Can You Bring Cost Down through Better Inventory Management?

In my previous blog I discussed two approaches to bringing down your cost: cost cutting and cost reducing, with regards to the overall supply chain network. The most effective way of cost reduction in supply chain is through the collaborative effort of the whole organization. As discussed previously, the supply chain has various areas where cost reduction can be done, but for this blog, I want to focus on cost reduction with better or best inventory management processes and practices.Basically inventory can appear in a variety of forms, such as raw material, goods in process, and finished goods. And each form represents funds (money) that are tied up until that inventory is “used up” by company as sold goods. Similarly, in retail stores, any stock on the shelves represents dollars tied up until it sells. In other words, inventory is anything holding up operating funds.

The main objective of a supply chain is to have the right inventory, at the right time, at the right location with the right quantity. To achieve this objective, it’s key to have a proper inventory management process in place within the organization. There are numerous ways to achieve this without driving up the cost of operations or the cost of inventory. Most importantly, such strategies will help the organization reduce the cost associated with inventory. There are some common techniques and some unique business processes which can be implemented to achieve cost reduction and help with the better management of inventory. Many organizations should implement the following ten practices to reduce inventory costs:

1. Conduct periodic reviews and audits of various inventories being held in-house.

2. Analyze the usage and lead times of on-hand and order book inventory.

3. Reduce safety stock based on customer demand.

4. Use 80/20 rule (ABC approach) for inventory control.

5. Improve cycle counting techniques for inventory management.

6. Use vendor managed inventory or implement vendor stocking programs, which means supplier are managing inventory with the organization.

7. Use collaborative planning and replenishment (CPFR) business processes and IT standards to collaborate among multiple parties in the supply chain network.

8. Improve the forecast of each product at the item level, i.e. use a variety of demand forecasting arithmetic models. No single set of algorithms fits all customers’ forecast or product families.

9. Communicate demand/hard orders to suppliers for better delivery of inventory.

10. Implement new inventory software which uses inventory quality ratio methodology and multi-echelon inventory optimization tools.

Many inventory management teams have ideas and strategies in their minds, but no time to bring them into action. That’s why when implementing any inventory management best practice, it’s important to have upper management’s support. Additionally, any process improvement should be in-line with the corporate objectives. Regardless of what size the organization is, any of the above inventory management best practices can be used to gain extraordinary results for the organization’s bottom line.

As organizations have an overall objective to put best practices into its supply chain management, supply chain managers need to start by looking at each process within the supply chain. Each activity needs to be mapped to understand where a best practice can be implemented, and where standard cross-functional processes can be set up. Every process and activity has owners who need to be in-line with the overall best practice implementation. For every process, it is crucial to have performance measurements which will create accountability and allow users to focus on the continuous improvement of process.

To achieve cost reduction in the supply chain, it’s imperative to have these inventory management strategies extend out to the organizations suppliers as well. By doing so, organizations will streamline processes internally and externally, and integrate will with the overall business objectives.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 2

Accommodating “Generation Y”

Let us not forget about the looming demographic shifts, given that the baby boomers are on their way out. One group that has been receiving a lot of attention is the so-called Generation Y: the group mostly in their 20s that has recently entered or is about to enter the workforce. These dudes and dudettes haven’t just adopted the use of the Internet – they have grown up with it, and they rely (live and breathe) on it.

A key characteristic of basically all Gen Y candidates today (which might belong to earlier generations, like the Gen X) is that they are keen consumers of Internet technology. They are accustomed to using websites such as Amazon.com, Google, Facebook, Ask, LinkedIn, Twitter, Travelocity, and eBay (to name but a few), often on a daily basis, to buy what they want, go where they want, stay in touch with their friends and family, get their work done, and do it all and more with ease.

So, when it comes to looking for a job, they transfer their job-seeking experience to the corporate brand, and they draw on their consumer web experiences to set their expectations for their online job seeking experience. There are a number of characteristics associated with a technologically savvy generation of job seekers. These characteristics include:

* The ability to do job hunting, in a 24×7x365 manner;
* Expectations of instantaneous responses coupled with a short attention span (”That was so yesterday!”);
* Desire for immediate feedback and rapid results (“Dude, where is my offer/promotion?”);
* Demands for flexibility (often to be able to work in pajamas and sleepers, or at least to bring their pet iguanas to work);
* Assumed free exchange of information/access to more information for decisions (e.g., “A mate just sent another job opportunity via Facebook to my iPhone.”);
* Tendency to migrate towards better opportunity and growth (vs. loyalty); and
* The attitude to move back with parents and volunteer for a “higher cause” than to work for a jerk.

It is thus small wonder that recruiters are increasingly use LinkedIn and Facebook in their efforts, while talent management software providers begin to offer the integration to these social networking sites as a matter of course.

Talent Management and HCM Defined (Sort of)

The phenomena and factors outlined both here and in Part 1, coupled with every company’s need to align people directly with corporate goals, are forcing human resource (HR) departments to evolve from policy creation, cost reduction, process efficiency, and risk management (i.e., all those “paper and pencil pushing”) tasks to driving a new talent growing mindset in the organization. One important distinction is the evolution of the difference between tactical and administrative HR and strategic talent and human capital management.

In a nutshell, transactional HR activities are administrative overhead, whereas talent management is a continuous process that should deliver the optimal workforce for the company’s business. In this new model, instead of being the owners of mundane processes, forms, and compliance, the HR staff should transform into the strategic enablers of talent management processes that empower managers and employees while creating business value.

First of all, there is confusion about whether HCM and talent management are the same thing, or perhaps one area is bigger and broader than the other. I, for one, personally tend to believe that HCM is the broader concept that includes both the administrative HR & payroll functions and talent management as the strategic component. However, as it typically happens in this industry, the talent management’s scope of applications (that are needed to support HCM processes designed to manage a company’s greatest asset, i.e., people) is defined differently by industry analysts and consultants.

Still, most define talent management to include the following: recruitment, performance management, competency management, succession management, career development, and incentive and compensation management (ICM). Other talent management modules can include: workforce planning, learning management systems(LMS), as well as workforce analytics, portals, and dashboards.

Talent Management Software Examples

As an illustrative example, Taleo’s on-demand talent management applications suite currently comprises solutions for companies to assess (including workforce planning and analytics), acquire (i.e., source, select, and onboard), develop (i.e., manage performance, manage career, and plan succession), and align their workforce for improved business performance (via goals management, internal mobility, and reporting).

