Posted by: Ron Hanscome | October 22, 2009

Scenario-based HCM Strategic Systems Planning – Key Variables

Most of you familiar with my work at HRchitect and other consulting organizations already know that I’m a strong believer in the need for organizations to make the investment in an HCM Technology Strategy, a 3-5 year roadmap that outlines the scope and pace of application investments and process redesign that supports overarching business objectives as well as the firm’s HR strategy. While there are many elements to a comprehensive HCM Tech Strategy, today I want to focus on a component that is becoming a more prominent part of these projects – the use of HCM market scenario-based analysis to add flexibility and robustness to the strategy.

Scenario-based planning has long been a part of military strategy, and is today used by many firms for business planning. Simply put, the objective is to put together a small number of likely scenarios (usually 3) to analyze the different ways they might impact investment and deployment decisions. Scenarios differ based on a number of variables. While all scenarios may be included in developing contingency plans, often one scenario is chosen as the most likely to occur, and it drives the majority of investment decisions for the base strategy.

Taking this approach into the realm of HCM Technology raises an interesting dilemma — of all the available market variables, which ones will have the most impact? Because it is generally difficult (not to mention expensive) to plan with too many variables, it is best to limit the analysis to a maximum of five (although 2-3 is optimal). Options within each variable should be limited as well (at most 3) to help prevent ‘analysis paralysis.’ Because each organization has unique characteristics (e.g., leadership approach, history, corporate culture) above and beyond industry segment and core business strategy, the chosen variables may differ substantially from company to company. For purposes of illustration, let’s examine three variables (1 internal, 2 external) that may drive scenarios for an HCM Tech Strategy that includes core HRMS, talent management suites, and talent management point solutions:

  • Company business performance (internal) — this variable is meant to present options for growth in revenue and/or profits, as this will likely impact both the amount that can be spent on HCM Technology and the number of employees that need to be serviced. Examples of a 3-option set for business performance might be “Strong growth: 10%+,” “Moderate Growth: 2 to 9%,” and “Flat/Declining Growth: -2 to+1%.”  Budget assumptions (eg., $$, headcount) may then be tied to each of these options.
  • Level of vendor investment in core HRMS (external) — this variable may be relatively straightforward if your firm is on the latest (or reasonably current) release of the flagship product line with a clearly articulated roadmap for building out talent management features of interest in the near future. However, it becomes quite a bit more complicated if you are trying to predict how much a vendor will invest over the next three years in a secondary product line (current market examples include various Infor applications and [of course] Oracle’s investment in future Peoplesoft releases in light of Oracle HCM Fusion availability in 2010). The key to building the right set of options is to understand your business requirements so that you can compare what you need  with your core vendor’s capabilities in the TM areas you desire to leverage during the time period covered by your strategy. 
  • TM Suite vendor investment – functional depth versus breadth (external) — Point solution vendors have taken advantage of the “breathing room” in the HCM market triggered by Oracle’s purchase of Peoplesoft in late 2004, and have expanded their functional footprint to cover multiple TM areas. Many of these TM suite providers (e.g., SuccessFactors, Softscape, Taleo, Kenexa, Cornerstone on Demand, SumTotal, Saba, Halogen, HRSmart, Authoria, StepStone, and many others) now face an interesting and difficult set of decisions around their ratio of investment for continued breadth of coverage of TM versus depth in any given area. Some TM suite vendors have even expanded into the core HRMS area with the delivery of “employee profile” or “universal talent record” functionality; this may result in further dilution of precious development resources. The key to successfully developing options for this variable is to compare your requirements with the capabilities of your current TM providers (and potential providers as needed) to determine the TM coverage gaps, and then estimate (with outside consulting support if needed) where the vendors on your ‘watch list’ will be spending their resources.

As you can see, this exercise is not for the faint of heart — it requires you to get as much information as you can about your current vendor roadmaps as well as other vendors of interest. It also requires you to make a series of judgment calls in order to develop analysis scenarios that truly fit your organization — so there is “art” here as well as “science.” The result of this effort, if done properly, is a robust set of scenarios that include pros, cons and likely impacts on your firm. This will help demonstrate to your senior leaders that you have developed a firm foundation for your most likely scenario and associated business case/ROI information — which will (hopefully) lead to quick approval of your HCM Technology Strategy, so you can get on with the hard part — strategy execution!

What other variables might you add to this list of examples? As always your questions and/or feedback is welcome!


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