BlogERP: Jim Holincheck's HCM Software Blog

Next Practices: “Bottom Up” Calibration

This is the second in a series of posts (first one is here) on what I call “Next Practices”.  These are practices that look beyond today’s conventional HR approaches to achieve improved business outcomes.

Business Situation:  In a slow growth economy, there are limited funds for merit increases and bonuses.  To the extent there are funds are available, organizations want to use those funds to encourage engagement and retention of high performers (and those with high potential).

Practice: “Bottom Up” Calibration - Today many organizations use “top down” calibration to make sure that performance ratings fit a specific distribution.  The idea is to promote fairness and to limit “grade inflation”.  Because performance is frequently linked to pay (especially variable pay), the intent also is to make sure that there is a differential in rewards for high performers versus low performers.  However, frequently the people making the final calibration decisions may be somewhat removed from actually observing each individual’s performance.  In addition, the exercise can be de-motivating to strong contributors who, because of the desired distribution, just miss out from the next higher ratings category.  All of these issues (and more) bring questions about the fairness of the exercise to employees.

“Bottom up” calibration approaches the issue differently.  The main premise is that co-workers (or people working on the same team) know who the best performers are, so why not ask them for their opinion?  Let them vote on the top performers and use voting distribution as the ratings distribution.  There are opportunities for abuse if groups of employees try to game the system, however, managers can do a “sanity check” (and make sure there are consequences for collusion).  By gaining the input of the employees in the ratings process, it helps overcome many of the fairness concerns.  In addition, the feedback can be more meaningful to employees because it is recognition by peers.

Example

There are good examples in sports of bottom up calibration.  For example, voting for the Pro Bowl in the National Football League (NFL).  Players around the league at the end of the season vote for which players they think were the best at their position during the season.  The players with the highest votes from each conference are named the starters for the Pro Bowl game.  Though not everyone who is voted as a starter plays for various reasons, it is an honor for the players selected.  In addition, it impacts the compensation for players (many contracts have clauses that pays them a bonus for being selected to the Pro Bowl).

Do you use calibration in your organization?  Have you looked at doing “bottom up” calibration?  If you have, what results have you achieved?

Trip Report: SuccessConnect 2010 – San Francisco

For the past two days I attended SuccessFactors’ SuccessConnect event in San Francisco.  This was the second in a series of user conferences that SuccessFactors will hold around the world.  The first was in New York City last week.  Jason Corsello did a nice job highlighting the key announcements and product updates from New York and San Francisco in his blog post.  I want to take a different tack with this post.

I had the opportunity to listen to a number of customers ranging from Coca Cola Enterprises (Consumer Products) to Lincoln Financial Group (Financial Services) to Williams Corp (Energy) to Stanford University Medical Center (Healthcare) to Ryan Corp (Professional Services) to tell the story of their journey with SuccessFactors or the recently acquired Inform.  As you can see, these customer span a variety of industries, but struggle with many similar talent-related challenges.  Common threads included aligning pay with performance, developing leaders for critical roles in the organization, and leveraging data to make better talent decisions.  I tried to document the key details for these customer stories via Twitter (here is a link to an archive of SuccessConnect tweets) so I will not repeat the observations in this post.

An interesting element of these stories was the impact of culture on the change management required to implement their solutions.  It is certainly accepted wisdom that change management is crucial to success, but the nuances of what works and does not work in different cultures was interesting to see.  It also started me thinking about the SuccessFactors culture.

Here are a few random observations about the SuccessFactors culture:

• Energy and Enthusiasm is Important – They had a lot of people attending the opening keynotes.  The employees went crazy, yelling and cheering, when Lars Dalgaard, the CEO, was introduced.  That kind of energy is rarely seen at events like these.
• They Play to Win – During the first day, SuccessFactor held a session for analysts (financial and industry) with the senior leadership.  They are a very competitive bunch.  One of the things that struck me (not a new thought, but it struck me again) is something Brian Sommer once told me (and I am paraphrasing) – all really successful software companies have four strong players in the following key roles – the Visionary, the Geek, the Financials guy, and the Salesman.  Lars plays the visionary as he is definitely the public face of the organization delivering the message of what SuccessFactors is all about.  Aaron Au is definitely the Geek.  He was a co-founder and designed and built their technology platform (Tom Fisher also was there and as VP of Cloud Computing will likely play a role here going forward as well).  Bruce Felt, the CFO, keeps tight reins on the financial model for SuccessFactors.  Jay Larson is definitely the salesman.
• They are Not Afraid to Make the Future – SuccessFactors was one of the early vendors offering performance appraisal solutions.  With the acquisition of Inform and CubeTree, SuccessFactors is showing that it is prepared to do the heavy lifting to try to grow emerging HCM (and potentially broader) market opportunities.  Social HCM and workforce planning and analysis are two emerging HCM market segments I believe will be important categories over the next several years.

The greatest impact of these acquisitions however may be the value they impart in talent management.  I made the argument here (Gartner subscription required) a few years ago that workforce analytics were crucial to effective talent management (think of talent management processes as levers business executives can use to achieve specific business outcomes – which levers to use and how requires data to determine).  BizX Insights, leveraging Inform, is a first step in that direction.

