The Puzzling World of HR Technology

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.

One of the best things about October is the release of results from the annual CedarCrestone HR Systems Survey. The 2011-2012 iteration is the 14^th edition, the survey has been ably led since Day 1 (that’s right, 14 years) by Lexy Martin, who has managed to maintain the continuity of data and analysis over three different organizations (first The Hunter Group, then Renaissance, and now CedarCrestone). This data (along with Lexy’s perceptive interpretation and insights) has always been made available for free – an amazing gift to all stakeholders in the HCM technology marketplace. You can download a copy from the CedarCrestone website if you don’t have one already. I have been digesting the survey results over the past couple of weeks; this is the first in a series of intermittent and irregular posts on my key takeaways from the data.

The first thing that really jumped out at me was the data collected on the major perceived advantages of SaaS – reduced HRIT/IT staffing, faster time to innovation (easier to be on latest product release and quicker time to implement), and a better user experience that drives adoption and value. Although the overall data certainly supported these perceived SaaS advantages, I want to focus on what else the data is telling us – in particular, about the state of the User Experience (UEX) for HCM technology. Let’s take a look at Figure 14 (page 10 of the white paper survey summary PDF):

Source: CedarCrestone 2011–2012 HR Systems Survey, 14th Annual Edition

• Overall, the survey responses support the perception of a better UEX for SaaS applications (2.3 versus a 2.0 for licensed apps). Although the difference seems small at first glance, converting the numbers to a 100 point scale results in a 67 for licensed and a 77 for SaaS – a full ten points, which is significant in my view. The difference is not surprising, given the dated user interfaces that are currently in place at many organizations – especially if an upgrade to a newer version with UEX enhancements has been deferred (common in the current economic environment).
• On an absolute scale, the improvement of SaaS over licensed applications is disappointing compared to the ideal UEX defined in the survey (“3 – Excellent, intuitive, user centered design, effectively promotes use”). Converting to a letter grade, If 3 is an “A plus”, the licensed app score is roughly equal to a “C minus”, while the Saas overall UEX was a “B minus.” I don’t know about you, but as the parent of two teenage boys, I’m really not happy with either of those grades on a report card! Even though the user experience in SaaS HCM apps is viewed as being significantly better, that doesn’t mean that we have arrived – there is still much work to be done to deliver a truly great UEX.
• Looking at the ratings by HCM function, it is interesting to see that respondents did not uniformly rate SaaS UEX as superior to licensed apps. In fact, Time & Attendance, Compensation, and Succession Planning showed slightly better ratings for licensed apps (although none scored above a “C” grade). On the flip side, the biggest differences were in HR Management/Record Keeping and Business Intelligence, where SaaS scored .3 better than licensed – two areas where UEX has historically been the least effective and difficult to enhance for licensed apps.

How should these findings impact your current HCM Technology implementation? HRchitect believes that the User Experience should be one of the fundamental criteria that drive an HCM Technology selection – and here are four “Rs” that will help ensure a good result:

• Recognize that replacing your licensed HCM app with a SaaS offering does not “automagically” guarantee a great UEX. What it will likely do is provide a measurably better starting point for what will hopefully become a good or even great UEX in the future – through your own efforts, vendor improvements, or some combination of both.
• Realize that all SaaS applications are not created equal – each has developed a specific tool kit for configuring and personalizing the application, and each has been built with particular UEX design assumptions. Some vendors began with html as the basis for the UEX, while others have progressed to Flash or other tools. Now the latest subject of conversation is HTML 5, which may allow some vendors to “leapfrog” current tools. It is crucial to understand where each vendor in your evaluation is at, as well as where they are heading in the future…therefore…
• Remember that UEX will continue to be a moving target over the next few years – all vendors will be working to improve it, UEX SMEs will continue to research and report on the latest successful approaches (many gleaned from the consumer side a la Amazon), and organizations will continue to experiment. Taken together, this conglomeration will steadily improve the UEX of applications – although I believe the progress will continue to be incremental rather than revolutionary.
• Resolve to focus on UEX when choosing your next HCM technology. Become one of your organization’s knowledge resources and advocates for UEX. Be sure that you get the right information during the selection process (by RFI, RFP, demo, or due diligence), so that you can determine what principles are driving the UEX, what UEX expertise is resident on the vendor development team, and the extent to which the delivered UEX can be configured to meet your organization’s requirements. Doing this will give you a good idea of your starting point as well as what you have to work with once you begin implementing the new solution.

As always, I welcome any thoughts or perspectives you might have on this topic – just add a comment or contact me directly. Stay tuned for some additional posts on other results of interest from the CedarCrestone survey.

Note: Most of the content of this post was originally published in the December 2009 / January 2010 issue of the IHRIM.Link magazine (at that time the flagship publication of the International Human Resource Information Management Association – click here for more information on this really useful organization and its publications). Even though some time has passed, I continue to suppress a nervous tic whenever someone uses the term “best practices” in my presence. So, I guess it’s time to get on the soapbox again…;-)

I’m sure many of you are gearing up for another busy fall HR Technology conference season, and whether you are attending ERE Expo this week, getting ready for HREvolution / HR Tech “conference combo” in Vegas, or checking out the annual conference(s) of your Human Capital
Management (HCM) vendor(s) of choice, chances are you will hear the term “best practices” being thrown around like those big fish at Pike’s Place Market in downtown Seattle. It might have been an invitation for users to share best practices for using social tools to recruit talent, a vendor demo claim of embedded best practices in their software, an industry analyst discussing talent management best practices, or a consultant outlining their methodology for helping clients implement best practices…whatever the situation, it is clear that everyone is on the best practices bandwagon, right? Wrong!

