This content is part of the Essential Guide: A guide to talent management tools and trends

Science of talent management software improves hiring

Creating successful hiring and training programs can be challenging. To meet the challenge, companies are turning to talent management software.

Talent management may be part art and part science, but a growing number of organizations are placing bigger bets on the latter. The reason: They're convinced that today's data-driven talent management tools can identify more highly qualified candidates, shorten the hiring process and help top performers hone skills more quickly once they're on board.

Goals like these motivated officials at Houston-based Mattress Firm to update their talent management system as the company grew from 500 stores in 2010 to nearly 2,100 facilities today. The executives needed an influx of employees, but headcount wasn't their only concern. "We not only wanted to accelerate our hiring process, we also needed to find people who would be the best fit for our organization," said Abby Ludens, vice president of talent management. "So, we put science behind our hiring efforts."

Mattress Firm's new talent management software helped this effort by creating profiles of people who performed best within the company's unique retail environment. The effort paid off: Since introducing scientific discipline to the hiring process, the company has seen a 65% decrease in voluntary turnover and an 11% increase in sales performance, Ludens said.

"Adding science to our processes also helps after people are hired," she added. "We can identify the areas where individuals have an opportunity to improve and then provide customized coaching to help them get to the next level."

Talent management software market tops $5 billion

Mattress Firm's talent management makeover isn't unique. The market for corporate talent management software is growing at double-digit rates and now tops $5 billion, according to Bersin by Deloitte, a consulting firm.

Buyers earmark approximately 85% of their spending for SaaS products, said Yvette Cameron, research director for human capital management technology at Gartner. The firm forecasts that by 2017, 50% of all spending for human resources technology will be for cloud-based services, she added.

Buyers are gravitating to advanced analytics capabilities, such as those used by Mattress Firm. Increasingly, talent management systems are adding predictive algorithms to help organizations assess talent. "These tools can help companies make predictions about a person's odds of retention or determine who is likely to succeed in a new position," said Aaron Ziff, vice president of International Strategy & Consulting (IS&C), which specializes in talent management applications. "In the past, predictive analyses have been the purview of data mining systems; now the technology is being integrated into talent management as a native capability."

Buyers are also adopting social networking and collaboration modules. "Today's more socially driven tools let companies take a marketing approach to how they engage with candidates," Gartner's Cameron said. "These organizations are initiating highly personalized conversations with prospects before they even become active candidates. Then, as positions become available, top prospects may be more receptive to the opportunity."

Social networking is also enhancing performance reviews with employees by capturing ad-hoc feedback from managers and peers throughout the year. "This is a much more effective way to influence performance and engage with the workforce than when organizations rely on just an annual performance review," Cameron said.

Five steps to guide your software selection process

With so many new capabilities coming to talent management systems, how can human resources leaders identify an application that will meet their current needs without locking themselves out of future innovations? Experts said the following five steps should guide the selection process.

1. Study vendor road maps. Before committing to a vendor, understand its plans for social networking, analytics, and other enhancements over the next two to three years. "Evaluate these plans based on the business priorities of your organization and where you'll need to make new investments," Cameron said.

2. Stay alert to integration hassles. New standards and vendor-supplied interfaces won't eliminate all problems associated with combining talent management modules and core HR systems. "The reality is that they get you only about 80% of the way there," Cameron said. "Clients say they routinely underestimate the effort involved in testing and maintaining integration."

Frequent releases of new capabilities in SaaS products mean the cloud doesn't necessarily ease integration headaches, she said.

3. Carefully evaluate the flexibility of underlying technology. Newer architectures designed to treat blocks of data and individual services as discrete components are more flexible than those for traditional talent management applications, IS&C's Ziff said. For example, modern object-oriented platforms let companies piece together performance ratings, compensation data, and other data elements to create a new workflow or custom report. "This means faster overall performance and it makes it easier to deliver talent management capabilities to mobile devices," he added.

4. Look beyond technology by re-evaluating business processes. In addition to adding the latest and greatest tools, HR should look for ways to simplify how they manage talent. "For example, if you have multiple scales for rating performance, it's difficult to combine them to determine average performance ratings throughout your organization," Ziff explained.

5. Consider the cost of lost opportunities when making the business case for upgrades. "Many clients don't sufficiently consider how they are being constrained by their current system," Gartner's Cameron warned.

Questions to consider include whether the current system is hampering a company's ability to attract and retain the best talent, attain high levels of engagement, or support mobile users. "Look beyond the traditional cost components of the business case and consider how your system either enables or constrains innovation and business agility," Cameron said.

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