Author: Ed Frauenheim

The $100 million deal to create Peopleclick Authoria is the latest mash-up in the talent management software field. And experts say more is in store.

Vendors offering just one or a few talent management functions could be candidates to gobble up—or be gobbled up—in the quest for more comprehensive product lines, consultant Karen Beaman says.

“I do expect this consolidation to continue,” says Beaman, who heads advisory firm Jeitosa Group International. “In order to be competitive, they have to have more well-rounded suites.”

OnJanuary 5, private equity firm Bedford Funding said it had acquired talent acquisition specialist Peopleclick for $100 million. Bedford Funding said it was creating a new firm by combining Peopleclick with Authoria, the HR software company that Bedford acquired in 2008 for $63 million. Authoria brings with it recruiting software capabilities, along with other functions such as benefits communication and performance management.

Together, Peopleclick and Authoria boast as customers nearly 60 percent of the Fortune 100. Their combined annual revenue is close to $100 million, says Charles Jones, chief executive of the new firm, Peopleclick Authoria. Jones is the founder of Bedford Funding. He also served as CEO of software firm Geac Computer Corp.

Ron Kupferman, former CEO of Peopleclick, and Jim McDevitt, former CEO of Authoria, will operate as vice chairmen, working on business development, the company said.

The Peopleclick Authoria news is the latest example of tie-ups in talent management software, which refers to applications for key HR tasks such as recruiting, employee performance management and compensation management. Other deals in recent years include Taleo’s acquisitions of compensation specialist Worldwide Compensation and recruiting software firm Vurv Technology, as well as Kenexa’s swallowing up of recruiting software provider BrassRing.

In September, research firm Bersin & Associates projected sales of talent management software would reach $2.2 billion by the end of 2009 and grow 15 percent in 2010.

Josh Bersin, the firm’s CEO, called the Peopleclick Authoria deal the union of “two strong players” in the talent management systems market. “Both companies are product and market leaders in their segments,” he said in a statement.

But meshing technologies could be a challenge for the new firm, says Jason Corsello, vice president at consulting firm Knowledge Infusion. Although Peopleclick and Authoria “have arguably some of the deepest, best-of-breed solutions for talent acquisition and talent management, the two products couldn’t be more different,” Corsello wrote in a recent blog item. (Corsello’s blog, The Human Capitalist, is featured at Workforce.com.)

Jones, though, says that integration hurdles are not new in the software world. He says the secret to successful mergers has more to do with culture than software code.

“It’s about the people,” he says. Jones plans to be busy ensuring happiness among the troops—more than 300 from Peopleclick and more than 200 from Authoria.

Jones, 61, lives outside of New York City but expects to work three days a week in Raleigh, North Carolina, where Peopleclick has had operations, and two days a week in the Boston area, where Authoria has had its corporate headquarters.

Workforce Management, January 2010, p. 11-12 — Subscribe Now!

Increasing employee engagement is a top priority for many HR leaders these days. But some observers warn that fixating on ever-higher engagement survey scores is wrongheaded and may backfire.

Organizations that measure engagement—including Gallup, Towers Perrin and the Corporate Executive Board—have different surveys and formulas for calculating employee commitment. And their findings about engagement overall vary.

Adam Zuckerman, a consultant at Towers Perrin, says it makes little sense to try to pin down a “normal” level of engagement, given variations by geography, industry and job function. The key, he argues, is for firms to raise scores.

“More of it is always good,” he says.

Critics, though, question sweeping claims about engagement. John Haggerty, managing director for executive education at the Center for Advanced Human Resources Studies at Cornell University, argues that engagement surveys that result in a numeric score often amount to hype.

“Too many companies conduct the survey, and then struggle to improve the metric, without any idea of whether their more ‘engaged employees’ are behaving in ways that foster or promote better customer service or higher productivity,” he says.

Companies focus too exclusively on employee engagement at the expense of other key people matters, says Laurie Bassi, head of consulting firm McBassi and Co. The quality of work processes—how well tasks are divided and carried out—is often overlooked in engagement assessments, Bassi says. She says the same is true for hiring practices, which play a big role in the culture of an organization and its business outcomes. “It is of course necessary to have engaged employees,” she says. “It is, however, not sufficient.”

