A Market for Human Resource Solutions

Recently I did a write up about Netflix and their Human Resources strategy. The post is uncreatively titled Netflix does Personnel Strategy.They basically only want high performers and will give them freedom to perform. Those that don’t perform are asked to leave. It’s nothing personal, people and situations change. What I also like is that the employees know this strategy from the point of hiring. No surprises.

The issue I see is how do you rate your top performers? The desire is to make it objective, but no job is completely bias free. Subjective components are necessary, they just can’t be overwhelming to the process. That is why I see a huge market for companies that specialize in offering some sort of method for optimizing personnel performance evaluations.

The other day I was checking the financial area of one of the websites I like and they ran a story about a small cap that was set to bust out.Its called Successfactors. They offer a package of these evaluation tools. They do it through a technology business model called Software as a Service or SaaS. How it works is a company only pays for the amount they use. Usually there is some sort of tiered level of access,but it doesn’t have to be. If one month I use 100 widgets then I pay for the 100 and the next month I use 500, I pay for that number and then the next month I only use 75 then I only pay for that. I don’t need to pay for 500 and have the excess sit in inventory waiting on the spike of use. The other advantage is since its software, it can be updated pretty regularly, so keeping current with latest version is a plus. If I purchase a static license I usually have to pay an additional fee for the most current upgrades. Microsoft Windows is the best example of the normal method. The SaaS model was made famous by a company called salesforce.com, but companies like Amazon have elevated it to another level of mainstream.

Not many would argue that a company’s biggest differentiator is its employees. Having good people is the basis for many books like In Search of Excellence by Thomas J. Peters and Good to Great by Jim Collins. I believe there are huge business markets in the HR space.Until companies come along and grow at tremendous rates, these markets are considered niche. But as companies like Paychex and Successfactors prove, being able to manage your human resources pays – well.


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