Category Archives: SuccessFactors Research

Managing Tomorrow Today

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I’m happy to present this guest blog from our Thought Leader partner and my friend Dr. Jac Fitz-enz.

Predicting the future is a big business. Economists, financiers, demographers, pollsters and pundits are paid big money for their insights into what might happen next in their respective areas of expertise. If we can catch glimpses of the future of something as complex as the economy, why can’t we look into the future to predict our human capital needs? I started researching human capital metrics in the 1970s, when almost no businesses were really crunching the numbers on their people. Today, I am working hard to push the frontier of predictive analytics. Last year I kicked off a predictive analytics initiative, and partnered with SuccessFactors Research to find out what works.

In business, gathering and analyzing data is only a beginning. Managers want metrics that are actionable, metrics that support business decisions. They want a glimpse of their future. To answer that call, we have developed HCM: 21, a better way to collect, integrate, process, analyze and predict business results. It links external forces and internal factors, plans with it, processes it, analyzes it and predicts it within a single, integrated system much like FedEx does with small packages. The value add is compelling business intelligence about our most mission critical resource: human capital.

HCM21

Most great advances in the information era have not revolved around new products. They have been about the distribution of something. Consider Avon in cosmetics, FedEx in package delivery, Amazon in books and USA Today in newspapers. In every case upon introduction adoption of the better method was condemned by naysayers. Innovation today is about efficient movement of data and products.

Just as other breakthroughs have been built on integration, HCM: 21 incorporates human capital information from many sources. But it is not about information technology in the sense of computers any more than Gutenberg was about paper and ink. Movable type launched the efficient distribution of information, which made possible widespread education and facilitated trade. HCM: 21 is the first successful method for combining mission critical, human capital data to manage risk and predict return on investments all within a single, comprehensive system.

You can find a preview of the HCM: 21 system in the whitepaper I wrote with Erik from SuccessFactors Research, Managing Tomorrow, Today. It is not a crystal ball for the future, but rather a blueprint for putting your data to work, not just to solve the problems you are facing right now, but to ready yourself for tomorrow. How integrated, actionable and relevant is your human data? Don’t get stuck looking backward and reacting, make sure your data is good enough to look forward to tomorrow.

Employees Want More Work? (Not Less?)

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I’m happy to post this guest blog by Doug Klein President of Sirota Survey Intelligence and one of SF Research’s Thought Leader partners. Doug will present findings from resent research on this topic with us in a webinar next week. Join us then to learn more.
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Well, not really. What employees truly want is the amount of work they have to do to match the expectations they had when they took the job. During the on-boarding process and throughout the early years, every employee continuously re-evaluates the “deal” between themselves and the company. When the “deal” is still fair, employees are satisfied (even enthusiastic), when the “deal” sours, they become highly attuned to dissatisfiers.

Part of most employees’ “deal” is to feel valued. This has a personal and performance component. They want to certainly be treated fairly and with all the common courtesies (like management not ignoring them, not being treated as a second class citizen, etc.) as well as having their current and future development needs met (so they can achieve their own personal work-related goals – whatever they may be).

Employees who are bored (reporting “too little work”) are often doing work for which they are ill-suited, or have jobs that are poorly designed. As a result, they have by far lower job satisfaction, sense of accomplishment, and pride in their employers compared to all other workers. All in all, they feel less valued.

Feeling overworked – a condition that could lead to job burnout – is far more prevalent than feeling bored and spikes during 2-5 years with the company. Employees who complain about being overworked often feel they are not receiving adequate support from co-workers. In addition, they contend that the quality of their work suffers (because of this inefficiency), resulting in greater stress and tension, and their feeling that they have sacrificed their personal lives for their jobs.

The complaints of both overworked and bored employees should be taken seriously, yet being bored has far more serious consequences for an organization than being overworked. Complaints about being overworked can be an indication of poor quality or work processes, and it can be difficult in certain circumstances to retain employees who feel they are overworked and out-of-balance with their work-life. But bored employees have an even greater negative impact on an entire organization, lowering morale and productivity, and draining resources.

