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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 7AM Pacific – 10AM Eastern, or catch up on full episodes with transcriptions here.

HR Tech Weekly

Episode: 57
Air Date: February 11, 2016


This Week

This week John and Stacey discuss:

  • Cloud has gloomy day Link
  • Voluntary Job Quitting hits high Link
  • SAP Performance Management Link
  • HotSchedules and Performance Management Link
  • Topics discussed: #CloudStocks, #PerformanceManagement, #VoluntaryTurnover

About HR Tech Weekly

Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 7AM Pacific – 10AM Eastern, or catch up on full episodes with transcriptions here.

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Begin Transcript

John Sumser:                         Good morning, and welcome to HR Tech Weekly: One step closer with Stacey Harris and John Sumser. I bet you can tell I’m not Stacey Harris.

Stacey Harris:                        Good morning.

John Sumser:                        Good morning, Stacey. How are you?

Stacey Harris:                        Good morning, John. Yes, this is Stacey Harris, and joining today from a very chilly, but nice and sunny North Carolina. I’m still home this week; I won’t be back on the road for another couple weeks. Are you home, as well? I know you were traveling a little bit, but are [crosstalk 00:00:43]

John Sumser:                        I am home and it is delightful. For months now, when I looked out the window when we started this show, it was the middle of the night, and now the gray dawn is just peeking and there is this enormous rose bush out in front of my window that, in about six weeks, is just going to be 40 foot tall avalanche of pink and it is starting to show. You start to see little hints of that right about now. It’s new, yeah.

Stacey Harris:                        Spring is … Yeah, I will definitely. Spring is coming, at least in North Carolina and to California think. For the northern cities who are under snow today, we are sorry for talking about spring. That is all I can say.

John Sumser:                        Right, for all of those people under snow, what I can say is what is really interesting about winter in California is when everything gets green. This is a desert so the winter is the time that things get green, so it looks like Ireland here right now.

Stacey Harris:                        Well, that is definitely a sight to see. Unfortunately, in the mailbag today, at least on the financial side, it is not looking all green, so I have some interesting conversations to have today. The topics that you and I are were talking about talking, we may not cover everything, it has been a busy, busy, busy news week.

One is the gloomy outlook from the financial perspective. There is a six week 26% drop in cloud business stocks and so we are going to take on that conversation a little bit this morning. There are also some interesting numbers around voluntary job quitting at its highest level in nine years. We had mentioned that at the end of last week’s conversation that there is going to be some new data, or at least some new data acquisition, around contingent workforces with the census coming out in 2017, so it will be interesting to see if that has … If we see a rise in the contingent workforce that sort of follows what is happening in the voluntary job quitting market.

There is also some interesting data from SAP coming out about a new piece of their performance in gold technology and they have really made a big, big push to announce this that they are now doing continuous performance management with their solutions.

Zenefits lost its CEO this week, or at least in the last couple of weeks and they put a new CEO in place, David Sacks took over. Then HotSchedules and PeopleMatter created a pretty big partnership, which is not, in itself, interesting because it is just more of a referral partnership, but I think as a conversation about industry specific vendors starting to pair up, there is an interesting conversation there. Particularly in light of what is happening with the cloud stocks.

If we have a little bit of time, there is some interesting conversation about our friends over at the Talent Board launching their CandE experience research and big data, is it still a thing? That is a great article, I was able to find that sort of listed picture and landscape of 2016 big data vendors.

John, where do you want to pick up this story, do you want to start talking about the financial piece or do you want to talk a little bit more about the jobs market first?

John Sumser:                        How about just a quick tip? You have a particularly simple and interesting thing about the contingent workforce?

Stacey Harris:                        Yeah, this one … Again, we talked a little bit at the end of last time and I think it is important to note we didn’t get to this conversation last couple of weeks, but Lyft ended up doing a settlement with their drivers for contingent workforces.

