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: 66
Air Date: April 14, 2016
This Week
This week John and Stacey discuss:
HR Tech Roars Back As Deal Activity Ties All-Time High Link
Credit Reports: Last Week Tonight with John Oliver (HBO) YouTube
36,000 Verizon workers go on strike Link
Big data’s biggest problem: It’s too hard to get the data in Link
The Most Productive Teams at Google Have These 5 Dynamics Link
Your Next Board Member Should Be a Geek 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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Transcript
Begin Transcript
John Sumser:
Good morning and welcome to HR Tech Weekly, one step closer with Stacey Harris and John Sumser. This is our 66th show. How are you Stacey?
Stacey Harris:
I’m doing well John, doing well. We’ve got sunshine and nice weather in North Carolina, even though we’re dealing with some political issues here, it’s still a very good day in the North Carolina East coast area. How about you, are you getting good weather there and are things going well on the West coast? I hear you are moving, packing up bags and stuff.
John Sumser:
Packing up bags, we’re headed to the big city. We’re moving from our little village of 1,100 people to the next big town that has 7,500 people in it, and actual grocery stores and an actual gas stations. It’s going to be great. All of the conveniences of modern life. I think we’re supposed to be at war, because Silicone Valley and North Carolina hate each other right now.
Stacey Harris:
Pretty much right now yeah, there’s Salesforce.com and there’s PayPal and multiple organizations are threatening to remove employees and big deals and Deutsche Bank has even canceled some employment plans here. Yeah, the two East coast and West coast are dueling at this point. Of course I have to say I’m a little bit more on the west coast side of things probably from my perspective, but I’m hoping North Carolina comes around.
John Sumser:
Bruce Springsteen is never going to play in North Carolina ever again.
Stacey Harris:
Yes, and Greensboro, North Carolina.
John Sumser:
Although he’s pretty old.
Stacey Harris:
They were terribly upset, there was a lot of news about that one. Yes, well.
John Sumser:
What a crazy thing.
Stacey Harris:
Yeah, it’s been interesting sort of being in North Carolina when all this is going on and again it’s my adopted state, and I do … The state has a lot of opportunities for growth and a lot tech companies are here including HR tech companies. I think Peoplefluent headquartered out here and the town that I’m in as well as many others, the Charlotte area, but the challenge is I think that whenever you’re in a sort of region that has two very large metropolitan areas.
Which is basically what North Carolina has, The Raleigh-Durham sort of Chapel Hill area here which is the Triangle. Then you have the Charlotte area which is very large. Then a lot of rural areas between that, you have very, very dynamic differences and sort of perspectives of what people’s feeling around politics and their decisions around what things should be regulated and not regulated. We are stuck in that North Carolina. Which is what most of middle America is.
John Sumser:
It reminds me, I saw an article this week about the bubble that some people live in and it listed the top 75 towns in the United States that are completely different from the normal experience of American people. I of course raised my kids in one of the top 5 , and my kids all decided to live in top bubble areas. Northern California, Manhattan, Boston, are places where the day to day experience is not the same for the rest of the country.
I think you may have some of that in North Carolina too, where there are parts of the state that’s probably too pejorative to say in the 21st century. Parts of the state have a more information oriented economy and the higher median wage and there are other parts of the state that aren’t. I’m sure that’s the conflict we’re dealing with.
Stacey Harris:
Yeah, it’s part of that, I think it’s also part of the, and we’re going to talk about a couple of these things going on in the news from an HR Tech perspective. It’s also very different cultural perspectives and backgrounds around how people view sort of the role of government right? Outside of whether or not you’re sort of growing up in an area that is sort of the norm or not. There’s also differences in how people expect sort of rules and regulations to play in their life. Interestingly enough sometimes the rules and regulations that they want differ based off of, not just their social background or their economic background but also based off of their historical background.
Particularly here in the South I’ve learned that there’s a lot of history and perspective that goes along with that it. It’s all good things worth having a good conversation about. That’s what it’s all about being in, I think, the world that we’re in. We get a chance to have really good conversations about differing opinions.
John Sumser:
Yeah, I don’t think many people outside of the South realize that there’s an honest to goodness perception that the South has been under occupation for 150 years. You don’t get that outside of the South but I’ve met many people over time who believe that after the great war was lost, the Northern government came in and occupied the territories and it’s like Bosnia [inaudible 00:06:05] or something like that.