The talent profile in your typical talent management solution only tells a partial story about an individual.  It provides structured data around things the organization needs to know about the person for their current job (and maybe next job) plus some common data about all people.  However, most people have a wealth of experience that is not captured in this structured data.  One of the promises of social networking (both internal and external) is that it provides a much richer set of data about a person, but in a less structured format because it is provided as part of the interactions within the networks.  I see very interesting possibilities when you combine the structured talent data in SuccessFactors with the unstructured data captured in CubeTree leveraged by the analysis prowess brought to the table by Inform.

What are those possibilities?  I have been thinking about it a fair amount lately as I am doing a keynote presentation next week at the SilkRoad technologies Connections conference in Bonita Springs, FL.  I do not want to give away the plot, but I plan on discussing some of these opportunities live next week at the conference.  After that, I plan to do a series of blog posts discussing these potential futures.  So, stay tuned. 

Succession Management: Is It All That It Is Cracked Up To Be?

The fall travel season has started.  I find myself at the Toronto airport with a little bit of time to post.  I have been reading Peter Cappelli's book "Talent On Demand".  It is well worth reading.  It gives a nice historical perspective on why we have the talent management practices we have today and why the assumptions that underlie those practices have changed significantly, leaving conventional wisdom wrong in many cases.  I found one particular passage around succession management extremely illuminating:

"We do succession planning to an unbelievable degree.  But once we do it, we don't use it.  Never have we received a senior vacancy and looked at the succession plan.  It's almost done as just another tick in the HR box"

One reason that succession plans do not work, at least for executive jobs, is that the events that trigger them --usually dismissal-- signal that the organization wants to move in a different direction with the next hire:  "We do not want someone like the last guy."  And succession planning is designed to produce candidates who look more or less exactly like that last guy...

Does that ring true for your organization?  I imagine that it would for most HR professionals.  Succession plans that are tied to individual characteristics or that do not change as the organization direction changes are not particularly valuable.  Like much of talent management, the use of succession management software is only as good what goes into it.  If you do not define the right characteristics for key positions (and adjust them regularly as the organization evolves) or do not develop broader talent pools that can be slotted into multiple critical roles, then a lot of time and effort can be spent on succession management with little results to show for it.

What do you think?  Is succession management worth the effort?  Is it better to not plan and fill needs as they emerge with a talent pool made of internal and external candidates?

Collecting Data on Talent Management Applications

Now that Google Docs supports offline editing of documents, I thought I would try it as a blog authoring tool.  I like it as a word processor so it may make an ideal offline blogging platform (especially on my Asus EEE).  Anyway, I digress.  I just put the finishing touches on the customer reference survey we will be doing for the Magic Quadrant for Employee Performance Management Software.  I am pretty excited about the data we will be collecting about usage and purchasing plans for talent management applications. I sent the survey questions to the vendors today so they could communicate to their customers what will be on involved in completing the survey. Of course, we will be gathering data about more than usage and purchasing plans (like satisfaction with the vendor and its products), but we have great plans for additional research based on the results.  If you are a Gartner client (subscription required), you can see how we leveraged this kind of data in the Magic Quadrant for E-Recruitment Software.  What are your most pressing questions about talent management application usage?

Reflections on Talent Management

Thomas and I just finished the first round of vendor briefings for the upcoming Magic Quadrant for Employee Performance Management (EPM) Software.  As Thomas bicycles his way through the Alps for the next two weeks (you can keep track of what he is up to here), I had a chance today to take a breath and reflect on the last few weeks.

We have seen a maturing of products as vendors continue to add functional depth to their EPM solutions.  We have also seen an increased focus on usability.  Not surprisingly, we have also seen many touting new social networking capabilities. 

At the same time we have been doing these briefings, I have been getting the usual steady stream of client inquiries.  I looked at the list of clients this month and it struck me that there were at least three of the very large variety (greater than 65,000 employees) plus another of that size tomorrow.  All four of them wanted to discuss integrated talent management.  All of them have some solutions in place in some talent management areas already but want to know more about the market for the broader suite. 

In "Unlocking the Strategic Value of Talent Management Application Investments" (Gartner subscription required), we discuss the adoption patterns of customers.  In terms of buying behavior, the research conclusions still hold true.  However, just because the really large companies have not bought talent management application suites does not mean that they would not like to do so.  Now, the vendors just need to be able to deliver the depth and breadth required by these customers.  What do you think?  Are vendors ahead of customer demand or do customers want more than the vendors can deliver?

Employee Performance Management: Two Sides of the Coin

Thomas Otter posted a while back about the problems with appraisals (including a link to a video from the UK version of "The Office" which is extremely funny).  Gautam Ghosh provides some good advice on about how to improve the performance appraisal process.  New Employee Performance Management software, in and of itself, does not improve performance appraisals.  It requires the right processes, culture (i.e., appraisals are fair, high performance is rewarded, etc.), and content (as Gautam points out, bad goals or too many goals can be problematic).

