Author: Ed Frauenheim

Talent management software programs have never looked nicer. But it’s not clear that they work better.

    In the past year or two, a number of HR software vendors have crafted applications with sleek user interfaces that resemble organizational charts.

    Within the org chart structure, products from Authoria, Taleo and others represent managers and teams in boxes akin to baseball cards that include employee photos and talent-related information such as performance rating.

    These vendors say the org chart approach boosts manager adoption of the software through an intuitive interface that borrows from the consumer Internet realm. Advocates portray the new look as an improvement over traditional HR software user interfaces, which have been dominated by tables and text.

    But skeptics, including some vendors, see org charts and employee baseball cards as little more than a fad that gets in the way of actual talent management tasks.

    Josh Bersin, chief executive of research firm Bersin & Associates, says the new user interfaces are less about greater effectiveness than they are a response to increased competition in the burgeoning talent management software field.

    “The vendors as a whole are right now selling a lot of sizzle,” Bersin says. An org chart interface “makes the system easier to learn. But it doesn’t necessarily make it easier to use.”

    Yet David Ludlow, vice president of product management for SAP’s human capital management applications, believes the integration of organizational charts into HR software is all but inevitable.

    “Just from a navigation or user-expectation perspective, the org chart is becoming more and more an expected standard,” Ludlow says.

Adoption problems
    Talent management systems are applications for key HR tasks, including employee performance management, compensation management and recruiting. They are among the fastest-growing products in HR software, which is itself the fastest-growing category of business software.

    Thanks to factors including fear of talent shortages, revenue from human capital management applications is slated to rise from $6.3 billion in 2006 to $10.6 billion in 2011, according to AMR Research.

“The vendors as a whole are right now selling a lot of sizzle. [An org chart interface] makes the system easier to learn. But it doesn’t necessarily make it easier to use.” —Josh Bersin, chief executive, Bersin & Associates

    Talent management tools today are being designed not just for “power users” in HR departments, but for managers and the entire workforce. The goals include helping managers turn once-a-year performance reviews into an ongoing, more effective feedback process.

    But as the applications move beyond back-office users, greater demands are put on their ease of use. According to a survey published last year by consulting firm Knowledge Infusion, usability ranked as the most important factor for considering a suite of talent management products.

    So far, the tools have run into adoption problems. Research published in November by Bersin & Associates found that 41 percent of organizations using performance management systems have trouble getting employees and managers to use them.

    That’s partly because the software products are trying to make the boss automate one of the most touchy-feely parts of his or her job, Bersin says. “Managers don’t like to use computers to manage people,” he says.

    The adoption dilemma also stems from poor user interfaces in the “first generation” of products, says Dave Michaud, vice president of product marketing for Taleo. Those products, he argues, tended to be built for HR officials rather than managers and employees. “Companies are trying to get talent management out into the field,” he says. “Largely, these tools were not designed with their needs in mind.”

Varied approaches
    Taleo last year debuted a new performance management application with a user interface centered on an org chart and baseball-card-like representations of employees. Clicking on the cards flips them over to show statistics such as performance review data, career information and succession data. By selecting various options on a wheel sitting in the upper left portion of the screen, users can take action in areas such as creating goals and launching a performance review.

    Taleo Performance made a splash when it hit the market in September. Jason Corsello, a vice president with Knowledge Infusion, was impressed with the product and its user interface. “Not only are they looking at the entire performance management process differently,” Corsello wrote on his blog, “but Taleo has incorporated some design concepts unseen in the market today.”

With the goal of getting managers more engaged in developing their people, “An org chart is a logical approach. It’s a strong visual metaphor.” —Nina McIntyre, senior VP of marketing, Authoria

    Taleo rival Authoria also has adopted an org chart user interface, designed to give managers a high-level view of their teams. Nina McIntyre, Authoria’s senior vice president of marketing, says the use of an organizational chart makes particular sense given Authoria’s focus on getting managers more engaged in the processes of acquiring, assessing and developing their people. Managers tend to think in terms of their teams, she says.

    “An org chart is a logical approach,” McIntyre says. “It’s a strong visual metaphor.”

    Authoria’s org chart interface allows managers to view open, approved positions and take such steps as creating a candidate pool for the job or view the approvals needed to make the hire. Managers also can click on a card and view the talent profile of an existing employee, which can include a résumé, performance review data and employee self-generated information such as relocation preferences.

    Authoria plans to upgrade the software so more actions can be taken from the org chart dashboard, including performance appraisals and goal setting.

    Authoria says it began demonstrating an org chart interface in early 2006, and claims to be the first talent management vendor to seize on the concept. In fact, McIntyre says, the company is seeking a patent for the idea of an “actionable” org chart.

    A patent could give Authoria the ability to block the use of org chart interfaces by other vendors, or at least extract royalties from them. “We’re not looking to stifle anyone’s innovation,” McIntyre says. “We’re looking for recognition of our own innovation.”

    Authoria already has found some recognition for its user interface in the form of customer Alcon Laboratories. The maker of contact lens solution and other eye-care products decided to sign up for Authoria’s talent management software last year in large part because of the org chart look and feel, says Kay Teague, director of HR technology at the company. “That was one of the biggest selling factors,” Teague says.

    Alcon Labs hasn’t begun using Authoria’s software yet. Teague is looking forward to rolling out the technology later this year. But she wishes Authoria’s product could automatically snag photos of employees from Alcon’s computer system, instead of requiring Alcon to manually upload pictures.

    Authoria says an update planned for this month will enable automated photo feeds.

“Companies are trying to get talent management out [to managers and employees]. Largely, these tools were not designed with their needs in mind.” —Dave Michaud, VP of product marketing, Taleo

    Other vendors have built org charts into their software. SuccessFactors’ new release, Ultra, has a “succession org chart” designed to let managers “zoom out to see multiple reporting layers or zoom in to focus on a specific employee.” It also features boxes with employees’ photos and information such as performance and potential ratings.

    Cornerstone OnDemand has taken a hybrid position with its latest user interface. On the left-hand side of the screen, Cornerstone displays a manager’s team in the form of small boxes containing employee photos, names and positions. On the right side are more conventional tables showing such things as progress toward goals for a particular employee. Charles Coy, director of product marketing at Cornerstone OnDemand, says the “MyTeam” interface stops short of a full-screen org chart in order to show comprehensive views of talent information.

    It’s not just talent management specialists that are embracing org charts for talent-related applications. Business software giant SAP last year announced a partnership with—and an investment in—Nakisa, one of several vendors that focus on software for creating organizational charts. By tapping Nakisa’s technology in a joint product, SAP is aiming to help customers better see and act on data already present in SAP HR applications.

    Succession planning is one intended use for the product, dubbed “SAP Talent Visualization by Nakisa.” It lets customers view an org chart with boxes displaying employees’ photos, their titles and their “bench strength.” The visualization tool also allows users to pull up snapshots of employees with talent information such as ratings of performance, potential and “risk of loss.”

Doubters
Despite the new Nakisa offering, SAP’s Ludlow concedes that an org chart user interface may not always be best. He says performance management software might be better served by a different look and feel than an organization chart, which highlights reporting relationships. “It’s all very document-driven,” Ludlow says of performance management. “It’s not very relationship-driven.”

    Donna Ronayne, vice president of marketing and business development at Halogen Software, takes this point further. She says org charts do not lend themselves well to companies in fields such as health care and professional services, where one person might report to multiple managers. “Sometimes these things just don’t make sense,” she says.

    Halogen’s user interface relies on traditional tables and text. That’s partly because the vendor’s more than 1,000 customers have not clamored for an org chart approach, Ronayne says. And some prospective customers who have seen demonstrations of talent management software with the newer interfaces have given Halogen high marks, says Karen Knox, Halogen senior sales manager. “They actually will come out and say, ‘Oh, this is so simple. This is so intuitive,’ ” Knox says.

    Taleo’s planned acquisition of Vurv Technology, announced in early May, raises some interesting user-interface questions. A description of the deal on Vurv’s Web site indicated Taleo’s software will eventually be the foundation for the combined company’s products. “The goal of the combined company is to incorporate the best of Vurv’s intellectual property and product line into the Taleo Platform, delivering a unified recruiting, performance and compensation solution,” Vurv stated.

    But prior to the acquisition announcement, Vurv CEO Derek Mercer pooh-poohed the sort of baseball-card view that Taleo has embraced. Mercer told Workforce Management that Vurv experimented with such an interface for its software around 1999. “Nobody—nobody—looked at it in card view,” Mercer said. “I think it’s a fad.” A lot of baseball card interfaces, Mercer said, are about “little screens” and “a little bit of data.”

    Softscape is another skeptic of baseball cards. The vendor has retooled its user interface to resemble the look and feel of Microsoft Office 2007, with its focus on a “ribbon” that replaces menus and toolbars. This approach is designed to make Softscape’s applications familiar to the many employees who will be spending lots of time working with Office 2007 tools, says Christopher Faust, executive vice president of global strategy at Softscape. “We went down a Microsoft path,” Faust says. “Why on earth would we want to create a new paradigm?”