As another example, the Authoria Talent Management suite is also an integrated, on-demand solution that addresses the strategic talent management lifecycle, from hiring through compensation, performance, benefits communication, and succession planning. Also, by delivering role-based dashboards with analytics and workflow tools, the vendor aims to help managers improve business performance through better people performance. Authoria’s “plan-attract-review-reward-develop wheel” of applications involves the following modules:

* Authoria Recruiting drives the hiring of top talent;
* Authoria Performance aligns employee actions to company goals and captures performance against competencies. Managers are given coaching in-context to ensure standardized, best practice performance appraisals. Besides coaching, the competency support enriches the entire talent management lifecycle;
* Authoria Compensation comprises Authoria Incentive, which automates incentive compensation, and Authoria Salary, which improves accuracy, auditability and cycle times of compensation management; and
* Authoria Development & Succession leverages performance data to identify and develop top talent.

Let me for example flesh out the succession planning and employee-development module capabilities that allow line-of-business (LoB) managers and human resource (HR) professionals to assess bench strength, and fill critical roles with high-potential, top-performing employees. This latest functionality, which Authoria showcasing at the recent HR Technology Conference & Exposition, empowers LoB managers and HR professionals with:

* Talent Pools – Whereby employees with high-leadership potential can be identified for critical roles, since managers and HR professionals have access to performance, education, work history, and other relevant information on potential successors;
* Succession Slates – Can be developed and maintained to readily identify high-potential employees to fill key roles;
* Succession Organization Chart – The availability and readiness of successors to key positions can be viewed directly from actionable org charts; and
* Bench Strength, Bench Health, Diversity, and Utilization Analytics – So that managers and HR professionals can view the slate of potential successors, and evaluate the readiness and flight risk of those people.

As the underlying technologies, Authoria’s role-based dashboards allow managers and employees to access reports and track workflow. The dashboards serve as a common starting point for a consistent and integrated approach to all aspects of talent management. Finally, Authoria Communications, the company’s original product, provides personalized benefits and policy communications to employees, with the idea of reducing costs and improving value.

Similar definitions and portfolios of talent management applications would come from Halogen Software, Kenexa, Lawson Software, SucessFactors, Oracle PeopleSoft HCM, Ramco Systems, Softscape, Workscape, Kronos, and so on. In the recently unveiled “Integrated Talent Management Practices Study” by IBM Global Services and the Human Capital Institute (HCI), the survey was based on the following six talent management dimensions:

1. Develop Strategy — Establishing the optimal long-term strategy for attracting, developing, connecting and deploying the workforce;
2. Attract and Retain — Sourcing, recruiting and holding onto the appropriate skills and capabilities according to business needs;
3. Motivate and Develop — Ensuring that people’s capabilities are understood and developed to match business requirements, while also meeting people’s needs for motivation, development and job satisfaction;
4. Deploy and Manage — Providing effective resource deployment, scheduling and work management that matches skills and experience with organizational needs;
5. Connect and Enable — Identifying individuals with relevant skills, collaborating and sharing knowledge, and working effectively in virtual setting; and
6. Transform and Sustain — Achieving clear, measurable and sustainable change within the organization, while maintaining the day-to-day continuity of operations.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 1

Sure, by now most of us have heard about the importance of strategically managing talent and human capital, but how many of us are convinced that companies truly buy into those lofty concepts in droves? Some of us will even have read McKinsey’s now classic study from the late 1990 that coined the term “the war for talent.”

In other words, now in the new millennium, we find ourselves in the talent age. The article’s authors claimed that in an environment where competition has become global and capital is abundant (well, at least it was 10 years ago, well before the recent collapse of banking investment giants, and the US and German government interventions), “…all that matters is talent. Talent wins.”

Conversely, during the agricultural and brick-and-mortar age of the 19th century, the economy was based on land, and on truly physical and very tangible assets, whereas people were regarded as a mere labor expense. The industrial age of the 1930 followed with a manufacturing-driven economy and a need for specialized workers. Then came the automation age of the 1960 that introduced the concept of human resources (HR) management. Still, higher business performance was derived through the most effective use of factories and distribution networks, i.e. physical assets, much more than via staff.

The knowledge age of the 1980s moved the basis of economic value to information and knowledge assets through integrated communications and computer technology. That era introduced the concept of “knowledge workers” and people being regarded as “assets” (rather than a necessary evil and expense). Now, post Y2K, the competitive battlefront is for the best people because they are the true creators of value. Nowadays, we are in the age of talent management and human capital management (HCM). Right?

Well, during these days of Wall Street crumbling and “main street” companies struggling to compete globally, it is easy to be cynical about concepts like HCM, while watching on cable TV how ten thousands of former employees are carrying boxes and vacating once coveted premises. Moreover, many of us have also in the past worked for (and with) jerks and felt unimportant and unappreciated by our employers.

How believable are then these platitudes about “people (or their skills, at least) being the most valuable corporate asset?” Yeah right!

True Mavericks Do Succeed

But, like mediocre individuals, mediocre and average companies resort to the usual “hire-and-fire” practices (not to use the currently politically loaded “more of the same” mantra). One such all-too-common practice is to layoff a number of folks in a knee-jerk fashion (many of whom might be potential talent gems) during the tough times, based on outmoded thinking that equivalent replacements will be readily available in the job market when times improve.

Little do these companies know (or think about) whether they have ever properly aligned their strategic business objectives with the current talent pool and employees’ performances. Do they know who the best performers are (and why, based on which metrics?), and who can smoothly replace whom in case of a departure (as a way of life)? Moreover, workforce planning at such organizations is based on past staff profiles, without the ability to project the needed skills’ requirements and shifts in the future. This makes forecasting workforce supply and demand almost impossible (if even intended).

On the other hand, analyst research has time and again proven that organizations using talent management strategies and solutions exhibit higher performance than their direct competitors and the market in general. For instance, Taleo’s own research shows that from Fortune 100 global enterprise recruiting and performance management to small and medium business, leading companies invest in talent management to select the best person for each job because they know success is powered by the total talent quality of their workforce.

According to Taleo Research and the Human Capital Institute (HCI), over the past two decades, the enterprise value vs. book value of publicly traded companies has increased fivefold. This value “delta” can be justified by the value of their brands, but also by the value of their assembled workforce. At the same time, the tangible vs. intangible assets ratios changed from 62/38 percent in 1982 to 15/85 percent in 2002.

Many of us have heard stories about the hipster companies like Google or Apple nurturing and pampering their talented employees in order to get the best innovativeness out of them. More examples of such environments can be found in William C. Taylor and Polly LaBarre’s acclaimed book entitled “Mavericks at Work”. Perhaps the maverick concept could also work in politics too, but let’s first discern who the real maverick is? But I digress…

Anyway, for ordinary mortals, the chance to work at such a privileged company seems equal to their chance of dating a movie star. Therefore, it is easy to go back to being cynical and dismissing HCM and talent management as just the latest fads.

