I’m going to simplify things, and speak in the generalities of 3 major regions.  The Americas (usually the U.S. based business, but also encompassing at least North American partners) has reached a maturity in global business where they have a decent understanding about how to deploy global systems.  U.S. multi-nationals have realized that good adoption of a global system will include early interaction from the global business partners.  Even then, the U.S. is highly region-centric and doesn’t get the cost and complexity of trying to integrate global requirements into a single HRMS, although they generally really do try (now).  And all of this is if a U.S. based business is calling the shots.  More on the U.S. as a non-HQ region in a second.

EMEA (usually just a European business) justifiably think that they are quite unique.  In fact, most American’s simply don’t understand the complex business environment that exists in EMEA.  American’s tend to think the labor laws and financial requirements that exist in the U.S. must far surpass any complexity in EMEA, but that is far from true.  EMEA is insanely difficult as you deploy languages, compliance requirements, differences in dealing with unions and work councils, and cross borders (lots of them).  When EMEA is the HQ country, Europeans are a bit behind the U.S. in understanding global HR requirements.  I’ll use the SAP system as a general example.  SAP was always far behind any other HR systems in formulating their HR requirements.  They simply didn’t see them as important, and the functionality was lead by U.S. based software companies.  It really was not until the early 2000’s that SAP started to understand, but by then, other software companies had a decade head start.  Even today, U.S. based
software companies seem to be far ahead in the area of advanced functionality.

Asia/Pac seems to be its own annoying world.  Not only are they fairly antagonistic to “West-lead” initiatives, but they often don’t agree with the approach.  I’ll have to give Japan a release on this one, but countries like China are becoming an integral part of global enterprises.  Unfortunately, China is a prime example of a country that can literally hire 100 people just to run manual processes and still have a positive ROI versus implementing automation.  Still, Asian subs and business units seem to like to do things their own way.

The core problem with global data is not about the technology.  In fact, it’s really not even about the peculiarities of the HQ  cultures.  Instead, there is a global problem that simply points to the fact that each HQ places prime importance in the requirements that are most visible – their own.  Alternative requirements don’t have as lofty a place, and when global systems are then implemented on top of biased priorities, you end up getting really unhappy region and business units.

Was this a merger, or an acquisition? Well, to be honest, my first reaction to this was that Wyatt got the upper hand.  I think I’m probably mistaken on this though.  It really does seem that just about everything is being split 50/50.  Each gets 50% of board members, the partners at each firm get 50% of stock, etc…  However, Wyatt did indeed get the CEO.  I’d generally say that this makes good sense since Wyatt was previously public and a CEO who understands how to operate in the public environment certainly has the upper hand.  Towers CEO now gets to be president.

What do I think of the retirement industry? Well, combining Wyatt (who I have long assumed was the largest actuarial firm out there) with TP really creates a behemoth in the retirement industry.  I have no idea if this is a good thing or not.  Sure, the new company will get the lions share of any new work available (which won’t be much), but the retirement industry is dying a slow death.  On the other hand, that slow death is obscenely slow.  Realistically speaking, if every plan shut down today, you’d still have to make actuarial valuations on an annual basis until the last plan participants died.  That would be decades.  In the mean time, this new company has an incredibly stable base of revenues.  It really does not matter what happens to the markets and recessions like we have right now.  When the plan needs an actuary, they will pay for it.  Even if retirement work declines at 3-5% each year, there is still 30-40 years of very steady income.

What happens to HR service delivery and technology work? This is probably the area I’m most concerned about.  Really, the Wyatt-TP merger presents an opportunity to the smaller players in the industry.  I always saw Wyatt as more of a mid-market player.  Actually they have some really good people, but just don’t have the depth and bench strength that TP once had.  In the last year, TP ended up completely removing its SAP and PeopleSoft practices and severly cutting much of the technology practitioners as the economy went shouth.  Certainly as we have discussed on systematicHR, this is consulting business that is subject to the swings in the economy.  Still, the merging of a mid-market player with an organization that has seriously trimmed its service delivery and technology capabilities does not make for a HR technology think tank.  I think that the Hewitt, Accentures, and Delloittes have it best right now.  While Accenture and Delloitte have not been the strongest in HR consulting (IMHO), they have been the best at integrating HR consutling with other functions like finance and technology.  Hewitt on the other hand has probably the best grasp of H operations from their HRO ventures.  I’d also say that small boutiques have been getting a much larger share of the HR technology and strategy market for several years now, and they are in better position now than ever before.

