Recently Saugatuck Technologies released a study showing that SaaS (Software-as-a-Service) Human Capital Management software contributes at least 2-3% to top line growth – definitely good news for companies seeking more green. An article in this week’s San Francisco Chronicle made me start to think about another kind of green – the environment. Human capital management is key to driving a number of environmental initiatives. Paperless reviews save paper. Working from home reduces gas-guzzling commutes and slows the need to build new office space, and as the San Francisco Chronicle points out, employees love working from home. As an important part of the individual value proposition to the employee, working from home helps keep your employees engaged.

But, successfully promoting a paperless office and shifting people from the office to the home, requires systems that support these activities. Goal alignment, ensuring that people are working on the right things for the right reasons, is very important. People need to feel like part of the team, even if they aren’t physically present. Traction, not action is the mantra for successful execution. Goal alignment ensures that people are moving in the right direction downfield to score, and not just gaining yardage. In fact, if your players are moving in the wrong direction, they are moving farther away from the goal. Goal alignment helps ensure that this doesn’t happen. It is not a substitute for supervision from a manager, but keeps the team working toward the overall company strategy.

Human Capital Management is a critical to earning green, and going green, enabling people to work from home, in global teams, anywhere, anytime. How green is your organization?

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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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.

Dion Hinchcliffe, a well-known blogger and thought leader in the Enterprise 2.0 space wrote a post recently in which he talked about the next generation of business software – social, interactive tools easily delivered over the Web – and how they can make a dramatic impact on the hierarchy and culture of businesses. These new tools, Hinchcliffe said, can tear down traditional knowledge barriers and walls within an organization by making information fluid, collaborative and accessible to everyone who wants it, leaving the power of that knowledge in the hands of everyday workers and not just managers and executives. That’s pretty powerful, and the catalyst for this dramatic transfer of power and virtual flattening of an organization, he said, lies in these simple, lightweight next-generation tools:

“Because they are highly democratic and egalitarian; anyone can deploy (Enterprise 2.0) tools, anyone can quickly learn to use and benefit from them, and they can be used to communicate and collaborate openly with anyone else inside (and often outside) the organization, are inherently viral, they literally tear down the barriers that would normally impede their forward movement and adoption inside the organization. And, anecdotally at least, this seems to be happening.”

This is a great piece of insight. In the past, there was always a barrier between every day workers and the information they worked with. To use a practical, HR-related example, take first-generation performance management tools – they were useful, but in order to get real value out of them in the form of analytics, they had to be sorted out either by hand by HR managers or run through a database by IT folks. Useful, but not efficient or at all egalitarian. Enterprise 2.0 gets rid of that gatekeeper.

As a general philosophy, SuccessFactors has always advocated transparency and the free flow of information – both are core doctrines written into our software and promoted as part of our own workplace culture. With SuccessFactors NEXT Labs, we’re trying to help promote that openness on both the technology and cultural fronts. NEXT Labs is a Trojan horse of sorts, designed to introduce Web 2.0 technologies and concepts – blogging and tagging capabilities, social networking and sharing – that render the adoption and repeated usage of an enterprise application painless for people accustomed to using such tools in their personal lives.  

Rather innately, Performance & Talent Management systems are the ultimate in-house Enterprise 2.0 tools: They help employees easily see their performance by harnessing the power of collaboration, communication and visibility, giving them the knowledge they need to make what they want out of their careers. In a way, NEXT Labs is our ”spoonful of sugar.” It  helps companies and employees eaily swallow what is all too often a bitter dose of medicince – the adoption of a new enterprise-wide software system.

The Atlantic Monthly has been running excerpts from old issues as part of their 150th anniversary celebration. Reading over an issue this weekend, I came across an article written by a Colonel R. Williams about a decade after the civil war ended – in 1878. His issue? That the military’s practice of promoting those with the longest tenure was “fostering apathy” rather than bravery or a commitment to excellence.”

Amazing that the same battles we fight today for meritocracies were equally well articulated 150 years ago.

Here’s an excerpt:

Our army presents the only known example of a business or profession, either public or private, in which incompetency and want of zeal bring the same substantial rewards as energy, capacity, and active attention to duty. Such a system of promotion is in violation of all the rules of common sense by which men are governed, as well as of those by which they are incited to strive for superior excellence, and the condition of our army at the outbreak of the rebellion affords an excellent example of its inevitable result. At that time the superior grades of the army were filled by old men, who, having outlived all above them, had been regularly promoted, in accordance with this system, to the positions which they occupied, regardless of the well-known fact that in the majority of instances they were unfitted, both by age and infirmity, to perform any military duty whatever. The spectacle was so pitiable, and the lesson it taught so apparent, that it might be supposed the government would have profited by such crushing experience, and been led by it to the adoption of wiser measures. Such, however, was not the case. Our system of army promotion is the same to-day as before the rebellion, and we are slowly, but surely, approaching the same result, from which the same experience, disastrous as it was to the country, must necessarily follow. At the close of the rebellion, and with the sad experience it had taught still before us, some effort at a change was made. The army was reorganized, and many young officers who had acquired experience, both of the regular and volunteer force, and who had especially distinguished themselves, were deservedly placed in high positions; but this spasmodic effort at reform was deemed sufficient, and we have again fallen back into the system of promotion by seniority, which, unless some dire necessity forces a change, must render the condition of our army equally as deplorable as when the rebellion commenced, by filling its superior grades by worn-out and superannuated old men. It seems needless to describe the effect which this system must produce upon the subordinate and junior officers of the army. In most instances it is deadening to all effort at improvement or professional skill, and suggests the natural conclusion: that, as superior rank is obtained only by longevity, each should strive to avoid all exposure, hardships, or dangers by which health may be impaired or life risked.

