HRTechTank NYC. The Highlander and the HR Enterprise
This is the second post in advance of the HRTechTank NYC on Feb 5th.
Killer bees never become the cataclysm the news reports promised and crowds feared. I guess that’s a good thing. I was very worried about it for a year or two as a kid, but then another sensation came, then another, then Gallagher, then the Y2k bug and then the deadly fish in the swamps of Florida, then the bird flu. I worry a lot.
Human Resources have changed, that might be scary, but it’s not.
HR was a Cerberus, its primary purpose to preserve itself and secondarily to protect the organism that held its leash.
HR has been defanged:
Legislation: made it onerous to be the employer. Compliance risk was a hot potato that necessitated transferred the burden to third party HR providers.
Innovation: HR tools such as Applicant Tracking Systems, Learning management, Payroll, benefits management and Recruiting software shifted allegiances from the HR dept keymaster to the employee.
Macro economic conditions: Companies responding to their own business risks and margin compression crossed the outsourcing HR chasm to operate more profitably and leaner.
Generational shifts and attrition: The workforce made a generational change that embraced technology and productivity gains from technology. It was survivor and legacy was voted off the island.
Labor market: Knowledge workers were migrating to hubs such as the Bays and NYC and were a scarce commodity. Attracting and recruiting talent altered the standard for a company’s currency.
A. It’s a great time to be in HR as a new entrant. Barriers to entry are extremely low. Competition has been reframed from quality to price.
B. It’s a crappy time to be in HR as a new entrant. Barriers to entry are extremely low. Competition has been reframed from quality to price.
Lower cost solutions have comprimised profitability and prospects and clients are not the compassionate type. They will endlessly swap in and out vendors as supply is in abundance. Until they can’t.
The greatest challenge of a new entrant is extracting shareholder value from their clients. To survive the new entrants must either become the incumbent or sustain that condition. Clients have put a ceiling on the costs of services and have a tapestry of ad-hoc solutions that do the job ‘good enough’.
2015 will be the start of the middle. Investors will have buyer’s remorse when they realize the amount of water needed to walk the length of the desert.
The staff needed to shovel coal in sales, marketing; servicing, renewals, finance, risk, product and development are expensive. The ADP, Paychex models worked to create a perpetual motion machine because it arbitraged labor. The payroll person in Kansas cost a lot less in upkeep and real estate and those savings reallocated resources to sales and marketing. This model only works when you get to the large numbers, until that way station is reached, a new entrant can’t create outsized shareholder returns. They are subsidizing clients. And that’s bad.
2015 will initiate the de-fragmentation. Capacity must be taken out of the market.
That’s the good and the bad news. It depends which side of the teller window you are on.
And that’s one of the reasons why I am going to the HRTechTank.
The winners in a hypercompetitive market will have a unique process, system or service that creates lateral value to all the points in a system. The winners will execute the best and stay disciplined in pricing and product. The winners will build a rainy day find and will lever the top line. The winners will have a well articulated organizational diagram. The winners may not be the most funded but they will be the best at stacking their chips. In fact, the winners likely will not be VC overfunded and bearing the burden of a hasty exit.  And, the winners won’t be a clone.
I am going to HRTechTank NYC to spend time with the players away from the neon and marketing