Upcoming HCM Research

I have not posted much to the blog recently as I have been trying to finish the update to the MarketScope for Employee Performance Management Software.  It has been a long (longer than expected) process.  We are near the finish line and should publish by the end of the week (maybe even tomorrow, but probably Friday).  I'd better be finished as I am leaving on vacation at that point.  I will not have ready access to the Internet so posting may be very infrequent (if at all).

I am working on some other notes that will get finished when I get back from vacation.  I am in the process of completing our first Hype Cycle for HCM Applications.  In addition, I am finishing up a note that provides our definition of Workforce Analytics.  Also, I hope to have some good news to report to you about the future of this blog when I get back from vacation.

Some Recent Research

I have not published much recently (or put it on the blog), but do have some very good stuff in the pipeline.  Here is a summary (subscription may be required):

Hellman & Friedman Acquisition of Kronos Will Fund Further Growth

This is the first major purchase by a private equity firm in the human capital management arena. Kronos will gain access to more resources to support its global expansion and movement into talent management applications.

Cool Vendors in Finance and HCM, 2007

Though many view financial and HCM solutions as mature and stable markets, the reality is that significant innovation is happening.

Plateau Bolsters Talent Management Suite With Nuvosoft Buy

Plateau's acquisition of Nuvosoft helps round out Plateau's talent management suite. Nuvosoft has strong functionality, but a limited customer base.

Key Issues for Finance, Human Capital Management and Procurement, 2007

Financial management, human capital management and procurement applications form the administrative "backbone" for all organizations. These Key Issues for 2007 summarize Gartner's research in these areas.

Also, if you are a Gartner for IT Leaders client, check out the new ERP/SCM specialty page off of the Application Management Home Page.  There is an Analyst Corner section that I post blog entries to on occasion.

Coming Soon

"MarketScope for Employee Performance Management Software"

"Defining Workforce Analytics"

A Long Week

Things started out very promisingly last week.  On Monday, I had a few client inquiry calls, but much fewer than normal.  I was able to finish up a presentation for the Gartner Outsourcing Summit in March.  On Tuesday, I flew to Las Vegas to Gartner's annual Research Offsite and then attended some meetings around research agenda management.  I am taking over responsibility for management of the Financials, HCM, and Procurement research agenda so it was a good learning experience.  I agreed to take on the role only if we hired an additional person to cover HCM applications.  So, that is what we are doing (e.g., good candidates are always appreciated -- especially if they are located in Europe and have a background in ERP as well as HCM).

On Wednesday, the Offsite kicked off proper.  We had the usual 2006 corporate review and priorities for 2007.  In addition, there was a meeting with the broader Software team to discuss 2007 priorities.  This was all good.  During one of the sessions, my wife called and informed me that one of her relatives had passed away.  This particular relative had been very kind and helpful when my Father-in-Law and Grandmother-in-Law had passed away and we wanted to be there.  So, I picked up my wife and Mother-in-Law in Chicago and flew to Miami on Thursday.  It was a full day of travel.  We attended the funeral on Friday and flew back to Chicago on Saturday night. 

It was a long week.  I am just now getting back in the swing of things now.  We are starting the vendor briefings for the update to the MarketScope for Employee Performance Management Software today.  Over the next three weeks, I will be spending a lot of time with the many vendors who offer EPM solutions.  I am looking forward to digging into the details on performance, compensation, and succession management.  However, given the time required for briefings and the additional responsibilities, I will probably be posting a little less frequently for the next few weeks.  Thanks for your patience.

Improving Performance Reviews

The SystematicHR blog has an interesting post about discussion on the Harvard Business Review Working Knowledge site about performance reviews and what can be done to make them better.  Below are a few of my guiding principles for making performance reviews more effective:

• Garbage In = Garbage Out -- One can have the best system in the world, but if they do not set SMART (Specific, Measurable, Actionable, Realistic, Time-based) goals, then it is hard to have accountability.  In addition, if you do not have the right competencies identified, then the best assessment technology will not help identify the right developmental opportunities.
• Begin With the End in Mind -- I am borrowing here from Steven Covey.  However, it is important that you understand what you want to accomplish by doing performance reviews.  For example, there are religious debates about whether or not assessments should be part of a performance review.  I will not takes sides on this because I think the mechanics of this is less important.  What is important is the conversation you want to facilitate between supervisor and employee.  Do you want to focus on development?  Do you want to focus on motivation (e.g., how performance impacts compensation)?  Do you want to focus on career development?  Do you just want to make sure that everyone gets a performance review?  Do you want to do all of the above?  This is where most performance review processes fall down.  Most organizations do not think about what they want to get out of the process and how they can best facilitate the conversation to make that happen.
• Performance Reviews May Be An Annual Process, But Performance Management Should Happen All the Time --   This is my biggest pet peeve.  Let's face it.  In most organizations, performance reviews are annual administrative exercise.  it is something that managers have to do.  It is something employees do not think is fair and balanced (much less really aligned with compensation).  Good managers should be communicating with employees regularly about performance and development.  It should not be an annual event.  Again, it is the conversation (in this case the frequency of that conversation) that is important.

OK, time to get off the soapbox.  What else should be on the list of guiding principles for performance reviews.