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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: 72
Air Date: May 26, 2016


This Week

This week John and Stacey discuss:

  • New federal law on overtime sparks debate Link
  • Big Leap Forward for Human Capital Disclosure Link
  • Ultimate Software Acquisition of Vestrics Predictive Analytics Platform Link
  • Entelo Raises $12 Million in Series B Funding to Bring Data-Driven Recruiting to the Enterprise Link
  • Bias in algorithms – Gender bias simulator Link

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 with Erin Spencer sitting in. Good morning, Erin. Good morning, Stacey.


Stacey Harris: Good morning, John.


Erin Spencer: Good morning, John.


John Sumser: Hey, so how are you all? It’s gloomy here in San Francisco. It’s really gloomy here in San Francisco, but it always is. It’s the coldest …


Stacey Harris: I was going to say, Erin, are you feeling sorry for John? I don’t know what it’s like in Ohio today.


Erin Spencer: No, it’s 85 and sunny. We’ve switched places a little bit. It’s beautiful here.


John Sumser: Oh, heat wave?


Erin Spencer: Absolutely.


John Sumser: We call 85 a heat wave.


Erin Spencer: Yeah.


Stacey Harris: We’re going to hit 90 today in North Carolina, in Raleigh Durham, John, so you guys would be turning any air conditioning you had on. I don’t know that many people have air conditioning in San Francisco.


John Sumser: We don’t have air conditioning, and 90 is completely unbearable. Completely unbearable. 85 is only marginally tolerable. If it gets up over 80 or down under 50 … People don’t work when it’s over 80.


Stacey Harris: We did talk a couple weeks ago about living in a bubble, right? Just saying that.


John Sumser: Yeah, it’s hard to live in paradise. It’s hard. It’s awful. What’s in Stacey’s mailbag?


Stacey Harris: Well, it’s been a busy week. There’s a lot of stuff going on as far as topics go I think with both the HR Tech space, some of it that falls into kind of the categories we always cover, and a couple of new things that may not fall into categories that everybody sort of generally thinks of as important topics. There’s also some interesting I think commentary being made about some of the recent Obama regulations around the additional changes to overtime payments that I think are worth revisiting. I know we talked about it last week, but I think it’s a big enough topic and a big enough issue for a lot of organizations that there’s some additional conversations to be had about it.


There was also some interesting articles this week that came out that I think really sparked some interesting topics about what’s happening both in how organizations are making sort of stock market investment decisions in businesses, and whether or not they can start to look at some HR metrics as part of their bigger decision making process. At the same time, we’re also seeing a lot of articles come out about issues where we have maybe fallen backwards in some cases in some really big ways around diversity, compensation equity, areas where we thought we had made quite a bit of headway, but now because of some of the new requirements around people signing things that require everyone to go to arbitrated litigation versus sort of general litigation. Now we’re starting to see people not able to actually bring forward some of these cases that they would have brought forward in the ’70s. We’re looking at some really interesting dynamics happening in the market.


It’s a lot of topics. Where would you like to start, John? Do you want to talk a little bit about …


John Sumser: Let’s talk about overtime. Let’s talk a little bit about overtime. The Obama stuff.


Stacey Harris: Yeah. Part of why I brought the overtime article back up again … This is … I just really … To me, I started seeing all these floods of articles coming out, both on on LinkedIn and from SHRM, and from lots of different organizations, and particularly from the SHRM organization really touting that they felt that this new overtime regulation was going to just literally be terrible. I mean, every article you read, particularly from SHRM, was pointing out all the things that this was going to do wrong, right? That it was going to hurt companies around … But on the other hand, you saw a lot of articles coming out, particularly from LinkedIn and from organizations that were more focused on employee outcomes and engaging employees that talked about how you could turn this in to a real positive conversation, and you were going to start to elevate certain roles in your organization in a way that you could start to really give people the pay for the time that they needed.


It just brought to me some light about where does HR stand today. They used to squarely stand as a management role in organizations, right? They were the heavy arm. They were the one that did the regulations. But with all the talent management conversation, we’ve also been supposed to be sort of HR is the arm that’s supposed to be helping build engagement and the organization that’s talking about employees’ needs and employees’ welfare. Do you think that we’ve made that turn, or are we still where SHRM thinks we are, is we’re supposed to be the arm of management?


