HR Systems Survey

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1 HR Systems Survey 18 th Annual Edition Innovation, Insights, and Strategy Conducted by Stacey Harris VP of Research & Analytics Erin Spencer Research Consultant

2 Information contained in this Survey analysis is compiled and analyzed by Sierra-Cedar as part of the organization s commitment to provide thought leadership on Human Resources technologies, trends, and the impact their adoption has on enterprise performance. Sierra-Cedar encourages customers, media, partners, analysts, and other readers to share the information found herein and to quote liberally from the Survey with appropriate credit provided to Sierra-Cedar. However, this report cannot be publicly posted in its entirety without explicit permission. Please credit all quotes and references from this publication as Sierra-Cedar HR Systems Survey White Paper, 18 th Annual Edition on first reference. All subsequent references should read Sierra-Cedar Survey White Paper. To participate in next year s research and receive an early copy of the Annual Survey White Paper, please submit your address here: To request a media interview, please us here: To download previous Annual White Papers or additional research based on this year s Survey, please access our Research site here: 2

3 Table of Contents Executive Summary HR Systems Survey Key Themes...2 Big Changes and Big Findings...5 Sierra-Cedar Human Capital Management Blueprint...8 Sierra-Cedar HR Systems Survey and HCM Blueprint...8 Starting Place, Administrative Applications...9 User Experience, HR Service Delivery Applications...9 Business-driven Applications, Workforce Management, and Talent Management...9 Foundational BI and Workplace Optimization No System is an Island, Connecting Enterprise Data and Workflows Key Practices and Outcomes Key Practices Quantified Organizations: Data-Driven Decision Making Introducing the Talent-Driven Organization HR Focus, Outcomes, and Impact...23 HR Systems Strategy and Culture...25 The Year of the Enterprise HR Systems Strategy...25 Elements of an Enterprise HR Systems Strategy...26 Enterprise HR Systems Spending...27 HR Technology Resourcing Strategies...28 The Value of Change Management...29 Overall Application Adoption by Size, Industry, and Region Adoption by Size...31 Adoption by Industry...32 Adoption by Region...33 Three-Year Application Outlook Total HCM Deployment Strategies...35 Implementations...38 Upgrades and Updates HR System Expenditures...42 Administrative Applications...44 Meaningful Foundations...44 Payroll Applications...44 Payroll Vendor and Solution Outlook...46 Core HR Management System Application...47 i

4 Core HRMS Vendor and Solution Outlook...48 Benefits Administration Applications...49 Service Delivery Applications...50 Service Delivery and Mobile...50 Shared Service Strategies, Changing the Service Delivery Conversation...50 Service Delivery Efficiencies and Outcomes...52 HR Help Desk Vendor and Solution Outlook...53 Workforce Management Applications...54 Going Beyond Compliance...54 The Changing Definition of a Workforce Management Suite...54 Workforce Management Buying Patterns...55 Breaking Free from the Time Clock...56 Workforce Management Suite Vendor and Solution Outlook...57 Talent Management Applications, Shaping a Strategy...58 Talent Management Buying Patterns...58 Talent Management Suite Vendor and Solution Outlook...59 Individual Talent Management Solutions and Vendor Outlook...61 Business Intelligence, HR Analytics, and Workforce Optimization...68 Breaking Through the Hype, The Realities of BI/HR Analytics...68 Business Intelligence and HR Analytics Solution Outlook...73 Data-Driven Organizations and HR Analytics The Total HR Systems Environment...76 Integrating the HR Experience...76 Total HCM Environment...78 Total Talent Environment...80 Voice of the Customer on Core HRMS and TM...81 Emerging Technologies and Innovations in HR Technology...86 Total Enterprise Cloud Movement...86 HR Going Mobile...87 Social Applications in HR...88 Going Beyond the Data, Future Walking Recommendations...93 Survey Methodology and Approach...94 The Depth and Breadth of the Research Survey Demographics...95 ii

