31796 workforce performance

Filing Information: August 2004, IDC #31796, Volume: 1, Tab: Vendors
Corporate Learning and Performance: Vendor Needs and Strategies
V E N D O R N E E D S AN D S T R AT E G I E S
W o r k f o r c e P e r f o r m a n c e M a n a g e m e n t : An I D C As s e s s m e n t
o f D D I ' s C a p a b i l i t i e s
Michael Brennan Ellen H. Julian
I D C O P I N I O N
As the global economy sustains growth and the war for talent intensifies,
organizations are increasingly focusing on change initiatives that will improve
operational best practices. The benefits realized by investing in workforce
performance management (WPM) solutions are becoming ever more appealing to
businesses across industries and geographies, and they include improvements in
goal setting, stronger employee engagement in work, compensation that better
reflects performance, and more efficient talent management. One company that IDC
believes business decision makers and HR executives should consider when
evaluating WPM providers is Development Dimensions International (DDI). DDI is a
financially stable company with a global footprint and is well positioned in the
emerging WPM market. IDC bases this belief on the following:
! Alignment of cascading goals with organizational strategy. DDI works with
its clients' senior management teams to articulate organizational objectives and
trains managers on how to set goals up and down the organization.
! View of employee life cycle. A key strength for DDI is that WPM processes and
methodologies are natural extensions of the company's domain expertise in
employee assessment and selection, succession management, and training and
development — all of which have evolved over the company's 34-year existence.
! Consulting expertise. DDI works with client organizations to align business
strategy and tactics with performance goals. DDI's approach is to work with
clients to design business systems that will enable companies to achieve their
goals and subsequently help clients integrate systems into their business
practices.
! Change agent. Companies that spend wisely on WPM will execute with the
conventional wisdom that technology will not create value simply by its
deployment. Thus, they will need an organization that is adept at communicating
value and training employees and managers on new systems and business
processes. DDI has proven that it is adept at both in its work with clients.
GlobalHeadquarters:5SpeenStreetFramingham,MA01701USAP.508.872.8200F.508.935.4015www.idc.com

©2004 IDC #31796 1
I N T H I S S T U D Y
This IDC study is designed to provide an understanding of the role of workforce
performance management in helping organizations achieve their strategic objectives.
In Worldwide Workforce Performance Management 2004–2008 Forecast: What It
Means and Key Players (IDC #31446, July 2004), IDC described the key elements of
a WPM system and the potential market opportunity for providing products and
services designed to facilitate such a system. This document summarizes several of
the principles laid out in that study and provides potential implementers of WPM with
recommendations for evaluating vendors. It is with these criteria in mind that we
appraise DDI's WPM offerings.
S I T U AT I O N O V E R V I E W
N e v e r L o s e S i g h t o f t h e F a c t T h a t P e o p l e
D r i v e B u s i n e s s P e r f o r m a n c e
Although systems and processes play large roles in generating returns for
shareholders, it is impossible to conceive of an organization today where people are
not the biggest drivers of success. Corporations, government agencies, and
educational institutions that cannot find, develop, and retain the talent they need
must recognize that they are at a disadvantage. Consider the following scenarios at
two DDI client organizations operating in different competitive markets:
! HCA is a $19 billion provider of healthcare services comprising locally managed
facilities that include approximately 191 hospitals and 82 outpatient surgery
centers in 23 states, England, and Switzerland. The number 1 priority for HCA
and others in healthcare is caring for and treating patients. In 2002, the nine-
facility TriStar Health System of HCA's MidAmerica Division investigated ways to
improve patient experience.
! McKesson Corp. acquired HBOC, a publicly held healthcare IT company, in
1999. Shortly after the deal was consummated, the company was challenged by
a significant drop in customer satisfaction scores.
On the surface, these two scenarios appear very different from one another. Upon
closer examination, however, many of the challenges facing these two organizations
were similar. For instance, TriStar was challenged by a shortage of skilled nurses,
who are in short supply and routinely change employers. In 2002, management
determined that while such churn is a systemic problem, most nurses who had
departed HCA's facilities had done so because of issues specific to the organization.
These causes included supervisors who were unqualified to manage employees,
insufficient professional development opportunities, absence of clear career tracks,
and a compensation strategy that was not linked to performance as measured by the
most important indicator of all — patient satisfaction.
For McKesson, a root cause of customer disenchantment was the departure of more
than 20% of the merged company, including the entire senior executive team and a
Organizations that
cannot find, develop,
and retain the talent
they need must
recognize that they
are at a disadvantage.