    Softscape has an org chart feature, but the “cards” on the screen representing employees do not include photos; they are more like business cards. Clicking on one pulls up a talent profile with information ranging from career goals to languages spoken to relocation preferences. “A baseball card just touches the surface,” Faust says.

    Vendors adopting the baseball card approach emphasize that it is not the only way to experience their applications. Taleo’s Michaud, for example, says users can select a “grid” view instead of a card view. Authoria’s McIntyre says an alternative to the org chart dashboard for managers is one featuring text-based alerts. Companies can also include “widgets” displaying data such as the status of performance appraisals, she says.

    “For those who do think visually, they’re drawn to the org chart view,” McIntyre says.

Building on potential
    The quality of information contained in the new baseball card/org chart interfaces is key, says Nov Omana, president of consulting firm Collective HR Solutions. “What meaningful statistics are you presenting with that picture?” Omana asks. “Is it actionable stuff?”

    Omana sees the latest wave of user interfaces as promising. But, he adds, “I don’t think we’re there yet.”

    Bersin also can imagine the org chart trend in talent management tools resulting in better products. He says talent management vendors, as much as any other business software makers, are trying to learn from the latest incarnation of the Web, which has become more interactive and in some cases streamlined.

    Bersin likens the org chart trend in talent management tools to a phenomenon he noticed among vendors of learning management software systems some time ago when that market heated up. Those vendors started concentrating on creating a flashy user interface.

    But there may be a natural limit to how much glitz will go into talent management applications. Bersin says that as software vendors gain customers, those users get accustomed to a particular interface and resist changes to it.

    “The bigger you get as a company,” he says, “the duller your user interface gets.”

Workforce Management, May 19, 2008, p. 29-36 — Subscribe Now!

 

Wrkday’s main challenge at the moment is following through on its product development plan and handling the company’s growth.

   Workday’s headcount grew from less than 100 in February of 2007 to about 220 in February 2008. Workday booked $26 million in revenue last year, and expects bookings to more than double this year.

   So far, about 80 percent of Workday’s employees are former PeopleSoft people. That’s a testament, in part, to PeopleSoft and Workday founder Dave Duffield’s legacy. His reputation is that of a salt-of-the-earth type who succeeded in an industry with more than its share of inflated egos and sell-at-any-cost personalities. And he remains a not-so-secret weapon for Workday.

   Duffield, 67, serves as both Workday’s CEO and “chief customer advocate”—a title that might seem phony in some quarters. But Workday stands out for its customer service, says Wes Bertch of Life Time Fitness, a Workday client.

   “We call, and they actually pick up the phone,” Bertch says. Life Time Fitness’s Michelle Bertch adds that Duffield is “a real person. He’s someone you actually want to talk to.”

   Duffield’s good-guy rep helped Workday win the business of H.B. Fuller Co., a Minnesota-based maker of adhesives used in cardboard boxes and other products.

   Steven John, director of global information technology for H.B. Fuller, said he usually doesn’t blaze the trail in adopting new technologies. But he made an exception with Workday.

   “Dave is a big piece of it,” John says.

   John calls himself a “second-generation” chief information officer, and his father’s experience with Duffield helped seal the Workday deal. “He worked with Dave Duffield and trusted him,” John says.

   Modest as he may be, Duffield has set an ambitious goal at Workday: He wants to reshape the business software industry, effectively repeating his history at PeopleSoft.

   IDC analyst Lisa Rowan says it’s hard to predict whether Duffield will succeed given today’s economic uncertainty. But, she said, “He’s a good bet.”

Employee data breaches are becoming like leaky roofs for companies—frustrating but familiar. And as such, experts say, organizations are getting smarter about preventing the kind of personal information exposures that can anger workers and damage a firm’s reputation.

Some employers have faced lawsuits related to breaches. And challenges persist when it comes to protecting employees’ privacy, including the difficulty of safeguarding sensitive information when so many workers take computers home or on the road. But through steps such as training and data encryption, organizations are finding ways to keep a tight grasp on employee information.

“It is now a routine concern,” says Doug Rosinski, an attorney with law firm Ogletree, Deakins, Nash, Smoak & Stewart.

Serious issue
During the past few years, the issue of employee data breaches has come to the fore for businesses and workers. That’s partly because of the related rash of consumer data exposures, in which banks and other organizations have lost control of key information. It also stems from the way millions of Americans have had to wrestle with the headache of identity theft.

What’s more, a number of high-profile cases involving lost or stolen employee data have focused attention on the issue.

Among the most public of the snafus was a May 2006 incident involving the U.S. Department of Veterans Affairs. In that case, computer equipment with data including names, Social Security numbers and dates of birth for as many as 26.5 million veterans and other individuals was stolen from the home of a VA employee.

Also key to the growing awareness is a set of state laws on data breach notification. California led the way with a statute passed several years ago.

Under California law, a business that maintains unencrypted computerized data that includes certain personal information must notify any California resident “whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person.” Other states have similar legislation, says Alan Raul, an attorney specializing in privacy and information security issues with the law firm Sidley Austin.

It is not so much that organizations have gotten sloppier with their data in recent years as the law has put a spotlight on the matter, he says.

“The spate of apparent data breaches was not triggered by changes in practice,” Raul says.

Since early 2006, there typically have been four to six media accounts of human resources data breaches per month, according to research by Don Harris, founder of consulting firm HR Privacy Solutions.

That number spiked in October 2007 to eight, but hit lows of just two for both September and November. Harris says the lulls could signal companies’ determination to keep themselves out of the papers on the data breach front.

“Maybe more and more employers are waking up and saying, ‘I just don’t want to be there. I want to do something about it,’ ” Harris says.

Legal liability
Still, a number of organizations have found themselves on the receiving end of lawsuits related to employee data exposures.

Among them is Union Pacific, the transportation giant that operates Union Pacific Railroad. Union Pacific, which employs about 50,000 workers, has acknowledged a series of eight data breach incidents between April 2006 and January 2007, most of which involved stolen laptop computers.

Those breaches gave rise to three lawsuits. The lost or stolen equipment in the incidents was judged to contain personal information for 35,738 current and former Union Pacific employees from across the U.S., according to a court document.

Union Pacific employees weren’t just worried about the dangers of missing computer equipment with personal information; they also fretted about the way the company used their Social Security numbers for a wide variety of purposes, says Robert O’Connor Jr., an Omaha, Nebraska-based attorney who represented employees in the litigation. Employees were even asked to disclose their Social Security number in filling out a reimbursement form when purchasing work shoes, O’Connor says.

“You’d go to Red Wing shoes and you’d have to put your Social Security number on it, instead of your employee identification number,” he says.

In December, a court approved a settlement that creates a $550,000 fund for paying half of a current or former employee’s identity theft losses, up to a maximum of $25,000 per person. The company also agreed to phase in a set of measures related to the protection of current and former employees’ confidential data. Union Pacific said that as a general matter it “will cease using Social Security Numbers as a routine means of identifying its employees.” It also pledged to encrypt all data files stored on company laptop computers.

Union Pacific spokesman James Barnes declined to comment on the allegation about shoe reimbursement. He said the company is focused on a future of better safeguarding employee data in order to give workers “peace of mind” on the issue.

“We’re going to extraordinary lengths to protect the identities of our employees, and that includes their Social Security numbers,” he says.

The VA also has been hit with a data breach lawsuit, one focused on the May 2006 incident. Attorney Rosinski, who is representing plaintiffs in the suit, says the two sides are in mediation talks.

Authorities eventually recovered the stolen computer equipment, and the VA says an FBI investigation concluded that no veterans’ personal information had been accessed or compromised. Rosinski, however, isn’t convinced.

“You can never prove it wasn’t taken,” he says.

The VA has weathered other troubles related to data protection. For example, three computers containing information on 12,000 veterans were stolen from a VA medical center in Indianapolis last year.

The agency says it has worked to improve its data security practices. It updated required annual privacy and cyber security training and has hosted satellite broadcasts on information security. It also has encrypted most VA laptops.

New ways of working
An emerging difficulty in employment-related data protection is the way organizations’ traditional boundaries are expanding to include mobile work and outsourcing.

Using electronic job boards to recruit candidates, for example, is a form of outsourcing—one that has proved to be somewhat hazardous. Last year, job board Monster said employer client log-in credentials had been compromised and used to illegally download contact information for 1.3 million job seekers.

Employee “homework” represents another challenge for companies, attorney Raul says.

The number of Americans whose employer allows them to work remotely at least one day per month jumped from 7.6 million in 2004 to 12.4 million in 2006, according to a report announced last year by professional association WorldatWork.

Raul says that employees who lug their laptops home may end up sharing them with family members, who in turn may download software. In other words, he argues, the potential is there for remote workers to expose sensitive employee data to hackers.

“Are all of the defensive measures that are available at the office available at the home?” he asks.

In addition, cyber criminals are growing more sophisticated, Raul says. The number of employee data exposure incidents may drop, he says, “but those breaches that do occur could possibly be more serious.”

