Talent Management

Five Reasons to Focus on Recruiting in 2009

Posted on December 30, 2008. Filed under: Sourcing and Recruiting, Talent Strategy, Workforce Planning | Tags: , , , , , , |

Here we are entering the worst recession in more than 30 years, reading about layoffs, downsizing, and restructuring in almost every industry.   So why would I start our 2009 research with a discussion about the need to focus on recruiting?   Well, contrary to what many may believe, even in times of job reductions recruiting must take a top priority.  Let me give you five good reasons:I Want You

1.   Even in times of an economic slowdown, many organizations still suffer from severe skills and leadership shortages.  Our Fall 2008 TalentWatch® research shows that 36% of organizations have severe shortages in line managers;   17% cite major shortages in technical roles, and industries like healthcare, government, and professional services still have shortages in many line positions.   While the pool of job candidates is much greater now, organizations must still focus on identifying and selecting the best candidates and this must be accomplished with fewer dollars for recruiters, headhunters, and job placement advertisements.

Bottom line:   recruiting teams must continue to seek out top candidates, despite reduction in budgets.

2.  Job seekers become more desperate, making the recruiter’s job more difficult.   In today’s economic climate, job-seekers will aggressively seek out positions — meaning that you will receive more applicants and a much higher job acceptance rate than normal.   Managers must carefully decide if today’s passionate candidate really believes your organization is the perfect fit or if he or she is just desperate to find a position.   And in some cases the pool of highly qualified candidates may have shrunk:   in tough economic times top candidates may want to avoid a risky relocation, making it hard to attract a highly qualified candidate from another geography.

Bottom line: recruiters must slow down and screen candidates more carefully than ever.

3.  Downsizing initiatives may cause an increase in turnover and reduction in engagement.   Many studies show (and common sense bears this out) that organizations which go through severe or sudden downsizing then get a “double whammy” — an increase in voluntary turnover and a reduction in engagement.   I distinctly remember going through sudden layoffs at two of the high-tech companies I worked for.   In both cases the good people immediately started looking around for jobs, knowing full well that they could be the next ones to go.  And those who may not have as many opportunities start to lay low and hide, hoping to avoid the next round of cuts.  The employees who survive a layoff often feel like “survivors” – and often feel less committed to the company and its turnaround efforts.  This is why so many companies go through multiple rounds of layoffs:  the first cut seems deep, but problems get worse if the process is not handled carefully.

Bottom line:   any downsizing effort requies a heavy dose of communication, vision, and strategy to bring people together.   Read our brand new research, A Manager’s Guide to Successful Downsizing, for more tips and examples.

4.   A strong recruiting program brings new ideas and excitement into an organization.   The toughest challenge to deal with during a downturn is the need to create a strong sense of commitment and focus to rebuilding the business.  We ask people to take on new roles, work longer hours, and often lead change programs which are new and challenging.  We want our people to be committed to restructuring and growth.  One of the greatest ways to build such a spirit is to see key new people entering the organization in critical roles.  Not only does it give people a sense of excitement, but it brings new ideas and creativity into the organization.

Bottom line:  do not be afraid to bring new pe0ple into the organization during a restructuring — the right people can create the urgency and change needed to succeed.

5.  Remember that recruiters must continuously recruit existing people into new roles.   When a company restructures, downsizes, or goes through a reorganization there is a tremendous need to “recruit” people into new roles.   I distinctly remember the terrible feeling I had when I had to “take over” a role from a sales group which had been downsized at one of my prior employers.   Rather than being “recruited” into the position, I was “assigned” the job.  It took me many months to get excited about the opportunity and build a network of people to support the reduced function.  In retrospect, if someone had professionally “recruited” me into the role I would have been far better prepared and excited about the new opportunity.

Bottom line:  stay focused on your internal recruiting and job migration efforts, as these changes will be as important as ever.

Sourcing, recruiting, onboarding, and employee lifecycle management are vital parts of high impact talent management.   Stay focused on this important part of your organization and you will be well prepared for growth when your business cycle turns – which may be sooner than you think.

PS, as part of our continuing efforts to provide you with world-class, highly actionable research and advisory services I am very excited to introduce Madeline Tarquinio Laurano, our new Principal Analyst focused on sourcing, recruiting, and workforce planning.  Madeline comes to us most recently from ERE, where she was the primary recruiting analyst among their 80,000+ readers, and research experience at Linkage Group and Aberdeen where she studied leadership development, succession management, and onboarding.   We welcome Madeline to our research team — and her new blog “All Aboard” will focus exclusively on the important and rapidly changing areas of sourcing, recruiting, job boards, and the use of social networking in talent acquisition.

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Softscape Settles SuccessFactors Lawsuit

Posted on December 23, 2008. Filed under: HR Systems | Tags: , , , , |

Today Softscape settled the lawsuit filed by SuccessFactors in March of 2008.   This lawsuit, which we wrote about in a prior blog post, revolved around a contentious sales presentation which was developed by Softscape and leaked into the public domain.   In the final settlement Softscape agreed that the presentation in question had some errors and should not have been distributed directly to customers.