Bassi adds that it is dangerous to apply a one-size-fits-all model of engagement and its causes to organizations. For example, it may turn out that engaging the employees of two similar retail banks requires very different strategies, she says. One bank may need to focus on the quality of feedback from supervisors, while the other—which is more mature in its performance management practices—should concentrate on professional development opportunities to fire up workers.

Theresa Welbourne, a business consultant and researcher at the Center for Effective Organizations at the University of Southern California, says improving the engagement scores of a certain class of employees is actually counterproductive. There are “entitled” workers who are satisfied on the job and feel very valued but perform poorly, she says. Increasing their engagement scores through traditional means such as extra rewards will work against them changing their work habits, she argues. “All you’re doing is reinforcing the status quo,” she says.

Welbourne’s consulting firm, eePulse, offers a version of an engagement survey that also measures employees’ level of “urgency,” which she says is a crucial factor in performance.

Dave Logan, co-author of Tribal Leadership, a book about successful work cultures, says companies set their sights too low by obsessing over engagement. At the most advanced organizations, employees feel “alive,” Logan says.

“Engagement is a bit of a remedial variable,” he says. “There are some cultures that go way beyond engagement.”

This recession, professional services firm Ernst & Young has tried to preserve its reputation as a best-place-to-work employer. And employees, it seems, have returned the favor.

As of mid-October, the audit and consulting company had not finished compiling the results of a formal employee engagement survey. But anecdotal evidence suggests that the firm is on the right track with its 144,000 workers, says Kevin Kelly, Ernst & Young’s director of the people team for the Americas.

“People are actually feeling more engaged,” Kelly says. “People feel more loyal.”

Business results indicate Ernst & Young is holding its own in tough times. For the year ended June 30, the London-based company reported worldwide revenue of $21.4 billion, a drop of 6.8 percent year over year in U.S. dollar terms. One of its Big Four accounting firm rivals, PricewaterhouseCoopers, posted global revenue for the same period of $26.2 billion, down 7.1 percent in U.S. dollar terms.

Another global competitor, Deloitte, reported a 4.9 percent drop in U.S. dollar revenue for the year ended in May. Engagement has become central for companies eager to rebound from the recession and deter defections once hiring picks up. Some experts argue that a more engaged workforce requires revamping the arm’s-length, layoff-prone relationship many firms have had with employees for decades.

Ernst & Young, though, has bucked the trend of mere transactional ties with workers. The firm has prioritized workplace flexibility, sought out employee views and stood out for strong training investments. It has made Fortune’s “100 Best Companies to Work For” list 11 years running. And it ranked fifth in a list of the world’s most attractive employers for business students published in October by employer branding specialist Universum.

The recession, however, has tested Ernst & Young’s reputation as an employer of choice. The firm gave out pink slips during the past year, sparking criticism. Industry tabloid Going Concern reported that “it sounds like it has been a bloodbath at E&Y,” and an anonymous posting at an online message board accused the firm of treating people as “disposable items.”

Ernst & Young declined to say what percentage of the workforce was cut, but it called the reductions “targeted” and defended its employee separation process.

“Every separation requires a written business case and a team of business unit leaders and HR professionals review each individual situation,” the company said in a statement.

The firm also has sought to retain its employee-friendly culture. For example, Kelly says the company “didn’t back off at all on learning and development” investments, which are slated to total $450 million for the year ended June 2010.

One program Ernst & Young has maintained is Milestone Week, an annual gathering of some 1,200 leaders to train and recognize newly promoted managers and executives. Greg Chapman, senior manager in Ernst & Young’s transaction advisory services group, attended the four-day event in Orlando, Florida, last fall. Chapman had expected Milestone Week to be canceled amid the panic gripping the economy.

“Everyone down there was pretty blown away by what the firm did for us, given the environment,” he says.

Workforce Management, November 16, 2009, p. 25 — Subscribe Now!