The Need for Talent Management Seems Real

But, at the recent Taleo World 2008 conference, I was able to witness first-hand that the talent management is a vibrant enterprise software market, and a battleground for both software providers and user companies (employers). In fact, the extraordinary (maverick) companies do not look for ordinary mortals but rather for a talent that is hard to find.

According to sources like The Gallup Management Journal, the United States (US) Bureau of Labor Statistics (BLS), the United Kingdom (UK) Chartered Institute of Personnel and Development (CIPD), Hewitt Associates, and Taleo, there are many challenging workforce issues confront HR departments, including:

* Heightened competition for skilled workers — sure, there is a record high unemployment figure in the US these days, but some sectors have severe shortages of skills such as nurses, petrochemical engineers, renewable energy (green) experts, or stem cell researchers, to name a few. Some stats are showing the figure of 10 million more available jobs than available skilled workforce in highly demanded sectors;
* Impending retirement of the “baby boomer” generation — the folks that are 65 and older, whose number is expected to double in a few years time from currently 35 million to 70 million. While this could be a good sign for senators McCain or Clinton’s voter constituency down the track (in 2012, say), it is definitely not for the US economy and innovative companies hungry for talent and knowledge;
* Low levels of employee engagement – with only 14 percent of employees being highly engaged (feeling fulfilled by and keen on their job), 62 percent moderately engaged, and 24 percent actively disengaged from their job (i.e., looking for something else, while this mundane job beats unemployment and helps with paying bills). This is not surprising, since acording to research published in 2005 by business management scientists and balanced scorecard pioneers David Norton and Robert Kaplan, a mind-boggling 95 percent of employees don’t understand the strategic goals of the company that employs them;
* Acknowledgement of the high cost of turnover – with a whopping 40 percent in the US, whereby 23 percent belongs to voluntary departures. Some stats show the cost to replace an employee going up to one and half of the employee salary. In fact, I recently learned that Starbucks could save US$120 million a year if it could only reduce employee turnover by 10 percent. Now I know what else contributes to my coffee drink price (besides the fair trade beans and employees’ benefits), and will start paying attention to see how long my neighborhood barristas stay at work;
* Arduous demands of managing dispersed global workforces, bundled with offshoring and outsourcing trends; and
* Importance of succession planning, which is a consequence of many other abovementioned issues.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 3

No Laughing Matter, Indeed

The discussion so far has ascertained that talent management, as a strategy, requires both appropriate systems and an organizational commitment to attract, acquire, manage, and measure the talent needed to achieve a company’s business objectives. Without the alignment of business and talent management systems and processes, and without closing the gap between workforce strategy and execution, companies will sub-optimize their benefits and put their goals at risk.

Going hand in hand with strategic alignment is another significant trend in recent years, which is the recognition that automating transactions in silos (within only, e.g., recruitment, performance, compensation, succession) is not helping the human resources (HR) department. It is indeed difficult to expect any strategic alignment between business and the talent roster with fragmented data, applications, and talent pools, where data is often lost, and there is consequently no single view (or single version of truth).

Hence, fragmented islands of information render HR departments’ decisions after-the-fact and reactive at best, whereby the system is used only a few times a year, while the information technology (IT) departments remain complex and inefficient. The company’s execution is thus inhibited, since it is difficult for its top managers to determine next year’s talent needs, identify top performers, keep good talent from leaving, find more quality people, and, at the end of the day, help drive business forward.

Moving toward an integrated approach means that all of the talent management functions can be accessed from one dashboard – and the data is shared for the benefit of aligning with business objectives. But more importantly, the unified talent management platform supports a third key trend, which is to promote the line of business (LoB) manager into a key constituent and decision maker.

However, as Sherry Fox’ blog post depicts it so well, it is not easy to be an HR staffer these days. Let’s imagine the life of an HR manager, when early in the morning he/she learns about the resignation of the top few performers, and later in the morning he/she reads the report on declining retention numbers, and learns about some hiring managers rejecting many potentially good candidates.

Of course, around lunch time, the chief operating officer (COO) will summon an impromptu meeting on why the company’s best people are leaving, while after the lunch break (if any), there could be some compliance complaints (e.g., on some diversity, age, handicap, privacy, and whatnot discrimination). Just to add the “icing on the cake” for the day, in the afternoon he/she learns that the top candidate was taken (since the offer came too late). Later in the afternoon comes a report on the sales folks missing their numbers due to still too many open positions.

What might go through the HR manager’s hectic mind (other than some suicidal thoughts) could be frustrations for not having the help of unified IT systems, his/her inability to read the hiring manager’s mind, the inability to obtain valid data to predict corporate talent vs. business gaps, and ultimately, the inability to move fast enough.

What Would Nirvana Be?

So, what could the unified talent management platform change and how? Well, in a hypothetical case, the unfortunate HR manager could instead see, first thing in the morning, a report saying that the retention numbers are at an all-time high. This would be credited to the new succession and career planning initiative (backed by equivalent software) that has lately placed 100 top performers in new jobs.

In mid-morning, the chief executive officer (CEO) might announce a new initiative in Europe, where he/she desires 50 managers with European experience, 200 employees who speak a European language, 300 employees with international career plans, and an external general manager (GM) candidate. Instead of being dumbfounded, the HR department is now able to swiftly send a European talent request to the executive staff worldwide.

In addition, with the help of a nifty recruitment application, the HR folks can launch a tailored European career site under the corporate brand. Soon after, resumes start flooding in, and based on a well thought-out success profiling and interview scheduling system, 75 ace candidates are invited in to interview.

In late afternoon, when CEO calls a follow-up status review on the European initiative, the HR manager gladly reports that he/she has mobilized the talent, whereby both top internal and external talent has been identified. It might turn out that, e.g., 32 percent of the existing global workforce has European goals, and the onboarding process is thus now live in dozens of countries.

The bottom line: mobilizing talent should help companies drive the business. In this case, the sales folks might just “blow out” the quarterly figures due to the high productivity of newly recruited reps that were immediately up to speed.

Sport Teams Championing Talent Management

But, nothing can be better music to my ears than marrying enterprise applications with sports. To that end, as to prove the concept of talent management, one of Taleo World 2008’s presenters pointed out Major League Baseball (MLB) team, the Oakland Athletics (A’s). In fact, the A’s GM Billy Beane’s executive talents and the organization’s baseball philosophy were the subject of Michael Lewis’ acclaimed book entitled “Moneyball: The Art of Winning an Unfair Game.”