Raul says companies ought to set policies for acceptable remote computer usage, as well as ask tough questions about whether sensitive data truly needs to be taken home. He also recommends creating formal agreements with vendors about how they treat an organization’s data.

Another key, he says, is encryption—which means altering data so that it cannot be understood by unauthorized people. In recent years it has become easier to encrypt the contents of a computer without seriously lowering the performance of the machine, he says.

“Many more companies are encrypting information that is contained on laptops,” he says.

Attorney O’Connor also sees encryption as crucial as organizations seek to safeguard employees’ confidential data.

“They need to encrypt, and they need to stop using Social Security numbers,” he says.

Rosinski says the private sector is headed in the right direction.

“The market is driving the employers to do the right things,” he says.

Consultant Harris also sees progress on employee privacy. He says hundreds of companies now have “chief privacy officers.” What’s more, he notices greater awareness of international data privacy rules.

“To me, it’s a sign that the whole privacy scene is starting to mature,” he says.

HR software company Vurv Technology has high hopes for a soon-to-be-released version of its performance management software. Some analysts are already applauding the company for wrapping the new concept of “pay for potential” into the application.

    But it remains to be seen whether Vurv Perform 4.0 will propel the firm into the top tier of performance management vendors—or if the product will help the low-key company compete against high-profile rivals in the red-hot realm of talent management software.

    Jim Holincheck, analyst at research firm Gartner, says Vurv may struggle if it doesn’t take such steps as raising more venture capital or going public, given that it is up against well-financed competitors. Last year, for example, rival SuccessFactors raised $108 million in an initial public stock offering. Jacksonville, Florida-based Vurv, founded in 1996, has raised a total of $30 million.

    A “bunch of vendors” are trying to become the top two or three in talent management and not all of them will succeed, Holincheck says. “My concern with Vurv is whether or not they have the resources to make it into the top tier compared to some of their competitors.”

    Kevin Marasco, senior vice president of marketing for Vurv, declined to discuss any possible plans for an initial public offering or additional venture funding. But he said the 330-employee company is determined to get to the head of the pack. “We’re absolutely committed to being a leader in the talent management technology space,” Marasco says. “We’re poised to leapfrog competitors in the market.”

    The talent management software market refers to tools for key HR duties such as recruiting, performance management, compensation and employee development. Talent management applications are among the fastest-growing products in HR software, which is itself the fastest-growing category of business software.

    Thanks to factors including fear of talent shortages, revenue from human capital management applications is slated to rise from $6.3 billion in 2006 to $10.6 billion in 2011, according to AMR Research.

    Some 20 vendors of talent management tools have a common mantra: integration. That is, they typically claim close links between a number of component applications for the purposes of more efficient operations, new insights and, ultimately, a better bottom line.

    Despite the promises, talent management as a field has room to improve. Research firm Bersin & Associates found organizations with multiple applications from the same vendor report that their talent management systems offer just slightly better than “fair” assistance toward key talent goals such as retaining top performers and ensuring quality of hire.

What’s in a name?
   Vurv was called Recruitmax until early 2006, when it changed its name. Company founder and CEO Derek Mercer says the new moniker stemmed in part from a desire to capture the culture of the firm. Vurv is derived from “verve,” meaning vitality and liveliness. The name change also signaled that the firm had expanded beyond its origins as a recruiting software vendor.

    Acquisitions have played a key role in the evolution of Vurv. It has gobbled up compensation management software firm InfoTechWorks, job competencies specialist InScope and performance management software maker KnowledgePoint. Last year, Vurv said it acquired People Business Network, whose applications are designed to help companies with such activities as layoffs and mergers.

    Marasco says Vurv has been working hard to tie its various applications together. And he says Vurv Perform 4.0—due by the end of March—is a product of those efforts. “It’s leaps and bounds for us,” he says.

    With the new tool, Vurv aims to make it easier for companies to reward employees not just for their past performance, but their future prospects. Vurv Perform 4.0 is designed to link performance, compensation and succession planning functions. Accord to Vurv, the application will help organizations quickly and easily compare performance and potential.

    Marasco says rich graphics help managers visualize information, such as charts of several employees’ performance ratings overlaid with charts of their total rewards. Vurv puts employee data related to compensation, performance and succession planning in one database. Marasco says that means managers can decide in one click to increase the pay of an employee directly from an analytic report, rather than having to switch to a separate application.

    The tool will help companies get their employee compensation in sync with their strategies, Marasco says. For example, if a firm is about to expand into Europe, suddenly its employees with experience in Germany or Sweden increase in their potential value to the firm, and can be rewarded accordingly, he says. “This should help companies better look forward,” Marasco says.

    Jason Averbook, chief executive of consulting firm Knowledge Infusion, says the pay-for-potential concept dovetails with the way young employees in the Millennial Generation want attention paid to their career development. And, he says, it gets companies focused on what’s ahead in their compensation practices. “Pay for potential is a very forward-looking way,” he says, adding that Vurv is showing “very good thought leadership.”

    Lisa Rowan, analyst with research firm IDC, gives Vurv credit for fresh thinking with pay for potential, but wonders how the idea would work out in practice. “If I have a lot of potential,” she asks, “how long would they give me to live up to it?”

    Marasco responds that the software assists with accountability in two ways. A personal development plan created in the software can help track an employee’s progress. And the performance management module allows firms to see if workers are meeting their goals.

Potential in performance management?
   Other vendors have stood out more than Vurv recently in the realm of performance management. Back in 2004, Vurv (then called Recruitmax) won an audience-decided contest among performance management vendors at the annual HR Technology Conference & Exposition run by Human Resource Executive magazine. But in 2005, Waltham, Massachusetts-based Authoria won the trade show’s shootout among vendors that sell compensation and performance management software.

    And last year, Authoria beat Vurv, SuccessFactors and HRsmart in a shootout to see which company best connects performance management and recruiting applications. What’s more, a report last year from research firm Gartner on performance, compensation and succession management applications gave Vurv a “promising” rating, while 14 vendors got a higher “positive” rating.

    IDC’s Rowan puts Vurv among the top three recruiting software vendors, alongside Taleo and Kenexa. But in her view, Vurv has not made a major mark in performance management. “I don’t hear that much about them in that space,” she says.

    Others in the market are louder than Vurv. Authoria CEO Tod Loofbourrow, for example, has a showman’s presence. Appearing next to Loofbourrow at the HR tech show, Vurv’s Mercer came across as soft-spoken. And SuccessFactors has made a marketing splash, featuring celebrity business leader Jack Welch at a user conference last year.

    Vurv concedes it has maintained a lower profile. A recent public relations pitch from Vurv referred to the firm as a “dark horse” in the market.

    That’s a bit of a misnomer for a company with more than 2,000 customers, including such heavy hitters as Coca-Cola, Deutsche Bank, Merrill Lynch and Nestlé. Vurv also clocked in as the 144th fastest-growing technology company in North America in the Deloitte & Touche annual “Technology Fast 500” list last year. Deloitte said Vurv’s revenue grew from $3.3 million in 2002 to $40.6 million in 2006.

    In any event, the horse named Vurv hopes to dash forward with Perform 4.0. And it has no plans to let up. Marasco said a number of companies have approached Vurv with an interest in acquiring it in the past few years. “We’ve turned them down,” he says. “We see the potential of making a billion-dollar company. We see the market being much, much bigger than today.”

Software tools to keep the brain fit are headed to the workplace.

    The products have been making a splash in the consumer market in recent years as older Americans wrestle with memory loss and other cognitive declines. And now vendors of “brain fitness” software are beginning to see employers as another fertile market, especially given the desire of baby boomers to stay in the workforce for years to come.

    A host of challenges face this nascent industry. They include doubts about the effectiveness of the software, concerns that exercises in front of a computer will bore people, and the prospect that employees in their 40s, 50s and 60s will feel stigmatized signing up for what could be considered brain rehab.

    But advocates are confident the burgeoning field of brain health is far more than a fad, and companies are likely to see significant benefits in areas such as productivity and retention through the use of the new software tools.

    Posit Science, a San Francisco-based firm, says several employers are testing its software this year. Posit Science’s Brain Fitness Program has been shown to improve the memory of people 60 years or older by 10 years or more, and the company’s CEO, Jeff Zimman, expects solid results in corporate trials as well.

    “This is going to be a hot area,” he says.

The players
    The brain fitness arena has its roots in scientific findings during the past two decades that the brain is fundamentally “plastic”—capable of rewiring itself even late in life. That’s good news, because experts also note that brain functioning begins to fall off as early as age 25. Among the key researchers in the field is Posit Science founder Michael Merzenich, a neuroscientist at the University of California, San Francisco who was recently featured in a PBS program on brain fitness.

    To combat the dulling of the mind and stave off the horrifying effects of dementia, a host of vendors now tout brain training software programs, including Happy Neuron.com, CogniFit, Posit Science and Fit Brains. Video game company Nintendo also is a player with its Brain Age software.

