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The Great Convergence
By eliminating the silos between succession planning, performance management and recruiting, talent-management suites just may change the way HR does business.
Kim Heger says her major challenge -- like that of most other HR professionals -- is finding the best people to fill positions at her growing organization. Unlike most HR professionals, she's responsible for filling open positions at 54 locations throughout the United States, Canada and Mexico. "We're constantly looking for quality talent," says Heger, manager of talent and HRMS at ADESA Inc. in Carmel, Ind. "We're dispersed across North America, plus we have 70 open positions at corporate headquarters alone." The company, which has 11,000 employees and provides wholesale vehicle auctions for the automotive industry, was spun off from its parent company in 2004. Heger and her boss, Director of Talent and HR Systems Frank Horvath, built the firm's recruitment and retention systems almost from scratch. "We had no recruiting system, no nothing, when I started here," says Heger. But instead of simply replicating what most other companies do in terms of recruiting, Horvath and Heger decided on a more strategic approach for finding new employees. "We're moving away from filling job requisitions to partnering with hiring managers," says Horvath. "We're sitting down with them and going through a set of business-related questions, really delving into what their needs, goals and objectives are, rather than what sort of individuals they're looking for." Heger says the company's model for talent management focuses not only on sourcing and interviewing candidates, but on making sure the onboarding process for new hires goes smoothly, tracking employees 60 and 90 days after their date of hire to see how they're doing -- or, if they've left the company, finding out why -- and ensuring that employee development and training programs are aligned with the company's business strategy. Perhaps most importantly, she says, the goal is to accomplish all of this while imposing few if any additional training requirements on hiring managers. "Kim's focused on providing a high level of service and quality to hiring managers so they can focus on their core functions," says Horvath. All of this has been made much easier due to technology: ADESA uses a recruiting and onboarding solution from Vurv (formerly Recruitmax), a performance management system from Oracle Corp. and a learning management system from Learn.com, all of them tightly integrated to provide the company with a clear view of the readiness and capabilities of its vast workforce. ADESA is just one of many companies that have turned to "talent- management suites" to aid in not only hiring great employees, but in developing and retaining them in a more systematic and seamless manner than before. Up until fairly recently, most companies tended to either buy each major component of a TM suite -- recruitment, performance management, compensation planning, succession planning and learning management -- from a different "best of breed" vendor, use whatever was available from their ERP provider or build their own solutions. Now, however, more and more best-of-breed firms are expanding their reach into multiple talent-management components, creating integrated TM suites by acquiring other providers or developing their own software and offering alternatives for companies that wouldn't otherwise be able to afford an HRIS or ERP system. Meanwhile, the major ERP vendors continue to refine and update their own TM capabilities. Jason Corsello, a human capital management analyst at the Yankee Group in Boston, says HR departments stand to benefit from these innovations. An integrated suite, he says, not only makes for a more consistent user experience, but also lets companies use a single data model to minimize duplication and share information more easily between different areas of the organization. A Single Platform
"We're seeing a huge amount of interest in these TM suites from companies," says Corsello. "The walls in companies are starting to come down. The recruitment folks are starting to break down the walls separating them from the people who do compensation and the organizational-design folks in terms of how they can leverage things to make the organization better." Earlier this year, Corsello authored a report focused on talent management in which he predicted that the worldwide market for TM solutions will surpass $2.3 billion by the end of this year and $4 billion by 2009, with North America and Europe accounting for the overwhelming bulk of that demand. Many TM vendors grew their business significantly in 2005, he noted, with some firms adding more than 100 new clients. The reasons for the demand are obvious, he says. "A [Society for Human Resource Management] survey revealed 55 percent of HR managers expect workforce retention to be a high or very high challenge for their firms in the next five years," he says. More companies are adding pay-for-performance plans and linking performance management to learning management, he adds. In the process, they're discovering the tools they have on hand often aren't up to the task. "Companies have a lot of stuff -- a recruitment application, maybe a homegrown performance management application and a learning system -- but they don't have them in a suite environment," he says. "So we're seeing companies trying to leverage an existing solution, to make it a one or two-vendor solution." The best-of-breed vendors now selling TM suites include SuccessFactors, which will soon roll out a recruiting management tool to complement its performance management and succession planning products, and recruiting vendor Taleo, which plans to add performance management and succession planning to its offerings by the middle of next year. Other firms, including Vurv and Authoria >, have focused on acquiring other vendors (Vurv absorbed compentency-management firm InScope earlier this year, while < Authoria > bought recruiting vendor Hire.com in 2005) to build out their capabilities in performance management and recruiting. They join vendors such as Softscape and HRsmart, which already offer integrated suites that include recruiting, performance management, succession planning and learning management. The vendors say they're simply responding to customer demand. "Companies are saying to us, 'Now I want pay-for-performance and to tie that together with other functions," says Kevin Marasco, vice president of marketing for Jacksonville, Fla.-based Vurv. "During the second half of last year, 40 percent of our new clients had more than one product from us. We're definitely seeing a growing trend." Christopher Faust, vice president of global strategy at Wayland, Mass.-based Softscape, says TM suites jibe with the preferences of today's HR customers, who want tools that connect their data seamlessly across the organization rather than new software releases packed with an ever-growing array of features. "We've seen a convergence in the marketplace, in strategic HR functions converging with the more transactional, tactical pieces into one single platform," he says. "Within the technology, the feature war is over: How deep within performance management can you really go, for example? Among the top vendors, we all have the same level of performance."