In other words, by paying close attention to the main pillars of talent management (i.e., recruiting, performance management, and compensation), and by aligning them to the overall business strategy of being competitive at a modest payroll expense (and budget), the A’s have managed to change the relentless game of baseball, and compete with the rich “evil empires” of the New York Yankees and the Boston Red Sox. Namely, for the most recent several years (not counting the dismal losing 2008 season), by using facts (stats) to supplement instinct, the A’s have achieved about the same number of regular season wins, about 730. This figure is about the same as those of the Yankees and Red Sox, despite the A’s being outspent multiple times (four times by the Yanks, and threefold by the Red Sox).

While this example has certainly convinced me of the importance and general value proposition of talent management, I, as an avid Red Sox fan (Go Sox!), have to add some additional facts, starting with the one that the A’s haven’t had much success in the postseason (playoffs). The Red Sox have also seemingly implemented the same pillars of talent management, but with the overall strategy of not necessarily skimping on the players’ pay, and of paying-for-performance (of course, in accordance with the MLB regulations and players’ union).

Maybe that hefty payroll (but still lower compared to the reeling Yanks) can be credited with the two World Series won in four years, and reaching five playoff contests in six seasons? When it comes to recruiting, the Red Sox’ farming system, combined with occasional free agent acquisitions, seems to be doing well. But it is the astute implementation of performance management and compensation that does the job and closes the loop.

Namely, instead of valuing the sluggers’ figures for home runs (HRs, not to be confused with human resources!), stats like on-base-percentage (OBP), number of pitches to strike out at bat, batting average (BA), number of strikeouts, etc., play a much more prominent role in evaluating the player. The same goes for pricey pitchers: instead of judging their mere number of wins, the stats like the number of walks, the number of strikeouts, the number of pitches per game, the number of innings per game, earned run average (ERA) etc., are even more critical for evaluations.

Switching sports, the New England Patriots would be another good example of exceptional results in the 2000’s being delivered by balancing talent with a limited payroll, due to the National Football League’s (NFL) salary cap imposed onto all teams (which is not the case with MLB). The Patriots would be an example of a team of virtually no star players with so much success in this decade (three Super Bowls in four years, and six playoff contests in seven years).

Even Tom Brady, who has meanwhile become a star on his own (in part owing to his “extracurricular” activities), would be a good example of recruitment and succession planning. Well, at least till this very recent season-ending (possibly even career-ending) injury…

In any case, I now subscribe to the “war for talent” motto from Part 1, much more I mean. Make no mistake, I doubt that the above sports teams use the solutions from Taleo, Halogen, Kenexa, Lawson, Oracle, SuccesFactors, Ultimate Software, Agresso, or Authoria, since in this field, the recruiting of players and coaches follows different paths (certainly not via resumes on Monster.com or LinkedIn, but rather via a close-knit network of agents, scouts, etc.).

Still, there might be some connection between sports and enterprise applications, since, prior to going public, NetSuite added Beane to its board of directors. Curiously, NetSuite’s on-demand software is used in the A’s sales and marketing department (after all, these teams need to sell us tickets and merchandize, and they need corporate sponsors).

Vendor Rating and Certification Updates: BI and ERP

It’s mid-November and time to tell you about some of the new product ratings and certifications that we’re covering in our research. TEC analysts recently completed certifying products from BatchMaster and Targit.

Each vendor successfully demonstrated how its product addressed a script of functionality as identified by TEC analysts. (Look for products proudly wearing the TEC certification badge in our evaluation centers and vendor showcase.)

* The Targit BI Suite, with its “few click” approach is covered in our BI Evaluation Center.
* The BatchMaster Enterprise solution focuses on the requirements of companies in the process manufacturing industry, as covered in our ERP Evaluation Center.

In addition to those TEC certified products, we also published new data about the following products.

* Newly revised data on the OpenAir professional services automation suite.
* Webcom joined our Business Process Management (BPM) Evaluation Center with the submission of its ResponsAbility product.
* Software development and QA company, Technosoft, joined our outsourcing evaluation center.
* TEC published newly revised data about Microsoft Dynamics SL. The product’s ratings in our evaluation centers (accounting, ERP for service industries, project portfolio management, etc.) correspond to its recent version 7.

The Wizardry of Business Process Management – Part 1

The business process management (BPM) market is sizzling hot, with Gartner Dataquest estimating its compound annual growth rate (CAGR) at 13 percent in 2009. In fact, almost all leading BPM vendors have been buzzing about their unprecedented growth and profitability, especially amidst the ongoing economic drought.

It is truly difficult to argue against the need for companies from all walks of life to improve their business processes. Doing “better, faster, and cheaper” is the “slogan du jour.”

In his keynote presentation during the recent Lombardi Driven Online virtual conference, Lombardi Software’s CEO Ron Favaron referred to BPM as “Business Pressure Management.” That pretty much says it all. Logically, to the end of managing business pressures, Lombardi offers its broad BPM suite called TeamWorks Enterprise Edition [evaluate this product].

I also recently attended a Webcast by Appian Corporation, possibly the first BPM company to deliver process, knowledge, content, collaboration, and analytics capabilities in a comprehensive suite, Appian Enterprise [evaluate this product] and its software as a service (SaaS) counterpart Appian Anywhere. I particularly liked one slide in the presentation deck wherein the eight bullet points’ first letters cleverly spelled out the mnemonic REMEMBER (why to deploy BPM now) as follows:

* Retain customers
* Enhance standardization (and consistency)
* Measure business performance
* Evaluate components of processes (subprocesses)
* Manage all elements of the business
* Bottom line improvements
* Eliminate bottlenecks
* Rapidly deploy new services (and processes).

Indeed, these are some of the typical benefits of deploying BPM systems, but the trouble, called the lack of clarity and consensus, starts with the quandary about what exactly constitutes BPM, and what exact parts and capabilities of BPM help achieve those benefits? In other words, are there more important and better BPM suites and/or components vs. those that are of less importance?

In plain English, BPM entails all methodologies and tools that help businesses improve their processes. Depending on the context, BPM can be regarded as a management discipline, a technology, or even both. If one defines BPM as an approach to methodically design, implement, execute, control, and improve business processes, then one can argue that it is a management discipline. In addition, there exists a raft of accompanying IT tools to support this discipline in all of its abovementioned stages.

