Erik’s note: We’re happy to present another guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

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The holiday season has different implications for everyone – the sales team is busy trying to close those year-end deals, managers are juggling their priorities around the vacation many workers take this time of year, and the good old folks in HR are preparing for performance review season. The happiest time of the year – or not, depending upon whether or not like Santa Claus, you have kept a careful list of who has been naughty and who has been nice all year long. For those companies who have invested in performance management, review season isn’t so bad.But what about when it is time to hand out gifts? Pay for performance has been proven over and over again to be on average one of the most effective drivers of real results for companies that have implemented it. Many companies have very loose pay for performance systems, a bit like Christmas, where all the kids get something. While that makes for a nice holiday, it can be very bad company policy. SuccessFactors Research decided to look into the matter, using our own customers as a point of reference. How do companies that only use Performance Management compare to those who use Performance Management and Compensation Management?
The results speak for themselves. SuccessFactors Customers who use Performance Management grew profits on average 36 % last year, beating their industry peers by an average of 20 percentage points. However, SuccessFactors Customers who use Performance and Compensation management grew profits on average 46%, beating their peers by an average of 30 percentage points! In this case, it’s Christmas for the investors as well. The bottom line – if you are implementing a great performance management system, you are not realizing the total potential gain unless compensation is closely integrated into the process.In this study we included all publicly traded companies with at least 500 employees that have been using SuccessFactors for at least 3 full quarters and use either the PM or PM and Compensation module.
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Erik’s note: We’re happy to present this guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

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Typically, we reserve the phrase “too much information” for our coworkers and friends who share just a few too many details with us by the water cooler, but in the world of HR, “too much information” is taking on a whole new meaning. As companies move from paper-based systems to electronic systems, they are inundated with information. Through software, businesses have the ability to measure everything, rather than just a few things tracked on paper and aggregated by hand for analysis. HR professionals can literally be overwhelmed by “too much information.”

I recently led a discussion on our Analytics and Reporting module at a regional User Connect meeting, and gained a lot of insight from our users. In order to extract maximum value from the mountain of available data, the “right” measures have to be carefully selected. Also, it was apparent that at times less can be more – a few really important measures can overshadow all of the others depending upon your business needs at the time. For example, if you are just starting to roll out the software, usage metrics are supremely important, but for a hospital system, measuring competency gaps might be the most critical. With so much data available, how do you choose what to measure and report?

Simple Framework for Choosing the Right Metrics

Because so many measurements are available after switching to a software-based talent management suite, it is critical to have a framework for choosing the right metrics at the right time.

Know your audience. Figure out who else will be looking at the metrics and what matters to them. A CEO and a recruiting manager will probably want to see different sets of metrics.

Have a goal. Before you measure, you should have an idea of why you are measuring. If your goal is to show a link between turnover and on-boarding cost, find the metrics that relate to help tell your story.

Find the greatest lever. It is likely that you will be able to find dozens of measurements that support your goal, but you should focus on the measurements that will have the most impact, give you the most pull. Always highlight the best “levers” to get results. Using dashboards and other heuristics that may be built into your system are a great way to do this.

It takes a bit of brainwork, but is worth the effort. Rich, meaningful data truly highlights the growing importance of HR and HCM within organizations. If you get stuck, ask questions. Managers and executives will likely be enthusiastic if you can start measuring things that matter to them.

This abundance of data is a completely new problem, but a great problem to have. Dr. Jac Fitz-enz, a SuccessFactors Research Thought Leader and the father of HCM metrics, started making the case for measuring human capital three decades ago , when practically no one had the capability or will to do it. Capability is no longer the problem; today, people can barely keep up with the information. Now, the focus is moving to an even higher level, linking these available human capital metrics to business goals, financial performance, and using predictive metrics to plan for the future. Will you be ready?

Cost, talent, or innovation – which of these three challenges will drive Human Capital Management decisions in the future? The answer is easy: all of them. The question of how to address these drivers is a far more strategic and important question. Charles Grantham, co-author of Corporate Agility, recently joined us to speak with our customers about coming challenges that businesses face due to dramatic shifts in how, where and by whom work is done – a major focus of his recent book and the research he and Jim Ware from the Future of Work are doing. In his presentation, he described 9 strategies for addressing the challenges.

