrate these days with enterprise applications.”

Harris recommended creating an adaptable HR systems strategy framework by:

1. considering your business and mission drivers, culture, workforce scale and scope, and HR service models
2. assessing the state of your HR tech with data, metrics, perceptions and achievements
3. prioritizing which of these metrics/data your company needs to see: turnover, retention, recruiting, compensation, employee demographics, performance, productivity, budget costs, engagement, compliance, safety, learning, total workforce cost, workforce availability and attendance, wellness and health, leadership pipeline and skills
4. setting benchmarks by coming up with future goals for your HR strategy and employee experience
5. identifying the obstacles to getting there, and
6. making a phased road map with timelines, budgets, resources and service delivery.

What Your Peers Are Investing in

Your CFO will be interested to know that SMBs with less than 500 employees are spending an average of $357-$555 per employee on HR systems. While overall HR tech spending increases are down slightly (the average right now is between 10% and 15%), according to the report, it should be noted that a third (33%) of small businesses intend to increase their spending.

The top three HR system areas where both SMBs and midmarket companies (with 500-4,999 employees) are investing:

• learning and training
• recruiting, and
• benefits and wellness.

The report also indicated an uptick in SMB investment in rewards and recognition tech (at No. 5 behind performance management).

“For a lot of organizations … they have to figure out different ways to think about compensation because they can’t afford many of the big benefits that are [available] … And with transparency regulations that are coming out … they’ve got to really think about things like rewards and recognition, as well as wellness tools and benefits,” Harris said.

Tech Turnover (and Retention)

Harris and Stevenson highlighted a marked dissatisfaction among HR tech buyers with their payroll software. Almost three in 10 respondents (28%) said they were switching.

The top reasons for dissatisfaction: 41% said lack of customization (most likely related to their industry and/or geographical region) and 38% cited customer service and maintenance issues.

In addition, survey respondents said implementation is an area where HR tech vendor companies need to improve. Just 13% said implementation exceeded their expectations and 30% said there was at least one major area of implementation that fell short of expectations.

Then there’s the flip side of the coin — the vendors companies are sticking with. According to the Sapient Insights study, the payroll vendors with the highest retention rates are:

• Workday
• UKG
• ADP
• Paylocity, and
• isolved.

Meanwhile, these payroll solutions had the highest user experience and vendor satisfaction scores among the survey’s midmarket respondents:

• Workday
• UKG Pro
• Ceridian Dayforce
• ADP Workforce Now
• BambooHR, and
• Paylocity.

Of course, there are other criteria for choosing HR technology. Take a good look at the reviews on BetterBuys.com.