The ROI of Talent Management

1. The ROI of Talent Management You can listen to today’s webinar using your computer’s speakers or you may dial into the teleconference. If you would like to join the teleconference, please dial 1.650.479.3208 and enter access code: 926 601 308 #. You will be on hold until the seminar begins. #TMwebinar

2. The ROI of Talent Management Speaker: Stephan Millard Senior HCM Strategist SumTotal Systems Moderator: Mike Prokopeak Vice President, Editorial Director Talent Management magazine #TMwebinar

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5. Frequently Asked Questions 1. Will I receive a copy of the slides after the webinar? YES 2. Will I receive a copy of the recording after the webinar? YES Please allow up to 2 business days to receive these materials. #TMwebinar

6. The ROI of Talent Management Mike Prokopeak Vice President, Editorial Director Talent Management magazine #TMwebinar

7. The ROI of Talent Management Stephan Millard Senior HCM Strategist SumTotal Systems #TMwebinar

8. Talent Management Return on Investment (ROI) Calculating the Cost & Benefit for Your Project Stephan Millard Talent Management Strategist

9. Agenda What is ROI, Why is it Important? Components of ROI Preview of Typical Benefits of Talent Management Evidence on Talent Management ROI Page 8 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

10. Show of Hands Please! YES! NO! Page 9 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

11. Agenda What is ROI, Why is it Important? How to use talent analytics to drive better leadership assessments How Successful Companies Assess Their future leaders Quick Tips for Using Talent Management Technology Page 10 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

12. What is Return on Investment (ROI)? Return on Investment Quantifies the Qualitative Benefits of Your Talent Management Project Page 11 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

13. Why ROI is Important? Provides executive management a calculation of hard benefits on your project It can correctly set expectations for the project’s return ROI evaluation can help drive higher project prioritization by executive management Page 12 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

14. Agenda How Integrated Talent Management can power success Components of an ROI Study How Successful Companies Assess Their future leaders Quick Tips for Using Talent Management Technology Page 13 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

15. Key Components of ROI Studies ROI: This is the return ratio of your project • Divides the total expected benefit by the total Payback Period: shows how quickly project costs your project investment is paid back • Always expressed as a percentage (e.g. 200% return) Return on Investment Study Net Present Value (NPV): This Yearly Calculations: This shows yearly calculation shows the time value of cash flows that the project generates – money for the talent management usually with a three or five year time- project horizon • Often used by CFO’s to rank a projects value – the higher the number the higher priority the project is given Page 14 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

16. Basic Formulation of ROI Study Enter Project Costs • This always includes direct costs (e.g. software & hardware) • Also includes indirect costs (e.g. employee training) Enter Projected Project Benefits • Generally broken up to cost savings, productivity and revenue benefits • Initially these are estimates many times and are refined Calculate ROI Outputs • These are the factors described on the last slide (NPV, Payback period, annualized results, etc.) Page 15 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

17. The ROI Inputs: Project Costs Labor or Indirect labor Software costs: Related headcount or headcount • Calculates the systems costs: costs: costs: license or SaaS • This cost shows the costs of software total costs of • Total costs of labor • This is the cost of over the life of the in setting up and training employees hardware, hosting project data-center, internal administering the on the new system talent management and any related and vendor support system costs to this costs. • Often broken down to compare SaaS, Hosted and On- premise deployment options Page 16 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

18. The ROI Inputs: Project Benefits Cost Avoidance benefits: This calculates the benefit of not having to incur some costs as a result of the Talent Management project • Example: Not needing to pay for maintenance or hardware associated with an old system that is being replaced Productivity benefits: This is the benefit of employees being able to be more productive as a result of the Talent Management project • Example: Cycle time for performance or compensation drops by 2X, so employees and managers can be more productive Revenue benefits: This is top-line revenue gained directly from having a talent management system. These are often the most challenging to show / attribute • Example: Faster time-to-market for the company’s products because employees are hired and productive quicker Page 17 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

19. Agenda How Integrated Talent Management can power success How to use talent analytics to drive better leadership assessments A Preview of Typical Talent Management Benefits Quick Tips for Using Talent Management Technology Page 18 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

20. Recruiting & Hiring Benefits Reducing employee turnover Pain Benefit Metric • Hiring the wrong • Better selection • Reduction in candidate can information turnover costs mean needing to means improving (e.g. advertising, re-hire again and quality of hire lost productivity) incur all costs Improved compliance with federal / state regulations Pain Benefit Metric • Time and money • Automated • Reduction in time spent on manually candidate selection spent manually managing and reporting to running reports and compliance reports comply with costs spent on or paying fines regulations fines Page 19 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

21. Performance Management Benefits Administering the performance process Pain Benefit Metric • Time dealing with • Improve the • Reduction in time administering the productivity of the spent on process performance performance management group process Time spent calibrating performance ratings Pain Benefit Metric • Manually ensuring • Reduce time • Reduction in time performance spent calibrating spent on ratings are performance calibration objectively rated ratings Page 20 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

22. Performance Management Benefits Manually writing performance reviews Pain Benefit Metric • Having managers • Reduce time • Reduced time per and employees spent writing review, per manually write / reviews and employee on evaluate reviews having managers writing write comments Value of better goal alignment across organization Pain Benefit Metric • Goals are not • Improve the link • Better alignment aligned to overall performance goals drives better organizational and corporate business results on objectives objectives specific corporate objective Page 21 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

