Research Bulletin 2007

Transcription

1 Research Bulletin 2007 About the Author Josh Bersin, Principal Analyst One of the biggest challenges in HR and training today is that of developing an integrated systems strategy. October 23, 2007 Vol. 2, No. 28 How to Build a Talent Management Systems Strategy Introduction One of the biggest challenges in HR and training today is that of developing an integrated systems strategy. This bulletin addresses this topic and provides readers with guidelines and considerations from our ongoing research in this critical area. The Tapestry of HR Systems First, we must recognize that in today s IT environment, most organizations already have a collection of IT systems - which, depending on the setup, could function like a tapestry, a quilt or a tower of Babel. In whatever array, these systems were developed and implemented over the years, based on the maturity of the systems vendors themselves. Almost all organizations have a payroll system, and most have an HRMS. The term HRMS refers to the underlying system that stores all the primary (and constantly changing) information about employees, contingent workers and contractors. It is typically the system of record for important information like salaries, current job and position, benefits, and often (but not always) the organizational hierarchy and reporting structure. The HRMS is largely a database system, used by back-office HR staff and serving as the source of truth for information about employees in the company. These systems were designed to facilitate the transactional aspects of HR assigning benefits, hiring, relocating, paying and terminating people. But as we all know, there are many complex and interrelated processes that make up talent management. These include:

2 Sourcing and recruiting; Performance management and succession planning; Leadership development; Workforce planning; Compensation and incentive rewards; and, Learning and development. These HR processes, which have become increasingly important each year, have spawned the development of systems for automation and improvement. In the late 1990s and early 2000s, the applicant tracking market took off leading many companies to implement stand-alone systems for recruiting. These systems focused on automating the process of sourcing, tracking candidates and managing the ongoing workflow of recruiters, managers and staffing leaders. In the early 2000s as e-learning exploded, the learning management systems market grew up and today most organizations realize that they need a highly sophisticated system to manage training administration and the learning programs in their companies. Now, we are in the heat of Figure 1: Brief History of HR Systems Hiring Recruiting E-Learning Compensation Performance Talent Integrated Solutions Market Growth - Adoption HRMS Applicant Tracking Recruiting Sourcing Learning Management Benefits Administration Compensation LCMS Performance Management Integrated Talent Management?? Succession Planning Competency Mgt Copyright 2007 Bersin & Associates. All rights reserved. Page 1 Josh Bersin Page 2

3 the performance management systems wave, in which organizations are intent on trying to automate and improve their performance management and succession planning processes. To add to the confusion, the HR software vendors are now scrambling to pull together all these talent management applications into integrated suites. 1 In our ongoing discussions with companies dealing with these issues, we find that most organizations are in a situation where they have a combination of: 1. Existing legacy systems (often the HRMS or even LMS and recruiting application); 2. A tremendous demand for new systems (often the performance management, succession planning or competency management system); and, If we cannot integrate the data and underlying workflow from all these different applications, where will we end up when we want to make strategic decisions? 3. A strong set of existing IT architectures and experiences that both cloud and color its level of risk-tolerance for new vendors. In fact, many CIOs and HRIT managers are trying to slow the process down, trying to hold HR back from buying too many systems from too many vendors that may not work together. Of course, they have good arguments: if we cannot integrate the data and underlying workflow from all these different applications, where will we end up when we want to make strategic decisions? Why Buy Systems? Start With the Business Problem As analysts who study business-driven solutions, processes and systems, we enjoy a pragmatic perspective. The first question an organization must answer in their quest for a systems strategy is what problems are we trying to solve? Frequently research members ask us for ROI templates for cost-justifying a certain type of software system, and typically what we tell them is that there are many different ways to justify these systems. 1 For more information, Talent Management Suites: Market Realities, Implementation Experiences and Vendor Profiles, Bersin & Associates / Leighanne Levensaler. Available November 2007 to research members or for purchase at Josh Bersin Page 3

