As HR Shifts From Headache to Hot Spot, Startups Take the Lead

Startups that provide services to supplement or augment internal human resources departments at big corporations are experiencing a surge in 2012. SaaS solutions are on a dramatic rise in terms of enterprise adoption; a 2011 survey looking ahead into the new year by HR consulting firm Towers Watson found that 54 percent of the 444 organizations it surveyed either are currently using, or plan to implement an SaaS solution in the near future to help with HR functions.

Recent moves in the HR startup space include the upcoming launch of ReferralBonus, a new online tool that will help people leverage their qualified social network connections to make money helping them find jobs, and also allow companies to post open positions and browse referral suggestions for free, paying rewards only when candidates are actually hired. ReferralBonus has some strong early buzz, having been named as a finalist in the Social Media Category at the SXSW Interactive Accelerator competition.

ReferralBonus CEO Marsh Sutherland said in an interview that ReferralBonus “treats users’ social networks as dynamic candidate databases from which we peersource candidates for jobs from our users’ first degree connections.” The site sends positions matched according to location and relevancy to its users, who can then choose to refer their matched connections. “If the candidate is interested, they join ReferralBonus and apply for the job using either their social network profile or their uploaded resume,” Sutherland said. “If the candidate is hired, 30 days after the new employee starts we charge the company’s credit card for the referral bonus.” ReferralBonus takes part of the fee, and passes the rest on to the referrer, who can either keep the reward or donate it to a charity directly via the ReferralBonus website.

Sutherland feels that the online recruiting space is currently missing the point. He said that most of ReferralBonus’ competiton is “focused on active candidates, cost money upfront, and don’t require written recommendations.” By contrast, ReferralBonus allows job postings for free, and “focused on identifying the best passive candidates and automating the existing real world process of referring the best candidates for jobs.” He notes that this is more in line with how real world companies hire, since “over 50 percent of white collar jobs are filled by referral.”

Sites like ReferralBonus and AOL’s new upcoming pseudo-startup venture Huntsy are aimed specifically at the beginning of the HR cycle, but more established players like Waterloo’s TribeHR are seeing a shift in employer perspectives across the entire HR function, and the startup’s CEO Joseph Fung said in an interview that enterprises are seeking out solutions like the one offered by his company in order to foster deeper, more meaningful relationships between employees and employers, and not just to decrease costs and hassles associated with maintaining internal paper-based HR departments.

Fung says that “there’s a lot of work around the social recruiting space, and a lot of work around the job seeking space because there’s so much in terms of …government legislation around building jobs, but when we look at the broader trends, that’s where we see more exciting things.” Fung points to recent acquisitions, like Oracle’s high-profile purchase of Taleo and the SAP acquisition of SuccessFactors as “affirmation that the relationship between companies and their employees is increasingly important.”

The conversation, Fung argues, isn’t about technology. “It’s not about SaaS or Cloud or mobile,” he says. “It’s really talking about a fundamental change in the school of HR thought. HR came out of that whole compliance or risk management culture, but really right now what it’s more about is the idea of cultivating high performance teams and cultures in real-time.” The shifting role of the HR function accordingly requires different tools, ones that encourage and enable consistent, efficient and engaged real-time communication.

Fung shared with us some new stats TribeHR gathered from its users for the purposes of an upcoming report that show the measurable effect increased engagement and real-time communication can have on HR performance. His team has found that of its users, those who use TribeHR the most experience less churn (the most engaged 20 percent saw 1/8th the turnover of the bottom 20 percent), more positive feedback (the top users saw words like “good job,” congratulations” and “way to go” 11 times more often on performance reviews that the bottom 20 percent), and more frequent (14 times more often at the top end of engagement) and higher salary increases (23 times larger for the most frequent users).

The spate of recent acquisitions and the numbers shared by HR consulting firms certainly indicate that companies are increasingly looking to cloud-based software and startups to make HR not only more painless, but also more of a contributor to the business’s overall well-being, instead of just a compliance headache that has to be dealt with. If startups can continue to provide evidence that their products not only reduce costs, but also improve engagement, retention, and job performance, expect the space to move at an even faster pace.