Guides

The Modern HR Tech Stack: Nearly Everything You Need to Know

In the customer relationship management (CRM) space, Salesforce is right at the top. But they’re hardly the only CRM on the block. There’s plenty of fish (read: tools) in the market, the other most notable of which is HubSpot. Both Salesforce and HubSpot top all sorts of best apps lists - best CRM, marketing automation, sales analytics, and more. This is no mean feat because, for the better part of the last two decades, both sales and marketing have seen the maximum interest and spending from companies. 

Companies today rely on these tools to collect high-quality, rich data about their customers across every single touch point of their journey. And the buzzword around the sales and marketing space for a while now, has been personalization. The same buzzword has started to apply to HR tech stacks. For the uninitiated, an HR tech stack is what HR professionals call the entirety of their technology solutions. In the $15 billion HR tech industry, there’s a new solution popping up practically every day, most of them offering personalization services. 

These might include services like individual learning paths, exit trigger predictions, and pulse surveys tools. With personalization, companies can clearly identify the challenges in their people practices and work on them to combat attrition and improve employee retention. For new-age companies who have high-growth aspirations, personalization of their people practices is not an option but an essential ingredient to being future-ready. Personalized communications with employees, individual development and career paths, and other such people practices have ushered in the new age of HR personalisation. 

All this is backed by the fact that having a strong HR tech stack is among the top three HR priorities in nearly half (46%) of responding organizations, according to a report by Oracle. The amount of investment flowing to HR tech tools shows the enormous scope of this market opportunity, especially in the wake of the pandemic and the rise in remote work. Still, it wasn’t until recently that businesses started streamlining HR responsibilities via software. Many of the 30 million small businesses in the US still handle their onboarding and benefits enrollment tasks on paper or Excel sheets. 

This is because even today, the biggest portion of an organization’s tech budget often goes to sales. Customer support and marketing come in as a close second or third. And HR, a distant fourth, fifth, or even the last priority. Because of these dynamics, there has always been a very high prevalence of sales and marketing software, as opposed to any kind of HR tech.

But that’s changing fast!

Today, other parts of the business are also being digitized, where HR doesn’t hold a distant priority anymore. From applicant tracking and onboarding to engagement tools, performance management software, and more, HR is getting the Silicon Valley treatment. 

The advent of these tools is also related to how the workforce is changing. With the impact of the Great Resignation and the subsequent shift to hybrid work, more organizations are prioritizing company culture, hiring, career growth, and other people-centric aspects.

Plus, employees are becoming the new consumers of the workspace. So, HR professionals need to stay in-the-know, on top of it all, and ahead of the curve. This article will help you understand how HR tech has transformed and evolved over the years, and why today’s hypergrowth companies are building up their HR tech stacks. 

Status of the HR Tech Landscape

The HR marketplace has largely moved in waves over the last few decades, driven by changes in technology, culture, and the economy. 

  • 1970s to 1980s: Systems of record
  • 1990s to 2000s: Systems of talent
  • 2000s to early 2020s: System of engagement
  • 2021 and beyond: Systems of work

Why was this shift important?

Companies are moving away from a top-down approach to one that is more people-centric. They want tools whose ROI translates to actual data-driven processes that help hire, support, and grow their employees. 

While the original systems of record were created to help HR leaders put processes in place, today’s systems of work are designed to help employees and managers manage themselves. Modern HR tech can even help companies achieve business goals. For instance, in a country like India, which has the largest population of Gen X in the world, companies can save at least $600m annually by using HR Technology. Within the United States too, the White House’s just released 2023 proposed budget talks about improving its HR tech capabilities.

If you’re a company that’s looking to build their HR tech stack, this is becoming an exciting new world. You’ll be able to find software that will help your people - tools they would actually like to use!