4 Figure 2: Category and Hierarchy of Business Problems Priority Problem Benefit 1 Automation Reduce the cost of errors, save time, reduce paper and better meet compliance requirements. 2 Process Improvement Better implement existing processes and perhaps even improve them, because the software will facilitate a more integrated and complete, datarich (current and historical) approach to a given process. 3 Business and Talent Breakthroughs Ability to do things we could not do before. The problems organizations wish to solve tend to fall into three categories, in a hierarchy of priority (see Figure 2). In the case of each of the type of HR systems discussed previously, there are a myriad of potential benefits at each level. Unfortunately, because of the state of the systems market and this will probably be true for Before you start shopping for technologies or decide that a given suite is the best approach, it is very important to decide what overall business problems you are trying to solve. many years to come each systems vendor in each category of the market has unique strengths in different areas. Before you start shopping for technologies or decide that a given suite is the best approach, it is very important to decide what overall business problems you are trying to solve. If you do not make this important and often soul-searching step, you will later find yourself very confused by the wide variety of systems, architectures, delivery models and implementation strategies before you. Josh Bersin Page

5 Business Drivers for TM Systems Figure 3: Typical Business Drivers for TM Systems Business Value Improve individual and organizational performance, align people, make better people decisions, align L&D with skills gaps, improve the leadership pipeline, increase retention and quality of hire, create greater pools of internal candidates, increase business speed through talent pools and succession plans. Business and Talent Breakthroughs Improve individual processes, facilitate better decisions at manager level, implement HR self-service, implement competency-based talent management, give HR better information for workforce planning. Process Improvement Automate, save paper, save time, reduce errors, meet compliance requirements. Automation Copyright 2007 Bersin & Associates. All rights reserved. Page 1 Your Talent Management Strategy Comes First Our best-practice research clearly shows that the greatest business results from HR systems come not from the systems, but from the underlying strategies and processes behind them. Our best-practice research 2 clearly shows that the greatest business results from HR systems come not from the systems, but from the underlying strategies and processes behind them. In fact, in our research into the business impact of 62 different talent management processes, we identified 22 processes today that drive the highest levels of business impact. 3 Many of these center around areas such as: Implementing a coaching and development-based performance management process; Using strategic competencies in the recruiting, performance management and leadership development process; Implementing skills and competency-based workforce planning; and, Creating personal and organizational goals that align with current, strategic business goals. 2 For more information, High-Impact Talent Management: Trends, Best Practices and Industry Solutions, Bersin & Associates / Josh Bersin, May Available to research members at or for purchase at 3 For more information, Josh Bersin Page

6 Figure 4: High Impact Talent Management Framework Figure 22: Bersin & Associates Talent Management Framework HR Systems & Metrics Business Strategy Sourcing & Recruiting Sourcing Candidate Pools Assessment Employer Brand Recruiting Selection Talent Strategy & Planning Critical Talent Strategy Performance Management Goal-Setting Cascading Goals Self-Assessment Manager Assessment 360 Assessment Development Planning Competency Assessment Competency Management Onboarding Role-Based Curricula Content Development & Delivery Management Training Operational Training Target Metrics & Measurement Job Profiles Process Governance Succession Planning Calibration Meetings Talent Reviews HiPo Identification Career Planning Talent Migration Plan Corporate Values Leadership Curricula e-learning Strategy Leadership Competencies Learning & Development Systems Strategy Leadership Development Formal Programs Stretch Assignments Executive Education Coaching Mentoring Job Rotation Assessment Evaluation Functional Competencies Coaching / Mentoring Programs Developmental Assignments Certification Programs Compensation Planning Base Compensation Plans Compensation Pay for Performance Short- and Long-Term Incentives Once you decide what strategic new processes are key to your organization s business success, various systems are available to implement these processes in numerous ways. These processes are not dependent on software solutions at all. In fact, many of them are often more dependent on your company s culture, training and generalized approach. If you want your investment in talent management systems to drive dramatic business impact and positive change we encourage you to consider these processes strategically and tie them directly to organizational business goals. What role does technology play? Once you decide what strategic new processes are key to your organization s business success, various systems are available to implement these processes in numerous ways. You must now determine which of them are capable of solving the problems you identified in your particular organization, and which have the Bersin & Associates High Impact Talent Management process is designed to help organizations build this business-driven talent management strategy. For more information, High-Impact Talent Management: Trends, Best Practices and Industry Solutions, Bersin & Associates / Josh Bersin, May Josh Bersin Page 6

