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Vurv Sees Promise in Pay for Potential

February 5, 2008
Related Topics: Career Development, Compensation Design and Communication, Human Resources Management Systems (HRMS/HRIS), Employee Career Development, Featured Article
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HR software company Vurv Technology has high hopes for a soon-to-be-released version of its performance management software. Some analysts are already applauding the company for wrapping the new concept of "pay for potential" into the application.

    But it remains to be seen whether Vurv Perform 4.0 will propel the firm into the top tier of performance management vendors—or if the product will help the low-key company compete against high-profile rivals in the red-hot realm of talent management software.

    Jim Holincheck, analyst at research firm Gartner, says Vurv may struggle if it doesn’t take such steps as raising more venture capital or going public, given that it is up against well-financed competitors. Last year, for example, rival SuccessFactors raised $108 million in an initial public stock offering. Jacksonville, Florida-based Vurv, founded in 1996, has raised a total of $30 million.

    A "bunch of vendors" are trying to become the top two or three in talent management and not all of them will succeed, Holincheck says. "My concern with Vurv is whether or not they have the resources to make it into the top tier compared to some of their competitors."

    Kevin Marasco, senior vice president of marketing for Vurv, declined to discuss any possible plans for an initial public offering or additional venture funding. But he said the 330-employee company is determined to get to the head of the pack. "We’re absolutely committed to being a leader in the talent management technology space," Marasco says. "We’re poised to leapfrog competitors in the market."

    The talent management software market refers to tools for key HR duties such as recruiting, performance management, compensation and employee development. Talent management applications are among the fastest-growing products in HR software, which is itself the fastest-growing category of business software.

    Thanks to factors including fear of talent shortages, revenue from human capital management applications is slated to rise from $6.3 billion in 2006 to $10.6 billion in 2011, according to AMR Research.

    Some 20 vendors of talent management tools have a common mantra: integration. That is, they typically claim close links between a number of component applications for the purposes of more efficient operations, new insights and, ultimately, a better bottom line.

    Despite the promises, talent management as a field has room to improve. Research firm Bersin & Associates found organizations with multiple applications from the same vendor report that their talent management systems offer just slightly better than "fair" assistance toward key talent goals such as retaining top performers and ensuring quality of hire.

What’s in a name?
   Vurv was called Recruitmax until early 2006, when it changed its name. Company founder and CEO Derek Mercer says the new moniker stemmed in part from a desire to capture the culture of the firm. Vurv is derived from "verve," meaning vitality and liveliness. The name change also signaled that the firm had expanded beyond its origins as a recruiting software vendor.

    Acquisitions have played a key role in the evolution of Vurv. It has gobbled up compensation management software firm InfoTechWorks, job competencies specialist InScope and performance management software maker KnowledgePoint. Last year, Vurv said it acquired People Business Network, whose applications are designed to help companies with such activities as layoffs and mergers.

    Marasco says Vurv has been working hard to tie its various applications together. And he says Vurv Perform 4.0—due by the end of March—is a product of those efforts. "It’s leaps and bounds for us," he says.

    With the new tool, Vurv aims to make it easier for companies to reward employees not just for their past performance, but their future prospects. Vurv Perform 4.0 is designed to link performance, compensation and succession planning functions. Accord to Vurv, the application will help organizations quickly and easily compare performance and potential.

    Marasco says rich graphics help managers visualize information, such as charts of several employees’ performance ratings overlaid with charts of their total rewards. Vurv puts employee data related to compensation, performance and succession planning in one database. Marasco says that means managers can decide in one click to increase the pay of an employee directly from an analytic report, rather than having to switch to a separate application.

    The tool will help companies get their employee compensation in sync with their strategies, Marasco says. For example, if a firm is about to expand into Europe, suddenly its employees with experience in Germany or Sweden increase in their potential value to the firm, and can be rewarded accordingly, he says. "This should help companies better look forward," Marasco says.

    Jason Averbook, chief executive of consulting firm Knowledge Infusion, says the pay-for-potential concept dovetails with the way young employees in the Millennial Generation want attention paid to their career development. And, he says, it gets companies focused on what’s ahead in their compensation practices. "Pay for potential is a very forward-looking way," he says, adding that Vurv is showing "very good thought leadership."

    Lisa Rowan, analyst with research firm IDC, gives Vurv credit for fresh thinking with pay for potential, but wonders how the idea would work out in practice. "If I have a lot of potential," she asks, "how long would they give me to live up to it?"

    Marasco responds that the software assists with accountability in two ways. A personal development plan created in the software can help track an employee’s progress. And the performance management module allows firms to see if workers are meeting their goals.

Potential in performance management?
   Other vendors have stood out more than Vurv recently in the realm of performance management. Back in 2004, Vurv (then called Recruitmax) won an audience-decided contest among performance management vendors at the annual HR Technology Conference & Exposition run by Human Resource Executive magazine. But in 2005, Waltham, Massachusetts-based Authoria won the trade show’s shootout among vendors that sell compensation and performance management software.

    And last year, Authoria beat Vurv, SuccessFactors and HRsmart in a shootout to see which company best connects performance management and recruiting applications. What’s more, a report last year from research firm Gartner on performance, compensation and succession management applications gave Vurv a "promising" rating, while 14 vendors got a higher "positive" rating.

    IDC’s Rowan puts Vurv among the top three recruiting software vendors, alongside Taleo and Kenexa. But in her view, Vurv has not made a major mark in performance management. "I don’t hear that much about them in that space," she says.

    Others in the market are louder than Vurv. Authoria CEO Tod Loofbourrow, for example, has a showman’s presence. Appearing next to Loofbourrow at the HR tech show, Vurv’s Mercer came across as soft-spoken. And SuccessFactors has made a marketing splash, featuring celebrity business leader Jack Welch at a user conference last year.

    Vurv concedes it has maintained a lower profile. A recent public relations pitch from Vurv referred to the firm as a "dark horse" in the market.

    That’s a bit of a misnomer for a company with more than 2,000 customers, including such heavy hitters as Coca-Cola, Deutsche Bank, Merrill Lynch and Nestlé. Vurv also clocked in as the 144th fastest-growing technology company in North America in the Deloitte & Touche annual "Technology Fast 500" list last year. Deloitte said Vurv’s revenue grew from $3.3 million in 2002 to $40.6 million in 2006.

    In any event, the horse named Vurv hopes to dash forward with Perform 4.0. And it has no plans to let up. Marasco said a number of companies have approached Vurv with an interest in acquiring it in the past few years. "We’ve turned them down," he says. "We see the potential of making a billion-dollar company. We see the market being much, much bigger than today."

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