As we discussed in our earlier post, this type of activity is very common in the enterprise software business.  It is very common for almost every software company to create harsh and pointed “talking points” about competitive products and claims.  In my days in the software industry I wrote many such documents and frequently used them in sales training and customer discussions.

In this particular case, the lawsuit, filed by SuccessFactors, seemed unnecessary and of little value.  SuccessFactors has managed to grow at over 70% during the period since March and both companies have continued to grow and prosper as the market for talent management software continues.   All the vendors in this market will continue to build aggressive sales presentations and I personally do not think lawsuits are a good way to promote healthy competition.

We continue to have great respect for both companies, and we firmly believe that the most important way to build a software company is to build excellent products, clearly segment the target market,  provide outstanding customer service and support, and stay very close to evolving market needs.   Both Softscape and SuccessFactors are successful, growing companies and both are executing well.

The Talent Management Software Market Evolves

We do see some major changes taking place in the talent management software market – and we will be explaining this further in the coming months.    Not only is the market growing, but it is becoming more mature – organizations now realize that the “talent management suite” is not really a suite, but a complex set of enterprise software which must provide a complete solution for many elements of people management.   The days of young, small companies entering this segment of the market are ending – and the players today are rapidly expanding the definition of “talent management” software to include much more than the traditional elements of performance, succession, and career development tools.

Watch for more from us in this exciting and evolving market in 2009.

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After Talent Management: Enter People Management

Posted on December 17, 2008. Filed under: Talent Management, Talent Strategy | Tags: , , , |

Business and HR leaders have been focused on integrated talent management for the last three years now, and it is clear that talent management concepts, strategy, and solutions have started to transform HR.  Most HR organizations today now have an owner of “talent management” and this person is pulling together formerly silo’d HR processes like performance management, succession management, career management, and leadership development.

Bersin & Associates Talent Management Framework

Fig 1:  Bersin & Associates Talent Management Framework

But something continues to be missing: many of these programs and strategies arevery HR-focused. They are often cost-justified and driven by the HR or L&D organization’s desire to become more aligned and efficient.  (I have sat through five presentations called “One-HR” in the last six months).  And yes, as we talked about in our research, “Business-Driven Talent Management” is our ultimate strategy.  But today many organizations have not yet reached the “business-driven” part of the solution – so the “talent management” strategy looks like an “HR-strategy.”

As we have written about many times in the past, the solution here is to do two things:  first, clearly identify and document the business problems you want to address (today this is pretty easy!);  second, translate these into the talent strategies you want to implement which support these business problems.  If you are transforming yourself from an investment bank to a retail bank, for example, you have many new roles to train, people to migrate, and processes to implement.  If you are moving from a healthcare service company to a preventive healthcare company (more on this below), then your talent strategy should include a process of retraining and re-thinking the roles of everyone in the healthcare value chain.

As we discuss in our research “every business strategy has an underlying talent strategy.”

As we talk with literally hundreds of companies over the past few years, we continuously remind them to work on these two levels first.  Only after these strategies are in place, can you design and implement your new performance, succession, and career development program.


Economic Downturn Creates a New Focus – An Expanded Role for Talent Management

Now, however, the business world has changed.   The critical problems organizations face in 2009 are very different: rapid market changes, restructuring, downsizing, mergers and acquisitions.  These problems not only create a need for better alignment and leadership, but a heavy focus on rapid talent planning, employee mobility, rapid skills development, and what we call “business agility.”  (You will see a lot more from us on this topic in 2009.)  This means that many of the 2006 and 2007 and 2008 concepts of talent management are no longer enough.  

Today I hear more and more HR and business leaders telling me “we have our talent management strategy well underway” but what we really need is a “People Strategy.”

What they are really saying is that while the traditional definition of talent management is important, they really need more — and I believe this concept of the “People Strategy” is the next “big thing” coming in the world of business-driven HR.

Consider the challenges of one of the nation’s largest healthcare providers, Kaiser Permanente.  This organization has 160,000 employees and is one of the country’s largest insurance providers, healthcare service providers, IT organizations, and facilities management organizations. It is transforming itself from a “healthcare service provider” to a “wellness provider,” which means a tremendous change in focus on preventive medicine. This transition will affect every role in the company, and it is accompanied by tremendous changes in organization structure.