They are going to offer more services and provide their contingent workforce with some more material and content and standards so they don’t have to go into labeling all of them as employees because that would be more costly for them. At the same time, we saw a big push from the Obama administration that they want to make sure that in the next several Census Bureau analysis efforts, that they are going to focus on doing a survey of the contingent workforce and that hasn’t been done since 2005.

I think that is something that … In 2005, which seems sort of crazy that we would have stopped tracking the contingent workforce, and even then we were only tracking those who worked part-time or who listed themselves as contingent, they are now going to redo that entire survey that they did around the contingent workforce. Redefine what is a contingent workforce person and then start to ask about it with the next survey that goes out in 2017.

I think that is actually big news because, to me, contingent workforce is going to change how we think about our employee base across the board for every HR organization, not just organizations like Lyft and Uber. What do you think about that John? Do you think it is going to be a big topic this year or next?

John Sumser:                        I think we are going to hear lots about it in the election and I think it is going to be demonized. I think there aren’t any politicians who are going to be able to avoid taking the position that being a contingent worker is somehow less than being an actual worker, so it will get highly politicized, which means that the data will show up and be attended to.

I saw a survey … I see surveys until they are bleeding out of my eyes, but I saw a survey that said 27% of the workforce is contingent workers, which is nonsense, but that is what the survey said and we are going to see stuff like that. We are going to see … This is going to be a very slow change in the contingent workforce and we will have plenty of time to make sense of it before it becomes a factor in everybody’s life, but there is a lot of money to be made by scaring people and so there is the sense of the politicians are in the front of that line and then the well funded entrepreneurs are in the second seat in that line.

Stacey Harris:                        Well, I think that is what is so important about the fact that May of 2017 they are going to do a survey on this because that is exactly it. That we have heard a lot of “Every company is going to make all of their employees contingent. Contingent employees are much happier.”

There has been a lot of conversation about whether contingent workers are the future, whether they are a conversation that people want to have or whether or not they are just another working model, and I don’t think we have the real data to say anything about it. All we have are different groups of companies that have their own data sets talking about contingent workforces, so I am excited about it.

John Sumser:                        Would you believe a survey that said contingent workers are happy being contingent workers? Some large percentage of them were happy being … I wouldn’t believe that, I don’t think that is even close to true. Just on the basis of benefits alone, people are much happier with stability than they are with ambiguity and contingent work is all about ambiguity and it passes responsibility for the ambiguity away for the company and onto the employee without modifying compensation.

Stacey Harris:                        I think it depends a lot on how we define a contingent worker. There is a difference between a contingent worker who is someone who has three different jobs and is trying to sort of manage their schedule and is focused on … The contingent work is the only work that they can get vs someone who has made the decision, or the choice, to be an open contractor in a market where they feel like they have more options if they are not working for a single employer.

A lot of that comes down to skill level and a lot of that comes down to what people … The flexibility they have because their own financial situations and, often times, we don’t define those contractors, consultants, as contingent workers because they, in many cases, own their own small businesses, so is that part of the contingent workforce these days or not and I think that is part of what needs to be defined and the labor department hasn’t done that up until now.

John Sumser:                        Yeah, now you are treading down the road that corporations are people and people are corporations and that is a weird kind of thing that could only possibly happen in the United States. Right? Guess what? People are not companies and companies are not people. [crosstalk 00:10:04]

Stacey Harris:                        … not arguing with you on that one, yeah.

John Sumser:                        My sense is that what we are not going to see is a massive explosion of the small, tiny group of people who are companies. It is a very … It is the exception that proves the rule, rather than the way things are going to be and the problem is the people, whose forecast and prognostications get listened to, are people in that category. People who are more comfortable than others being both the company and the person.

Stacey Harris:                        And being independent and being more ambiguous about their financial income because there is enough of it that they don’t have to worry about it, so I think it is a long conversation that is worth having, but I think it is hard to have that conversation today in light of the lack of data.

To me, that is the exciting part of the conversation is that we have, once again, realized that you can’t have an honest conversation about what is happening without getting some data about it because right now I think we are all making assumptions based off of our own personal experiences with this environment and with people who worked in the contingent workforce.