2 #31796 ©2004 IDC
significant number of middle managers. The majority of newly installed leaders had
never been exposed to formal management training, and many had received
"battlefield" promotions due to high management turnover.
Ultimately, these two organizations realized that they needed to boost organizational
commitment. Jack J. Phillips, PhD, describes organizational commitment as
encompassing employee satisfaction as well as the "extent to which employees
identify with organizational goals, mission, philosophy, value, policies, and practices."
Organizational commitment is a driver of productivity. This makes perfect sense —
when people are engaged in their work and can easily relate their career goals to the
mission of the organization, they are set up to perform well.
E n t e r W o r k f o r c e P e r f o r m a n c e M a n a g e m e n t
An effective means of increasing organizational commitment is making use of a
functional workforce performance management system. IDC defines workforce
performance management as an adaptable, ongoing business system that involves a
combination of sponsors, managers, and employees. The ongoing processes that
compose the system include (see Figure 1):
! Defining job roles and related competencies that align with the mission and goals
of the enterprise
! Setting clear performance standards and goals at appropriate levels within the
organization
! Observing and measuring moves in key performance indicators at individual,
group, and enterprise levels
! Conducting written and oral performance appraisals to give and receive feedback
about performance as it relates to the achievement of individual and
organizational goals
! Assessing individual and organizational skills gaps impeding performance

©2004 IDC #31796 3
F I G U R E 1
D y n a m i c s o f W o r k f o r c e P e r f o r m a n c e M a n a g e m e n t
Individual competencies and
career strategy
career strategy
Enterprise environmental analysis
and action plans
and action plans
WPM
Job role
definition
Performance
goals/standards
Appraisal and
measurement
Gap analysis
career strategy
career strategy
and action plans
and action plans
WPM
Job role
definition
Performance
goals/standards
Appraisal and
measurement
Gap analysis
Source: IDC, 2004
F U T U R E O U T L O O K
W o r k f o r c e P e r f o r m a n c e M a n a g e m e n t : T r e n d s
Today, most organizations address WPM using a mix of paper-based methods and
general desktop applications. To most companies, a WPM "system" consists of
annual — and often inconsequential — performance reviews. However, there are
signs of demand calling for WPM to play a bigger role in the way the employees are
managed and developed to drive business results. Ensuring that employees' efforts
are set to execute on business strategy is a key issue for many executives
addressing the changing demographics (e.g., age, geographic locale) of their
workforces. For example, globally dispersed workforces need to be managed and
motivated to achieve desired performance outcomes. In addition, the established and
growing acceptance of HR self-service using portals will drive greater employee
involvement in WPM processes.
Ensuring that
employees' efforts are
set to execute on
business strategy is a
key issue for many
executives addressing
the changing
demographics (e.g.,
age, geographic
locale) of their
workforces.

4 #31796 ©2004 IDC
W o r k f o r c e P e r f o r m a n c e M a n a g e m e n t :
B u s i n e s s V a l u e
The benefits realized by investing in workforce performance management solutions
will become ever more appealing to businesses across industries and geographies as
the successes of others proliferate. These benefits include:
! Improved strategy execution through better goal alignment
! Improved employee engagement and performance (every employee knows what
is expected of him/her and often plays a role in establishing the expectations)
! Objective means of identifying and rewarding top performers
! More efficient hiring, internal placement, and succession management
! More targeted training and development initiatives
E S S E N T I AL G U I D AN C E
R e c o m m e n d a t i o n s f o r S e l e c t i n g a W o r k f o r c e
P e r f o r m a n c e M a n a g e m e n t S o l u t i o n s P r o v i d e r
Recognizing the challenges to organizational commitment that lead to employee
disenchantment and turnover, as McKesson and TriStar did, is an important step in
setting the context for a performance management system. In practice, however,
implementing such a system and ensuring its ongoing use are daunting propositions.
IDC believes that because most organizations do not possess core competencies in
organizational behavior or HR systems and processes, they will look to vendors — as
McKesson, TriStar, and others have looked to DDI — to provide workforce
performance management products and services to assist them. They should look for
the following capabilities when evaluating providers:
! Alignment of cascading goals with organizational strategy. An effective
system must be holistic in that it considers and aligns measurable objectives
related to people in all areas of the business. It must also enable stakeholders to
continually account for changes at the individual level (e.g., promotion), group
level (e.g., assembly of a new product line), and organizational level (e.g.,
merger). Therefore, organizational buyers should seek a provider that is willing to
familiarize itself with their business and that possesses processes and libraries to
assist them in selecting the behaviors/competencies and goals/objectives
associated with key job roles.
! View of employee life cycle. Organizations should seek a vendor with
capabilities that go beyond performance management. The business value of
performance management is enhanced when it is integrated with other HR
systems and processes such as recruiting, succession management,
compensation, and professional development.
Implementing a
workforce
performance
management system
and ensuring its
ongoing use are
daunting propositions.

