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Integrated Talent Management:The Next Frontier in Human ResourcesOutsourcing
Yvette Cameron, Sr. Director HRO Strategy & MarketingBusiness Process Outsourcing, SAP AG
HRO SummitTampa, Florida22 October 2008
Our World Keeps ChangingFlat world trends are already re-shaping business priorities
© SAP 2008 / Page 2
Decelerated investments;challenges for the chronicallyunder-funded
Economic Downturn
InnovationPeople are the last frontier ofcompetitive advantage in aknowledge economy
Virtualization
GlobalizationExpanding infrastructures and globalworkforce challenges ability to get singleview of the truth
GenY and an aging workforce drivenew demands on information accessand collaboration
Success through people – what does it mean?
Everyone talks about it, but what does it mean?
Better management of talent can drive
Rapid, successful new product introductions (better market agility)
Sustained business results over time
Higher customer satisfaction
Improved workforce agility
Technology can support this transformation of strategic workforcemanagement
Alignment and communication are key
According to a Harvard Business Review report (“Turning Great Strategyinto Great Performance”):
Companies typically realize only about 60%of their strategies’ potential value
because of defects and breakdownsin planning and execution
Approximately 30% of this problem can be attributed to:Poorly communicated strategyUnclear accountabilityInadequate consequences or rewardsActions required to execute not clearly definedInadequate performance monitoringInadequate or unavailable resources
“Turning Great Strategy into Great Performance”, Harvard Business Review, July 2005
Strategy execution requires “stronger’ HR
The McKinsey Quarterly, “Making Talent A Strategic Focus”, January 2008
What is Integrated Talent Management?
Integrated Talent Management is acomprehensive and proactive approach foridentifying, attracting, developing, and retainingthe talent needed to execute business strategysuccessfully
Its core processes includeAttracting and acquiring talentEducating and developing talentIdentifying and growing future leadersAligning and rewarding the workforceEngaging the workforce for optimal business results
For maximum benefit, talent managementprocesses and analytics should rely on a commoninfrastructure leveraged across each of the coretalent processes
Integrated TalentManagement
Talent Data Talent Profile Experience Competencies Career history Mobility &aspirations
Companyfoundation
Organizationalstructure
Jobarchitecture
Keypositions
Competencycatalog
Goalcatalog
Sharedcomponents
andbuildingblocks
Performancegoals
Careerplan
Developmentplan
Potentialassessment
LearningContent
Calibration
Performanceappraisal
Workforceplan
Global internal &external talent pool
Compensationadjustment
On-boarding
Successionplan
Trainingopportunities
Courseenrollments Talent Review Job requisition
Integrated talent management technologyleverages a common infrastructure
Within Organization Outside OrganizationHRDepartment
WorkforceManagersEmployeesExecutives
Candidates ExternalServiceProviders
End-to-endprocesses
Plan
Align
Acquire
Reward
Develop
Measure
Attract
Deploy
BusinessIntelligence Reporting, analytics, alerts, dashboards, warehouse
Growth in Talent Management applications nowoutpaces Core HR
Source: The Human Capital Management Market Sizing Report, 2007-2012, AMR, July 2008
In 2007 – combined revenues across components of talent managementrepresented a greater amount of HCM revenue share than core HR (41% to 38%)By 2012, the gap will widen to 47% talent management to 32% HCM
Varying maturity levels in talent managementreflect value perceptions
Composite based on data from Gartner, Everest Research Institute, Bersin & Associates, and SAP Analysis,
Compensation(SME)
LSO
Performance Mgmt
RecruitingSuccession Planning
Employee DataMgmt
Learning
Workforce Planning
Emergence
Social Software
PerformanceOutsourcing
Rapid Growth Reaching Maturity Mature/Mainstream
TM O
utso
urci
ngTM
App
licat
ion
Visualization
Compensation(MGR)
RPO
TM Suites
Silos drive automation – Integration drives strategic results
Talent Management Outsourcing (TMO)requires shared Provider/Buyer responsibilities
More than any other HRO, Talent Management Outsourcing requires thecoordination of BPO/Retained Org capabilities. For example:
Recruiting– BPO – Administrative services– Retained Org – decision making leveraging outsourced ITLearning– BPO – Course administration– Retained Org – decision making leveraging outsourced ITPerformance, Compensation, Succession – mostly retained
