A lot of my companies — SVA, Lambda, Major League Hacking — are in the business of training people and placing them as fellows in companies. Increasingly, many of my companies — Maven, Reforge and several more upcoming — are involved in upskilling of current employees in companies. What these two sectors share is that the most rational buyer is a manager (for fellowships) or the employee themselves (for upskilling). The challenge is that the budget for both of these areas (hiring and learning and development) often fits under HR in larger companies.

I am sure that there are pro-active innovative HR departments out there, but most of my companies experience is that HR is where innovation goes to die. If a development manager finds that running one month fellowships without interviews is great for her hiring, she runs straight into the rules HR has created, enforced with a budget for paying for those fellowships. HR likes resumes and interviews a lot and the average HR person has grown up with this as a norm. And HR is where all of the company recruiters live, so changing the process is not in those employees best interest. Trying to change hiring behavior is not that difficult with hiring managers, who do the most practical thing to get the best people. But it’s very difficult to change HR practices, and it’s likely at scale that HR needs to come around to this new way of hiring or the innovation will die.

Likewise, when it comes to upskilling, HR often has the budget. So an employee takes a class and either pays for it herself or asks her manager to reimburse. While this works at small scale, at some point the dollars get large enough that HR gets involved. This is also a difficult situation for HR because they often employ a large number of learning and development professionals, and moving money to outside vendors can run against those employees best interests. So there is probably even more friction from HR in this area.

All of this reminds me of the IT organization in the client-server era. That organization, while not the direct buyer, was responsible for implementing new systems, so had a large amount of power to determine what was purchased and when. Then SaaS came along, departments bought what they wanted, ignored IT, and the rate of innovation for tools increased exponentially.

So what happens with HR? Or more specifically, does it change the nature of HR? It feels likely that when it comes to a lot of the ways that culture, hiring, evaluation, and firing get done, HR will stay central. But do these new ways of hiring and upskilling start to move budget out to the rest of the organization? I don’t know nearly enough about the power of HR relative to development or sales, but I bet it’s similar to what their relationships were with IT. Ultimately, HR is a service organization to the rest of the company, while also having some policing responsibilities. It will be interesting to see what happens as many of these edtech companies get to scale and whether a re-organization of HR could make it much easier for new startups to innovate in these areas in the future.

Co-founder and CEO NetGravity, Rocketship Education, Zeal Learning, Dunce Capital. john@danners.org https://dunce.substack.com/