Executing Integrated Talent Management (ITM) – Step 3: Science and Measurement

May 10, 2012

HRchitect has been involved in approximately 2000 HR technology related projects for hundreds of companies of all sizes and industries across the world. We have gained tremendous insight that we love to share with you so that you can benefit from the experience, and the lessons learned from others. With 15 years in business behind us in working with many of today’s leading companies, let us best position your company for a successful future with Talent Management Systems!

Successfully executing the ITM concept requires a holistic approach that includes embracing ITM as a philosophy, developing a strategy, applying science & measurement disciplines, breaking down process barriers, selecting and implementing enabling technology, and sustaining the new solution over time.

Three previous posts around this subject have given you an overview of our seven-step process for a successful approach to ITM and covered the first two steps – Philosophy & Strategy. Now we move on to step #3.

Step 3 – Science

& Measurement

 

Fundamental question:  What tools and methodologies will enable us to best measure and predict outcomes?

Another critical element that is unfortunately often neglected or totally absent in ITM implementations is the application of the science of individual and organizational psychology to strategy, processes, and technologies. Note that it’s not just about the individual employee – their skills, competencies, performance, etc. – but also how organizational elements like culture, HR program effectiveness, and linkage to business outcomes can impact both individual and organizational performance.

One area where the application of science is extremely important is pre-hire assessment. Providers of scientifically validated assessments have partnered with many customers to demonstrate dramatic overall improvements in traditional HR measures. As an example, Kenexa (a leading provider of assessments) reports that one customer experienced 26% higher performance review scores and 40% fewer counterproductive incidents after an assessment was implemented for a key job category; another customer showed a direct improvement in customer satisfaction of 32% compared to the period before the pre-hire assessment was put in place. A retail customer of SHL (another leader in the assessment space) reports that associates that scored well on the pre-hire assessment sold on average $12 more per hour – a significant impact to the business when multiplied by the sales force of 6,000+ employees.

These examples show that the application of science to ITM processes can make a dramatic difference to workforce performance, and thus substantially improve business outcomes. Science can be applied in more than just the area of pre-hire assessments; it plays a key role in analyzing the impact of changes to process and technology and developing a ‘closed loop’ metrics feedback system, which leads us to the second component of this step – measurement.

It is not possible to overstate the importance of developing a strong foundation of measurement to support ITM. The HR function has historically been a laggard in this area, with a prevailing opinion that HR is “about people” and that “it’s just too hard to measure HR – it’s too soft.” We believe that this attitude is a cop-out, one that has its historical roots in the lack of analytical thinking skills resident in many early HR practitioners. Lack of understanding and expectations by senior business leaders has also been a contributing factor, and the dearth of user-friendly HR reporting and analysis tools has also had a part to play. Whatever the reasons for the lack of HR measurement in the past, it is clear that there is no excuse for this mindset moving forward. As one senior HR leader of an HRchitect client recently put it, “What gets measured gets done. We must continually strive to increase the measurement acumen of the HR function in order to increase the impact of HR program investments on business outcomes.”

In this methodology, the definition of the measurement framework is best accomplished via dialogue with stakeholders throughout the organization. We recommend that project teams conduct a role-based analysis to determine critical metrics. This usually results in a very large pool of potential metrics. Although it is tempting to try to ‘boil the ocean’ and give all roles everything, it is much more realistic to prioritize the metrics list based on the number of roles needing a given metric, impact to the business, ease of delivery, and other criteria. The result will be an initial subset of metrics that satisfy the 80/20 rule, and a plan for delivering extensions in phases over time.

HRchitect finds it useful to categorize metrics according to the following taxonomy, which is based on metrics complexity versus impact:

Figure 1 – HCM Metrics Taxonomy

 

  • Information Distribution – these HR metrics are simple, fairly easy to gather, and sent out to stakeholder roles periodically (e.g., standard reports)
  • Metrics Delivery (Dashboards) – as we move up the complexity scale a bit, this category includes ratios and graphical depictions of data delivered to a role; more sophisticated capabilities include the option to drill down to the underlying details from summary metrics.
  • Contextual Embedded Analytics – another step up in both complexity and impact, this category includes metrics and analysis that is embedded into the supporting technology in order to provide ‘just in time’ information needed by a role to make a decision.
  • Correlated Analytics – this category of metric takes data out of the HR silo and links it with enterprise financial and operational information to understand the impact of HR program investments.
  • Predictive Modeling – this “Holy Grail” of measurement is to use historical and current data to predict future results – this is the most complex of all measurement categories, but has the potential to deliver the greatest impact, once the organization is able to accumulate longitudinal data for robust trend analysis

To show how this taxonomy plays out in an ITM function, here is an example from Performance Management:

 

Figure 2 – Performance Management Metrics that Matter

Beginning at the bottom left are metrics commonly delivered via standard reports – useful, easy to gather, but more focused on the efficiency of this ITM process. Metrics in the middle of the chart are more commonly delivered via dashboards or embedded analytics, and move into the realm of effectiveness. Finally, those examples in the top right are related to correlation and prediction; complex to accumulate and analyze, but of great value in determining the impact on the business.

As an ITM project team works to identify the initial metrics subset and extensions, is it likely that the first delivery will have a higher ratio of efficiency metrics, as it will be important to deliver the standard data that roles are expecting. However, we recommend that at least some effectiveness and impact metrics be included (1 or 2 minimum per ITM function) in order to prove the value to HR and the business, and to build momentum for future delivery of the extensions to the measurement framework. In this way, the project team can team science with measurement to define critical organizational metrics for roles and stakeholders within the organization; this will ultimately drive improved linkage to business outcomes in subsequent phases.