The Concept of the People Strategy

The company’s “people strategy” must include things which go beyond what we would call “talent management:”

  • Talent segmentation or “audience analysis” – identifying the critical pools of people in the organization and how they will be managed, compensated, trained, and hired differently.   These segments will be used for many purposes:  different sourcing and recruiting policies, different compensation programs, different training and career development strategies, and different general management approaches.
  • Understanding pivotal talent – the concepts of “pivotal talent” have been around for a few years.  Which roles in your organization drive the greatest level of value today – and which will be even more important into the future?  If you had only one dollar to spend on development, where would you spend it?  When you need to downsize, which roles can you afford to do without?  Organizations do not yet know how to identify their pivotal talent, but I believe they will focus on this in the coming years.
  • Integrated compensation or total reward strategies – most “talent management” teams are very OD focused.  They do not directly integrate with the compensation function yet.  But once you think about your organization’s business strategies, talent segments, and pivotal talent, it is now important to consider compensation within the same framework.  While “total rewards” may not fit into today’s definition of the talent management strategy (in some organizations it does), it definitely fits into the “People Strategy.”  For example, during a downturn, which groups will get lower bonuses and compensation, which will suffer layoffs, and which may in fact see compensation increases?  Where and how should we implement pay-for-performance over different pools of talent?  Where can we afford to pour more money and where should we hold back?
  • Diversity – how will we dovetail our diversity strategy into our talent management strategy?  Several HR leaders have asked me why diversity is not included in our framework, and I told them that I have yet to see it included in most organizations’ view.  Yet in today’s rapidly changing labor market, diversity is not just a compliance issue, it drives your competitive advantage.  If you cannot hire, manage, and operate as a diverse organization your business opportunties will be severly limited.  It must be part of the “people strategy.”
  • Talent planning – how will we plan, model, forecast, and manage the pool of people we have, the people we need, and their requisite skills and capabilities?  This is one of the emerging areas we are studying in early 2009.  The term “workforce planning” is widely used today, but in most cases it refers to a system of collecting open headcount.  In a “people strategy” workforce planning must be accurate, dynamic, and integrated with the business.  For example, can you get a handle on the contingent workforce in your company and identify whether those roles are strategic or tactical and how cost-effective they are?  Using highly skilled contingent workers is a business strategy, not just something to account for in HR.
  • Career models and deep specialization and skills – most organizations now realize (and I hope all do soon) that their core business is dependent on deep levels of skills within certain critical roles.   New books like “Talent is Overrated” have driven home the principle that only by practice (read “training”) can someone become an expert.  Where are the critical career models in the organization and how will we allocate resources to build these skills, provide mobility into and out of these roles, and facilitate growth in these roles?  How can we create a development planning process at the manager level which drives the skills and mobility we need?  While this kind of thinking goes on in L&D today, it must be integrated into the company’s bigger strategies for people.
  • Learning Culture and Business agility – a big topic we are now studying.  How can the organization “learn” more quickly?  When a business downturn hits, one of the first things the CEO says is “how did this happen to us?”  “what can we do to prevent this from happening again?”  The topics of innovation, leadership, new business growth, harvesting of existing businesses, all depend on the “people strategy.”

So what I believe we are seeing is a “growing up” of the concepts of talent management.  Think about where you are in your own organization’s talent management plan.  My guess is that if you build a multi-year roadmap, what you will find is that today’s “performance management” project, which turned into an “integrated talent management” program, will soon turn into an integrated “people management” strategy.

We will be publishing much more on this topic in the coming year – and most importantly including examples and case studies at our IMPACT 2009 Research Conference.   I personally think it is very important to think ahead and understand that today’s focus on talent management will evolve soon.  And remember that in today’s economy your talent management program must be business-driven, focused on your organization’s short and long term strategy, and executed with speed and efficiency.

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Life or Death: Building a Corporate Learning Culture

Posted on December 3, 2008. Filed under: Enterprise Learning, Talent Strategy | Tags: , , , , |

Witness the number of companies undergoing a wrenching transformation (read “potential death”) in today’s economy: the US Auto industry (GM, Ford, Chrysler) , the US Newspaper industry (LA Times, NY Times), and many elements of the financial services industry.

A recent global survey of 1100 business leaders by Boston Consulting Group found that one of the top three things keeping CEOs awake at night was their ability to “build a learning organization.”   Our research shows clearly that organizations can be broadly grouped into two types: those that “learn” and those that “don’t.” Those that “learn” have an uncanny ability to evolve: they are what we call “enduring” companies, and they find ways to continuously change their products and services as markets change.

Examples of companies that “learn” include UPS – which started as a horse and buggy delivery company and is now a global logistics company operating in every mode of transportation.   Another is Caterpillar, a company which has evolved its products from steam-driven tractors to a broad array of building equipment and services around the world.

Our High Impact Learning Organization® research demonstrates that companies which have a “learning culture” have much greater financial returns over a 10-20 year period – in fact the HILO 80, the 80 top companies in our 780 company research group, deliver more than 10% greater earnings growth and over 15% revenue growth over a 10 year period than the average in their industry.

Building a Learning Organization is a Matter of Life or Death

Today, with the economy clearly at a low point, an organization’s ability to learn is a matter of life or death.

