Why SMBs Are Buying — But Not Using — HR Tech

By Sarah Fister Gale

Feb. 26, 2019

Small and midsized businesses may be investing in more HR technology, but they aren’t making good use of it, and that’s a shame.

A new survey from HRIS provider BerniePortal found that while 64 percent of small and midsized businesses use HR software, few are using technology to manage the full scope of HR. “SMBs are definitely familiar with HR software, but they are not using it,” said Alex Tolbert, founder and CEO of BerniePortal.

Tolbert attributes the lag in uptake to the fact that HR leaders in smaller companies are time-strapped and over-worked. More than half of the companies surveyed have just one HR person on staff, and many of them report that HR is not their sole responsibility.

This creates a Catch-22 for tech adoption. Sole HR leaders know they can benefit from automation delivered through HR software, but they don’t have the time, budget or expertise to choose products, vet vendors and deploy new applications. “The survey tells us that HR administrators are time-challenged, and that they recognize the opportunity to streamline their workload through automation,” Tolbert said. They just need to find the time and resources to leverage them.

SMBs Spend Big

This transition does appear to be occurring. Sierra-Cedar’s 2018-19 HR systems report found that the fastest growing segment of new HR technology buyers is small businesses, with 38 percent reporting plans to spend more on HR tech in the next three years.SMBs hr tech

“By the time a business reaches 20 to 50 employees, they are starting to see the value of core HR technology,” said George LaRocque, founder and principal HCM market analyst for LaRocque LLC in New York. His research found small companies use an average of seven to eight HR related apps at this point in their growth cycle. “It’s not hard to get to that point even in a small firm.”

Also read: AI Is Coming, and HR Is Not Prepared 

Usually they start with payroll, though demand for talent is causing a shift toward talent management systems. The Sierra-Cedar survey found small businesses were more likely to increase spending in talent management applications than any other category.

“Across industries, everyone has a talent problem,” LaRocque said. “They are competing with each other for a limited talent pool, and they have to get creative in the way they source.” That is spurring them to adopt applicant tracking systems and recruiting apps, as well as in-house tools to engage workers and manage succession planning faster than they might have in the past. “HR is being pushed to find more innovative ways to address the talent issue,” LaRocque said. “It is driving the adoption of more HR applications in small businesses.”

Though even if small companies are eager to adopt new tech, they are cautious about where to spend money, and how to generate the most value from limited budgets.

For very small companies just beginning the HR software journey, LaRocque encouraged them to start with core HR solutions. “You want to get payroll, benefits, time and attendance, and paid time off in order, and there are a lot of platforms designed to help small companies do all that,” he said. “Then you can start looking at purpose-built solutions to meet your specific workforce needs.”

The HR problems a company faces will determine the kinds of tools they should deploy — but they shouldn’t delay. “If you think you don’t have time for technology you’ve got your head in the sand,” he said. The time savings that HR leaders achieve by automating laborious HR tasks make these tools immediately worth the investment, especially for small companies with under-staffed HR teams.

Sarah Fister Gale is a writer in Chicago.

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