The Essential Guide To Employee Performance Management Systems

The Essential Guide to
Employee Performance
Management Systems
Leighanne Levensaler
Director of Talent Management Research
October 2008
© BERSIN & ASSOCIATES RESEARCH REPORT | V.1.0

Employee Performance Management Systems
Introduction
For decades, organizations have used simple office productivity tools to
support employee performance management practices, such as goal-
setting and performance reviews. Some early adopter organizations
have even taken advantage of the web-based employee performance
management applications that came on the market about five years ago.
These nascent applications offered organizations the ability to realize
great efficiencies through forms automation, self-service and improved
compliance reporting. While these efficiency gains are certainly beneficial,
they did not provide significant strategic business value or provide
organizations with assistance in addressing critical talent challenges.
In the last 24 months, however, we have witnessed dramatic

advancements in employee performance management solutions and, as a
result, the performance and talent management market has experienced
explosive growth.
Given the dynamic nature of the market, organizations are justifiably

confused on many fronts, such as:
• What is “needed” in a technology solution;
• What their current HR systems offer (as compared with what is

available on the market);
• Which providers should be considered; and, ultimately,
• How to evaluate employee performance management solutions.
Through this comprehensive research study, we set out to provide

organizations with a practical guide to address some of their biggest
questions, including the following.
• What is included in an employee performance management system

and how have the feature sets evolved to support broader talent
management strategies?
• Why should we implement an employee performance management

system and what are the biggest benefits?
• How well-adopted are the systems today?
• What are the top implementation challenges?
Bersin & Associates © October 2008 • Not for Distribution • Licensed Material
• What are the best practices, and how can we ensure a successful
implementation and adoption?
• Which are the leading solution providers and how do we differentiate

the solutions offered?
• What is the most efficient and effective approach in the evaluation

and selection of employee performance management solutions?
We found that the leading solutions available today are much more than
an employee performance appraisal tool; they now support advanced
feature sets, such as goals management, competency management and
development planning. In addition, integrated performance management
solutions (as the core of a talent management suite) offer support for pay
for performance, and career and succession management.
Additionally, the technology solution provider landscape has undergone

dramatic changes as a result of mergers, acquisitions and an influx
of new entrants to the market. The stability of solution providers is
understandably a serious concern for every organization.
This report is designed to be a companion report of The Essential Guide

to Employee Performance Management Practices. It is intended to
provide your organization with the information you need to:
• Educate your project team and stakeholders on the state of the

market and the solution provider landscape;
• Identify the solution providers that support your critical requirements

and meet your business needs; and,
• Guide your organization in how to approach the selection of an

employee performance management system, given the chaotic state
of the market today.
We welcome your feedback and sincerely hope you find this guide to be
an invaluable resource.
For more information, Talent Management Suites: Market Realities, Implementation

Experiences and Vendor Profiles, Bersin & Associates / Leighanne Levensaler, January
2008. Available to research members at www.bersin.com/library or for purchase at
www.bersin.com/tmsuites.
For more information, The Essential Guide to Performance Management Practices,
Bersin & Associates / Leighanne Levensaler, October 2008. Available to research members
at www.bersin.com/library.
Research Methodology
This research study was initiated in February 2008 and completed
in August 2008. We invited representatives from U.S. and global
corporations, nonprofits, government and higher-educational institutions
to participate in interviews and focus groups to discuss their employee
performance management practices. Over a five-month period,
47 organizations from a wide variety of industries and geographic
locations shared the changes they made that had real business impact.
In mid-July 2008, we surveyed HR practitioners and line managers
from organizations of all sizes and across all industries; the final count
of qualified respondents was 716. The survey yielded a large cross-
section of respondents. (See section, “Appendix VIII: Research Survey
Demographics,” which provides a detailed breakdown of the survey
demographics.) Of particular interest is the percentage of multinational
(41 percent) and non-U.S.-based (13 percent) organizations participating
in this research. For the final analysis, we segmented the responses
by geographic reach, industry, and a host of other demographic and
operational characteristics. The goal of the segmentation was to provide
organizations with benchmark data to assist with the design of their
employee performance management strategies.
In order to provide readers with another reliable benchmark for