So what is a “learning culture” and how do you build one?  Well there When we look at companies which endure and prosper over long periods of time, we see that they have an uncanny ability to innovate, reinvent themselves, and adapt to change.   Our research and upcoming Learning Culture assessment discovered that there are nine independent pillars which drive an adaptable learning organization:

  1. Executive Culture.  Do line executives truly support and reinforce the business processes and investments needed to support innovation and learning?  Do they take a personal interest in employee and leadership development?  Do they regularly move business leaders throughout the company to gain new perspectives?  Do they maintain funding for learning and innovation initiatives?  Do they drive and manage change?  Do they take risks and encourage and support new products?
     
  2. Managerial Culture.   Are line managers incented, coached, and directed to build capabilities in their teams?  Are they paid to develop people and innovate?  Are they empowered and motivated to be coaches and not just managers?  Are their a variety of support and development programs for managers to provide feedback and development for their people?  Are they rewarded for experimentation and innovation?  Are they open to “bad news?”
     
  3. Customer Culture.  How close are product, service, and support teams to customer needs?  Are there vigorous and regular processes for customer input?  Do customers have many ways to interact with the company and provide input?  Is customer input considered sacred and valuable?  Are customer facing roles given high priority and respect in the organization?  Is there a free-flowing set of customer needs available to everyone who creates or produces a product or service?
     
  4. Operational Culture and Process.  How are line organizations incented and organized?  Are employees provided with the opportunity to change processes and products when necessary?  Are their programs and systems to monitor and improve quality and customer service?  Are customers intimately involved in process and product development?  Are their processes in place to learn from mistakes or does the team “shoot the messenger?”  
     
  5. HR, L&D, and Leadership Development.  Does the HR and L&D organization have the funding, mandate, and executive support to build organizational and leadership development programs?  Do they support knowledge sharing programs?  What stage of maturity is the company’s leadership development program?  Are their regular opinion surveys and other forms of feedback from employees and customers which drive organizational change?  Is innovation rewarded and incented?
     
  6. Financial Support.  How is employee development, knowledge management, innovation, and training funded?  Does each business unit or operational unit have to find money in their own budget to accomplish such tasks?  Is there budget for skunk works or new ideas?  Is there a corporate funded group which promotes innovative development teams and programs?  Are such programs monitored and supported year after year or do they get cut during bad times?  Does the organization benchmark its spending against its peers?
     
  7. Career Planning and Employee Mobility.  Does the company have a plan, model, or process for career planning?  Is it easy or possible for someone to change roles or move into a new position regularly?  When a reorganization takes place, is there a way for people to move from team to team without penalty?  Are job rotation and developmental assignments regularly offered?  How well do managers understand and participate in the career planning process?
     
  8. Employee Development and Alignment.  How are employees developed and measured?  Do they have an incentive to build new skills, learn new things, and get involved in new projects?  Is development considered a valuable part of an employee’s career?  Is there a widespread goal development process and how does it accomodate the time needed to build new processes and systems?
     
  9. Technology Investment.  Is there an ongoing investment in technology infrastructure to support learning, knowledge sharing, employee connectivity, social networking, e-learning, content management, and other tools.

 

These nine pillars are not easy to build.  In fact, they often take years to build – but we find that high performing, enduring companies do each of these things well.  In the coming months we will be introducing a new set of research and assessment tools to help organizations understand their ability to “learn.”  

While many of these things seem “soft” – in fact they are “hard.”  They demand a focus from business leaders, HR, IT, and line management.  They touch the way a company is managed and the way the company works.  Does this matter today, in the middle of a recession?  You bet it does:  if your company wants to survive during a slowdown, you must be able to adapt quickly and effectively.

Watch for more on this topic in coming months – and a major launch of our research in this area at IMPACT 2009®.

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Lessons from Yahoo: Enduring Organizations Manage Executive Succession

Posted on November 19, 2008. Filed under: Leadership Development, Succession Planning, Talent Management | Tags: , , , , |

This week we witnessed another vivid lesson in the value of executive succession: Jerry Yang steps down as the CEO of Yahoo!. Yang replaced Terry Semel, who spent years trying to build Yahoo! into a media company, only to see it lose market share to the more innovative, technology savvy Google. Yang presided over an indecisive decision not to merge with Microsoft, and watched the Yahoo! stock drop from $33 to around $11, effectively trimming billions of dollars off the company’s value.

Now we find that yes, in fact, Yang is a great visionary, but not a strong leader – his inability to change the consensus culture at Yahoo! and make rapid decisions (the Microsoft merger seemed pretty logical to me) are now considered out of favor. The board is looking for an internet-savvy leader who can make decisions, drive execution, and build alliances.

Companies do not have to go through this. In fact, Enduring Organizations®, companies that build brand value over decades of business cycles, rarely if ever go through such tremendous soul-searching to find CEOs. They build strong leadership models, capturing the essence of their business and talent strategy in a set of leadership capabilities. Then they identify high potential leaders throughout the company, using well understood approaches to succession management. And they develop leaders internally through a wide variety of approaches: developmental assignments, internal projects, executive coaching, external education, and 360 assessments.