The poll we’ve been running here for the last few weeks has been asking “Would you be in favor of an “open salary” policy at your company in which everyone’s salary was published for all to see?”

As you can see from the responses (nearly 200 of them) 60% of respondents said fuhggedaboudit (AKA no). Originally based on this post from the Chief Happiness Officer, the poll was an attempt to see if people agreed with Alex who argues that there are a number of very compelling reasons to do away with the secret salary system.

While I, too, balk at the idea of publishing my salary, in many ways doing so would represent the natural evolution of something we already do at SuccessFactors: make our goals public. The idea behind pay for performance is that those who perform best get paid the most – thereby incentivizing increased performance. But if people don’t know what others are getting paid, there is a disconnect. I know what Joe did or did not accomplish from his public goal plan, but I don’t know if he got paid more or less (and how much more or less) as a result. There is a perception of pay for performance, but no proof-laden pudding to support it.

I guess my question then becomes – can you realize the ultimate promise of pay for performance without open salaries?

I was sent this article written by Joe Torre, the manager of the New York Yankees, that was recently published in BusinessWeek. Now, regardless of what you think of the team, you have to admire Joe. Just being able to remain the manager of the Yankees for this long while working for George Steinbrenner has to give you some insight into the man’s pluck.

The truth is that he’s a very insightful guy with real heart (somehow in my mind, I always envision him crying after winning something), and in the article he shares some of his thoughts on managing talent. In part, he talks about how he uses one of the team’s worst moments (letting the Red Sox take the momentum, and the world series, away in 2004) to motivate his people to always be ready. But he contrasts that motivational technique with a keen understanding of the fine balance between emotionality and competitiveness. A quote:

These days it is so important for a CEO, or any manager, whoever it is, to be aware of his or her personnel. We are in an age of computers, and everything is so damn impersonal. But in the end, it still comes down to people. You have to make people feel necessary. Even if their contributions are minor, it adds to everything else. That’s what makes the machine work. I love players with heart, not necessarily emotion, but those who deep down are driven by something more than mind and body. I don’t play favorites. The 25th member of the squad is just as important as the first guy. And I can’t let my own emotions get in the way of competing. I have had to release guys I loved, and keep players I didn’t necessarily care for.

Depends on who you ask.

Via digg.com, I came across an article from the WSJ entitled “Employers increasingly favor bonuses to raises” – which discusses the whole concept of performance-linked bonuses. According to the article, 80% of companies will offer some from of bonus program this year up from 78% last year and 67% in 1997. The article discusses the pay-for-performance initiatives of Whirlpool, which has made more employees eligible for bonuses and increased the maximum bonus that can be achieved.

According to the article “Whirlpool also awards merit raises based on performance. But it considers bonuses a more powerful motivator. “It starts breaking away at the notion of entitlement,” says David Binkley, Whirlpool’s human-resources chief. With merit pay, “if you just spread it around, it just raises your costs.” Across corporate America, he notes, “those days are coming to an end where everyone just automatically gets this 3.6%, 3.7%” merit raise.”

In case you were wondering, the average raise for 2007 is projected to be 3.7%, up from 3.6% this year  – according to data from Hewitt.

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Sometimes I read these articles and wonder who benefits from all this fear-mongering. Clearly, someone is out to scare the heck out of us. In any event, Forbes presents “Where have all the leaders gone?,” a rather sanguine look at the looming talent shortage at the C level.

In the article, commentator Kevin Cashman (CEO of a leadership development firm) responds to reader questions. One reader asks “…what practical measures can senior leaders take to deal with potential crises?” Cashman responds:

It may sound simplistic, but the best thing a top leader can do is be a great coach, boss and mentor. After conducting 19,700 exit interviews of key employees leaving companies, the Saratoga Institute found that 85% of bosses thought their top people left for more money and opportunity. But the real reason behind the turnover: 80% said they left due to poor management and leadership or because of a dysfunctional company culture. If you’re a board member, a CEO or a leader on the front lines, paying more attention to the development of your people and teams is the crucial variable for retaining key people.

It’s a point well made. Talent shortages are far more acute for companies that don’t actually work to develop their employees. Keeping the top performers you already have is far easier and more efficient than going back to the well.

From AOL/CareerBuilder comes this list of 12 signs you’re getting fired. Everyone loves lists, but perhaps this one is somewhat overzealous in its paranoia.

#4 on the list is “You had a bad review.” Certainly most companies don’t fire you for a bad review - even if you’re on a performance improvement plan as the article implies.

#12 is “You’re hearing rumors.” Yeah, that one is the key. ‘Cause as we all know, rumors are the source of all truth. Come on.

Though I’m frowning on parts of the execution – the concept is good (and there are some legitimate points in the article). So what are some REAL signs you’re about to lose your job? If I get enough comments I’ll post a list from the real experts – you!