We’ll address the next step in successful ITM execution, Process, in the next blog and please let us know how HRchitect can assist you to get maximum benefit that comes from Integrated Talent Management.

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The Evolution of Integrated Talent Management (ITM) – More Leverage Points

April 10, 2012

We went through some of the leverage points that come out of the recruiting/onboarding process in the last post. Now you have some talent onboard and it is time to look at what’s next with linkages in other parts of ITM. Again, when all of this is working together, the positive impact is greater than can ever be achieved on their own.

Learning Management – Information on both available, required and completed learning events can be linked to multiple functions, including:

Performance Management—tying the learning event catalog into the appraisal process can help managers select learning events that can help the worker address performance gaps.

Compensation—completion of learning events can automatically feed skill-based pay (where utilized).

Succession Management—weaving learning information into this process will enable the firm to identify what learning events are available to help prepare successors for their most likely assignments.

Career Planning—as workers compare themselves to potential positions, knowing which learning events are needed to improve talent profile gaps adds value. A key trend that has emerged over the past three years is the growing awareness of the need to capture and codify informal learning events in addition to the formal instructor led (classroom and virtual), and on-line events in the traditional learning catalog. Informal learning consists of many potential types, including on-the-job training, job shadowing, mentoring, and reading assignments; each of these can become part of the organization’s learning catalog, and linked to competency, skill or other profile elements to drive improvement recommendations.

Performance Management – This function contributes to ITM with the following leverage points:

Learning Management—performance gaps highlighted in the appraisal process can be tied to specific learning events, thus improving the effectiveness of manager feedback.

Compensation—as firms move toward increased use of pay for performance (including multiple types of variable compensation), appraisal results should drive payouts commensurate with actual performance.

Succession Management—performance ratings should be linked to this process to help identify consistently high performers that otherwise might be missed.

Two important trends have emerged over the past several years in the performance management arena. The first is an increased interest in the concept of calibration—how best to normalize performance ratings across the enterprise to take into account inevitable variances in rating by different supervisors. The second is a continuing drive towards pay for performance by tightening the linkage between performance appraisal results, goals achievement, and compensation. Vendors have responded by delivering product enhancements to address both of these trends

Workforce Planning & Metrics – Even though unemployment in the U.S. remains high, many firms still find it difficult to fill certain skilled positions (this is particularly true in the high tech, healthcare, and oil & gas industry segments). This has driven substantially increased interest in workforce planning solutions. While this discipline is still in its infancy in most organizations (this has not changed much over the past three years), it holds a central role in ITM. Done right, workforce planning must include the external view of labor availability as well as the internal analysis of the workforce and projected needs. The results of workforce planning should both feed and be fed by the other ITM functions in a sort of ‘closed loop’ feedback/response system. For example, the workforce plan should drive which positions will be recruited over the next year, and results of the recruiting process (e.g., longer hire cycles for certain positions) will impact the next iteration of the workforce plan. Poor performance results for some needed competencies may cause adjustments to the workforce plan, such as expanding or reducing the number of planned staff with those competencies. And none of this will work properly without a strong foundation of metrics and workforce information management, as the right ratios and indicators must be tracked through all of the ITM functions.

Offboarding – This function has received much less attention (and consequently, usage) than onboarding, even though the same tools and processes (in reverse) can and should be used to facilitate the proper exit of workers from the organization. Regulatory compliance (e.g., Sarbanes Oxley in the U.S.), has driven the need to ensure appropriate cessation of system access privileges upon termination, while other regulations such as COBRA mandate timely notification and processing of benefits continuation. Some analysts have coined the term “Enterprise Transition Management (ETM)” to describe onboarding and offboarding (and even the use of these tools to process workforce mass changes due to internal restructuring/downsizing/M&A), but this term has not yet entered into common usage.

We hope you found this useful in regards to the benefits of Integrated Talent Management. We’d love to help your firm realize these benefits so let’s talk!

Matt Lafata, HRchitect

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The Evolution of Integrated Talent Management (ITM) – Leverage Points

April 9, 2012

We recently talked about the Talent Profile as being the linchpin of successful ITM and everything revolving around it. We also talked about some of the important “leverage points” or linkages. Let’s branch out a little bit and talk about some of the other important linkages in ITM that, when working together, multiply each functions’ impact.

Assessments – Over the past three years there has been an increase in the general market realization that assessments can add value to each ITM function. This has led to an expansion of the use of assessments beyond their historical niche in recruiting and leadership development. Of particular importance is the need for assessments to be validated as defensible instruments for recruiting, measuring talent profile “gaps,” and measuring progress against profile gaps as well as achievement of objectives.

Recruiting – A significant amount of information is collected during this process; in traditional talent management this data just sits in the applicant tracking system (ATS), never to be used again. ITM strategies try to leverage recruiting data within multiple other functions, including:

Learning Management—profile gaps identified during recruiting assessment can drive a learning program designed to move the worker towards full proficiency.

Performance Management—recruiting assessments can form a base record for monitoring potential performance gaps.

Succession Management—job and experience information gathered during the recruiting process can become part of the ‘internal resume’.

Career Planning—job requirements (e.g., competencies, education, experience) used for recruiting can be leveraged by employees and contingent workers to determine potential fit for other positions in the organization.

The past three years has seen a significant growth of interest in the twin concepts of candidate relationship management (CRM) and managing external talent pools. Organizations want to cultivate longer term relationships with potential candidates by establishing communication channels (e.g., e-mail, text, social networks, collaborative websites) to let them know about job openings of interest and to communicate the firm’s employment brand. The goal is to maintain a connection with high performing workers of interest as their careers develop, so that they can potentially fill a role with the organization in the future. Vendors have responded to market interest by building tools to facilitate CRM (some more than others); they have also moved aggressively to delivery better integration with social networking tools as an aid to recruiting—another strong growth trend for this function.

