Why HR Tech Will Continue to Stay White Hot

HR tech is having a moment.

Companies increased spending for HR tech by 57% in 2021, according to the 2021-2022 HR Systems Survey by Sapient Insights Research Group. Investors have poured more than $9.2 billion into HR tech startups since just September of last year.

Certainly the COVID-19 pandemic and remote work has accelerated the need for HR tech, but Amy Yin, a former software engineer at Coinbase and current founder of her own HR tech startup OfficeTogether, points out that there has been a real creative renaissance in the HR industry—particularly due to an influx of engineers of color and diverse backgrounds.

“With tech becoming more mainstream and popular, you're seeing more and more folks with different perspectives come in,” Yin told The Org. “I think HR was one of the departments that got the least amount of love early on.”

“Part of the reason why we're seeing such an explosion of HR tech is because folks with these different backgrounds and perspectives are bringing their technical skills to the table to solve these really people-centric problems,” said Yin, who is now the CEO and co-founder of OfficeTogether, a solutions startup helping hybrid workplaces.

HR Tech Helps Burnout

These people-centric problems range from everything from recruiting and hiring, to COVID compliance measures, to workplace engagement and employee retention. But with so many different tasks to juggle, HR leaders—who are increasingly referred to as People leaders at tech companies—are experiencing burnout at an accelerated rate.

“The role of the People and Culture officer has evolved a lot,” Heather Dunn, Chief People Officer at talent CRM platform Gem, told The Org. “The past year has taken an emotional toll on People leaders. Gem’s data found that the acceptance rate for People and Culture jobs is 6% lower year-over-year compared to other general and administrative roles, the most drastic drop as far as acceptance rates go.”
Scarcity among People and Culture talent is already a huge problem, and to alleviate some of this burnout, companies large and small are turning to technology to help give time back to their People and Culture leaders.

This quandary has snowballed into the rise of an HR tech stack. Similar to the customized set of tools marketing and sales leaders select to help their funnels, companies are starting to see the value in doing the same for its HR functions.

“An HR tech stack is now necessary,” Garret Star, Director of Partnerships at Greenhouse, said. “These tools are helping HR managers automate manual processes, save time and remove human error.”

HR Tech Provides Valuable Data

But it’s not just the tools that have mirrored marketing and sales teams. People leaders are starting to treat recruiting and onboarding as a funnel itself.

This phenomenon is the genesis for Dunn’s company, Gem. Gem’s product operates as a talent CRM, in which recruiters and hiring managers have a central place to store data about candidates and track key metrics in their hiring pipeline that they can communicate to leadership.

“I think a lot of HR professionals get knocked for not being able to back things up with data,” Dunn said. “But with the increase of tools, like Gem, where you are able to track recruiting and people analytics, it’s given us more credibility within our leadership team to actually make more progress for our own team, because we now have data to back up our decisions.”

Harnessing this data and applying it to a “talent pipeline” or “recruiting funnel” is perhaps the biggest secret to HR tech’s explosive growth.

“More data is being collected by people and culture leaders than ever before,” Yin said. “Companies are eager to use that data.”

Even Yin’s startup, which collects data on the hybrid workplace, can help inform C-suite leaders at startups on important HR information, like which days are the most popular for people to commute to the office and tracking where in the hiring process candidates are falling off.

One of the biggest data points People leaders are looking at is diversity metrics. Both Dunn and Yin said to expect to see widespread adoption of HR tech and recruiting software that can track diversity metrics and help companies meet goals for hiring candidates of all different backgrounds.

“As a recruiter, in the past, you'd spend hours and hours trying to gather data from different sources and trying to come up with reasons for your leadership team to know, essentially, what's happening in the hiring pipeline and where people are falling off, particularly from a diversity perspective,” Dunn said. “That’s all changing due to people analytics and more regular tracking.”

Dunn is wary about the increasing synergies between People teams and marketing and sales teams, but ultimately sees the transformation to a more funnel-like process as a net positive.

“Do I want the People function to become more like marketing and sales? No,” Dunn said. “But being more thoughtful about the candidate experience, like how sales teams nurture their own leads, is one of the incredible parallels I see between people, and marketing and sales.”