Those who have worked with me at various points in my journey through the HCM  technology landscape are very aware that use of the term “best practices” is a longstanding pet peeve of mine. Simply put, I believe that the term is at best unhelpful and misleading, and at worst can actually hamper an organization’s journey towards more efficient and effective HR processes. With apologies to friends and colleagues who have heard this all before, here is my brief manifesto for why we should not use the term “best practices,” and why the phrase “leading practices” more accurately describes what we are all trying to accomplish in the realm of HCM.

So, what’s my beef with the use of the term “best practices?” My concerns break down into three major areas:

•  First, the implication of “best practice” is that there is only one way to optimally perform a given task or process; as an end-user organization you must find that best practice and implement it, otherwise you are a “loser” and not functioning optimally. As a vendor, all I have to do is find the best practice for a given function and code it into my software, and Voila! – my application includes embedded best practices. Unfortunately, this view does not reflect the reality of the world of HCM. My experience as a consultant indicates that there are many different and equally successful ways to optimize HCM processes, and that a single “best practice” that cuts across geographic and industry segments simply does not exist.

• Second, the term itself encourages the tendency of many organization leaders to look for a “magic bullet” that will quickly solve all of their problems with a given HCM function. I’ve been involved in many projects over the years where the desire to quickly fix a problem led to chasing after the latest technology “fad,” and ultimately the selection and implementation of a new solution that addressed the specific issue. However, the end result did not ultimately improve HR support of the business, because the gains in the specific process were mitigated by the lack of integration of that solution to other HCM technologies, or because the best practice operated in  isolation from the other critical processes. I regularly work with organizations where this ‘magic bullet’ mindset has resulted in a patchwork of ‘best of breed’ point solutions that don’t work well together…and of course, the latest ‘magic bullet’ is an ‘integrated talent management suite’ with embedded ‘best practices’ and functions that work together seamlessly. The reality for your organization is that HCM is a web of interrelated processes – things are always more complex than they seem, and a true ‘magic bullet’ (despite marketing hype to the contrary) doesn’t exist.

• Finally, the notion of “best practice” implies that a single way of doing things can be adopted by an organization “as is.” Differences
  in culture, geography, organization structure, and leadership philosophy don’t matter – “According to [insert expert here], Company ABC has best practice performance management and this is how they do it, so let’s put that in place here by the end of the year.” The corporate landscape is littered with examples of failed attempts to implement a given best practice, because it was adopted with no consideration of the fact that every organization is unique. Attempts at benchmarking with similar organizations (whether the variable is size, industry segment, geographic reach, etc.) to find the right fit have generally had limited success, precisely because it is so difficult to match some of the less tangible factors. I strongly believe that any HCM practice that is delivering good results for one organization must be carefully analyzed to determine how it can be tailored and adapted for the new organization, rather than simply adopted out of whole cloth.

Because of these issues, I strongly advocate the use of the term “leading practice” instead of “best practice.” “Leading practice” is more inclusive, and recognizes that there are many ways to deliver optimized HCM processes, and that no single combination of HR science, process and technology works for all kinds of organizations. Using “Leading practice” also helps defuse our inherent tendency to look for the “magic bullet,” as it recognizes the complexity of HR processes and the need for thoughtful, holistic analysis that leads to more comprehensive solutions. Finally, the notion of “leading practice” is a broader approach that opens up an organization to consider multiple methods used by other firms, enabling the building of a process that may incorporate elements of several different processes to arrive at a ‘best fit’ solution.

Hopefully I’ve made a strong case for you to remove “best practice” from your lexicon and replace it with “leading practice.” If so, here are some suggestions for finding and implementing leading HCM practices for your organization:

• Get to know your business – and I mean, really get to know it. Take the time to understand the current state of the organization, current and future business strategies, management and leadership philosophy, and demographic/generational variations by location and geography. All of these nuances will help shape the analysis of which tools and processes are ‘best fit’ for your firm.

• Leverage your networks – talk to colleagues in your industry as well as others (you never know where good ideas might come from). Don’t neglect other sources, as consultants, vendors and industry analysts may have access to company case study information that will prove valuable.

• Take the time to think it through – you need to balance the need for speed with the fact that your organization has limited capacity for change. Taking the time to really analyze what your firm needs (including thinking more broadly beyond the specific issue to be addressed) and developing a robust set of business requirements will make all subsequent project phases much easier.

• Take nothing at face value – whether it is process redesign, vendor evaluation or customer references, dig deeper. The devil is in the details, and asking the deeper questions now will save a lot of heartache later. Remember that demos are designed to do one thing – sell  software. When in doubt, ask more questions until you are satisfied with the answers.

• Don’t forget internal marketing and change management – no matter how wonderful the new leading practice is, you will  need a comprehensive plan to “sell” it internally and manage its successful adoption.

So, there you have it – will you join me in this modest semantic revolution?

No more “best practices!” Viva “leading practices!”