Onboarding – Once a candidate has been selected, the role of onboarding is to ensure as quick and effective a transition to fully competent performance as possible. Much of onboarding is administrative (e.g., facilitating secure access to buildings and IT networks /applications, ordering space and equipment, completing new hire paperwork and benefits enrollment, maintaining contact with new hires prior to their start date); however, it can significantly impact ITM by facilitating the transfer of competency and assessment information from recruiting to other ITM components. While some organizations (and vendors) consider onboarding to be a part of recruiting, others (including HRchitect) believe it has achieved a level of importance that merits consideration as a separate component. It is important to note that multiple vendors have rolled out onboarding applications, either as niche solutions or as part of their ITM suite.

Now that we have somebody “on-boarded”, we’ll tackle additional aspects of Talent Management and their linkages in a future blog.

Matt Lafata, HRchitect

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The War for Talent and the Talent Profile

April 6, 2012

In a recent blog, we talked about four “talent” areas that we feel companies must focus on today in the ongoing “war on talent” – understanding your talent, reviewing your talent, reaching talent and assimilating talent. We touched on the subject of the “talent profile” and thought we would expand on that a little.

First, our definition of the Talent Profile (and Competency Management) is that it basically functions to track employee skills, competencies, preferences, and other characteristics in one place for use by other Integrated Talent Management (ITM) functions. This also includes competency development/modeling and integration to 3rd party competency providers.

As an aside, and for some background before getting into the Talent Profile, HRchitect believes that the addition of the word Integrated to “Talent Management” continues to be a critical differentiator for many organizations. Although just about every firm has developed processes and systems for these functions, to this point they have tended to operate in silos, with very little connection of either process or technology. Even though many of these functions leverage significant common data and attempt to have the same outcomes (e.g., improved retention, increased productivity), oftentimes haphazard and uncoordinated implementations have caused results to be much less than optimal. The situation has often been exacerbated by focusing on technology enablement as a ‘quick fix’ to perceived issues, leading to a hodge-podge array of non-integrated technologies and processes. The bottom line for many organizations is a reduced return on their talent management investments.

After at least five years of intensive marketing of the ITM concept, we are starting to see an impact. Today even mainstream firms are trying to take a more strategic, comprehensive, and integrated approach to their talent-related functions. The goal is to structure programs, processes and technology in a cohesive manner that multiplies each function’s impact.

One reason firms are moving to holistic ITM strategies is the concept of ‘leverage points’ or ‘linkage’; that is, ways in which processes can be engineered to share information between functions and increase the overall impact of ITM investments. We’ll address some of the other major leverage points and trends for each ITM function in another blog, but let’s focus on the Talent Profile and Competency Management for now.

Over the past three years or so, firms have moved beyond basic skills & competency tracking to the concept of the employee “talent profile,” which captures additional important elements such as preferences (career, geographic, mobility), education, external work history, motivation, and other characteristics in one place. Robust competency management has become the linchpin of successful ITM, in that competencies are the best-fit basis of measurement for many processes. Competencies and other talent profile information needed by the firm are used to develop workforce plans, assess potential fit of candidates to open requisitions, determine knowledge/skill gaps that can be addressed by learning events, highlight performance gaps, drive skill-based pay programs, and identify candidates for succession management and career planning processes.

If you have been following HRchitect over the years, you know that we identified several years ago that competencies should be the primary “glue” that unites ITM functions (e.g., used in recruiting to assess fit with job requirements, in performance management to measure ongoing improvements, in learning to identify learning events that impact competencies, in succession management to identify ‘best-fit’ candidates for leadership positions, and in career development/planning to provide a way for employees to measure their potential fit for other positions).

Despite the emergence of less intensive approaches, firms have long struggled with a way to effectively keep competencies current and relevant in the face of continued business change. The concept of the Talent Profile has emerged as a more comprehensive, lighter-weight alternative to a full-blown competency management process—by tracking education, motivation, preferences, work experience, and education along with critical skills and competencies, organizations are able to engage the worker in keeping this information up to date. The results are improved accuracy and applicability of the information and less administrative burden.

We expect that the vast majority of ITM implementations over the next three years or so will include a Talent Profile, and that most current installations will complete one or more enhancement projects that expand the number and type of characteristics being tracked by the profile. It is also highly likely that profile search capabilities will continue to improve.

It is our hope that we helped you solve another piece of the puzzling world of HR technology and continued good luck as you better prepare for the ongoing war for talent!

Matt Lafata, HRchitect

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The War for Talent Continues to Take Shape…and it’s Real

April 3, 2012

At a recent Human Capital Management (HCM) vendor conference (Saba Summit in March 2012), I served on a panel and was asked what I thought were some of the top areas in Talent Management that companies are focusing on right now, given our current economic and business conditions.

While I think there are many areas that companies should focus their efforts on, namely around figuring out their long-term HR technology strategy and how Integrated Talent Management (ITM) plays a central role, I decided to focus the answer around the so-called “war on talent”.

Today, the unemployment rate in the U.S. is anywhere between approximately 9%-16% depending on many factors – what expert you talk with, politics, geography, race, and a host of other ways to measure. However, when you focus specifically on “skilled labor”, that number hovers around 4% and since many economists believe that anything under 5% basically amounts to full employment, you can quickly see the problem, and it is likely only going to get worse.