Despite this difficult Q1, we believe the market is going to come roaring back in Q2 or Q3 of 2009.  Most of the private companies we talk with (Plateau, CornerstoneOnDemand, Learn.com, GeoLearning, Halogen, and others) tell us that while they had a weak Q1, they have seen tremendous growth opportunities in Q2.

First, the mid-market and small enterprise segment of talent management is starting to grow rapidly.

Fourth, there is still tremendous demand for talent management software.  In today’s rapidly changing workforce (from layoffs to restructuring to rapid growth), the value of this set of software is greater than ever.  While Q1 was tough for vendors, most buyers only postponed their purchases – giving themselves more time to evaluate options and improve their own businesses.  In Q2, Q3, and Q4 these companies will buy these systems.

So my thinking on the slump basically reflects back to 2001 when the dot-com bubble “burst.”  When that happened, basically, HR technology spending totally dried up.  It actually took about 3 years for HR technology spending to come back, and when it did, spending came back with a vengeance.  My theory on this was that when spending cuts happened in 2001, HR technology was among the first to be cut.  Then as the recession ended and things got better, neglected business critical technologies were upgraded, implemented, and restored.  Things like CRM or supply chain that didn’t get needed upgrades for months or years got the first funding dollars.

As we all know (or think), in most companies HR funding is a lower priority than other business functions.  I don’t see any reason to see this to be any different as the economy recovers this time.  As organizational revenues recover, employees will be rehired or returned from furloughs, business critical applications will be maintained first, and budget cycles will still lag a year behind needs.  Before an organization goes out and spends $100K or even $1M on any HR application including talent management, there are a whole lot of other unspent business critical dollars that will probably come first.  HR budgets that got slashed in 2009 will still remain slashed in organizations with any governance at all.  Perhaps some organizations will get dollars in their budgeting cycles at the end of this year, making dollars available in 2010, but I’m guessing that 2010 budgets will focus in other areas than HR.

Perhaps Josh is a better judge than I am though.  It may indeed be possible that certain talent applications will actually fare better than most other HR technologies.  Performance and Succession ran such high profiles in the last few years that we can only hope executives remain enamored with those technologies.  I’m not a big fan of looking at vendor pipelines for guidance on future sales.  Every vendor (application, outsourcing, or consultancy) has great looking pipelines right now.  Salespeople seem to be sandbagging as much questionable prospecting into their pipeline portfolios as they can right now, as much to remain optimistic as to try and keep their jobs.  Pipelines are also more robust in number of prospects, but smaller in terms of deal size.  The mega deals that have kept vendors going for years will be slower to rebound.  I think that most organization will have to deal with the technologies they were able to install in the last couple of years and hope they continue to work for a couple more years.

The truth of the matter is that data warehouses are inherently bad at being data hubs.  An essential part of the data warehouse is the ETL engine.  ETL stands for Extract, Translate, Load, and it’s the translate part that gives us problems.  When the translations occur, what is actually happening (simplistically) is the data goes through a transformation so that when you report in the end stat of a data warehouse the data definitions are the same.  The transformation is really an alteration of the data so that analytics are made simpler and possible at the same time.  However, transformed data does not really work well for integration.

Let’s take salary grades as an example.  When you do a global analysis of salaries, you would probably load in global employee salaries, currency conversion rates, and then perform a calculation to convert the data into the home currency.  The report then might look at the distribution of salaries across several bands.  These bands however, have been transformed into global bands as opposed to using the home country’s salary grades.  In many cases, the original salary grades may not have gotten into the data warehouse intact.  (just an example I thought of off the top of my head).

I would suggest that to be a true data hub, you would want to have the original data from the original system.  Let’s say that you need global employee data from many sources to load into a single global succession system.  Not only will you be taking employee indicative data, but you’ll want performance scores, education, goals, etc…  Once again, the problem with a data warehouse here is that performance scores in each country may utilize different rating scales, etc.  The normalized data out of a data warehouse may not be suitable for the succession application depending on the decisions you make when you implement.

The alternative is to use what is usually called the ODS, or the Operational Data Store.  The ODS often exists within the DW application, but is a loading area (after the E in ETL, but before the TL).  The ODS is not ideal because it’s really just a storage tank before translation, but does hold untransformed data from all the systems.  While not intended as an interface engine, its tables could be used for it (I suppose), but the actual transformed data tables are simply not appropriate for use as an interface engine in my opinion.