5 Table of Contents Figure 1: Top 5 HR Technology Initiatives...5 Figure 2: Business Process Improvement Initiatives...6 Figure 3: Changing HR Technology Initiatives...7 Figure 4: Sierra-Cedar HCM Application Blueprint...8 Figure 5: Chain Factors and Outcomes...11 Figure 6: Linking HR Technology to Outcomes...12 Figure 7: Linking HR Technology to Outcomes...15 Figure 8: Introducing the Data-Driven Organization...15 Figure 9: Lessons from Data-Driven Organizations that Support Performance...17 Figure 10: Lessons from Data-Driven Organizations: They Get the Basics Right...17 Figure 11: Lessons from Data-Driven Organizations: They Innovate with HR Technologies...17 Figure 12: Introducing the Talent-Driven Organization...19 Figure 13: Talent-Driven Organizations...19 Figure 14: Lessons from Talent-Driven Organizations: Strategies and Culture...21 Figure 15: Lessons from Talent-Driven Organizations: They Get the Basics Right...21 Figure 16: Lessons from Talent-Driven Organizations: They Innovate with HR Technologies...21 Figure 17: Talent-Driven Organizations Use More Metrics...22 Figure 18: Top Performers, Talent-Driven, and Data-Driven Organizations...23 Figure 19: Achieving Outcomes Requires Focus...23 Figure 20: Achieving Outcomes Talent...24 Figure 21: Achieving Outcomes HR...24 Figure 22: Achieving Outcomes Business...24 Figure 23: Percentage of Organizations with HR Systems Strategies...25 Figure 24: Enterprise HR Systems Strategy Aligns with Lower HR Tech Expenditures and Fewer HR Resources...26 Figure 25: 3-Year HR Technology Spending Trends Outlook...27 Figure 26: Tomorrow s HR is More Strategic and Analytical...28 Figure 27: Change Management Practices...29 Figure 28: Benefits of Change Management...30 Figure 29: Application Adoption Levels by Size...31 Figure 30: Application Adoption Levels by Industry...32 Figure 31: Application Adoption Levels by Region...33 Figure 32: Three-Year Adoption Outlook...34 Figure 33: Embedded Analytics Solutions...34 Figure 34: HCM Technology Deployment...35 Figure 35: HCM Deployments by Size...36 Figure 36: Multiple Pathways to an HR Tech Transformation...37 Figure 37: Plans For Replacing HR Technologies...38 Figure 38: Implementations Timelines Continue to Decrease...39 Figure 39: Modules Most Often Implemented with an HRMS...39 Figure 40: Implementation Resources, Who Does the Work?...40 Figure 41: Updates and Upgrades, Licensed HRMS Upgrade Average # of Months...41 Figure 42: Updates and Upgrades, SaaS HRMS Update Average # of Weeks...41 Figure 43: Total HR Technology Costs per Employees...42 Figure 44: HR Technology Costs Vary Little by Deployment...43 Figure 45: Implementation & Support Costs Vary Greatly...43 Figure 46: Payroll Deployment Models...44 Figure 47: Effectiveness of Global Payroll Solutions...45 Figure 48: Payroll Solutions Adoption by Size...46 Figure 49: HRMS Replacement Initiatives...47 Figure 50: HRMS Adoption By Size...48 Figure 51: Benefits Solutions Adoption By Size...49 iii

6 Figure 52: Shared Service Models...50 Figure 53: Shared Service Center Locations...51 Figure 54: Functions Included in HR Shared Services...51 Figure 55: Value of Service Delivery Technologies...52 Figure 56: Help Desk Adoption...53 Figure 57: Strategy for Selecting WFM Solutions...55 Figure 58: Workforce Management Technology Strategy Customers Want More Services...55 Figure 59: Workforce Management Goes Mobile & Wearable...56 Figure 60: Workforce Management Adoption By Size...57 Figure 61: Strategy for Selecting TM Solutions...59 Figure 62: Talent Management Suite Adoption By Size...60 Figure 63: Recruiting Applications Adoption By Size...61 Figure 64: Compensation Applications Adoption By Size...62 Figure 65: Learning Applications Adoption By Size...63 Figure 66: Ranking Learning Features...64 Figure 67: Performance Management Application By Size...64 Figure 68: Succession Management Applications By Size...65 Figure 69: Onboarding Solutions Adoption by Size...66 Figure 70: Ranking Onboarding Features...67 Figure 71: Moving to a Data-Driven HR Function...68 Figure 72: Business Intelligence/HR Analytics...69 Figure 73: Tools for Simple HR Analytics...70 Figure 74: Tools for Visualizing and Sharing Data...71 Figure 75: No Standard Tools for Complex BI Needs...71 Figure 76: Data Sources Integrated Into an HR Analytics by Deployment Method...72 Figure 77: HR BI/Analytics Solutions Adoption By Size...73 Figure 78: Most Use HR Analytics to Look BACKWARD...74 Figure 79: Some Use HR Analytics to Look FORWARD...75 Figure 80: Data-Driven Organizations Also Focus on the BUSINESS...75 Figure 81: Integration Strategies Matter...76 Figure 82: Self-Reported Data Privacy Process Maturity Levels...77 Figure 83: Total HCM Legacy Solutions...78 Figure 84: Total HCM Cloud Solutions...79 Figure 85: Total Talent Management, HRMS Suites...80 Figure 86: Total Talent Management, TM Suites...80 Figure 87: HRMS Vendor Satisfaction and User Experience...81 Figure 88: ITM Vendor Satisfaction and User Experience...82 Figure 89: More Satisfaction with HRMSs vs. TM Suites...83 Figure 90: High and Low Vendor Satisfaction Drivers...84 Figure 91: Percentage of Vendor Benefits and Challenges Selected by End-Users...85 Figure 92: Business Systems: To Cloud or Not to Cloud...86 Figure 93: Mobile-enabled HR Process Adoption Mobile Adoption Growth...87 Figure 94: Mobile-enabled HR Process Adoption...88 Figure 95: Social Tools Use and Plans...88 Figure 96: Workplace Collboration...89 Figure 97: Emerging Technologies Use and Plans...90 Figure 98: Emerging Technology Exploring the Explosion of Talent Acquisition Tools...91 Figure 99: Use of Emerging Talent Acquisition Tools by Talent-Driven Organizations...92 Figure 100: A Playbook for Your Style of HR...93 Figure 101: Demographics Information: All Respondents...95 Figure 102: Survey Participants Organization Types...96 Figure 103: Survey Participants Organization Strategies...96 Figure 104: Survey Participants by Function and Role...96 Figure 105: Demographics International and Global Organizations...97 iv

