How can the IT department improve company performance? How can IT enhance not so much what a company does, but how well it does it?
Typically, IT’s approach to performance management is information-driven. The idea is that the company will be able to achieve its strategic goals more readily if the information it uses is abundant, up-to-date and reliable. Indeed, achieving this is for many IT professionals a lifetime’s work.
But to focus on information is to dwell on the collateral produced by business activity – sales figures, financial reports and customer satisfaction surveys – instead of the agents who really drive that activity: the employees.
The human resources department, meanwhile, is naturally more adept at maximising the performance of human beings. Recruitment, training, compensation and motivation are all strings in the HR department’s bow in its quest to derive the greatest value from that ‘human capital’.
A category of software has evolved that helps the HR department as it conducts these tasks, namely human capital management (HCM) software.
Tools in this varied category are distinct from HR applications that simply automate repetitive processes such as payroll, because while it is no replacement for good management, HCM can contribute directly to company performance.
“HCM is strategic because it enables the organisation to align investments in human capital with the overall objectives of the company,” writes Forrester Research’s Paul Hamerman.
Bridging the gulf that typically exists between IT and HR, and helping HR to make the most of its technological investments is another way in which IT can help to boost company performance, beyond the delivery of information.
A fine balance
According to research published in 2005 by business management scientists David Norton and Robert Kaplan, a staggering 95% of employees don’t understand the strategic goals of the company that employs them.
The solution that Norton and Kaplan have advocated since the mid-nineties is the balanced scorecard. A central tool for business intelligence (BI) and corporate performance management (CPM), the balanced scorecard presents information about an employee’s or team’s performance against company-wide strategic goals, in order to allow individuals and their managers to see how their own actions contribute to the big picture.
For IT, performance management investments usually focus on the ongoing task of integrating and cleansing vast arrays of data to feed information systems such as balanced scorecards.
But from the perspective of the HR department, getting information to the employee is just one of many ways to ensure that they make an effective contribution to the company. The variety of other techniques is reflected in the diversity of the HCM software industry.
The first point of contact between an employer and an employee is, of course, the recruitment process. Software that helps to automate the repetitive processes involved in recruitment, such as sourcing candidates and ‘on-boarding’ new hires is, according to Forrester’s Hamerman, highly commoditised and the market ripe for consolidation.
But attracting the best talent is a powerful way to add to the strategic value of a business. Tools that help HR to recruit better employees are therefore highly valuable.
Andrew Dugdale is a director at ICDL, a company whose roots lie in training and developing salespeople. “Our core business is enabling global corporates to transition from reactive, need-based selling to proactive strategic selling,” he says.
One of its customers, BT, was disappointed with the number of its salespeople – around one in five – that were able to immediately implement the strategic selling techniques they had learnt on ICDL training courses.
“BT set us a challenge to find out what makes some people better able to learn these selling techniques,” Dugdale recalls. “We started analysing the core skills that drove performance in strategic selling. These, we found, included intelligence, motivation and modes of behaviour.”
ICDL has developed profiles for various sales roles and has used these to build an online applicant assessment tool, which measures not just the intelligence but also motivation and behavioural patterns of candidates.
The system is still in development, but Dugdale claims that in beta tests it has proven to more effectively predict the future performance of a candidate than both traditional, informal assessment techniques and psychometric testing.
The only approach to outperform ICDL’s online tool is to install a fully-staffed assessment centre, he says. “But the difference is, ours is on online tool that anyone can use,” Dugdale adds.
Tools such as this can be employed in an outward-facing fashion to ensure that the ‘human capital’ that an organisation attracts is of the highest value. But the same approach can also be applied to existing employees in order to measure and maintain the company’s existing human resources.
Recruiting from outside the organisation is an expensive and inefficient way to fill roles. It can, according to some estimates, cost between five and seven times as much to recruit someone from outside the organisation than it does to promote from within.
And external recruitment is unreliable. According to Julie Windsor, UK director of operations at talent management software vendor Cezanne, it typically costs £450,000 to replace a senior manager in a financial institution, and two-thirds of successful candidates will leave within one year.
“The cost of not retaining the talent that you already have is enormous,” she explains.
Talent management software works by providing a framework to define the strategic goals of the organisation, the skills required to achieve those goals and the availability of those skills in the existing workforce.
The content of the system – the goals of the organisation and what skills are needed – must be evaluated by the HR department. The software merely provides a tool for conducting the process of talent management more effectively. But in doing so it forces the HR department to make the strategic goals and skills they require explicit, which allows it to align human capital investments with overall strategic directives. “The software is not entirely people centric; it is aimed at serving the business’s objectives,”
Another useful case for talent management occurs when companies merge. In 2006, the networking divisions of Siemens and Nokia were spun off and merged to form Nokia Siemens Networks. In order to take stock of the combined human capital (and to plan for reduced staffing requirements), the company used talent management software from HCM vendor SuccessFactors.
“When you’ve got two teams coming together like that, you’ve got to make sure they are aligned in terms of their goals, their skills, and their competencies,” explains SuccessFactors’ VP for EMEA sales, Andy Leaver.