John Sumser: My answer to the whole question is a good deal more complicated than that. One of the things that’s happening is their new management model is emerging, and the new management model has a good deal more measurement in it, and a good deal of more transparency between the company and the employee, and the employee’s role is different because the employee knows about the company now. It used to be that the company could keep secrets from employees, and that just isn’t possible any longer. Right? That changes the balance of power, and so how do you manage that is a management question. That’s exactly a management question. It doesn’t strike me that trying to figure out this change that’s driven by technology and demographics is inherently a move towards employee advocacy. I think it’s pretty …


I mean, lots of people are sloppy with these distinctions that I’m making, but when you make HR into an employee advocacy organization, it’s hard to imagine why the management of the company would continue to invest in that, because employees are a stakeholder, and there’s the stakeholder and the company and it’s always the case that the interests between stakeholders and the company diverge in some places, or they’d be the same group.


Stacey Harris: Yes, definitely. Yeah.


John Sumser: They’re not, so you always have to manage that tension in the HR world when you have weight to the company.  But that’s not like a change.


Now, in the breathy vendors who are selling stuff to really young organizations that haven’t had HR experience, this gets confusing to talk about.


Stacey Harris: I think yeah.


John Sumser: I don’t think the big enterprises are confused about this.


Stacey Harris: You don’t think they’re confused. Well, and maybe that’s the case. I guess I was just really struck by the division of conversation around this topic, right? The amount of, “Well by taking away exempt status from some employees or requiring them to track their hours, this is really going to make people very, very upset in the organization. You’re just going to have big, big engagement issues,” right? That’s the conversation you’re hearing on one side. On the other side, they’re saying, “Well now you can start to provide some value proposition to them working extra hours, right? You can start to provide them with reasons why they might want to sort of move into different roles in the organization.” There’s definitely pros and cons on both sides, but there was such a dour perspective coming out of one side of what I think is a big voice for HR professionals still these days, which is SHRM, compared to what we were seeing come out of many of the technology companies, which granted will be making a lot of money in many cases off of these new regulations because there will be a lot more tracking required, right?


John Sumser: Well, there’s some other things [inaudible 00:09:26] too. The living wage, the estimated living wage, which is code for this ought to be the minimum wage. Living wage in northern California where all these technology companies are is $60,000 a year. It simply doesn’t affect anybody. I mean, of course it affects some people, but the major industries in northern California are unaffected by this. You don’t hear big broadcasts from the big organizations. I think that’s generally true in companies over 10,000 people, if they’re not in hospitality or retail or one of the real intense customer-facing industries. It seems to me, and this might be a northern California view, it seems to me the wages are higher than this, and that this is a small thing being offered to a small group of people.


Stacey Harris: Yeah. Well, it’s a large group of people that’s going to be affected. The organizations that they felt were going to be most impacted were higher education, retail, staffing, those organizations where you have supervisors who were in exempt roles who could work as long as they needed, and now they sort of … The other side of this picture, they said this is going to have an impact on whether or not we could roll out mobile HR or mobile technology for our workspace as well, because once someone takes technology homes and leverages it, then they’re on the clock.


John Sumser: Right.


Stacey Harris: We’ve been having …


John Sumser: [crosstalk 00:11:14]


Stacey Harris: And you have to track it, yes. Yeah. They’re saying people are going to have to have their mobile devices taken away. Well, that’s a little drastic. Again, assuming that people can sort of make some of these decisions on their own. Just some real dramatic things that you know, we’re just going to have to really watch what people are doing with a fine eyeglass there. It will be interesting to see where this takes place, and if there are some movements to make this sort of less impactful in certain regions or certain areas where they could make some state laws, regulations, around this. By and far, there’s a lot of conversation taking place on this I think, and particularly in the HR tech space, because organizations are going to need to track hours for a lot more professionals in their organization at this point, including professionals in white collar space, particular in, as you noted, in regions where the average salary or average compensation is in the range more of $30,000. Right.