7 Executive Summary The Sierra-Cedar HR Systems Survey White Paper, 18 th Annual Edition is the latest research installment of the longest running, most widely distributed, and most highly participative research effort in the HR industry. Since 1997, this invaluable resource has been a catalyst for the HR Technology community, providing insight and guidance to practitioners around the world. The Sierra-Cedar HR Systems Survey stands alone as a Global benchmark of Human Resources (HR) technology adoption and the value achieved from the use of these technologies, seen through the eyes of HR Information Technologists (HRIT) and Information Technologists (IT). This year s White Paper covers adoption and trends for applications, deployment options, vendor solution outlook, expenditures, and value achieved for the following categories of applications. Throughout the report, we suggest implications and recommendations for both practitioners and vendors. Administrative Applications: Core Human Resource Management System (HRMS) Payroll Benefits Service Delivery Applications: Employee Self Service (ESS) Manager Self Service (MSS) Help Desk Portals Workforce Management applications Talent Management applications Social- and Mobile-enabled applications Business Intelligence (BI)/analytics solutions Emerging technologies Additionally, we cover insights on supporting HR practices: Systems strategy Adoption blueprints Integration practices Implementation practices Change Management practices Expenditure and Resource strategies The Survey was conducted from May 12 th through July 1 st, The Sierra-Cedar HR Systems Survey White Paper is based on 1,204 unique organizations representing a total workforce of 21 million employees and contingent workers. 1

8 HR Systems Survey Key Themes STRATEGY & CULTURE This is the year of the Enterprise HR Systems Strategy; 4 of organizations have a major HR Systems Strategy initiative. Organizations are taking multiple pathways to transforming the HR Systems Environment, with a mixture of rip and replace, combination, hosted, outsourcing, and hybrid environments. HR organizations achieve higher levels of HR, Talent, and Business outcomes by embracing their organization s culture. Data-Driven, Talent- Driven, and Top Performing Organizations provide insights on their unique approaches to HR systems. HR Technology Strategy Pathways Forward Outcome-Focused HR FOUNDATION We ve hit the tipping point: over 50% of purchased Core HRMSs are SaaS solutions. The new conversation is about the Enterprise HR Cloud, including Payroll and Workforce Management. Payroll and Workforce Management become the stumbling blocks to HR technology transformation efforts, with 20% of organizations currently evaluating their Technology vendor and solution options. HR is transforming the service delivery model with Shared Service centers, HR portals and help-desks solutions, along with mobile access. Organizations leveraging all of these technologies on average service 5 more employees per HR Administrative headcount. Enterprise HR Cloud Back to Basics Service Delivery INNOVATION Organizations leading the way in HR analytics are not only looking backward and forward, but towards business outcomes; 39% of organizations are now doing some level of HR analytics. Identifying and acquiring Talent in a consumer-driven market has opened the space for an explosion of new and emerging technologies. More than 50% of organizations are using new Talent Acquisition tools outside of their applicant tracking systems. Wearables are a hot topic this year, and we see a 30% increase in the percentage of organizations using Wearable technologies as part of their HR Strategy; 5 of organizations using Wearables leverage them to improve workforce productivity. Data-Driven HR Talent-Driven HR Wearables 2

9 This is the year of the Enterprise HR Systems Strategy! No one can deny that we are in an age of continuous change when it comes to both enterprise and personal technology environments. Without an enterprise strategy for the HR technology stack, organizations are finding that they not only spend more on total HR technology expenditures per employee, but they also reduce the overall number of employees they can serve per HR resource. Strategy is both a key component when it comes to a technology environment and a significant opportunity for many organizations; more than 40% of organizations are looking at improving or developing a new Enterprise HR Systems Strategy this year. This is a key issue for Top Performing Organizations, as well as those organizations evaluating their HR Technology environments. Part of developing an Enterprise HR Systems Strategy is working through an organization s current- and future-state HR technology plans. If the goal is to transform the technology environment, creating a more modern architecture that can support new User Experiences, mobile access, and full-data analyses requirements, then organizations need to define a pathway forward. Our research has shown that organizations are taking multiple pathways forward and are leveraging this opportunity to rethink the enterprise view of HR technology. From a strategy and cultural perspective, we re finding that organizations are spending an enormous amount of time focusing on the outcomes they re trying to achieve with HR processes and technology. We ve identified three specific HR outcome models Talent-Driven, Data-Driven, and Top Performing Organizations to give insight into how focusing on outcomes can change an organization s decisions concerning HR processes, people, and technology. Now that we ve seen a shift both from vendors and buyers towards Cloud/SaaS Core HRMS solutions, the real foundational questions turn to the enterprise HR Cloud. These solutions may include Talent, Workforce Management, Payroll, and Core HRMS, as well as emerging technology solutions. Can organizations achieve the desired transformational outcomes with hybrid environments? Can organizations manage regional requirements and global data privacy issues in Cloud environments? These are the foundational questions organizations are facing today. We ll share insights into how they are addressing these questions and their outcomes. These critical questions, along with the desperate need to gain better data and insight into an organization s internal workforce, are forcing decision makers to shift gears and refocus their energies on basic HR systems. Over 20% of organizations are evaluating their options today when it comes to critical systems such as Payroll and Workforce Management solutions, but few are ready to make a move without assurances that change would create better organizational outcomes. 3

