TOP PERFORMING ORGANIZATIONS

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1 THE 7 PRACTICES OF TOP PERFORMING ORGANIZATIONS Highlights and Recommendations taken from CedarCrestone HR Systems Survey White Paper w w w.cedarcrestone.com/annual_surve y

2 The Seven Practices #1: Top Performers standardize processes and use sophisticated change management practices. #2: Top Performers are more likely to already have, or be planning a move to, a SaaS HRMS. #3: Top Performers avoid extensive customizations of their HRMS. #4: Top Performers have higher user adoption of employee, and manager self service, and shared services. #5: Top Performers are more likely to have an Integrated Talent Management (ITM) system on the same platform as their HRMS solution. The Seven Practices of Top Performing Organizations Summary and Recommendations Taken from CedarCrestone HR Systems Survey White Paper Top Performers Maximize Value from Their HR Technologies...1 Top Performers Are Much More Financially Successful Than Their Peers...2 Think about People and Processes, Not Just Technology...3 Consider SaaS HRMS and Talent Management Solutions If You Haven t Already...4 Avoid Customizations to Save Time and Money...5 Put Your Technology into the Hands of Your Employees and Managers...6 Implement a Single Platform for Your HRMS and Talent Management Solutions...7 Use Integrated HR Data for Better Decision Making...8 Stretch the Value of Your HR Technology Budget...9 #6: Top Performers have more sophisticated business intelligence (BI) solutions in place and more often put these tools in the hands of managers. #7: Top Performers have more HR technologies in use and spend less on HR technology per employee. Information contained in this white paper was compiled and analyzed by CedarCrestone as part of our commitment to provide knowledge on workforce technologies, trends, and the impact their adoption has on the performance of the enterprise. CedarCrestone encourages customers, media, partners, analysts, and other readers to share the information found herein and to quote liberally from this document with appropriate credit to CedarCrestone. We request that all quotes and references are credited as CedarCrestone s The Seven Practices of Top Performing Organizations White Paper. i

3 Introduction Each year, once the CedarCrestone HR Systems Survey closes, we identify all of the publicly traded survey respondents and collect their key financial metrics. Just as Stephen Covey studied highly successful people, we looked for highly successful organizations to understand their key practices and why they are so successful. To select these organizations, we chose four independently validated key financial metrics. The result is the CedarCrestone list of the Seven Practices of Top Performing Organizations. As we looked at these organizations, the differences between this top cohort and other organizations are striking and consistent. Top Performers Maximize Value from Their HR Technologies What do Top Performing organizations do differently than everyone else? They work to get maximum strategic value from their HR technology investments. Maximizing Value: Top Performers have more technology in place than other organizations (see Practice #7), but they don t just implement technology for technology s sake. Instead, these organizations make an active effort to maximize the strategic value from each solution. From the start, they standardize and improve and transform their business processes (Practice #1). They implement sophisticated and pervasive change management programs for employee buy-in (Practice #1). Combined, process improvement and change management ensure that employees and managers are maximizing self service options (Practice #4), taking the burden from the HR department, but more importantly empowering employees. They have even gone a step further in leveraging their HR technology investments by implementing sophisticated business intelligence solutions and putting decisionmaking tools in the hands of their managers to improve the quality and impact of their decisions (Practice #6). Control Costs Maximize Value Keeping Costs Under Control: Top Performers have more technology while spending less on technology per employee (Practice #7). Their up-front process work means they can avoid customizations (Practice #3) and the costly implementations and upgrades that go with a highly customized system. They are leading the way in implementing SaaS HRMS solutions achieving a reduced total cost of ownership of SaaS solutions both in outright expenditures and staffing (Practice #2). They have chosen to leverage their existing HRMS solutions by implementing an integrated talent management solution on the same platform (Practice #5). These strategic technology decisions enable Top Performers to make the most of their technology budget. As your organization develops its HR technology strategies and plans for 2013, we encourage you to look at these practices of the best-of-the-best to see what is most relevant for you to adopt for your organization. 1

4 Methodology For 15 years, CedarCrestone has conducted a broad survey on HR technologies adoption and the value organizations achieve from their use. The CedarCrestone HR Systems Survey had 1,246 respondents worldwide. To select the highly successful organizations, we chose four independently validated key financial metrics for the publicly traded organizations among respondents (n=280). Looking at a composite score across all of these metrics, we identified the top 50 organizations as Top Performers. We then analyzed their survey responses to identify common characteristics. Top Performers Are Much More Financially Successful Than Their Peers Four metrics identify Top Performers Top Performers Revenue per Employee. The average Revenue generated by each employee. This metric gives an $681,903 indication of the productivity of enterprise employees. Revenue per employee for Top Performers was nearly twice that of all other respondents. Profit per Employee. The resulting Operating Profit $317,508 attained by each employee. This figure provides a measure of profitability of enterprise employees. Profit per employee of Top Performers was 142% higher than other respondents. All Others $352,576 $131,157 Operating Income Growth. Gross Income subtracting operating expenses before interest payments and taxation expressed as a growth rate over the prior year. It indicates how well organizations are investing in employees. Top Performers operating income grew fifty percentage points more than other respondents. 61% 11% Return on Equity. This shows the profit generated from the total shareholder financial investment in the company. The ratio gives an indication of how viable it is for the company to raise further shareholder funds for continued expansion of the company. Top Performers ROE was more than double other respondents. 23% 10% 2