After reading this and engaging in discussions with Charlie, it became apparent that we actually help our customers execute on several of these strategies. We do this in a unique way, enabled by our delivery model and the focus of the product suite in terms of what it actually does for people.

For example, many people think of investing in on-demand solutions as an outsourcing strategy – moving administration away from the core business. But a better way to look at our model is to think of it as an INSOURCING strategy, the customer is INSOURCING a best-in-class and ever improving process. Of course, it is very powerful to let someone else do non-strategic activities faster and cheaper for you. But when you truly INSOURCE, you get the best of two worlds: it is someone else’s core business to figure out the best way to do things, and constantly improve it for you, while also being very cost efficient. That cost efficiency is of course a mutual win for INSOURCE providers and customers.

Effective human capital management processes are critical to INSOURCE. Why? Facilitating teamwork and collaboration is critical for innovation. Finding high potentials, developing their skills, and adapting to the new workplace is critical to closing the talent gap. People are the largest variable cost for most businesses (70%), optimizing their performance is critical to reducing costs. The revolution of on-demand software delivery with the SaaS model enables this phenomenon of being able to INSOURCE strategic processes that support your business’s strategy execution.

Imagine you are on the football field – What if 15% of your performance is dependent on the play you select, and 85% of your performance is dependent on your ability to make the play? Where would you invest most of your time, training your team to pass, catch, run, and block, or picking out the right play?

By and large, studies have found execution is the clear driver of company value and financial performance. How much? Well, about 15% of company’s performance is attributable to strategy – the remaining 85% is attributable to execution, as found by Becker and Huselid’s “ High performance Work Systems and Firm Performance.” Joyce, Nohria, Roberson found a similar ratio in “What really works.”

That’s right – Execution of the strategy is 6 times more important than the strategy itself!

How do you execute on a strategy? In a word: People. At the end of the day, it is the employee who makes things happen, who gets results – not machines, strategies, vendor relationships or what have you. People are your real differentiator and now typically make up 70% of a company’s cost (and growing). This is doubly true in today’s knowledge-focused economy. We see today that about 80% of a company’s valuation cannot be explained by the balance sheet, which shows the growing importance of intangibles and people performance to future cash flow. The value of a company is no longer in its factories, IT systems, or physical assets – it is created by the company’s people.

Your company is in fact already on the field, fighting for customers, revenues, and a competitive position. Instead of “picking out the best play”, focus on what will most help you move downfield toward your goals: people performance, 85% of your success depends on it. Goal alignment, individual accountability, and engagement equal strong execution. Build up these strengths and capabilities of your company to help ensure you can make the big plays. So yes, people performance does matter, because their ability to execute is the key factor in creating value and driving results for your company.

Erik’s note: We’re happy to present this guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

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I once taught a class designed to introduce senior citizens to computers. By far, the internet was the most difficult concept to explain. Teaching file systems was fairly easy – it is not much of a stretch to visualize files in folders. Start up a web browser and the analogy breaks down. All sorts of questions come up, “this file is on my screen, is it in my computer?” “Is this file on their computer?” The complex amalgam that is a webpage, some bits cached locally, others served up from different data centers around the globe, took some time and effort to explain.

Some of the questions raised by my students were eerily prescient, like “Where is here?” Data made the move into the “ether” a decade ago. In many ways, work is woefully behind – still physically tethered to offices, desks, and phone lines.

Recently, Jim Ware and Charles Grantham, principal founders of The Future of Work, and authors of the recently published book Corporate Agility, joined SuccessFactors Research as thought leader partners for a webinar discussing remote work and productivity. The revelations were profound:

• Work will be spread throughout the day and week (24×7), no more 8 to 5 work schedules
• Work will be divided into smaller chunks with cycle times down from months to weeks
• Work will be accomplished in a wide range of locations, 35% home, 35% office, and 30% in-between

As we me make the transition to knowledge work, “here” is no longer a physical place. “Here” is the where the data is, “here” is where the project is. Virtual meetings take place alongside the data, in the ether, not tethered to the physical office.