10 One area seeing rapid change and movement is Service Delivery Applications; not only are we seeing growth and valuable outcomes from these solutions, but the change in this area is a precursor to the evolving relationships between the workforce and employers. Employees are becoming consumers of HR services, and HR is seeing a shift in its role from administrator to service provider. For organizations looking to improve user experiences, increase employees served, and add value to their HR technology investments, adoption of shared service centers, mobile-enabled processes, and supporting technologies is key to achieving these goals. Innovation comes in many formats, the least of which is simply new technology. Organizations taking new and different approaches to HR create their own level of innovation, from process to people, as well as their technology adoption strategies. We ve identified two innovative organization types this year: Talent-Driven and Data-Driven HR functions. Our goal is to share the concept that there are multiple ways to reach your business outcomes, while staying true to your organization s own culture and capabilities. As the overall technology market changes, innovative technologies tend to fall on the fringes of enterprise needs. Two areas that are attracting a great deal of attention this year are Wearable technologies and tools supporting Talent Acquisition efforts. Neither area has achieved full-enterprise acceptance yet, but we see these technologies as gateways to tomorrow s HR technology conversations. They may feel like fads, but the concepts underpinning these technologies social individualism and tomorrow s Internet of Things (IoT) are here to stay and worth the conversation. 4

11 Big Changes and Big Findings Each year we ask organizations about their top HR technology initiatives the areas in which they plan to spend 2 or more of their time and resources in the coming year. We find that organizations generally focus on specific areas year over year, so we look at this over a three-year period going back to 2013, and what we see is that business process improvement continues to be the number one area in which organizations invest. Today, 6 of organizations are planning a major initiative concerning a business process improvement effort. Figure 1: Top 5 HR Technology Initiatives 30% Increase in 3 Years % 3 Business Process Improvement HR Systems Strategy Talent Management Service Delivery BI/Workforce Metrics We might question why two-thirds of the 1,200 organizations we surveyed are vested in making changes in their processes, but our research shows that organizations with higher-than-average levels of overall Process Maturity levels see several benefits over time. These organizations report higher overall Vendor Satisfaction and technology User Experience scores, better HR and Talent outcomes, and higher levels of technology adoption. The next major initiative, HR Sytems Strategy, saw the greatest jump from fourth place last year to second place this year. There is a 30% increase over the last three years in organizations planning an initiative to create or update their strategy. The HR Systems Strategy conversation is not just about technology planning, but the changing expectations organizations have for outcomes achieved from their HR processes and technology investments. We also see a slight increase in Talent Management initiatives this year, primarily focused on organizations planning to implement additional Talent modules within their existing environments or switching to Talent technologies more closely aligned with the Core HRMS environments updated in the previous year. Overall, we see a slight increase this year in the percentage of organizations planning to completely replace Talent Management suites. Service Delivery initiatives saw a slight decrease this year from last year, which is not surprising considering we saw a 30% increase last year in the adoption of Manager Self Service solutions and HR Help Desk technology. It is still a top five initiative, and we believe the focus this year will be implementing more mobile-enabled HR environments across all HR technology environments. 5

12 When looking at the actual Business Process Improvement (BPI) initiatives organizations plan to tackle this year, we see investments in particular categories. The largest group of organizations making process improvements focuses on Recruiting, often in tandem with Onboarding; 4 are working on Recruiting and Onboarding together. We also see that organizations working on Talent Management Profiles and Data Process Improvement, as well as Learning and Development, Compensation, and Performance, tend to review these areas at the same time. Figure 2: Business Process Improvement Initiatives Core HR Learning 9% TM/Profile Onboarding Performance Recruiting % Core HR processes are changed alone 17% 4 work on Recruiting and Onboarding together 2 Compensation 7% HR Analytics ESS MSS 8% 9% 60% MSS processes change with ESS On the administrative back office side of the processes, 1 of organizations are working on BPI around Core HR processes 60% of whom focus solely on these processes areas alone. Although these percentages are smaller, we do see 8 9% of organizations working on ESS and MSS, with a focus on the end-user Experience. These process areas include master data management, employee process workflows, and employee communication strategies. Organizations working on ESS and MSS often do so in tandem, with 60% planning these process improvements in the same year. Once again, Business Intelligence and Workforce metrics rounds out the top five initiatives at 3, and we see this as a continuous area of growth. New investments in embedded HR analytics solutions doubled last year, and we expect to continue to see investments in these application areas rapidly increase. The question that remains is, Will these new embedded technologies lead to complex HR and workforce analytics in the near future, or will investments and initiatives need to shift to enterprise platforms and tools to achieve these desired outcomes? 6