John Sumser:                        Yeah, so let’s talk about the Stock Market. Holey Moley. Holey moley, are you going to have to work until you are 100 now?

Stacey Harris:                        (laughs) Yeah, at least that. We were talking earlier … I don’t even pay attention to my own 401k right now because it is just better not to look at it, but I think that is probably, for my very, very conservative 401k planning, I think anybody who has been investing in the cloud based businesses, that we work with on a daily basis, is probably very, very scared right now and what we are seeing, at least coming out from all of the financial statements, because I get a chance to be in a lot of those research groups who are in the financial market, there has been a continuous plethora of outreach saying, “Please stay calm, please understand. Here is what we think about is going on in the market.”

On a daily basis, I am getting three or four financial analysts sending out their new statements saying “Things are not as bad as you think they are”, and yet, we know that there has been a 26% fall in the last six weeks and the cloud stocks that many of us follow and people are trying to decide, “Is this the bubble bursting, it it?”, and the companies that are on that are LinkedIn, WorkDay and, people that we, Net Tweet, talk about on a regular basis, as well as organizations like Tableau who saw a pretty big drop, who deals with B&I analytics.

John, you had an interesting take on this, do you think that this is a slowdown or do you think this is a normalization or do you think something else is going on?

John Sumser:                        Well, I think, for almost as long as I can remember anymore, Wall Street has valued software companies on the basis of their license revenue and done that in a way because of the factors like 10 times the revenue is what a company is worth and that is crazy. The only way you can ever make that work is if you expected the company to dominate the market somewhere down the road.

It is the only way that ten times its revenue is a sensible evaluation, but because they were valuating companies that way and investors want a high valuation, software companies organized their thinking about how software works to accommodate that model, because they wanted their business to be valued as high as it possibly could, so they are going to conform to the ways that the financial analysts see the business.

What has happened is that the financial analysts have changed the way that they see the business. The people who are responsible for institutional purchasing have realized that it is silly to invest in the company that way so the beginnings of this cutback have all been changes in institutional position, or changes in the way that institutions, like pension plans and hedge funds, who value these companies in the portfolio and that those are all relatively public things that cause the market to move.

I don’t think it is going back. I don’t think this is a momentary inconvenience, I think this is a more reasonable way to think about the way that stocks are worth and so this might be a buy opportunity as the financial advisors are all saying, but only if you understand that it is going to have reasonable growth based on actual performance here on out and that you don’t have to show a profit for some length of time, generosity is going to have disappeared.

Stacey Harris:                        Do you also think, John … One of the things that I said at the end of my big presentation[inaudible 00:15:29]data at this year’s [inaudible 00:15:30] said, “Here is the big trends I see coming.”, one of the trends I put out there was organizations, at least technology organizations, are going to starve, because features and functions and all of the technology itself is starting to flatten out and mature. Even when you are talking about B&I analytics, even those less mature places are starting to see futures and functions stabilize.

Are we looking at a market, at least from where I was at, that is going to start being differentiated based off of service providings and me and you have had this conversation. We said “Well, they could never really be thought of as service providers because the cost of the workforce required to do services is too expensive for a tech company that is being”, as you have said, “being valued this way.” Well, this opened the door that these HR technology companies, at the very least, can start to think about services the way they haven’t been able to think about it previously.

John Sumser:                        Well, if you relax about the investment part, and I covered this area, sort of invested in this area and if you just think a little bit past the crisis, what this does is forces all of these companies to become better companies. Right? If they have managed to bet their fate on their stock price, well they are in trouble. You shouldn’t do that.

If they have based their business on actually building something interesting, this will allow them to build up the more important pieces that they weren’t allowed to build up before. I think this should strengthen these companies on the long haul. It will kill a couple of them. Zendesk is in a death spiral anyhow, but this will kill a bunch and that is okay. That is okay, then the people who remain will be much, much stronger.