This is just one example of several, coming, dramatic shifts in attitudes, demographics and the global economy. In the paper Talent Management 2017, Erik Berggren and Jason Corsello examine these changes and show how talent and performance management will actually drive strategy in the future. From this session, one question really sticks out – How can we better collaborate? With a distributed workforce, how can we even find each other when we need to? Software vendors are just starting to answer these questions. One successful innovation that we have brought to market is our employee profile module. It is just the tip of the iceberg, so to speak, in encouraging collaboration. An early adopter of this tool reported that 94% of their employees started using it immediately after deployment, indicating that interest in connecting people is strong. At the end of the day, how could you drive people performance if people can’t even find each other? Where is here? What are your ideas for bringing people together in a distributed world?

Ask HR to provide a list from the payroll and you should get the answer with reasonable accuracy, – right?

Well, with an average 20% of the working population (Manpower estimate) working for one company but technically being paid from another -so called contingent workers- the answer is not that obvious anymore. According to American Management Association 93% of U.S. corporations use some form of contingent workers.

However, far more important than getting an accurate headcount is how you get these value-contributors aligned with your company’s goals and priorities. How do you engage and motivate these people and ultimately, how do you get real performance from them?

The answer is that you need to include all value-contributors, irrespective of how they are being paid, in your strategic HCM plan and execution. Your process for

• aligning goals,
• setting expectations,
• monitoring performance,
• develop skills, etc.

should at a minimum include all your value-contributors and not only those on your payroll.

Whatever your strategy, make sure you include all of the individual value-contributors that participate in its execution.

The challenge of finding people and leveraging their strengths and interests is part of the reason why SuccessFactors today has launched a consumer-inspired Employee Profile solution. In its simplicity it’s genius. The product builds the social network framework automatically from the traditional HRIS information in the system, but then the ownership for enriching the content lies in the hands of individuals, encouraging workers to advertise their strengths and have fun creating and building their profiles. Of course, managers can build on top of the profiles in terms of performance and potential data, etc. This approach to user-managed and user-relevant applications is also inclusive of contingent workers. All value-contributors now have the opportunity to define their own value proposition to the business through self-completion of skill and competency inventories.

SuccessFactors Research and Thought Leader Dr. David Sirota hosted a webinar in which the link between engagement and camaraderie is revealed. Of course building this kind of community, or social network, is crucial to building camaraderie and driving the performance of these value-contributing contingent workers.

But at the end of the day how can you work and collaborate with people that you can’t find nor even know exist?

So the question remains: Do you know who is working for you today?

Out here in California, school starts next week. Being new at selecting schools for my kids, I learned that there are at least two things parents seem to be studying when they make a decision on where to place their kids:

- The proportion of kids at the school with free lunch allowance and
- The standardized test scores of the kids at that school

Those are certainly interesting data points, but are those the real and only predictors we’ve got for academic success?

What if human capital management techniques could contribute to our children’s academic success? It turns out that they do, by using them to help manage teachers. Who woulda thunk it? Our SF Research thought leader and partner Dr. Laurie Bassi (President of McBassi & Co, an HCM auditing firm), that’s who.

The results of her work are even more interesting than the topic itself. Dr. Bassi found that although children’s academic success is partially dependent on the level of their parent’s affluence, and the proportion of free-lunches – the school’s HCM practices are more than twice as important.

Listen to my conversation with Laurie about this study on this short podcast.

My question is really how much of this finding can be applied to other non-profit organizations to spur performance and ultimately drive some real productivity? One example: how influential is smarter HCM on putting our tax dollars to better use? I bet we’d all be interested in the answer to that one.

More details on Dr. Bassi’s study and the findings can be found here.

According to a recent study commissioned by Cisco, mobile workers are expected to account for a quarter of the world’s working population by 2009.  With this in mind, how:
•    Can your organization afford not to drive real performance from your remote workers?
•    Can you even attract and retain the people you need if you fight this trend? – Who wants to work for a company that would take personal sacrifices for granted? Hours commuting could be used for personal and company productivity.

