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Formal HR management system uptake lags among partners

Channel partners often lack a formal HR management system and may not employ the HR processes and best practices they need to manage rapid growth.

Channel companies are adept at offering a plethora of services to businesses, but they often find themselves needing guidance when it comes to dealing with internal human resources (HR) needs as their own business grows.

Many partners, smaller companies in particular, have yet to introduce a formal HR management system. Indeed, most channel partners are still trying to understand how best to allocate their resources when it comes to talent acquisition, training and the "ultimate deployment of manpower to sell and manage customers in a world driven by cloud, mobility, analytics and social media," noted Anurag Agrawal, senior analyst at Techaisle, a small and medium-sized business (SMB) and channel partner market research firm.

While training and certification were the most important areas for resource allocation in 2013, this year the post-sales service and support category is the top area for allocating resources, Agrawal said.

The lack of organizational structures and systems for recruiting personnel and allocating resources can become an obstacle for growth-oriented channel firms.

"Smaller MSPs/resellers aren't any different than any other companies in that they must attract top talent and likely lack the HR processes and best practices that may be required for rapid growth," observed  Eric Klein, director of mobile software at VDC Research "A big challenge for any growing company is to have the appropriate -- and seasoned -- HR personnel in place for oversight and governance."

In fact, many channel partners do not even have internal HR departments, yet HR technology is changing at a rapid pace, making it a challenge for channel partners to effectively learn, adapt, internally adopt and resell human resources management systems, Agrawal added.

Some channel companies, however, have adopted technology to automate the HR function and simplify processes.

Jacobus Consulting, a Rancho Santa Margarita, Calif.-based company that provides IT services to healthcare customers, lacked a formal HR management system, relying primarily on Microsoft Excel spreadsheets to track its HR information, noted Alan Hall, senior vice president of Information Technology at Jacobus. The consulting firm has deployed FinancialForce.com's enterprise resources planning (ERP) platform, which includes a human capital management (HCM) app. FinancialForce is built on the Salesforce1 cloud platform.

As [channel companies] grow from small to large and evolve their business to new IT consumption models, their culture will change, and they need to be very sensitive to that.
Kevin RhonePractice Director of Channel Acceleration, Enterprise Strategy Group

"Prior to implementing FinancialForce.com, our ERP functions were only partially automated," Hall said. "We used a variety of different applications and a lot of Excel spreadsheets. Over time, this created a lack of visibility into internal processes, which led to a disconnect between our departments. Additionally, reporting was time consuming, and sharing and accessing information was painful because data was stored across a variety of documents and applications. We had simply outgrown Excel and, as a result, were spending too much time and money on reporting, which was burdensome for employees."

FinancialForce HCM now enables Jacobus' employees to easily access and share information between teams, Hall noted.

"FinancialForce HCM made it possible for us to break down internal silos and use the same dashboard across the entire business, including sales, marketing and supply chain, so teams could share data quickly and easily, and management could make more informed business decisions," he said.

FinancialForce's human resources management system also helps keep employees up to date on company policy changes, increases transparency around back-office processes, and provides a consistent, reliable interface for Jacobus' consultants to submit reports, Hall explained.

Acquiring new talent

Kevin Rhone, practice director of Channel Acceleration at Enterprise Strategy Group said channel companies with less than 75 to 100 employees typically do not have their own dedicated HR staff unless they're in high-growth mode.

Those companies, Rhone said, need to think about two things in terms of their HR needs as they grow from small to large: Acquiring different talent and changing their culture. "They need to hire people with different skills than they have on board."

The list includes people with skills in C-level sales, broad technology implementation, consultative data migration and management, system integration and software development. No longer are they just selling to the heads of IT, he said, but to lines of business as well. In addition, "Increasingly, they're going to be asked by their customers to integrate their core technology to other vendor solutions," he said. "So it's a completely different skillset and they're competing in a fierce market to recruit people with that expertise."

He added that this probably means channel companies will have to pay higher salaries for employees with different skillsets than they're paying now and they also need to "paint a picture for candidates that [the company] is very forward-looking and innovative, so it's a corporate culture issue."

This will be a challenge for most partners because they're changing their organization and processes, which is a hard thing to do, Rhone noted.

Establishing compensation programs

Cloud-oriented channel partners need to develop appropriate compensation and incentive programs that support both pre-sales and post sales activities, said Agrawal. Like Rhone, he said most channel partners either do not have robust HR departments or they outsource HR to consultants or vendors specializing in that area. But the latter do not help them develop effective programs for compensation, internal training, certification, product vs. services sales, and recurring vs. non-recurring revenue, to determine, for example, whether sales personnel should be incented on total contract value, he said.

Compensation and incentives need to change in order to reflect the transformation of a partner's business model to now include both traditional sales and more recurring revenue, Rhone maintained. Within a partner organization, "hunters" find the big-ticket sales and then hand them off to "farmers" to support after the deal is closed, so the hunters can go off and find their next big sale. Partners must have a combination of hunters and farmers, each with different skills and expectations matched up with different compensation structures that motivate and reward the right set of behaviors, he said.

 For example, customer-success employees -- sales people who are measured on such criteria as customer satisfaction, renewal rates and upsell as opposed to net new sales -- would generally receive a higher base salary and lower incentives. Rhone said he believes partners need to also provide incentive compensation for technical and support people in this model as well. The idea is to match those employees' compensation plans to the recurring revenue model -- something that is not often done.

"As [channel companies] grow from small to large and evolve their business to new IT consumption models, their culture will change, and they need to be very sensitive to that," Rhone said.

Additional reporting by John Moore.

Next Steps

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Read about the best hiring practices for channel partners

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This was last published in May 2015

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