comparison, we identified 10 organizations with high-impact and deeply
integrated employee performance management practices. We selected
the organizations after completing 47 research interviews. The leading
organizations come from different industries and range in size from
5,000 employees to 250,000 global employees. What they share is a well-
developed, high-performance management culture and an integrated
approach to building organizational capability. In several sections of this
report, we refer to the practices of these “leading organizations.”
Of the more than 700 research participants, 30 percent are listed in the
top 100 on the FORTUNE 500 list and 28 percent are listed on the “100
Best Companies to Work” list. It is not a Bersin & Associates practice to
disclose the names of the respondents and organizations participating in
the research unless we seek formal approval.
In addition to the findings captured from organizations, we conducted

an extensive analysis of the solution provider landscape. We invited 30
solution providers to be evaluated and profiled for this research study
and report. Ultimately, we covered 25 solutions, including two from

Oracle. Our analysis approach included the following activities.
• We collected comprehensive profile data, based on a standard

set of company and product questions similar to a request for
proposal (RFP).
• We conducted detailed briefings, and evaluated the providers using a

functional criteria matrix and use-case scenarios.
• We conducted customer reference checks for each solution provider.
• We developed a profile for each solution provider, including

functional evaluation ratings and our own analysis.
We believe our approach to evaluating the market and solution providers

is unrivaled in the industry.
Summary of Key Findings

1. The performance management systems market is the
fastest growing subsector in the human capital management
(HCM) market and will soon be the biggest talent
management segment.
The performance management systems market is estimated at $520

million for 2008, growing at a rate of 35 percent from 2007. The
market is growing more than twice as fast as the more mature talent
management segments of recruitment and learning management –
and has potential to be largest talent management segment overall
by 2011. We estimate that the market for performance management
systems is less than 12 percent penetrated in the U.S. and less than
nine percent globally.
2. The performance management market has been redefined.

No longer a standalone market, it now encompasses solutions
that support integrated performance, career, succession and
manager-focused compensation management – and is the core
of the talent management suite.
The explosive growth of the performance management systems

market can be attributed, in part, to the trend of both solution
providers offering and organizations pursuing an integrated talent
management solution. Our research shows that the “performance
core” offers the highest-value integration points and, as a result, it is
typically the first set of modules an organization will implement in an
integrated approach. Further, every integrated talent management
solution on the market today supports the performance core.
Organizations with integrated talent management suites cite two
to three times the return on investment (ROI) than organizations
implementing point solutions.
3. There are more than 30 solution providers vying for market

position, making it very difficult for buying organizations to
narrow the field for evaluation.
In terms of revenue and customers for performance management

solutions, SuccessFactors, Halogen and Oracle (respectively) are the
market share leaders. From an overall company revenue standpoint,
there are several other large, stable solution providers offering
performance management solutions, including SAP, StepStone and

Taleo. While there are many providers offering solutions, most
are optimized to service organizations in only one or two target
segments. We found that less than half of the providers are able to
meet the needs of organizations with 10,000-plus employees, while
only seven of those providers have deep experience with truly global
implementations. For smaller organizations with less than 1,000
employees, there are only nine providers that would have a solution
and the type of services required to meet their needs.
4. The performance management market is quite elusive, beset

with new entrants, consolidation and global expansion.
In early 2008, leading recruitment management provider Taleo released

their Taleo Performance solution with great fanfare. Several months
later, the company announced that it was acquiring Vurv. Not only
one of its direct competitors in the recruitment management space,
Vurv was also one of the largest performance management solution
providers with more than 750 customers running several versions of its
products. Another recruitment management provider, Cytiva, launched
an on-demand performance management solution designed by some
of the pioneers in the performance management market.
2008 also could be called the “year of globalization.” Many