Most researchers have documented a drop in overall engagement during the recession. In September, Workforce Management conducted a survey of about 525 readers at companies with 1,000 or more employees. Roughly 45 percent of respondents reported that engagement had decreased a little or a lot at their organization since the recession began. Nearly 27 percent said engagement had stayed the same, and 28 percent said it had increased.

Organizations with layoffs were more likely to see a drop in engagement, Workforce Management’s survey found. Of the 313 respondents who said they had experienced layoffs, 63 percent said the layoffs decreased employee engagement among the “survivors.”

One HR manager at a large travel industry company says engagement has dipped at her firm during the downturn. The organization went through a major restructuring with significant layoffs about three years ago. Then the recession hit. “It did lead to more job losses, more reduced security,” says the manager, who spoke on condition of anonymity. “Employees are just feeling nervous.”

In a study of employees from across the globe, the Corporate Executive Board found that the percentage of employees who are highly disengaged climbed from 8 percent in the first half of 2007 to 21 percent in the second quarter of this year.

Unlike other studies, surveys by advisory firm Towers Perrin have not documented a slide in engagement during the downturn. But Towers Perrin research has shown signs of trouble for employers. In the second quarter, according to the firm, slightly more than one in five employees said it would not take a lot to make them look for a job elsewhere.

Workforce Management, November 16, 2009, p. 22 — Subscribe Now!

 

By and large, HR consulting firms have stepped lightly around the issue of how well their corporate clients have cut costs and employees during the past year. It’s rare to hear outright criticism that businesses botched the job.

But Rusty Rueff doesn’t mince words on the subject. Rueff, the former head of HR at video game giant Electronic Arts and now a board member of workplace feedback site Glassdoor.com, remains appalled that so many firms chopped workers between the Thanksgiving and Christmas holidays last year.

“You just don’t do that,” he says.

What’s more, some companies made “cosmetic cuts” designed to please Wall Street with little sense of whether they were appropriate, Rueff says.

Rueff, who also served as CEO of digital music distributor Snocap and worked in HR at Frito-Lay, isn’t a stranger to layoffs. Nor is he opposed to them. But he thinks companies should try to do them once, and cut deeply enough so that no others are needed.

Last year, the initial cuts companies made often were 7 percent or less of the workforce, Rueff says. As a result, firms often required another round or more of layoffs later on, he says. In addition, some leaders have taken advantage of the fact that employees have had few job options during the downturn, Rueff argues.

At some firms, an “abusive” relationship has taken shape, Rueff argues, with employers the guilty party.

“They’ve been callous,” he says. “They’ve been insensitive.”

Rueff and I butted heads some when I reported about overtime concerns in the game industry several years ago. And I’m inclined to think many companies could have gotten through the recession with minimal or no layoffs, partly through furloughs and other methods to trim expenses.

But I appreciate Rueff’s refreshing candor on the question of job cuts. There’s a fair amount of evidence that employees, including top performers, have felt mistreated or let down by their employers over the past year.

A recent survey of 500 U.S. employees from consulting firms APCO Worldwide and Gagen MacDonald found that more than 80 percent of respondents say they are extremely loyal to their company and personally motivated to do all they can to help their companies succeed. But less than half of employees say they completely agree with the statements “My company is loyal to me” and “My company values its employees.”

And many workers say they are ready to bolt. Sixty percent of employees intend to leave their firms as the economy improves next year, and an additional 27 percent are networking or have updated their résumés, according to a recent survey of 904 workers in North America by advisory firm Right Management.

Rueff likens the situation to how an abused spouse may stick with a partner as long as there is no financial alternative. The minute they see light at the end of the tunnel, they’re gone, Rueff says.

“We will definitely see people pick up and start to go,” he says.

Last year’s sudden financial crisis and the massive layoffs that came in its wake beg a question: Is workforce planning possible in any meaningful way?

It is, say firms that sell workforce planning software. Vendors such as Vemo, Infohrm and HumanConcepts pitch products designed to help companies prepare for the future of their workforces.

The tools, which tend to focus on either short-range or long-term planning, aren’t perfect. Over-reliance on data-crunching software can cause companies to lose sight of intangibles that are crucial to a company’s culture, for example. And as the recession demonstrates, business predictions are highly fallible.