Related to talent management is the field of succession planning. Another category of HCM software, succession planning tools organise and administrate ongoing profiles of managerial staff with the explicit goal of determining the leaders of tomorrow.
Again, succession planning is a strategic HR practice which can be done without software. According to Leaver, high street bank Lloyds TSB produces a paper-based report every month noting its top performing managers.
The CEO, he says, will meet with star names whenever he visits a particular region or business unit in order to familiarise himself with his potential replacements.
But as with all HR processes, dedicated software can introduce transparency and repeatability to succession planning.
Another wrinkle in the HCM software market is employee performance management. While talent management and succession planning elucidate and manage the long-term development of human capital, employee performance management tools are designed to help managers get the most out of their staff.
This involves setting goals according to personal ability and strategic objectives, assessing employee performance and attributing reward accordingly.
These are common tasks for any manager, and are usually conducted informally with paper or email-based processes.
But, as Forrester analyst Zach Thomas explains, “Paper- or email-driven performance review processes are dreaded by managers and HR, are rarely compliant, and are typically performed annually in conjunction with salary reviews.”
The administrative burden of performance assessment is, in particular, increasing due to the current vogue for what is known as a ‘360 degree performance review’, wherein an employee’s performance is assessed by themselves, their manager, their peers and, in some cases, their customers.
Global insurance company Allianz Group employed SuccessFactors 360, a software-as-a-service employee assessment tool, to manage its performance assessment process.
Allianz is a global corporation but it is made up of various local subsidiaries, each of which has its own assessment processes. “One of the difficulties we previously had was assessing people across the organisation,” explains Brenda Leadley, Allianz’s assistant senior VP for global talent management.
The multiple systems of performance assessment meant that it was difficult to compare two candidates for internal promotion; for example, from different companies within the group. The web-based nature of the SuccessFactors allowed Allianz to roll a single mode of performance assessment across the group.
What is more, it allowed employees to invite colleagues from different member companies to take part in their 360
degree assessments. ‘Performance and compensation’ is, according to Forrester’s Hamerman, the hottest segment of the HCM industry at the moment, withglobal revenues of $522 million growing at 17%.
But few longitudinal studies have been conducted about the efficacy of performance management techniques such as 360 degree assessment, and anecdotal reports suggest that software tools can drive a wedge between manager and employee.
“Performance management software has to go hand in hand with processes and behaviour,” explains Bettina Pickering, a senior consultant for management consultancy firm PA Consulting Group.
“If the other two don’t happen then the system can’t help that much. It can make things faster and slicker but if you want a genuine performance improvement, line managers have to be taught to do continuous performance management.”
THE software tools in the HCM kitbag embody approaches to performance management that may be unfamiliar to many IT departments. They manage the human capital of an organisation and the non-numerical processes of recruitment, employee development and motivation.
But the most powerful HCM approach of all may prove to be a combination of human and organisational techniques with the numerical and informational performance management tools that IT departments are often involved with. Sales performance consultancy ICDL is currently working with business intelligence provider QlikTech on a combined service that integrates the former’s employee profiling functionality with BI tools such as sales forecasting, for instance.
The tool gathers and integrates information and personal aptitudes such as intelligence and motivation alongside historical financial data, allowing a manager to quantify the potential business impact of hiring a particular candidate or developing particular skills in an existing employee.
This combined service points to a more rounded approach to performance management which takes both information relating to individuals (the traditional domain of HR) and data concerning products, customers, markets – that of IT and finance – into account.
This will, according to ICDL director Andrew Dugdale, help companies manage human capital in as rational a way as they currently do financial capital.
“Some experts argue that human capital should be a balance sheet item,” he says.
“But there is no structured way to compare it against revenue. The combination of our offering and Qliktech is a mechanism for really getting to grips with how human capital can be monetised.”
HCM meets social networking
THE job of human capital management (HCM) software is – broadly speaking – to provide a framework that makes the abilities, skills, experience and career motivations of a company’s employees visible and manageable.
As such, there is considerable harmony between HCM systems and social networking. In the consumer realm, sites like Facebook and Bebo allow users to define their interests and attributes, as well as plan and document their personal lives.
French mobile telecommunications provider SFR wanted a way to make the career ambitions of its 10,000 employees visible, and saw that there was a potential in social networking.
It asked HCM software provider Jobpartners to develop an internal social network, and the result was ‘My SFR’, based on Jobpartners’ Active Network platform.
Not only has the network become a knowledge management tool – employees with particular skills and experience can be located by colleagues around the organisation – but it now contributes to the company’s performance management processes.
The network provides employees with a forum in which to express their career goals, which is invaluable information for HR as they prepare performance assessments. The content that workers add to the social network is not included in formal performance reviews, to ensure that My SFR has the quality of a relaxed social forum, but it provides useful context for those reviews.
For Jobpartners founder and head of sales and marketing, Patrice Barbedette, Active Networker could eventually lead to a system whereby corporate social networking profiles take on the role currently served by CVs, documenting an individual’s employment history, skills and ambitions.
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