Integrated Talent Management:The Next Frontier in Human ResourcesOutsourcing

Yvette Cameron, Sr. Director HRO Strategy & MarketingBusiness Process Outsourcing, SAP AG

HRO SummitTampa, Florida22 October 2008

Our World Keeps ChangingFlat world trends are already re-shaping business priorities

© SAP 2008 / Page 2

Decelerated investments;challenges for the chronicallyunder-funded

Economic Downturn

InnovationPeople are the last frontier ofcompetitive advantage in aknowledge economy

Virtualization

GlobalizationExpanding infrastructures and globalworkforce challenges ability to get singleview of the truth

GenY and an aging workforce drivenew demands on information accessand collaboration

Success through people – what does it mean?

Everyone talks about it, but what does it mean?

Better management of talent can drive

Rapid, successful new product introductions (better market agility)

Sustained business results over time

Higher customer satisfaction

Improved workforce agility

Technology can support this transformation of strategic workforcemanagement

Alignment and communication are key

According to a Harvard Business Review report (“Turning Great Strategyinto Great Performance”):

Companies typically realize only about 60%of their strategies’ potential value

because of defects and breakdownsin planning and execution

Approximately 30% of this problem can be attributed to:Poorly communicated strategyUnclear accountabilityInadequate consequences or rewardsActions required to execute not clearly definedInadequate performance monitoringInadequate or unavailable resources

“Turning Great Strategy into Great Performance”, Harvard Business Review, July 2005

Strategy execution requires “stronger’ HR

The McKinsey Quarterly, “Making Talent A Strategic Focus”, January 2008

What is Integrated Talent Management?

Integrated Talent Management is acomprehensive and proactive approach foridentifying, attracting, developing, and retainingthe talent needed to execute business strategysuccessfully

Its core processes includeAttracting and acquiring talentEducating and developing talentIdentifying and growing future leadersAligning and rewarding the workforceEngaging the workforce for optimal business results

For maximum benefit, talent managementprocesses and analytics should rely on a commoninfrastructure leveraged across each of the coretalent processes

Integrated TalentManagement

Talent Data Talent Profile Experience Competencies Career history Mobility &aspirations

Companyfoundation

Organizationalstructure

Jobarchitecture

Keypositions

Competencycatalog

Goalcatalog

Sharedcomponents

andbuildingblocks

Performancegoals

Careerplan

Developmentplan

Potentialassessment

LearningContent

Calibration

Performanceappraisal

Workforceplan

Global internal &external talent pool

Compensationadjustment

On-boarding

Successionplan

Trainingopportunities

Courseenrollments Talent Review Job requisition

Integrated talent management technologyleverages a common infrastructure

Within Organization Outside OrganizationHRDepartment

WorkforceManagersEmployeesExecutives

Candidates ExternalServiceProviders

End-to-endprocesses

Plan

Align

Acquire

Reward

Develop

Measure

Attract

Deploy

BusinessIntelligence Reporting, analytics, alerts, dashboards, warehouse

Growth in Talent Management applications nowoutpaces Core HR

Source: The Human Capital Management Market Sizing Report, 2007-2012, AMR, July 2008

In 2007 – combined revenues across components of talent managementrepresented a greater amount of HCM revenue share than core HR (41% to 38%)By 2012, the gap will widen to 47% talent management to 32% HCM

Varying maturity levels in talent managementreflect value perceptions

Composite based on data from Gartner, Everest Research Institute, Bersin & Associates, and SAP Analysis,

Compensation(SME)

LSO

Performance Mgmt

RecruitingSuccession Planning

Employee DataMgmt

Learning

Workforce Planning

Emergence

Social Software

PerformanceOutsourcing

Rapid Growth Reaching Maturity Mature/Mainstream

TM O

utso

urci

ngTM

App

licat

ion

Visualization

Compensation(MGR)

RPO

TM Suites

Silos drive automation – Integration drives strategic results

Value Considerations for OutsourcingTalent Management

Talent Management Outsourcing (TMO)requires shared Provider/Buyer responsibilities

More than any other HRO, Talent Management Outsourcing requires thecoordination of BPO/Retained Org capabilities. For example:

Recruiting– BPO – Administrative services– Retained Org – decision making leveraging outsourced ITLearning– BPO – Course administration– Retained Org – decision making leveraging outsourced ITPerformance, Compensation, Succession – mostly retained