In Talent Management Outsourcing – IT matters more than ever for theretained organization
TM technology choices impact BPO value
CostImprovement
ShortTerm
LongTerm
QualityImprovement
ShortTerm
LongTerm
RiskManagement
ShortTerm
LongTerm
Impacts acrossphases:
•Transition
•Ongoing
•Evolution
Quality levers:
•Standardization
•Automation
•Innovation
Types of Risk:
•Transformation
•Operations
•Strategic
•Financial
•Legal
Solution Types
IT Drivers of Value
ERP
(on-premise oroutsourced)
Niche
(single process;SaaS or on-premise)
Talent Suite
(SaaS, on-premiseor hybrid)
Integration – A lever across all aspects
Levers of Quality
CostImprovement
ShortTerm
LongTerm
QualityImprovement
ShortTerm
LongTerm
RiskManagement
ShortTerm
LongTerm
Impacts acrossphases:
•Transition
•Ongoing
•Evolution
Quality levers:
•Standardization
•Automation
•Innovation
Types of Risk:
•Transformation
•Operations
•Strategic
•Financial
•Legal
Solution Types
IT Drivers of Value
ERP
(on-premise oroutsourced)
Niche
(single process;SaaS or on-premise)
Talent Suite
(SaaS, on-premiseor hybrid)
Integration – A lever across all aspects
Standardization is critical to achieving quality andcost goals of outsourcing
Consider the following in your technology options:Extent of configurability and personalization – upon implementation andongoingAbility to leverage HRO providers’ economies of scale in businessprocess and labor arbitrageBeyond towers of functionality – how does the provider achieve processstandardization across the integrated talent management landscape?
Within the context of BPO, while a best-of-breedapproach may present some benefits, a closer look
reveals the advantages of an integrated solutiondeployed in a standardized way.
Buyers of “TM Suites” focus first onautomation (Usability, Functionality)
What is the most important factor whenselecting a talent-management suite?
Source: Knowledge Infusion and HRE Talent Suite Adoption Survey, August 2007; n-256
Increase fromprevious years reflects
challenges of multi-vendor approach
Aspect ofautomation
Usability and functionality: Ensure the basicsare met
Business needs should drive the software decisions – not the other way aroundToday most customers simply automate
Incremental functionality is less groundbreaking than initial market entryapplications
Time-lags between vendor capabilities become less relevant as applications mature
“UE Glut” can drive user rejectionIn HRO – this could be mitigated by provider
Best-in-class across all modules giving way to greater emphasis on integrationFull functionality enablement (functionality effectiveness) requires integration for end-to-end process support. e.g. (blue=TM, green=ERP)– Recruit job profile and competencies learning upon hire to fill gaps budgets– Performance review calibration succession pools talent profile project
scheduling
Integration matters!
“An integrated talent management approach with service delivery, talentmanagement, and business applications on the same platform as the coreHRMS is a best practice.
We see a lower total cost of ownership from this integrated footprintreflected in lower per employee costs as opposed to a best-of-breed ormixed talent management environment.”
CedarCrestone 2008-2009 HR Systems Survey:HR Technologies, Service Delivery Approaches and Metrics
October 2008
“
Source: CedarCrestone 2008-2009 HR Systems Survey: HR Technologies, Service Delivery Approaches and Metrics, October 2008
Integrated Talent Management drivesimproved operational results
Source: CedarCrestone 2008-2009 HR Systems Survey: HR Technologies, Service Delivery Approaches and Metrics, October 2008
Reports from Bersin & Associates surveying over 700 globalorganizations reveal that those using integrated talent managementsuites routinely achieve superior results: they report two to threetimes higher return on investment in key HR processes than thoseusing standalone talent components.
Source: The Essentials of Performance Management Practices, Part 1, Bersin & Associates, October 2008.
“… Second, those taking anintegrated talent managementapproach strongly outpaceorganizations with a best of breedapproach on operating incomegrowth nearly three times (13.1%vs. 4.8%)”
CedarCrestone 2008-2009 HR Systems Survey:HR Technologies, Service Delivery Approaches and
Metrics, October 2008
“
Example: Learning integration across HR andthe Enterprise
One data modelIntegration by design
SimplicityConsistencyMaximum re-use
Resource & QualityManagement
Sales AccountingAnalytics
Enterprise Learning
HR MasterData
OrganizationalManagement
TimeManagement
Recruiting
Skills &Competencies
Performance &Succession
Barriers to Integrating Talent Management*
Getting to integrated talent management:break the silos!