Posit Science expects solid results in corporate testing trials of its software. “This is going to be a hot area.” –Jeff Zimman, CEO, Posit Science

    The content of these programs varies. Happy Neuron.com, for example, offers games designed to work out five major brain functions: language, attention, memory, visual processing and “executive function,” which includes logical reasoning. One of Happy Neuron’s language games, “Split Words,” asks users to match the parts of words divided into two or more sections, with the help of a general category for the session such as “gardening.”

    Fit Brains plans this month to introduce games for a range of cognitive functions. By the end of March, it intends to add games as well as other features such as brain fitness metrics.

    Brain Age, built for the Nintendo DS mobile game device, runs users through activities such as solving math problems, playing sudoku puzzle games and reading literature aloud.

    Posit Science, meanwhile, works to improve memory and train the brain on basic processing skills. In one activity, users are asked to listen to two tones played in rapid succession, then decide whether the second was higher or lower than the first.

Benefit questioned
    The brain training software industry is new but promising. Brain Age and its sequel Brain Age 2 have together sold more than 14 million copies worldwide since 2005, says George Harrison, who was senior vice president of marketing at Nintendo of America before retiring from the company at the end of 2007. Nintendo’s brain games are inspired by the work of Japanese neuroscientist Ryuta Kawashima, and they estimate the “age” of users’ brains based on their performance. But the products are pitched primarily as fun, Harrison says. “We haven’t done any scientific research to demonstrate any health claims,” he says.

    On the other end of the spectrum, Posit Science has had its software tested by researchers who have presented findings in scholarly journals and at conferences. In November, the company touted results of a study of 524 healthy adults 65 and older. Half of them completed up to 40 hours of the Posit Science program. The other half followed the advice that older people will benefit from new learning in different subject areas, and completed up to 40 hours of a computer-based educational training program on topics such as the history of Great Britain.

    Those in the Posit Science group showed “significantly superior” gains in standardized, clinical measures of memory equal to roughly 10 years, the company said in a statement. The company also said participants in the Posit Science program showed significant gains in how they perceived their memory and cognitive abilities, such as remembering names and phone numbers or where they had left their keys, as well as communication abilities and feelings of self-confidence.

    Even so, the degree to which software programs can slow the cognitive decline associated with aging has been questioned. Sandra Aamod, editor of the journal Nature Neuroscience, and Sam Wang, professor of molecular biology and neuroscience at Princeton University, offered a critical view of the products in a November New York Times opinion piece. A better bet, the authors argued, is physical exercise.

    “So instead of spending money on computer games or puzzles to improve your brain’s health, invest in a gym membership,” the authors wrote. “Or just turn off the computer and go for a brisk walk.”

    Some advocates for computer brain fitness products say software training should be part of a broader range of brain health activities, including walking and swimming.

    Paul Nussbaum, a neuropsychologist and chief scientific officer of Fit Brains, suggests a five-part program for brain health, with attention to socializing, physical activity, mental stimulation, nutrition and spirituality.

Targeting the workforce
    Until now, companies haven’t paid much attention to brain health, Nussbaum says. He notes the way corporate health fairs typically have tables set up for diabetes and bone density. “There’s nothing at these health fairs focused on the brain,” he says.

    Corporate training departments also have ignored sharpening basic employee mental skills such as memory or language processing.

    The graying of the workforce may change that. The number of U.S. workers 55 and older is projected to grow by 46.7 percent between 2006 and 2016, according to a December report from the Bureau of Labor Statistics. The rate of expansion in the number of those older workers is nearly 5.5 times the 8.5 percent growth projected for the labor force overall. People 55 and older are expected to make up 23 percent of the workforce in 2016, up from 17 percent in 2006 and 12 percent in 1996.

There are questions about whether the programs are interesting enough to hold employees’ attention. “I’m not convinced that over the long haul a baby boomer is going to take the time to sit down and do these computer exercises.” –Paul Nussbaum, a neuropsychologist and chief scientific officer Fit Brains

    Amid numbers like these, brain fitness software firms are eyeing the workplace as potentially lucrative.

    Michael Cole, founder and CEO of Vancouver, British Columbia-based Fit Brains, says the “corporate wellness” market is a good fit for his firm. In other words, he imagines companies offering access to his software as a health benefit. Fit Brains is in talks with a company that already provides employees with software to track their physical fitness and nutrition.

    “It’s something we’re looking to get into,” Cole says. “There’s tremendous interest.”

    Nussbaum adds that company executives likely will invest in brain fitness for the sake of having sharper workers.

    “I imagine these CEOs want [employees’] brains to be highly efficient,” he says.

    Happy Neuron.com also envisions selling into the corporate market. Laura Fay, COO of the Mountain View, California-based company, says information workers are a promising target audience. “Staying sharp with language and executive-function skills is absolutely critical,” she says. “There’s significant benefit from a corporate worker standpoint.”

    Happy Neuron.com is a subsidiary of France-based Scientific Brain Training, and in France the company has dabbled in workforce applications. A homeopathic products firm, for example, trained drivers with exercises designed to hone attentiveness and spatial skills.

    Posit Science’s Zimman gives the hypothetical situation of a 55-year-old employee who has 30 years of industry experience but a mind less sharp than that of an up-and-coming employee in his or her 30s. Boosting the memory and mental processing speed of the older worker could make a big difference, he says. “You can see how that worker could run circles around the young hotshot,” he says.

    At the same time, Zimman believes his software is likely to improve the performance of workers of all ages. And he likens the potential impact to the way companies regularly upgrade the processing power of their computers. “We’re asking can you make for more productive workers by refreshing their processing abilities—that they probably haven’t done, for the most part, since they were in the crib,” he says.

Early tests, challenges
    A hint of the workforce possibilities in brain training software can be seen in the use of Posit Science’s program by the Los Angeles Unified School District’s adult education program. The district has trained more than 200 people in the software as part of a pre-existing memory enhancement class, says Arlene Torluemke, who coordinates older-adult programs for the district. Many students in the program are volunteer employees at sites like hospitals, and they have credited the software for a better work experience thanks to a sharper mind, Torluemke says. “They’re appreciating it,” she says. “People are feeling more in charge.”

    Still, there are questions about whether the programs are interesting enough to hold employees’ attention. Among the skeptics is Nussbaum. “I’m not convinced that over the long haul a baby boomer is going to take the time to sit down and do these computer exercises,” he says. He says Fit Brains is working to make its games fun, personal and practical. Cole adds that the firm aims to create a sense of community around the exercises. He plans to make it possible for people to play a game together.

    Brain training software faces other possible challenges in the shape of neurosurgeons and pharmaceutical firms. Increased knowledge about the brain raises the prospect that surgical procedures will emerge that enhance the mind, perhaps with computer implants. Drugs already have been developed to combat Alzheimer’s disease, and there’s talk of “cosmetic neurology” in the near future, where humans can effectively control their brain chemistry.

    Zimman, though, isn’t worried much by those trends. He says people are wary of invasive surgery and pharmaceutical solutions. A Posit Science survey conducted in 2004 found that 88 percent of those questioned preferred brain fitness exercises to taking a pill.

    Even so, might not aging employees fear being labeled soft in the head—or worse—if they agree to train their brains? Zimman doubts the software tools generally will be looked on as rehabilitation therapy or anti-senility treatments. He says his firm wasn’t sure exactly what to call its program, but that early customers came up with the concept of “brain fitness”—a term that draws a positive connection with the physical fitness arena.

    “The boomer cohort is embracing it,” he says.

Workforce Management, January 14, 2008, p. 19-23 — Subscribe Now!

Talk to employees. Treat laid-off ones well. Keep investing in training. Try to redeploy your talent. Have top executives share in the sacrifice.

    These are among the key steps companies ought to take when reorganizing their firms, says University of Colorado business professor Wayne Cascio. Companies that do these things typically end up with better long-term financial results as well as a better reputation, says Cascio, who studied corporate overhauls for the U.S. Labor Department and wrote a book titled Responsible Restructuring: Creative and Profitable Alternatives to Layoffs.

    By failing to take employee views into account “you can move a lot faster, but you may lose a lot of creativity in the process,” Cascio says.

    Cascio is part of a broader debate about how companies ought to handle workforce matters when they come to a crossroads, such as financial trouble or heightened competition. Such turning points are becoming commonplace as the pace of business picks up and many firms face volatile swings in their fortunes.

    Among the companies going through a restructuring is computer chip giant Intel. In response to falling revenue and market share, Intel over the past 20 months has revamped operations and shrunk itself. It announced 10,500 job cuts from the 102,500 employees it had in mid-2006. And thanks to attrition and other activities, including the sale of business units, the company expected its headcount to get down to 86,000 by the end of 2007.

    Despite decades of calls for leaders to act “strategically” with respect to the workforce, most companies still lack consistent and logical methods for making the best choices, says John Boudreau, management professor at the University of Southern California.