Look at companies like GE, IBM, Procter & Gamble, Textron, McDonald’s, and Goldman Sachs. These companies have deep pipelines of leadership talent, always being developed and assessed for future top positions. When a change needs to be made, 90% of the time it can be made internally.

Sometimes, of course, a company loses its way and an outsider is needed: Lou Gerstner at IBM and Ron Williams at Aetna. But these situations are rare in these companies, they work hard to constantly re-evaluate their leadership needs and build new leaders as business cycles change. IBM, my alma mater, has completely changed its “profile of leadership” in the last 5 years to reflect the company’s new business model of global services, team based consulting, innovation, and expertise development.

In many ways companies like Yahoo! are still young, so these “old-fashioned” processes have not yet taken root. But that’s no excuse: if Yahoo! wants to become an Enduring Organization®, it’s high time they took the executive succession process seriously. It may be too late, time will tell.

Bersin & Associates defines an Enduring Organization® as one which develops long term business value over decades, through many business cycles, and through many transformations. These companies outperform their peers over consistent periods of time. Our research focuses on identifying the proven principles of enduring organizations to help younger companies embrace these proven approaches to managing talent.

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Fear: Does your organization have the Courage to invest in tough times?

Posted on November 13, 2008. Filed under: Enterprise Learning, Leadership Development, Talent Management | Tags: , , |

You can’t pick up a newspaper these days without reading about more business downturns, layoffs, and lowered expectations for retail sales, automobiles, consumer products, housing, and financial services.  Lots of business leaders are making tough decisions right now, and I also know a lot of our HR and L&D readers are worried about their jobs.

In fact, for baby boomers like me, the concept of retirement in the next 10-15 years is now becoming a fleeting thought:  many people now realize that they may have to put off retirement for another time.  (The stock market has lost an entire decade of positive performance, so we all have to wonder what that says about US business competitiveness.)  

So there is a lot of fear out there – and business leaders in almost every industry are being forced to make difficult decisions:  cutting costs, reducing headcount, getting out of certain businesses, and restructuring.  In our just-released Fall 2008 TalentWatch®, we found that almost 1/3 of our respondents have a new CEO or top management team and 26% are going through some type of major restructuring.  These changes bring stress into every person in the organization.

How do organizations deal with these transformations?  The key, of course, is to build a workforce that can rapidly adapt.  In this kind of environment people have to take on new roles, take charge of turning around their operations, and focus relentlessly on execution.  In many cases these changes identify dramatic gaps in capabilities and skills which may have been glossed over during good times.  

An example:  Global Pharmaceutical Company

Let me give you an example.  We are working with a large pharmaceutical company which is going through a business transformation.  This company is a global leader and traditionally built its business through a series of autonomous geographic business units, supported by a global research, global manufacturing, and global corporate functions.  Such a business structure worked well in a market with fast growth, high margins, and highly differentiated products.

The world has changed however.  Today pharmaceutical companies must deal with the loss of patent protection on many products, the need to sell to low cost healthcare providers, a neutral to negative regulatory environment, and the need to continuously invest in R&D as new genetic-based pharmaceutical breakthroughs become possible.

So this highly successful, well regarded company, which is over 100 years old, needs to change.  They are changing in two big ways:  first, they are reorganizing the company into global business units which focus on different market segments;  second they are revamping their manufacturing capacity to more rapidly deliver generic versions of their patent drugs.  These two changes result in new job roles, new leadership positions, and a new sense of purpose among tens of thousands of loyal employees.  The company is now focused on operating as an integrated company, with the ability to reduce costs, increase adaptability, and deal with these market changes.

Such Changes Demand Investment:

This particular company realizes that in many ways they are not prepared for this transformation.  So they are investing in a series of new leadership development programs, a new global leadership model, and a new program to rebuild the “nobility of first line management” through a new focus on managerial talent development.  

They also realize that many people who’s careers were built in one business function (e.g. sales or marketing) have to broaden their understanding of the business, so they have built a business simulation which teaches leaders about how the entire company and the pharmaceutical industry work. 

These programs show a commitment to building skills and capabilities during the downturn, with a clear understanding that now is the time to empower and enable managers and leaders to make the changes needed.

Does Your Company have this Courage?

It takes courage and leadership to invest in talent now.  One of the easiest things to cut during tough times are HR and L&D budgets.  While you may have to tighten the screws on your learning and HR operations, you will find that a continued focus on talent development today is more important than ever.  Our 2008 High Impact Learning Organization® research clearly found that organizations with a continuous, systemic focus on organizational learning greatly out-perform their peers.   Your role as an HR or L&D leader is to help build confidence in your leadership that they should continue to invest and hold you accountable to deliver the programs and strategies that help your organization transform itself during today’s economic slowdown.

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Where is the “Talent Management” Market going?