Organizational silos have different driversLOB Drivers– Short-term automation and
process improvement– Can’t wait for lengthy
evaluation cycle or upgradesCIO Drivers:– Focus on reduced vendor
landscape and complexity– Seeking long-term solution
sustainabilityProduct silos challenge the Talentmanagement business case due tofocus on automationManaging the conflict in short-termvs. long-term drivers: consider a bridgingstrategy with SaaS
*Source: IDC's HR Technology Conference Survey, October 2007
The Innovation Lever of Quality
Technology facilitates innovation, i.e.:“baseball card” profiles and dynamic calibrations with AJAX and FlashUse of social networking in recruiting process
SaaS leads with most rapid delivery of new capabilities, but on-premiseBOB and ERP catching up (new release methodologies, faster releasetimes)
Some potential downsides of too-frequent changes
Process innovation requires easy adoption of process changes throughpersonalization and configuration options – again SaaS may impose limitsor at least hidden costs
Risk Considerations
CostImprovement
ShortTerm
LongTerm
QualityImprovement
ShortTerm
LongTerm
RiskManagement
ShortTerm
LongTerm
Impacts acrossphases:
•Transition
•Ongoing
•Evolution
Quality levers:
•Standardization
•Automation
•Innovation
Types of Risk:
•Transformation
•Operations
•Strategic
•Financial
•Legal
Solution Types
IT Drivers of Value
ERP
(on-premise oroutsourced)
Niche
(single process;SaaS or on-premise)
Talent Suite
(SaaS, on-premiseor hybrid)
Integration – A lever across all aspects
How software can mitigate transformationrisk
ImplementationMethodologies &
Consultants
ExtensiveStandardInterfaces
Broad SolutionScope
Configuration &Personalization
Capabilities
Mitigation ofTransformation
Risk
-Country and scopeexpansion-Usability
-Templatization-Ability to change
-Reduce overhead of ERP-Online config process-Resource availability
-Data and Processconnection points beyond
EE Master Data
Operations risks are heavily impacted bychoice of technology
Vendor ManagementMultiple technologies, relationships, compliance across all
Availability of resourcesEnablement of labor outsourcing and global expansionImpact of vendor attrition on long-term availability of resources
Solution RiskAutomation across process vs. end-to-endData redundancy/error risks (synchronization)Innovation Delivery – scope, timing, successRealization of transformative promises
Strategic Risk: Vendor viability is a realconsideration
The Shrinking Niche Vendor Pool1 53+ M&A/Attrition events since2005, impacting
Ongoing levels of productsupport, consultingservicesFuture investments forinnovationFuture migration
Most niche vendor revenues in$20-70M range, with manyunprofitable
Primary revenues fromheritage products
At least 23 vendors competingfor ‘suite’ leadership
1This is not a comprehensive list of all niche talent management vendors – only a representation showinghow a given pool of 63 vendors in 2003 has decreased to 27 in the course of 5 years.
