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Evaluating HRTech in a Modern Era: 7 Essential Practices to Add to Your Playbook

December 6, 2024 | Josh Tanenbaum

Two coworkers sitting together looking at laptop in office

Today’s HR executives navigate a complex tech landscape in which they must balance the employee experience, organizational goals, and data security. 

An increasing focus on vendor compliance and cost management has shifted preferences toward comprehensive platform providers and domain expertise versus point solutions. 

Here are seven essential practices in evaluating HRTech.

1. Determine Your Technology Needs 

Before allocating money to purchase new HRTech, first assess your existing technologies. Determine whether you have the existing functionality needed to achieve your new goals—and those of your employees. You’ll want to consider the technologies’ impact on your labor force and organizational sustainability. This may require engaging stakeholders, such as your chief security officer, chief technology officer, or chief sustainability officer.  

For instance, consider an employer aiming to increase employee retention and talent acquisition using a student debt management platform that alleviates financial stress. An employer might consider benefit utilization rates and improvements in employee retention and conversion rates for extending job offers. For the employee experience, CHROs will evaluate both quantitative metrics, such as the total amount of student loan payments saved, and qualitative feedback from employees regarding perceived financial stress relief. By beginning with clear objectives, HR leaders establish criteria for success that guide the selection and implementation processes, ensuring technology investments are not just reactive but strategically aligned.

2. Engage Key Stakeholders—and Do It Early

HRTech impacts many areas of an organization, so it is crucial to involve stakeholders from finance, IT and information security (InfoSec), and legal and compliance in the decision-making process—and to do so early. Cross-functional collaboration provides diverse perspectives that strengthen the business case and mitigate risks.

Key Questions for Stakeholder Engagement:

  • Finance: What return on investment are we expecting by implementing this type of technology? What would be the approximate cost of purchasing the technology? Do we have it in the budget? Do we need to implement the technology in phases? How would financial leaders assess the impact on cost-saving or revenue-enhancing goals?
  • IT and InfoSec: What capabilities do we need from the new technology? Will we be replacing existing systems, or do we require technology that can integrate with them? Do we have the in-house resources to implement and maintain the technology, or will we need outside consultants? Who would have access to these systems?
  • Legal and compliance: What laws do we have to comply with relative to the technology? For example, artificial intelligence (AI)-related technologies have compliance regulations. Several states have implemented regulations related to AI usage in employment decisions. Will there be requests for proposals (RFPs) for vendors? Who will be responsible for data security?  

Engaging stakeholders early helps to identify potential challenges, ensures alignment with internal policies, and builds support across departments, making implementation more seamless.

It’s also important to consider who owns the risk. For example, consider a technology that outsources logistics to 1099 workers and provides micro-health and -retirement benefits. It’s important to assess whether the solution offers an “employer of record” or whether legal risk falls to the employer; conversely, be wary of worker classification compliance challenges. Another case: If an employer offers an employee a wage access or paid time off liquidity benefit, consider who owns the financing recourse—the employer or the employee? Are there any second-order effects employees experience that could reverse the intended value?

3. Prioritize Enterprise-Grade Solutions: Data Security, Compliance, and Privacy Standards

With increasing regulations and litigation around data privacy, robust security, and compliance are non-negotiable. These components will need to be included if an RFP is created. Solutions that don’t meet data protection standards can jeopardize employee trust and organizational integrity. 

Key Questions Before Buying Enterprise-Grade Solutions:

  • Compliance certifications: Does the vendor hold certifications such as Systems and Organizations Controls 2 (SOC 2), and is it compliant with regulations such as the Health Insurance Portability and Accountability Act (HIPAA) and the General Data Protection Regulation (GDPR)? These credentials signal that a provider meets rigorous data protection requirements.
  • Integration capabilities: Can the tool integrate with existing HR systems to maintain a unified, secure data environment? Integration reduces the risk of data fragmentation. 
  • Data transparency: Does the provider offer clear documentation on data handling and privacy policies? Transparency builds trust with both employees and compliance teams. 

