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The many varieties of HCM software allow companies to manage the employee life cycle.
Megan Santosus, CFO IT
September 15, 2005
Virtually all forms of IT have been designed to boost employee or corporate performance in some way, but the category called workforce productivity (also known as workforce optimization or human-capital management) is especially fertile. Vendors abound in all its subcategories, and while there has been a noticeable movement toward consolidation, which companies will dominate the space is still an open question.
Many vendors cut across all the categories cited below, with product suites that address the entire "employee life cycle." Note that we did not include vendors in every category in which they play, nor are the listings at the end of each segment comprehensive. ERP vendors, for example, address most or all of these categories, and BI vendors are beginning to embrace HCM as well.
Among the more active areas of human-resource software, says Josh Bersin of Bersin & Associates, is recruiting — or talent acquisition, as it's called in strategic HR circles. "Every vendor seems to be offering recruiting systems," he says. Think Monster, Resumix, and Jobster. Those are just three choices in the crowded recruiting-software market.
More than just a system that stores and searches résumés for keywords, recruiting software is touted as a way to save money by streamlining the hiring process and to work more effectively by better matching candidates to available jobs. The software is typically offered via an on-demand subscription service. The reason, says Bersin, is that a lot of the functionality that goes along with hiring and recruiting, such as creating job postings, and collecting and storing résumés, can be easily delivered via the Web. Add to that the cyclical nature of hiring, and it seems logical for organizations to go with a subscription-based service. Still, many vendors do offer recruiting software as a traditionally licensed product or module within a broader suite.
Recruiting systems aim to help organizations improve the processes of recruiting and hiring by quickly prescreening, sorting, and storing résumés, and then matching those résumés to available job openings. Some systems also include modules for various administrative tasks, such as background and reference checks, and skills assessments. Some vendors, including BrassRing LLC in Waltham, Massachusetts, offer so-called "talent life-cycle management" software that encompasses a range of processes spanning recruiting, training, and internal hiring.
Other companies vying for a piece of the recruiting action include Deploy Solutions, Peopleclick, and Webhire. In June, Authoria acquired Hire.com, and in July, Jobster acquired WorkZoo, two deals that signal the continuous merging of functionality that currently characterizes the HRMS market.
For organizations large and small, training is an essential component of developing a workforce. Learning-management software essentially delivers training to the desktop (often via a Web browser) and allows organizations to track and monitor which employees receive training, when they are trained, and how well they understand the training material. Such systems are particularly relevant in industries that are bound by regulation and compliance issues (such as finance and health care) or that require employee certification. Learning systems are also deployed to train employees on new products, either those they are using internally or those they are selling to customers. "Suppose your company has a new finance system; you can use this type of technology to verify attendance to classes and then centrally test their comprehension," says Frank Russell, CEO of GeoLearning Inc., a vendor of managed-learning services.
Learning-management systems are based on foundational software that acts as a database or administrative hub, tracking employees, course content, and other components. On top of that may sit content-creation tools and other middleware that helps distribute content. And then there is the training content itself, which can be developed in-house or obtained from a universe of third parties.
As for ROI, companies can expect savings simply by making training materials available electronically rather than on paper, as well as by eliminating travel to a central training facility. "Cost avoidance can be a primary reason for deploying learning systems," says Charlie Gillette, CEO of learning-systems vendor Knowledge Anywhere Inc. Yet efficiency is just one argument. As Bersin notes, "Sometimes you can't do something without a learning system. You may need to quickly train your sales force prior to the launch of a new product, for example. That's where there is real value in the technology."
Plateau, SumTotal Systems, Intellinex, Saba, and Convergys are among the vendors in this space.
Performance and Compensation Systems
Practically every organization regularly reviews the performance of its employees, a chore that most managers happily confess is the bane of their existence. The aim of performance-management systems is to both automate the employee-review process and link reviews to organizational performance. Are employees taking definitive steps to achieve their sales goals? Are there succession plans in place for top managers? What kinds of skills will the organization need in the next two years? Those are the kinds of questions that performance-management systems put at the desktops of both managers and employees.
Performance-management systems often include or feed into compensation systems. Ned Albee, vice president of human resources at Lancaster General Hospital in Pennsylvania, says a performance-management system from San Mateo, California-based SuccessFactors enables the hospital to more equitably distribute merit-based pay increases. Before deploying the system, managers reviewed employees annually around their date of hiring. The result, Albee says, was that sometimes well-deserving employees wouldn't get the increase they deserved simply because the pool of available money had already been spent by the time they received their reviews. With the current system, all 4,500 employee reviews are completed at the end of the fiscal year. "We can now also manage the merit expense budget by reviewing all performance scores before distributing the pay increases," Albee says.
Other managers say the systems are useful for obtaining a 12-month view of employee performance, versus focusing too closely on the period that immediately precedes the review. Some vendors offer "succession planning" software that builds on performance and training systems to identify likely candidates for jobs further up the food chain.
Along with SuccessFactors, leading vendors include Authoria, Halogen Software, Workscape, Callidus Software, Centive, Ceridian, Softscape, Kenexa, and ERP giants SAP and Oracle.
If organizations view employees as assets, then it follows that those assets should be allocated effectively. In general, "workforce-management software involves staffing, developing, tracking, and rewarding employees," says Michael DiPietro, vice president of product marketing at Kronos Inc., a leading vendor of workforce-management software. In practical terms, such software schedules employees based on business volume and also tracks labor activities, projects being worked on, work orders, hours, and how workers should be paid.
Workforce-management software grew out of time- and attendance-monitoring systems and can now address many facets of the workforce, from making sure that assembly lines are adequately staffed on the third shift to identifying the best salespeople to tackle a new account and making sure they are rewarded properly.
According to DiPietro, CFOs who sought to streamline their supply chains in the 1990s should be able to relate to workforce-management systems. "Back then, CFOs were looking at critical factors affecting inventory," he says. "Workforce management is similar; it's all about managing workforce resources in the context of business goals and demands."
Workforce-management software vendors include ADP, Softscape, Workbrain, 360Commerce, and CyberShift.
As for cost, at the low end, a single module of, say, an assessment-management system may cost $5,000, while an enterprise learning-management system deployed for a global company can run in the millions. The software-as-a-service model, however, is popular in this space.
Companies such as SuccessFactors, Employease, Authoria, and others typically charge a per-module/per-employee/per-month fee that can minimize up-front costs (and deployment times) and scale as needed. Customers should explore how such services integrate with internal systems, and with other outsourced services they may rely on.