One mechanism of action at play, as previously indicated, is employee perceptions of the “deal-delivered.” Work-life balance is almost an afterthought to people who feel their employers are meeting their end of the “deal” by being fair, providing interesting and meaningful work, and recognition or rewards for a job well-done. Work-life balance becomes a real issue when employees feel that their employers aren’t holding up to their part of the partnership.

However, when employee don’t feel valued (like when they feel bored) or feel overworked (because the company is being inefficient or cheap vs. dealing with an unexpected – or expected – rise in demand) issues like work-life balance, commuting, etc. become highlighted in their minds and become true dissatifiers.

Do you look forward to coming to work?

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While the world is experiencing a war for talent, each region has its own, unique talent related challenges. Indeed there are local talent management phenomena, as Jason Averbook from Knowledge Infusion and I discussed in his recent blog.

In some European countries a lot of businesses carry a huge cost for people on sick leave. This cost in most European countries is a shared responsibility between each company and some kind of government funded insurance system (most employers must pay this insurance anyway – in many places it is mandatory).

How much of a burden is this for organizations? There are many consequences when employees overuse sick leave:

  • Need to carry extra staff to cover for the absence levels
  • Cover the absences with temporary staff that is both costly and not always fully productive in wider-scoped roles
  • Lose business – which might be the worst of all alternatives since it will hit both the top and bottom line

Let’s look at this example from a financial service company in Holland:

The employer is legally responsible for paying 70% of the normal salary, after 2 sick days for a full 2 years. In a majority of industry sectors, this is legally raised to 100% through deals with unions. Our research indicates that the sick leave in Holland is about 6% (Sweden, Norway and the UK between 4-6%, France 3%, Italy, Ireland & Germany about 1.5%)

For a global financial service company with about 2 Billion Euros of labor cost and 35K employees there is an average cost per employee of 57K Euros. With 6% absent for sick leave that would mean that 2100 employees are absent at a cost of 120M Euro per year. If that sick leave could be reduced to 5% this company would have 350 more people working while directly saving 20M Euro. This example though showing significant cost savings is only looking at the direct cost of this absence, and not at the more strategic impact of lost business opportunities, or the individual human costs. Though there are arguments for fixing systematic problems caused by over generous sick pay, there is really nothing organizations can do about it in the short term… or is there?

To find the answer I turned to one of SuccessFactors Research Thought Leaders Ken Scarlett who has been researching this, and the conversation left us with some very real solutions.

Aggregately speaking, the higher the Engagement level (as measured by an engagement index) the lower the sick leave rates, and there is no better way to predict the likelihood of abusing sick leave than by the responses to the questions “Do you look forward to coming to work?” and/or “Do you feel you work is important to others?” Ken’s research shows that the group who answered negatively to those questions has the highest propensity to max out/abuse sick leave. With the specific questions above, you can actually create a highly accurate forecast within 10% margin of error.

In any country and any industry your job as a leader is to increase the likelihood that your people answer the question “Do you look forward to coming to work?” positively.

Building bench strength is a myth

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Why is that? Per definition that would imply that the person on the bench has more potential and capacity than what is currently being used right now. Well how many star players are happy sitting on the bench waiting for their turn to play? Building it only works if done right and that is to look deeply and widely at your workforce potential and employee preferences, and then act on that information. Act means putting people to use and managing to their potential. The worst thing you can do is to ignore untapped potential, thus de-motivating and potentially losing your strongest people. Such a loss will be seen on the profit and loss statement, in addition to being a human loss for individuals. Studying the financials of our customers we see that those customers that are using our Succession Management module operate with 7.9%pt (absolute) higher net profit margin than those that don’t…

In his upcoming book, Talent on Demand, our research partner Peter Cappelli discusses the need for looking at talent as an input parameter for production, and uniquely applies the same model that is used for the supply chain. You don’t want to build costly excess inventory anywhere in the physical supply chain but, is it acceptable on the most costly asset – people?

Peter will join us at our upcoming customer conference in June to discuss this approach of managing talent along with other SF Research thought leader partners as well as our customers.

Is work a place or something you do?