organizations are now pursuing truly global talent management
strategies. As such, they require the solution providers to support
multiple languages, as well as offer support for highly sophisticated
configuration and distributed administration requirements. Several
leading solution providers (including Cornerstone OnDemand,
Softscape and Plateau) extended their sales, services and support
teams beyond North America in an effort to support their
multinational customers – as well as tap into the enormous market
potential of Europe / the Middle East / Africa and the Asia-Pacific
region. At the same time, several global providers (including
StepStone and Pilat HR Solutions) have successfully entered the
U.S. marketplace.
5. We are at the point in the market in which performance

management systems can drive tremendously high return
on investment.
In addition to hard time and cost-savings, organizations cite better

alignment of individual goals to organizational goals; more consistent
feedback and ratings; and, better insights into key performance

indicators as benefits of performance management systems.
Moreover, organizations identified implementing an automated
technology solution as the highest impact change made to their
employee performance management strategies. We cite this finding
with caution, though. The technology solution itself does not provide
the higher-value benefits or change behavior. The high-value benefits
come from the process, policy and user experience design work
organizations must go through to configure a technology solution to
meet their needs. The act of selecting and implementing a technology
solution forces an organization to really think about its practices as
they relate to the company’s goals and management culture.
6. User experience is a key differentiator for solution

providers in this ostensibly homogenized performance
management market.
As performance management systems continue to support more

advanced and integrated functionality, they increasing become
much more complex and difficult to use. For solution providers, an
intense focus on user experience is critical to ensuring customers
adopt sophisticated functionality and to supporting overall customer
success. In the last nine to 12 months, several leading providers have
undergone major development efforts to significantly improve their
systems’ user experience – and now incorporate “next-generation”
features, such as decision and performance support, collaboration,
and contextual or smart content.
7. SaaS (software as a service) is the predominant delivery

model for performance management systems. Adoption
of the SaaS model has dramatically increased the pace of
product innovation and the frequency of product releases in
the market.
Sixty-two percent of organizations with a vendor-provided solution

today are deployed on-demand in an SaaS model. By eliminating
organizations using an enterprise resource planning (ERP) solution
for performance management from this analysis, the percentage
increases to 81 percent. The single code base and controlled
management environment of SaaS enable solution providers to
move to more frequent (e.g., quarterly or semiannual) releases
of enhancements to the software. For buying organizations and
customers, this means it may only be a quarter or two until the

solution provider can close a functional gap in its product. Thus, there
is no more waiting years for functionality, or taking on a lengthy and
expensive upgrade process.
8. SaaS can be highly configurable. Over the last six to nine

months, several leading SaaS solution providers have
extended their product capabilities to support organizations
with highly “customized” and varied global performance
management practices.
Now that the majority of security concerns with SaaS are no longer
valid, reticent organizations cite the inability to customize an SaaS
solution as the major obstacle to adoption. It is true that SaaS
solutions cannot be customized – but several solutions on the market
do not need to be customized in order to meet an organization’s
sophisticated needs. Leading solution providers now offer as much
configurability as possible to accommodate nuanced approaches, as
well as variability in the approaches, based on business unit, region,
type of worker or any combination of attributes. Functionality for
establishing business rules, templates, controlling data access and
setting up notifications can now be defined at a very granular
level. In addition, the solutions have come a long way in offering
distributed administration privileges. In the early stages of this
market, all SaaS solutions are not equally competent in this area and
configurability should be considered a key differentiator. To ensure
the best fit solution, organizations should develop detailed use-case
scenarios to guide the evaluation process.
9. The performance management functionality available in the