In Talent Management Outsourcing – IT matters more than ever for theretained organization

TM technology choices impact BPO value

CostImprovement

ShortTerm

LongTerm

QualityImprovement

ShortTerm

LongTerm

RiskManagement

ShortTerm

LongTerm

Impacts acrossphases:

•Transition

•Ongoing

•Evolution

Quality levers:

•Standardization

•Automation

•Innovation

Types of Risk:

•Transformation

•Operations

•Strategic

•Financial

•Legal

Solution Types

IT Drivers of Value

ERP

(on-premise oroutsourced)

Niche

(single process;SaaS or on-premise)

Talent Suite

(SaaS, on-premiseor hybrid)

Integration – A lever across all aspects

Levers of Quality

CostImprovement

ShortTerm

LongTerm

QualityImprovement

ShortTerm

LongTerm

RiskManagement

ShortTerm

LongTerm

Impacts acrossphases:

•Transition

•Ongoing

•Evolution

Quality levers:

•Standardization

•Automation

•Innovation

Types of Risk:

•Transformation

•Operations

•Strategic

•Financial

•Legal

Solution Types

IT Drivers of Value

ERP

(on-premise oroutsourced)

Niche

(single process;SaaS or on-premise)

Talent Suite

(SaaS, on-premiseor hybrid)

Integration – A lever across all aspects

Standardization is critical to achieving quality andcost goals of outsourcing

Consider the following in your technology options:Extent of configurability and personalization – upon implementation andongoingAbility to leverage HRO providers’ economies of scale in businessprocess and labor arbitrageBeyond towers of functionality – how does the provider achieve processstandardization across the integrated talent management landscape?

Within the context of BPO, while a best-of-breedapproach may present some benefits, a closer look

reveals the advantages of an integrated solutiondeployed in a standardized way.

Buyers of “TM Suites” focus first onautomation (Usability, Functionality)

What is the most important factor whenselecting a talent-management suite?

Source: Knowledge Infusion and HRE Talent Suite Adoption Survey, August 2007; n-256

Increase fromprevious years reflects

challenges of multi-vendor approach

Aspect ofautomation

Usability and functionality: Ensure the basicsare met

Business needs should drive the software decisions – not the other way aroundToday most customers simply automate

Incremental functionality is less groundbreaking than initial market entryapplications

Time-lags between vendor capabilities become less relevant as applications mature

“UE Glut” can drive user rejectionIn HRO – this could be mitigated by provider

Best-in-class across all modules giving way to greater emphasis on integrationFull functionality enablement (functionality effectiveness) requires integration for end-to-end process support. e.g. (blue=TM, green=ERP)– Recruit job profile and competencies learning upon hire to fill gaps budgets– Performance review calibration succession pools talent profile project

scheduling

Integration matters!

“An integrated talent management approach with service delivery, talentmanagement, and business applications on the same platform as the coreHRMS is a best practice.

We see a lower total cost of ownership from this integrated footprintreflected in lower per employee costs as opposed to a best-of-breed ormixed talent management environment.”

CedarCrestone 2008-2009 HR Systems Survey:HR Technologies, Service Delivery Approaches and Metrics

October 2008

“

Source: CedarCrestone 2008-2009 HR Systems Survey: HR Technologies, Service Delivery Approaches and Metrics, October 2008

Integrated Talent Management drivesimproved operational results

Source: CedarCrestone 2008-2009 HR Systems Survey: HR Technologies, Service Delivery Approaches and Metrics, October 2008

Reports from Bersin & Associates surveying over 700 globalorganizations reveal that those using integrated talent managementsuites routinely achieve superior results: they report two to threetimes higher return on investment in key HR processes than thoseusing standalone talent components.

Source: The Essentials of Performance Management Practices, Part 1, Bersin & Associates, October 2008.

“… Second, those taking anintegrated talent managementapproach strongly outpaceorganizations with a best of breedapproach on operating incomegrowth nearly three times (13.1%vs. 4.8%)”

CedarCrestone 2008-2009 HR Systems Survey:HR Technologies, Service Delivery Approaches and

Metrics, October 2008

“

Example: Learning integration across HR andthe Enterprise

One data modelIntegration by design

SimplicityConsistencyMaximum re-use

Resource & QualityManagement

Sales AccountingAnalytics

Enterprise Learning

HR MasterData

OrganizationalManagement

TimeManagement

Recruiting

Skills &Competencies

Performance &Succession

Barriers to Integrating Talent Management*

Getting to integrated talent management:break the silos!