13 Figure 3: Changing HR Technology Initiatives 2 Large organizations planning a Global HRMS Consolidation Initiative 1/3 Planning a Systems Integration Initiative 17% Fewer planning a major Workforce Management Initiative than last year 70% Increase in major Initiatives to Mobile-Enable HR Systems in the last 3-years Other changes in major HR initiatives that are worth noting this year: 2 of Large Global organizations are planning a Global HRMS consolidation. This remains a major initiative for Large Global organizations, and we believe they will continue to focus on consolidation initiatives as long as they have multiple solutions within individual regions that impede their ability to aggregate enterprise employee data in a single location. 1/3 of organizations are planning a systems integration initiative; this is up considerably from last year. This initiative suggests that organizations are finding, even with new solution integrations, challenges continue to cost both time and money for HR and IT departments. 17% decline in major initiatives to work on Workforce Management applications. This is one area, like Payroll, where organizations are hesitant to make a change. Not only are they concerned with what s happening in the legal and compliance market, but they are also waiting to see if the major enterprise application environments plan to make further investments in these systems. 70% increase over the last three years in organization s investing in mobile-enabled HR initiatives, to 20% planning a major initiative in this area in the next twelve months. On average, we see that organizations have doubled the average amount of employees now using some level of mobile-enabled HR processes to 2 this year. 7

14 Sierra-Cedar Human Capital Management Blueprint Sierra-Cedar HR Systems Survey and HCM Blueprint For the Sierra-Cedar HR Systems Survey, we asked questions about five primary categories and 31 individual application areas, not counting emerging technology areas that are detailed in the Sierra-Cedar Human Capital Management (HCM) Blueprint. The Survey also gathered details concerning HR system strategies, processes, vendors, implementation, Change Management, HR technology expenditures, supporting resources, and emerging technologies. Figure 4: Sierra-Cedar HCM Application Blueprint FIN General Ledger, Purchasing, Budgeting, T&E Enterprise Data Privacy Enterprise Content 6 Adoption Service Delivery HR Help Desk, Portal Self Service/Direct Access Employee Self Service Manager Self Service 9 Adoption Enterprise Social Vendor Management Enterprise Workflow Administrative Excellence Service Delivery Excellence Workforce Management Excellence Talent Management Excellence Workforce Optimization Excellence Administrative Apps Core HRMS, Roles/Competencies (Profile Mgt.), Payroll, Benefit Admin, Embedded HR Analytics, VMS 58% Adoption Workforce Management Time & Labor, Absence & Leave Management, Labor Scheduling, Labor Budgeting, WFM Analytics, 39% Adoption Workforce Optimization Workforce Planning, Workforce Analytics, Predictive Analytics Business Intelligence Foundation Reporting/Visualization and BI tools 5 Adoption Talent Management Recruiting, Performance, Learning, Compensation, Succession, Career, Talent Profile, Onboarding, TM Analytics CRM Network Security Mobile Access Backlog, Pipeline, Customer Satisfaction SOA, API, ETL PaaS Integration Platform Project Costing, Contracts, Grants Projects Over the last 18 years, we ve seen a roadmap of application adoptions emerge as we follow respondent organizations through their annual plans for implementing HR applications. Some organizations have a clear strategy for how they purchase and implement their HR systems; others exhibit an organic-growth model based on immediate needs and funds. The Sierra-Cedar HCM Application Blueprint captures the most common path an organization generally follows when they adopt HR solutions over multiple years; it further embodies our perspective on how to optimize an organization s HR solutions within the context of their enterprise systems environment. Finally, it looks at how organizations connect these solutions to attain the desired levels of excellence required to achieve organizational goals. 8

15 Starting Place, Administrative Applications Most organizations start their HCM application journey by deploying Administrative Applications, primarily in the form of a Payroll solution over 99% of our HR Systems Survey respondents have a Payroll solution in place. Most often Payroll solutions are implemented with an HRMS, but some organizations do leverage a Payroll system alone often in place of an HRMS until their needs expand. Over 9 of surveyed organizations currently have an HRMS in use. For most organizations, the HRMS sits at the heart of their HR and workforce data management needs and shares data with multiple HR applications. Once an organization reaches a certain size and complexity, an HRMS becomes necessary to manage the needs of the entire workforce, and we see a trend in increasingly smaller organizations finding a need to implement a solution. The Survey data shows organizations with just over 50 employees have plans to implement an HRMS in the next 12 months. Those organizations without an HRMS are primarily Small organizations, non-profits, and in some cases franchise organizations. Other Administrative Applications adopted by organizations include Benefits Administration and, increasingly, embedded analytics. The Benefits Administration application, also highly adopted, is outsourced more than any other application today over 2 of organizations leverage a Total Benefits Outsourcing (TBO) solution. Today, most Administrative Application packages include some level of embedded analytics. User Experience, HR Service Delivery Applications When organizations have Payroll, an HRMS, and Benefits Administration in place, they naturally achieve some level of Administrative Excellence for their HR function. Typically, they then focus on self-service applications such as Employee and Manager Self Service and other Service Delivery solutions such as an HR Help Desk, and Portal technologies. We see service delivery tools, general self service, and Manager Self Service continuing to expand and change in the next few years, in part due to the need to keep up with workers expectations for consumer and Mobile technology that can be accessed where and when it is needed. Organizations that focus on this area of application adoption achieve a high level of service delivery excellence and often experience an increase in the number of employees each HR administrative role can support across an organization. Business-driven Applications, Workforce Management, and Talent Management For many organizations, Workforce Management and/or Talent Management application adoption follows the Administrative and Service Delivery solutions. Workforce Management tools are used to help get the right person, with the right skills, in the right place, at the right time, at the right cost. Talent Management applications are specifically used to help attract, develop, and retain Talent. Each of these technology categories has multiple individual applications that encompass a total solution. Organizations spend considerable time working towards Talent Management and Workforce Management excellence but overall these two areas work hand in hand, and many organizations find they need to invest equally in both areas to be able to truly achieve their goals for Workforce Optimization. 9