Posted on November 9, 2008. Filed under: Enterprise Learning, HR Systems, Talent Management | Tags: , , , , , , , |

As the US economy lost 240,000 jobs last month and the unemployment rate rises to 6.5%, one of the questions I know many people ask is the direction of the “talent management” marketplace.  Let me give you our thoughts on the trends taking place.

First, the urgency of “talent management” in corporate HR organizations has not slowed.  In fact, nearly every organization we talk with is moving ahead with their new talent management strategies, which includes redesign of performance management, further integration of their HR organization, assignment of a Vice-President or other senior HR leader responsible for “talent management,” and the desire to implement talent management software.

Second, we also are finding that most companies are also reducing the size of their HR and L&D organizations (the US L&D market in 2008 has shrunk significantly, and we will be publishing this data in the next few weeks).  We are now working with many organizations to restructure their training departments to create more centralized organizations in the interest of reducing costs, and we see a dramatic dropoff in the development of new L&D initiatives which are not directly related to talent management.

Third, organizations are cutting back on travel and other development-related expenditures and now investing more in lower cost, collaborative learning infrastructure.  One Fortune 100 company we are working with has decided that instead of replacing their learning managment system they are going to implement new collaborative, Learning 2.0 strategies using low cost social networking software to enhance their sales and service training and create more employee engagement.  The LMS “upgrade” looked like a $5 Million project, so it is going on hold.

Fourth, the talent management systems market continues to grow, but at a slightly slowing rate.  In fact, if we look at the Q3 2008 revenues of four publically traded companies, SuccessFactors, Taleo, SumTotal, and Saba, we see positive but slowing revenue growth in every single company.  Revenue growth rates at these four companies are 77%, 39%, 12%, and -1% respectively.  Unfortunately, each of these public companies continues to lose money and all have seen their market caps drop (along with the entire market).  But the market is still healthy:  for example we know that private companies are also growing – Plateau, GeoLearning, and Learn.com each grew by over 25% in the last year.

Fifth, if you look at the talent management software market, which we see as a tremendously important part of corporate HR and talent management going forward, it is beginning to become a bit crowded.  While we still see explosive growth into many years in the future, our latest research now shows that most buyers see similar features from many software providers.  As a result the “price to enter” the market is higher, and software vendors have to invest more and more in sales and marketing to maintain their revenue growth.  SuccessFactors, the fastest growing of all, continues to invest an amazing 61% of its revenue in sales and marketing, which is unsustainable for any company over a long period of time.   We firmly believe that the talent management software market, just like the LMS market, will segment itself into leaders in different segments (global enterprise, enterprise, mid-market, and eventually small business) – and both Oracle and SAP will continue to grow.

Bottom line:  Today’s economic environment has caused new stresses for the HR and L&D organization and will definitely slow the market for talent management software.  But is the party over?  Not at all.  Organizations of all sizes continue to push ahead with their new talent management, social networking, capability modelling, and collaborative learning strategies — they key is to maintain the focus on these programs in a highly efficient way.

New research on these topics:

The Essential Guide to Performance Management Systems and the Market

Enterprise Social Software 2009:  Facts, Analysis, Trends, and Vendor Profiles

The Talent Management Factbook

The Corporate Learning Factbook

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Restructuring HR: Where are we going

Posted on October 26, 2008. Filed under: Enterprise Learning, HR Systems, Talent Management | Tags: , , , , , |

In the last year many of our research members and clients have come to us for help in restructuring their HR or Learning & Development organizations.  There have been three major forces at play here.

1.  Reducing costs:  In nearly every industry organizations are going through restructuring, mergers, or other cost-cutting efforts.  The HR department plays a major role in these changes – both by facilitating these changes and by eliminating duplication in its own operations.  Consider the merger of two regional Banks we just worked with:  both had talent management teams, both had compensation, diversity, and compliance organizations.  

Well the decision about what to cut and how to reorganize were not easy:  one of these banks focused on high net-worth individuals and small businesses, so it had a large workforce of account and portfolio managers providing customized services.  The other was a more traditional retail bank, staffed largely by people dealing with retail clients.

Bottom line:  the combined organization design required a sharp and focused look at the new workforce strategy, the key competencies and capabilities in place, and which of the HR teams had the expertise and understanding to execute the new combined bank’s strategies.  Some of the operations went to the traditional retail banking HR leaders, others (talent management, for example) went to the HR leaders from the smaller, acquired organization.

Advice:  consider your new workforce strategy and look for the most valuable HR skills and capabilities in dealing with the new workforce, and use this to guide your reorganization.

2.  Implementing new Talent and Capability Management Solutions:  The second major driver behind new HR organizations is a need to implement talent and capability management strategies.  Consider one of our clients who is a large, well known consumer packaged goods company.  This particular company has a well established talent management strategy which moves people across functional organizations (e.g. marketing, sales, manufacturing) from product line to product line.  These people rise through the organization in these functional roles and eventually have the opportunity to become general managers of consumer products.

