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Bersin & Associates Research Finds That Implementation of Performance Management Systems Yields Positive Business Impact in over 85% of Companies

Performance Management Now Viewed as Cornerstone of Modern Talent Management Strategy

Oakland, CA – October 15, 2008 – Bersin & Associates, a research and advisory firm focused on enterprise learning and talent management, today announced the release of two new studies which together represent the most thorough analysis to date of employee performance management, the foundation for virtually all corporate talent management processes – ranging from compensation to onboarding to succession management.

The Essentials of Performance Management Practices: Part 1 delves into the practices of performance management in corporations today, with a specific focus on their business impact. The Essentials of Performance Management Systems: Part 2 takes a critical look at the rapidly growing market for performance management systems, examines implementation and adoption trends, and compares and contrasts offerings from 25 solution providers.

“Once viewed as a standalone employee appraisal process designed to feed compensation and promotion decisions, performance management has now become the cornerstone of modern talent management,” said Leighanne Levensaler, director of talent management research and the study’s primary author. “Our research found that this seemingly simple process is undergoing significant transformation as organizations embark on automating goal alignment, assessment, coaching, development, and succession processes.”

The Bersin & Associates research is published in two parts: Part 1 is designed to give HR executives and managers insight into modern, high-impact employee management processes, with a focus on the best practices for a variety of different business conditions. Part 2 is a comprehensive buyer’s guide to the performance management systems market.

“This research demonstrates two important findings,” said Josh Bersin, president. “First, effective employee management practices are different from those in the past and focus on alignment, coaching, development, and measurement. Second, the red-hot market for performance management software is paying off for buyers. More than 85% of the organizations we studied are seeing demonstrable positive business impact from implementation. This is one area of software truly generating high returns on investment.”

The following technology providers are covered in the research study: ACS, Authoria, Business Decisions, CornerstoneOnDemand, Cytiva, Halogen Software, HRsmart, ICIMS, Kenexa, Learn.com, Oracle (Enterprise Business Solutions), Oracle (PeopleSoft), Organization Metrics, Pilat HR Solutions, Plateau, Saba, Salary.com, SAP, Silkroad, Softscape, Stepstone, SuccessFactors, SumTotal Systems, Taleo, and Technomedia.

Other Key Findings

  • Managers and supervisors are the front line for all employee performance practices and, ultimately, drive the success or failure of any talent management strategy. However, 45% of respondents believe managers in their organizations currently have difficulty in differentiating between high and low performers. Almost 40% of line managers do not believe they have the training and skills needed to be effectively manage employee performance. Management coaching and development is an integral component of adoption and success.
  • Performance management based on coaching and development has stronger positive outcomes overall than performance management based primarily on competitive assessment. Only one third of responding organizations today exclusively use competitive assessments for performance management and these organizations see far less return than those with a coaching and development model.
  • While enterprise-wide standardization is appealing, high-impact organizations do not adopt the “one size fits all” approach to performance management. To maximize business value, high performing organizations tailor practices according to operating functions, geography and culture, legal requirements, and unique needs of different workforce segments. Companies that localize key practices report higher employee retention rates.
  • The performance management systems market is the fastest growing segment in the human capital management market and will soon be the biggest. The market is estimated to reach $520 million by end of 2008, a 35 percent increase from 2007. The market is growing more than twice as fast as the markets for recruitment and learning management. The market has tremendous potential for growth, with only 12% penetration in the United States and less than 9% globally.
  • Organizations with integrated talent management suites cite two to three times the return on investment than organizations implementing point solutions. Performance management is at the heart of today’s integrated talent management suites, which also support succession planning, career development, compensation management, and other talent management processes.
  • User experience is the key differentiator in a crowded field of approximately 30 suppliers. In the last year, several leading providers have undergone major development efforts to significantly improve their systems’ user experiences. These solutions now incorporate “next-generation” features, such as decision and performance support, collaboration, and contextual or smart content.

Valuable Information for Purchasers

These two studies offer valuable information to those considering the purchase of performance management systems.

“Technology alone cannot address performance management challenges,” said Levensaler. “Companies must take a two-prong approach – first, focusing on planning and process design and then, evaluation and selection of a system that meets the priorities and needs of the organization.

“In this market, the selection process can be particularly daunting because solutions seem so similar at first glance. However, there are some key differences. Those reading these studies will discover how to efficiently develop a short list and go about the selection process in an efficient and methodological way.”

Readers will find:

  • Implementation experiences and benchmarks, including time to deployment, system integration, and best practices.
  • Solution providers by company revenue and revenue growth.
  • Market share by revenue and customers.
  • Solution differentiators, including user experience, support for other talent management applications, customer and domain experience, price, delivery models, and global capability.
  • Step-by-step evaluation guide.
  • Total cost of ownership discussion.

About This Research:

These studies are based on multiple research initiatives conducted over the last seven months. In August 2008, Bersin & Associates conducted an extensive, quantitative survey capturing responses from more than 700 HR, learning and development, and information technology professionals to identify the key drivers, adoption levels, business challenges and trends in corporate performance management and the implementation of performance management systems.

Thirty percent of the respondents are employed by companies listed in the top 100 of the Fortune 500; 28% are employed by companies appearing in the “100 Best Companies to Work For” list. Over 40% of respondents represent multi-national organizations; 13% are from companies based outside of the United States.

Bersin & Associates analysts also conducted in-depth interviews with 47 HR executives to get a detailed perspective of performance management. From these interviews, the company identified 10 organizations with performance management practices and processes that yield significant business impact. These organizations represent a variety of industry segments and range in size from 5,000 to 250,000 employees.

Finally, Bersin & Associates analysts conducted three-hour briefings with 25 selected providers of performance management systems. The briefings included system demonstrations that focused on use cases and presentations on company backgrounds and product roadmaps.

For More Information

The two studies are available at no cost to all Bersin & Associates research members. Non-members can purchase both studies for $995 or separately (The Essential Guide to Performance Management Practices: Part 1, $495; The Essential Guide to Performance Management Systems: Part 2, $595).

For more details on The Essential Guide to Performance Management Practices: Part 1, including an audio overview and a table of contents, click here.

For more details on The Essential Guide to Performance Management Systems: Part 2, including an audio overview and a table of contents, click here.

About Bersin & Associates

Bersin & Associates is the only research and advisory firm focused solely on research in enterprise learning and talent management. The company’s WhatWorks® research and research-based services are designed to deliver actionable and practical guidance and to improve operational effectiveness and business impact.

Bersin & Associates research members gain access to a comprehensive library of best practices, case studies, benchmarks, and in-depth market analyses designed to assist professionals in making fast and confident decisions. Research areas include planning and strategy, learning programs and delivery, talent management, technology and infrastructure, and measurement and analytics. Member benefits include strategic advisory services, briefings, forums, analyst interaction, and workshops.

Bersin & Associates is the host of the industry’s only annual research conference on enterprise learning and talent management. IMPACT 2009: The Business of Talent®, will be held April 14-16, 2009, in St Petersburg, Florida.

For more information, go to www.bersin.com or call 561 455 0622, extension 223.