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Sometime during the movement from an agricultural economy to an industrial economy I think we have collectively mixed this concept up, and so it merits the question today. Work used to be about what you could produce. When we moved into offices and cubicles, and started shuffling information back and forth that concept was lost. We started to refer to work as somewhere you go, and this changed how work was measured; workers were paid and rewarded for time and not always results.

Work is what you do – not just a place where you go. In a recent article published in the Harvard Business review, Tamara J. Erickson discusses this very issue in terms of what Gen Y’ers expect from work. In essence the task and not time is what matters to them.

I hope that this concept is not only for Gen Y but for everyone in the workforce, irrespective of age. According to recent research from our thought leader partners Jim Ware and Charlie Grantham at the Future of Work, people today divide their working time almost equally between the office, home or somewhere in between. I am, for instance, writing this blog on a plane to Europe to speak at a strategic talent management conference in Stockholm – well I guess that is work though I’m not technically in the office.

This is of course pretty straightforward as a concept but nonetheless difficult to change in some organizations. The solution, may I suggest, comes from a managerial change in attitude and behavior. If we get away from the face time and office hour concept and instead focus on the expected results and goals that need to be achieved, productivity will improve. People naturally want to do great work and be rewarded for the results. It also allows people to focus on managing their energy, in addition to managing their time. Maybe you are more productive, alert and energized at 8pm after a long run on the treadmill at the gym than you are at 10am in the morning. Why not get some work done then? If your employer measures your contribution, not your time on the clock, go for it! It maximizes your productivity, benefiting you and your employer.

Maybe we could learn from the US Marine Corps and their usage of mission based orders. An order is given with the goal that needs to be accomplished, along with an explanation as to why that goal is important. It is then up to the officer in charge and closest to the action to deal with how to get it done and to do it. That is goal orientation instead of time orientation. So focus on output and results instead of time. Semper Fi!

People are not only an expense post but also a strategic asset

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70% of total cost of doing business is people cost

80% of the value of a company is not found on the balance sheet


Why are people only an expense post on the income statement?

Today: Profitable companies see their people as a necessary cost of doing business.

Tomorrow: The economy goes in cycles and the cost of doing business quickly becomes a big problem when companies face problems continue to grow or even maintaining the top line. So people go from being a cost to becoming a problem. I thought this is an important reminder right now with some indications of the US and world economy moving into slower growth and potentially a recession. Are your people becoming a problem that you will deal with?

Talkers: Some organizations talk about their people as their greatest asset but what they typically mean is that they actually understand that people also belong on the balance sheet and refer to people as means of production. That is a great industrial factory floor viewpoint of people. They are a means of production as is raw materials and capital. However they don’t need to write of this asset. It is also a pretty stale view assuming a constant value of this asset.

Walkers: Modern organizations should see their people not only as a cost but also as a capital investment. There is however a fundamental difference between a dead asset and a person. An asset will depreciate over time. Of course to various degrees depending on what it is and how it is being used and maintained. A person’s value will increase over time in terms of the ability to deliver value to customers. This additional value contribution potential springs from experience, network, knowledge, skills and courage. The more this type of asset is being used the more it appreciates (of course within human capacity). Ongoing growth and learning should make an individual more capable of dealing with broader and more complex issues at a faster pace. Nothing new here and I think that this viewpoint is greatly illustrated by Larry Bossidy while explaining the turnaround of AlliedSignal (The Job No CEO Should Delegate, Bossidy, HBR, 2001). However if companies only pay lip service to this they are selling them self short in terms of limiting growth, harvesting productivity gains and ultimately creating shareholder return. Growing the greatest asset will grow the company and set it part from competitors.

Dr Kirk Hallowell from PDI and I are working on a more in depth paper looking into the right metrics to measure and and manage people as assets. We will present our findings in a webinar end of January. Our goal is to show how greater people practices pays of financially and introduce some specific metrics that we suggest organizations start using to achieve real results.

Give the Gift of Great Performance this Year

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

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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Too Much Information

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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

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?

Insource the strategic stuff

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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.

Does People Performance Really Matter?

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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.