©2004 IDC #31796 5
! Consulting expertise. A vendor should be able to demonstrate its expertise
through its work with clients across vertical industries and styles of governance
(e.g., centralized, matrixed). In addition, a vendor should have experience
implementing workforce performance management systems and aligning them
with other organizational systems. It is worthwhile for organizations to look for a
vendor that has implemented in technical environments similar to their own. This
should cut down on the number of surprises for everyone.
! Change agent. Companies should look for an external agent that can help effect
change in organizational culture and individual behavior to drive proper use of
the system. Those companies that spend wisely will execute with the
conventional wisdom that performance management technology will not create
value simply by its deployment. Thus, they will need an organization adept at
communicating value and training employees and managers on new systems
and business processes.
D D I H a s t h e E x p e r t i s e t o P u t W P M t o U s e i n
O r g a n i z a t i o n s
Company Overview
Founded in 1970, DDI is a global human resource consulting firm focused on
assisting its organizational clients by designing and implementing employee selection
systems as well as identifying, retaining, and developing talent. DDI's consultants
offer a full range of services that include system design, communication strategy,
alignment with other organizational systems, skills development (conceptual and
interpersonal) through direct delivery and train-the-trainer programs, accountability of
roles and responsibilities, and measurement.
Table 1 provides a composite view of the company. DDI is financially stable and well
positioned to leverage the growing demand for WPM and HR solutions in general.
Despite a tough climate for business spending in recent years, DDI continues to
generate positive operating cash flows, thanks largely to a loyal customer base and
negligible debt. The company invests approximately 7% of revenue in R&D. In
addition, the company has established a partnership with Workscape to deliver
technology-enabled solutions that meet a wide variety of customer requirements.
Those companies that
spend wisely will
execute with the
conventional wisdom
that performance
management
technology will not
create value simply by
its deployment.
DDI is financially
stable and well
positioned to leverage
the growing demand
for WPM and HR
solutions in general.

6 #31796 ©2004 IDC
T A B L E 1
D D I C o r p o r a t e O v e r v i e w
Category Data
Headquarters Bridgeville, PA
Founded 1970
Worldwide revenue, 2003 Just over $105 million; approximately 65% of business done in North America
Total number of employees 800 full time and 400 part time
Average tenure of full-time employee 8 years, which indicates an employee retention rate of 88%
Geographic presence 70 offices located in 22 countries
Performance management resources • Performance management system evaluation services
• Competency libraries for multiple levels/functions customizable to
organizations
• Performance management training in goal setting, coaching, and performance
reviews for managers
• Senior management "cascading" goals sessions
• Consulting services
Major WPM partnership Workscape, which provides WPM application that enables DDI's methodologies
Representative clients HCA, BT Exact, Franklin Templeton, Spirox, McKesson, DHL, BIC, and Lily
France
Key competitors Towers Perrin, Hewitt Associates, Accenture, Deloitte Consulting, IBM Global
Services, Mercer Consulting
Source: IDC and DDI, 2004
DDI's Position in the WPM Market
The market for performance management solutions involving both software and
services is evolving, and DDI is well positioned to take advantage of growing demand.
The company's work with clients, some of which are discussed below, shows that it
possesses the capabilities that organizations should consider when evaluating
providers of performance management products and services.