Three or four years ago, we published a groundbreaking report entitled “The Suite Life of Integrated Talent Management”, and in that report we stated:

“Organizations across the globe are concerned with finding enough skilled labor to accomplish their business objectives, given the potential of continuing talent shortages in critical skilled positions. Upcoming retirement of the Baby Boomer generation, changing demographics, and skills gaps due to education shortfalls all have the potential to dramatically impact an organization’s ability to attract, develop, and retain the right talent.

Over the past three to four years the world has gone through a significant period of economic turmoil that again, depending on who you talk with, is either continuing, getting worse, or getting better. So what is an organization to do? Arm your company with know-how and face the war on talent head-on!

Here are four “talent” areas to think about, in no particular order…

1)       Understanding your talent. Seems simple enough but many organizations simple don’t know what they currently have, and where those “rock stars” are within their own organization. Start by getting all data in one place (the talent profile), before any analysis can take place. Information such as internal & external work experience, aspirations, goals, motivations, preferences, assessment results, etc. Think about a person’s LinkedIn profile and a Facebook profile brought together in a talent record that is available to you. The Talent Profile is a major trend of HCM vendors today and something that needs critical attention paid to it (we’ll take more about it in future blogs).

2)       Reviewing your talent.  This can take many forms but start with the traditional and formal talent reviews. Many firms still do this once a year but organizations are increasingly looking at this differently. Start rating the performance of your employees, including the potential for flight risk and what that impact would have on the organization. Develop clear action lists for those employees you want to keep and manage out those you don’t.

3)       Reaching talent. This applies to both inside and outside your organization, and goes back to the Talent Profile in number 1 above. If you don’t know who and what you have, you will have a difficult time reaching that internal talent. In addition, leverage alumni networks as an example and cultivate talent ‘gardens’, i.e. tracking college & even pre-college potential talent. Remember, it’s a war out there so you need to cast a wide net and prepare to capture more than your competitors do!

4)       Assimilating talent. So you’ve found the “rock stars” you have been searching for. Now what. You need to ensure that your onboarding programs don’t wreck your carefully cultivated employment brand, but instead ‘lock in’ the new talent you have found. It’s vitally important to remember that the recruitment process is just the beginning of a new employee’s experience with your company. The initial excitement that new hires experience over starting a new job can quickly develop into frustration as they run into challenges in their desire to become acclimated with a new company and their desire to be productive in their new job and environment (something I would expect you want as well!) A very common frustration includes a lack of connection to their new company and its culture. Another challenge is in completing paperwork with poor instructions and yet another is simply the fact that most companies prepare poorly for a new employee’s first day. The list actually goes on and on…

Good luck and we hope this helps you better prepare for the ongoing war for talent!

Matt Lafata, HRchitect

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HRchitect’s MarketMinute: Oracle Announces Acquisition of Taleo

February 13, 2012

Last week, Oracle, an enterprise application software vendor, announced the acquisition of Taleo, a cloud-based human capital management (HCM) solutions provider, for $1.9 billion and a little over five times the projected 2012 revenue for Taleo.  Members of HRchitect’s executive team – Matt Lafata, Rick Fletcher, Ron Hanscome, John Hinojos, Tom LaMarre and Alex Tellez – met to discuss the transaction, on the implications to the talent management marketplace, during the most recent Market Minute.  Audio from the discussion is available here.  Key takeaways are always posted to The Puzzling World of HRtechnology blog and appear below.

Initial reactions:

  • It makes sense long term to have Integrated Human Capital Management.
  • The continued consolidation and acquisition of best-of-breed vendors by the ERP’s may create a commoditization of talent management features in the industry.
  • We may see an opportunity cost of integration over innovation.  Internal thrashing and energy that would be spent on innovating each of the particular product suites may instead be spend on providing good integration paths between the Oracle core products and Taleo capabilities.
  • How will products that currently integrate to Taleo be affected?
  • What does the product roadmap look like?  Oracle has historically had a tightly controlled approach to talking about product releases until they are almost out the door.  It may be hard for customers to get a good understanding in advance of what the roadmaps look like and what the impact will be on their own organization’s strategy.
  • How will Fusion and the Fusion applications be reconciled with the deeper, in many respects, best-of-breed / talent management capabilities that Taleo brings to the table?
  • A year ago the industry was seeing the talent management vendors consolidating and moving toward the suite vendors going after the mid-sized core HR vendors to create a whole human capital suite.  Over the last couple of months, the ERP vendors who have a lot of cash, have been picking these players up, largely because acquisition is an easy way to add cloud / SaaS capabilities to their product offerings.

Should existing Taleo customers be concerned about the acquisition?

  • Clients who are not Oracle shops are already expressing concern.  However, Taleo’s integration tools are agnostic – they currently work well with a number of HR systems – so there will be limited impact there.
  • Don’t panic.  No immediate changes will happen to the Taleo product offering or support are expected.

With this move by Oracle, and SAP’s previous acquisition of SuccessFactors, what about Workday?

  • Workday has build out talent management (performance, career development, succession planning and compensation) and for a first or second-version offering, is really very strong and all delivered within the context of an integrated HCM application.  However, recruiting and learning are the two remaining outliers.  Workday has chosen not to build these out.  The question remains if they will go outside of their organic approach and acquire someone, or will they continue to partner in the delivery of recruiting and learning?  The next few months should prove important in them determining that strategy.