Here is my take on answering these questions; I think that it comes down to how you manage and measure the impact that your people are delivering. Simply put; manage potential, measure on output. Face time doesn’t explain real output from peoples’ efforts so you might as well just forget about it. You can’t manage what you can’t see, but do you see peoples’ work just because you see their faces in the office? I doubt it.

Of course there are tasks and times that completely merit people being physically together but not all tasks all the time. Would software that helps you align the goals and monitor performance be helpful for managers to focus on the goals and the execution of these? I think so. Individual contributors, irrespective of where they work and how they are technically being compensated, can get a clear line of sight and produce while being accountable for the output.

 

Our friends and research partners from the Future of Work are doing research into this area and Jim Ware  and Charlie Grantham will unveil their knowledge on this topic in a SuccessFactors Research webinar on September 12.

Max’s note: We’re proud to present this guest post by SuccessFactors’ Director of Research, Erik Berggren.  

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What’s the best way to be productive? I wager 99% of you just thought to yourself – “waste less time.” After all, if we used every minute efficiently we could build skyscrapers in days, right? Maybe.

According to a new salary.com survey, young people are wasting more time than ever before (2.1 hours/day) at work and the insinuation is that this is major cause for concern. But, it’s not quite as simple as all that. Productivity has a numerator and a denominator. The denominator is time. There’s only so much in a day. The numerator? Output - how much stuff is getting done. To improve your productivity you could work on either or both sides. But it’s a balance, a single minded focus on the denominator is at best somewhat limited.

SuccessFactors’ stated goal is to increase worldwide productivity by 50% and I can tell you that we’re not going to get there by identifying slack time and eliminating it. Peter Capelli ( a SuccessFactors Research thought leader pictured left) shared his thoughts on this survey this morning on Morning Edition on NPR. Click here to listen.

Peter and I had a great conversation around productivity and HCM last week in preparation for his upcoming webinar highlighting some interesting findings from his coming book “Talent on Demand.” There is much more to driving productivity than cutting slack out of the workday and I invite you to join our webinar next week to find out why and what to do about it from one of the greatest thinkers in this area.

Max’s Note: We’ve been following an interesting discussion over at Vendorprisey (and Jim Holincheck’s response) on the delta between survey data that shows CEOs consider people issues strategic and the lack of any substantive action in involving HR in strategic matters. Our own Erik Berggren responds below:

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If HR is supposed to help executives make better informed decisions, HR needs to start with relevant data to support them. What is relevant? Well, anything that affects the company’s ability to execute its strategy.

At the most basic, we need to know how many people we have with the requisite skills today. What about retirement? If we do nothing, how many of these people with what skills will we be short? Are we playing scenarios of various turnover rates in various roles? How will those affect our need and our ability to attract the relevant talent to fill this need? Do we look at our talent base both in terms of size and composition today and a few years out?

The idea of “a few years out” – how we will compete in the future –  that is the where strategic decisions are born. It’s why HR needs to be strategic in two ways – defining the strategy AND supporting its execution.

Here is a practical example of how fast this becomes the most strategic issue at hand. A few years ago I was working as a consultant helping a CEO and his COB with a complete turnaround of the business. A new, sustained top line and an above industry standard bottom line margin was the goal. The company was loosing bids and business looked rather bad. But the turnaround took hold, and the company, an engineering firm, started to do better and begun to win significant contracts.

But the lack of integration with strategic HR planning might have cost us dearly. Delivering on these new contracts completely drained critical skills in various engineering areas. Further, a shortsighted reduction in force nearly put the company in a situation where the same people let go would return as more expensive contractors. We became aware of this just in time to correct course and successfully averted the distaster.

Nevertheless, looking at this scenario early on and integrating more tightly with the internal talent pool as well as the external talent market could have led to a more optimistic approach with pricing and left the company with a better margin. And you can be sure that a strategic, HR-driven approach to planning that looks both internally and externally is now the standard way of doing business.

We (SF Research) are currently working on this need for HR to be more forward looking, strategic and predictable. We’re looking at what HCM metrics are predictors of future success. On this topic, we’re currently working with Dr. Jac Fitz-enz on a white paper and are preparing to discuss this topic and early findings in a webinar on July 24.

I invite you to join us to hear our conclusions and our take on how HR can get strategic by thinking forward.