This is a very traditional talent strategy, pioneered by Procter & Gamble and now used by Unilever, Clorox, Kraft/Altria, and many other consumer goods companies.

But how does this type of organization work when the company enters a major economic slowdown, an acquisition, or divestiture of an entire product category?  It builds functional skills which are supposedly transferrable into a new product.  But in reality, what our research has shown, is that many such CPG (consumer packaged goods) companies have old, long-established techniques for marketing which may or may not fit into such a new market.

Clorox, for example, creates entirely new marketing and product teams to enter new markets.  The highly successful “Green Works” product line from Clorox was incubated and developed outside of the company’s traditional marketing organization.

Bottom line:  as we find in almost every industry, the “magic” to a newly combined talent management organization is not to simply squash together all the organizational development roles, but rather to stitch them together with a strong focus on the company’s strategic business needs.  In our High Impact Talent Management research we find organizations which succeed with integrated talent management create talent “pools” which are treated in special ways based on their demographic, skills, and strategic role.  Oil companies, for example, must create special “talent pools” for exploration and production engineers, because they provide such high value and are in such short supply.

3.  Adoption and Integration of New HR and Learning 2.0 Technologies:  The third major change which is causing HR to change is the rapid adoption of new HR and Learning 2.0 (read “social networking“) technologies.  It is now possible to purchase an HRMS system which includes integrated functionality for goal alignment, performance management, succession planning, talent pooling, career management, and more.  And in the area of enterprise learning, today’s new learning management systems (LMS) now have social networking, collaboration, messaging, and content management embedded.

In addition, as our latest High Impact Learning Organization research shows, more and more of an organization’s capability-building expertise now lies in its ability to create internal collaboration and communities of practices — and less relies on traditional competency management and training. 

Consider a large pharmaceutical company.  We are working with three such companies right now and each are looking for ways to reduce L&D costs by implementing integrated technologies and organization structures to share knowledge, collaboration, tools, and infrastructure across sales, research, manufacturing, and other large business functions.   The traditional HR and L&D organization which may have decentralized groups must be changed to take advantage of these new integrated technologies.

Bottom line:  new technologies can be transformational, but make sure you consider how they will force and enable your HR and L&D organization to collaborate as well.  If you want to understand how these changes are occurring, read our new Social Software 2009 research or our just-published report The Essential Guide to Performance and Talent Management Systems.

In 2008 and 2009 we expect many organizations to grapple with these challenges:  what is the “new role” for corporate training?  What do we do with the HR generalists located in our business units?  How does the talent management team create strategies which can be customized for critical roles?  And what parts of HR should be globalized vs. decentralized?

While the traditional approach to outsourcing HR transactions continues to drive cost reduction, I believe it is these higher level issues which are really going to drive HR’s value in the next 12-24 months.  With the economy slowing and more than 30% of organizations going through some type of restructure or leadership change, we must think about how we will reorganize ourselves to provide cost reduction, integrated talent solutions, and enable new technologies all at once.

(We have a variety of tools and assessments to help organizations work through these issues – please contact us if you would like to learn more.)

Comments welcome…

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Corporate Talent: Where the US Labor Market is Going

Posted on October 20, 2008. Filed under: Enterprise Learning, Sourcing and Recruiting, Talent Management, Workforce Planning | Tags: , , , , , |

One of the important things senior business and HR leaders must consider is the availability of labor – that is not just “people” but “the right people.”  Right now, with a 6.1% unemployment rate, the US labor market has undergone some major changes…. and such changes in the availability of work directly affect the skills and capabilities of people.  For example, when I graduated from college in 1978, there was a dearth of engineers and a tremendous interest in energy (as there is now).  So, I studied Mechanical Engineering.  In the decades since, that particular area of study dropped out of favor – but now it’s back.

Consider the following changes which have happened in the last 9 months:

  • The number of jobs in construction has dropped by 4.3% (323,000 jobs lost)
  • The number of jobs in manufacturing has dropped by 2.7% (366,000 jobs lost)
  • The number of jobs in natural resources/energy has increased by 8.6% (64,000 jobs gained)
  • The number of jobs in education and health services has risen by 2.1% (394,000 jobs gained)
  • The number of jobs in government has grown by 1.1% (254,000 jobs gained).
So what we have experienced is a fairly dramatic drop in the need for manufacturing and construction roles and a very dramatic increase in the demand for energy, education, healthcare, and government roles.  Interestingly, working for the government is more popular among young people now than it has been since the 1960s.

 

US Labor Market by Industry October 2008
Fig 1:  US Labor Market by Industry, Bureau of Labor Statistics

 

This data shows what a “non-manufacturing” economy we really are.  The largest industries by employment are business and professional services, healthcare, and retail (and government).  We truly have become an industry of shoppers who are trying to remain healthy.  The fact that 17% of all employees work for some form of government is also alarming.