Final thoughts:

  • As with all acquisitions, intent or strategy around it is one thing, execution is an entirely different thing.  The success of this acquisition will depend on how well the strategies are thrashed out, and how well they are executed.
  • The HR technology marketplace continues to move and shake with mergers and acquisitions.  It is always wise to go into an evaluation of an HR system with eyes wide open and consider all of the decision drivers that are most important to your organization, before deciding on any vendor

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December WebMingle Recap, Part 2 – What’s Ahead for 2012

December 28, 2011

Note: On December 14 HRchitect conducted its traditional year-end WebMingle. Matt Lafata (President), Ron Hanscome (VP HCM Systems Strategy Consulting) and John Hinojos (VP Consulting Services) spent a lively hour discussing major HCM technology events that occurred in 2011 versus what we predicted last December, and delivered a fresh set of predictions for 2012. Part 1 reviewed major events of 2011 and how our predictions panned out. This post will cover what we expect will happen in 2012, and Part 3 will discuss what it all means for companies looking to invest in HCM technology solutions over the next 12 months.

Economics and Demographics – Critical Issues for 2012

  • Last year began with signs of economic recovery, which triggered a lot of spending on HCM technology, as organizations released budget to address some long-deferred investments. However, we saw a slowing of activity during the summer, due in our opinion to uncertainty about the strength of the recovery and some concerns over a double-dip recession combined with the normal vacation season slowdown. Activity picked up again somewhat as we moved into autumn, and it appears that many organizations are planning for strategy, evaluation/selection, and implementation projects for HCM technology in the first half of 2012.
  • Mixed messages about the economy (e.g., better housing and manufacturing data versus concerns over country debt levels in the European Union and the need for a longer-term solution there) may lead to spending reductions in the last half of 2012, as firms may choose to ratchet back spending if there are too many warning signs.
  • There is lingering impact from the economic downturn that began in 2008 – many “Baby Boomer” workers are postponing their retirement plans, and now plan to stay working for the foreseeable future. This means that there is significant participation of three generations in the workforce, with a fourth now beginning to enter.
  • Having four generations in the workplace will definitely strain HCM processes and technologies for most organizations, as each generation has different perceptions, expectations, and needs. The biggest gap will likely be from “digital natives” who want to leverage their social networks as a part of their job, perform HR processes on their mobile devices, and demand a leading-edge user experience throughout.

Trends to Watch in 2012

  • The overall Human Capital Management software market will continue to consolidate, but at a slower pace – there has been so much activity in 2010 and 2011 that the pace has to slow down somewhat, as there are fewer attractive targets left standing, and vendors have to pause and digest their purchases. We believe that further acquisition activity in 2012 will focus on ITM suite vendors “rounding out” their solutions by purchasing point solution vendors. The pace of acquisition could remain (or even accelerate) if the economy takes another hit, resulting in smaller privately-held vendors becoming distressed properties at attractive prices.
  • Marketing and development efforts around ITM suites will continue, but shift focus – vendors did a great deal of “missionary” marketing in 2009-11 to educate potential customers on the value of ITM. That work has paid off, as most buyers now have a fundamental understanding of ITM. We believe that vendor marketing over the next few years will focus on showing the market how leading-edge capabilities (e.g., social, mobile, communication/collaboration, analytics) can add value to core ITM processes.
  • Niche and ITM suite vendors will maintain their feature/function lead – much like 2011, we expect the gap to generally remain constant during the year. Vendors will invest in improving the overall user experience of their applications, as this is increasingly a critical success factor for end user adoption. Another general area of investment focus will be support of more sophisticated metrics and analytics. We also expect to see more attention paid to working with customers to enable better support of workforce planning.
  • ITM vendors will increase their investment in social, communication & collaboration capabilities – after several years of marketing hype and frenzy, solid proof points of value emerged in 2011, even though large-scale end user adoption has lagged behind the buzz to a considerable extent. Recruiting will continue to lead the ITM functions in adoption with social sourcing and candidate relationship management, but the incorporation of collaboration capability into performance management (performance “notes” and multi-rater feedback), career development/ succession planning (community feedback on strengths/opportunities), and learning(tracking informal learning events) should all see increased usage in 2012.
  • Mobile enablement of ITM processes has become the next frontier of marketing and end-user adoption – after a year of tremendous hype around mobile (particularly focused around the manager role) highlighted by the release of Workday and PeopleFluent iPad apps in Q311, we believe that 2012 will be the year of execution. We expect to see some effective pilots as well as larger scale implementations by the end of the year. Many vendors are choosing the cross-platform approach of utilizing HTML 5 over supporting specific mobile platforms; this will increase their ability to efficiently roll out mobile apps, with the downside of not being able to leverage each platform’s specific user experience functions.
  • Organizations will continue to try to rationalize their application portfolio by implementing ITM suites – the trend in 2010-11 was that the vast majority of organizations strategically embrace the ITM suite concept; however, actual suite purchases lagged due to the lack of a fully integrated set of equally functional applications. In the end, organizations (particularly in the enterprise market) are less willing to ‘trade off’ functionality in one component of ITM for the sake of integration. Market consolidation of ITM suite vendors and concrete plans for integrating acquired functionality should increase the average number of modules purchased per ITM suite in 2012.
  • SaaS has become the preferred method for ITM deployments – although some organizations (less than 2011) still want the option of on-premise deployment, we expect that over 75% of ITM deployments will utilize some form of SaaS in 2012.
  • The linkage between Performance, Learning, Succession and Career Development is increasing in importance for ITM – the change to this area for 2012 has to do with the growing need for robust career development/planning processes in many industry segments; this function also needs to leverage the rich data contained in a centralized talent profile. All four of these functions will feed the talent profile, and help drive “Talent Review” or “Talent Pipeline Planning” processes.
  • Organizations are increasingly trying to satisfy multiple types of recruiting with a single solution – this trend continues from 2011, especially in the desire to unify professional and hourly recruiting onto a single solution. We also expect some leading firms to include the contingent workforce in their definition of a holistic recruiting solution, due to their desire to use their contingent workers as a potential talent pool.
  • Talent Profile data (including competencies) has become the centerpiece of ITM – we expect to see more organizations deploying a centralized talent profile in 2012. As well, there will be a continued expansion of data beyond traditional skill / competency information to include such elements as career and geographic preferences, education, work experience, performance / potential ratings, and performance review results. The robustness of the talent profile has now become one of the critical factors driving selection of ITM Suites as we move into 2012.
  • The quality of vendor service and support remain the key to long-term customer satisfaction – solution feature/function and cost are weighted very heavily in ITM selection projects. However, wonderful inexpensive capabilities are of limited value if you are not able to partner effectively with your solution provider. The quality of the vendor’s service and support must be factored appropriately into any ITM selection project. Customer panel discussions throughout 2011 indicated that this area needs to be improved to meet expectations; it remains to be seen whether ITM vendors will make the long-term investment needed.