4. Evaluate the Solution’s AI-Enabled Offerings

When prioritizing potential technology solutions, you’ll want to consider what they offer in terms of AI. The technology could possibly help with identifying at-risk employees, assessing skill gaps, providing targeted development, customizing health care coverage—and solving many of the “one-size-no-longer-fits-most” challenges in benefits today. But AI is also a flashy phrase that can mean everything and nothing. If a product claims to be “AI-enabled,” dig into what that means: Directly ask what AI’s role is in the product and what (if any) of your data will be used to train it.  All AI is centered on data and logic, but solutions vary greatly based on goals, techniques, and learning capabilities. 

Key Questions for Evaluating AI:

  • Input data: What information does a product’s model digest, and how is it utilized? Consider the privacy of that data and its ownership once digested. 
  • Techniques: Whether it’s computer vision, natural language processing, neural networks, machine learning, or another approach, why did the company choose that tool? Is the model supervised or unsupervised? How narrow or wide is the scope of the AI—does it work only for one specific task, or does it have broad applications? How does the model learn over time? Consider whether the company can integrate its values into the model design and what resources are required to maintain the solution. 
  • Outcomes: How does AI contribute to the product’s value proposition? How did the firm test its model’s efficacy? Consider potential bias traps in its logic that could challenge its ability to produce accurate results.

5. Review Proposals: Select Vendors to Demo Products and Discuss Costs 

HRTech can generally be bucketed into three pricing schemes: price per employee per month, utilization-based pricing, and tiered pricing. Noncore benefits (perks outside of retirement and health insurance) have an average utilization rate of 5%. Well-designed pricing ensures alignment with firm and employee success. Firms are shifting toward utilization-based pricing that scales tech costs with outcomes, minimizing waste. Tiered pricing, on the other hand, provides the advantage of greater cost predictability. As an HR executive, you’ll want to take your time reviewing technology proposals and opt for aligned, flexible, and scalable pricing models.  

6. Pilot Solutions First and Measure Success

A pilot phase is a strategic way to test a solution’s usability and relevance, allowing HR leaders to receive valuable feedback useful for refining the tool. Alternatively, you can sign a master service agreement (MSA), starting with a pilot stage, and then auto-trigger a wider rollout to avoid going through procurement or compliance twice. 

Key Questions for Pilot Testing:

  • Gather user feedback: Are there processes to collect feedback on usability, relevance, and potential issues? 
  • Champion engagement: Do you have pilot-phase users who can advocate for the tool upon full rollout? Engaged users in the pilot group often help to drive broader adoption.
  • Cohort analysis: What user personas or demographics benefit most (and least) from the solution? What characteristics are driving utilization? What product features need to be adjusted for your organization? Workforces are increasingly diverse, and one size of a solution no longer fits most. Testing for how a solution effects one part of your employee base versus another is critical to a successful roll-out. 

Testing with a small employee group before a full launch minimizes potential disruptions and maximizes the likelihood of a successful implementation.

7. Communicate the Technology Rollout and Offer Training

Once your pilot phase is complete and any course corrections have been made, it’s time to roll out the HRTech at your organization. HR executives are integral to ensuring employee buy-in of new technology, so you can make a big difference.

Key Questions for Rollout:

  • Methodology: How do you want to communicate the new technology to employees (email, Slack, in person)? What’s the best way to offer training (self-paced learning or a live training session)?
  • Context: How do you want employees to perceive the new technology? A big part of this is offering context and background so employees understand the reasoning behind this new offering. By providing clear communication and transparency, you’ll increase the chance of employee buy-in. 

The Bottom Line

HRTech is now experiencing its golden age—and with it, the demand for sophistication around procurement has dramatically increased. Investing in benefits that promote wellness, career mobility, and employee satisfaction yields significant returns, contributing to a thriving, engaged workforce. 

Applying these seven practices enables organizational leaders to make informed, high-impact tech investments that support organizational goals. It also helps them create a workplace where employees thrive.

Josh Tanenbaum is the founder and managing partner of Rebalance Capital and the author of the concept paper Don’t Count B2B2E as B2B2C—It’s Just Different. Rebalance Capital is a leading innovation source for HR leaders in sophisticated and regulated organizations. Tanenbaum previously was a human capital consultant at Korn Ferry.  

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