Dr. Jac Fitz Enz - Managing Tomorrow, Today!

Jim

Welcome back to People Performance Radio. Today we have a great interview with Dr Jac Fitz Enz, the CEO of Human Capital Source, and Erik Berggren of SuccessFactors. Also I just want to let you know, coming up on October 1st at 11 am Pacific, 2 pm Eastern, there'll be a webinar with Dr Jac and Eric Berggren entitled "Managing Tomorrow Today—HM for the 21st Century". Within this webinar, they're going to talk about, how in the face of today's dismal markets, organizations have shifted their focus from cost reduction to top line growth, excellence in execution, and acquiring top talent. To accomplish this, executives are struggling to anticipate the next cycle's growth opportunities. For more information, and to register for this webinar, please go to www.successfactors.com/podcast.

So without further delay, let's get into the interview given by Dr Steve Hunt.

Steve

Hi, this is Steve Hunt with People Performance Radio. Today we are very lucky to be talking with Jac Fitz Enz from Human Capital Source, as well as Erik Berggren from SF Research, and for those of you who don't know, and most of you probably do know, that Jac Fitz Enz has been a huge influence in driving the whole focus on talent management metrics in human capital measurement, and Jac is going to be telling us about some stuff that he and Erik are working on, to really kind of take it to the next level, Jac, you told me a little bit, but maybe you could just, tell us a little bit about what you're working on, and what is this next project?

Jac

Thanks Steve. Let me set a little context, I always like to have a background to whatever I'm thinking or working on. I think really, what it starts out with is that everybody is really familiar with the macro issues today, globalization, shifting demographics, uncertain economies, the market volatility, and all of that, so that's the fundamental issue, and everybody understands it, and part of the problem is that the accounting doesn't help us very much there, because it deals with past activity, and publishers liking indicators about tangible assets. That really isn't where the problem is today. If you're familiar with the conference board survey that came out recently of 700 CEOs worldwide, they said their three chief concerns were top line growth, excellence in execution, and talent investment. Now, accounting only deals with the revenue part of that, the top line growth, but not with execution or talent, except as an after thought, perhaps as some kind of a surrogate measure of return on investment.

Clearly what we need in order to deal with these issues that are now up the most, is we need living indicators, and that's what got us started on this about 18 months ago, working with Erik and a few other companies, it was clear that putting up benchmark data, and looking at the kind of data over the past doesn't really solve the problem, because that doesn't help us manage the future. The strategic issues facing us today are things like leadership, engagement, readiness, capabilities, loyalty and so on, that's the language of the emergent market, and we can't solve those strategic issues with tactical responses such as new software except, and this is was SuccessFactors I think has done very well, except if we embed software in an operating system, which then gives a greater objectivity and helps us move forward and be able to overcome some of the problems of bad data in the past.

So that's kind of the basic idea, and the wiser vendors, people like SuccessFactors and KnowledgeAdvisors and Oracle, to name a few, are working on systemic applications that support improved execution and performance measurement, and that's where the game is, so that's basically, what were about is providing a system to do that.

Steve

So can you maybe give an example of, have you created a system, or a system that you're creating—exactly how it will work, what the data is it's going to gather, and what the results will be that it's going to present to business leaders?

Jac

Well, there are fundamentally three issues here: one is, what we call "strategic capacity scanning"—big term, all it means is, taking a look at the world, everything that's going on outside that could affect your organization, as well as the things inside that could affect your organization's performance in the future. So the idea is to broaden the scope, because my view of workforce planning in the past has been, it's been very truncated, we look at the business plan, we look at the labor supply, we identify some gaps and we go try to fill them, and there's so many other things going on out there that affect our business, such as the globalization, the demographics etc, that we have to broaden the scope. So first of all, we collect a lot of data about external forces and internal factors that are going to affect our human, our relational and our structural capital in our organizations. That gives us a very nice solid database for going forward. From that we look at capability planning, which is a slightly different idea than workforce planning in that, instead of trying to fill holes, which is basically what a lot of workforce planning has been about, rather the mechanistic, we look at capabilities, we say, "What does this company need in the way of skills in the future?", and really looking into the future, not just today and tomorrow or the next year, but looking out a couple of years, what kind of changes are going on in the marketplace with new technology, customer demands, government regulations or whatever, that will affect the kinds of people we need in the organization.