    In the absence of a “decision science” for optimizing the workforce during a restructuring, technology industry companies ought to be careful not to ignore the long-term effects of job cuts or training reforms, Boudreau says.
“In times of crisis, people tend to revert to their fundamental operating models,” he says. Tech firm leaders in a crunch may “tend to make decisions about their ‘people’ issues through a technology and money lens, but those frameworks can often miss vital considerations.”

    One aspect of Intel’s restructuring that has come under scrutiny is the way it cut 1,000 managers by late July 2006. Intel had too many managers and some of them were blocking ambitious lower-level employees, says a former Intel manager who lost his job in the management cutback. But Intel ended up ousting many managers who were skilled at people development, says the former manager, who spoke on condition of anonymity out of concern that his current tech-industry firm could be harmed by his comments about Intel. One of the criteria used in deciding who to cut, the former manager says, was how well managers had prepared their direct reports to move up in the firm.

    Intel declined to comment on his claim. But an internal Intel document shared with Workforce Management indicates the company realized it was losing quality employees in the 1,000-manager cut. It also indicates Intel did not try to move any of those laid-off managers to non-management roles.

    The memo, intended to help managers speak with their teams about the layoff, includes a series of questions and answers, such as this one: “It seems as if we promote our best ICs [individual contributors] to management positions, and now we’re letting 1,000 of those people go. Why not move them back to being great ICs? Aren’t we losing some of our best talent by doing this?”

    The memo’s response is this: “We know we are losing good people in this move. But we have too many managers, and this manager reduction is necessary to improve our decision-making and communication and to resize the company. In addition, since we need to become a leaner company and are limiting job openings, redeploying their skills, as individual contributors or as managers, is not a reasonable option.”

    Intel declined to comment on the memo.

    Some authors have argued against mass layoffs as a strategy. Louis Uchitelle’s 2006 book The Disposable American makes the case that layoffs often backfire for individual companies and erode the quality and even the mental health of the American workforce. Writing in 2006, MarketWatch columnist Herb Greenberg was skeptical about Intel’s big job cuts. “Maybe, just maybe, large layoffs are a sign of failure, not success,” Greenberg wrote. “… These layoffs signal the end of Intel’s great run. Its monopoly grip is loosening, and its leaders and circumstances behind its early growth are gone.”

    On the other hand, David Wu, equity analyst for investment firm Global Crown Capital, says Intel’s job- and cost-cutting was needed to help prepare it to serve low-income markets such as India. Those rapidly-growing markets are a key to Intel, which launched a “Discover the PC” initiative in 2006 to help make computer technology affordable to “first-time computer users in emerging markets.”

    “I don’t know if they cut the right people,” Wu says, “But the slim-down was overdue.”

    In its restructuring, Intel has taken some steps that are considered smart. Employees who lost jobs in the overhaul say Intel provided generous severance packages, which sends a positive message back to remaining workers. The company also has ramped up spending on training even as it cut overall HR costs by nearly 40 percent.

    But there are other areas where Intel may have run counter to the best restructuring practices. Among the charges from ex-employees critical of the firm is that Intel did not do enough to ask employees about their interests during the overhaul. Intel executives counter that managers routinely check in with subordinates about career goals, and employees had to be reassigned based on the company’s new strategy.

    Total compensation for the five highest-paid Intel executives fell from $43.7 million in 2005 to $34.4 million in 2006, and Intel chief executive Paul Otellini saw his total pay drop from $12.2 million to $9.8 million. To rank-and-file employees, though, giving up a couple of million dollars of a multimillion-dollar package may not seem like much of a sacrifice. Ken Iverson, former CEO of Nucor Steel, took a 60 percent pay cut during a reorganization, Cascio says: “He was saying, ‘We’re all in this together.’ ”

    In the 1990s, Cascio considered Intel among the top corporations when it came to restructuring. He was impressed by Intel’s redeployment program, which gives employees affected by downsizing a chance to find new work at the company. Intel still in many cases offers its redeployment program, in which employees have eight weeks at full pay and benefits to seek a job at Intel or elsewhere.

    Cascio, though, no longer puts Intel in the top strata of restructurers, saying the company over the years has done less to find ways to preserve and redeploy its talent. “The firm has resorted to widespread layoffs,” Cascio says. “Intel seems to have changed its philosophy over the past decade or so.”

    Intel spokeswoman Gail Dundas says the firm doesn’t always have openings for workers in the redeployment program. But, she says, the program amounts to a better deal than what many other companies offer. “It continues,” Dundas says. “The spirit is still there.”

One of the questions swirling around semiconductor giant Intel is whether its legendary culture is alive and kicking.

    That culture, associated most famously with former CEO Andy Grove, is centered on principles including risk-taking, fairness and “constructive confrontation”—the ability of any employee to challenge any other regardless of rank.

    Intel’s track record of success over roughly 40 years has been attributed in part to its system of beliefs. Company officials say the Intel way continues to thrive—and point to a financial rebound in 2007 as well as product innovation. But early last year, Intel came under fire in a book that claims the company’s culture has deteriorated.

    That point is echoed by some ex-employees who were laid off or left Intel during its major corporate overhaul of the past 20 months. In addition, some results of an internal employee survey indicate worker dissatisfaction and suggest a less-than-lively climate of innovation.

    February 2007 marked the publication of Losing Faith: How the Grove Survivors Led the Decline of Intel’s Corporate Culture. Ostensibly written by a pair of ex-Intel employees using pseudonyms, the book made the claim that not all people are treated equally at Intel. It also told of a “mammoth bureaucracy” at the company, “whose elite members are entitled to repeated failures without consequences and decision authority without accountability.”

    Asked to comment on Losing Faith, Intel spokeswoman Gail Dundas said she would let Intel’s results speak for themselves. Revenue for the third quarter of 2007 grew 15 percent year-over-year to a record $10.1 billion, while net income was up 43 percent to $1.9 billion. Last year, Time named Intel’s 45-nanometer Core processor one of the best inventions of the year.

    “We’re continuing to innovate,” Dundas says. “Our results are good.”

    Still, a number of former Intel employees who left or were laid off during the company’s restructuring perceive a corporate culture in decline.

    Marleen Lundy, who lost her job managing leadership development programs after spending seven years at Intel, says “constructive confrontation” has gone by the wayside at the company. “It’s lost the freedom to speak your mind and actually take risks,” she says. Last year, Lundy co-founded a consulting firm, Magna Leadership Solutions, along with two other ex-Intel employees.

    Intel’s Dundas responds that “risk-taking is alive and well at Intel.” As evidence, Dundas points to the $5.7 billion Intel expected to spend on research and development in 2007, and to 16 new products unveiled January 7 at the Consumer Electronics Show in Las Vegas. Speaking at the event, chief executive Paul Otellini outlined a major push by Intel into the realm of consumer electronics.

    But Intel has stumbled in that arena in the past. Its failed forays into digital televisions and audio players get at another major complaint from ex-Intel employees, some of whom say the company has not held senior-level executives accountable for mistakes over the past several years.

    A former training specialist says Intel’s top management not only gave up ground to rival Advanced Micro Devices in processor chips, but did not succeed in diversifying the company’s products. He points out that a much-touted digital TV effort petered out, and says the company missed opportunities to get its semiconductors into cell phone cameras and to promote a well-regarded digital music player, the Intel Pocket Concert Audio Player.

    “The people who got us into the mess are just shuffled around,” the specialist says. “People several layers below are paying for it.”

    In recent years, Intel’s upper-management echelon, its corporate officers, has experienced significant upheaval. Of 34 people listed as corporate officers in the company’s 2002 annual report, just 17 remained in that category in the 2006 annual report. Those 17 made up only 59 percent of the firm’s 29 corporate officers as of February 26, 2007. Extensive turnover among corporate officers can indicate a company has quietly moved out poorly performing senior leaders.

    Dundas declined to comment on changes in the executive ranks. She concedes the company has made mistakes. But she argues that’s a part of risk-taking. “We’ve tried to learn from those and move forward,” Dundas says.

    Still, some results of Intel’s “Organizational Health” employee survey done in August point to an ailing culture. The results indicated that just 55 percent of Intel employees are satisfied with their career development opportunities at the firm, and that 44 percent of employees would leave the company for a job elsewhere with similar pay and benefits.

    Asked to respond to the statement “At Intel, informed risk-taking is valued regardless of the outcome,” only 50 percent agreed. And asked to respond to the statement “I believe that action will be taken based on the results of this survey,” just 48 percent agreed.

    Intel declined to comment on specific employee survey questions. But it says the overall results of the survey were flat compared with 2005 and an improvement from 2000.

    The company also points to recent honors that reflect well on its culture. Intel ranked fifth on the 2007 list of the 100 Best Corporate Citizens published by Corporate Responsibility Officer magazine. In that report, Intel got the highest score of all 100 companies in the category of employee relations.

    Keeping the Intel culture alive has become more difficult as the firm has grown in size and spread across the globe, says Robert Burgelman, a Stanford University business professor who teaches several courses a year on strategic thinking to Intel senior managers. Burgelman says his work with Intel executives convinces him that the company continues to preserve free-flowing debate, regardless of rank, and to practice another key Grove concept: Employees commit to the chosen strategy even if they disagree.