Stacey Harris:                        Do you think it is going to impact the investment in those organizations who are not public yet? For example, the big investments made in benefits last year, and now we are seeing their CEO, betting to use rapid growth because of those investments. Their CEO, Parker Conrad, is resigning due to compliance regulatory issues that the company is now sort of … They weren’t getting all of the right license to do the insurance efforts that they were doing, so the new CEO has taken over, David Sacks, who was the COO, do you think that is going to impact the investments, that we are seeing in those type of organizations, as well?

John Sumser:                        Well, an awful lot of people who don’t know anything about HR have come to our industry with solutions that are interesting solutions to problems that HR ought to have if HR was what they think HR is. Does that make sense? When you don’t know anything about the market, you bring dopey stuff to the market.

Stacey Harris:                        [crosstalk 00:18:46]

John Sumser:                        Yeah, so there is a fair amount of lots of money and very little sense floating around the industry right now and some of those companies are going to have a hard time. They are going to have a hard time under these circumstances, but there are also some really smart offerings that are shrewd investments at normalized values that should be able to ride out of this, but investment is going to tighten up.

Stacey Harris:                        Well, one of the things that I think along all of these lines is that people are sort of saying, “Well, if the market is starting to slow down a little bit and things are starting to, particularly in the HR space, HR tech space, are we starting to see that the big spend is over?” There will still be spend, but is the big spend over?

On the other hand, one of the big stories that I pulled out of the bag this week, which I thought was quite interesting, is we have been hearing that unemployment rates are at their low time average, but it wasn’t quite as good in January as it was in December. I thought it was a really interesting story about voluntary job quitting has hit its highest level in nine years.

It is a now at a point of where were at in 2008 and the voluntary job quitting is a big issue for a lot of cases and, in many cases, means that they are losing their best people and these numbers are pretty dramatic. It rose to nearly 3.1 million, at least here in the States. That doesn’t sort of think worldwide, but I think that affects and impacts worldwide issues as well.

Do you see that that is going to spur more investment in technology that has to do with keeping top talent? Or do you think, again, this is an opportunity to figure out the total technology HR stack, or is this going to be more of an operational conversation for organizations? I thought that this was sort of interesting. This is going to maybe balance out some of the slowing down in spending that we saw and some people’s plans.

John Sumser:                        It has been a recession for everybody, companies and employees alike and that means that companies hang onto people they don’t really want and people who don’t really want to be there, stay. The capital investment lags all of that, so a lot of people were in a lot of companies with old technology and as they leave, because they can’t believe they are living in the Stone Age, they will cause the people they leave to ultimately upgrade their technology.

I would say that that is the lion’s share of the actual marketplace, so you can imagine this causing an upgrade pressure on things that are more like infrastructure, like timecard systems, time and attendance management. Sort of the basic HR functionality. You can imagine that getting a lot of attention as a result of this.

Stacey Harris:                        I would agree. I had a conversation, actually just yesterday, with a large organization in the food entertainment business and they had invested heavily in the technology for their customers. Mobile everything for their customer base. They were still on the AS 400s for their HR technology.

John Sumser:                        What?!

Stacey Harris:                        Yeah.

John Sumser:                        What?!

Stacey Harris:                        They were asking the question “How long do people generally stay on certain HR technologies?”, but this is not … I have seen an uptick in these type of conversations of these organizations who have held onto their HR technology for very, very long times. I do think that fundamentally we are going to see a big drive, in the next year or two, to really look at the fundamental HR technologies that have to do with the core elements and the workforce element.

I would agree, I think that is where you are going to start see as people start moving and we start seeing these shifts that … I don’t think the driver is going to be that we want new technology for the sake of new technology.

Part of the reason people have held onto these technologies, I think the driver is going to be that we need to get better user experiences for our end users and that is a hard conversation to make a business case around if you have an organization that hasn’t quite decided that employees are the center of your business case vs the buyers of your organization.

John Sumser:                        Got it, got it. What is next on the list?