16 Foundational BI and Workplace Optimization Over the past ten years, we have seen organizations that have high levels of adoption in other HR system areas focus on bringing all of their transactional and process information into a single environment for data analysis efforts. Today, we see organizations investing in a combination of enterprise platform technologies designed for data analytics, along with embedded solutions across each of the primary HR technology categories. Many continue to use traditional applications such as Excel, report building technology, and statistical tools. Finally, in the new era of Big Data, organizations are leveraging new visualization tools, as well as sophisticated dedicated HR/BI solutions that mix services and analytics technology together to analyze and visualize large amounts of enterprise data. The ultimate goal with all of these solutions is to provide wider access and insights into HR data that will help optimize the workforce efforts, as well as scenario planning, workforce planning, and predictive analytics that will provide an organization with the insights needed to make critical decisions for the future. No System is an Island, Connecting Enterprise Data and Workflows As organizations build out their own HCM blueprint, they quickly realize that HR solutions cannot exist separately from enterprise data privacy standards, content, social environments, and workflow solutions. Connecting HR systems to enterprise environments helps embed HR solutions into everyday work environments and these worlds begin to look seamless. To accomplish seamless connections, organizations need to think about their network security; access to devices such as Mobile, PC, and kiosk; data connection points provided through Service-Oriented Architecture (SOA) tools; Application Program Interfaces (APIs); Extract, Transform, and Load (ETL); and Enterprise Integration Strategy (EIS) and platforms. A recent addition to this list of enterprise connection protocols is Platform as a Service (PaaS) environments that allow for further broadening of the enterprise reach through useful marketplaces and custom-built applications and connectors. It is also important to remember that these HR technologies need to co-exist in a larger ecosystem that provides access to other data sources such as Finance or Operational data systems which, when integrated, then provide data for the best possible workforce analytics support. 10

17 Key Practices and Outcomes Sierra-Cedar has been on an 18-year quest for the value of HR technologies. Over the past few years, we formalized that search with Dr. Janet Marler, professor at State University of New York (SUNY). Together, we developed a very clear model that looks at the link between HR technology adoption to HR, Talent, and business outcomes. We call this our value chain analysis approach. As seen in Figure 5 below, we identified four specific HR outcomes, five specific Talent outcomes, and five specific business outcomes for evaluation. Figure 5: Chain Factors and Outcomes HR Outcomes HR alignment with business strategy HR cost efficiency Employee engagement Employee and manager productivity Talent Outcomes Ability to develop a highly qualified workforce Availability of workforce data for decision making Talent mobility Ability to attract top talent Retention of top talent Business Outcomes Market share Organizational profitability Customer (constituent) satisfaction Competitive advantage Innovation Scale of 1 5 Strongly Declined Declined Neutral Improved Strongly Improved We asked Survey respondents if over the last year their HR, Talent, and business outcomes declined, stayed the same, or improved on a scale of 1 5. In addition to these Survey questions, Sierra-Cedar gathered the following independent financial data on each of our participating organizations with publicly available data: Revenue numbers Profit margin numbers Operating Income Growth Return on Equity 11

18 We then combine this data with the self-reported data on improvements or declines, and therefore are able to show correlations between adoption of certain technologies and outcomes across all respondents. This model, as seen in Figure 6, links higher total application adoption (TA) to improved HR and Talent outcomes (HR), to improved business results (BR), and ultimately to financial value in the form of return on equity (ROE). Figure 6: Linking HR Technology to Outcomes TA Higher Total Apps Adoption Predicts HR Improved HR & Talent Outcomes Predicts BR Improved Business Results Predicts ROE Higher Return on Equity HR Technology application adoption is indirectly related to improved organizational results (Competitive Advantage and Market Share) through improved HR and talent outcomes (improved Cost Efficiency, Decision Making, Employee Engagement, Developed Workforce, Talent Retention) and linked to improved financial performance (ROE). We continue to partner with SUNY on ongoing statistical testing of our annual research data to gain further validation of our research and the outcomes achieved by participants. For more details on the Value Chain Analysis process and plans for further statistical evaluation, take a deeper dive on the topic with this article. 12

19 Key Practices One additional benefit to our value chain analyses efforts is the ability to compare multiple organizational aspects and characteristics across both financial outcomes and value chain outcomes. This analysis work has given us a unique perspective on the idea of Key Practices and allowed us to look carefully at organizations taking new and different approaches to HR. This year we ve looked at three different types of organizations: Data-Driven HR Organizations Talent-Driven HR Organizations Top Performing Organizations Each of these organizations creates their own level of innovation, from process, to people, as well as their technology adoption strategies. Our goal is to share the concept that there are multiple ways to reach business outcomes, while staying true to the culture and capabilities of an individual organization. Top Performing Organizations For the past few years, we have focused on finding high value from HR technologies and associated best practices by looking at Top Performers those with high financial performance in these areas: Revenue per employee Profit margins per employee Operating Income Growth for the previous year Return on Equity For the last two years, we ve found fewer differences in how Top Performers approach HR Technology and aggregate Survey responders, leading us to recognize that the competitive advantage effect of HR technology adoption on Top Performers has minimized as more organizations adopt similar HR technologies. There are other HR practices and processes that we have called out throughout the paper, but ultimately the focus for Top Performers is often one of financial outcomes, which may occur at the expense of long-term planning. 13