    Part of what convinces Burgelman that Intel is on the right track is that top officials are keenly aware that they have to keep working on the company culture. “It’s my sincere feeling that it’s still there,” he says.

Kevin Gazzara and Ali Lakhani didn’t plan on leaving Intel to start a leadership consulting business. They say Intel all but pushed them into it.

    Gazzara spent 18 years at the computer chip maker, much of that time as a leadership development specialist. Up until December of 2006, he ran training programs for first-line and midlevel managers at Intel. Gazzara also has taught at the University of Phoenix for more than a decade.

    Lakhani worked at Intel for 17 years. Although originally a semiconductor engineer, he took an interest in leadership development and earned a doctorate of management in organizational leadership from the University of Phoenix in 2005. Gazzara was his mentor.

    In late 2005, the pair began pitching a new leadership assessment tool within Intel. Dubbed the Cross-Cultural Leadership Inventory, it was designed to link leadership behaviors and characteristics to organizational performance and business results across 70 nations.

    The inventory was based on Lakhani’s research and involved examining the leadership performance and business results of about 200 Intel managers. Gazzara says the Cross-Cultural Leadership Inventory was unique in providing a tailored, measurable view of how well a particular executive would perform in different parts of the world.

    As Gazzara and Lakhani tell it, they found numerous Intel business unit leaders interested in the tool, but got stuck at the door of Richard Taylor, Intel vice president and co-leader of the firm’s HR department. Taylor heard them out last year but declined to move forward with a proposed pilot of the tool, Gazzara and Lakhani say.

    According to Gazzara and Lakhani, Taylor considered the inventory a typical 360-degree assessment, which is a diagnostic tool that takes in feedback from a variety of co-workers. But, they say, Taylor’s view missed the crucial way their tool measured cross-cultural leadership and predicted business results, grounded in Intel data.

    Taylor declined to go into detail about the decision regarding the inventory. But he defended Intel’s choice in a statement:

    “There are many systems for assessing and developing leadership, all of which have pros and cons and none of which are totally perfect,” he said. “We are satisfied with the approach we are taking and will let the results of the company and its people speak for themselves.”

    Having suffered a 9 percent revenue loss in 2006, Intel rebounded financially last year. Its third-quarter revenue rose 15 percent to a record $10.1 billion, and net income for the quarter jumped 43 percent to $1.9 billion. Intel also has introduced a variety of new products in the past 12 months or so, including a processor named by Time as one of the best inventions of last year. What’s more, the company has received high marks for its leadership development practices, and its corporate culture is famous for encouraging employees to pipe up with good ideas and challenge executives.

    But Intel’s approach to leadership training has come under fire amid a major corporate restructuring over the past 20 months. And some ex-Intel employees claim the culture has atrophied.

    For Lakhani, Taylor’s reaction was in stark contrast to the informed risk-taking he was used to seeing in Intel’s design engineering. There was an “aversion to trying new things” in the realm of people development, he says.

    For Gazzara, the decision added to the frustration of getting transferred to a job he didn’t like and not having a say in the move. In the course of the company’s overhaul, Gazzara found himself designing one-off training courses even though his passion lay in broader leadership development and employee engagement programs.

    He and Lakhani survived job cuts during the restructuring, which involved chopping some 10,500 positions from a workforce of 102,500. But they both resigned after the meeting with Taylor. Lakhani left the company in May; Gazzara’s last day was in June 2007. That same month, they started a consulting firm to pursue their vision of smarter leadership assessment and development. Along with another ex-Intel employee, Marleen Lundy, they formed Magna Leadership Solutions.

    The three say they’ve built a new diagnostic tool that connects cross-cultural leadership behaviors with business outcomes. Dubbed CALIBER (for Culturally Adapted Leadership for Inspired Business, Excellence and Results), it is based on additional research Lakhani did with non-Intel subjects.

    So far, Magna has snagged business from clients including Cisco Systems and Avis. Gazzara and Lakhani plan to release a book this month that highlights leadership principles using a Wizard of Oz analogy.

    Despite their frustrations with Intel, Magna’s founders say they hope for the best for the company. Gazzara, Lakhani and Lundy may have traded the blue Intel logo for a black Magna one, but they say they still have a little “Intel inside” them. “We will always have Intel-blue blood running through our veins,” Gazzara says.

Intel portrays its dramatic restructuring over the past 20 months or so—which includes some 10,500 job cuts—as a corporate upgrade. Done in the face of falling revenue and market share, the reorganization has made the computer chip giant leaner and more competitive, Intel says. Better financial performance and new, groundbreaking technology are apparent proof of the restructuring’s success.

    But behind this rosy picture are signs the overhaul included glitches that may cause Intel problems down the line.

    What’s at stake is the potential loss of an Intel that has long been known as a place that prizes fresh ideas, frank talk and employee engagement. It is a company that for years could be found among Fortune‘s best places to work. But now a number of former Intel employees say the firm botched the restructuring

    in ways that have harmed morale, employee development and long-term leadership quality. In addition, some results of an internal employee survey point to worker dissatisfaction and suggest a less-than-thriving culture of innovation.

    Intel’s restructuring raises questions about how organizations should go about handling people issues when faced with financial trouble. The company also may offer a cautionary tale about the business world’s push to rely more heavily on quantitative workforce data and to categorize employees according to highly defined skills or competencies.

    Wayne Cascio, a University of Colorado business professor who has researched corporate reorganizations, touted Intel as among the best companies for responsible, effective restructuring in the mid-1990s. He no longer considers the chip maker in that upper echelon of firms, saying Intel has resorted to widespread layoffs. Despite Intel’s financial progress of late, it may not be clear for years whether the company’s recent restructuring was sound, he says.

    “A lot of times there are delayed effects,” he says. “Your financial numbers can look good in the short run. But you also have to worry about things like institutional memory and the ability to innovate over the long term.”

    Effective managers and top training specialists left the company amid the overhaul, a number of former Intel employees say. In interviews with a half-dozen former Intel employees, other criticisms surfaced—including charges that Intel disregarded employees’ passions in reorganizing, squandered the talents of HR specialists and unwisely shifted leadership training efforts from lower-level managers to upper-level executives.

    Critics say problems in Intel’s reorganization are part of a broader erosion of its culture.

Intel’s corporate overhaul may have badly damaged employee development, morale and the company’s culture of innovation— offering a cautionary tale of how employers should handle workforce issues amid a major transformation.

    “Several levels of management have stopped listening to the people who are doing the work,” says Kevin Gazzara, a former program manager in Intel’s learning and development group who says he quit the firm in sadness and frustration last year. He had been at the chip maker 18 years. “Intel could have done it so much better.”

    Workforce Management obtained some of the results of Intel’s August Organizational Health Survey, which indicated that just 55 percent of Intel employees are satisfied with their career development opportunities at the firm, and that 44 percent of employees would leave the company for a job elsewhere with similar pay and benefits. Asked to respond to the statement “At Intel, informed risk-taking is valued regardless of the outcome,” only 50 percent agreed.

    Intel, which at times has touted its leadership in the area of workforce management, declined to comment on specific employee survey questions. But it says overall results of the survey were flat compared with 2005, and an improvement from 2000.

    Patricia Murray, Intel senior vice president and co-leader of the firm’s human resources department, says Intel is aware that its esprit de corps took a hit during the restructuring, which dates to April 2006. “We just lived through a very hard time. Our morale is down,” Murray says. “And this is the time to do something about it.”

Financial turnaround
    Founded in 1968, Santa Clara, California-based Intel is the world’s largest semiconductor company. Intel’s culture has been lauded as one of the most effective and employee-friendly in the world, and for years the firm has been known as a corporate training leader.

    But the company’s revenue fell 9 percent in 2006, to $35 billion, and its net income dropped 42 percent, to $8.7 billion. Reports said Intel lost market share to arch rival Advanced Micro Devices for periods of 2005 and 2006. During the dot-com boom, the company’s stock price had soared to nearly $70, adjusted for dividends and splits. But Intel shares hovered around $25 in 2005 and dropped below $20 for much of 2006.

Intel’s HR department is aware that esprit de corps took a hit during the restructuring. “We just lived through a very hard time. Our morale is down. And this is the time to do something about it.” —Patricia Murray, senior VP and human resources department co-leader, Intel

    Faced with this weak performance, Intel in April 2006 announced its intent to restructure. And in September of that year it revealed plans for an overhaul designed to reduce costs and operating expenses by $2 billion in 2007 and $3 billion in 2008. The reorganization was expected to trigger savings in merchandising expenses, capital, materials and labor costs. Intel said it would cut its workforce to 92,000 by the middle of 2007. That is 10,500 fewer positions than it had in mid-2006.

    “These actions, while difficult, are essential to Intel becoming a more agile and efficient company—not just for this year or the next, but for years to come,” Intel president and CEO Paul Otellini said in a statement at the time.