Core HR is more of a commodity than ever.  Truly it has simply turned into a specific set of functionality, and that which made it strategic before has been ripped out of core and placed into other applications or engines.  First, let’s look at commoditization.  At one time, the ability to provide table driven data validation, full effective dating, and robust compliance was the domain of a few major players.  Now, these functions are a part of almost all major HRMS solutions offered at any price.

Second, we look at functionality that used to make core HR solutions strategic.  I’ll call these workflow and analytics.  From the process standpoint, end to end solutions no longer exist in the HRMS application.  Indeed, end to end workflow barely exists at all.  Point solutions have virtually disabled the ability to flow work and approvals through multiple products with different approvals in each.  While it is possible to utilize a workflow engine to accomplish this, the cost is prohibitive to all but a few very large organizations, and I have not seen HR a high enough priority anywhere to deploy it.  Analytics on the other hand have almost been fully removed from the HRMS application.  Value can’t be provided by core HR if none of the talent, payroll and benefits data sits in other applications or outsourcers.  Indeed, as the value of analytics comes from cross functional data analysis, business intelligence is really the domain of massive data warehouse applications.

Third, the old employee and manager self service systems are mature and ubiquitous.  Having employees enter in their new phone number is not very exciting anymore, and the real self service functions of performance reviews or compensation processes are generally removed to the talent systems.  Instead, we move to massive portal environments that remove the existing self service functions from each individual application and centralize the user interface.

If indeed the HRMS application has been commoditized in terms of functionality, then the lowest price point that offers scalability and good data architecture (not all applications out there are very pretty from the backside) would seem to suffice.   Scalability obviously so that your organization can not only grow, but store greater amounts of employee effective dated rows over time.  Good data architecture because the ability to port data into data warehousing applications as well as integrating to other point solutions will be made much simpler.

http://www.cedarcrestone.com/survey/systematicHR.html

Continuing and New Research Areas For 2009. This year’s survey covers questions about the following:

• Adoption of talent management, business intelligence, service delivery, and workforce management applications as well as SOA and Web 2.0 innovations
• Deployment options and related expenditures (on premise, software-as-a-service, hosting, business process outsourcing, etc.)
• Comprehensive metrics such as employee/HR staff ratios, administrative costs per employee, links between technology adoption and financial performance, and many others

I think I was wrong.

Perhaps my being wrong has nothing to do with our NOT being smarter.  Perhaps we had every intention to continue to prepare our HR infrastructure.  But that fact of the matter is that cash is tight.  Nobody is lending money, and few people are making enough money to spend freely.  With that, HR budgets are being reigned in and once again, HR technology spend is down.

The money multiplier is a simple macroeconomic theory.  For every actual dollar (unit of printed currency) in circulation, there is a multiple of that dollar that becomes a portion of GDP.  For example, if HR has 1 dollar to spend on software, a software vendor will in turn spend a portion of that dollar on R&D, which in turn may go to HR consultants, etc.  The idea I’m trying to put forth is that in a good or bad economy, the money multiplier fuels the HR industry.

The problem is that in a good economy, the HR industry has funding from corporate budgets.  In a bad economy, HR budgets are cut to the bare bones for continuing basic operations.  HR is not a self funding industry – we rely on the rest of the enterprise to provide is with the cash we need to fulfill our objectives.  Without cash from the enterprise, the entire industry goes into a lull.  Without the seed cash from the enterprise, the money multiplier stops working.

I’m not sure what happens next.  We know that the applications providers have been doing some massive layoffs.  We know that sales are slowing.  We know that consulting operations for both the vendors and traditional consultancies is slipping.  What we don’t know is how quickly the enterprise will start fulfilling our budget requests when cash starts to flow again.  I’m still hoping that even if we don’t continue spending right this minute, that ultimately we are smarter than last time.  Let’s get in front of budgets and make sure there isn’t a 3 year lag before HR spending comes back.  Let’s make the case now that our priorities are still enterprise priorities and can’t wait until 2012 to get started again.

People whose faces turn red when they drink alcohol may be facing more than embarrassment. The flushing may indicate an increased risk for a deadly throat cancer, researchers report. ¹

What?!?  So just because I apparently lack an enzyme that helps to process alcohol, I might be at increased risk for cancer?  Read on.

