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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Your “Incumbent” HR Systems Vendor – What to do?

Posted on August 19, 2008. Filed under: HR Systems, Talent Management | Tags: , , , , , , , , , , |

I just completed a series of interviews with three organizations going through the important, challenging, and time consuming process of implementing a new performance management system.  In each case (a large healthcare provider, a global mining company, and a global call center operations company), the company is using the implementation of a performance management system to implement a new, re-engineered, strategic performance management process.  But rather than discuss this, I’d like to give you some thoughts on their vendor strategy.

These three companies each chose to use their “incumbent” systems vendor.  Rather than go to the “biggest” or “noisiest” systems vendor (I wont mention any names), they felt that they would see far greater benefits by using a newer system from their provider of recruiting software.  Why did they do this?  Because in each case they felt they had a wealth of data, experience, and strong working relationship with this company.

This points out two critical points, which we are publishing in a major research bulletin in the next few weeks:

1.  The biggest ROI from HR systems comes from integration, not automation.  As Leighanne Levensaler, our Director of Talent Management research has pointed out in many of her findings, the real breakthrough benefits of HR systems now come from newly enabled applications, such as pay-for-performance, integrated career and development planning, enterprise succession management, and strategic internal and external recruiting – not from automating or improving a single process.

As our data will prove, this means that the benefits of integration are now far greater than the potential downside of going with a product which may be missing a few features.  (Assuming your incumbent vendor is developing the features you need.)

This means that if your LMS vendor has a solution, or your recruiting vendor has a solution (or even your ERP vendor), you should really look hard at the time, energy, and existing investment you have made in this system before you rush out and bring in a new solution provider.  Obviously there are tradeoffs when your incumbent vendor is not keeping up, but in today’s HR systems world remember that “integration” is far more important than “automation.”

2.  The big “Incumbents” are getting their acts together.  The second point I want to make is that the traditional incumbents (recruiting systems providers, ERP providers (Oracle, PeopleSoft, SAP, Lawson), and LMS providers) are all getting their “talent and performance management” software acts together.  While there are many feature differences between the providers (and our Talent Management Suites research will help you identify these), all now provide some form of an end-to-end solution which includes performance management.

While this continues to be a wild and wolly world of innovation (watch social networking coming around the corner), we think the role of your incumbent is becoming more important than ever.

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New Disciplines of the Modern Training Organization

Posted on June 2, 2008. Filed under: Content Development, Learning 2.0, Learning Programs, Talent Management | Tags: , , , , , , , , , |

This month we are launching The High Impact Learning Organization®, a research study which has been more than three years in development.  During this time we have interviewed hundreds of corporate HR and training leaders and reviewed in-depth trends of more than 780 global organizations. 

Listen Audio Overview of this research:  click here.

As I have been discussing this research with our research members, I realize that one of the most profound changes that is taking place in corporate learning and development is the need for a new set of disciplines, a new set of skills and competencies.  The traditional “instructional design, development, and delivery” skills, while still important, are fading into the background.

New Skills and Disciplines

  • Facilitating learning, not Delivering learning.  In today’s networked organizations, informal or collaborative learning is now critical.  Rather than creating a learning program and delivering it to an audience, today’s high-impact learning organizations create learning opportunities – by creating communities of practice, social networking experiences, and subject-matter expert-led experiences.  NetworkAppliance, Cisco, Dell, Pfizer, IBM, and many of our other research members have transformed their learning organizations by providing tools and opportunities for experts to teach and share information. Such tools and systems include blogs, wikis, video studios, rapid e-learning tools, RSS feeds, and even “twitter” and other social networking tools. 
  • Information Architecture, not just Web Design.  In today’s corporate learning environment, it is not enough to build “compelling courseware” or an “easy to use LMS.”   We have too much information available to our employees and customers:  product documentation, job aids, online courses, how-to guides, videos, and more.  The critical skills needed are the ability to create an online experience which is relevant and usable for the employee at their time of need — and this requires a focus on information architecture, not just “ease of use.”  (For more information on “information architecture” please read our research.)
  • A Learning Architecture, not just Blended Learning.  The concepts of blended learning, which I first wrote about in 2003 and 2004, have not gone away.  In fact they are more important than ever.  But now you have so many choices of media, collaborative tools, simulations, and other forms of content that you must ration and simplify your choices.  The answer is what we call a “corporate learning architecture,” which describes the tools, approaches, and processes you will support in your organization.  It gives program managers and learning executives a recipe of what to do when.  Again, we discuss this in detail in our research.
  • Competency-Based, Role-Based, and Function-Based Learning, not just Learning Paths.  In today’s “content-rich” organizations, our job is now to create “relevance and context” not just “content.”  This means that when we create a learning program and some online experience to supplement it, we must consider how the learner will locate, use, and apply the content.  If the program is a career or leadership development program, it must be competency based.  If it is a performance-driven learning program, it may need to be role-based (e.g. defined and customized for a certain job role) or function based (e.g. defined and customized for certain job functions which may cross roles).  Each of these models requires a slightly different way of thinking about and developing content.

    A perfect example is sales training for a new product rollout.  Do you want to develop skills in product usage and demonstration?  Do you want to develop skills in sales objection handling?  Or do you want to build solution-selling skills?  Each possible training strategy will required content in different forms for different uses – and in most major product rollouts you need all elements!  Read our Learning Leaders® report on how Symantec solved this problem in their massive new security product rollout.
  • Integration with Talent Management, not just Driving Organizational Competencies.  Finally, one more “new discipline” which we must all address is the need to work closely with our talent management brethren.  In today’s talent-constrained organizations, the L&D organization must understand the needs for new career development programs and portals, integrated performance and development planning processes, competency-based assessment and recruiting, and onboarding.  These processes are not new to L&D professionals, but they take a different level of rigor and approach to the traditional “performance-driven” training programs.  They are more complex, take longer to implement, and require a deeper level of organizational commitment and change.