Stacey Harris:                        Well, kind of on the same topic. HotSchedules and PeopleMatter partnered to create an interesting workforce management conversation. I don’t know if you know HotSchedules, I know you know PeopleMatter and PeopleMatter just got a new CEO earlier this year, or the end of last year.

PeopleMatter is an industry specific talent management, HRMS technology workforce management technology for the quick service and convenience store industry and HotSchedules is one of the foremost workforce management solutions, as well as planning solutions and scheduling solutions for the quick service and retail industry.

They are partnering up to basically be referral partners for each other, but I thought this was sort of interesting because they are actually a little bit of competition, but they are also really focused, it sounds like, on trying to sort of create a total technology platform that can compete, in many cases, with some of the other total technology platforms that are in the market. Do you think we are going to see more of these industry specific groupings?

I am starting to see them in conversations, that is why I pulled this one example out, of organizations really starting to focus on industries as we start to get the Oracle, SAP, Ultimates and Ceridian sort of doing more blanket, mid-market general populations and larger. What do you think about the vertical conversation? Do you think it is going to heat up or do you think it is going to stay where it is at?

John Sumser:                        Well, I think the PeopleMatter/HotSchedules news is a [bell rubber 00:25:38]They are … They were competitors, they were headed in each other’s direction, they were building functionality that was exactly the functionality of the other players and this sounds like a truce to me. It sounds like two competitors just figured out that the only way to make money is by not competing and I think we will see more of that. I think we will see more of that.

There is a lot of little players and a lot of little spots who claim to be universal solutions and are actually only really good in narrow fits and they are going to find each other because the marketing hype and the sales reality don’t match up right now and survival will depend on not believing their own rhetoric. It is going to be cool to watch it, actually, because that kind of consolidation, which is other than the roll up investment consolidation which we have been watching, produces pretty interesting things.

Stacey Harris:                        I think what is going to be interesting, because I had another earlier conversation this week with a little company doing competency management work, which I hadn’t heard of anybody talking about competency management in ages, to be honest. This is … Hulu partners with their Kahuna product.

This is just small company, it is a services company, an implementation company, for the rest of the basic co-factors, who had built a fairly in-depth competency management tool that was particularly focused on those organizations like energy and oil and gas and consulting businesses that are really investing heavily in competency management and tracking competency management.

It is a vertical industry model, it is not something that would appeal to the whole market because we have tried to sort of roll competencies, big, big competency management models out to the whole market and it never quite took because it became very complex. It was interesting to hear them talk about the growth and the interest because as many of their organizations that they are working with have moved their overall HR platforms to the cloud, this one or two things that they are lacking is a big issue for them.

This really deep, multi-roll, multi-group competency management model, so what they are finding is a lot of those organizations are coming to little point solutions again just to get those little pieces that they need and try to integrate them with these larger cloud solutions. I think some of these industry vertical groups are actually going to have to start really thinking differently about their role in the market and we might see more point solutions, too, starting to pop up as well.

John Sumser:                        It is going to be a great time. We have roared through our half hour together this morning. Anything strike you as the takeaway people should have?

Stacey Harris:                        Well, I think one takeaway probably is, depending on where you stand on the financial side of things, you can look at all the things happening in the last couple of weeks with the stock market as both good or bad, so you have given people another way to look at it and I think that is a great opportunity for the market as a whole.

Ultimately we are going to start to see maybe more investments in some of the core technology systems, at least from what me and you are seeing. I think that will be worth a conversation for next week is “What are we seeing in the core HR technology space and where are organizations heading with that?”

John Sumser:                        Fantastic. Well, thanks for doing this and thanks for being here Stacey and thanks for listening everybody. You have been on … What are we calling this thing again?

Stacey Harris:                        [crosstalk 00:29:36]

John Sumser:                        … with Stacey Harris and John Sumser. Sorry, not enough coffee this morning.

Stacey Harris:                        [crosstalk 00:29:44] Thanks everyone, bye-bye.

John Sumser:      Bye-bye.

End Transcript

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