The war for talent is on. With the market for quality workers becoming increasingly competitive, executives are making their company's human capital a top priority. Also, as millennials enter the workforce, HR leaders want to implement performance management technology to appeal to this instinctively more collaborative and tech-savvy crop of new workers.
Talent management software can help businesses recruit, train and retain valuable employees. Despite integration issues, analysts report that the technology is in high demand.
In this guide, learn about the four pillars that make up talent management software and its potential benefits. Find tips for choosing the right system and discover major vendors and important trends to consider.
Table of contents:
Talent management software's four pillars
Talent management software can be broken down into four functions, which analysts refer to as the "four pillars:" recruitment, performance management, learning and compensation management.
The recruitment module helps HR to attract qualified candidates and keep track of resumes through an applicant tracking system (ATS). Performance management enables managers to define and monitor employee goals. Learning tools aid with onboarding, provide employees with training materials to improve their performance and keep track of skill progression. Compensation management connects performance to pay, and makes sure that every employee is paid correctly.
Talent management software unifies these four functions, although a number of products from niche vendors specifically address one or more of these areas. While companies might be interested in specialty software to remedy a particular problem, experts say that a consolidated system can help reduce Total Cost of Ownership (TCO).
Benefits of implementing talent management software
It's often difficult for companies to keep track of their staff's goals or skills in a meaningful way. This can lead to employees feeling slighted when they are not properly recognized for their efforts. When frustrated workers resign, the business is forced to spend time and money to recruit and train new employees.
Talent management software can bolster employee retention by explicitly documenting goals and rewarding success with pay-for-performance compensation management. The recruitment function allows companies to hire the right workers from the start, which experts say can lead to a stronger workforce.
The four integrated modules can also help HR managers glean a closer look into the employee lifecycle, and identify and remedy training gaps.
Tips for choosing a talent management system
There are several important factors to keep in mind when choosing talent management software, according to industry experts. HR leaders should first examine the business' workforce, taking into consideration the number of employees, their geographic locations, and turnover rates. Any other software that the company uses, such as a CRM or ERP system, should also be taken into account for integration purposes.
HR leaders should go into the decision process with a clear idea of what they'd like to accomplish with the aid of new software. Is the goal to automate manual processes, standardize a number of disparate systems, or completely reinvent the HR approach? The answer will help HR managers choose the right talent management software to address the company's specific needs.
It's also important to calculate the TCO of a new HR system, a step that experts say often gets overlooked. A strong business plan can help win the support of a company's C-level executives, whose endorsement of talent management software is often critical for its success.
Because integration across modules is one of the greatest challenges cited by talent management software users, experts suggest that business leaders identify which of the four pillars is the most crucial for the company, and then choose a system that is strongest in that area. Currently, recruitment is most HR executives' top concern.
Experts say that IT and HR should work together to evaluate talent management software. IT consultants can help HR leaders determine if the four modules integrate smoothly, while also taking the user interface into consideration.
Emerging trends: Social media and Software as a Service (SaaS)
Two major trends are affecting talent management software: social media and the cloud.
Experts say that major vendors are starting to "socialize" their platforms by revamping their recruitment modules, adding collaborative capabilities to learning and implementing 360-degree feedback into performance management. However, because HR has historically associated external social media with company risk, analysts say that it will take some time for managers to warm up to new social tools, which reside behind the firewall. Until then, supply will be ahead of demand.
SaaS HR products are on the rise, and talent management systems are leading the way. Low upfront costs and automatic upgrades are two key benefits of using cloud-based software, and HR managers are taking notice.
Adopting SaaS software has extra implications for HR, however. Because employee data is under specific privacy regulations, analysts recommend that HR managers carefully evaluate SaaS vendors' privacy policies before moving data to the cloud. Despite privacy concerns, HR is migrating to the cloud faster than other departments, such as finance.
Prominent talent management software vendors
Major acquisitions have shaken up the talent management market.
Although analysts generally regarded SAP's acquisition of SuccessFactors as a positive move, some users complained that the decision muddied the vendor's HR offerings, as SAP already had an HCM product. Not long after, Oracle announced its acquisition of Taleo, and IBM threw its hat in the ring by acquiring Kenexa several months later. Other leading talent management software vendors include Cornerstone and Halogen.
While both SuccessFactors and Taleo were identified as leading talent management systems before their acquisitions, Kenexa was not a main competitor. In light of the recent acquisitions, analysts caution that the functionality of these systems may change.