John Sumser: Right. Right. I don’t know. I guess … I don’t see a big windfall for HR techs there, do you?


Stacey Harris: I think for workforce management technologies, it will be for those that are time tracking technologies, it will be. Yeah.


John Sumser: So you think there will be whole companies that have to change their entire way of tracking time in order to comply, or isn’t this really just people who didn’t use to have to use the system now have to use the system?


Stacey Harris: Well, yes. I mean, I think you’re not going to find a lot of organizations having to buy new technologies. They’ll have to add users to their technology, right?


John Sumser: Right, right. It’s not like a big … It’s a little [cash 00:13:04] increment of some kind that’s proportional to the number of people who actually have to make this change, which I understand to be under a million.


Stacey Harris: I don’t have the numbers in this particular article and in this particular space. I did it on last week’s, so there was yeah, some numbers in that one.


John Sumser: It’s something like that. It’s a little … Yeah.


Stacey Harris: Well, and that’s … We’re seeing a lot of conversation about it. I mean, probably one out of five articles I was going through had some topic about this. Even if you’re saying it’s dealing with just a little group or audience, is it being made a bigger topic because it foreshadows what we’re going to see in other areas, right, of regulation?


One of the other topics that was sort of … It was in the conversations this week, but I don’t think a lot of attention came to it, was an article in I think it was Fast Company or one of the other … Or Huffington Post. Yeah it was probably … No, CFO magazine. That’s where it was from. I apologize.


CFO magazine had an article about investment community wanting various groups, particularly two groups, the Human Capital Management Coalition and the Principals for Responsible Investment Group, which are two large sort of investment communities, now sort of saying they are going to start tracking some HR metrics in their investment decision portfolios, right? These are pretty large groups, you know 1500 institutional investors worldwide in one and the other one as got $2.5 trillion in investment money. You get through this whole article that they’re talking about and what really struck me is they kept saying, “Yes, we want to do this.” The only sort of metric they could really reference was turnover metrics is something they felt everybody really could agree on at any level. Then you had a lot of commentary about people saying, “Look, there’s just no standard HR metrics that we can report on that would be able to be as valuable as our financial metrics or our sales metrics or our operations metrics are, because there’s no regulations around basically how these metrics should be viewed and what should be reported every year.


Is this the bigger issue, right? There’s no regulations around HR sort of metrics?


John Sumser: Wow. You’re saying that investment bankers are saying they can’t do HR metrics because there’s not enough regulation? Is that what this is? That seems …


Stacey Harris: At least that’s what two of the professionals in the article said, yeah. No one said that’s all of them, right?


John Sumser: Never heard of an investment banker who though regulation was a good idea for anything. You know, these are investors.


Stacey Harris: There’s two. I don’t know about the rest of them, yeah.


John Sumser: These are investors. The only investors who are interested in more regulation have found a way to make money off of regulations. Otherwise, regulations are cost in enterprises that investors would prefer didn’t have more costs, because more cost means less profit. [inaudible 00:16:49]


Stacey Harris: I get what you’re saying, but there were some commentary here that a lot of these metrics are being captured anyways. People are gathering this data, workforce planning, turnover, engagement, data about performance, right? They’re doing it anyways to run the company. The problem is is that very few of the organizations are doing it in a standard way, and there’s no expectation about how it’s reported. I think that’s what they’re talking about, is in many cases this data that’s there, it’s just not regulated on how it’s reported and the numbers can be fudged pretty easily because there’s no regulations on them.


John Sumser: So there aren’t any standards, and nobody in the history of business metrics had the conversation, what would it be good to publicly report?


Stacey Harris: Yeah.


John Sumser: Right? The point of this, up to this point metrics has been like, in your family do you have one of those doorways where everybody’s height is measured over the years?


Stacey Harris: We did, yeah. Before I moved, we had one. Yeah.


