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Big VC Round For SilkRoad

                $54 Million to SilkRoad technology, inc.

SilkRoad technology is a provider talent management solutions. The company has the backing of several venture capital firms including one involving Flip Filipowski. This week they announced the successful close of $54 million in venture funding.

Flip's a great fellow. He took time years ago to meet with me re: a startup I was launching. He was super to deal with back then and was great to visit with last fall at the HR Technology show in Chicago.

My research firm, Vital Analysis, prepared a report on SilkRoad last fall and it remains one of the most requested reports we have. Interestingly, many of the requests come from European businesses that are interested in a new Talent Management solution. Just based on the market interest in that report alone, I would guess that SilkRoad is definitely getting traction in the market and may turn out to be a winning investment for its VCs.

Incidentially, any software firm that can raise $54 million in this market must be doing better than just ok. Specifically, they must be:

• closing a growing quantity of deals (proof of business model)
• managing expenses well (operational excellence)
• expanding their pipeline (gaining market acceptance)

Best wishes to their continued success...

The Economy from an HR Week Viewpoint

                                  The Recession is On

In conversations with numerous HR technology and outsourcing executives this week at the HR Week shows in New York City, we confirmed that:

• Persons in lower skill positions (e.g., call center workers) were staying in these jobs due to economic worries. Attrition rates for these positions is down markedly.
• Highly skilled, tight labor markets (e.g., engineers, accountants, IT professionals) are still highly constrained and employers are begging for more talent

There are some interesting implications to this. First, employers may need to be more aggressive in managing attrition of low-performing individuals in lower skill positions. Just because a low performer wants to stay with the firm doesn't mean they should be allowed to do so. Likewise, employers should expect a boom in voluntary separations once the economy improves. They'll need to be prepared to replace a larger than normal spike in attrition when this transpires.

Additionally, employers should be on guard for defections of their top players. No matter what the economy, great people are always in demand by competitors. If too many of these employees leave, how effective can your firm be if all it has are the modest, mediocre or barely passable workers?

Recessions create interesting problems and opportunities for employers. Will your firm use this time as an opportunity to significantly upgrade its workforce or will it wait until the economy improves? Waiting can cost you some great finds as people are more motivated to change positions when their current employer is looking a bit scared or iffy during a down-turn. Smart recruiters will act now and create powerful teams for their employer.

More on the Softscape - SuccessFactors Litigation

                      Softscape Lines Up Top Flight Counsel

SoftScape has lined up Taylor & Co. to defend them in the case recently filed by SuccessFactors. The two attorneys from Taylor & Co. on this case will be Steve Taylor and Jessica Grant. Mr. Taylor achieved some measure of fame in HR circles with his successful defense of PeopleSoft in a theft of trade secrets trial in the early 90s.

In that trial, two competing HR software firms alleged that newcomer, PeopleSoft, had infringed on proprietary intellectual property. In the spirit of full disclosure, I was personally subpoenaed for that case although I did not get deposed or offer testimony. That case was quickly dismissed as the Federal judge on that case did not find that the infringements were at all material or unique. In that case, plaintiffs alleged that a screen requesting 14 data elements like name, address, zip code and social security number were a unique, defensible HR intellectual property creation. I agreed with the judge that those 'unique' features were obvious and common to just about any payroll or HR system. PeopleSoft prevailed and their sales exploded immediately after the case was ended.

Softscape needs a solid litigator and it appears that they've made a good choice (see: http://www.tcolaw.com/aboutus.html) . If they get the case heard in Federal court with a sharp judge, that could help them, too.

No one can handicap the case right now as the discovery process is far from complete. Like in sports and war, a good defense is as important as a good offense. Lining up solid defense attorneys is a good move on Softscape's part. If this case is all about the bad acts of a rogue employee, both parties could save a lot of money and reach a quick settlement fast. The attorney fees will be steep. If it's a bigger matter, it will become the HR software story of the year.   

Temporary Restraining Order - Softscape / SuccessFactors

Latest News -

U.S. Judge Claudia Wilken granted SuccessFactors its motion for a temporary restraining order (TRO)against Softscape. Specifically, the court ordered Softscape to:

• not distribute the PowerPoint deck in question
• not access SuccessFactors' websites or other intellectual property
• not make statements that purportedly come from another

The court further ordered Softscape to post a $10,000 bond. The court also granted permission to issue subpeonas to Verizon and Comcast. Those subpeonas will help identify who either sent the PowerPoint deck to SuccessFactor prospects or who logged into SuccessFactor webinars.