Once we have those two things, then we have to start delivering on our services, if we're talking about within HR or any other function, that's when we start to look at our processes, and say, we've got a process where the sources, the methods and the results are very effective, and we've built some software now, some algorithms, to be able to analzye that, and not only can we look at a process, such as staffing or training or whatever, and improve the way it's being delivered, but we can also correlate and connect that to some degree, we don't know how much yet till we actually run it in the marketplace, to some degree we can connect that with the scan that we did in the beginning and all the data that's out there.

Last simple example, obviously if there's some real labor problems out there, then we've got to make some changes in terms of the way we go out and source and train people, so trying to encapsulate a very big idea in just about 60 seconds, that's kind of an example of where we're going.

Steve

That's great Jac, it definitely is a very big idea, but I think it's totally on the money as far as what we need. A couple of questions I have to maybe clarify it a little bit, so you mentioned ones like, with the strategic capacity scan in, it's really going beyond what's been looked for in a more narrow view of workforce planning. Can you give an example of some of the external factors that you're including in your analysis, that traditionally were not included in workforce planning?

Jac

Sure, I would say it's everything else, but that's rather non-specific, but it's all the things we read about in the paper every day, it's all the economic issues that are affecting our organization as well as any others that may be competing with us or co-operating with us, it affects our suppliers as well as our competitors and our customers.

Steve

So would it be things like the real estate market in different regions, and things like that?

Jac

Exactly, I mean if SuccessFactors is going to try to bring people from the east coast to the Silicon Valley, we all know what the problems are there in terms of the economics of real estate, it's just a terrible problem, but that's one micro example, Steve, of the kinds of things that we would look at that would have an effect on what we're doing around human capital management.

Steve

Interesting, and then I really like too the idea of going from filling holes to building capabilities, I think that's a real great way of paraphrasing the old idea of workforce planning, and really just saying, "Look, if it's an investment, we should be focusing on building, not filling".

Jac

Building capabilities, not filling holes.

Steve

What sort of capabilities are you seeing, like a company might identify—"We need more of this"—other than, you always hear broad things like leadership, but I assume you're trying to get down to a little more specific level?

Jac

Sure, we're talking about tangible skills, if you will, that exist at the desk level, so if you're at SuccessFactors, of course, you're dealing with technical skills. If you're running a refinery, it's a different set of technical skills, if you're running a hospital, it's a third set of technical skills, if you're running a bank, it's another set, so every organization has technical skills embedded in every job that they've got, and in order to fill those jobs effectively and into the future, they've got to be thinking about, "How is our market changing?" Look at what's happened in banking, for example—when I was in banking years and years ago, there was no such thing as ATMs, everybody came in with their passbook every month and had their savings account manually updated—that world has changed, so the set of skills that we had then are certainly different than now, and they're going to be different in the future, as technology continues to invade a service business like banking, it's certainly has done the same thing in healthcare.

Steve

Yeah, that makes a lot of sense. I think when people have a labor shortage, it's not a shortage of people, it's really a shortage of people that know how to do the things you want them to do, which is skills.

Jac

Of course, it's not just bodies, it's skills.

Steve

It's skills. And I guess the last thing is, so it sounds like you guys are looking at a mass of data, and you have algorithms to present this—what sort of reports and presentations do you provide? Have you put this together and put this data in a way that makes sense to some business leader?—how do you do that?

Jac

me give you an example, using staffing again, because it's the one thing everybody understands. Now, there's three issues in staffing: the source is where do we get pepole, all the different sources we have out there, from job boards to newspaper advertising, journals, everything else you can imagine. There's the methodology we use for selecting people, we do individual interviews, group interviews, we do testing, we do assessment, we do onboarding to bring people in, and then the question is, what kind of results are we getting out of it? So we can look at things like, what's the performance of people, and let me back up just a second, we would take a job group, in a job group you want to talk about a mission critical job group of people who were hired at least two years ago, say two to three years ago, so we want to know, what has their performance been, and we can scale that of course; we want to know what has their salary progression been?—again it can be scaled, these are people moving ahead or being in the curve; we can look at things like potential, the potential ratings that come out of performance reviews that supervisors do, it's just what you mentioned before, looking ahead as opposed to looking behind; and the fourth might be things like tenure—are they still here, or have they left?