John Sumser: Yeah, yeah. I think lots and lots and lots of families do that. They don’t do it for public reporting. You know, they do it to see how things are growing and how things are going, and that’s what you often use business statistics for. When you have to report it to a regulator, it gets so complicated that you can’t get anything done, but if you wanted to examine statistics across a series of organizations, you’d have to figure out how to compare apples to apples. You know, there have been great attempts at doing that over the years. That’s what InfoHR was before [inaudible 00:18:48] SuccessFactors bought it. It’s a lot of what some of the emerging fence marketing companies do. I think there are institutes that collect data, that if you want to contribute the data, you have to certify that you’re doing it a certain way in HR. So that’s really interesting. That’s really interesting.


It’s also kind of bright that investors are taking enough interest in the HR metrics to care about that. That’s a remarkable thing.


Stacey Harris: Well, we’re starting to see more conversations. Well, and you’re also seeing the vendors spending a lot more time on the technology as well, and from a statistical perspective, or from an analytics perspective. Another sort of quiet … It wasn’t sort of a huge announcement this week, but we definitely heard from Ultimate Software purchasing sort of … You had mentioned Info HR, but a similar organization called Vestrix, a little organization out of Chapel Hill, North Carolina here originally. They made a purchase of that sort of HR analytics organization that had built a model around how they would help organizations identify HR analytics and metrics that would go across their organization and that they could sort of make some business decisions off of. So they were sort of the mixture of technology and services that went around with HR analytics. Ultimate purchased them last week, sort of solely purchased them, and with it sort of rolled out a new release, their 2016 spring release, saying, “We are focusing heavily on more prescriptive analytics offerings,” and that, “The [Vestrix 00:20:33] purchase will be part of that underpinning.” Did you get a chance to sit in at all on that briefing with Ultimate this week John, or talk to anybody from the [Vestrix 00:20:41] organization?


John Sumser: Yeah. I have a pretty good [inaudible 00:20:45] sense of this. Vestrix … What’s interesting about Vestrix is it’s really an engine for driving analytics rather than a framework for having analytics. Does that make sense? It’s a statistical engine, and it allows massive quantities of statistical calculations to be run on data. That means that it’s possible for somebody who owns something like that to do … There’s a lot to be done with big time text calculations, and understanding what the patterns are in all of the text that a company uses, and having a tool like this would make that much easier to accomplish, right? It suggests that Ultimate’s view of how you inform the organization with its own data is pretty sophisticated, right? It’s pretty cool, actually, that they are aware enough to see the value of the approach, and that you would have to build this particular approach outside of the typical enterprise software development laboratories, which [inaudible 00:22:14] ridiculous levels of investment in people.


Stacey Harris: Exactly. I think that’s the big thing that I thought. This is both an investment in people as well as you said, through the engine, the technology. One of the things about organizations like Ultimate is their idea that they’re building everything organically. This particular space is something where the engine of analytics … It can’t be built on the architecture of enterprise technology. If I understand both what you’re saying and I understand what I’m hearing from the industry, it really has to be something somewhat separate and data flows in and out of it.


We saw a similar move in some cases from WorkDay. They did a purchase of a large analytics organization that’s an engine model as well last year.


John Sumser: Right.


Stacey Harris: I think this is what we’re starting to see from most of these large enterprise technologies, is the idea that they have to have these analytics engines to be able to meet the needs for predictive, real, truly predictive analytics down the road. Would you say that’s the basis of what they’re trying to get to?


John Sumser: That’s exactly right. That’s exactly right. The thinking about what analytics is, what analytics could be, and how you go about growing it is way more sophisticated than I think anybody understands. It means that people have done engineering projects and discovered they can’t do it on their own, right? There’s a collective trash heap of badly done analytics projects as people start to figure out what this stuff really means.


I think that means it’s even more important to keep talking about ethics and what happens when you use analytics, because the potential for mistakes is significant. The mistakes are significant.


Stacey Harris: Well, and that might lead in to the next topic. Entelo this week … Entelo is a talent acquisition technology. I remember meeting with them in the early, early days, several lovely people who had started this very small, new talent acquisition technology. They raised $12 million in Series B funding this week, and noting that a vendor of choice for 425 companies, they’ve doubled their head count in 2016, 588% year over year growth, right? They were touting all this.