Extreme BPM Definitions

Simple as that, right? Well, not really, and my concern with the BPM word-use is semantics. Namely, so many people might still mean “business process modeling tools to help us with radical business process re-engineering (BPR),” which was all the rage back in the early 1990s. Indeed, this erstwhile people-centric approach of managing the overall business, independent of the specific technology or tools that are used to support it, has since gone out of fashion.

Namely, the problem is that the abstract world modeled in modeling tools often has not much to do with real-life business processes and typically cannot be implemented. If a business process analyst models a company all the way in, e.g., IDS Scheer AG’s ARIS tools, by the time he or she is done the model might already be obsolete.

And by the time the company implements the model, the dynamic economic environment will have already changed. Yet the model on paper (a bunch of flowcharts) must be deployable, usable, and maintainable in production. Business processes are about dynamics (or business agility, if you will) and a drawn flowchart is anything but dynamic.

On the other hand, the purely integration-centric approach of providing a way for software to communicate and execute automated workflow to accomplish discrete tasks via integration and process orchestration is not nirvana either. Many other vendors might mean that BPM is “an effective way for us to re-package our traditional enterprise application integration (EAI) tools under the guise of a service oriented architecture (SOA) orchestration project.”

IBM’s BPM suite, Fujitsu Interstage, TIBCO Software, Software AG (formerly webMethods), SAP NetWeaver BPM, and Oracle BPM come to mind here. These integration-centric BPM providers have often been accused by pure-play BPM suite providers of primarily targeting IT departments to try to sell BPM as a matter of service orchestration.

Yet, the true value of BPM should be to empower business users. To be fair, these larger companies have recently acquired companies that provide BPM software aimed at business users, and I imagine the competition from larger companies will only intensify.

For instance, zooming in on Oracle’s BPM product strategy, the idea here is to offer a complete and integrated BPM platform that caters to system-centric, human-centric, document-centric, and decision-centric business processes (workflows) in a single runtime environment. The suite is aimed at business owners and developers to collaborate, to define processes across systems and lines of business (LoBs), and to improve business process efficiency by modeling, executing, monitoring, analyzing, simulating, visualizing, and optimizing business processes.

But, by digging deeper into the Oracle SOA Governance suite and Oracle BPM suite, it is possible to note so many identical components, differing mainly in the fact that Oracle BPM has to also accommodate human interventions. The Oracle BPM suite can be bolstered optionally with the business process analysis (BPA), design, and modeling capabilities via the partnering IDS Scheer’s ARIS tool (e.g., for achieving Six Sigma compliance).

IDS Sheer’s blog post recently tried to demarcate the line between BPA and BPM suites as follows:

“The primary purpose of Business Process Analysis (BPA) tools is to visualize, analyze and improve business processes. BPA tools help translate every day business complexity into structured models (scope: from business to model). They provide insight into an enterprise’s structure – i.e. how strategy, products and services, processes, roles, information and systems are related and influence one another. By creating a single point of truth, BPA tools strive to improve the communication between various stakeholders in a company, safeguard corporate knowledge and support decision-making and change management. Most notable user groups are business managers, process owners, quality managers, business analysts, risk & compliance officers and enterprise architects. BPA tools have rich semantics in order to fulfill a broad information need. They enable users to visualize and analyze the enterprise from different point of views, e.g. from a performance-, risk & compliance- or architecture perspective.

Business Process Management Suites (BPMS) on the other hand serve a different purpose and target a different audience. While they do offer modeling capabilities, their primary purpose is to automate, execute and monitor business processes based on technical models (scope: from model to execution). Notable user groups are business- and information analysts, process engineers, software developers and system administrators. BPMS do not offer such rich semantics as BPA tools in the sense that their metamodel does not comprise concepts for performance management, risk & compliance management or architecture management. Then again, these concepts are not required to automate processes.”

A Fragmented and Crowded Market

Thus, the market for BPM software and related implementation, consulting, and training services is intensely competitive, rapidly changing, and highly fragmented. Every BPM aspirant likely encounters competition from internal IT departments of potential or existing customers that may seek to modify existing systems or develop proprietary systems in a do-it-yourself (DIY) fashion.

The process improvement adoption has started lately in many IT departments via implementing a set of concepts and policies for managing IT infrastructure, development, and operations. Some of these sets and disciplines are Information Technology Infrastructure Library (ITIL), IT Service Management (ITSM), and Control Objectives for Information and related Technology (COBIT).

Moreover, there are a number of enterprise-wide initiatives around process improvement disciplines such as Lean manufacturing, Six Sigma, Total Quality Management (TQM), etc. These frameworks of concepts and policies often require IT support in order to make operational best-practice workflows, while the linkage to business users is critical.

The market consists of a number of established BPM suite providers such as Appian, Ascentn Corporation, Cordys, Global 360, Lombardi, Metastorm, Savvion, Pegasystems, and Ultimus, to name some. In addition to the abovementioned SOA middleware and enterprise architecture (EA) providers, internal IT departments, and BPA and process mining vendors (e.g., IDS Scheer or Pallas-Athena respectively), BPM suite vendors also compete with companies that target the customer interaction and workflow markets, and companies focused on Business Rules Engine (BRE) such as Corticon Technologies, FICO (formerly Fair Isaac Corporation), and the ILOG division of IBM.

Competition additionally comes from professional service organizations that develop custom BPM software in conjunction with rendering consulting services. To further muddle the picture, there is a number of Enterprise Content Management (ECM)-based vendors such as the Documentum division of EMC Corporation, FileNet, the division of IBM’s Information Management Group, Adobe LiveCycle, Oracle Stellent, and Autonomy Interwoven, to name but a few.

What Constitutes a Full-fledged BPM Suite?

BPM suites’ scope can be sliced and diced in many ways. For one, Part II of my 2008 five-part blog series entitled “It’s About Process (or Ability to be Responsive)” outlined the necessary BPM suite components. But if one is to look at BPM suites through the lens of the Plan-Do-Check-Act (PDCA) loop, one could think of covering the following three necessary activities (within the feedback loop):

1. Business process modeling and analysis, which were explained earlier on;
2. Business process automation or execution; and
3. Business activity monitoring (BAM), measuring, process mining, and so on, as parts of continuous business process improvement efforts.

Most of the abovementioned contemporary BPM suites have a comparable basic functionality set, which has been specified as the desired capabilities of a BPM suite in Gartner’s 2008 report entitled “Four Paths Characterize BPMS Market Evolution.” These capabilities are:

* Model-driven development environment (with model-driven process execution rather than source code-based one). Processes can be changed bi-directionally, either in the design or execution stage (each impacting the other), and with an audit trail of changes;
* Process component registry or repository management;
* Document management and ECM systems;
* User and group collaboration;
* System inter-connectivity;
* Business event management, business intelligence (BI), and BAM;
* Online and offline process simulation and process optimization;
* Business rules management system (BRMS);
* System management and system administration; and
* Process execution and a state management engine.