But workforce management software is selling at a brisk pace. That’s partly because of a recession that took much of the world by surprise, vendors say. They argue that many firms responded to the downturn with crude people cuts that cost them key talent or handicapped their growth. Wisely implemented, workforce planning tools promise to help organizations handle variable business demand, says Brian Kelly, president of Infohrm for North America.

“We can’t predict economic downturns,” he says. “What we can do is help organizations manage through good and bad times.”

Planning strategies
Workforce planning software refers to applications that allow companies to forecast the number and kind of employees they will need at some point in the future. A cousin to succession management, which focuses on specific positions in a firm, workforce planning tends to home in on key job families or skills that will be required. In many cases, the tools let firms experiment with different scenarios, examining what workforce costs or risks may result from taking steps such as entering a new geographical market or eliminating a business unit.

 

“Having access to as much data as possible and being the owner of the data is a good thing toward achieving the goals of workforce planning.” —Lisa Rowan, IDC

 

Vendors of workforce management software tend to fall into two categories. The first is short-term or operational workforce planning, meaning preparing for changes within months—such as a restructuring or merger.

HumanConcepts, Aquire and Nakisa offer products in this category, and each has a background in making tools for representing a firm’s employees graphically in organization charts.

Then there are longer-term, strategic workforce planning software providers. Their products are designed to help envision the workforce as far out as three to five years. Vendors involved with long-term planning include business software giant SAP, Aruspex, Vemo and Infohrm.

The amount of spending on workforce planning software is difficult to pin down. Workforce planning applications represent a nascent market, says Lisa Rowan, analyst with market research firm IDC.

“The vendor offerings probably address some but maybe not all of the eventual components,” Rowan says. Long-term planning is missing in most organizations, according to a recent report from research firm Bersin & Associates. In its March report, Bersin said 92 percent of companies have some level of workforce planning, but only 21 percent “take a strategic, long-term approach to addressing the talent demand, talent supply and the actions necessary to close the gap between the two.”

Bersin analyst Madeline Laurano wrote that organizations are, in effect, “bingeing on talent” when times are good and “purging talent” when times are tough. The approach is both costly and hurts the stability of the workforce, Laurano wrote.

“Looking for a more stable path, many organizations are now seriously thinking about workforce planning as a foundation for both a short-term fix and a long-term strategy,” she wrote.

Random cutbacks
Growing interest in workforce planning has to do with the way organizations have focused on their talent in the past couple years, says Cassie Barajas, chief performance officer at consulting firm Knowledge Infusion. Firms have worked harder to identify and retain key performers, she says.

“What we’re seeing right now is the importance of understanding who the workforce is,” she says.

That understanding is limited at the moment, according to a recent survey conducted by Knowledge Infusion and the International Association for Human Resources Information Management, a professional group. Just 48 percent of respondents said their company has necessary workforce data readily available to make immediate workforce decisions such as layoffs.

The figure suggests that much of the workforce cutting during the past year or so was less than thoughtful. Talented people were cut and companies sometimes slashed more than necessary, says Martin Sacks, chief executive of Bay Area-based HumanConcepts. Many laid-off employees eventually were hired back, and the net cost of the cutbacks was higher than it needed to be in many firms, Sacks says.

A sub-optimal experience with layoffs is a major reason firms are turning to workforce planning applications, he says. “Everyone’s coming out of the recession with a bad taste in their mouth, saying, ‘Wow, I don’t want to go through that again.’ ”

They appear to be putting their money where their mouths are. In late September, Sacks said HumanConcepts’ revenue for the three-month period of July through September was growing at a double-digit rate year over year, putting the company on track for its largest quarter ever in terms of sales.

It’s a similar story at New York-based Vemo, which has 20 employees and whose clients include Toronto-based media firm Rogers Communications, Atlanta utility firm Southern Co. and retail giant Sears. Vemo’s revenue doubled in 2008 and is on pace to double or triple this year, says chief executive Peter Louch.