Organizational silos have different driversLOB Drivers– Short-term automation and

process improvement– Can’t wait for lengthy

evaluation cycle or upgradesCIO Drivers:– Focus on reduced vendor

landscape and complexity– Seeking long-term solution

sustainabilityProduct silos challenge the Talentmanagement business case due tofocus on automationManaging the conflict in short-termvs. long-term drivers: consider a bridgingstrategy with SaaS

*Source: IDC's HR Technology Conference Survey, October 2007

The Innovation Lever of Quality

Technology facilitates innovation, i.e.:“baseball card” profiles and dynamic calibrations with AJAX and FlashUse of social networking in recruiting process

SaaS leads with most rapid delivery of new capabilities, but on-premiseBOB and ERP catching up (new release methodologies, faster releasetimes)

Some potential downsides of too-frequent changes

Process innovation requires easy adoption of process changes throughpersonalization and configuration options – again SaaS may impose limitsor at least hidden costs

Risk Considerations

CostImprovement

ShortTerm

LongTerm

QualityImprovement

ShortTerm

LongTerm

RiskManagement

ShortTerm

LongTerm

Impacts acrossphases:

•Transition

•Ongoing

•Evolution

Quality levers:

•Standardization

•Automation

•Innovation

Types of Risk:

•Transformation

•Operations

•Strategic

•Financial

•Legal

Solution Types

IT Drivers of Value

ERP

(on-premise oroutsourced)

Niche

(single process;SaaS or on-premise)

Talent Suite

(SaaS, on-premiseor hybrid)

Integration – A lever across all aspects

How software can mitigate transformationrisk

ImplementationMethodologies &

Consultants

ExtensiveStandardInterfaces

Broad SolutionScope

Configuration &Personalization

Capabilities

Mitigation ofTransformation

Risk

-Country and scopeexpansion-Usability

-Templatization-Ability to change

-Reduce overhead of ERP-Online config process-Resource availability

-Data and Processconnection points beyond

EE Master Data

Operations risks are heavily impacted bychoice of technology

Vendor ManagementMultiple technologies, relationships, compliance across all

Availability of resourcesEnablement of labor outsourcing and global expansionImpact of vendor attrition on long-term availability of resources

Solution RiskAutomation across process vs. end-to-endData redundancy/error risks (synchronization)Innovation Delivery – scope, timing, successRealization of transformative promises

Strategic Risk: Vendor viability is a realconsideration

The Shrinking Niche Vendor Pool1 53+ M&A/Attrition events since2005, impacting

Ongoing levels of productsupport, consultingservicesFuture investments forinnovationFuture migration

Most niche vendor revenues in$20-70M range, with manyunprofitable

Primary revenues fromheritage products

At least 23 vendors competingfor ‘suite’ leadership

1This is not a comprehensive list of all niche talent management vendors – only a representation showinghow a given pool of 63 vendors in 2003 has decreased to 27 in the course of 5 years.

Cost Considerations

CostImprovement

ShortTerm

LongTerm

QualityImprovement

ShortTerm

LongTerm

RiskManagement

ShortTerm

LongTerm

Impacts acrossphases:

•Transition

•Ongoing

•Evolution

Quality levers:

•Standardization

•Automation

•Innovation

Types of Risk:

•Transformation

•Operations

•Strategic

•Financial

•Legal

Solution Types

IT Drivers of Value

ERP

(on-premise oroutsourced)

Niche

(single process;SaaS or on-premise)

Talent Suite

(SaaS, on-premiseor hybrid)

Integration – A lever across all aspects

Cost implications across all phases ofoutsourcing

Transition and Ongoing PhasesImplementation timeframes and costs– HRO templatization and standardization helps minimize ERP impacts– SaaS value proposition diluted if there is a need for deep integration across

processesUE Glut – impact of proprietary/multiple systems on overheadPeople –– availability of resources on required cost basis (esp. globally)– Increased need for call center support when self service is insufficient or

confusing

Evolution PhaseFrequency of innovation (updates)Process or country expansionExpansion from LSO or RPO into other areas of talent – integrationmakes this a natural add-on vs. complex ‘new’ implementation