While most of the leading BPM suites would address this prescribed broad functionality set by and large, they have some intrinsic differences that make them more suitable for one usage scenario versus the others. This difference often comes from the underlining architecture and the genesis of a particular suite. It may also be a consequence of the key customer segments that the vendor targets.

BPM practitioners understand some of the common usage types of BPM systems, often referred to as “human-centric business processes,” “system-centric (integration) processes,” and “document-centric processes.” Most of the real-life business processes have all of three elements in them, but some are heavier on one versus the other two.

In its whitepaper entitled ”Understanding Usage Scenarios An Enterprise BPMS Must Support,” Savvion identifies and describes four other equally important usage scenarios that are not very well understood. These are: case management, rule-based (decision-intensive) processes, project-oriented processes, and event-centric process management. Savvion claims to currently be the only BPM provider that can accommodate all of these seven usage scenarios.

What About Accommodating Change (We Can Believe In)?

But, after all this discussion, do BPM suites necessarily mean “build for change?” Do they by default mean easy automation, rapid iteration, and execution?

The bar has to be set higher, since pragmatic buyers are increasingly looking for proven fixed-cost business-driven enterprise-wide BPM deployments. An astute BPM suite should take a process-centric approach to managing business operations that can deal with any business workflow with high impact on overall customer service operations.

Metastorm’s [evaluate this product] white paper “Building a Business Case for BPM” asserts that there are three fundamental characteristics of BPM that make this technology the game-changer:

1. BPM is Incremental. One of the core advantages of BPM is that it need not require you to conquer all problems at once in order to deliver results. Rather projects can start small, while still making a large impact…To paraphrase, it is less important to start with the perfect process candidate than it is to establish a leverage point from which to extend into other opportunities.
2. BPM is Measurable. BPM is unique among technology-based initiatives in its ability to incorporate metrics and measurement parameters at the outset of the project and to automatically capture and track them along the way. BPM presents the opportunity for an immediate and material impact on business performance and visibility.
3. BPM is Repeatable. BPM presents a compound benefit where the skill set and competencies gained from the first process deployed can be leveraged to automate and improve multiple processes throughout the organization for years to come.

Clarifying the BPM Value Proposition

So, has all this lengthy discussion about BPM parts and parcels has brought some clarity to you? Well, I could understand if you are still having an “as clear as mud” feeling. Therefore, I was recently fortunate to witness a witty presentation that attempted to explain the essence of BPM via some humor and metaphor of the classic “Wizard of Oz” movie.

Namely, on March 23, 2009, Alan Trefler, Pegasystems’ founder and CEO, gave his luncheon keynote presentation at the Gartner BPM Conference in San Diego. His theme was “Don’t just Survive…Capitalize.” Trefler begun by reminding the audience that in today’s turbulent economy we are all “not in Kansas anymore” and may just need some ruby slippers to find our way back home to profitability. If you have 14 minutes to spare, you can re-capture the spirit of the event here.

How Project Management Can Help Manufacturers

Recently there were two great articles published on our Website touching the interesting problem of interactions between traditional manufacturing management and project management: The Business Model for the 21st Century Is Project-centric and Weather the Recession with Project ERP. I agree with the respective authors that the project-driven management approach can help companies improve their businesses in any kind of economic situation, whether during a recession or a booming economy. But in this blog post I would like to share some thoughts with you on other aspects of how project management can help manufacturing.

1. Project management has been—and still is—a useful methodology to run and manage standalone projects, such as new product development or the selection and implementation of a new enterprise resource planning (ERP) system. In this type of project, the project’s targets, scopes, resources, and other parameters are quite obvious and defined by the substance of the project itself. In my examples, they are to develop a new product and to prepare the necessary documentation and equipment for manufacturing; and to have a new ERP system deployed and running where well-trained users are successfully dealing with it and the managers are receiving the information needed in a timely and convenient manner.

Usually, organizations have no problems with this type of project management use—everyone understands it clearly and the methodology is well defined. In addition to engineer-to-order (ETO) manufacturers creating unique custom-made products and usually managing those customer orders as projects, project-driven activities can also be beneficial for assemble-to-order and make-to-order types of manufacturing businesses. For example, an internal customer order fulfilment policy can be created where some orders are segregated as projects, and business processes are defined based on project management knowledge.

2. Project management methodology can also be used in managing internal company changes which, at a first glance, might not seem like a “traditional” project, or might not seem to be a project at all. Here are two examples: a) due to market requirements, a manufacturer has to reduce a cost of a particular product; b) a manufacturer must identify and eliminate supplier-related bottlenecks in the purchasing of key components for the production. In these cases, it is not that easy to recognize project targets, scope, and work breakdown tasks. However, I do believe that this type of business challenge can be characterized as a project, and standard project management techniques can be successfully applied in this case. A company might have multiple projects running simultaneously: special project management software or an ERP system that includes a project management module can be used for these types of projects as well as for standalone projects.

3. And finally, a few words about the matrix structure of a company as an area of project management knowledge and application of methods. As the term suggests, there should be “horizontals” and “verticals,” as in a matrix. Let’s say there are traditional functional or department managers, and at the same time there are product managers assigned for for the development and management of particular products or product families. The functional chain of “purchasing, planning, manufacturing, packaging, and shipping” will be our “horizontals”, and product managers with their teams will be the “verticals”. Our matrix is the intersection of the horizontals and verticals (see fig.1). A product manager can assign different people for the different projects (employees working on the same project are highlighted with blue).

matrix-structure.jpg

Figure 1. Matrix structure [click thumbnail to enlarge]

Companies with a matrix structure type of management, as mentioned in Weather the Recession with Project ERP, should be able to track and manage costs by products or by product groups throughout the entire product lifecycle. This is only possible when using ERP systems that are smart enough to distinguish those costs and associate them with a corresponding product, or even with a product component. With all the seeming simplicity of this structure, in reality it is not that easy to implement, or to achieve the expected level of effectiveness.

The major problem businesses face when implementing a matrix structure within a company is a potential conflict of interests between functional and product managers and their employees—especially when they make diametrically opposed business decisions. Here is an example to demonstrate this:

Say you are a material buyer and you are required to purchase either material A or material B this week, but you are limited in your budget. You might get a very good deal and save lots of money on material A because the supplier is offering a discount this particular week only, but at the same time, a product manager insists on purchasing material B according to his own priorities. In addition to this, your boss is not a product manager but a purchasing director, and she is going to appraise your performance based on how effectively you spend the company’s funds. So what would be your choice as a buyer? Tough question, isn’t it?