Most organizations have moved beyond the one-size-fits-all, form-based, periodic user experience. Today, modern companies use anywhere from 7 to 9 HR tech applications mapped across the hire-to-retire journey. There are different platforms for learning, communications, reporting, compensation, and payroll, among others. Companies spend several thousand dollars per employee per year (usually more than is spent on training) on HR technology. 

Here’s how this unbundling has played out across different sectors:

HRMS Platforms

The base HRMS (Human Resource Management System) platforms continue to be the backbone of basic HR processes. Among the many tools in your HR tech stack, this is arguably the most important to consider. After all, it is nearly impossible to run a company without some HR database and these HRMS software help with precisely that. They manage employee records, job history, training, demographics - all of which are vital and used by millions of businesses. Small wonder then, that the HRMS market is over $8 billion in size and continues to grow as companies replace legacy HR tools every year. 

Recruitment

Another important function under the HR umbrella is recruitment. If you’re an HR manager, you very well know the woes of new hires not working out, despite carrying out thorough job-fit analyses. The massive scale of the recruitment industry is also something to consider. Over 45 million people in the world change jobs in the US alone each year. Around the world, this number is at least four to five times higher. A major disruption in the market is the rapid success of products like Humanly, IBM Watson, and integrated chatbots that screen candidates, answer questions, and direct prospects down the funnel with great accuracy.

Learning

On its own, the learning technology market is valued at about $20 billion. One key trend in this sector is the quick adoption of the ‘Netflix of learning content’ - the LXP (Learning Experience Platform), which encourages social and curation-based learning over the traditional LMS (Learning Management System). New-age tools aggregate content from any source (even internally developed content) and help the individual build learning paths. 

There are also LXPs that offer a MOOC-like platform for learning. On the microlearning front, there are tools like LinkedIn Learning that are creating adaptive learning paths based on your job, learning history, or your activity at work. Similarly, there are workflow learning tools and even 3D learning tools.

Popular learning platforms:

  • Degreed
  • Go1
  • Docebo

Rewards and recognition

Rewards and recognition is the fuel that fires employee engagement. Employee recognition tools help organizations with celebrating great work any time, anywhere. More than an ‘Employee of the Month’ award, businesses today want to customize their rewards to match their company culture. Today there are tools that motivate employees with tangible rewards like digital gift cards. 

These also include company swag bags, Amazon products, and custom rewards. Some recognition software also have pulse surveys to measure engagement and plug-and-play virtual activities. The whole idea is to show true appreciation to a company’s employees and customers, while boosting loyalty and productivity at the touch of a button.

Engagement

Companies are struggling to offer sustainable engagement strategies in the wake of the pandemic. Engagement tools help foster a culture of collaboration, connection, and continuous learning no matter where an employee is located. As Josh Berger puts it, engagement platforms “are becoming analytics engines with real-time response systems.” With their powerful analytics, these tools can predict turnover so you can work to retain your top talent. Some tools really do the heavy lifting for you - they can be personalized such that employee feedback is mapped to your organization’s chart and everyone can see the insights that are relevant to them. 

Wellbeing

Driven by the pandemic, employees (particularly Gen Z and Gen Y) are demanding humane and healthy workplaces. The Global Wellness Institute shows that this is a $49 billion market that is growing year-on-year. Interesting trends in the wellbeing industry can be mapped to two different sectors: financial wellbeing and mental wellbeing. Each of these broad areas have dozens of options when it comes to tools. 

Financial wellbeing tools are innovating with instant pay and gift options, pre-payday loans, and real-time pay to help employees manage their money better. In the mental health arena, there are tools that offer app-based coaching and behavioral change via meditation and mindfulness.

Popular wellbeing platforms:

  • Castlight Health
  • 11meade
  • Plum

Performance Management

Traditionally, HRMS tools were built for HR professionals and worked like integrated talent management solutions. Within these HRMS tools, the performance management module was based on the dreaded annual performance review. 

So, there arose a need for a separate PMS tool. One that removed the onus from HR leaders and also offered innovative functionalities around goal management and engagement. 