5 #1: Top Performers standardize processes and use sophisticated change management practices. In CedarCrestone s experience with HR technology implementations, we see time and again that the most successful implementations include up-front business process improvement work. When we look at the practices of Top Performers, they standardize processes where it makes sense and know when to support country or unit variations. Top Performers know that changing processes or technology doesn t come easily. They invest in change management from the start to ensure that people embrace the changes and actually use the solutions, making their implementation more successful and the results more impactful. In top performing organizations, HR has this power to make changes and does. By looking beyond technology to think about people and process impacts, the HR department in Top Performers is more likely to be seen as strategic to the organization. Think about People and Processes, Not Just Technology Processes come first: Top Performers are more likely to be engaged in business process improvement work. They have more standardized processes throughout the organization. Top Performers implement this process standardization while simultaneously working in a more diverse and complex environment Top Performers work in 40% more countries than all other respondents. Level of Process Standardization Top Performers All Others Top performers engage in best practice change management initiatives: Sophisticated methods: Top Performers use methods such as process optimization, Six Sigma programs, stakeholder engagement, and usability studies across user stakeholder communities, in addition to a myriad of communication and training approaches. Pervasiveness: Most Top Performers indicate that change management is a standard and expected part of every implementation throughout the organization. One respondent told us his organization spends 50% of the actual implementation budget on change management! Dedicated resources: Top Performers have resources explicitly dedicated to change management, either through internal positions, specialized teams, or external consulting resources. 3

6 #2: Top Performers are more likely to already have, or be planning a move to, a SaaS HRMS. As all companies begin to embrace or at least explore SaaS for their HRMS, Top Performers are leading the way. The many benefits of SaaS solutions, including reduced ongoing support costs and an improved user experience, are outweighing any concerns that Top Performers may have about the switch to SaaS from licensed models. While some organizations are embracing a hybrid model of a combination of onpremise and SaaS, Top Performers are more likely to make a complete switch to a SaaS HRMS. Consider SaaS HRMS and Talent Management Solutions If You Haven t Already SaaS HRMS Adoption Top Performers All Others Why SaaS? While all organizations cite an expected improved user experience as the #1 reason to move to SaaS, Top Performers are also more likely to recognize the impact on total cost of ownership and the reduction in IT infrastructure that comes with SaaS. How are they moving to SaaS? Unlike all other survey respondents, Top Performers are more likely to be putting effort into replacing their HRMS rather than upgrading their current systems. Among Top Performers, 8% have adopted Workday and this will double in the next year to 16%. What about Talent Management? SaaS solutions are more widely implemented for talent management applications across all respondents, and Top Performers lead the way. 60% of Top Performers currently have SaaS talent management applications, increasing to 75% in the next 12 months. 4

7 #3: Top Performers avoid extensive customizations of their HRMS. When organizations do up-front business process improvement work and use best practice change management (as in Practice #1), they can avoid customizations that will increase the time and money it will take to implement or upgrade any solution. Avoid Customizations to Save Time and Money Top Performers Level of Customization All Others The cost impact of minimizing customizations can be seen in the lower HR technology expenditures of Top Performers (see Practice #7). 21% 79% No customizations Some customizations 6% 92% No customizations Some customizations Fewer customizations = most up-to-date technology. Top Performers are more likely to be on the current release of their HRMS than other respondents. Being on the most current release means that these organizations can take advantage of improved technology, functionality, and user experience that comes with each release. Fewer customizations = faster time to upgrade. Not only are Top Performers more likely to upgrade, those upgrades take an average 25% less time than other respondents. As a result, they start realizing the value of the upgrade sooner. Fewer customizations = more productive HRIT/IT staff. Without the responsibility of maintaining customizations, HRIT/IT teams at Top Performing organizations can support 25% more technology than at other organizations. Putting this another way, Top Performing organizations have 25% smaller HRIT/IT staff. 5

8 #4: Top Performers have higher user adoption of employee, and manager self service, and shared services. Put Your Technology into the Hands of Your Employees and Managers % of Employees/Managers Adopting Self Service Across All Processes Having the right technologies is one thing, but are the technologies being used, particularly by employees and managers outside of the HR department? Top Performers have leveraged their process standardization and minimal customizations to get their technologies into the hands of their employees so they really make the desired impact. Employee Self Service Manager Self Service Focus first on administrative applications. More than 80% of Top Performers staff have self service access to administrative applications such as basic data changes, payroll, and benefits. These applications are easy to implement and are a good first introduction to self service. For managers, focus on performance management. More than 70% of managers at Top Performing organizations use self service applications in performance management process. As a regularly occurring (and mandatory) process in most organizations, performance management is a good introduction to manager self service. Give mobile access. While mobile access to HR technologies is an emerging practice, Top Performers are leading the way, giving 10% of their employees mobile access, compared to just 4% of other organizations. Use this new technology to put information into the hands of your employees and managers, wherever they are, on their devices of choice. 7