ERP’s HCM solutions has reached functional parity with the
majority of the “best-of-breed” solution providers.
Point solution providers no longer have the 12 to 18 month product

advantage over the much larger ERP providers. The latest product
releases from Oracle (EBS 12.1 and PeopleSoft 9.1) and SAP (ERP HCM
6.0) offer comparable performance and succession management
functionality. Recent advancements are, in part, due to the fact that
the ERP providers are much more focused on the HCM business –
and are spending more on research and product development
than the smaller, less resourced providers. While advanced feature
sets and user experience are now available, organizations must
Employee Performance Management Systems 10
be on the latest version of the ERP environment to implement the

enhancements. For some organizations, the upgrade could be several
years away, depending on their individual organization’s overarching
ERP strategy and the timing of the HR upgrade. Fortunately, once
an organization has upgraded, the ERP providers have adopted a
strategy to offer new features through frequent (several times a year)
enhancement packs between major point releases.
10. Organizations identified their top implementation

challenge as insufficient training and performance support
for employees and line managers.
As performance management practices become more

sophisticated, the role of the line manager and the employee increases
significantly – and the related technology solutions are required to
do much more. In our research study of performance management
practices, we found that 38 percent of line managers do not feel they
have the training and skills needed to be effective in their expanded
roles. In addition, the top challenge in implementing performance
management systems is not having enough training and performance
support for the users. To ensure end-user adoption and appropriate
execution of the practices, organizations must budget extensively for
education, change management and performance support.
For more information, The Essential Guide to Performance Management Practices,

Bersin & Associates / Leighanne Levensaler, October 2008.
SuccessFactors, Inc.
Company Overview
SuccessFactors is one of the fastest-growing public software companies,
COMPANY SNAPSHOT
and the leading provider of on-demand employee performance and
talent management solutions. The company enables organizations of
Headquarters
San Mateo, California, USA every size, and across every industry and geography, to achieve high-
Date Founded: 2001 performing workforces through goal alignment and execution, talent
Public of Private
development and planning, and pay-for-performance initiatives. From
Public (NASDAQ:SFSF) 92 customers and approximately 282,000 end-users in 2003 to more
2008 Projected Revenue than 2,140 customers and four million end-users today, SuccessFactors’
Estimated: $105 million solutions are widely deployed across 60 industries in more than 185
Employees: 700 countries in 22 languages. Founded in 2001 with offices around the
Customers: 2,140 world, the company employs more than 700 people, all passionately
North America – 85%
Total Number of Users focused on revolutionizing the future of work. For more information,
4 million please visit http://www.successfactors.com.
Customer Retention
Rate: More than 90%
Top Five Industries
Figure 75: Solution Provider Profiles – SuccessFactors
Figure 1: Sample Screenshot – SuccessFactors4
1. Business Services
2. High Tech
3. Financial Services
4. Healthcare
5. Retail
Largest Implementations
and Number of Users
1. Johnson & Johnson
(129,000)
2. Wachovia (101,000)
3. Lloyds TSB Bank, PLC
(60,000)
Source: SuccessFactors, 2008.
Representative screen shot from the provider’s performance management solution.
Product Overview
Performance Management and Succession Management Product Family
Delivery
Current
Models
Version Number of
Date Current Supported
Number Customers Development
Product name Version (SaaS / Languages Supported
Available on This Technology
Released Multitenant,
for General Version
Hosted, and /
Release
or Installed)
1. Goal Management Via the SaaS model, all SaaS / 22 Languages: Java
customers are on the most Estimated Multitenant Bahasa (Malaysian), Bahasa (Indonesian),
recent release. SuccessFactors at 1,800 Chinese (simplified), Chinese (traditional),
2. Performance Management employs a monthly release Danish, Dutch, English (U.S.), English (U.K.),
cycle that allows customers to French (Canadian), French (European),
“opt into” new features. German (European), Italian, Japanese,
3. 360 Degree Reviews N/A Korean, Polish, Portuguese (Brazilian),
Portuguese (Portugal), Russian, Spanish
(international), Thai, Turkish, Vietnamese
4. Learning and Development N/A
5. Succession Management Estimated

at 800
Bersin & Associates

Performance and Succession Management Capabilities
Evaluation
Performance management planning and review cycle management 
Goals management 
Competency management 
Performance planning 
Development planning 
Performance reviews 
Performance calibration support 
Pay-for-performance integration 
High potential / talent identification 
Job profile management 
Talent profile management 
Succession management / pool and position-based 
Talent analytics 
Global capabilities 
 = None  = Basic  = Comprehensive
Bersin & Associates

