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Now available from Ventana Research is our Value Index on Total Compensation Management for 2014.  Total compensation management directly addresses one of an organization’s largest investments – employee pay. As such it is a critical activity for supporting other human capital management and talent management processes.

VR_TCM_VI_2014Our Value Indexes are informed by more than a decade of analysis of how well technology suppliers and their products satisfy specific business and IT needs. For each we perform a detailed evaluation of product functionality and suitability to task in five categories as well as of the effectiveness of vendor support for the buying process and customer assurance. In this case the resulting index gauges the value offered by each vendor and its products in supporting total compensation management, which is necessary for running an organization efficiently and managing its largest controllable expense.

Total compensation management has evolved significantly over the four plus years in which we have published a Value Index on the topic. From both conversations with reference customers for this report and analysis from our benchmark research on this topic we conclude that it is still evolving as practice in organizations today. The research shows that spreadsheets are still the primary tool for compensation planning in one out of four (26%) organizations and used often by an additional one-third (35%). But it also shows that others use stand-alone compensation management products and still others have integrated the process and technology within a human capital management application suite. Regarding the latter our benchmark research shows that three in four (76%) participating organizations said that it is important or very important to have compensation management and talent management systems integrated; in addition lack of integration to talent management is the most widespread impediment to successful compensation management, selected by two-third (66%) of participants.

For compensation management to be fully effective in today’s organizations it also must include several next-generation technologies in use in other parts of human capital management. The most important of these is analytics that help managers make better compensation decisions. The increasing importance of compensation analytics is evident in our human capital analytics benchmark research, which reveals that the metric most often used by executives (75%) today is compensation.

Mobility and collaboration are becoming important to total compensation management.  Mobile capabilities are found in six of the compensation management products we reviewed for the Value Index; our human capital analytics research reveals growing adoption: one-third  of companies are using mobile technology for these analytics today, and more than half (52%) intend to use it. Collaboration, though less widely adopted, is important in larger organizations to enable managers in various roles to comment on the correct total compensation for their employees.

The 2014 edition of the Total Compensation Management Value Index evaluated both products that are part of a larger suite of talent management products, which was the most common type, and others that stand alone. In general, we find several benefits to a suite. Among them are analytics integrated with other talent management applications, a common user experience and centralized administration, which make ownership and adoption somewhat easier for the customer.

TCM_2014_Weighted_OverallAmong the compensation management products we evaluated, all cover core compensation management of salaries or hourly wages as well as merit pay, bonus pay and some kinds of incentive pay. Functionally, the differences among the nine products appear in areas such as support for complex plan rules, the number of geographies covered and the ability to support various types of compensation plans (for example, focal vs. anniversary plans) as well as the implementation of next-generation technologies. Some products offer more effective application management tools and better product documentation for support and business case development. While we recognize that some organizations may need only basic salary or hourly wage capabilities, we believe that many organizations with 1,000 or more employees will require more advanced functionality.  Therefore we based our overall assessment partly on the array of capabilities that comprise total compensation management.

Based on these evaluation criteria, the top vendor in our 2014 Total Compensation Management Value Index is SAP SuccessFactors, followed closely by PeopleFluent. This finish mirrored the ratings in the 2012 Total Compensation Value Index. Eight of the nine vendors in this year’s Value Index we rated Hot; this close grouping indicates the general maturity of this market. In this year’s Value Index following the two leaders are those also rated Hot who are: Oracle, Towers Watson, beqom, IBM, Decusoft and SumTotal Systems, and then ADP who was rated Warm. Two new vendors to this Value Index are Decusoft and Towers Watson, and then beqom who was previously known as Excentive.

In today’s competitive business and employment environment, more companies see compensation as a differentiator for their employer brand and want technology that can help them advance their compensation programs to attract and retain top talent. Next-generation technologies such as mobility and analytics enable employees to understand the total value of their compensation packages. As compensation plans become more complex, the need for capabilities like integrated budgeting and modeling become greater so finance departments can ensure that plans adhere to budgets. Furthermore, integrating compensation and performance management, as well as other key talent management applications, helps businesses judge and motivate their top performers. If these critical issues affect the performance of your own business, I urge you to utilize our 2014 Total Compensation Management Value Index for insights on how to address them most effectively.