 

Firms may want to categorize their positions into strategic roles. “The big thing here is that you are talking about work activities—roles—and not people.” —Peter Louch. Vemo

 

San Francisco-based Aruspex also expects revenue to double this year. The 25-person firm, with clients including coffee chain Starbucks and insurance provider Aetna, raised nearly $4 million in financing last year. Aruspex CEO Howard Koenig says the firm might take in additional funding to fuel its growth. Already, investors appear to be champing at the bit. Koenig gets about a call a week from venture capitalists interested in his firm, he says.

There’s increased market awareness of workforce planning, says David Ludlow, SAP vice president of solution management for its HR software suite. SAP sells a joint product with software maker Nakisa. SAP also says clients can tackle workforce planning by combining different SAP products such as its core human resources management system and business intelligence analytical software.

Workforce planning is “potentially one of the next big things, like talent management has been,” Ludlow says.

Scanning the workforce landscape
One of the keys to long-term workforce planning is an “environmental scan.” That refers to considering the range of external factors that may affect a firm’s supply and demand for talent, such as regulatory, political or business trends.

Koenig says that in the energy sector, firms have to take into account the price of oil when predicting retirements. That’s because stock prices of employers are linked to oil prices, and at a certain price per barrel, older employees with significant stock holdings can be expected to exit their firms.

Once organizations figure out what data sources to include in their planning calculations and how to weight different factors, they typically lay out a number of scenarios and segment their talent. Vemo’s Louch says firms may want to categorize their positions into strategic roles critical for a long-term advantage; key roles crucial to short-term results; core roles that are marginally important to business priorities but are nonetheless necessary; and non-core roles that may represent places to cut or make more efficient.

 

There’s an increased market awareness of workforce planning. It is “potentially one of the next big things, like talent management has been.” —David Ludlow, SAP

 

“It’s kind of like marketing,” Louch says, referring to the way firms cluster customers into different groups and plan marketing strategies accordingly.

Workforce planning strategies might look strange at first glance. Infohrm’s Kelly gives the example of an insurance firm that wants to trim its staff of $100,000-per-year underwriters to save costs, but wants to do so without threatening future growth.

By examining data on the performance and career paths of existing underwriters, Kelly says, an organization might learn that its best underwriters rise from the ranks of its own call center managers, who make $50,000 a year. Such internal promotions also save tens of thousands of dollars per underwriter in recruiting fees.

An optimal choice might be to cut underwriters now but load up on call center managers and actively shepherd them into the underwriting role over time.

At Greater Baltimore Medical Center, the main challenge in recent years has been retaining nurses. The 340-bed hospital experienced 18 percent turnover among bedside nurses a few years ago, says Mark Thomas, Greater Baltimore’s vice president of human resources and organizational development. That contributed to nursing shortages and the need to spend more than $6 million annually for pricey staffing agency nurses.

 

Workforce planning strategies should not remain static. “We’re constantly tweaking those plans. Don’t think that it’s a ‘once and done’ type of activity.” —Nick Nyhus, Ameriprise

 

With the help of Infohrm’s consulting and technology, the hospital noticed particularly high turnover among new nurses. So it upgraded the onboarding process with better-trained coaches and the use of cohorts for new nurse graduates, which can create a sense of community. Partly as a result of these efforts, overall turnover among the hospital’s 1,100 bedside nurses has dropped to 13 percent, and spending on temporary nurses has fallen to “well under” $2 million, Thomas says.

An advantage of working with Infohrm, Thomas says, is that the vendor has taught his team how to do workforce planning largely on its own. Next up for the hospital is a project to apply workforce planning to its growing hospice unit. “We’ll be doing most of the work,” Thomas says.

Niche firm or big company?
Companies looking to buy a workforce planning application face a familiar issue: Should they go with a specialist or tap a more comprehensive business software provider? SAP’s Ludlow argues that his firm has an advantage when it comes to building sound workforce planning tools, because its software can tie directly into HRMS systems and other key applications, such as business planning software.

IDC’s Rowan says SAP has a point. “Having access to as much data as possible and being the owner of the data is a good thing toward achieving the goals of workforce planning,” she says. Rowan adds that time-and-attendance and scheduling information is important, especially for an hourly workforce. “Being able to visit historical staffing trends is needed.”

Niche providers counter that their systems can be configured to gather a wide range of data, including external sources such as Department of Labor information.