23. Compensation Planning Benefits Improved budget compliance Pain Benefit Metric • Manual • Automated • Reduced spend compensation process ensures and time by planning often has that manager admin. dealing managers going cannot exceed with exceptions over budget their budgets Reduced Turnover of high-performers Pain Benefit Metric • Goals are not • Improve the link • Better alignment aligned to overall performance goals drives better organizational and corporate business results on objectives objectives specific corporate objective Page 22 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

24. Succession Planning Benefits Reduced management time – going from manual to automated Pain Benefit Metric • Manual succession • Automating the • Reduced executive planning is a very process lets it be time, reduced inefficient, time done year-round by administrative time consuming process all involved and is much more efficient Reduced Turnover of high-performers Pain Benefit Metric • Higher performers • Improve • Reduced turnover leave because they identification and among high- do not see retention of future performers opportunities to grow leaders with better in the company and more timely information Page 23 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

25. Other ROI Factors to Understand • This refers to how long a given benefit takes to Ramp start to show quantified benefits • Usually this is why year 1 many talent management projects do not show strong results Risk • This refers to risk of each input (cost or benefit) coming in as expected. • This is the percent of a given benefit that can be Attribution “attributed” to the project • Good to try and track the results as closely as feasible so you have evidence Page 24 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

26. Principles of Successful ROI on a Project • Do not commit to ROI on every front for all employees Do not boil the ocean • Focus on one or two benefit areas and on a definable audience • While it is nice to see big numbers, they Do not commit to an add significant risk of project failure ROI that is too large • Too large an ROI often endangers credibility Negotiate attribution • It is good if benefit calculations have up-front agreed upon attribution calculations Discuss key ROI • Understand what ROI metrics your finance department uses metrics with finance Page 25 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

27. Agenda How Integrated Talent Management can power success How to use talent analytics to drive better leadership assessments How Successful Companies Assess Their future leaders Evidence on Talent Management ROI Page 26 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

28. Human Resources Maturity Model Level 4: Business-Integrated HR HR strategy part of the business strategy. HR helps to drive business decisions through people, data and insights. Business and HR systems integrated and advanced. Level 3: Strategic HR Department HR aligned with business strategy. HR functions supporting business needs. Initiatives split between HR process improvements and talent needs. Level 2: Fundamental HR Services HR strategy partially or fully defined. Siloed HR functions. Some standardized processes and policies; core services managed well. Some automated talent systems, but little integration of data. Level1: Compliance-Driven HR Services No HR strategy. Personnel function, mostly separate from business and talent needs. Line managers perform HR activities as they see best. Bersin & Associates, 2010 Page 27 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

29. Integrated Talent Management Direct Impact on Business HR’s Relationship to Business Strategy 40% 30% 20% 10% 0% HR is a full partner in developing and implementing the business strategy Low Market Performers High Market Performers Page 28 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

30. Why Integrate Talent Management? Analyst research shows direct correlation to business performance Bersin 2011 HR Factbook shows organizations that have reached maturity (Level 4) by having business-integrated HR functions rather than compliance drive (Level 1) HR show significantly higher performance in the following metrics Page 29 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

31. More Mature HCM Practice = Greater ROI ■ HBR Article in 2007 ■ Effective talent management drives better sales & greater stock return ■ Same correlation shown in many articles & studies Maximizing Your Return on People, March 2007, Harvard Business Review Page 30 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

32. SumTotal Strategic HCM Solution Empowering Customers to Become Stronger Strategic Business Partners ■ Providing Actionable Insight ■ Enabling End-to-End Integrated Business Processes ■ Driving Productive, Pervasive Access ■ Improving Time-to-Value and Reducing Cost of Ownership ■ Enabling collaborative solution development community Page 31 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

33. Long Lasting Customer Relationships Broader Offerings, Improved Operations, High Customer Retention SumTotal Worldwide Leader in Strategic HCM Market Share (users) 3,500+ Customers Over 45+ Million End-Users Leader in SMB, Mid-Market & Enterprise Solutions Global Scalability Page 32 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL March 5th, 2012

34. Most Advanced - Recognized as Leader by Analysts 6+ Years in the Leader’s Quadrant (Gartner CLS MQ) “SumTotal has established itself as the market share and mind share leader …” 2+ Years Rated “Visionary” (Gartner EPM MQ) “…well suited for global organizations … seeking best-in-class functionality” Global Market Share Leader for Learning (Bersin 2011 LMS Systems) “Highly configurable” … “Market leading Learning Management” … ”best-suited to large, global organizations.” 3+ Years Rated Hot (Ventana Total Compensation) “The top ranked supplier based on the weighted factoring of five product and two customer assurance categories …” 4 + Years in the Leaders Section (Forrester Wave LM) “Forrester Wave for Enterprise Learning Suites” Leader in Every Section of Forrester Wave (2011 Forrester TM) “...among the leaders for integrated performance & compensation solutions” Highest Rated Overall (AMR Strategic HCM) “...the broadest and most mature application suite in the strategic HCM specialist space” Page 33 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

35. Questions & Answers Visit us at www.sumtotalsystems.com and through these social channels: @SumtotalSystems http://www.linkedin.com/groups?home=&gid=45382 http://www.facebook.com/SumTotal.Systems Page 34 - October 16, 2012 – PROPRIETARY AND CONFIDENTIAL

36. Questions and Answers Stephan Millard Senior HCM Strategist SumTotal Systems #TMwebinar

37. Join Our Next TM Webinar Fast and Agile HR: Leveraging Talent Management to Guide the Journey Tuesday, November 6, 2012 • TM Webinars start at 2 p.m. Eastern / 11 a.m. Pacific Register for upcoming TM Webinars at www.talentmgt.com/events Join the Talent Management magazine Network http://network.talentmgt.com/ #TMwebinar

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