Looking to land an innovative approach to your learning management systems or bring the latest cutting-edge solution to your AI HR efforts?
There’s a great chance you’ll be working with a start-up for your HR tech, if that’s the case.
“Your existing enterprise HR vendors are innovating, but it’s genuinely incremental innovation. Your core vendors will not be able to keep pace with the innovation that is happening in the start-up community, nor do they want to,” said Dr. Thomas Otter, general partner with HR tech venture firm Acadian Partners, during a presentation Thursday at the HR Technology Conference Virtual. (Registrants can listen to the session replay here until May 1.)
Many large HR vendors frequently develop alliances with start-ups and participate in the start-up ecosystem, said Otter during his presentation, “The Importance of Disruptive Innovation in HR Tech.”
Start-ups can serve as the mechanism to bring innovative HR technology to your company, Otter said.
“As an organization, it’s really imperative to be working with start-ups because they are going to be the bedrock of the digitalization of your HR functions,” he explained.
He advised HR leaders to devote as much time to the HR tech start-up community as they do to their large enterprise HR vendors.
How to work with HR tech start-ups
While the time investment should be similar, Otter said, don’t expect to work with a start-up in the same way as an enterprise vendor.
Avoid handing a 100-page request-for-proposal document to a start-up, for instance. It may work well with a core enterprise HR vendor that you have a relationship with and whose products you understand the capabilities of and potential problems with, but start-ups require a different approach.
“Defining requirements is a horrible way of working with a start-up because they are trying to solve your business problems in a novel, new way,” Otter said. “If you come with a list of requirements, you essentially close out that discovery process. They want to spend time talking with you to understand what’s not working.”
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Also, try to refrain from rewriting what typically should be a standard purchase agreement. Large enterprise customers can easily afford the cost of an attorney, but for start-ups, it can often mean making a choice between investing in research and development or paying an attorney to review the rewrites. Ideally, HR leaders would want their start-up partners to be focused on developing the next innovative technology that could benefit their organization, Otter said.
He added that HR leaders should be mindful when entering into pilot programs because such ventures can pull away a start-up’s valuable resources and attention. Pilot programs should be part of a larger contract that states that if the pilot is successful by a certain date, then the start-up can start booking revenue for their contract, versus negotiating for a contract once the pilot is completed, Otter said. The former sends a strong and favorable message to VCs, who fund the start-up bringing innovation to the HR client.
Enterprise customers should also ideally be willing to go public with their HR tech start-up partnerships. This gives the start-up a referral for other clients to build their business, which in turn helps the HR leaders work with a stronger company, Otter said.
“If you constrain the ability of that start-up to communicate you are a customer, you really undermine your relationship with that start-up and undermine its success,” Otter said. “I put the burden on HR if you are going to be leveraging your brand in working with a start-up, then it’s only fair that you allow the start-up to cite your brand.”