In addition to the Giants’ Major League Baseball (MLB) World Series 2010 victory, San Francisco has been even more famous for its software powerhouses, spearheaded by mighty and ever-acquisitive Oracle and the cloud computing trailblazer salesforce.com. Another company from the same metro area that has lately had admiration and accolades lavished upon it is SuccessFactors, a player in the software as a service (SaaS) talent management market.

In fact, a number of SuccessFactors employees are former Oracle and salesforce.com alumni, but I wouldn’t be surprised to see some trickles of employees going in other direction too. In any case, SuccessFactors was founded in 2001 by Lars Dalgaard, who previously held various general management positions at Unilever, a global packaged consumer and industrial goods company, in the Netherlands, Germany and Denmark. In November 2007, the company went public on the NASDAQ Global Market under the stock symbol SFSF. 

For several years, the company’s vision was to address the following critical questions that plague virtually all organizations:

• Is the organization getting the performance it should from its employees?
• Can the organization measure employee performance objectively and consistently?
• Does the organization know who its real performers and leaders are?
• Are employees in their right jobs? Are they happy, motivated, and engaged at work?
• Are employees promoted based on clear key performance indicators (KPIs) of what it takes to be successful?
• Do they understand their own potential and how to get to the role they want?
• Are employees clear on how their pay relates to their own performance?
• Are they clear on their own goals and how they relate to organizational goals?

In this fluid global economy, all types and sizes of organizations need to have the correct answers to these longstanding questions on their “intangible” yet costly and critical assets (i.e., the human capital). Organizations face a rapidly increasing need to focus the energy and talents of their employees, and motivate them to achieve higher levels of performance.

Not only must organizations have clear goals and objectives at all levels but they must also reward employees clearly, objectively, and consistently, based not only on measurable results, but also on their engagement, courage, future potential and ability to energize and lead their colleagues throughout the organization. SuccessFactors refers to these capabilities and needs as People Performance.

SuccessFactors has been “drinking its own champagne” when it comes to managing its own organization via its burning passion for People Performance. As one of its publicly heralded founding principles, SuccessFactors employees must treat each other, their customers, and their business partners with respect. In addition, they have been encouraged to do the following: speak with candor, honesty, and integrity; take responsibility and demand accountability; lead, learn and adapt; relentlessly pursue excellence, and constantly strive to make their customers successful.

People Performance Drives Corporate Execution

In September 2009, Dalgaard and his team spearheaded the creation of the Business Execution (BizX) category in order to expand the vendor’s reach beyond the People Performance solutions market. They did this in part because they believed that the market for business execution software presents a significantly larger potential market opportunity than the market for People Performance solutions. In some estimates, this move opened up a US$36 billion market opportunity centered around solving the biggest problem in business today: how to improve execution (a.k.a., management effectiveness). 

Execution is the difference between any business’ survival and game-over, and is the critical success factor in the time of consequence (i.e., when the “rubber meets the road” and the “going gets tough”). But for most companies there is a significant “execution deficit” or a gap between strategy and execution.

Namely, while every company has a strategy, most companies do not execute their strategy as well as they could or should, for one simple reason: it is just not that easy to get everyone in an organization to take the right actions, at the right time to produce the right results, each and every day. Most of us have likely heard of the difficulty of “herding cats.”

That’s where SuccessFactors comes in with its cloud-based Business Execution (BizX) Software Suite of on-demand applications. The suite’s modules (to be detailed later) empower the C-level, business line managers, and rank-and-file employees to tie their performance directly to overall business goals and fundamentally change how work gets done everyday. SuccessFactors helps companies execute their strategy more effectively in the following two important ways:

1. By making sure everyone in the organization is completely aligned and working on the right issues (i.e., the Business Alignment market whose size is estimated to be US$20 billion, and which includes goals, dashboards, and org charts)
2. By ensuring that every employee is working to his or her full potential (i.e., the aforementioned People Performance market, whose size is estimated to be US$15.6 billion, and which includes performance management, compensation, career development, recruiting, and succession planning)

In other words, SuccessFactors’ solutions enable its customers to bridge the execution gap between articulating strategy and achieving tangible results by systematically aligning human resources to organizational strategy and optimizing workforce performance. By optimizing workforce performance and ensuring that the collective efforts of their people are aligned to their business strategy, customers can achieve superior business results by:

• Communicating strategy changes more quickly
• Increasing time spent on strategic priorities
• Increasing the rate of project completion
• Increasing the number of high performers (while decreasing the number of low performers)
• Increasing overall productivity

For more information on this strategic shift (or evolution, if you will), see extensive blog posts by ZDNet’s bloggers Oliver Marks and Larry Dignan. The articles are replete with multimedia materials and visual illustrations of SuccessFactors’ strategy at the time of its unveiling.