20 Quantified Organizations: Data-Driven Decision Making Last year we introduced for the first time Quantified Organizations those whose HR practices support an environment of data-driven decision making. For 2015, we once again analyzed the Quantified Organization, but throughout the paper this year we ll refer to them as Data-Driven Organizations. This group was identified through a unique index of qualifiers, providing for a year-over-year review of these organizations. Data-Driven Organizations are selected based on four leadership areas: 1. BI Process Maturity the organization has high levels of Process Maturity when using Workforce Analytics, a function of Business Intelligence that is effective (aligned, best practice, strategically focused) or transformational (unique, stands above others, and contributes to competitive advantage financially and enables the organization to be an employer of choice). On a scale of 1 (manual), 2 (efficient), 3 (effective), and 4 (transformational), the Data-Driven Organizations are clearly effective and approaching transformational. 2. Direct access by line managers HR analytics and Business Intelligence is used directly by managers to support their workforce decision making. In 2015, the average access to HR analytics provided to managers was 3 of the organization by all respondents, up from 19% in An impressive 7 of managers in Data-Driven Organizations have direct access to Business Intelligence and HR analytics. 3. More data sources addtional workforce data, including Core HR, Talent Management (TM), Workforce Management (WFM), financials, sales, and various operational systems, paint a more complete picture. Organizations that use multiple data sets are more quantified in their ability to show the contribution of workforce efforts to business outcomes. Data-Driven Organizations use 4.9 BI sources for decision making compared to 2.7 sources for Non-Data-Driven Organizations. 4. More categories of HR metrics these help organizations make informed business decisions and optimize their workforce. We included six categories in our Survey: Recruiting, Absence, Learning, Compensation, Performance, and Productivity. Data-Driven Organizations are using 4.5 metrics on average for their HR reporting efforts compared to 2.9 for Non-Data-Driven Organizations. In our analysis, we compared Data-Driven Organizations to those organizations that did not meet our criteria. Those organizations that did not meet our criteria were labeled Non-Data-Driven. You can find the comparison of these organizations in Figure 7 on the following page. 14

21 Figure 7: Linking HR Technology to Outcomes Better BI Process Maturity Data-Driven Organizations BI Process Maturity 3.1 Effective Non-Data-Driven Organizations BI Process Maturity 2.3 Efficient More Manager Access to Analytics More Data Sources Managers with BI access 7 BI Sources 4.9 Managers with BI access 3 BI Sources 2.7 More Categories of Metrics Metrics Categories Tracked 4.5 Metrics Categories Tracked 2.9 When reviewing the financial outcomes of Data-Driven Organizations, we found that our indexed organizations achieved higher levels of financial performance in the form of Return on Equity (ROE) for a second year in a row. Survey data shows a 70% difference between the ROE numbers for Non-Data-Driven Organizations at 1 and Data-Driven Organizations at 27%. ROE, a significant financial metric, provides the standard basis for how efficiently and effectively an organization is run. We also look at the perceived strategic value of Data-Driven HR functions, and once again find that the Data-Driven Organizations are 6 more likely to be viewed as strategic partners by their business counterparts over the Non-Data-Driven Organizations, as seen in Figure 8. Figure 8: Introducing the Data-Driven Organization Strategic Value Return on Equity % 70% 1 Data-Driven Organization Non-Data-Driven Organization 15

22 Lessons from the Data-Driven Organizations The practices of Data-Driven Organizations provide valuable insight into how they maintain their advantage in today s insight-driven world. We looked at the differences across these organizations in three ways: Strategy and Culture Foundation and Basics Innovation Data-Driven Strategy and Culture Strategy and culture are two areas that every organization strives to cultivate, but often struggles to clearly define. This is true at the enterprise level as well as the functional HR level. Strategy and culture create an environment of common understanding where the workforce is clear about the outcomes they are trying to achieve and how an organization expects them to be accomplished. Data-Driven Organizations embrace the importance of strategy and culture within HR. As seen in Figure 9, these organizations are twice as likely to have an Enterprise HR Systems Strategy that is updated regularly, and one-and-a-half times more likely to have an Enterprise Integration Strategy (EIS). The focus on enterprise-wide strategies continues into their future plans. Finally, these organizations understand the importance of creating a Culture of Change Management. Data- Driven Organizations are twice as likely to practice Change Management efforts with every technology upgrade, release, or implementation the organization manages versus Non-Data-Driven Organizations. Data-Driven Foundation and Basics Leveraging data to inform organizational decisions requires that an organization gather, label, and house that data in similar ways; this data curation is important regardless of the size or global reach of an organization. This year s Data-Driven Organizations range in size from Small with just 70 employees plus contingents to Very Large with over 360,000 employees plus contingents. Many Data-Driven Organizations are also global, operating in an average of 27 different countries. These organizations are headquartered all over the world; locations include the US, Canada, South America, Western Europe, and India, and span all industries. As seen in Figure 10, we find that Data-Driven Organizations are more likely to have high percentages of HR process standardization and high levels of overall HR Process Maturity on a four-point scale. They are also more likely to leverage a central shared services function to deliver their HR services. Data-Driven Innovation How an organization approaches innovation can mean the difference between catching a wave, riding a wave, or being bowled over by the wave. Innovation is one of the key areas we ll see that is often differentiated across various types of organizations and dependent upon organizational culture and risk aversion. Data-Driven Organizations take an innovative approach to the technology they integrate, evaluate, and actually use on a daily basis. One of their key areas of innovation involves adopting and integrating total HR Suites in the areas of Talent Management and Workforce Management, as well as Business Intelligence tools. These organizations use more data and metrics throughout their HR processes and are five times more likely to adopt and integrate these solutions than Non-Data-Driven HR functions. These Data-Driven Organizations also look to innovation as a more effective way to reach their employees. As seen in Figure 11, they are 70% more likely to have adopted Mobile-enabled HR processes and twice as likely to leverage Wearables in an HR capacity. 16