As you can see, a matrix structure implementation is very challenging and it involves huge structural changes at all levels of the employee hierarchy. More importantly, a psychological shift in people’s approaches and working habits is essential. On the other hand, many companies have been able to overcome these hardships to elevate their businesses into the next level.

I know of a manufacturing company that was implementing an ERP system for the first time, implementing ISO quality standards, and changing its organizational structure into a matrix at the same time. In fact, I was the ERP implementation project manager at that company and I must say, it was an interesting and challenging time.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 2

Accommodating “Generation Y”

Let us not forget about the looming demographic shifts, given that the baby boomers are on their way out. One group that has been receiving a lot of attention is the so-called Generation Y: the group mostly in their 20s that has recently entered or is about to enter the workforce. These dudes and dudettes haven’t just adopted the use of the Internet – they have grown up with it, and they rely (live and breathe) on it.

A key characteristic of basically all Gen Y candidates today (which might belong to earlier generations, like the Gen X) is that they are keen consumers of Internet technology. They are accustomed to using websites such as Amazon.com, Google, Facebook, Ask, LinkedIn, Twitter, Travelocity, and eBay (to name but a few), often on a daily basis, to buy what they want, go where they want, stay in touch with their friends and family, get their work done, and do it all and more with ease.

So, when it comes to looking for a job, they transfer their job-seeking experience to the corporate brand, and they draw on their consumer web experiences to set their expectations for their online job seeking experience. There are a number of characteristics associated with a technologically savvy generation of job seekers. These characteristics include:

* The ability to do job hunting, in a 24×7x365 manner;
* Expectations of instantaneous responses coupled with a short attention span (”That was so yesterday!”);
* Desire for immediate feedback and rapid results (“Dude, where is my offer/promotion?”);
* Demands for flexibility (often to be able to work in pajamas and sleepers, or at least to bring their pet iguanas to work);
* Assumed free exchange of information/access to more information for decisions (e.g., “A mate just sent another job opportunity via Facebook to my iPhone.”);
* Tendency to migrate towards better opportunity and growth (vs. loyalty); and
* The attitude to move back with parents and volunteer for a “higher cause” than to work for a jerk.

It is thus small wonder that recruiters are increasingly use LinkedIn and Facebook in their efforts, while talent management software providers begin to offer the integration to these social networking sites as a matter of course.

Talent Management and HCM Defined (Sort of)

The phenomena and factors outlined both here and in Part 1, coupled with every company’s need to align people directly with corporate goals, are forcing human resource (HR) departments to evolve from policy creation, cost reduction, process efficiency, and risk management (i.e., all those “paper and pencil pushing”) tasks to driving a new talent growing mindset in the organization. One important distinction is the evolution of the difference between tactical and administrative HR and strategic talent and human capital management.

In a nutshell, transactional HR activities are administrative overhead, whereas talent management is a continuous process that should deliver the optimal workforce for the company’s business. In this new model, instead of being the owners of mundane processes, forms, and compliance, the HR staff should transform into the strategic enablers of talent management processes that empower managers and employees while creating business value.

First of all, there is confusion about whether HCM and talent management are the same thing, or perhaps one area is bigger and broader than the other. I, for one, personally tend to believe that HCM is the broader concept that includes both the administrative HR & payroll functions and talent management as the strategic component. However, as it typically happens in this industry, the talent management’s scope of applications (that are needed to support HCM processes designed to manage a company’s greatest asset, i.e., people) is defined differently by industry analysts and consultants.

Still, most define talent management to include the following: recruitment, performance management, competency management, succession management, career development, and incentive and compensation management (ICM). Other talent management modules can include: workforce planning, learning management systems(LMS), as well as workforce analytics, portals, and dashboards.

Talent Management Software Examples

As an illustrative example, Taleo’s on-demand talent management applications suite currently comprises solutions for companies to assess (including workforce planning and analytics), acquire (i.e., source, select, and onboard), develop (i.e., manage performance, manage career, and plan succession), and align their workforce for improved business performance (via goals management, internal mobility, and reporting).

As another example, the Authoria Talent Management suite is also an integrated, on-demand solution that addresses the strategic talent management lifecycle, from hiring through compensation, performance, benefits communication, and succession planning. Also, by delivering role-based dashboards with analytics and workflow tools, the vendor aims to help managers improve business performance through better people performance. Authoria’s “plan-attract-review-reward-develop wheel” of applications involves the following modules:

* Authoria Recruiting drives the hiring of top talent;
* Authoria Performance aligns employee actions to company goals and captures performance against competencies. Managers are given coaching in-context to ensure standardized, best practice performance appraisals. Besides coaching, the competency support enriches the entire talent management lifecycle;
* Authoria Compensation comprises Authoria Incentive, which automates incentive compensation, and Authoria Salary, which improves accuracy, auditability and cycle times of compensation management; and
* Authoria Development & Succession leverages performance data to identify and develop top talent.

Let me for example flesh out the succession planning and employee-development module capabilities that allow line-of-business (LoB) managers and human resource (HR) professionals to assess bench strength, and fill critical roles with high-potential, top-performing employees. This latest functionality, which Authoria showcasing at the recent HR Technology Conference & Exposition, empowers LoB managers and HR professionals with:

* Talent Pools – Whereby employees with high-leadership potential can be identified for critical roles, since managers and HR professionals have access to performance, education, work history, and other relevant information on potential successors;
* Succession Slates – Can be developed and maintained to readily identify high-potential employees to fill key roles;
* Succession Organization Chart – The availability and readiness of successors to key positions can be viewed directly from actionable org charts; and
* Bench Strength, Bench Health, Diversity, and Utilization Analytics – So that managers and HR professionals can view the slate of potential successors, and evaluate the readiness and flight risk of those people.

As the underlying technologies, Authoria’s role-based dashboards allow managers and employees to access reports and track workflow. The dashboards serve as a common starting point for a consistent and integrated approach to all aspects of talent management. Finally, Authoria Communications, the company’s original product, provides personalized benefits and policy communications to employees, with the idea of reducing costs and improving value.