Stay tuned for Part 3, which will discuss the implications for any organization looking to purchase and implement ITM technology in 2012. You may also access the full audio replay of the WebMingle here.

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Posted by Ron Hanscome

December WebMingle Recap, Part 1 – 2011 in Review (How Did We Do?)

December 21, 2011

On December 14 HRchitect conducted its traditional year end WebMingle. Matt Lafata (President), Ron Hanscome (VP HCM Systems Strategy Consulting) and John Hinojos (VP Consulting Services) spent a lively hour discussing major HCM technology events that occurred in 2011 versus what we predicted last December, and delivered a fresh set of predictions for 2012. This blog post will focus on reviewing what happened in 2011. Part 2 will cover what we expect will happen in 2012, and Part 3 will discuss what it all means for companies looking to invest in HCM technology solutions over the next 12 months.

Major HCM Technology Market Events
2011 proved to be a very busy year in terms of acquisition; at last count 23 transactions or announcements occurred, signifying a huge influx of capital into the HCM technology marketplace. Of that total, the HRchitect team highlighted the following 6 transactions for discussion:

  •  SumTotal buys GeoLearning (January), Accero and CyberShift (July) – this set of acquisitions signaled SumTotal’s intent to move beyond its enterprise learning roots into the midmarket with GeoLearning, and ultimately provide a holistic solution that includes integrated talent management (ITM), core HRMS, and workforce management. However, the organization faces quite the challenge integrating its five learning platforms and Softscape (purchased September 2010) with the latest purchased applications.
  • Taleo buys Cytiva (April) and Jobpartners (July) – increased Taleo’s penetration in the midmarket with Cytiva’s SonicRecruit solution as well as providing a stronger foothold in Europe with Jobpartners recruiting and ITM solution.
  • Peoplefluent buys Aquire (April) – a prime example of investment in analytics by the ITM market, Aquire’s significant capabilities in analytics, org charting, and workforce planning are now being leveraged in the context of Peoplefluent’s ITM suite.
  • SuccessFactors (SFSF) buys, is bought, and buys some more – leading ITM suite vendor adds LMS capability (formal and informal) via the April Plateau and March Jambok acquisitions. In perhaps the biggest deal of the year, on December 3 SAP announced its intent to buy SFSF for $3.4B (a very robust valuation that validated interest in the ITM market). A few days later, SFSF announced it was acquiring Jobs2Web in order to add social recruiting and candidate relationship management functionality to its recruiting offering.
  • Technomedia buys Hodes iQ – an interesting move by this niche learning-focused vendor to add the Hodes recruiting functionality. Technomedia has a presence in Canada and France, and this purchase may help them to expand their footprint both functionally and geographically.
  • Kenexa buys Batrus Hollweg – this November acquisition of a leader in assessments for the hospitality segment highlights Kenexa’s goal of deepening their already robust assessment capabilities, a key enabler of ITM for many organizations.

In addition, the past 12 months included a number of funding transactions that further highlight investor interest in the overall HCM market in general, and the ITM market in particular:

  • SilkRoad Technologies raised $40m in November 2010
  • Cornerstone OnDemand executed an oversubscribed IPO in March 2011 that raised $137M
  • LinkedIn went public May 2011, raising an eye-popping $4.3B (21 x estimated 2011 revenues)
  • Jobvite announced in May 2011 that it had raised $15M in Series C funding
  • Kenexa conducted a follow-on stock offering in May 2011 that raised an additional $79M