Regards,

Stephan Millard

VP & Research Director


Much has happened for SuccessFactors in the past year as it became more a part of SAP, which acquired it in 2012.  One of the most notable changes was the departure of its founder, Lars Delgaard, who set the culture of the company, and the selection of Shawn Price as president. The changes in leadership have come as SuccessFactors shifts away from its position in “business execution” software toward a HR and talent management suite, which aligns it more with what SAP has. (For background, see my colleague Mark Smith’s report shortly after the acquisition.) Since then, SuccessFactors and SAP have worked at strengthening several parts of their human capital management product by connecting it with its new payroll software and more recently its HANA in-memory processing platform. The products, however, remain separate. These advances should be well received by both existing customers and those considering either its new payroll system or SuccessFactors’ HR management and talent management systems.

The biggest announcement of this kind was made at the 2013 SuccessConnect event in October, where Price revealed that SuccessFactors applications will be running on SAP HANA, which now runs almost all of SAP’s enterprise applications. Mark wrote about SAP HANA following the 2013 SAP SAPPHIRE conference. Since the SuccessConnect event, SuccessFactors has made some progress toward putting the release into production. Specifically, as of the release SuccessFactors designates August 1308, its Talent suite has been tested on HANA and is now available to beta customers. The company plans soon to launch its workforce analytics product on HANA as well.

In addition Employee Central, SuccessFactors’ HR management product, and SAP payroll products now work together more. As most HR management systems are well established, Employee Central is a relative newcomer, and SuccessFactors has continued to enhance the product over the year or so it has been on the market. The simplicity and user experience of Employee Central is worth seeing how the face to applications and information is changing for SAP. While users of SAP Payroll still have to perform many activities in the older standard SAP user interface, Employee Central users can handle some common payroll tasks directly within the more intuitive Employee Central interface. That said, this is probably where some of the greatest complexity lies in integrating SAP and SuccessFactors applications. Although there is a shipping product that is somewhat integrated, I still advise due diligence for customers, which often have complex and custom requirements for both HR and payroll functions. Making sure you understand how the application addresses configuration requirements in the new integrated environment is important to a successful implementation.

It is noteworthy that Employee Central includes the Workforcevr_ngbi_br_importance_of_bi_technology_considerations Analytics product. This is one of the best HR analytics offerings on the market today because of its usability. Unlike many analytics systems, which provide dashboards with visualization or metrics in a report and then leave it to the user to understand much of the data, the SuccessFactors analytics product provides a plain English interpretation of many of the results it shows and includes an interpretation guide within the system to help users understand common HR terms and the purpose of the analysis. It was so forward thinking that it won the 2012 Ventana Research Technology Innovation Award for overall business innovation. Our benchmark research on next-generation business intelligence shows that the most important technology consideration is usability, which more than three out of five participants (63%) selected, and SuccessFactors offers that.

SAP Jam is another product that has been tied into SuccessFactors’ HCM suite and thereby advanced its business collaboration vr_socialcollab_supports_talent_managementcapabilities. SuccessFactors has worked to develop collaboration capabilities of SAP Jam and expose those capabilities to other products within the SuccessFactors suite, most notably Employee Central and Learning Management. In both of these cases, several collaboration features from Jam are embedded within the products, making social collaboration stronger for both the suite and the core SAP Jam. Picking core HR Management and Learning Management as the initial integration points for SAP Jam matches well to our benchmark research on social media and HCM, which shows that knowledge sharing and learning are among the top five goals of social collaboration.

One area in which SuccessFactors and SAP both are lacking is a competitive workforce management product. However, last year they filled the gap by announcing a partnership with Kronos to integrate its Workforce Central product. Our 2014 Workforce Management Value Index provides in-depth reviews and comparisons of the vendors and products in the workforce management market, and I recommend consulting it to see how SAP shapes up.

As SuccessFactors continues the process of migrating into SAP, it has strong products in many segments of HCM, though the messaging it now uses to describe their value seems to less aggressive than before. However, its completed and planned integrations as well as the recent Kronos partnership strengthen its position in the HCM market. As 2014 gets under way, we will get into the details of several SuccessFactors products, with a more in-depth look at its compensation management, analytics and payroll products as we launch Value Indexes in each of these areas. SuccessFactors’ improvements over the past year are worth checking out as you look to determine what HCM systems will work best for your specific needs.

Regards,

Stephan Millard
VP & Research Director

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