9 #5: Top Performers are more likely to have an Integrated Talent Management (ITM) system on the same platform as their HRMS solution. Implement a Single Platform for Your HRMS and Talent Management Solutions Impact of Talent Management on Same Platform as HRMS $800,000 $607,989 Having an ITM solution on the same platform as the HRMS solution enables organizations to achieve efficiencies in the support of their systems and also impacts their ability to do cutting-edge talent analytics. The difference between Top Performers and other organizations here is striking, with 70% of Top Performers having their ITM and HRMS on the same platform, compared to 47% at other organizations. $600,000 $400,000 $200,000 $52,498 $0 Yes* Revenue per employee $457,898 $26,918 No* Net Income per employee * Yes: Respondents with talent management and HRMS on same platform No: Respondents with diverse talent management solutions not on the HRMS platform Save money on integrated talent management. Top Performers pay nearly 50% less for their integrated talent management solution compared to other organizations. By building on technology that they are already familiar with, Top Performers are able to keep their additional investment in integrated talent management lower. Save money on business intelligence. A single platform for all of your HR and talent management data makes it easier to implement sophisticated business intelligence solutions (see practice #6). At the same time, Top Performers spent less than half of what other organizations spent on business intelligence. Get talent management into the hands of your employees. Employees at Top Performing organizations are more likely to be using self-service for talent management, they have greater access to social collaboration tools, and they are nearly 2.5 times more likely to have mobile access to talent management applications. 8

10 #6: Top Performers have more sophisticated business intelligence (BI) solutions in place and more often put these tools in the hands of managers. The ability to do cutting-edge analytics comes from having a BI solution that integrates data from multiple sources and presents results through dashboards or other visualizations, and Top Performers do this better. Top Performers are also more successful at getting their BI solutions into the hands of their managers, where real business value can be achieved by enabling better decision making. Use Integrated HR Data for Better Decision Making Percent of Managers with Access to BI Tools 25% 15% Top Performers All Others Manager access = better decision making. Putting business intelligence into the hands of managers has always been a best practice in our view, and this year is no exception. Nearly 50% more managers at Top Performing organizations have direct access to BI tools, enabling data-driven decision making. Integrate multiple sources of data for leading edge analytics. Top Performers are 20% more likely to use cutting edge business intelligence tools that integrate data from multiple sources throughout the organization. Top Performers are leaders in the implementation of HR warehouses and enterprise-level scorecards or dashboards. Consolidated views of data from throughout the organization give managers the big picture they need for everyday decisions. Take advantage of cutting edge technology to expand access to analytics. Top Performers are taking the lead in two emerging areas of BI: mobile access analytics and push technologies, which actively put data into managers hands through automated distribution of reports or alerts based on metric conditions. Fifteen percent of Top Performers plan on implementing push technology in the next 12 months, compared with just 5% of other organizations. 9

11 #7: Top Performers have more HR technologies in use and spend less on HR technology per employee. Top Performers have more technology in place across all categories of applications (as shown to the right). And they do all of this by spending less per employee than other organizations. Top Performers success shows that you don t need a top dollar budget to be a top performing organization. Stretch the Value of Your HR Technology Budget HR Technology Expenditures Per Employee Top Quartile of Applications In Use Top Performers All Others $247 $280 62% 35% Both foundational applications and cutting-edge technologies put Top Performers in the lead. Not only do Top Performers have more applications in place today than other organizations, they have focused on improving the use of their foundational technologies through increased self service (see #4) and are leading the way in adoption of business intelligence and social applications. Investments in talent management are a top priority for Top Performers. Looking ahead 12 months, Top Performers are outpacing other organizations in their plans to implement competency management or profiles, succession planning, and career development. Make smart technology decisions to stretch your technology dollar. Keeping your talent management on the same platform as your HRMS (see #5), avoiding customizations (see #3), looking at SaaS solutions (see #2), and investing up-front in business process work and change management (see #1) all of these strategic technology decisions enable Top Performers to make the most of their technology budget. 11

12 About CedarCrestone CedarCrestone delivers industry-focused client success by providing consulting, technical, and managed services for the deployment, management, and optimization of next-generation applications and technology. CedarCrestone s Research and Analytics staff provide comprehensive benchmark services, an ideal starting point of any update to your HR systems strategy, to prioritize applications, or to support development of your business case. Contact HRSystemsSurvey@CedarCrestone.com for further information. Corporate Office 1255 Alderman Drive Alpharetta, Georgia