The Crystal Ball Review – HRchitect’s Predictions for 2011

  • Market consolidation continues – this one was accurate as far as it went; however, the continued pace and size of activity went beyond our expectations, with the SAP / SFSF serving as the capstone of a very eventful year.
  • The link between integrated Performance Management, Succession Planning and Learning will increase for customers – we saw some increased interest in linking these processes together to improve the effectiveness of ITM, as well as some purchases of integrated enabling technology; however, adoption was somewhat slower than we expected due to the uncertain economy and the difficulty of change management in organizations.
  • There will be increased adoption of integrated Performance Management and Compensation to Support Pay for Performance Programs – We have seen some evidence of direct linkage in our client engagements, but not as much as anticipated. Clients are looking for it, but vendors haven’t yet delivered easy to use, robust capabilities. Delivering truly impactful pay for performance programs takes a lot of work – and many organizations are not able or willing to accept the increased workload.
  • There will be increased convergence of the ITM Suite and HRMS – several core HRMS vendors have delivered enhanced ITM capabilities in 2011. The most visible example is Workday, whose three 2011 releases featured expanded performance management, succession planning, and compensation functionality. Ultimate Software continued its focus on the right level of capabilities for the midmarket, and now provides recruiting, onboarding, performance management, and compensation modules.
  • Software-as-a-Service (SaaS) continues to gain popularity – the momentum shift to SaaS clearly continued for ITM, but there was also a strong increase in SaaS deployments for core HCM and Workforce Management (WFM) applications as well.
  • Customers will not upgrade existing ERP legacy apps without investigating SaaS alternatives – HRchitect consultants experienced this in most evaluation projects; however, while SaaS was certainly considered, the uncertain economy resulted in less budget for ‘rip and replace,’ causing many organizations to stay the course with their existing ERP-based HCM solutions. Some went the route of the least expensive upgrade, while others chose to wait and only apply bug fixes and compliance upgrades, looking to re-assess the situation in 2012.
  • Niche and ITM suite vendors will continue to maintain their feature/function lead – this proved to be an accurate prediction overall; however, there were some core HCM vendors that took a big step forward, such as Workday with its ITM-focused releases, and Lawson software with its integration of the Enwisen acquisition for HR portal and Onboarding. However, Lawson’s subsequent purchase by Golden Gate (PE firm) and merger with Infor has resulted in the exodus of some key talent, and has raised doubts about its product investment strategy moving forward.
  • Mobile will play a big role in HR technology in 2011- certainly mobile enablement was one of the major marketing focus areas for vendors, with all the associated hype of early solutions. Actual adoption was pretty limited, but we expect to see more reality hit the marketplace in 2012.
  • Web 2.0 collaboration and social software tools will see increased usage – actual adoption was significantly impacted by generational workforce differences, as well as the impact of change management programs in user organizations – the overall result was less pervasive use than we expected.
  • Linkedin usage as a recruiting tool will increase – our actual experience with clients revealed that more organizations and recruiters are now using LinkedIn as the primary way to gather information on potential employees. LinkedIn has also announced several partnerships with recruiting technology vendors in 2011 to improve the integration between their applications and LinkedIn.
  • The application user experience will differentiate ITM products and impact adoption – almost every ITM engagement in 2011 focused on the user experience as a critical selection criteria, reinforcing the notion that great functionality is not adopted if it isn’t easy to use.
  • Increased vendor focus on customer service/support is critical to customer satisfaction – most trade show events that we attended in 2011 included some form of customer panel. Without exception, panel attendees gave their vendors less than stellar grades, and called for them to “up the ante” on service and support. The question is, are the vendors listening?
  • ITM solution price points will rise after the “dust settles” from vendor consolidation – in many respects the dust is still settling, given the pace of acquisition activity. Therefore, we saw continued price pressure due to economic conditions and competitive selections.
  • ITM vendors with holistic solutions that drive business results will gain share versus technology-focused providers – HRchitect clients certainly focused on both tangible ROI projections and qualitative benefits in their selection projects. Vendors have responded with more robust support of business impact justification during the sales process. In the end, the pace of consolidation (every major vendor trying to get to a more holistic solution) made it difficult to validate the accuracy of this prediction. Rest assured, however, that this remains an area of high interest to all current and potential users of ITM technology.

Hopefully you found this look back at 2011 to be interesting and useful. Part 2 will cover our predictions for 2012.

To listen to the show in its entirety, click here for the audio archive.

Leave a Comment » | HCM, HR technology, Human Capital Management, Talent Acquisition, Talent Management, Workforce Management | Permalink
Posted by Ron Hanscome

HRchitect’s Market Minute – SAP Announces Acquisition of SuccessFactors

December 6, 2011

Over the weekend, SAP, an enterprise application software vendor, announced the acquisition of SuccessFactors, a cloud-based human capital management (HCM) solutions provider, for $40/share representing $3.4 billion and eight times the projected 2012 revenue for SuccessFactors.  Members of HRchitect’s executive team – Matt Lafata, Rick Fletcher, Ron Hanscome, John Hinojos and Alex Tellez – met to discuss the transaction, on the implications to the talent management marketplace, during the most recent Market Minute.  To listen to the audio from the briefing, click here.  Key takeaways are always posted to The Puzzling World of HRtechnology blog and appear below.

Initial reactions:

  • Wow factor at the price that SAP is paying to get access to the ITM cloud capabilities of SuccessFactors.  Price of $3.4 billion is very robust and validates the ITM market as a market that bares investment.  We should see the impact from a price perspective on a number of the other ITM vendors that are publicly traded (Kenexa, Taleo, Cornerstone OnDemand, TowersWatson, and several others).
  • There is some concern around what it will take to integrate all of these SAP platforms into the landscape for SuccessFactors.
  • This is a really good thing for the SAP customer base.  SAP has always been a more transactionally-strong application, very much an on-premise play, and had been slow to move successfully into the SaaS role.  We could see a paradigm shift for SAP with the impact¸ influence and expertise from development on the SuccessFactors side.  With Lars Dalgaard coming on to help round out the rest of the product line, long term we’ll see some tight integrations between the core SAP HRIS modules with the SuccessFactors talent management suite, bringing together a much more integrated app.  SuccessFactors brings to SAP are much stronger talent management applications.
  • Initial concern from current users on what this means to them.  It is too early to know exactly the effects that this will have on customers and how SAP is going to integrate these products.  It will be interesting to see how they do it, as these are two very different product lines.

Should existing SuccessFactors customers be concerned about this merger?

