Calculating the return on investment (ROI) of your talent management project is one of the best success metrics you can show - but how to do it? Join this webinar to discuss the fundamentals of calculating return on investment for your talent management project. This webinar will: Help you understand the key things to think about when calculating ROI. Discuss how ROI can help your talent management project succeed. Show the key components that make up ROI calculations. Enable you to create an ROI model for your talent management project.

1. The ROI of Talent Management
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2. The ROI of Talent Management
Speaker: Stephan Millard
Senior HCM Strategist
SumTotal Systems
Moderator: Mike Prokopeak
Vice President, Editorial Director
Talent Management magazine
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6. The ROI of Talent Management
Mike Prokopeak
Vice President, Editorial Director
Talent Management magazine
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7. The ROI of Talent Management
Stephan Millard
Senior HCM Strategist
SumTotal Systems
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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
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Management to Guide the Journey
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