7 specific features, ease-of-use, workflow, security, domain management architecture and delivery model that work in your company. There exists today a series of breakthrough new processes just now becoming available, which may also be important to your strategy. Integrated performance and learning. Align L&D resources and programs directly with organizational performance and talent needs, by taking the individual performance plans of each employee, aligning them with corporate goals, identifying organizational and individual learning gaps, and then developing strategies to meet these goals. Integrated performance management and succession planning. Improve your leadership pipeline, the effectiveness of leadership development and facilitate rapid change, by taking the individual goal achievement, competency assessments, experience and feedback from each employee and fitting them into succession pools for management, leadership and professional roles. Pay for performance. Create a performance-based culture by taking the individual and organizational results from a given period and providing simple or complex compensation structures to pay high performers for their efforts. Integrated recruiting and performance management. The results of performance plans and competencies can be used to create profiles of high-potential employees during the hiring process. This process can also be used to improve hiring practices by monitoring the performance and retention of candidates over time, it is possible to isolate a profile of high-performing candidates in order to improve recruiting effectiveness. Integrated career planning and self- or manager-directed career and development planning. Establish architected career paths built around competencies which allow employees and managers to direct people (or themselves) into new roles through structured and unstructured development. Building from within improves retention, engagement and satisfaction. It helps people manage their careers, while helping the organization manage people into the roles of greatest need. For more information, Talent Management Suites: Market Realities, Implementation Experiences and Vendor Profiles, Bersin & Associates / Leighanne Levensaler. Available November 2007 to research members. Josh Bersin Page 7

8 All of these strategies make sense to companies, but the question is which do you really want to achieve now? Different systems strategies will enable different possibilities. Differentiate between the processes you must accommodate and those that are nice to have. When we help companies select LMS systems, for example, we encourage them to differentiate between which particular processes they must accommodate and which are nice to haves. If you decide it is essential for you to automate a complex revenue-generating customer training process, then this use case is a mandatory set of requirements for any system. If you must provide integrated development planning with your performance management process, then it is important to consider an integrated product set with both performance management and an LMS. Consider a Three- to Five-Year Roadmap Processes and Systems As you establish the talent management strategy above, it is important to realize that each of these initiatives will take time to design, implement and roll out. In many organizations there is already a well-established process for performance management or succession planning, for example. It may not be completely adopted enterprisewide, but the process is well-established, successful and widely understood. In this case, the software should facilitate the process that already exists and not necessarily break it just because the software may not have a particular feature. It is important to realize that each of these initiatives will take time to design, implement and roll out. Our research shows that in the first one to two years of a performance management systems implementation, for example, you will likely see a negative return. The first year will often require a long period of process design, data integration (e.g., competencies and job profiles), training and change management. Most organizations adopt a pilot program for the first year s review. In the second year, you work out the bugs in a broad implementation and then in the third year, the system starts to provide high levels of value. If you then decide to integrate this process with development and career planning, you must consider the fact that these more advanced capabilities may not be ready until years three or four. We routinely assist organizations in building these roadmaps. Often one of the dependencies in the implementation of talent management Josh Bersin Page

9 Think process first, system second and you can build a roadmap that matches your organization s business-driven talent management strategy. systems is the development of competency models or integrated learning plans, and this must also be considered. In addition, if your roadmap covers a three- to five-year period, it forces you to look at a hot startup vendor in a slightly different light. When you share your roadmap with the vendor, do they see their product strategy aligning with your needs? Think process first, system second and you can build a roadmap that matches your organization s business-driven talent management strategy. Think Use Cases, Not Features As you define the processes you want to automate and how the system will be used, it is important to develop real-world use cases for your organization. A use case is not a set of features it is a complete scenario that describes how your organization does (or will do) a specific business process. A use case is not a set of features it is a complete scenario that describes how your organization does (or will do) a specific business process. If you have an existing process for performance appraisal and evaluation, for example, write it down including all the surrounding ways that this process is informed by- or supplies information to other processes. By doing this you will create a scenario that enables the systems vendors to show you precisely how the software will fit (or not fit) into your environment. While many organizations do fit their processes to the software, this can often be dangerous because there may be a step in your current set of requirements that is impossible or awkward to do in the systems you select. While feature lists are helpful for general analysis of vendors, they will not do you much good in the final selection and our experience with many companies in their selections shows that use cases often tell you which vendors truly understand and have solved the problems you want to solve in your systems strategy. The Importance of Profile Management and Integrated Data about People One of the important and difficult issues in today s HR systems landscape is that data about people is often sprinkled around in many places. When you want to make strategic decisions, such as: Josh Bersin Page 9