At Their Fingertips Many companies are turning to TM suites for greater consistency and efficiency in the way they hire and develop employees. At Regis Corp., a Minneapolis-based chain of hair salons, Karen Woodson has just finished overseeing the company's implementation of < Authoria > Recruiting and < Authoria > Performance and is now presiding over the launch of < Authoria >'s Succession module. "This is actually the company's first attempt at any kind of talent-management database," says Woodson, Regis' director of talent management. "Before I came here, Regis had no HRIS. It was all very decentralized." The company's goals are cost reduction, consistency and reduced turnover, she says, adding that the company still doesn't have an HRIS and has no plans to acquire one anytime soon. The new recruiting and performance-management modules allow Regis to create an "employee profile" that will enable more consistency in the company's talent-management process, says Woodson. "Now, each new applicant will have a profile in the system, and that profile will actually begin tracking against everything they do in the organization," she says. "It's basically an online HR file." At Medica, a 1,100-employee nonprofit health-plan provider in Minnetonka, Minn., a talent-management suite is being used to help find people ideally suited for often-demanding call-center jobs, develop a leadership pipeline and put employee peformance-related information at managers' fingertips. "We now have a huge amount of control over what had been a paper nightmare," says Gloria Hoffman, Medica's manager of HRIS and payroll. "Managers have the ability to run reports to see where their people are at any time. The process of moving through the peformance review cycle is much more efficient." Beginning in 2003, Medica implemented a TM suite from Softscape that now includes performance management, succession planning and learning management. The company customized the suite to create its own jobs profiler, says Nora Compton, project manager for HR, learning and facilities. An important feature of the suite is the ability to perform "cross-system reporting," she says. "We can look at performance reviews and succession planning and see what kind of score someone got and rub those two things up together," says Compton. "It should prove to be an asset in terms of letting us understand where our talent is and what we might be able to do to move it forward." In the near future, the company anticipates creating development plans for each employee that are closely linked to departmental and organization-wide goals, as well as individual job competencies, says Compton.
