The transformation is under way-if you haven't noticed, you will. Organizations of all sizes, shapes and profiles, public, private and even non-profit organizations, are quickly pursuing corporate-wide initiatives to align, measure and maximize their workforce.

HR departments traditionally have focused their technology efforts on driving down costs by automating or outsourcing non-strategic, transaction-oriented processes-such as benefits enrollment and payroll administration-to enable greater focus on core business strategies. However, the recent convergence of an integrated human capital management (HCM) solution, incorporating talent management, performance management, incentive management and learning management, is transforming the way global organizations manage the ongoing performance of their workforce.

Recent studies suggest organizations that excel in aligning, developing, motivating and maintaining their workforce tend to be high performers and dominate their markets. As a result, the misalignment of business and workforce strategies is forcing many organizations to identify new technologies and tools to connect human capital with corporate strategy.

The importance of HR in shaping the performance of an organization is finally getting the respect it deserves. HR departments are becoming transformation agents that drive key strategic, performance-driven initiatives for a global organization, and with sponsorship from the highest levels of an organization, HR can have a dramatic effect on the financial performance of every global organization.

Migration Toward a Performance-Driven Organization

With workforce reductions in place at many global organizations, the focus has shifted to creating a performance-driven culture based on measurable results that are aligned with corporate goals and objectives. The aggressive recruitment of high-performing talent will again intensify, making competition tough for organizations that don't excel in HCM. Strength in human capital is now being highlighted by executive management as a key to financial success on Wall Street. Key areas of interest for performance-driven organizations include driving performance with pay-for-performance programs, which reward employees based upon their actual contributions to the organization in specific periods, and succession planning initiatives, which accelerate the growth of high-performance employees.

The Emergence of On-Demand Solutions

The rapid emergence of the hosted, on-demand solution model is creating opportunities to leverage technology in pursuit of achieving high-performance workforces. Organizations have begun to adopt fixed-fee cost-reduction models, which are encouraging a dramatic shift toward rapid adoption of hosted solutions. "Mission-crucial" solutions-or those applications that are vital to business success, but not critical to daily operations, such as HCM solutions-are seeing increased adoption outside the firewall of organizations.

Hosted CRM applications such as Salesforce.com helped the on-demand delivery model gain visibility. The general acceptance of and migration toward a hosted software model provides a low-cost entry point for organizations of all sizes to adopt HCM solutions. On-demand solutions practically eliminate the perceived risk associated with enterprise software implementations and expedite internal buy-off of new applications. In addition, the hosted delivery model provides a "hands-free" approach that requires limited internal IT support, low upfront investment risk and economies of scale.

One of the most distinct advantages for on-demand vendors is the ability to provide continuous innovation and rapid time to value. On-demand solution vendors are rapidly differentiating from their larger, more established on-premises competitors by offering increased agility and the ability to seamlessly roll out functionality upgrades more quickly and frequently. They minimize long deployment cycles and drastically accelerate ROI. Lastly, these solutions enable organizations to easily turn off or unplug an application if it no longer provides innovative features or value.

Get Started Now

If you haven't done so yet, get your HR transformation started immediately. The recent economic recession forced many companies to realign their human capital assets. Companies now have a clean slate to put automated processes in place for the next wave of growth and build a sustainable competitive advantage. It's important to note that adopting an HCM solution is not a cure for bad internal processes. Instead, start by getting executive sponsorship that will spearhead the corporate transformation process. Then begin the technology due diligence process immediately.

Best practice methodologies from HR service providers must be combined with technology expertise from the technology vendors. An HCM strategy should be forward-looking into where an organization would like to be in 3 to 5 years. Although the integrated HCM approach is still in the development stage, it provides a great opportunity to create a leadership position for workforce excellence. This includes understanding the vendor landscape, profiling functionality requirements and investigating best practices within the industry.

Jason Corsello is a Senior Research Analyst for Yankee Group. For more information, contact Jason at (617) 880-0338 or jcorsello@yankeegroup.com.