Stacey Harris:
It’s probably not quite as deep as that, but it’s definitely in part of the psyche, there’s no way about it. It’s part pf the decision making process. Kind of getting into that, into the news that we sort of have to cover today. There’s actually some really interesting news as it relates to sort of government regulations and labor laws., 36,000 Version workers walked off the job yesterday over a labor agreement.
There’s so big news around that and I think plays into some of the conversation we were just having. There was some interesting news this week about Google. Speaking about a company that sort of works inside of a bubble inside of another bubble right? Google actually done some of their own internal I would say, research on how teams work. It’s well worth I think, having a conversation because it fits a little bit with our conversation last week about do you build a team or do you develop a team?
John Sumser:
Right.
Stacey Harris:
Then there was an interesting article also sort of along the same lines about the fact that boards are not hiring, hiring is probably the wrong word, but boards are not bringing on enough people who understand technology and so companies are really struggling with the fact that they have really business savvy people on their boards but more than 50% of the time in the US and 95% of the time in Europe they do not have people on those boards who understand what’s happening in the technology market.
John Sumser:
Right.
Stacey Harris:
Again, part of this are we in a bubble? Do we really understand what’s happening in the market? Then we have some great interesting data about where venture-capital’s heading for the technology space today, particularly in the HR space. Then you had some interesting comments that you sort of pulled from a John Oliver from last weeks’ Tonight show about background checking and credit checks in the HR space, so a lot of stuff to talk about today.
John Sumser:
Where do you want to start? Dig into the mail bag and pull one out Stacey.
Stacey Harris:
Let’s start with … Often times we start with … We spent a lot of time last year talking about what’s happening in the financing side, in the funding side of HR technology and there was a nice little article some one had sort of pulled together the data and the stats from CB Insights around how much HR tech funding was happening currently today versus what had happened over the last several quarters. Because I think there was a big perception that all the funding was going to be pretty much bottoming out after last, and we’ve seen a big dip in funding, venture-capitol funding for HR technology environments in sort of the last two quarters of the year. I mean you talked about what was happening and why that was happening and how that was effecting even the stock market.
There’s some data to show that we’ve seen a slight uptick if you want to call it right? Half of the … Basically what we saw was that the funding deal slipped the second quarter, the second half of last year, but this year basically, the first quarter of this year we’ve seen that they have reached half as much as the highest quarter which was the second quarter of last year of funding, already in the first quarter. We’re seeing a slight uptick, not as big as we saw last year, but more than what people expected in a venture-capitol funding.
The three companies that they mentioned that got big funding deals this quarter were Snag a Job, which neither me nor you had heard about, which was a hundred million. There’s Series C hire got forty million in Series C and Checker, which is a background checking group got forty million in Series C funding. You’ve followed the funding market for quite some time John, does this surprise you that it hasn’t gone as far down as people thought it would?
John Sumser:
Well, what’s really interesting is talking about numbers without pictures is a really challenging thing to do, but what’s interesting is if you look at the trend over the last five years, the amount of funding coming into HR tech is continuing to rise. There was a really big crazy quarter a year ago where over almost a billion two was dropped into our marketplace. But the first quarter this year was almost six hundred million dollars and that compares to a total of about two hundred million in 2011, all of 2011.
There’s a continuous growth in funding and that surprises me. It seemed to me that the tech company revaluation that happened in the first quarter would have effected investment almost instantaneously and it hasn’t. It hasn’t, there’s something about HR tech that’s still attracting, in particular, Andreessen Horowitz, who is one of Silicone Valley’s largest firms. They are the leading investor in HR technology. You don’t really see their people around the industry in the way you see some other VC people, but it’s counter-intuitive to me that it’s continuing to grow. I would have expected it flatten out.
Stacey Harris:
Yeah, I thought the other thing that was sort of interesting about this article is that not only are we seeing sort of investment continue at pretty high levels. Higher than expected, but we didn’t get as much news this quarter about those investments as we did, I would say, the investments from last year. There wasn’t really big news announcements about these and big, big, marketing plays on this. When we saw Zenefits getting their big investments, and One Source getting big investments, there was no doubt they were pushing press releases out to every sort of HR influencer that they could find in the market. You just didn’t see that as much.