Cost Considerations
CostImprovement
ShortTerm
LongTerm
QualityImprovement
ShortTerm
LongTerm
RiskManagement
ShortTerm
LongTerm
Impacts acrossphases:
•Transition
•Ongoing
•Evolution
Quality levers:
•Standardization
•Automation
•Innovation
Types of Risk:
•Transformation
•Operations
•Strategic
•Financial
•Legal
Solution Types
IT Drivers of Value
ERP
(on-premise oroutsourced)
Niche
(single process;SaaS or on-premise)
Talent Suite
(SaaS, on-premiseor hybrid)
Integration – A lever across all aspects
Cost implications across all phases ofoutsourcing
Transition and Ongoing PhasesImplementation timeframes and costs– HRO templatization and standardization helps minimize ERP impacts– SaaS value proposition diluted if there is a need for deep integration across
processesUE Glut – impact of proprietary/multiple systems on overheadPeople –– availability of resources on required cost basis (esp. globally)– Increased need for call center support when self service is insufficient or
confusing
Evolution PhaseFrequency of innovation (updates)Process or country expansionExpansion from LSO or RPO into other areas of talent – integrationmakes this a natural add-on vs. complex ‘new’ implementation
Provider Case Study: How technology complexitycan generate operational inefficiencies
Candidate Self-Service
Web Content Management
Manager Self-Service
Employee Self-Service
Vendor Self-Service Administrator Self-Service
Knowledge Management System
User Eventing/Messaging
System
CompensationManagement
System
ERP PayrollSystem
DocumentManagement
System
TalentAcquisition
System
BPO ESS
Input
Output
WFA
ERP
Time &Attendance
Benefits Admin
DefinedBenefits
Health &Welfare
Workforce Dev
Planning
LMCS
LMC
AbsenceManagement
System
BPO ESSCall Center
Utility
Integration Layer
Interfaces, Gateways, Web Services, Integration Services
Services Layer
Security Services, Data Services, User Services
Business IntelligenceReporting/Dashboards, OLAP Analytics
User Access
Outside Organization Within Organization
Candidates, Providers
Note: content has been simplified for confidentiality
Managers, Employees, ExecutivesHR Department
Provider Case Study: How technology complexitycan generate operational inefficiencies
Vendororganization’s
ability todeliver
Functional fitagainst typical
clientrequirements
License andMaintenance
Cost
Resourcesavailable in lowcost locations
Integrationcomplexity,cost and on-
going supportrequirements
TechnicalArchitecture Fit
ERP 1 80-90%coverage
ERP 2 80-90%coverage
Compensation Management
Document Management
Benefits Administration
Workforce Planning
Talent Acquisition
Absence Management
Business Intelligence
Technical implementation and ongoing support of complex landscape is expensiveEven more so when parts of the landscape require specifically-trained permanent resources and rely onoffshore specialists who hard to find, resulting in poor utilization and use of on-shore resources and overallsubstantially inflated cost structure
Relatively smallcompanies are not
able to support largeprojects
Very expensive whenvarious point solutions
added together
Nearly impossible tofind resources in lowcost locations (India,etc.) with necessary
skills
Release synchronizationcreates significant additional
risk, cost, and reducesinnovation because
less likely to install latestrelease
Complexity can lengthenImplementation timeline by
100-125% or more overprojections
Provider Case Study: How technology complexitycan generate operational inefficiencies
IT (incl.implementatio
n. andmaintenance)
G&A costs
20%
60%
10%
Cost oflabor
Profit 10%
Full-scope regional HRO over 6 years (including transition), 50K+ employeesEconomics over duration of contract
IT
G&A costs
45%
45%
10%
Cost oflabor
ESTIMATESROUNDED NUMBERS
Loss
Planned deal economics Actual deal economics
(afterrenegotiation)
Are we measuring the right things?
“All of our service level measurements were green – butorganizationally, we were red.”
– Buyer of HRO including HR and Talent Management,September, 2008
“
Integrated Talent Management OutsourcingRequires A New Way of Doing Business
HRO is not ITOTMO (Talent Management Outsourcing) is different from traditional “HRO”requiring
Specialized knowledge of these strategic talent processesStrategy consulting and change management far and above traditionalHR/PY changesUnification of data and processes with exceptional business intelligencecapabilitiesNew measures & metrics are needed
What does “success” mean in outsourced talentmanagement engagements?
Call center responsetimesTransaction leveltimelinessTransaction levelaccuracyCustomersatisfaction levels…
Improved levels ofsatisfactionInstructor qualityLearningeffectivenessDecreased time to fillnew hires…
Improved saleseffectivenessOrganizationalreadinessIncreasedshareholder value...
what can/shouldemerge here?
Business Impacts:Improving Efficiencies
Strategic:Doing the right things
Service Levels:Doing things right
What are the right measures for demonstrating talent managementsuccess, and how does this change the buyer/provider dynamic?
Integrated Talent Management is the nextfrontier in HR outsourcing
Today’s economic conditions underscore the need for and opportunityfrom talent investments
More than any other outsourced initiative –Talent Management strategies and technologyrequire a holistic approach across processesand provider/client interactions
When considering outsourced talentmanagement, ensure
Solution functionality is aligned withbusiness needsAll processes are fully integrated for maximum business impactSelected technologies fully support the value drivers of HRO: Cost,Quality, Risk Mitigation