Similar definitions and portfolios of talent management applications would come from Halogen Software, Kenexa, Lawson Software, SucessFactors, Oracle PeopleSoft HCM, Ramco Systems, Softscape, Workscape, Kronos, and so on. In the recently unveiled “Integrated Talent Management Practices Study” by IBM Global Services and the Human Capital Institute (HCI), the survey was based on the following six talent management dimensions:

1. Develop Strategy — Establishing the optimal long-term strategy for attracting, developing, connecting and deploying the workforce;
2. Attract and Retain — Sourcing, recruiting and holding onto the appropriate skills and capabilities according to business needs;
3. Motivate and Develop — Ensuring that people’s capabilities are understood and developed to match business requirements, while also meeting people’s needs for motivation, development and job satisfaction;
4. Deploy and Manage — Providing effective resource deployment, scheduling and work management that matches skills and experience with organizational needs;
5. Connect and Enable — Identifying individuals with relevant skills, collaborating and sharing knowledge, and working effectively in virtual setting; and
6. Transform and Sustain — Achieving clear, measurable and sustainable change within the organization, while maintaining the day-to-day continuity of operations.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 1

In other words, now in the new millennium, we find ourselves in the talent age. The article’s authors claimed that in an environment where competition has become global and capital is abundant (well, at least it was 10 years ago, well before the recent collapse of banking investment giants, and the US and German government interventions), “…all that matters is talent. Talent wins.”

Conversely, during the agricultural and brick-and-mortar age of the 19th century, the economy was based on land, and on truly physical and very tangible assets, whereas people were regarded as a mere labor expense. The industrial age of the 1930 followed with a manufacturing-driven economy and a need for specialized workers. Then came the automation age of the 1960 that introduced the concept of human resources (HR) management. Still, higher business performance was derived through the most effective use of factories and distribution networks, i.e. physical assets, much more than via staff.

The knowledge age of the 1980s moved the basis of economic value to information and knowledge assets through integrated communications and computer technology. That era introduced the concept of “knowledge workers” and people being regarded as “assets” (rather than a necessary evil and expense). Now, post Y2K, the competitive battlefront is for the best people because they are the true creators of value. Nowadays, we are in the age of talent management and human capital management (HCM). Right?

Well, during these days of Wall Street crumbling and “main street” companies struggling to compete globally, it is easy to be cynical about concepts like HCM, while watching on cable TV how ten thousands of former employees are carrying boxes and vacating once coveted premises. Moreover, many of us have also in the past worked for (and with) jerks and felt unimportant and unappreciated by our employers.

How believable are then these platitudes about “people (or their skills, at least) being the most valuable corporate asset?” Yeah right!

True Mavericks Do Succeed

But, like mediocre individuals, mediocre and average companies resort to the usual “hire-and-fire” practices (not to use the currently politically loaded “more of the same” mantra). One such all-too-common practice is to layoff a number of folks in a knee-jerk fashion (many of whom might be potential talent gems) during the tough times, based on outmoded thinking that equivalent replacements will be readily available in the job market when times improve.

Little do these companies know (or think about) whether they have ever properly aligned their strategic business objectives with the current talent pool and employees’ performances. Do they know who the best performers are (and why, based on which metrics?), and who can smoothly replace whom in case of a departure (as a way of life)? Moreover, workforce planning at such organizations is based on past staff profiles, without the ability to project the needed skills’ requirements and shifts in the future. This makes forecasting workforce supply and demand almost impossible (if even intended).

On the other hand, analyst research has time and again proven that organizations using talent management strategies and solutions exhibit higher performance than their direct competitors and the market in general. For instance, Taleo’s own research shows that from Fortune 100 global enterprise recruiting and performance management to small and medium business, leading companies invest in talent management to select the best person for each job because they know success is powered by the total talent quality of their workforce.

According to Taleo Research and the Human Capital Institute (HCI), over the past two decades, the enterprise value vs. book value of publicly traded companies has increased fivefold. This value “delta” can be justified by the value of their brands, but also by the value of their assembled workforce. At the same time, the tangible vs. intangible assets ratios changed from 62/38 percent in 1982 to 15/85 percent in 2002.

Many of us have heard stories about the hipster companies like Google or Apple nurturing and pampering their talented employees in order to get the best innovativeness out of them. More examples of such environments can be found in William C. Taylor and Polly LaBarre’s acclaimed book entitled “Mavericks at Work”. Perhaps the maverick concept could also work in politics too, but let’s first discern who the real maverick is? But I digress…

Anyway, for ordinary mortals, the chance to work at such a privileged company seems equal to their chance of dating a movie star. Therefore, it is easy to go back to being cynical and dismissing HCM and talent management as just the latest fads.

The Need for Talent Management Seems Real

But, at the recent Taleo World 2008 conference, I was able to witness first-hand that the talent management is a vibrant enterprise software market, and a battleground for both software providers and user companies (employers). In fact, the extraordinary (maverick) companies do not look for ordinary mortals but rather for a talent that is hard to find.

According to sources like The Gallup Management Journal, the United States (US) Bureau of Labor Statistics (BLS), the United Kingdom (UK) Chartered Institute of Personnel and Development (CIPD), Hewitt Associates, and Taleo, there are many challenging workforce issues confront HR departments, including:

* Heightened competition for skilled workers — sure, there is a record high unemployment figure in the US these days, but some sectors have severe shortages of skills such as nurses, petrochemical engineers, renewable energy (green) experts, or stem cell researchers, to name a few. Some stats are showing the figure of 10 million more available jobs than available skilled workforce in highly demanded sectors;
* Impending retirement of the “baby boomer” generation — the folks that are 65 and older, whose number is expected to double in a few years time from currently 35 million to 70 million. While this could be a good sign for senators McCain or Clinton’s voter constituency down the track (in 2012, say), it is definitely not for the US economy and innovative companies hungry for talent and knowledge;
* Low levels of employee engagement – with only 14 percent of employees being highly engaged (feeling fulfilled by and keen on their job), 62 percent moderately engaged, and 24 percent actively disengaged from their job (i.e., looking for something else, while this mundane job beats unemployment and helps with paying bills). This is not surprising, since acording to research published in 2005 by business management scientists and balanced scorecard pioneers David Norton and Robert Kaplan, a mind-boggling 95 percent of employees don’t understand the strategic goals of the company that employs them;
* Acknowledgement of the high cost of turnover – with a whopping 40 percent in the US, whereby 23 percent belongs to voluntary departures. Some stats show the cost to replace an employee going up to one and half of the employee salary. In fact, I recently learned that Starbucks could save US$120 million a year if it could only reduce employee turnover by 10 percent. Now I know what else contributes to my coffee drink price (besides the fair trade beans and employees’ benefits), and will start paying attention to see how long my neighborhood barristas stay at work;
* Arduous demands of managing dispersed global workforces, bundled with offshoring and outsourcing trends; and
* Importance of succession planning, which is a consequence of many other abovementioned issues.