Mario Ellis is ready for a change. As director of compensation and HR systems for the University of Chicago Medical Center, which employs 6,300 people, Ellis wants more flexibility than his ERP-based goal-setting and performance-evaluation system currently provides. He envisions replacing it with a system that uses a dashboard interface to inform him at a glance about important human-resources concerns, such as succession planning, employee performance, and compensation.
“I want something that’s more intuitive,” says Ellis, who still relies on paper for some tasks. He also wants a system that can better align the medical center’s workforce with overall strategy.
There certainly is no shortage of such systems to choose from. The “talent management” software market is booming, and the products — often sold via a cloud-based, “software as a service” (SaaS) subscription model — offer plenty of bells and whistles, everything from core capabilities such as tracking a worker’s tenure and career goals to the ability to create employee profiles that mimic those found on popular social-networking sites such as LinkedIn and Facebook.
According to Forrester Research, such SaaS-based systems, offered by companies like SuccessFactors, WorkDay, Taleo, Lawson, and many others (not to mention the major ERP vendors), attracted strong interest in 2010 and are fast becoming mainstream for recruitment, performance management, and many other HR functions. Current costs run between $350,000 and $400,000 annually for the primary components in a performance-management suite that serves about 10,000 employees, says Lisa Rowan, program director for HR and talent-management research at market researcher International Data Corp. (IDC). Smaller companies can get started for as little as $25,000 a year (in a SaaS model).
Assessing the ROI
While the software may have come a long way, it can’t solve all the thorny HR problems that plague companies. But the benefits of a well-implemented talent-management system could be huge, analysts say. Superior talent management is strongly connected to enhanced business performance, according to Ernst & Young’s 2010 report “Managing Today’s Global Workforce.” The survey found that companies that aligned talent-management programs with their business strategy delivered a return on investment (as measured by return on common equity, or ROE) that was, on average, 20% higher over a five-year period than companies lacking such alignment. Among companies that integrated certain key elements of talent management (such as succession planning and recruiting), the results were even more dramatic: ROE over a five-year period was, on average, 38% higher than those that failed to integrate those capabilities.
One activity that the new systems aim to improve is the employee performance review. Historically, such reviews have been conducted mostly for legal reasons — to justify salary decisions or create a paper trail for a bulletproof termination. Usually the process is loathed by managers and employees alike, and the resulting forms are typically stashed away in file cabinets.
“People aren’t good at it and they know they aren’t good at it,” says Steve Hunt, an industrial organizational psychologist and a director of business transformation services at SuccessFactors. “People really struggle to give feedback.” They also struggle with the unpleasant and difficult conversations that can follow reviews.