I’m wondering in some sense if the investment money isn’t now being looked at a little bit differently. It’s not as much as a PR play right? As it is truly investment money to get things moving. Because we say last year at least Q1-11 and Q1-16 the companies that basically acquired the most investment money from top to bottom, at least based of this analysis was Zenefits at 584 million. You have One Source Virtual at 165 and then there was a China based organization, which I’m not going to be able to pronounce the company [crosstalk 00:13:10]
John Sumser:
Aw come on.
Stacey Harris:
I’ll spell it,
John Sumser:
It’s spelled.
Stacey Harris:
Faiake.
John Sumser:
Go ahead, try and say that.
Stacey Harris:
No I’m not going to try and say that, but 163 million and then we’ve got Glass Door at 162 million. All very different organizations, all made a lot of news when those investments were put into them over the last several years.
John Sumser:
Yes, I think if you look, the top ten list is Zenefits, Once Source Virtual, the Chinese company, Glass Door, Gusto, Snag a job, PayCorp, Namely, HireVue and Plan Source. If you go from the bottom, Plan Source is an insurance brokerage play with benefits administration being sold to insurance brokers. HireVue is doing amazing stuff with analytics, they’re a video interviewing company, but what that really means is they’re applying facial recognition technology to questions of organizational design and development.
Namely is a full up HR suite. PayCorp is a payroll company, Snag a Job is an hourly job board. Do you know what Gusto is?
Stacey Harris:
I don’t know Gusto, that was on my list of to look up. I have not heard much about Gusto as far as an organization yeah.
John Sumser:
Glass Door’s money all came from Google. I’ve never heard of the Chinese company. Not only can’t I pronounce it, I haven’t heard of it. I bet there’s an HR Tech China going on right now so all of the in crowd who are at the HR Tech China event will know how to pronounce the name and what it means. One Source Virtual is a crazy investment in an implementation company. Then Zenefits is at the top of the list, but can you imagine financing an HR Tech company and having to think of a news story that goes “These Clowns invested in the same market as Zenefits?”
No body wants the news right now, nobody wants the attention because the Zenefits investment is problematic.
Stacey Harris:
Yeah, Zenefits has caused some PR issues I think for the whole market.
John Sumser:
Yeah, but still I’m floored. I think that everybody who listens to the show should scratch their head and go, “What?” but investment continues a pace, we’re in the right place at the right time.
Stacey Harris:
Well, and maybe to add on to that, as we said Checker is one of the organizations that got forty million here, just this year first quarter and they’re a background checking organization right? Most people are just like, “Why are background checking are getting large investments? I think more HR is in the mainstream then we give credit for these days. One of the things that you had pulled out, I told my counterpart who works with me that I sat for a half hour watching this Jon Oliver, Last week Tonight clip and cried and laughed at the same time on credit report right?
For anybody who hasn’t had the opportunity to enjoy some of the Last Week Tonight Show with John Oliver, which is hosted by HBO. I recommend that you take some time and look at some of the clips. This particular clip from last week I believe it was. John Oliver hit hard on what’s happening with the credit companies. The companies that basically create the credit scores and manage your credit history as well as the background companies and how people are struggling with not only the accuracy in a lot of these organizations. But how they have an impact on everyday things like getting an apartment and getting a job and being able to hold a job.
John, you pulled this together, but one did it hit you because it was mainstream? This isn’t just something talked about between HR geeks like us who really get into the technology around HR technology in this space or because there was something here that you thought was more interesting?
John Sumser:
Well, what got my attention. John Oliver is an amazing social critic, and he skewered the credit reporting industry and the background checking industries. What got me is inside of our world, inside of the HR tech industry, these things are sort of taken for granted. That jobs come with credit checks and background checks and that’s a normal thing. What John Oliver did was stitch together bits of pieces of stuff that point out things like there is no correlation between trustworthiness and credit score. There is no correlation between a whole bunch of things and the way that decisions get made and so you can imagine that this is the beginnings of a political issue to really look hard at how the entire credit scoring operation works. What happened?