My assessment:

The judge issued an appropriate TRO. The impact on Softscape, so far, is minimal but when the participants are identified, it could get problematic for those involved. SuccessFactors gets what it most needs: the end of the distribution of this document and a pile of sympathetic publicity.

At this juncture, the case will now go through a protracted discovery process followed by additional court room time for the civil case. When the discovery process is completed, it will be interesting to see if criminal charges are possible. Those could arise if SuccessFactors' web site or other intellectual property was illegally viewed with stolen passwords or other acts.

For now, the talent management/human resources software space will go back to being a relatively calm space. It will get more interesting again once the discovery facts come to light. Who wins in this deal? No one really except the lawyers. Who'll pay is clear: Softscape and certain Softscape employees. Softscape will need to distance itself from rogue employee behavior, if that's indeed what happened. It will need to double down on its PR activities and become a more humble, chastened and repentant firm. That's okay and software buyers are actually a forgiving lot. They've forgiven a lot worse:

• CEOs who blew most of their investors' capital on elaborate Vegas parties instead of product development;
• CEOs convicted of crimes;
• Products with over 10,000 bugs
• Products that were late, by years, to market
• Loss of key company founders

Both companies need to move past this quickly and get prospects focused on the real matters at hand: talent management and HR problems in today's business economy. This dust-up should not become more important than solving their customers real business problems.

To read the judge's opinion see: http://www.softscape.com/pdf/doc/TRO_Decision080313.pdf     

Softscape - SuccessFactors Dustup - Continued

                                  When Software Sales Go Awry

                        What Software Buyers Should Guard Against

When you read the court filing by SuccessFactors (see:  http://www.successfactors.com/docs/complaint.pdf ), you see some activities that software sales and marketing professionals should avoid at all costs. Likewise, there are instructional points for software buyers, too.

Reading the complaint and those launched from other plaintiffs in unrelated spats, I decided to craft a generalized point sheet for both buyers and sellers of technology.

For Software Sellers:

• Never produce competitive analysis materials with the intellectual property of competitors included. This means that unauthorized use of logos, trademarks and screen shots are off limits. Remember, you don't need internal documents to be pretty to be effective. But, if you include other firm's intellectual property, can you make sure it never, ever, leaves your firm? Many people naively think they can but all it takes is one misguided employee, disgruntled employee or upset prospect to tank your business.
• Never use artifice to discover the capabilities of a competitor's offerings. Don't register for competitors' webinars and other marketing events posing as someone else. Don't make unauthorized screen shots of competitors' products. Always remember that its their intellectual property not yours.
• Never use pilfered passwords or hack a competitors' system. I know these things are candy to the wrong employee but this type of behavior must be harshly dealt with and never permitted.
• Never try to pass off your competitive assessment as the work of another or especially that of a direct competitor
• Never hire a third party to do competitive assessment work you know to be illegal or unethical.
• Never ask a third party to use subterfuge (e.g., pretend to be developing a market research report) to gain access to third party data.
• Never tell bald-face lies. If you know it is untrue, don't publish it.
• Never share any internal competitive assessments with any prospect. One of them will betray you. That is an absolute truth. Worse, once a document leaves your firm's domain, it takes on a life of its own.
• Train your sales and marketing team to never develop rogue sales enablement documents.

For Software Buyers:

• Realize that most technology vendors maintain 'negative' references for all of their major competitors. Any vendor of any size has some percentage of customers who have migrated away from their product. Many of these defections could be for very legitimate business reasons (e.g., vendor rationalization, merger, downsizing, etc.). Negative references, generally, are not at all valuable unless they make up a material (i.e., more than 20%) percentage of the competitor's install base.
• Never trust anonymous sources of competitive information. This analysis is rarely worth the paper it's written on.
• Particularly negative data must be viewed as skeptically as you would view overly complementary puffery. This information is so skewed/slanted to a particular point of view that you will need to put it into a more appropriate context to determine if it's even relevant for your firm. If it's not objective, it's problematic.
• Do your own reference checking. Nothing beats hearing straight from the horses mouth.
• Seek out unique references. Don't rely on anyone's pre-vetted list of contacts. Find Wall Street analysts, integrators, industry competitors/colleagues, etc.

