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SuccessFactors - You're Hardcore, But I Love You Anyway...

Is it a layoff?  Or a purging of the untalented, unmotivated and/or those with a poor fit for their role?

If you're a fan of performance management and wish you could do more in your company to drive aHardcore performance culture, you've got to love SuccessFactors.  They produce on-demand software that allows you to have a dashboard of what's going on in your shop, regarding performance management.  Beyond simply tracking due dates, the solution allows you to see cascading goals, see the rating distribution across the enterprise, and throws a little succession planning flavor your way as well. 

There are lots of reasons to love SuccessFactors and others who provide similar stuff, including Taleo, Halogen Software and hopefully in a little bit, the TalentedApps team at Oracle.

Here's another reason to love SuccessFactors.  They apparently eat the dog food they make.  They may even drink the Kool-Aid.  From Ed Frauenheim at Workforce's Global Work Watch:

"SuccessFactors lowered its headcount from 736 at the end of 2007 to 694 at the end of March. The drop was a bit puzzling, because SuccessFactors has been one of the fastest-growing software firms around, selling tools that help manage employee performance reviews and other human resources tasks. Revenue nearly doubled last year, to $63.4 million.

The headcount issue prompted a question by a financial analyst during an earnings call earlier this year. SuccessFactors founder and chief executive Lars Dalgaard explained the situation as axing employees who didn’t belong.

“So we hired a lot of people in [the first quarter], but we just fired more,” Dalgaard said on the call. “We’ve been on a very aggressive hiring spree for a long time, and we’ve used our own products to find out the people that weren’t going to be part of the future.”

When I asked a company spokesman about the headcount change, he offered this explanation: “We get rid of low performers and/or cut our losses if some initiative is not working out, and that’s what happened.”

Pressed once more on the topic, the company said this in a statement: “The headcount reduction was not a layoff. We eliminated low performers and we eliminated a group associated with a vertical focused area that did not produce results (we will not provide specific, further info). “This is consistent with our pay for performance philosophy and aggressively managing our business for performance.”

If you read Ed's whole piece, he's locked in on the fact that it's a layoff.  To Ed's point, if the reduction is actually a layoff, SuccessFactors may have some issues here.

Work with me on this one.  Let's say for the sake of argument that SF hired no one during the three month period, which would mean they termed 42 people for the quarter in question.  If you went to the turnover report and the coding showed "Involuntarily Term - Poor Performance", then what SF is saying is true.  And that means the reduction was driven by them using their own solution, which is cool.

However, since a poorly performing department is cited as part of the numbers, some red flags go up.  Let's say they shuttered a department of 30 in these numbers.  If that's the case, they just splattered all who were impacted by that with the specter of being a bad performer.  That's bad form, and from a practical standpoint, not true.  In any universe with 30 people (my example), you'll have good, bad and average performers as part of the mix.

The truth is in the numbers.  If the shuttered department only accounts for 10% or so of those termed in the quarter, then the company is drinking the Kool-Aid.  If it accounts for a sizable chunk of those termed, it's classically inaccurate to throw the specter of performance on everyone in the department. 

Still, I love the fact that SuccessFactors would try to spin the headcount reduction as their culture being hardcore for performance management.  That means they're passionate about the space, even if they're being a little reckless in sharing performance data on those impacted.

Welcome to the wonderful world of being publicly traded, SuccessFactors! 

Comments

Jason averbook

great post kd. If truly pert mgmt driven, thank goodness. Was at client who said 'we can't get rid if them, ten years here'. Hats off to lars for running his business the way we all should, atleast in this case of low performers

insert name here

What you missed is if they used their own application to HIRE these people in the first place. After all, isn't the purpose of their app (& Taleo's and the like) to find the best of the best? You need to look at who is running these companies and their motivation. It's not to build a better toaster, which BTW they aren't.

L.H.

Apparently they just laid off 180 employess last week from my inside source there. Some folks would say they got rid of low performers but I belive the company is not doing so well. Look at the financials and margins. All I can say is thank goodness I denied an offer from them last month.

J.P.

I have an inside source as well, and there were large layoffs at SuccessFactors. My source mentioned they do not use their tools at the company as they preach. The layoffs were described as very typical in comparison to experiences at other companies. The idea behind the software is solid and crucial to all businesses, but it could be too much politics going on at this small, struggling company.

Coach HR

Thanks for the news. I've used Success Factors products when I was an HR executive. I loved the convenience and nice neat bundle in came in. With these two announcements, I'm wondering about the focus on the short term need to sell. Right now much of the woes of the economy is contributed to poor decisions made for short term gains. SF seems to be promoting and possibly institutionalizing that kind of thinking both with their customers and within their company.
How do you measure ethical decisions and behaviors that have long term ramifications?
How do you reward people for creating a culture of innovation? You know those outliers who just keep testing the boundaries and are as annoying as... well you get the idea.
When over 80% of the MBA programs don't teach participants how to create a culture or manage performance/goal setting how can we expect executives to think both short term and long term about the community they serve and the employees lives that are entrusted to them?
I know - old school thinking. Not the thinking of a true business partner. Yea you're probably right. But tell me how do we inspire employees to do the right thing when we ask managers to punch a button, stack rank employees and make decisions during tough times on who stays and who goes? The underlying assumption is those same managers had conversations and held people accountable during the year. If that's true, then why do we need this product? Shouldn't the "low performers" have been weeded out by now?
I still like SF products. Just hate their new marketing spin. Feels like they are now subscribing to the "sell the product and let the customer beware philosophy". The old philosophy of helping a company achieve higher productivity through holistic thinking was something that in my experience set them apart from the crowd.

Barbara

SAS did the same thing but all of their "layoffs" listed as low performers were people who had been there 20+ years....can you spell age discrimination?

Henry

My name is Henry Lansang. I am an in house headhunter based in NYC. Am interested in speaking with any and all Senior Sales Executives (Regional Sales Manager/s) who were laid off from SuccessFactors. If you know anyone who is looking, please contact me 917 289 3979.

huh

Is successfactors relly tht bad place to work cuz it went up to $9 and been thinking that everyone there must be rich now? What kinda questionable practices people talking about cuz if there be problems w/people not gettin commissions, they should just report to dept. labor. What kinda lawsuits people documenting and thinking of filing? Some fraud going on? thought sfsf was so family friendly that it was even helping out employees in their divorces or relationship probs. Not seen any concrete details in these postings? How could lars be that bad he is marrying nicole asian chick.

Sylvia

I worked for SuccessFactors for about 8 months in the Consulting arena. They made lots of promises during the hiring process - This was one of the worst run companies I have ever worked with. My manager ( who made all these promises before I was hired) never called me once in 5 months to see how I was progressing. Even when I told him I had concerns about the position and what was promised. In the my region, about 40% of the people hired quit after the first 3-6 months. They saw through the scam. In my exit interview I told the truth that this company is not a Performance Management company. I never saw Performance Management at SF at all. It\'s more of a cult! And - chose not to drink the \

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