23 Figure 9: Lessons from Data-Driven Organizations that Support Performance Updated HR Systems Strategy Enterprise Integration Strategy Change Management Culture 6 50% % 27% Data-Driven Organization Non-Data-Driven Organization Figure 10: Lessons from Data-Driven Organizations: They Get the Basics Right Process Standardization Process Maturity Central Shared Services 10 Average Shared 8 Average Shared 3.0 Effective & Efficient 2.0 Efficient 7 5 Data-Driven Organization Non-Data-Driven Organization Figure 11: Lessons from Data-Driven Organizations: They Innovate with HR Technologies Top Adopters of WFM, TM, and BI Higher Level of Mobile Adoption Early Adopters of Wearable Technology 3 39% 2 1 7% Data-Driven Organization Non-Data-Driven Organization 17

24 Introducing the Talent-Driven Organization In 2015, we are also introducing Talent-Driven Organizations entities that support an environment of Talent- Driven decision making through their HR practices. When identifying these organizations, we use a unique index of qualifiers that will provide us with a year-over-year review of these cohorts. Talent-Driven Organizations are selected based on their leadership in four areas: 1. Career Planning Process Maturity. The organization has high levels of Process Maturity in Career Planning, a function of Talent Management in a way that is effective (aligned, best practice, strategically focused) or transformational (unique, stands above others, and contributes to competitive advantage financially and enables the organization to be an employer of choice). On a scale of 1 (manual), 2 (efficient), 3 (effective), and 4 (transformational), the Talent-Driven organizations are clearly effective and approaching transformational compared to Non-Talent-Driven Organizations that have no process or a highly manual process. 2. Succession Planning. The organization conducts the process of Succession Management in a systematic manner. In 2015, only 3 of all respondents were conducting systematic Succession Planning. 100% of our Talent-Driven organizations were doing Succession Planning, compared to only 2 of Non-Talent-Driven Organizations. 3. HR Analytics Outcomes. The organizations leverage HR analytics to accomplish key talent outcomes. These organizations must identify at least one of three key talent outcomes which they are leveraging their HR analytics efforts to achieve: Employee Engagement Employee Retention Risks Identifying Top Talent As seen in Figure 12, we were pleasantly surprised to see that most Talent-Driven Organizations were focusing on achieving more than one Talent outcome in this group compared to our Non-Talent-Driven Organizations which were more likely to be focusing on no more than one or none of these outcomes. In our analysis, we compared Tata-Driven Organizations to those organizations that did not meet our criteria listed above. Those organizations that did not meet our criteria were labeled Non-Talent-Driven. You can find the comparison of these organizations in Figure 12 on the following page. 18

25 Figure 12: Introducing the Talent-Driven Organization Better Career Planning Process Maturity Succession Planning Talent Driven CP Process Maturity 3.2 Effective Succession Planning 100% Not Talent Driven CP Process Maturity 1.5 Manual Succession Planning 2 Use HR Analytics Identifying Top Talent 7 Identifying Top Talent 2 Use HR Analytics Employee Retention Risks 70% Employee Retention Risks 40% Use HR Analytics Employee Engagement 6 Employee Engagement 2 When reviewing the financial outcomes of Talent-Driven Organizations, we found that our indexed organizations achieved higher than average levels of financial performance in the form of ROE. We found a 3 difference between the ROE numbers for Non-Talent-Driven Organizations at 1 and Talent-Driven Organizations at 1. Although that is not quite as high as the Data-Driven Organizations, it is still noteworthy. ROE is a significant financial metric that provides a standard basis for how efficiently and effectively an organization is run. In addition to ROE performance, the Talent-Driven Organizations also had 1.4 times the revenue per employee and a higher profit per employee than Non-Talent-Driven Organizations. These organizations are focusing on their employees total outcomes. Talent-Driven Organizations were also 5 more likely to be viewed as strategic partners by their business counterparts over the non-talent-driven Organizations, as seen in Figure 13. Figure 13: Talent-Driven Organizations Strategic Value Return on Equity 60% 5 1.4x Higher Revenue/ Employee 39% Talent-Driven Organization Non-Talent-Driven Organization 19

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