Wasted Human Capital: New Survey Identifies Looming Talent Management Crisis in Corporate America

Human Capital Is Too Often Wasted or Neglected, Not Aligned with Corporate Objectives; Too-Few Companies Have Necessary Strategies in Place to Address Impending Talent Gap

SAN MATEO, Calif. - June 6, 2006 - A new talent management survey released today indicates that a majority of companies in corporate America are failing to make good use of their existing talent pools, creating a troubling productivity gap that will only worsen as more and more aging baby boomers transition into retirement. The 2006 Performance and Talent Management Trend Survey, the most comprehensive talent management survey ever conducted, revealed that an extraordinary number of companies across the nation are working blindly - without a strategic plan in place to manage talent assets, with little to no visibility into their individual talent pools and without any comprehensive merit plans in place to reward performance.

Based on a survey of more than 1,000 human resources professionals across corporate America representing companies ranging in size from 25 to 250,000 employees, overall responses indicate that:

More than 50 percent of companies fail to have a succession planning strategy in place;
More than 50 percent of companies report challenges aligning employee goals with corporate strategy and tracking employee progress against those goals;
More than 45 percent of companies lack visibility into their employees' skills, experience levels and desired career paths; and
More than 50 percent of companies report that the majority of their employees are not compensated or rewarded based on performance.

These survey results are disturbing as they definitively underscore the lack of formal structure and processes in place to defend against a well documented and understood impending talent crisis," said Jason Corsello, Program Manager, Business, IT & Outsourcing Services, Yankee Group. "Corporate America is wearing blinders to this critical problem and unless initiatives are enacted and technologies leveraged, corporations will be dealt a numbing blow when their talent assets begin to walk out their front door."

The 2006 Performance and Talent Management Trend Survey, was conducted throughout April and sponsored by SuccessFactors, the global leader in on-demand, web-based performance and talent management solutions. The study brings into sharp focus several talent management issues previously documented in various studies and management reports, reflecting a need for companies throughout corporate America to better cultivate and manage their human capital assets to remain competitive in an increasingly competitive global environment. The study was administered by an independent research organization using both online and offline methods across a wide range of companies employing between 25 and 250,000 individuals. A detailed report of the survey's data and findings, Grading Corporate America: The Definitive Performance and Talent Management Scorecard, is available free online at http://www.successfactors.com/ and incorporates related third-party insights and SuccessFactors' recommended remedies.

"These survey results should act as a wakeup call for organizations throughout North America, said Allan Schweyer, Executive Director, Human Capital Institute. "It is vital that appropriate talent management initiatives be put in place now, ahead of the broad skills shortages to come and that leaders take the steps necessary to ensure that their workforces are aligned correctly to achieve corporate priorities."

Additional report findings indicate that only 28 percent of corporate America appears satisfied with its existing performance review process. With 78 percent of respondents reporting at least an annual company-wide performance review program, only one-third of corporate America has taken steps to implement a software solution that helps employees write effective performance reviews and streamlines the review process for human resources managers.

"Despite all discussions about a war for talent and a huge retiring employee base, this survey clearly shows that Corporate America is fundamentally ill-prepared to meet the upcoming business challenges and will suffer greatly unless definitive steps are immediately taken," said Lars Dalgaard, founder and CEO of SuccessFactors. "The good news is that real technology does currently exist to help companies of all sizes motivate, align, develop and reward employee efforts in ways that can and have delivered real business results. The even better news is that the right technology can also be implemented quickly."

Other key findings within the survey include:

More than 35 percent of companies fail to set goals and objectives for their employees;
More than 45 percent fail to quickly identify qualified internal candidates for open positions;
More than 50 percent report difficulty completing performance reviews on time; and
More than 50 percent of existing employee reviews are poorly written and ineffective.

As the Baby Boomer generation begins to enter its retirement years, it becomes even more imperative that companies undertake appropriate succession planning and bridge the impending talent gap between those employees stepping down from key positions and those just beginning to rise up through the management ranks. Filling key positions as they are vacated raises a business' competitive advantage and encourages companies to proactively align employees' goals with the company's stated objectives and guarantees that future talent shortfalls are addressed early in the HR planning process, along with appropriate accompanying compensation strategies.

The final purview provided by the national survey is around 360 degree reviews. Already overburdened with slow and cumbersome performance review processes, corporate America is also abandoning, unnecessarily, 360-degree reviews, according to the survey. Respondents reported only 35 percent of companies had conducted a 360-review process in the past year and only a quarter of those who had not yet conducted a 360-review process planned to in the coming year.

Often considered hard to quantify and difficult to execute, 360-degree reviews can actually provide a valuable window into management's ability to effectively communicate through all levels of their organizations and whether or not employees are understanding management's goals.