Another challenge related to workforce planning tools is trying to capture and preserve the positive facets of a firm’s culture. Simply focusing on key jobs or critical skills can blind a company to crucial factors, such as firmwide values, that ultimately translate into business success.

Vemo’s Louch, though, says it’s possible to account for the importance of cultural fit in different roles by considering performance review data, if those reviews assess workers partly on how well they embody corporate values.

Louch says it’s generally easier to launch a workforce planning initiative in an individual-oriented, quantitative culture. But, he suggests, workforce segmentation also can be done in an organization that is by nature more group- oriented.

“The big thing here is that you are talking about work activities—roles—and not people,” Louch says. “So even in egalitarian cultures, you may acknowledge that certain work activities drive greater immediate or long-term value for an organization.”

Then there’s the question of the overall power—or limitations—of workforce planning products. HumanConcepts’ Sacks says frequent use of his firm’s tool can help organizations avoid drastic cuts during tough times. Continually updating a firm’s talent structure to fit with business realities and goals, he says, is akin to driving a car with incremental turns of the steering wheel rather than a sudden swerve.

“You make lots of little changes as opposed to a big one,” he says.

That captures the philosophy at financial services firm Ameriprise Financial. The company, with about 11,000 employees, uses software from Infohrm to create workforce plans looking two to three years out. But those strategies are not static, says Nick Nyhus, vice president of talent management at Ameriprise.

“We’re constantly tweaking those plans,” Nyhus says. “Don’t think that it’s a ‘once and done’ type of activity.” Nyhus says workforce planning software helped as Ameriprise downsized during the recession, affecting approximately 300 positions. The company was able to get data quickly on matters such as how long positions had been open, which indicates talent scarcity, and average tenure in positions, which gave a sense of institutional knowledge at risk. The software saved Ameriprise weeks of data analysis, Nyhus estimates.

Still, there’s a danger in leaning too heavily on software that all but implies users have a high-tech crystal ball. Aruspex CEO Koenig suggests even the best tools rely on people plugging in sobering scenarios.

That was largely missing in the latest recession, with its abrupt drop.

“Everybody was so bullish and drunk on growth they didn’t model this scenario,” he says.

Workforce Management, October 19, 2009, p. 37-43 — Subscribe Now!

The workforce planning software that companies are gobbling up has strong roots in the land Down Under.

Two of the vendors selling long-range workforce planning applications—Aruspex and Infohrm—were started by Aussies. And, observers suggest, Australian organizations have been ahead of the curve when it comes to using workforce planning tools.

Australians’ early arrival to the workforce planning party has to do with labor market conditions that led to low unemployment, says Stacy Chapman, an Australian native who co-founded software firm Aruspex several years ago.

“Australia faces a few serious demographic challenges—low birthrates since the 1970s, and a remote island, so almost no illegal immigration—plus a history of very tightly controlled skilled migration,” Chapman says. “It is these low unemployment rates and an aging population which have made planning a priority.”

Aruspex is headquartered in San Francisco, but software development is done in Melbourne. The other workforce planning software company with Australian origins, Infohrm, is headed by CEO Peter Howes, who was on the academic staff at Queensland University of Technology in Australia and formed a precursor to the firm in 1982. Infohrm has operations in Australia, the U.K. and the U.S.

Australian federal government agencies were prompted to consider the future of their workforces some time ago, thanks partly to government policy that encouraged public-sector employees to retire at 54 years and 11 months of age, says Jaye Tanner, a consultant at Infohrm. Tanner, who served in the Australian departments of immigration and employment workplace relations earlier this decade, says Australians were attuned to the issue of the aging workforce by the 1990s. That’s earlier than most Americans or Europeans began focusing on the graying of the workforce and possible labor crunches.

“People were aware of workforce-labor issues,” she says. “Australians probably had to do that earlier on.”

Even recently, Australia has faced relatively tight labor markets. Australia’s unemployment rate was 5.5 percent in August, compared with a 9.6 percent rate in the U.S., according to the Organization for Economic Cooperation and Development research group.

Workforce Management, October, 2009, p. 40 — Subscribe Now!