This new PMS tool also needed to have the functionality that let you revisit old conversations throughout the year via continuous feedback, timely reviews, social praise, and OKR updates.

For new-age companies with remote or hybrid-setups, tools that offered a degree of personalization turned out to be a goldmine. They allowed their organizations to be flexible according to the maturity of their HR function. Nearly every HR leader who has converted to a continuous process can vouch that the result is positive. 

Today’s PMS tools like Mesh help companies manage performance and goals, and give them tremendously better data, insights, and transparency into their entire talent process. Employees receive feedback from multiple people, including their peers, managers, and direct reports; their check-ins give them and managers a better idea of why they did or did not receive the rating and appraisal they wanted. 

Plus, with features such as social recognition and developmental feedback, there is plenty of new data added to the process. What’s valuable is that this data will give you far less biased results at the end of the year.

These new performance management systems also often have pulse surveys built-in. Pulse surveys help companies keep a check on the levels of employee engagement.. The data from these surveys can help HR leaders visualize the nature of goals and feedback, and chart meaningful employee development paths.

Examples of performance platforms:

  • Mesh.ai
  • Lattice
  • 15five

Innovative and forward-thinking companies have learnt to track performance metrics via a PMS (performance management system). A PMS works as a dashboard too, and gives you early warnings of potential problems that allow you to make adjustments and keep your business on track. There are four main reasons for the rapid unbundling of the performance management tech stack:

  1. Deep configuration: Today’s PMS software offers deep configuration that is suitable to your company. For instance, if your business requires employees to set OKRs without linking them to your objectives or competencies, a tool may be modified to do that. Conversely, if your company believes in cascading goals or wants all the manager 1:1s to be factored in while storing performance reviews, that can also be configured. Some tools, like Mesh, for example - have a feature where users can create their own cohorts, which can help in more relevant and insightful performance review cycles. Choosing the right software can ensure that your teams are getting all the support they need to succeed.
  1. Customization: Modern PMS can help you track talent metrics on an ongoing basis so you can make informed and strategic talent decisions. You’ll even get to create personalized, intuitive dashboards that are easy for everyone in the organization to understand and use. 
  1. Continuous check-ins: 80% of Gen Y say they prefer on-the-spot recognition over formal annual reviews. Since the new workforce wants immediate feedback, companies are investing in creating a culture of feedback. A PMS software offers ongoing, peer-to-peer, and upward feedback systems. It would even have reminders to ensure no one would fall through the cracks.
  1. Fast adoption tools: The last thing your managers or employees need is another system, another password, another hassle. So, today’s PMS providers ensure that their system integrates with tools that you already use in your daily workflow, like Slack. If they are open to using a new tool, they need one with a clean user interface that offers anytime/anywhere accessibility. What companies today look for is lightweight, easy-to-use software that’s built to optimize adoption and usability. 

Why your hyper-growth company needs a dedicated PMS

Old-school outlooks to performance management are usually not motivating. If anything, they are demotivating. And since motivation is key to employee engagement, which in turn improves company productivity, having a dedicated PMS is the need of the hour. 

In fact, in 2018 alone, almost 76% of organizations had reinvented their performance management to be more continuous. Clearly, new-age workplaces are switching to a modern performance management system to adapt, boost, and drive performance—rather than simply evaluating it. It has been a major cultural change.

If you’re a hyper-growth organization, here are some reasons for you to invest in a performance management system:

  1. To measure performance accurately.
  2. Bridge employee skills gaps with coaching.
  3. Help employees reach their goals—both personal and professional.
  4. Boost employee morale and reduce turnover.
  5. Offer recognition and constructive feedback for employees’ work.
  6. Create a base level of trust between employees and their managers.
  7. Build a path to success for all employees.
  8. Align company-wide goals and objectives. 
  9. Drive outcomes that matter to your business.

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.