This week SuccessFactors took a somewhat bold move by relaunching itself as a "Business Execution" software company. This big idea, which is not new (The Balanced Scorecard Initiative® has developed tools for this for many years), is to reposition the company's performance and talent management software as a way to build strong alignment between business leaders and the workforce. First, let me say, that I am 100% in agreement with this concept. In our ongoing research into best-practices in management, leadership, and HR we continually find that business alignment is the most difficult yet most important thing which HR must do. Our entire research strategy for the last five years has been focused on giving HR and L&D leaders the tools they need to become more effective, efficient, and aligned. And we try to continuously remind people that "talent management" is "management."
On the other hand, we must also remember that Human Resources, as a business support function, has many tactical roles also. HR and L&D leaders must manage compensation, hiring, compliance, terminations, onboarding, operational skills development, management development, leadership development, as well as diversity, EEOC compliance, healthcare and benefits, and much more. While of course we want all these programs and systems to be business-aligned, many of them are very operational and tactical in nature. So while talent management software can be highly strategic, it plays an important operational role as well.
The analogy I would use is to consider IT. IT, like HR, is also a "support function." It does not directly generate revenue, yet it plays a vital role in enabling everything else in the organization to work well. The IT software management market, which is tens of billions of dollars in size, includes many many needed tools (databases for example) which do not directly drive business execution, but rather enable and improve IT's ability to drive business execution.
So is SuccessFactors saying that their new products will truly be "business execution" products? Or is the company using this approach to simply differentiate itself from its fast-growing HR software rivals?
For those of us who worry about talent management and business all day, we clearly understand that the "people" part of a company is both the most costly (e.g. in Healthcare salary costs are over 65% of total revenue), and the biggest lever for success. We clearly understand that our ability to align, motivate, compensate, hire, train, develop, move, and assess people is both difficult and important (there are more than 10,000 books written on the topic of business management). (Our 2009 Talent Management Factbook® directly proves that companies with superior talent management processes generate 28% greater revenue per employee than those with average processes.) We also know that the new, dynamic processes which rapidly and continuously align people with ever-changing business needs are vital to success.
Now, SuccessFactors aside, if you look at all the major talent management software providers (Taleo, Oracle, SAP, Plateau, Saba, Cornerstone, Halogen, and many more), they all provide the tools which help make this happen. While they do not specifically call themselves "business execution software companies," this is precisely what they do.
Yesterday I had a call with the SVP of HR for one of the most profitable and successful healthcare providers in the country. He told me about their strategy to align all their employees toward the organization's three major goals: financial results, patient experience, and healthcare outcomes. We talked about how difficult it is to get the people in the laundry (located in the basement) to realize that by letting an iodine-stained sheet go onto a bed they can have a direct impact on the organization's financial results. We discussed how important it is to hire and promote the right people into management, continuously communicate the three missions of the organization, and help each individual workgroup develop goals which are easy to understand and well-aligned. He is a "business-execution" guy.
As we discussed "how" he does this, he told me that 3 years ago they completely redesigned their performance management process. They dramatically simplified the forms and tools and built a top-down goal alignment process with goals at each level. Then they spent enormous amounts of energy working with managers to help them understand how this process will work. And they now use Taleo Performance to manage this process.
My point is simply that Talent Management is all about Business Execution. It's not just a new name for HR – it is a new set of programs and processes which align traditional HR people-management topics with the ongoing and ever-changing business needs.
In our first research on talent management (2005-6) we developed our four stage High Impact Talent Management® methodology, and we showed that the first step in a talent management program is to clearly define the business goals at hand. The really hard part of business execution is not "telling people what to do," but helping them succeed at doing it. And organizations which do this well go far beyond having a great performance management program – they have interlocked workforce planning processes, they discuss talent at all operational staff meetings, they understand the key characteristics of success, they invest heavily on learning and on-the-job coaching, and much more. And by the way, you have to design the processes well before you implement software.
If this is what SuccessFactors is up to, then bravo! Let's quickly help businesses re-position their "talent management" strategies as "business execution" strategies.
By the way, one major part of this new initiative is opening up the API's to SuccessFactors so that business data from CRM, ERP, and other systems can be integrated easily. SuccessFactors customers would not only be able to look at goals, development plans, and succession plans but also quota attainment, patient quality, and a wide variety of business execution measures. This, to me, is an exciting new angle for talent management systems (which we believe are going to turn into "People Management" systems) and we should all thank SuccessFactors for making this easy to understand.
Finally, I want to point out that one of the biggest issues in "business execution" is not just helping people accomplish their goals, but making sure the "right person" is in the "right job" at all times. What often upsets business performance is not simply "execution" but "change." In the last two years companies that have succeeded are not those who only "execute" but rather those who can "adapt." Once you get your "execution engine" working, something happens (merger, reorganization, new regulations, product and technology innovation) that makes you have to rapidly change the way things are being done. When we talk with mature buyers of talent management software they tell us that the ultimate benefits are beyond "execution today" – the system helps them rapidly redeploy, move, retrain, and realign people as the business goes through changes.
I see this as a bold and exciting new positioning strategy for SuccessFactors, and one which will help the entire HR software market move ever-faster into 100% business alignment.