Moreover, the more recent press release from the vendor talks about the impact SuccessFactors’ BizX offerings have had on the Village of Schaumburg, outside of Chicago, Illinois. The BizX solutions have reportedly allowed the village to prepare for a large wave of impending retirements within the local government.

The BizX Solution Suite’s Editions

As noted earlier, SuccessFactors provides an integrated, on-demand Business Execution (BizX) Software Suite for companies of every size, shape, and industry. SuccessFactors’ over 3,100 corporate customers with over 8 million users span a number of industries (over 60), including healthcare, retail, financial services, manufacturing, high-tech, energy and chemicals, professional services, consumer goods, life sciences, government, education, and non-profit.

The full suite of performance and talent management programs can be tailored into specific offerings for businesses of different sizes. The suite’s modules utilize a single code base and reside on a multi-tenant SaaS architecture. To address the varied needs of different sized organizations, SuccessFactors markets the following principal editions of its application suite:

• Enterprise Business — For organizations with more than 2,500 employees, the company markets the Enterprise Edition, which is the top-of-the-line offering, providing functionality and configurability that can scale to support the complex needs of large global enterprises with tens to hundreds of thousands of employees.
• Mid-Sized Business — For organizations with 501 to 2,500 employees, the vendor offers SuccessPractices. Mid-sized organizations typically need a robust solution but may not require the advanced functionality of the aforementioned Enterprise Edition. Each of the SuccessPractices modules is pre-configured with best-practice and related workflows, form templates and other content tailored to the needs of mid-sized organizations and designed to allow for more rapid implementations.
• Small Business — For organizations with 50 to 500 employees, SuccessFactors markets its Professional Edition. Small businesses typically need an automated solution but may not require the more advanced functionality of above product’s editions. Professional Edition includes modules pre-configured with the best practices for smaller organizations.
• Emerging Business — For organizations with fewer than 50 employees, the vendor offers its Express Edition, an out-of-the-box performance review solution. Express Edition is a web-based and user-friendly system that can be rolled out almost instantly, without implementation support. This edition is also targeted at individual managers who want a tool for writing performance reviews (appraisals)but may not want a company-wide solution.

SuccessFactors currently has more than 8 million users within 3,000 companies that leverage SuccessFactors every day, up from approximately 300,000 users and 100 companies in 2003. Needless to say, the offerings can be tailored to fit companies of any size, from the world’s largest retailer Wal-Mart with 2.1 million users to the aforementioned small and emerging business offerings designed for companies of fewer than 50 employees.

Global Capabilities

SuccessFactors is currently offered in 35 languages, as the company has 168 global offices, spanning several continents. The solution supports multiple currency conversion capabilities, which is particularly critical for customers with a global presence.

As for the vendor’s main offices, it has five US offices, six in Europe, twelve in the Asia Pacific region, and nine throughout Latin America. Additionally, SuccessFactors works with numerous partners (including multiple third-party solutions for the SuccessCloud application exchange) from around the globe, with consulting, outsourcing, and distribution partners in North America, Latin America, the Asia-Pacific region, and the Europe and Middle East region.

Core Competencies of SuccessFactors

Because the performance of an organization is directly tied to the performance of its people, SuccessFactors has designed its solution around the Performance Management and Goal Management modules. The Performance Management module streamlines the performance appraisal process and transforms the often rushed and tedious performance review process into an ongoing method of tying employee performance to business results.

The module is configurable, allowing customers to design performance review templates and workflows to best meet their needs. Performance Management also delivers rich content that enables managers to provide meaningful and productive feedback to their subordinates.

For its part, the Goal Management module supports the process of creating, monitoring, and assessing employee goals across the organization. Identifying appropriate goals is a very effective method of motivating employees to perform at peak levels. To qualify as appropriate, a goal must be: Specific, Measurable, Attainable, Relevant, and Timely (i.e., “S.M.A.R.T.” in the vendor’s lingo).

The Goal Management module allows executives and managers to align employee goals to the priorities of the organization. Customers can improve overall employee performance and agility by using the module to focus employees on shared goals as these goals evolve. Goal Management can continually track progress against high-level strategic goals across the organization.

SuccessFactors has historically derived a significant portion of its historical revenue from sales of its core Performance Management and Goal Management modules. On the down side, if these modules do not remain competitive, or if the company experiences pricing pressure or reduced demand for these modules, its future revenue could be negatively affected.

Part 2 of this blog series will analyze SuccessFactors’ additional modules and some nice-to-have capabilities, as well as the most recent developments, such as a few tuck-in acquisitions. In the meantime, your comments, thoughts, suggestions or individual experiences with talent management/human capital management (HCM) and business execution solutions are more than welcome.