©2004 IDC #31796 7
Alignment of Cascading Goals with Organizational Strategy
DDI works with its clients' senior management teams to articulate organizational
objectives and trains managers on how to set goals up and down the organization.
Early on in the relationship, McKesson executives and DDI worked to create
leadership competencies based on McKesson's goals. In addition, DDI helps its
clients set goals and manage performance consistently. As part of its work with
Australian media firm Sensis, DDI successfully trained managers in several key areas
related to WPM — from linking individual performance objectives and company vision
to measuring performance relative to these objectives and identifying employee
development opportunities.
View of Employee Life Cycle
A key strength for DDI is that WPM processes and methodologies are natural
extensions of the company's domain expertise in employee assessment and
selection, succession management, and training and development — all of which
have evolved over DDI's 34-year existence. The company is also able to bring these
capabilities to bear to complement organizational adoption of WPM. For its nurse
retention problem, TriStar (of HCA's MidAmerica Division) initially worked with DDI to
define competencies necessary for certain jobs and categorize positions into multiple
job families. These exercises helped drive more accurate recruiting — a process for
which TriStar used DDI's behavior-based interviewing system. In addition, the
MidAmerica Division has sent its 1,000+ managers to a DDI leadership development
program, which includes a module that trains them to administer performance
management effectively.
Consulting Expertise
DDI works with client organizations to ensure strategy execution and goal alignment,
instill a culture of accountability, and foster employee-manager engagement. DDI's
approach is to work with clients to design a performance management system that
enables the companies to achieve their goals and subsequently helps the clients
integrate the system into their business practices. This process, dubbed "CASAM,"
also addresses the cultural aspects of integration:
! Communications strategy
! Accountability to drive system
! Skills to implement
! Alignment with other systems
! Measurement
DDI recognizes the need to demonstrate measurable returns to both its existing and
potential customers. Over the past 34 years, the company has developed standard
tools and indices to help its clients better understand the influence of its offerings on
moving key indicators of both individual behavior and organizational performance.
The center of TriStar's attention was reducing employee turnover; DDI helped the
company accomplish this goal. For McKesson, the broad focus was on leadership.
A key strength for DDI
is that WPM
processes and
methodologies are
natural extensions of
the company's
domain expertise in
employee
assessment and
selection, succession
management, and
training and
development.
DDI recognizes the
need to demonstrate
measurable returns to
both its existing and
potential customers.

8 #31796 ©2004 IDC
With DDI's help, the company measured the following improvements to determine
success:
! Employee turnover reduced from 20.4% in March 2000 to 4.8% in June 2002. At
one point during this stretch, the company reported a decline in turnover for 23
consecutive months.
! The employee referral rate increased from 25% in 2001 to 30% in 2002.
! Customer satisfaction scores increased from 4.94 to 5.38 on a 7.0 scale in two
years.
! Revenue and operating income both showed marked improvements.
! The average attendee rating for DDI's leadership courses was a 6.6 on a 7.0
scale, with leaders requesting that additional classes be scheduled.
Change Agent
Changing behavior is at the heart of what DDI does. When McKesson turned to DDI
to help with its gaps in leadership, company officials credited much of their success
— measured using indicators such as a 15% decrease in employee turnover in two
years and a 5% increase in employee referral rates in one year — to the training and
development expertise their vendor of choice brought to the table. DDI not only
supported implementation of WPM by training 700 managers on why they should use
the system and how to use it; the company also provided a multiday leadership
development program to prepare managers to help drive performance.
C o n c l u s i o n
Despite the limited use of WPM today, there is some pull from the marketplace calling
for WPM to play a bigger role in the way workforces are managed and developed to
drive business results. With a full range of services including system planning,
implementation, training, support, and measurement as well as proven success in
delivering successful performance management solutions, DDI is well positioned to
drive business results and has established itself as an early leader in this market.
L E AR N M O R E
R e l a t e d R e s e a r c h
! Worldwide Workforce Performance Management 2004–2008 Forecast: What It
Means and Key Players (IDC #31446, July 2004)
! Worldwide ERP Applications 2004–2008 Forecast: First Look at Top 10 Vendors
(IDC #31269, May 2004)
! Dissecting the New PeopleSoft by Analyzing Its Product, Marketing, and Global
Ambitions (IDC #31195, May 2004)
Changing behavior is
at the heart of what
DDI does.

©2004 IDC #31796 9
! Western European HR and Payroll Applications, 2004–2008 Forecast (IDC
#LC01L, May 2004)
! Global IT Economic Outlook, 2004 (IDC #31205, April 2004)
! Adoption, Preference, and Practice: A Demand-Side Snapshot of Learning
Management Systems (IDC #30737, January 2004)
! Adoption, Preference, and Practice: A Demand-Side Snapshot of eLearning
Content (IDC #30507, December 2003)
! Click2learn and Docent: IDC's Perspective on the Proposed Merger (IDC
#30316, October 2003)
! U.S. Corporate and Government eLearning Forecast, 2002–2007 (IDC #30119,
September 2003)
! Worldwide and U.S. Enterprise Portal Services Forecast Update, 2003–2007
(IDC #29878, August 2003)
! Worldwide Human Resources Management and Payroll Processing Applications
Market Forecast and Analysis, 2003–2007 (IDC #29803, July 2003)
C o p y r i g h t N o t i c e
This IDC research document was published as part of an IDC continuous intelligence
service, providing written research, analyst interactions, telebriefings, and
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Copyright 2004 IDC. Reproduction is forbidden unless authorized. All rights reserved.
Published Under Services: Corporate Learning and Performance

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