User Experience
Evaluation
Administrator’s user experience 
Employee and manager’s user experience 
 = Lagging  = Current  = Leader
Other Products
Product Name and Current Version

Other Human Resources Products
Number (Available for General Release)
Core HRMS N/A
Advanced Job Description Manager –

Advanced features beyond the core
Competency Management
job role / competency management
capabilities
50 predefined competency
management, included in base product;
Competency Content Library
additional partnerships with Lominger,
PDI, DDI.
Recruitment Management Recruiting Management
Onboarding Recruiting Management
Capability provided via partnership with

Learning Management
GeoLearning
Capability provided via partnership with

Learning Content Management
GeoLearning
Offboarding/Transition Management N/A
Compensation Management and

Compensation Management Variable Pay (advanced bonus
calculations)
Workforce Planning N/A
Time and Expense N/A
Workforce Analytics Analytics and Reporting
Targeted Content Packs (e.g., healthcare,

Other behavioral interview questions, wage
data, et al), Engagement Survey
Service Offerings
COMPANY SNAPSHOT
Implementation Services Customer Service
(cont’d)
Technical Consulting Services Strategic Consulting Services
Geographic Expansion
Targets Platform Hosting Remove BPO
Asia-Pacific, Europe / the
Middle East / Africa, Latin
America Customer Training Partner Training
Resellers / Distributors
IBM, Ceridian, Convergys, Regional Users Groups Industry Users Groups
Hewitt, Accenture, Gevity,
TriNet, GeoLearning
User Conference
Three Key Company Differentiators

1. Organically built and seamless integration across performance and
talent management initiatives.
2. Proven track record exhibited by large user base, and high number
of satisfied and successfully deployed customers.
3. SaaS delivery model provides fast time to value, straightforward

implementations and faster innovation.
Bersin Analysis
SuccessFactors is a leading talent management suite provider with (by
far) the most well-adopted employee performance management product
on the market today.
For this profile, we evaluated the Enterprise Edition of the application

suite. This version is suitable for organizations with more than 1,500 users
or organizations with sophisticated practices. To address the varied needs
of different size organizations and / or levels of employee performance
management maturity, SuccessFactors delivers two other editions of its
product – SuccessPractices for organizations with 300 to 1,500 employees
and the Professional Edition for organizations with up to 300 employees.
In the current release of the Enterprise Edition, we found performance

management and development planning to be comprehensive, and very
well-integrated with compensation and profile management.
One of the biggest differentiators of the SuccessFactors solution is the

innovative employee and manager experience. Leveraging the latest Web
2.0 technology, SuccessFactors now offers support to help organizations
address the most common contributors to end-user dissatisfaction and
low adoption rates. Rather than expecting users to constantly feed the
system and get nothing in return, SuccessFactors makes extensive use of
features, such as performance support, collaboration and integrated data
experiences. These features help to engage users by providing contextual
information to support decision-making and planning.
We found the succession management capabilities to be just basic and

limited to slate-based position planning; however, the identified gaps
in succession management will be addressed very soon. Improvements
(such as scenario planning and pipeline analysis) will be available in
the company’s Q4’2008 release. SuccessFactors indicated that further
enhancements to succession planning (including support for talent pool
management) will be included in the Q1 and Q2 releases in 2009.
The company’s customers shared that they would like to see

improvements in the administrator’s experience – particularly in the
areas of configuration management, and support for distributed
administration across organizational units and geographies.
As recently as12 months ago, we reported that the majority of

