Part one in a two-part series on how HRO can impact the performance of your organizations workforce lifecycle.
The HR BPO landscape has changed beyond recognition during the last year. People used to ask questions such as How much can we save? and Can they do the job for us without too much disruption to my business? While these issues still remain, more organizations are making that final HR BPO decision and now asking questions like How can we use this opportunity to achieve a much more powerful HR experience that will improve the performance of my organization? Chief HR Officers (CHROs) and their C-level peers are slowly coming around to the fact that they can not only get the basics right with today’s suppliers, but they can also learn to train, develop, incent, manage, and retain their key staff with some of the new application solutions becoming available in todays HR BPO portfolio solutions. Some of the HR BPO providers are building their own proprietary applications within their platforms, whereas others are adopting a best-of-breed approach and partnering with software providers who specialize in performance management.
Organizations that excel in developing their workforce are high performers and dominate their markets. The misalignment of business and workforce strategies has forced many organizations to head back to the drawing board to connect human capital with corporate strategy. Comprehensive HR BPO provides the tools to achieve high-performance in your organization, but you need to partner with your supplier to ensure they provide you with the support, training, HR transformation skills, and IT integration expertise to reach this end-goal.
Traditionally, HR departments have focused their technology efforts on driving down costs by automating or outsourcing non-strategic, transaction-oriented processes, such as benefits enrollment and payroll administration to enable greater focus on core business strategy. The recent convergence of integrated Workforce Lifecycle Management (WLM) solutions that incorporate talent management, performance management, incentive management, and learning management, is transforming the way global organizations manage the ongoing performance of their workforce (see Exhibits 1 and 2). Along with integrated modular functionality, these solutions offer tremendous advantages, including simplified usability, rapid deployment and adoption, and hefty customer value. These improvements are shaping this newly integrated market for dramatic expansion in 2005 and beyond. The Yankee Group forecasts this integrated WLM market to reach $2.2 billion by 2008, almost doubling in size during the next three years. The rapid uptake of comprehensive HR BPO solutions is providing a major channel of growth, as suppliers look to entice organizations with these integrated offerings.
Traditionally known as recruiting management and e-recruiting, talent management includes all core business processes in talent acquisition and hiring, including identifying, recruiting, and on-boarding candidates for hourly, salaried, and contingent workforces. Key product features include internal and external candidate sourcing, engaging, interviewing, application tracking, skills assessment, candidate profiling, team collaboration and feedback, and resource planning. In addition, some talent management vendors offer skills inventorying, internal mobility, workforce planning, regulatory and compliance, and executive search functionality. The goal of talent management is to streamline the identify-to-hire process and improve the quality of hiring for the organization. Yankee Group estimates talent management will grow at a 19 percent compound annual growth rate (CAGR) during the next four years due to interest in improving the quality of new hires, continued growth and adoption of contingent workforces, and a renewed focus on adding new outside talent into an organization.
Performance management includes the ability to manage the ongoing goals, objectives, and performance of the workforce and the ability to align workforce performance with corporate strategy. This includes activities beyond the on-boarding process and extending to career development, performance improvement, and succession planning. Organizations that use performance management solutions can increase time-to-productivity by more than 50 percent for new employees. Key features include cascading goal management and tracking, performance assessment and appraisal (including 360-degree evaluations), skills and competency management, and career planning. The key to successful performance management solutions is integrated functionality with talent management, learning management, and incentive management applications.
Performance management currently accounts for approximately 12 percent of total WLM spending (see Exhibit 3). Yankee Group predicts performance management will be the fastest growing area within WLM, growing at a CAGR of 23 percent during the next four years. Yankee Group credits the strong growth to the interest in career development, succession planning, and the affordability and rapid return on investment of performance management solutions.
This aligns workforce incentives and compensation with corporate financial objectives and is designed to motivate the workforce using advanced modeling, planning, and reporting automation to provide cash and non-cash incentives to employees and partners. Key features include all aspects of managing incentive pay, such as commissions, bonuses, benefits, rewards, and stock and option grants. Incentive management solutions traditionally have applied to sales organizations but recently expanded beyond complex sales compensation management to include pay for performance functionality for the entire workforce. Yankee Group predicts 11 percent growth during the next four years attributed to new initiatives, such as pay-for-performance and variable pay programs across all functional departments.
Learning management focuses on continuously improving the internal workforce and external partners through ongoing training, course development, and workforce improvement. Key features of traditional learning management applications include Web-based course training, workforce collaboration, skills tracking, and career development. The ultimate goal is to increase workforce competencies and collaboration, thereby increasing the organizations top-line performance. Some vendors even promise top-line growth through the utilization of their learning management solutions. Yankee Group estimates a 16 percent growth during the next four years due to increased integration with other solutions such as performance management.
In next months column, well look at some of the adoption drivers for WLM solutions and recommendations for enterprises. Stay tuned