    In November 2007, Intel said its headcount would likely get down to 86,000 by year’s end. Intel spokeswoman Gail Dundas said the additional downsizing is a result of “normal attrition and other business activities.”

    Intel’s financial performance has improved. Revenue for the quarter ended September 30, 2007, jumped 15 percent year over year to a record $10.1 billion. Net income was up 43 percent to $1.9 billion. Also last year, the company unveiled new processor chips designed to stem electricity leakage, a nagging problem as circuitry grows smaller. Time named Intel’s 45-nanometer Core processor one of the best inventions of the year. Intel shares recently neared $28 before settling back around $22.

Key managers ousted
    Critics, though, say Intel’s gains may be short-lived. Ex-Intel employees interviewed for this story generally agree the company was bloated and needed an overhaul, but they take issue with how Intel executed the changes.

    Among the jobs Intel eliminated were 1,000 management positions trimmed by late July 2006. During that cut, Intel wound up sacking many leaders skilled at people development, says a former Intel manager who lost his job in the reduction. The manager, who spoke on condition of anonymity out of concern that his current techindustry firm could be harmed, says one of the criteria used in allocating those pink slips was how well managers had prepared their direct reports to move up in the firm.

    “If you had a well-run organization with a lot of bench strength—in other words, you were a good manager—you were deemed expendable,” he says.

    Intel declined to comment on this claim. But an internal Intel document shared with Workforce Management indicates the company realized it was losing quality employees in the 1,000-manager cut. The memo, intended to help managers speak with their teams about the layoff, states: “We know we are losing good people in this move. But we have too many managers, and this manager reduction is necessary to improve our decision-making and communication and to resize the company. In addition, since we need to become a leaner company and are limiting job openings, redeploying their skills, as individual contributors or as managers, is not a reasonable option.”

    Intel declined to comment on the memo.

“Once you measure too much, you believe the organization is a machine. I think the organization is a living organism.” —Lynda Gratton, professor, London Business School

    In addition, former Intel employees say first-rate employee development experts were laid off or left as a result of the restructuring. Among the leadership experts Intel lost in the overhaul is Kevin Gazzara. Until December 2006, Gazzara ran leadership development programs at Intel targeted at first-line and midlevel leaders. Workforce Management featured Gazzara in a November 2005 cover story about globalization training, and his efforts were among the reasons Workforce Management gave Intel an Optimas Award in 2006 for overall HR excellence.

    With a doctorate in organizational leadership, Gazzara has researched how employee performance can be improved by setting up jobs that match workers’ preferences for a certain blend of routine, troubleshooting and project-oriented tasks.

    Given this background, he says it is ironic that Intel leaders dismissed his and others’ interests during the restructuring. Intel assigned him to work on ad-hoc courses based on his knowledge in training design, he says. But his heart and his expertise were in working on comprehensive leadership development and employee engagement programs, where he saw great potential to help Intel. Partly out of dissatisfaction with his new role, Gazzara resigned in June from the company he had loved for years.

    “The managers did everything on paper by the numbers,” Gazzara says. “There were no discussions.”

    Gazzara has since founded a consultancy focused on leadership development with two other former Intel employees. The firm, Magna Leadership Solutions, has done work for customers including Cisco Systems and Avis.

Expertise squandered
    Indeed, Intel’s other HR co-leader, vice president Richard Taylor, says that over the past five years he has pushed to make Intel’s HR department more data-driven. Taylor, an accountant by training, and other Intel officials don’t dispute that HR reassignments were done based largely on competencies. But Intel officials contest the idea that employee preferences were ignored, noting that managers are expected to talk with their direct reports at least annually about career aspirations.

    Intel may have lost some training specialists, but its training investment has increased, officials say. Per capita spending on training has increased 6 percent over the past four years, Taylor says. Preparing leaders has been a key target: spending on leadership development rose 119 percent last year, and is up 50 percent over the past five years, Taylor says.

    Intel also defends the quality of the leadership development expertise that remains at the company. “I am really proud of this HR organization,” Taylor says, adding that his staff is made up of “some of the best, most professional and most skilled HR people anywhere in the world.”

“I am really proud of this HR organization. … [It is made up of] some of the best, most professional and most skilled HR people anywhere in the world.”  —Richard Taylor, VP and human resources department co-leader, Intel

    Robert Burgelman, a business professor at Stanford University, gives Intel high marks when it comes to developing its executives. Burgelman, who teaches several courses a year on strategic thinking to Intel senior managers, says many firms train their executives with a smattering of different courses, coaches and concepts. The result is a cadre of leaders who don’t use the same frameworks for solving problems or setting strategy, he says, which slows them down. “Intel has avoided this by exposing many, many people to the same ideas,” he says.

    But critics claim Intel made poor use of leadership development experts in the course of the restructuring.

    A former training specialist who left Intel last year after more than 15 years with the company says Intel effectively wasted his talents by reassigning him. Before the restructuring, the training specialist created leadership programs for an Intel business unit with more than 4,000 employees. Intel moved him into an HR generalist role, he says, where he often handled entry-level administrative tasks such as helping employees locate company policies. Other experts in organizational development were given similar generalist roles, he says.

    “I told my manager they shouldn’t be paying someone like me to do this job,” says the specialist, who earned more than $100,000 a year.

    Taylor says a number of organizational development professionals were asked to handle a broader array of HR tasks, such as recruiting and compensation matters. But he denies the new work should amount to superficial tasks. Taylor says his HR staff should be deflecting basic inquiries to the Web or a call center, and that their new role allows for increased authority given the larger ratio of Intel employees to HR professional.

    “It may be broader, but it’s hugely more impactful,” he says.

Development revamp
    Intel also used the occasion of the restructuring to adopt a new philosophy on employee development, company officials say. More continuous learning, greater involvement of managers in leadership training and better use of “Web 2.0” interactive technologies are central to development efforts now, officials say.

    “Our focus on developing great leaders has stepped up a notch,” Taylor says.

    Intel employees overall, though, are far from content when it comes to career development, according to the August employee survey. Asked to respond to the statement “I am satisfied with my opportunities to develop and grow at Intel,” only 55 percent agreed or strongly agreed.

    This figure, in addition to the finding that more than 40 percent of Intel employees are willing to leave for a job with comparable pay and benefits elsewhere, indicates Intel may be at risk of losing valuable employees. John Boudreau, management professor at the University of Southern California, stresses he is not personally familiar with Intel’s situation or recent history. But he says research suggests that top performers tend to be particularly sensitive to career development opportunities, and often have the most options if they decide to leave.

    Intel’s Murray says turnover hasn’t risen in the wake of the restructuring. Turnover generally remains less than 10 percent annually, and less than 2 percent for the employees Intel dubs “high performers.”

    Even so, Intel officials say they are taking action to keep employees happy in terms of growth opportunities. In July, the company hired Steve Backers to head up career development programs.

Data-driven
    Whether Intel’s legendary corporate culture has withered is subject to debate. Intel officials argue it is alive and kicking. But another result from the August employee survey hints at significant employee distrust of management. Asked to respond to the statement “I believe that action will be taken based on the results of this survey,” just 48 percent of employees agreed or strongly agreed.

    Lack of confidence that leaders will respond to employee feedback may help explain Intel’s gradually declining performance on Fortune‘s list of the 100 Best Companies to Work For. After finishing in the top 65 from 1998 to 2004, Intel finished 97th in 2006, and failed to make the list altogether in 2005 and 2007.

    That drop-off also corresponds roughly to Taylor’s data push. Analysts agree that organizations should do more to quantify their talent and make workforce decisions more scientifically. But some warn the numbers focus can go too far, and ignore intangibles or impede innovation. London Business School professor Lynda Gratton, for example, warns that companies sometimes pay too much attention to metrics, and that can get in the way of fostering “hot spots” in a firm, where important new work gets done. “Once you measure too much, you believe the organization is a machine,” Gratton told Workforce Management last year. “I think the organization is a living organism.”

    Gazzara says the changes to Intel’s HR operations are part of a broader, disturbing trend of focusing on metrics without serious consideration of the experience, passion and talent of employees. “I really think the `H’ in HR, particularly at Intel, is missing,” he says. “People are viewed as a commodity.”

    Intel officials beg to differ. Murray, for example, says that she read most of the 57,000 written comments submitted by employees in the recent employee survey. And her vision for the company is not one of merely optimizing talent metrics. Intel has a “huge opportunity to say, `OK, we’re changing. Now let’s make this a lively, engaging workplace,’ ” Murray says.

    Not everyone is so sanguine about Intel’s prospects. The training specialist who left the company after more than 15 years portrays Intel’s recent restructuring as part of a rise and fall of smart people management at Intel. In his view, managers were given a great deal of autonomy during the company’s flush times in the 1980s and ’90s, and some invested in effective employee development practices. But as money got tight over the past few years, he argues, senior managers reverted to a technology and finance orientation. Intel effectively sacrificed its people de- velopment legacy in the pro- cess, he says.

    “They killed an essential side of Intel’s soul,” he says.