10 Who to hire? Who to promote? Who to move into a new position? Who to give a raise? Who to put into a high-potential track? Who to put into a critical training program? These decisions need a wide variety of data about people. This data is now often called the person profile in the jargon of HR systems vendors. The person profile includes many things, such as: Age, demographic information, salary history and job history; Educational history, prior experience, managerial experience and professional experience; Certifications, designations and transcripts; Performance ratings, feedback and 360-degree assessments; Languages spoken, location preferences and physical limitations; Personal career goals, development plans and training history; Developmental assignments, feedback from executives and other leaders; Competencies, traits, psychographic assessments, and so on. Where is all this data located? All over the place. Some of it is in the employee s resume, some in the HRMS, some in the applicant tracking system, some in a file cabinet with performance appraisals, some in the learning management system, and much of it is located in the desk or PC of the employee, his / her manager or others in the organization. When we start to look at leadership development and strategic talent management systems, it becomes important to decide where the system of record will be for each type of data. When we start to look at leadership development and strategic talent management systems, it becomes important to decide where the system of record will be for each of these types of data. If you decide, for example, that skills-based workforce assessment and planning is an urgent process for your company, you may find that you want to put the core competency data for your organization into your LMS because the LMS typically has the assessment tools and learning programs to provide these assessments. If you make this decision, however, you now must decide how this data will be transferred regularly into the performance management and succession planning system. Josh Bersin Page 10

11 Some companies build data warehouses (typically data marts) to pull Many of the new HR systems vendors are so young that their employee profiles are not yet sophisticated enough to handle all the data elements you need. information from all the record systems to create the succession planning or workforce planning employee profile record. In today s HR systems environment this is often the best approach, but before you make this decision it is important to discuss the issues and evaluate vendors based on their capabilities to be the system of record. Many of the new HR systems vendors are so young that their employee profiles are not yet sophisticated enough to handle all the data elements you need. At this stage, it is important to partner with IT. Typically the HRIT organization owns the organizational HR data model and may already One of the most valuable things IT can do to help you is to develop a data architecture for HRrelated processes. have developed a data-architecture for people-related processes. Once they have this architecture, it becomes much easier to evaluate systems vendors based on their level of richness, openness and compliance with this architecture. If the structure is not yet in place now is the time to request IT s assistance. This is one of the most valuable things IT can do to help you. Consider Your Organization and Governance We should not understate the importance of your organizational structure and governance. Every IT system particularly those used by employees and managers needs owners. These individuals must make decisions about how the system will work, what reports will be available, who will have access to what information and who will be able to enter what type of information. Without even considering the system security, domain management or other features of the software, the first question you must ask is how will we administer and manage this system? For example, will the U.K. subsidiary have the authority to change part of the process in some way? In the LMS world this is very important, because training functions are often distributed to different functional areas and business units. In the world of performance management, organizations often modify the process for hourly workers versus mid-level managers versus executives. In the world of recruiting, the recruitment process will vary across business units. Josh Bersin Page 11