Build Vs. Buy When it comes to TM suites, no single vendor currently dominates the market in terms of quality or customer reach, says Corsello. "There isn't a single vendor yet that can really claim complete functionality in this area," he says. "From a usability standpoint, it's not a seamless approach as you navigate between these modules. It's definitely improved over the past 18 months, but there's still a ways to go to get to compelling. " Vendors also need to make their talent-management suites more user-friendly, he adds. "A lot of the vendors, especially in recruitment, have reached the point where many of the capabilities in their solutions have been over-engineered," says Corsello. "They've built too much complexity into the product." Some vendors are attempting to make their products easier to use, he adds. He cites Vurv's recent decision to join Google Inc.'s Enterprise Professional program, which lets inexperienced users of the Vurv solution take advantage of Google's search engine to access data from the software they might otherwise have trouble finding. Meanwhile, others in the industry assert that too many firms are more focused on acquiring other vendors than improving the functionality of their current products -- often to the detriment of the customer. "Many of our competitors have bought small or struggling companies just to get a 'check-the-box' solution and, so far, that strategy hasn't proved successful for many of them," says David Michaud, vice president of product marketing at Dublin, Calif.-based Taleo. Michaud notes that many of those solutions aren't integrated with their core products. "The history of acquisitions in the software space is littered with failures," he continues. "People have this high-level vision of acquiring a company and gaining its capabilities, but integrating these applications can be quite a challenge -- one might be on Microsoft's .NET and another is on Sun Microsystem's Java. In many cases, those applications don't end up getting integrated to the point that the customer gets the full value of an integrated TM suite." Taleo is still considering whether it will develop its own applications or grow via acquisitions, he adds. For her part, Lisa Rowan, an HCM analyst at IDC in Framingham, Mass., considers "build" to be the best approach. "The reason is that at the core of all this is a consistent data model," she says. "If you acquire rather than build, you're going to spend as much time retrofitting as you are on straight development." As for HR users, she adds, it should matter little whether a solution was acquired or developed internally. Paul Baier, < Authoria >'s vice president of product development and strategy, makes no apologies for the fact that the Waltham, Mass.-based vendor has focused on acquiring other firms. Indeed, he says, < Authoria's HR customers appreciate it. "We've certainly been more aggressive in terms of buying applications while most vendors are building," he says. "But this is not a 'brand-new feature' market. The challenge is to competently integrate an application with other solutions. The companies that choose to build are spending a lot of time listening and figuring things out. Meanwhile, we go out and obtain an installed base of customers." Furthermore, says Baier, acquisitions allow a vendor's clients to leverage the best practices of other companies. "We get asked again and again, 'How are other companies doing global compensation?' " he says. "We have 120 different customers using our compensation planning products every day, so we can go see how they handle Sarbanes-Oxley."
ERP or Best-of-Breed? Another question companies must face when it comes to TM suites is whether to go with their ERP provider, assuming they have one, or to go with a point solution. Rowan says that although ERPs tend to lag "six months to a year" behind the best-of-breed in terms of product depth and functionality, companies must also consider their long-range plans. "If you're thinking about performance management, you also need to be thinking about compensation planning, because those areas are so tightly linked," she says. "And if you're looking at pay-for-performance, those integration points are even more critical. You need to have a roadmap and understand what your next step is going to be." Corsello agrees that best-of-breed vendors have the edge in functionality -- for now, at least. "I'd say the ERPs are doing a much better job recently, and they're leveraging their advantage in terms of their installed base and integrated usability," he says. David Ludlow, vice president of HCM solutions at Newtown Square, Pa.-based SAP Americas, and Gretchen Alarcon, vice president of global HCM strategy at Redwood Shores, Calif.-based Oracle, also point to ease of integration. "Lots of best-of-breed vendors have been purchasing applications from other vendors that use different data models and processes, and there's probably some difficulty in tying all that stuff together," says Ludlow. Oracle's Alarcon says human resource leaders should look at "the big picture." "Talent management can't exist without being tied to the overall strategies of the organization and making sure there's a connection," she says. "A niche provider may be able to do additional data fields, but how are they able to leverage where the business is going overall? Our solutions are used by all parts of an organization. We can look at talent-management objectives and tie them to the actual financials." However, ADESA's Horvath says the ERPs' integration advantage isn't what it once was. "You can integrate today in ways that you couldn't 10 years ago," he says. "The ERPs are very good at databases, but just because they can sell you everything doesn't mean they're good at everything." Regardless of whether HR leaders turn to a best-of-breed vendor or an ERP for a TM suite, Rowan says vendors still have a ways to go before their suites can help HR become a true business partner. "When HR departments have the tools and the data to predict where recruiting shortfalls will occur and the impact that, say, early retirement will have on the company, that's when they'll be true business partners. But I think TM suites, as we know them today, aren't there yet in providing those capabilities." Corsello is more favorable in his outlook. "I think TM suites will dramatically affect HR in the same way supply chain management software affected the procurement function," he says. "Ten years ago, procurement was focused on tactical elements that stayed within procurement. But thanks to SCM, procurement is now focused on the link between suppliers and customer demand. "I see a similar analogy with HR and TM suites: They'll focus HR on identifying the key people in the market that you need and maintaining the lifecycle of that talent to ensure it's being rewarded and developed."
October 2, 2006 Copyright 2006© LRP Publications |
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