But those with only one copy can develop a tolerance to acetaldehyde and become heavy drinkers…  Reducing drinking can significantly reduce the incidence of this cancer among Asian adults. The researchers calculate that if moderate- or heavy-drinking ALDH2-deficient Japanese men reduced their consumption to under 16 drinks a week, 53 percent of esophageal squamous cell cancers in that group could be prevented.

OK – so wait just a minute – I can reduce my risk of cancer by limiting my drinking. ²  So let me get the logic straight here:

1. I am an Asian with “Red Face Syndrome”
2. People with Red Face Syndrome sometimes become heavy drinkers
3. Heavy Drinkers have a higher risk for throat cancer
4. Therefore people with Red Face Syndrome have a higher risk for throat cancer.

Call me stupid, but this is the most illogical logic I have ever seen published in the New York Times.  Did we stop to think that perhaps all heavy drinkers have a higher risk for throat cancer?  And did we measure the percentage of heavy drinkers among Asians compared to other populations?  In reading the this from the NY times, I certainly believe that numbers 3 and 4 above are correlated, but I’m not at all sure that numbers 1 and 4 above are correlated in any way.  Let’s try this logic on or size:

1. Employees are hired from employee referrals into the call center
2. Employees from employee referrals have a high risk of leaving the call center within 1 year
3. Therefore, employee referrals are a poor source of hire for the call center.

I’m hoping you can see my trouble with this logic.  In the employee referral case, we didn’t measure the performance against other groupings of applicant sourcing, nor did we validate that turnover within 1 year was actually abnormal.  Here’s all I’m saying.  Depending on hour you design your analytics, they could seem like they are telling you a certain story.  Hopefully you have someone in your HRIT or analytics organization who has taken a statistics course sometime in her past.  Misinterpreting data can be pretty silly.

1. Nicholas Bakalar, March 20, 2009.  “Drinker’s Red Face May Signal Cancer Risk.”  Retrieved from NYTimes.com on April 18, 2009. [back]
2. Not that it matters – but I don’t drink [back]

Now we can debate why A.I.G. felt it necessary to guarantee seven executives at least $3 million apiece when the economy was clearly on shaky ground. Perhaps we will find out these contracts were a bit of sleight of hand to enrich executives who knew this financial Titanic had hit the iceberg. But another possible explanation is that A.I.G. knew it needed to keep its people…

“We cannot attract and retain the best and brightest talent to lead and staff” the company “if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he said…

“The jobs are terrible,” said Robert M. Sedgwick, an executive compensation lawyer at Morrison Cohen who represents a number of employees of banks that have taken government money. “You have to read about yourself in the paper every day. These people are leaving as soon as they can.”

Let them leave, you say. Where would they go, given the troubles in the financial industry? But the fact is, the real moneymakers in finance always have a place to go. You can bet that someone would scoop up the talent from A.I.G. and, quite possibly, put it to work — against taxpayers’ interests.

“The word on the street is that A.I.G. employees are being heavily recruited,” MS. Meyer says. ¹

So while I understand the whole talent and retention thing, basically we are saying that the people who were arguably behind the largest financial crisis in modern economic history are worth retaining.  There is no arguing that these are fabulously talented people.  But fabulously talented people can either exercise their talent in either positive or negative ways.

An organization recruiting AIG talent knows two things.  First, these people do have a track record for innovation and being very good at what they do.  Second, the instruments these people put in bankrupted one of the largest corporations in the world and threw the world economy into a tailspin.

It’s like the concept about marriage and changing one’s spouse.  You can assume you will be able to change your partner after you are married, but it never really works.  So here, you know you have really talented and smart people, but the idea that you can change the underlying principles and philosophy they operate on seems a bit naïve.

1. Andrew Ross Sorkin, March 16, 2009.  “The Case or Paying Out Bonuses at A.I.G.”  Retrived from NYTimes.com on April 18, 2009. [back]

I personally think it’s fair to say that if you are a global organization in the Americas and EU, you will eventually have operations and employees in other parts of the world.  If that assumption is fair, then in my opinion you might as well pursue safe harbors under the US Department of Commerce.

There is quite a nice EU website here¹ to tell you more about model contracts than you ever wanted to know.

1. http://ec.europa.eu/justice_home/fsj/privacy/modelcontracts/index_en.htm [back]