And you can add lots of other things to it, and then you could also build this thing in depth with different levels and different locations, etc. If you think about it as a cube with a lot of cells in it, you've got these three issues of source, methodology and results, by looking at that and running these algorithms, we can determine what is the most effective combination of source and methodology in terms of getting these results. So we might find a newspaper ad plus onboarding gives us great results, and that's one example that we've come up with, so we can then go back to an organization and say, "This is the most effective source for this kind of people today, and let's look into the future—are there any changes that are likely to happen in the future around this set of skills that might negate that finding of the past?" And given the data we've got from our scan and our capability planning, we can do a much more thorough job of predicting the kinds of skills we're going to have to recruit, and the best methodology and the best sourcing to do that, and do this credibly.

Steve

It sounds like it's so cool, it sounds like such a massive sort of data engine, and you can have all sorts of different inputs that go into it, to the prediction. Can you make an analogy to some other area of business functioning that does something similar to this?

Jac

I think process analysis works anywhere, of course, because all processes are fundamentally analytically the same, but you can talk about doing something in marketing, you can talk about doing something in production, when you've got sources of material or people or whatever, coming into this, you have methodology within that discipline, whether it's for production or marketing or customer service, and you have outcomes, which is satisfied customers, or products that come out on time with high quality, so it's a matter of determing what's coming into that process, what is happening in the process, it's the ‘input, throughput, output' old model, we're just being very specific about it.

Steve

And it sounds like, I was thinking myself, a pretty complex analytical engine to crunch through all of this—is that true?—or are you able to do this with relatively straightforward statistics?

Jac

It's pretty simple. Actually, I think the thing that's been missing in the past is people just haven't wanted to make the investment of time and money, because they didn't see the problem being that big, but the algorithms are not that difficult, they're things that you know very well, and anybody who's got a statistics background of some sort would know very well. Obviously capturing the data, of course, is the first part; if the organization doesn't have it, then we've got to start from there.

Steve

And I guess, that would be my last question—have you found a good way to get organizations to collect that data? Are they just being more willing to do it, recognizing how critical this problem is?

Jac

It's the ones that see this as a critical problem that say, OK, we'll bite the bullet, and we'll go and make the investment to collect the missing data that we don't have, and the ones who don't see that is a big enough problem, don't want to invest the time to do it, so that's the way it is. It's the same as, I want to mention, when 30 years ago, Steve, people didn't have data, they didn't know what it cost to hire anybody, and if you don't have these six variables costed, there's no way you can do this. "Well, we don't have it"—well then you've got to make a choice, don't you? You can either start doing it, or you can go do something else.

Steve

And people are finally getting the point that we really need to start doing this, so basically what I hear you saying is that companies realize, wow, people really are becoming the competitive differentiature here, and we need to invest in it.

Erik, I wanted just to ask a little bit, I know you've been working with Jac on this—what has SuccessFactors' role been in this project?

Erik

Well, obviously this is of great interest for us as well, and going back to Jac's last comment, if you just have a way to systematically collect, consistently get strategic data around your people, then you have the pillar stones on which you actually can put into Jac's big engine here in terms of the analytical engine, as he put it. So really what we see is that the companies that really do take advantage of this, and probably don't have to bite the silver bullet, are some of our customers maybe, some companies that really track and get systematic records of strategic data around their people, and what I mean with strategic data there, what we bring to the table here is, for instance, consistent performance review scores, filled with integrity and visibility, so we know that if you use numbers, for instance, a three means a three, and it means this; potential scores on those specific competencies that are the skills, the capabilities, that comes out of the scan that Jack talked about initially, and if you're doing succession management, for instance, if you go deep enough and you assess people's, not only their performance, but also their potential, with some rigorousness, then you actually do get the real data that you actually can have, and those are leading indicators of a company's future performance, and that's exactly what we want to get to it, and we see that we're being a collector and an engine for actually driving the transactions of those strategic data, so we can get these smart analytics built on top of it.

