The Wall Street Journal-20080115-Demand Rises for Talent-Management Software
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Demand Rises for Talent-Management Software
Two years from now, Diana Hatcher knows she will be ripe for promotion to a more senior job at United Parcel Service Inc. Based on her most recent performance review, the company's talent-management system determined that she will qualify to advance by then if she gains experience in a different area within her department. Right now, her boss is helping her make the switch.
Hoping to reduce turnover and increase worker satisfaction, companies are upgrading the way they manage, assess and share employee performance data. They are investing in Web-based software that tracks the progress of workers from the time they apply to work at a company until they leave.
Ms. Hatcher, a public-relations supervisor, says she appreciates her company's support in helping her climb the corporate ladder. At her previous jobs, "I never really knew what was being done with the information in my review. It never came up again," she says. "Now it's become something more integrated into my career development."
About a dozen software companies and a handful of other businesses such as search firms and payroll companies are capitalizing on the demand for talent-management systems, says Dan Weinfurter, chief executive at Capital H Group, a management-consulting firm specializing in talent and leadership. One provider, seven-year-old Success Factors Inc., reports revenue of $44.1 million as of March 2007, with its greatest year-over-year sales increase -- more than 50% -- occurring between 2005 and 2006. The San Francisco-based company, which went public in November, says it has more than 1,300 customers, up from 176 at the end of 2004. Another company in this niche, Workstream Inc. of Ottawa, which was founded in 1996, saw revenue climb 99% to $29.3 million in 2007 from $14.7 million in 2002. Other companies angling for a piece of the industry include Workscape Inc., Taleo Corp., Authoria Inc. and Halogen Software Inc.
The surge is largely due to a looming worry of corporations: a labor shortage in industries across the board, says Loretta Penn, vice president and chief service excellence officer at Spherion Corp., a national staffing and recruiting firm based in Fort Lauderdale, Fla. The aging of the baby boomer generation and a decline in worker satisfaction are the leading causes, she says.
Talent-management systems are designed to provide insight into an employer's recruiting and succession-planning needs. By tracking the number of employees that come in and out of a company, the programs can identify thinning areas along the organizational chart. Furthermore, they can pinpoint internal talent that might qualify or have the potential to qualify for expected vacancies and see from employee profiles whether a person is willing to relocate or aspires to work in a different area.
Anthony Chen, director of succession management for Hilton Hotels Corp., says the hotelier has been using Success Factors' talent- management technology for about three years to keep its 300 nonfranchise U.S. hotels nationwide sufficiently staffed. "Whenever there's an opening for any general-manager position around the country, we know the top current team members that would be a good fit for that type of hotel," he says. Previously, the company relied mainly on applications from current employees and outsiders.
Talent-management systems also aim to simplify the employee review process for both managers and workers. For example, instead of filling out forms using a computerized spreadsheet, the technology allows managers to enter ratings and notes into an online database of employee profiles. The entries are cumulative and can be used to make head-to-head comparisons. Employees can also look up the information at any time, enter feedback and see suggestions on how they can progress to the next level or achieve a particular goal. In addition, they can get a roadmap showing how to improve in weak areas, such as a suggestion to enroll in a company training program.
Other features that these systems offer include tools for managers to track and evaluate job candidates, plus detailed information for employees about their compensation and ways they can monitor their company stock and 401(k) accounts.
Lynnette McIntire, Ms. Hatcher's boss at UPS, says talent-management technology helps her excel at the review process. "My responsibility as a manager is to foster skills development and promotion. This gives me a way to track that and to map out a plan together with the employee," she says.
Ms. Hatcher says she noticed a clear difference in how her work was monitored and evaluated when she joined the delivery company in 2003. "In the past, some of my managers weren't comfortable doing performance reviews or it was something that got pushed on the back burner," she says.
The cost of a talent-management system varies depending on the number of modules companies select and their employee headcounts. Some providers also charge monthly or annual subscription fees. San Francisco-based Marine Terminals Corp. spent about $250,000 on a system in late 2006 and pays $70,000 a year for service, says Art Reimers, chief people officer at the stevedore company, which has roughly 4,000 employees. Previously, its managers filled out employee review forms by hand, and they were filed in storage cabinets soon after employees signed off on them. "It was too paper intensive. People didn't like writing all this stuff," he recalls.Small companies can also benefit from talent-management systems. Erin O'Leary-Rallis, owner of Nittany Embroidery & Screenprinting Inc., purchased one for her closely held clothing-design and retail firm a year ago. In particular, she says she likes being able to give her 20 full-time employees advance notice about their performance. The system is set up so that employees can complete a self-assessment and get anonymous feedback from their peers for their bosses to see prior to annual in- person review sessions. Now, she says, "reviews are not as emotionally packed."
Though many technology providers help companies install and set up their talent-management systems, workers often face a steep learning curve. "The execution is always harder than putting something in place," says Mr. Weinfurter. "Start with something simple and build over time."
Advent Software Inc., an international technology company, is planning to add talent-management software later this year for its roughly 1,000 workers. "Employees now tend to expect this," says John Brennan, vice president of human resources at the San Francisco-based firm. "They find easy access to information in all aspects of their lives and expect the company they work for will provide the same."