The Traditional Skills and Disciplines

 Many things in organizational learning have not changed.  You must still understand the principles of performance consulting, needs analysis, instructional design, and assessment.  Learning organizations must still partner closely with line managers and business executives to understand the skills needed to meet urgent new business priorities.  And they must continue to hold themselves accountable for measuring the adoption, alignment, efficiency, and impact of the L&D investment.

But while these disciplines remain, our research clearly shows that the “high-impact” organizations are focusing more and more on developing the new skills above.  Read more about the Top 18 High-Impact Best-Practices of High-Impact Learning Organizations in our research.

As always, I welcome your comments.  

(To get a copy of The High Impact Learning Organization® research report, click here.)

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Talent Management Suites: Research Launched

Posted on January 16, 2008. Filed under: HR Systems, Talent Management | Tags: , , , , , , , , , , , , , , , , , , , , |

We just released the largest-ever research study on the market for talent management suites.  This research took place over the last 18 months and is the result of an exhaustive analysis of 20 vendors, 800+ HR managers, and in-depth meetings with more than 50 organizations.  Leighanne Levensaler, our principal analyst in this area, is responsible for this tremendous effort.  (Click here to download the table of contents.)

A few key findings: (press release available here)

  • This is a very big market.  We estimate the total market at $2.3 billion in 2008 (this includes software and services for compensation, performance management, learning management, succession management, and recruiting systems), and growing at almost 20% per year.  For an overview of the segments, please click here.
  • There is no real “leader” yet.  As the research points out, several vendors are growing very quickly, but none command enough market share to come close to being the “leader.”  With new vendors continuing to enter (payroll providers, for example), the market will continue to expand before a real “leader” emerges.
  • We evaluated the software solutions using a technique we call “capability charts” – which show you the depth of functionality, experience, growth rate, and market adoption of each product in each functional area.  What these charts show is that each vendor has some very strong areas, some strong areas, and some “emerging” areas.The three vendors with highest ratings include CornerstoneOnDemand, StepStone, and SuccessFactors.  Other important vendors include: Authoria, Halogen Software, HRsmart, Kenexa, Lawson, Learn.com, Oracle, PeopleSoft, Plateau, Saba, SAP, Softscape, SumTotal, Technomedia, TEDS, Vurv, and Workstream.
  • Our research found that very few organizations have really adopted the end-to-end suite yet.  Large organizations find this very difficult, because of their large tapestry of existing legacy systems.  We do believe that the existence of these new systems is enabling people to map a 3-5 year architecture to converge and combine HR applications. 
  • There truly are many breakthrough new talent management and business applications possible with these systems.  Initiatives like pay for performance, integrated development planning, performance-driven succession management, leadership development, workforce alignment, career development, etc. are all difficult to do without an integrated solution.  We clearly see tremendous business improvements possible with these new systems.

We have many many case studies to share in this area.  We look forward to your comments in this exciting new area of talent management.

You can listen to Leighanne’s overview here.  Download the study overview here.  Purchase the research report here.

If you would like to review some of the other materials on this market, please visit our talent management suites research program or join our membership program.

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Wow. Performance Management Really Matters in Retail.

Posted on December 13, 2007. Filed under: Performance Management, Succession Planning | Tags: , , , , , , , , |

As we continue to study best-practices in talent management and talk with many organizations, we see more and more evidence that top-down goal alignment and transparency truly do drive business results. 

For example, we recently had an in-depth discussion with the Vice-President of HR at Bon-Ton Stores, a highly-successful mid-sized retailer which operates among the higher performing retailers in financial performance.  Bon-Ton has grown from 35 to 287 stores with more than $3.7 Billion in revenues in the last five years.  The company acquired several set of high-end stores from Saks and has integrated the merchandising, distribution, and retail operations with great success.

As we discussed the organization’s keys to success, the VP of HR told us that the CEO has always paid very close attention to the development of its people.  In fact, the company has developed a comprehensive, competency-based approach to recruiting, management, leadership development, and succession planning which is far more integrated than any other retailer we have spoken with. 

The company prides itself on transparency (the 16 core competencies are broadly available), goal alignment, and training.  Each year a set of “critical roles” are identified (there are 87 as of now), and succession plans are scrutinized for these positions.  (Research members can read more about Bon-Ton and its competency model in our research library.)

After this detailed discussion I went back to our High Impact Talent Management benchmarking database and reviewed our findings about retailers.  Some astounding facts came up:

Retail organizations with enterprise-wide performance management processes which are standardized and open (transparent) (approximately 21% of organizations in our database) are 47% more effective at delivering a high-performance culture than those without formal programs, and 71% more effective than those with no performance management processes at all.

All I can say is “wow.”   The retail industry is one of the most difficult of all to manage:  high turnover, rapid product cycles, and low margins.  Yet here, as in other industries, sound people-management processes really pay off.  When we refer to “transparency,” we refer to the process of clearly communicating company values, goals, and individual sales objectives across all employees, stores, districts, regions, and divisions.  This is what drives Bon-Ton’s success – and many other retailers as well.

If you have not yet figured out why performance management should be a transparent, organization-wide process, you should.  Read our High Impact Talent Management® research for more details.

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