Steve

Now, Jac, I know you've been doing this for a while, but it's still relatively early on, given what, like they say, audacious goal, which I think is great that you're heading for—what so far do you have, any real accomplishments that you'd like to share with our listeners to say, this isn't just talk, we're really doing this—do you have some accomplishments that you could share?

Jac

We've just started to test drive it, I'll tell you honestly, I've only carried the whole program through with one company, but the kind of people that are involved in this who are going to start using it in about ten days are people like SuccessFactors, Oracle, KnowledgeAdvisors, Target Stores, the Blue Cross, Lehman Brothers, Fidelity—all these people were sponsors of developing this product in the beginning, so they're going to be the first ones to use it, starting next week they're going to have the package in their hand, and then we'll start working with them on a test basis, and see just how well it works, but they're all very excited about it, and I gave this people a lot of credit, they're pretty smart people with a lot of experience, so I think if they're involved and interested, there's got to be something behind it.

Steve

Wow, that's cool, and what is this called?

Jac

It's called predictive management, and the product itself is HCM: 21, which stands for Human Capital Management in the 21st Century.

Steve

That sounds really cool, and Erik and Jac, is there anything else that you'd like to share about this product, as we're coming to the end of our interview?—this sounds really cool, I'm very excited to learn more about it.

Jac

Well, from my standpoint, this is where the game is, it's not accounting systems, and if you want to be in the front of the parade, then you've got to use the latest technology that's out there, and I firmly believe, and I don't see any evidence to the contrary, that nobody else has got anything nearly as advanced as this, so we're pretty excited about it actually.

Erik

1Yeah, and there is no question that this smart strategic focus on their people and trying to manage and predict the future is really a key strategic differentiator for those companies that are going to be able to move in this direction.

The last thing I wanted to say is that, why don't we make a little ad for the webinar that we're going to do on October 1st, where you're more than welcome to tune in for about 45 minutes or an hour, where Jac and I are going to present this in a little bit more comprehensive format, where we are actually going to use some visuals as well, to spell out how it is and where it works and what we see are the critical components to really make it work, and I think that's a pretty good ending of this, and I'd really like to thank you, Jac, and look forward to keep working with you on this.

Steve

Yes, thank you Jac, very much, and we will put on our podcast site the information on, if you want to go to the webinar on the first, how to access that, and Jac and Erik, thank you very much, always a pleasure to talk to both of you, and I look forward to learning more about this, Jac—it really does look like, when you say, "take things to the next level", you mean it, so it's cool.

Jac

Thank you.

Steve

Thanks.

Jim

Thanks for that great interview, Steve. I just wanted to remind you all again that coming up on October 1st, 11 am Pacific, 2 pm Eastern, there will be a webinar with Dr Jac Fitz Enz and Erik Berggren titled "Managing Tomorrow Today—HCM for the 21st Century". Within this webinar, they're going to discuss, how in the face of today's dismal markets, organizations have shifted their focus from cost reduction to top line growth, excellence in execution and acquiring top talent. To accomplish this, executives are struggling to anticipate the next cycle's growth opportunities, and again, for more information on this webinar, and to register, please visit us at successfactors.com/podcast. See you all next week.

Zoe

Hi, this is Zoe. Coming soon in the UK a new series of podcast interviews focused on talent in uncertainty. Tune in to find out more on how Cable and Wireless, Premier Farnell, Lloyds TSB and the Lancaster Hotel Group are using SuccessFactors to address their business challenges.

Speaker

If you would like to be a guest on the show, or sponsor, please drop us a line at podcast@successfactors.com, or you can leave us a message at 650-425-7474. This podcast is copywritten by SuccessFactors. The views expressed are the individual’s own, and do not necessarily represent those of SuccessFactors, SuccessFactors’ partners or customers. See you next week.