12 Before you shop and evaluate systems and vendors, it is important to consider what distributed administration is needed, given your organization s structure today, and how you will govern and manage this administration. Implicit in these decisions will be the definition of different systems roles: super administrators, administrators, managers, There is no substitution for building real-world use cases specific examples of how you implement a given process, how it is administered, what types of reports will be used and how it will be configured. employees, HR users and executive users. How each of these people use the system will vary. These governance decisions will lead to set of requirements for roles, domain management, security and reporting for the selection of systems vendors. There is no substitution for building real-world use cases specific examples of how you implement a given process, how it is administered, what types of reports will be used and how it will be configured. These use cases should be documented in detail and the vendors you consider will gladly show you how their systems accommodate these scenarios. We have a wide variety of use cases you can build upon to create the specific scenarios you need for your organization. Consider Your Existing Staff, Systems and Tolerance for Risk Unless you are a small company or a startup, it is likely you already have a lot of experience with some types of HR systems. You may be a PeopleSoft shop and have many people trained on the PeopleSoft technologies. As a result of that experience, your IT organization may decide that they must continue the investment in this area or in fact many tell us the opposite, that they no longer want to invest in these particular technologies. You may have very few IT staff available. In this case you may need a vendor with extensive professional services and experience with an outsourced solutions provider to get you the help you need. Many LMS vendors, for example, provide complete solutions including systems implementation, content integration, report definition and more. You may have an LMS or ATS system that is highly successful, and you have a strong relationship with that vendor therefore you want to invest in that vendor s products first. If you find that the fit is good, you may want to invest in that relationship. Josh Bersin Page 12

13 In other cases you may have been burned by a fast-growing vendor that did not deliver on their promises (this is not uncommon in this market). In this case, your organization may have lost its risk-tolerance and may want to do business with a more conservative but perhaps slowergrowing provider who can focus more precisely on your needs. The biggest driver of success is a meeting of the minds between the buyer and provider. In our systems research and advisory services we often find that the biggest driver of success is a meeting of the minds between the buyer and provider. You must feel comfortable with the vendor s products today, their services, their support and their ability to work with you. Remember that in these architectural decisions, you are not just buying products but you are also buying companies and as this market continues to change rapidly, the products will evolve quickly. There really is no substitute for a reference. We urge all buyers to look for two to three references from customers with very similar business strategies, use cases, organization sizes, and industry and governance models to your own. Take the time to visit these companies in person, if possible. As the market for talent management systems is still young, you do not want to be the first global solution for a given vendor, for example. Consider the Delivery Model you Prefer Obviously in today s world there is a tremendous amount of interest in software as a service (SaaS) models. Vendors in the SaaS world heavily push their multi-tenant architectures, quality of service, uptime and other features. We will not discuss SaaS in detail at this time, 6 but it is fair to say that there are essentially three models for enterprise software today: 1. Licensed, in which you own and manage the software; 2. Hosted, in which you own but someone else manages the software; and, 3. SaaS, in which you rent the software and it is provided as a service. 6 For more information, SuccessFactors Files for Public Offering: The SaaS Model for Talent Management Grows, Bersin & Associates / Josh Bersin, August Available to research members at Josh Bersin Page 13

14 Figure 5: SaaS, Hosted or Licensed Models for Software Model Upgrades and Fixes Cost Considerations $ Model Licensed You are responsible for patches and fixes, and likely will install when you have time. You must purchase the software as a capital investment and budget for implementation, operations, fixes and upgrades. You own the software and it is yours to maintain. Hosted Single- Tenant The hosting vendor installs these patches and upgrades whenever you are ready for them. You typically purchase the software and pay an annual fee for implementation, operations, fixes and upgrades. You own the software but someone else maintains it and operates it. On-Demand SaaS Multi- Tenant The vendor installs these patches and upgrades transparently to you, whenever they want to. All your fees are monthly or annual and the LMS vendor takes on any cost of hardware, database, fixes and other service. The vendor provides it to you as a service. Key issues to consider are your needs for data integration, geographies and domain management, and your financial model. The SaaS model provides many benefits (e.g., regular upgrades, no need for version and fix management), but it is relatively new for global implementations so larger organizations still prefer the licensed model. The key issues to consider are your needs for data integration, geographies and domain management, and your financial model. SaaS software looks like a lease to a CFO, so the financial model for SaaS software is very different. The choice of delivery model affects your business case and long-term financial strategy for the systems. In the case of licensed software, much of the long-term costs of the system are related to the operational costs of running, upgrading and maintaining the software. Josh Bersin Page 14