But I think that the thing that I remember most about Entelo, you probably know them a bit better on the recruiting side John, is they have this sort of anonymized recruiting model, right, where you get the data and you see all the information about the candidate without knowing who they are. It’s this anonymous model. Do you think that’s part of where we’re starting to see some of this going, which is the idea of letting the data make some of the decisions without putting bias into them, possibly? Can we even get there? Is that possible?


John Sumser: Well, this is probably an hour long conversation.


Stacey Harris: Not five minutes, huh?


John Sumser: It’s something that I’ve been spending a lot of time thinking about. The thing about algorithms is you can write an algorithm that is free from bias, objectively free from bias. The difficult thing is that bias is insidious and a very tiny amount of bias creates a very big distortion. There’s something I saw this week which is called the gender bias simulator. It was a project from Columbia University that uses a statistical engine to forecast the impact of certain amounts of bias. You could set it at 1%, 5%, or 10%. It turns out that a 1% difference in the way men and women are treated in the workplace, promotion and disciplinary decisions, creates a 35% imbalance in a very short amount of time, right? A tiny amount of bias, big amount of impact.


Now, what algorithms do is they don’t add bias, but they amplify the existing bias. There’s already this problem that says 1% equals 35%, but now you’re going to put like a magnifying glass on it so it’s going to get bigger in terms of its impact as the result of algorithms doing what they do. This doesn’t matter in the place where these sort of predictive algorithms are being conceived, which is retail markets online. It matters a lot when it’s your job that you’re talking about.


Stacey Harris: Well, and I think the bigger question then comes down to … Something like Entelo is a great example, right? If you go in to the technology with full faith and some assurances that it is not biased, that it has all the right … I’m sure Entelo has done a lot of their great … I’ve talked to the lady, and they’re generally very focused on making sure that all this stuff is working the way it should work so that they have built technology that’s keeping in mind all the things you and I are talking about. I think the bigger question is that once you get past that point, if something comes to a lawsuit, who’s held accountable? Is it the company, or is it the vendor of the technology, right?


John Sumser: Go ahead.


Stacey Harris: I was just going to say, and the big conversation about this is that … You know, there was a big article this week in the New York Times magazine about the fact that 26 years later, the boom-boom room suite, I can barely say it, or suit, which is from 26 years ago where the Barney and Smith branch office was sued for having basically discrimination against all the females in their organization for brokers. That sort of lawsuit could not be brought at this point in time any longer, because we have basically made people sign documents saying everything has to go through arbitration these days, right? That everything has to be done outside of the federal and state court systems.


Are we doing the same thing with technology on some level, right? Making people say, “Well, if you agree to use the technology, we’re no longer liable”?


John Sumser: Of course that’s what you’d do if you were running a company. Of course that’s what you do. I think it will be … This will be a differentiation battle in the next couple of years, but the lawyers will always recommend that you make the case that I made, which is that algorithms do not introduce bias. The bias already exists. It may amplify the bias that already exists, but the bias already exists. What that is saying is if the algorithm amplifies bias, it’s your fault. I’ll be surprised to see a company that provides algorithms that doesn’t frame it that way.


Stacey Harris: All right. Well, once again we have gone through our 30 minutes, and we didn’t even get a chance to talk to Erin about one of the topics we were going to talk about, which was another organization. Maybe we’ll get to it next week, which is PeopleAdmin and TeacherMatch combining to create a new K through 12 talent management advanced student system. I know not everybody here might be as in to the K through 12 market, but I think the whole higher education, K through 12 market, government market, is something that we’re seeing some changes in. Maybe next week we’ll get a chance to talk a little bit about that.


But John, we’ve talked about data analytics, we’ve talked about money being invested in companies because of HR analytics and because we have no standard metrics not getting money invested in it that way. It’s been a very broad conversation this week.


John Sumser: Yeah. Yeah. Thanks. Erin, I’m sorry that I ran through your time. We will make sure to correct that next week. Thanks both of you for being here.


Stacey Harris: Thanks John. Yeah, thanks everyone. Have a good week.


Erin Spencer: Thanks John.


John Sumser: Yeah, have a great week. Bye bye now.

End Transcript

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