SuccessFactors’s customers were in the small to medium-sized category.
While this may still be true (given the amount of customers the company
supports), SuccessFactors is used in organizations of all sizes and across
all industries. Over that last year, the company has had great success
with selling into large, complex organizations. Today, we find that
SuccessFactors appears on the evaluation shortlist for almost every
North American-based organization seeking an employee performance
management system. In addition, the company’s global presence and
experience is steadily increasing. New consulting and reseller partners
(such as IBM) should help SuccesssFactors expand its geographic reach
and target to many more global corporations.
About Us
Bersin & Associates is the only research and advisory consulting firm
focused solely on WhatWorks® research in enterprise learning and
talent management. With more than 25 years of experience in enterprise
learning, technology and HR business processes, Bersin & Associates
provides actionable, research-based services to help learning and HR
managers and executives improve operational effectiveness and
business impact.
Bersin & Associates research members gain access to a comprehensive

library of best practices, case studies, benchmarks and in-depth market
analyses designed to help executives and practitioners make fast, effective
decisions. Member benefits include: in-depth advisory services, access to
proprietary webcasts and industry user groups, strategic workshops, and
strategic consulting to improve operational effectiveness and business
alignment. More than 3,500 organizations in a wide range of industries
benefit from Bersin & Associates research and services.
Bersin & Associates can be reached at http://www.bersin.com or at

(510) 654-8500.
About This Research

Copyright© 2008 Bersin & Associates. All rights reserved. WhatWorks®
and related names such as Rapid e-Learning: WhatWorks® and The
High-Impact Learning Organization® are registered trademarks of
Bersin & Associates. No materials from this study can be duplicated,
copied, republished, or re-used without written permission from Bersin &
Associates. The information and forecasts contained in this report reflect
the research and studied opinions of Bersin & Associates analysts.

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© BERSIN & ASSOCIATES RESEARCH REPORT | V.1.0

In the last 24 months, however, we have witnessed dramatic

Given the dynamic nature of the market, organizations are justifiably

• What is “needed” in a technology solution;

• What their current HR systems offer (as compared with what is

• Which providers should be considered; and, ultimately,

• How to evaluate employee performance management solutions.

Through this comprehensive research study, we set out to provide

• What is included in an employee performance management system

• Why should we implement an employee performance management

• How well-adopted are the systems today?

• What are the top implementation challenges?

• Which are the leading solution providers and how do we differentiate

• What is the most efficient and effective approach in the evaluation

Additionally, the technology solution provider landscape has undergone

This report is designed to be a companion report of The Essential Guide

• Educate your project team and stakeholders on the state of the

• Identify the solution providers that support your critical requirements

• Guide your organization in how to approach the selection of an

For more information, Talent Management Suites: Market Realities, Implementation

In order to provide readers with another reliable benchmark for

In addition to the findings captured from organizations, we conducted

and report. Ultimately, we covered 25 solutions, including two from

• We collected comprehensive profile data, based on a standard

• We conducted detailed briefings, and evaluated the providers using a

• We conducted customer reference checks for each solution provider.

• We developed a profile for each solution provider, including

We believe our approach to evaluating the market and solution providers

Summary of Key Findings

The performance management systems market is estimated at $520

2. The performance management market has been redefined.

The explosive growth of the performance management systems

3. There are more than 30 solution providers vying for market

In terms of revenue and customers for performance management

performance management solutions, including SAP, StepStone and

4. The performance management market is quite elusive, beset

In early 2008, leading recruitment management provider Taleo released

2008 also could be called the “year of globalization.” Many

5. We are at the point in the market in which performance

In addition to hard time and cost-savings, organizations cite better

feedback and ratings; and, better insights into key performance

6. User experience is a key differentiator for solution

As performance management systems continue to support more

7. SaaS (software as a service) is the predominant delivery

Sixty-two percent of organizations with a vendor-provided solution

customers, this means it may only be a quarter or two until the

8. SaaS can be highly configurable. Over the last six to nine

9. The performance management functionality available in the

Point solution providers no longer have the 12 to 18 month product

be on the latest version of the ERP environment to implement the

10. Organizations identified their top implementation

As performance management practices become more

For more information, The Essential Guide to Performance Management Practices,

Source: SuccessFactors, 2008.

Representative screen shot from the provider’s performance management solution.

Performance Management and Succession Management Product Family

5. Succession Management Estimated

Bersin & Associates

Performance management planning and review cycle management 

Performance calibration support 

High potential / talent identification 

Job profile management 