 

The second economic factor to consider is where industry growth is occurring.  Today, despite the recent drop in the stock market, some industries continue to be doing very well:  our new TalentWatch® research (to be published this month) shows that many Aerospace, Business Services, Defense, High Technology, and Healthcare companies are still growing rapidly.  And when we ask business leaders what roles they need to grow, companies tell us that their biggest shortages are in:
  • Line Managers:  43% of organizations cite severe or major shortages
  • Engineering / technical professionals:  42% of organizations cite severe or major shortages
  • Skilled labor:  30% of organizations cite severe or major shortages
  • Sales:  30% of organizations cite severe or major shortages
  • Top executives:  yes, believe it or not, 34% of organizations cite severe or major shortages.
As our Talent Management Factbook® research supports, organizations are still suffering from shortages in their leadership pipelines, shortages in technical skills, and a never-ending need to find the right sales and executive roles to run their businesses.
 
What does this mean to you?  Despite the dire economic news, more than 40% of the companies we surveyed told us they are limited by the inability to hire key people.  And based on the information above, our economy is slowly but surely shifting to one of services, government, healthcare, and energy workers. 
 
Further supporting this trend is the following data.  According to the Bureau of Labor Statistics, the fastest growing jobs over the next five years will be: 
  • Network systems and data communications analysts – 53% increase
  • Home health aids – 49% increase
  • Software engineers and applications programmers – 45% increase
  • Financial advisors (!!! really?  yes) – 41% increase
  • Medical assistants and nurses – 35% increase
  • Substance abuse and other counselors – 34% increase (I wont even try to guess the reasons for this).

Bottom line is this:  if your organization needs technical, managerial, or healthcare workers to grow, you should plan ahead.  You are likely going to need to further invest in career development, tuition reimbursement, and increases in training in order to obtain the skills you need.  Our research shows a fevered interest in complete career development programs among corporations – programs which help young workers build their skills in professional, technical, and service roles – not only leadership.

I personally believe that the next administration in Washington is going to wake up to these shifts in labor skills and availability and start a massive emphasis on technical, energy, and health training and education in the US.  WIthout such a shift our businesses are going to be increasingly forced to invest in these skills internally.  Either way, we have no choice but to watch these trends – it’s a critical part of our role as strategic talent managers in our organizations.

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Enterprise Social Software: A New Category

Posted on October 2, 2008. Filed under: Enterprise Learning, HR Systems, Learning 2.0 | Tags: , , , , , , , , , , , , , , , , , , , , |

This week we introduced some important and groundbreaking research on a new, important category of enterprise software:  the market for corporate Social Software platforms.   Traditionally our research has focused on identifying the strategies, processes, and systems which help corporate HR and L&D drive effectiveness and business value.  But as we continued to study the market for Talent Management and Learning Management software, we found that almost every software vendor was building features for internal social networking.

As we talk with corporate HR and L&D leaders they tell us that more and more of their focus is moving toward strategies and systems which support and create internal social networks, internal collaboration, content sharing, and informal learning.  So naturally we asked ourselves, how is this all going to come together?

Our research found several things.  First, today most companies are experimenting with many forms of social software in the areas of employee expert directories, customer service, customer community management, sales force collaboration and knowledge management, and technical communities of practice.  In fact, more than half the companies we talked with have active, highly sophistocated communities of practice in many of their customer facing and technical roles.  

Second, we found that very few companies have found a way to apply these tools and solutions to enterprise-wide HR, learning, and talent strategies.  Some, like IBM and Cisco, have invested heavily in this area and are well along on implementing what we call “learning on-demand” solutions internally.  But most companies are still bringing together teams from IT, HR, L&D, sales, and service and trying to figure out how an enterprise-wide social networking strategy would work.

Third, we found that this new application segment has spawned a large and very fast-growing segment of software providers.   While the jury is still out on whether these companies will grow into billion dollar companies or be subsumed into the likes of Oracle, SAP, Microsoft, IBM, and others, we believe that for the next 3-5 years these companies will become very important in the development of strategies and solutions for enterprise-wide learning and talent strategies.  The market is already over $270 Million and we expect it to grow to over $400 Million by the end of 2009.

These new, fast-growing companies like Atlassian, Jive Software, LiveWorld, Mzinga, and Telligent have built highly functional systems which implement the four major categories of “Social Software” – conversations, connections, collaboration, and content.  While most are not uniquely targeting the market for HR and corporate training, all are moving in this direction and they warrant a good look by your organization.

Does this mean that the market for Learning Management Systems (LMS) and content management systems is going away?  No, not at all — but it clearly means that a new “category” has been created, and this new category will challenge LMS providers and corporate buyers to think hard about how they build their next-generation HR and Learning systems architectures.

I encourage our clients to learn about this space – it is transformational.  Our upcoming research bulletin on the role of Social Networking in Enterprise Learning and Talent Management will help you learn more.

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