    Some might call this a naive viewpoint, given how common it is for companies to trim training during tough times. In any event, Intel says it has done nothing of the sort. Pointing to greater funding and a revamped training philosophy, Taylor says the company is as committed as ever to fostering employee and leadership growth.

    And he frames Intel’s approach to the annual Fortune contest as another sign of the company’s commitment to the best people practices. One of the steps in pursuing a spot on the Fortune list is a survey given to 400 randomly selected employees. The results are given back to the firms.

    “We still choose to apply for it,” Taylor says, “because we want to learn from our employees.”

Workforce Management, January 14, 2008, p. 12-17 — Subscribe Now!

Authoria has emerged as the rock star of the moment in talent management software.

    But it remains to be seen how long the company’s celebrity will last amid bruising competition and the demands of rapid growth.

    In October, Authoria handily won a showdown of talent management vendors at the annual HR Technology Conference & Exposition in Chicago. The Waltham, Massachusetts-based firm beat rivals Vurv, SuccessFactors and HRsmart in an audience-decided contest to see who best connects recruiting and performance management applications. Authoria’s win follows the firm’s victory two years ago in a similar “shootout” among vendors that sell compensation and performance management software.

    Besides the conference wins,Authoria recently has been touted highly in analyst reports and is seeing torrid sales. For the first half of this year, bookings rose by 40 percent, with new customers including 3Com, GlaxoSmithKline and L-3 Communications.

    But all the customers—more than 300 large organizations in total—raise the prospect that Authoria may struggle to provide them with excellent service. And although Authoria’s star has risen, it sits in a busy constellation with competitors ranging from talent management specialists to larger, more comprehensive software players such as Oracle and SAP.

    Jim Holincheck, analyst with research firm Gartner, gave Authoria a “positive” rating this year in his report on software for performance management, compensation and succession management. No vendor surpassed Authoria, but 13 others got the same positive rating.

    “It’s a crowded market out there,” Holincheck says.

    Authoria founder and chief executive Tod Loofbourrow is confident the 10-year-old company can continue to stand out, by taking into account the needs and wishes of managers and employees and by focusing on improving clients’ business results.

    Loofbourrow also expects his firm to be among the few talent management vendors left standing as the market shakes out over the next few years.

    “I’d say we’re in the third inning of a nine-inning game here,” he says.

Lucrative game
   The talent management software game is lucrative.

    Authoria and its rivals sell tools for key HR duties such as recruiting, performance management, compensation and employee development. Talent management applications are among the fastest-growing products within the HR software arena, which is itself the fastest-growing category of business software.

    Thanks to factors including fear of talent shortages, revenue from “human capital management” applications is slated to rise 11 percent annually between 2006 and 2011, to $10.6 billion, according to AMR Research.

    Some 20 vendors of talent management tools have a common mantra: integration. That is, they typically claim close links between a number of component applications for the purposes of more efficient operations, new insights and, ultimately, a better bottom line.

    Despite the promises, talent management as a field has room to improve. Research firm Bersin & Associates found organizations with multiple applications from the same vendor report that their talent management systems offer just slightly better than “fair” assistance toward key talent goals such as retaining top performers and ensuring quality of hire.

    Authoria brings a unique background to the talent management field.

    While other rivals started off as recruiting or learning management system specialists, Authoria’s roots are in the area of employee self-service tools. Authoria’s first products were designed to help employees access personalized information about corporate benefits and policies. The company still offers that software, but partly through acquisitions it has added capabilities such as recruiting and performance management.

    Employee communications may not seem at first glance to be a critical part of talent management. But Authoria has used that expertise well in building applications that are used by the bulk of employees, not just HR “power users,” says Nov Omana, founder of consulting firm Collective HR Solutions. “They have a significant strength in bringing information to people’s desktop,” he says.

    Authoria also has won kudos for an “elegant user interface,” in the words of analyst Josh Bersin, and a well-rounded product suite. Gartner’s Holincheck says Authoria has “pretty strong functionality across a pretty broad set of talent management areas.”

    Alcon Laboratories, which makes contact lens solutions and many other eye care products, recently chose Authoria for its entire lineup of talent management applications. The company is starting with recruitment software, followed by compensation management and later performance management and succession planning. Kay Teague, director of HR technology for the 13,000-person company, says Authoria impressed Alcon with its clean user “look and feel.”

    Also important to Teague was Authoria’s vision of a comprehensive package of tightly connected talent management applications, where, for example, a single “dashboard” screen allows users to access a variety of software tools. “They are working toward a truly integrated suite,” she says.

    Alcon also considered SuccessFactors, Vurv and Workstream. Cost was not much of a factor in the competition, Teague says: “There was very little price difference.”

Winning the shootout
   Authoria got the best of Vurv and SuccessFactors again at the HR Technology Conference, as audience members voted it the winner in each of the three shootout segments. The first segment involved showing how the software could create a new job requisition based in part on the example of a successful employee in a related role. In the second, vendors were asked to show how their applications could search for both internal and external candidates, assess the quality of hires from external recruiting firms and compare their fees, and finally compare an internal candidate with two external candidates.

    The last segment centered on a midyear review for an employee hired externally, in which vendors were asked to show how their software captured data from the recruiting process to help fill out an employee profile as well as demonstrate a quality-of-hire “dashboard” report.

    Among the factors that carried Authoria to victory was the performance of Loofbourrow himself. The chief executives from each vendor demonstrated their software, but Loofbourrow stood out with a showman’s presence. For instance, he ended the first two segments with “cliff hangers” about what else Authoria’s software could do.

    Despite Authoria’s successful conference presentation, there are questions about how much the company reveals about its financial performance. Rival talent management vendor Plateau says profitability and revenue growth over time should be a factor in choosing a supplier.

    “Numbers tell a story,” says Paul Sparta, Plateau’s CEO. Sparta says Plateau was growing and profitable for 13 straight quarters until 2006, when it purchased compensation management specialist Nuvosoft. “We are break-even now and will be profitable again next year,” he says.

    Authoria provides some financial data, including the fact that it recently brought in $22.5 million in financing, and that recurring revenue grew 42 percent last year. The company also points to its roster of well-known clients, such as Aon Corp., Boeing and PepsiAmericas, as a sign of its financial strength. But Authoria declined to disclose whether it is profitable or to discuss revenue or profitability information from years past.

    “As a private company, we really don’t disclose our financials, including revenue, revenue growth, profitability, etc.,” Michael Blaber, director of marketing communications, said in an e-mail.

    Teague says Authoria was similarly tight-lipped with her about financials.

    “They weren’t really willing to lay it all out there,” she says. On the other hand, she says, Authoria convinced finance officials at Alcon that the company was a safe enough bet.

Competition still steep
   Authoria may have won the Alcon account, but plenty of Authoria’s competitors are snagging new customers as well. Besides Oracle and SAP, another larger software company pushing hard into talent management is Lawson. These players offer customers the potential of streamlining the number of software vendors, since they offer core HR systems for tracking basic employee data as well as a range of business applications beyond HR software.

    Even within the talent management field, Authoria doesn’t have all the bases covered. It lacks what many see as a key component: a learning management system, which is software for tracking employees’ coursework and certifications. Loofbourrow says his software ties into the learning management products from other vendors. He does not see an Authoria learning management application as a priority. The most central aspects of talent management are recruiting, performance management and compensation management, he says, while learning management is “secondary.”

    Lately, customers seem to be buying Authoria’s argument about the best approach to a talent management suite. During the past few quarters, 40 percent to 50 percent of Authoria’s new customer wins have involved three or more software products, compared with 25 percent during the first half of 2006.

    But by selling software suites to so many customers, Authoria is setting itself up for a customer-service challenge. Authoria and other talent management specialists face the task of providing good service to clients who have been used to a high level of care from the traditional, large HR software suppliers Oracle and SAP, says Jason Averbook, chief executive at consulting firm Knowledge Infusion.

    “The vendors are not doing a good job setting expectations when they implement these solutions,” he says. “All of them are struggling with it.

    The issue is exacerbated, in a way, by the “software as a service” approach used by Authoria and other talent management vendors. It refers to applications that are accessed over the Internet as opposed to software that runs on a customer’s internal computers.

    “Because it seems so easy to deploy, customers don’t expect issues,” Averbook says. “When issues arise, it is a surprise to customers, creating a chasm between expectations and reality.”

    Without having turned on Authoria’s software yet, Alcon’s Teague has no complaints about Authoria’s service. But given the industrywide concern and Authoria’s fast addition of customers, poor service is a worry. “I’m afraid of that going forward,” she says.

    Blaber says Authoria has its eye on the service ball. The firm’s “Rapid Results” implementation process uses “best practices” to speed up the deployment of Authoria software, Blaber says.

    “Over the past 10 years, Authoria has built a very solid track record of meeting the expectations of the most demanding employers in the world,” he says.

    Teague is hopeful about Authoria. But she realizes today’s talent management sensation could fall from its pedestal.

    “No one’s really there with an integrated system,” she says. “I just hope Authoria is able to provide good service to their customers as well as deliver on its vision of a truly integrated suite.”