15 Figure 6: Cost of Ownership for Licensed Software Initial Infrastructure 5-20% Deployment Personnel 5-15% Ongoing Infrastructure 5-15% Ongoing Personnel 50-85% Hardware Software Security Networking Monitoring tools Reporting tools Facilities Needs analysis Configuration Tuning and testing Launch IT staff training End-user training Hardware upgrades Network security Bandwidth Redundant systems Backup helpdesk Scheduled maintenance Unscheduled maintenance Outage response End-user support IT staff training and support Upgrades and add-ons Security monitoring Figure 7: Cost of Ownership for SaaS Software Setup Fees 2-5% Deployment Personnel 3-5% Ongoing Costs 80-90% Ongoing Personnel 5-10% Vendor setup fees Application testing Integration with other systems Configuration Launch and end user training SaaS subscription fees (typically include implementation, support, upgrades, end-user support, content integration, and other services) System administration Working with vendor End-user support and marketing Josh Bersin Page 15

16 In the case of SaaS models, the costs are more heavily weighted toward subscription fees. SaaS vendors are dependent on happy customers to maintain their subscription fees, so in many cases they are the most serviceoriented vendors in the market. SaaS vendors tend to serve smaller customers, because most large companies are still not ready for OnDemand software solutions. As a result, they often have fewer resources for professional services and more limited options for systems integration. On the other hand, SaaS vendors are dependent on happy customers to maintain their subscription fees, so in many cases they are the most service-oriented vendors in the market. Our research in the LMS market showed that SaaS vendors had much higher customer satisfaction scores in the enterprise and mid-market segment than licensed software vendors, for example. Consider System to System Integration Finally, there is the issue of how IT will integrate this system into your other HR systems. Our research on talent management suites clearly illustrates that sophisticated talent management systems require integration between LMS, HRMS, ATS and other systems. Such integration can be done through the use of web services as well as more traditional system-to-system integration. There are also third-party system integrations you may need. For example, your CRM system may hold all information on sales attainment for the sales organization. This data will directly impact compensation and even performance appraisals. In order to connect these systems, you are likely going to have to build this integration. As of yet, no vendor has productized CRM integrations to their talent management systems. Most software vendors use a newer, service-oriented architecture, which enables software developers to reach directly into different modules of the system to integrate workflow and data. If you believe this level of integration is necessary, the best solution is to have your HRIT or IT specialist look at the architecture and programming interfaces available from the vendors you are interested in. Again, speak with references who have used such integrations in their own solutions. Josh Bersin Page 16

17 Integration Reality Figure 8: Cost of Ownership for Licensed Software Portals: Employee Manager Customer Partner Learning Content Learning Content Content Interfaces Collaboration (Webcast, Discussion, Blog, Wiki) Content Development Tools Content Management (LCMS) Performance Support LMS Programs, Courses, Objects, Assessments Prices, Fees, Student Hours, Credits, Resources, Certifications, Scores, Completions, Ratings Reporting Competency Requirements, Organizational Competencies, Skills Job and Role Descriptions, Open Requisitions Organizational Data (Relationships, Hierarchy, Geography) Compensation Data (Current, planned, short / long term) Employee Profile Data (Demographics, History) Career Development Succession Planning Sourcing & Recruiting Performance Management Goals, Objectives, Performance Plans, Development Plans, Assessments Reviews, Ratings, Rankings Data Application Tools Copyright 2007 Bersin & Associates. All rights reserved. Page 1 Bottom Line: Build a Long-Term Architecture and Plan The bottom line is you should build a long-term plan and architecture. Our research and advisory services are designed to help you: Establish a business and talent management strategy; Develop use cases; Identify a short list of vendors; and, Make the final decisions. These systems are complex, powerful and in a rapid state of flux. While talent management does not require a systems solution to be effective, organizations now realize that by building a business-driven systems strategy you can begin to implement the kind of breakthrough talent management solutions that break down the traditional barriers of HR. Buyers must have patience, build a roadmap and implement their strategy one step at a time. We look forward to your feedback and to helping you develop these strategies with the support of our research and advisory services. Josh Bersin Page 17