Talent Management - Fix the Attitudes not the Software

        HR vs. IT - A Battle Talent Management Software Can't Solve Alone

Please check out this story: http://www.cioupdate.com/career/article.php/3732731 ("HR Still Doesn't Get It"). It discusses findings from a Deloitte study about how HR doesn't understand or offer what technical hires want/need in a career.

I've been expecting more stories like this as too many companies view HR as a process to put butts in seats. Career discussions are viewed as irrelevant anymore as many employers have no intention of retaining anyone a second longer than absolutely necessary. That callous attitude can 'work' sometimes when there exists an overabundance of talent but IT is not in that space. For that matter, neither are fileds like nursing, engineering and other technical skills.

Thank you Deloitte for documenting this.

As to vendors who hawk Talent Management software, you really need to tune up your sales presentations as your software alone will not solve the attitudinal problems of less-informed, transactionally oriented prospects. You can't help those who don't want to (or refuse to) address the entirety of their staffing and talent management problems. The answer isn't business analytics, 360 degree evaluations or other modules. It's basic business management and that's a tougher problem to solve.

Can You Correlate HR Exec Pay With Value?

HR Executive Pay vs. Quality of People Hired 

 

Human Resource Executive published a list of the top 50 highest paid HR executives (see "HR's Elite: The Class of '06", August 2007). The table they produced is still giving me heartburn as the top two highest paid HR executives are with companies that I don't believe hire the best and brightest. Should HR executive pay be tied to the quality of the employees/workforce?   

 

The article reports that the top HR executives at Home Depot, Inc. and Best Buy Co., Inc received total compensation of $5,804,081 and $5,700,869 respectively. Stock awards made up a significant portion of each of these ($4,327,850 and $3,167,961 respectively). However, the Home Depot executive was also reported to have received an additional $12,987,242 in other compensation. Other compensation was defined as 'typically includes benefits and perquisites'. What kind of perks are worth that sum?

Yes, I recognize that HR is a huge area of concern for big-box retailers. However, Wal-Mart employs more than anyone and their executive wasn't on this list. Curious?   

 

Let's put an even finer point on this matter. The same publication ran a cover story this month on the Top 100 HR executives (see "Terms of Engagement", January 2008, Human Resources Executive).  This article shows the total employee headcount of the top 100 largest US employers. Wal-Mart was indeed #1 with 1.8 million employees. Second was McDonald's Corp. at 465,000 followed by UPS (427,000), IBM (329,000), Home Depot (364,000) and Target (352,000). Best Buy is 43rd on the list with 140,000 employees. On a cost/employee basis, the Best Buy executive is costing almost $41/employee. The Home Depot executive is costing almost $52/employee.   

 

Best Buy may get some things right as a profitable electronics retailer but their in-store help where I live is often unmotivated and unwilling to help get the right products stocked for that store. Repeatedly, I'm told that this store doesn't carry a lot of the products other Best Buy stores offer because some system or person has pre-determined what we need in this market. I guess we need lots of DVDs and music CDs because when I need special computer cables, low cost hard drive enclosures, etc. I usually end up going to TigerDirect after getting blank stares at Best Buy. Should I expect the help at Best Buy to really take ownership of customer situations, act entrepreneurial, etc.? Probably not. My LaserJet toner cartridge problem just isn't what gets them juiced.   

 

Home Depot workers, when you can find them, aren't all that bad, they're just scarce. I can't count how many times I've gone into my local Home Depot and never encountered a single employee. Maybe that's their business model at work. When you need an employee there's no way to call for them. You may have to roam across rows and rows and rows of the store only to find someone in decorative wall coverings who doesn't know a thing about PVC pipe fittings. If someone is getting almost $13 million in perks to hire the skeletal or hidden crews at these stores, I'd like some of that cash. Better still, send some of that perk money to the store near my house and hire some additional help.   

 

Maybe we need some more oversight over egregious CEO and HR executive pay. Readers, do you think these executives deserve this sort of pay?