Provider Case Study: How technology complexitycan generate operational inefficiencies

Candidate Self-Service

Web Content Management

Manager Self-Service

Employee Self-Service

Vendor Self-Service Administrator Self-Service

Knowledge Management System

User Eventing/Messaging

System

CompensationManagement

System

ERP PayrollSystem

DocumentManagement

System

TalentAcquisition

System

BPO ESS

Input

Output

WFA

ERP

Time &Attendance

Benefits Admin

DefinedBenefits

Health &Welfare

Workforce Dev

Planning

LMCS

LMC

AbsenceManagement

System

BPO ESSCall Center

Utility

Integration Layer

Interfaces, Gateways, Web Services, Integration Services

Services Layer

Security Services, Data Services, User Services

Business IntelligenceReporting/Dashboards, OLAP Analytics

User Access

Outside Organization Within Organization

Candidates, Providers

Note: content has been simplified for confidentiality

Managers, Employees, ExecutivesHR Department

Provider Case Study: How technology complexitycan generate operational inefficiencies

Vendororganization’s

ability todeliver

Functional fitagainst typical

clientrequirements

License andMaintenance

Cost

Resourcesavailable in lowcost locations

Integrationcomplexity,cost and on-

going supportrequirements

TechnicalArchitecture Fit

ERP 1 80-90%coverage

ERP 2 80-90%coverage

Compensation Management

Document Management

Benefits Administration

Workforce Planning

Talent Acquisition

Absence Management

Business Intelligence

Technical implementation and ongoing support of complex landscape is expensiveEven more so when parts of the landscape require specifically-trained permanent resources and rely onoffshore specialists who hard to find, resulting in poor utilization and use of on-shore resources and overallsubstantially inflated cost structure

Relatively smallcompanies are not

able to support largeprojects

Very expensive whenvarious point solutions

added together

Nearly impossible tofind resources in lowcost locations (India,etc.) with necessary

skills

Release synchronizationcreates significant additional

risk, cost, and reducesinnovation because

less likely to install latestrelease

Complexity can lengthenImplementation timeline by

100-125% or more overprojections

Provider Case Study: How technology complexitycan generate operational inefficiencies

IT (incl.implementatio

n. andmaintenance)

G&A costs

20%

60%

10%

Cost oflabor

Profit 10%

Full-scope regional HRO over 6 years (including transition), 50K+ employeesEconomics over duration of contract

IT

G&A costs

45%

45%

10%

Cost oflabor

ESTIMATESROUNDED NUMBERS

Loss

Planned deal economics Actual deal economics

(afterrenegotiation)

Looking Forward

Are we measuring the right things?

“All of our service level measurements were green – butorganizationally, we were red.”

– Buyer of HRO including HR and Talent Management,September, 2008

“

Integrated Talent Management OutsourcingRequires A New Way of Doing Business

HRO is not ITOTMO (Talent Management Outsourcing) is different from traditional “HRO”requiring

Specialized knowledge of these strategic talent processesStrategy consulting and change management far and above traditionalHR/PY changesUnification of data and processes with exceptional business intelligencecapabilitiesNew measures & metrics are needed

What does “success” mean in outsourced talentmanagement engagements?

Call center responsetimesTransaction leveltimelinessTransaction levelaccuracyCustomersatisfaction levels…

Improved levels ofsatisfactionInstructor qualityLearningeffectivenessDecreased time to fillnew hires…

Improved saleseffectivenessOrganizationalreadinessIncreasedshareholder value...

what can/shouldemerge here?

Business Impacts:Improving Efficiencies

Strategic:Doing the right things

Service Levels:Doing things right

What are the right measures for demonstrating talent managementsuccess, and how does this change the buyer/provider dynamic?

Integrated Talent Management is the nextfrontier in HR outsourcing

Today’s economic conditions underscore the need for and opportunityfrom talent investments

More than any other outsourced initiative –Talent Management strategies and technologyrequire a holistic approach across processesand provider/client interactions

When considering outsourced talentmanagement, ensure

Solution functionality is aligned withbusiness needsAll processes are fully integrated for maximum business impactSelected technologies fully support the value drivers of HRO: Cost,Quality, Risk Mitigation

Thank You