  • Over the short-term, we would caution anyone against doing anything radical and moving off of their SuccessFactors platform.   The structure of the deal will not be complete until 1Q12 and we will understand a lot more about the exact roadmap sometime during that quarter.  The structure that is being communicated is that SuccessFactors will continue to operate as a separate organization, but as an SAP company.  Things will continue as-is, at least over the short term.
  • For SuccessFactors customers who do not own SAP as a core system, they may want to be aware of possible energy spent on a deeper level of integration to SAP than with Workday, UltimateSoftware, PeopleSoft or Oracle.  In the end, SuccessFactors has had to integrate with multiple back-end HR systems since there beginnings as an organization.  That toolkit doesn’t disappear with this acquisition.
  • If organizations are currently evaluating talent management suites, it is certainly something to take into account.  For customers who are considering SuccessFactors and do not own SAP, they need to take a clear look at how the tools align with their requirements.  If it is a close split between systems, it may give pause and companies are going to make decisions based on if they are on one of the other core systems.  In the future, the SuccessFactors product will be geared to work very well with whatever SAP has.  How well is it going to work with other tools?
  • No concerns with SuccessFactors as they will be very autonomous.
  • SAP marriage brings great global customer support, stronger development standards and testing, HR record expertise in the integration between the employee record with the talent management record.

Will other ERP’s follow suit?

  • Cause ERP’s to look at finishing out the suite.
  • ERP systems have historically looked at talent management differently than the stand-alone systems.  ERP’s look at all of the business functionality plus core HR and payroll, the reason that the talent management best-of-breed vendors started out there was because customers were not getting the services and the products they needed from the ERP vendors.  How well will the ERP vendors, if they start to create this overall product, be able to bring in the innovation that they talent management groups have been looking for and needing?

Does this action help or hurt the other vendors?

  • SuccessFactors is now going to have a much greater audience within the SAP client base of 176,000 customers.  There is enough of a market there, especially due to the fact that SAP customers have deep pockets and have budget for talent management apps, that it will have a bit of an effect on some of the other vendors out there in terms of market share.  However, it will depend on the execution of the deal and whether or not SuccessFactors talent remains or bolts.  Also, we have to look at the fact that SAP is driven off of a perpetual license and maintenance revenue model versus the subscription-based revenue model.  There have been other organizations that have had tremendous issues with getting sales forces and the leadership within the organization to reconcile the differences between sales compensation with a subscription based model vs. a perpetual license revenue model.
  • For the short-term, the other vendors might have the advantage when it comes to the less-educated buyer.  There is a window of opportunity for the other vendors to pray upon some fears in the marketplace and swoop in and talk to prospects about the stability of their organizations and that they are truly SaaS.
  • Long-term, one thing to think about is the opportunity cost of innovation.  How much innovation energy that might be spent on delivering new capabilities to the market will now be spent on tying the two companies’ applications together?  This might be an opportunity for other talent management suite vendors.

Final thoughts:

  • Don’t overreact and run away from SuccessFactors right now, just wait and see how everything unfolds as the deal won’t be complete until 1Q12.  As always when evaluating systems, use a Decision Drivers approach to reduce risk.
  • We believe that no short-term changes will occur over the next 6-12 months.  SuccessFactors and SAP will continue to run as two separate organizations with a common ownership.
  • It will be very interesting to watch the blogosphere over the coming weeks and months for talk of potential acquisitions.
  • SuccessFactors current shareholders should be very happy right now, as well as shareholders of other talent management vendors.

To hear more from our team on further implications of this acquisition, and the many others that have taken place over the recent months, join us for the HR technology Year in Review & Tech Trends for 2012 WebMingle next Wednesday, December 14 at 1PM Central.

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Posted by Tiffany Appleby

Don’t Miss Thursday’s HRchitect WebMingle with Charles Coy of Cornerstone OnDemand

December 3, 2011

The HRchitect WebMingle is designed to give you some insight into the puzzling world of HR technology, talk about upcoming events in our industry, and provide insightful interviews with people of our industry – who they are, what they do and why you should care. The WebMingle has become the most popular live weekly Internet show in the HR technology industry!

The WebMingle has truly redefined how people get information about vendors, trends and really anything related to HR technology and we are very proud of that.

This week’s guest is Charles Coy, Senior Director of Analyst and Community Relations. Charles previously appeared on HRchitect’s WebMingle in early 2009.

Cornerstone OnDemand is a leading global provider of a comprehensive learning and talent management solution. We enable organizations to meet the challenges they face in empowering their people and maximizing the productivity of their human capital. Our integrated software-as-a-service (SaaS) solution consists of the Cornerstone Recruiting Cloud (early 2012), the Cornerstone Performance Cloud, the Cornerstone Learning Cloud and the Cornerstone Extended Enterprise Cloud. Our clients use our solution to develop employees throughout their careers, engage all employees effectively, improve business execution, cultivate future leaders, and integrate with their external networks of customers, vendors and distributors. We currently empower over 7.1 million users across 179 countries and in 29 languages.

As Senior Director of Analyst & Community Relations, Charles serves as the “voice” of Cornerstone, discussing company vision and momentum with analysts and evangelizing the company through social channels and speaking opportunities. He has worked in a variety of positions at Cornerstone since the early days of the company more than a decade ago.

Visit www.HRchitect.com/Knowledge/WebMingle to listen live this Thursday, December 8 at 2pm CST. If you missed any of our previous 85 or so WebMingles, you can also access them from that page.

We look forward to welcoming Charles Coy with Cornerstone OnDemand to the HRchitect WebMingle and hope to have you join us as well.

If you would like to be considered as a guest on an upcoming WebMingle, please contact Tiffany Appleby at tappleby@HRchitect.com

Matt Lafata, HRchitect

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Posted by mattlafata

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