What happened is that many people, myself included, got beat up in the down turn in 2007 and took credit score damage as part of that deal. That means that people who might not have had terrible credit scores 15 years ago now have credit scores. The credit score industry made a big deal about the association between credit score and character. That’s always been, credit worthiness and character have been correlated until the bankers stole all the money. John Oliver’s critique is that people are being denied work because of something in their credit history when it’s not really the problem of the people that have the bad credit history. That’s hard for us to digest because we’re a culture where that sort of thing is like the movement earlier this week, where Hilary Clinton got on the stage with the Glass door people about fair pay.
There’s a movement towards a transparency in pay and transparency in credit so you just talk about it., but it’s new.
Stacey Harris:
It’s new, it’s mew and I think there’s a lot of people, and I think you had posted it on Facebook and I saw some commentary from our industry friends who kind of said, “He got a couple things wrong, like not every job get’s credit checks.” I think the commentary around all of this is that the challenge isn’t just about transparency, let’s talk about this, let’s not hide it in the shadows, but the other side of it is, we make assumptions, we make long term assumptions in the recruiting and hiring space.
Money is being invested based on those assumptions on things like background checks and credit checks being a valuable hiring tool. When in reality, when you look at the data and this is the conversation we’ve been having about data for quite some time. It’s probably telling a different story. This idea that big data is starting to add to our transparency conversation. As much as we fear that data is going to open up more things then we want it to, create a Pandora’s box. It could also start to help us get some reality checks on that our assumptions have been wrong for many, many years.
One of the articles that I puled off of ZDNet from Jason Hiner, I follow some of his articles from e time to time, but he had a great conversation about the fact that big data’s biggest problem right now is it’s too hard to get the data into any of the systems. They have basically said that it used to be that big data’s challenge was the analysis issue, we couldn’t analyze structured and unstructured data together. You had to do it all by hand, you were hand coding and things like [inaudible 00:21:39] and stuff like that.
Today, he mentioned that almost every one of the big vendors Tableau, Click, TIBCO, Micro Strategy, they’re all offering huge tools now that can analyse data and do it very effectively but the biggest problem is getting that data in to the system. John Oliver’s example of credit checks and background checks are a great example of a lot of data there, with a lot of unstructured data about how well these hires do that hasn’t really been analyzed.
John Sumser:
What I find interesting, I don’t know if you agree with this or not, it seems to me that the cleansing of the data is where the real intelligence about the data comes from. Right? What you do when you clean data is you adjust it so that it fits categories, you make decisions about what goes … It’s like the stuff I’m doing when I’m moving. You make decisions about what goes into what box. That’s what data cleaning really means. In the process of making a decision of what goes into which box the person who makes that decision becomes really, really smart about what’s inside of the data.
Executives call it a “cleaning problem” company that wish that their data was perfect so they didn’t have to explain why their stuff doesn’t work, wished that it was organized perfectly. The reality is data isn’t clean, it isn’t going to get clean and the perfect world in which we have enough clean data so we can do perfect analytics is a fantasy. Right. Or do you disagree?
Stacey Harris:
Well, I think there’s going to be some answers, I think some technology is going to make this a bit easier probably. Right now we have to think about the fact that data cleaning is horrendous because we are dealing with multiple layers of data that’s basically coming at us from different sources and none of these systems talk together. I do think that over time it will become easier but I do think that you’re always going to need the categorization person.
Jason Hiner put forward there were three ways to solve this issue and I actually think he did a pretty good job of outlining them. He said the big data analytics software is going to get better, so that big data analytic software is going to start including tools to improve the cleaning process, because right now they don’t. Almost anybody you talk to does most of this work in Excel in one level or another and if it’s big data then they’re doing it in multiple levels of Excel.
The data prepare-ers are going to become the paralegals of data science, which I think is what you’re talking about. Data prepare-ers are going to be the people who really have the valuable insight in the organization, or the AI is going to help cleanse the data and that’s the part that’s a little bit scary. Because I think the artificial intelligence cleaning data is the part … That’s where we’re seeing Microsoft. IBM, Amazon. There’s a big update on Microsoft’s annual stock holder meeting that they hold that was just not two weeks ago, maybe three weeks ago. They talked about Microsoft’s plans around artificial intelligence and that communication.
I thought, watching what Microsoft’s doing with artificial intelligence is well worth I think anybody’s time. Because that, I think, is where the businesses are going to try and go, that artificial intelligence is going to clean our data. That, I think, is the scarier part, because we’ll get more of, “Well, someone programmed that background checks and hiring should be going hand in hand and they’re good together” and that’s someone’s opinion and that get’s put in as fact, and artificial intelligence picks that up and runs with it instead of the actual data showing us that.
John Sumser:
I wonder if this isn’t just, what we’re learning about artificial intelligence, is it’s going to be just like people intelligence. Which is there are some smart people and there are some stupid people. Right, so competitive differentiation is going to be, “Is your AI or smart or stupid?” If you’ve got stupid AI well, the thing that we want to avoid most, although I don’t know where you come out on it actually, is what kind of AI does the government have? From a corporate perspective the amount of investment you put in getting your AI really smart is going to be what makes a difference.
Stacey Harris:
Well, I think Google sort of did a little scenario run of some of this a little bit right. Google had, as you know, almost all the work that Google does is done in teams so they are always trying to improve the concept of hiring and building teams. Google tried to, I love … I personally picked this article because of this line. Google considered a Pokemon approach to team staffing. Considering my son has followed Pokemon from the beginning and he love Pokemon even at 17 and he’ll probably yell at me for pronouncing it inappropriately, but I thought what the heck are they talking about?
I can remember him having his Pokemon cards and saying I have to create the right Pokemon combination to beat whatever the little ball was that he was beating when he was 7 years old. We have a whole generation of people who have sort of grown up with the idea that they’re sort of creating the right combination of teams and so Google attempted … They made their HR department in charge of creating teams, when people were putting together projects. Teams not based off of John and Sue and I know them and their background but teams based off team dynamic science supposedly.
An extrovert, an introverts, someone who … diversity issues like women and men, issues about sort of about people who like to be in teams and not like to be in teams. They put together all their science, their artificial intelligence together to build this concept and it failed they said, 180 teams in Google sales and [inaudible 00:28:02] organization conducted the 100 interviews and they found that none of that really worked and that instead what they found was that it was better off if they just basically set up the right parameters for any team. Like psychology, safety, dependability, structure and clarity, the impact of the team. If the members knew all these things then any kind of team can work well together. Is that kind of what you’re thinking? The science could fail us.
John Sumser:
Well, this stuff is crazy, if you look at the factors in the Google bid, psychological, safety, dependability, structure and clarity, meaning an impact. These are all factors that push away from diversity. That absolutely push away from diversity and inclusion and so there is, I am now hearing routinely that at certain phases in an organizations growth the best kind of culture is mono-culture. This tends to come out of Silicone Valley because so many companies get started in Silicone Valley, but there’s a way of looking at the start of companies. At E Harmony when I went to the Elevated Careers Launch at E Harmony they cited data that said having everybody be the same on a company so psychological, safety, dependability, structure and clarity, meaning and impact was the best the way to build a team.
I went, “Aye, yi, yi, yi, yi.” That’s not what we’ve been trying to do here for the last 50 years are so. I think we’re going to have a great big giant conversation about whether what Google is finding has to do with what happens when you have so much money that your biggest problem is over-resourcing stuff versus what do you got to do when you’re little and scrappy.
Stacey Harris:
We cycled back to where we started at John, are we in bubbles right?
John Sumser:
That’s right, that’s exactly right. That’s exactly right and we have wailed through our half and hour. It’s been extraordinary as usual Stacey, thank you so much for doing this.
Stacey Harris:
Been fun and great to get a chance to chat with everybody this week. Hopefully we get some more interesting conversations for next week. We didn’t even get a chance to talk about Version and the 36,000 workers who did a big labor movement this week. Maybe next week, we’ll try to get that in the conversation.
John Sumser:
Really, when was the last time 36,000 walked off the job and this is about shipping jobs over seas.
Stacey Harris:
It is yeah, that was their big … I think a little bit about communication with in the company because the big focus from that perspective was that they were reducing jobs in a particular business function that is not doing well, even if the company is continuing to make record breaking profits this year in other areas. How do we think about company dynamics and PR is a big issue for Verizon and I think this is a big concern for the market as a whole when we start thinking about labor movements.
John Sumser:
That’s right, we’re going to have a big pile of stuff to talk about next week. Thanks again Stacey and thanks everybody for tuning in. You’ve been listening to HR Tech Weekly, One step closer with Stacey Harris and John Sumser on our 66th show. Have a great afternoon, bye-bye now.
Stacey Harris:
Thanks everyone, bye.
End Transcript