Lars Dalgaard - CEO of SuccessFactors LIVE from the SuccessConnect Europe Conference

Speaker

Live at the SuccessConnect Europe event in Paris, Stuart Lauchlin was able to grab a few moments with SuccessFactors' CEO Lars Dalgaard, who began by talking about the effects of the global downturn.

Lars

So I think the impact in our market is that people are in a situation where, if they're not realistic about what's going on in the economy, which is consistently across the globe, we're finding out that there is no decoupling, in fact all of our economies are connected. In our particular case, we see that there's an even bigger need for what we do in this type of a market, because of course there's nervousness around making any type of financial decisions, but so we provide the research material and knowledge to make people comfortable that this will give them an ROI immediately, because they can make the existing people that stay that aren't fired successful earlier.

Stuart

Does it change the nature of who you talk to in organisations in terms of making the sale, are you finding that CEOs and CFOs are more interested in hearing what you've got to say?

Lars

Yeah, we do, and typically CFOs and CEOs are surprised when they hear what we've got, and they're very hopeful that they can quickly do something when they find out that it's a web product where you can actually get it up and running in a couple of hours, weeks at max, depending on if you're a 100,000 people organisation, they realise that this is something that can have an impact right now, that Wall Street will actually see in this or the next quarter, and so that gets them very excited, the SaaS model has really come into play. As you know, we have more 10,000 user customers than anybody else in the world in the SaaS market, the software as a service market, and so we're experts in handling these corporations of any size, and get them up and running quickly.

Stuart

This isn't just an economic downturn that's going to impact on that size of company though, is it? — it's everybody?

Lars

Sure is.

Stuart

Do you see more of an emphasis on the enterprise at the moment, are they the ones that are having to react first, can SMEs react more flexibly, just because of their size?

Lars

We are actually seeing that small businesses are pretty strong, and they want to be able to do things to not get wiped off the planet, and maybe there's a false sense of security in a large company, that you're going to stick around, but I think it's interesting that we saw today Citibank firing 50,000 people, I'd been waiting for those big announcements, and now we had one of them, and I think we're going to see a lot more before we're going to get better.

Stuart

HR people have been struggling to get a voice in the boardroom or a place at the table for a long long time — is this one of the, not good side effects of what's happening, but does it improve their prospects?

Lars

Shall we give her a hand? — how about that.

Lars

Another company that we were very impressed with at Unilever, we used a lot of their tools, which is Tetra Pak, and just phenomenally innovative packaging company, the things they come up with in packaging completely blows everybody else away, and Lars Bobek is here to talk to us about all the work you did in the go live, and preparation to become successful with this.

Stuart

Yes, I think it's an excellent opportunity, which we're talking to the many people in the room today is, this is your opportunity to be a leader, and not just sit back and wonder what you can do. Here you are, you have the tools to do something about it, find out, like with the Stack Ranker product, who are my stack ranked performers, and who are not. Nobody likes to fire people, I've been fired, it's a horrible feeling, my dad was fired, I remember him coming home and being fired, the whole family was in despair, but the reality is, if you don't fire the wrong people now, you'll be in much worse trouble very soon, and you need to take care of it. We have the products to help you do that.

Lars

There is a saying, of course, "Be careful what you wish for"— are HR people ready for this new responsibility? Will they accept it, or are they just used to not getting that seat at the table?

Stuart

Yeah, I think that we've seen a massive change, it's sort of like evolution, but it's a very fast evolution, and do you want to get on land and survive if you can't breathe in the water, it's kind of that sort of a scenario, and you need to breathe and survive, and so the strong will survive in this case, and the weak ones will just go away, and we're finding that they've established themselves incredibly strongly, and it's a beautiful thing to watch these people that have never been in such a strong position before step up to the plate, and literally lead with these types of opportunities, and have some answers, because management is looking for answers, there's so much change happening at a pace that people have not seen before, you need to be able to get ahead of that, and they can help them.

Lars

One thing about economic uncertainty though, it does make people reach for their comfort blankets, as it were, and if you're SAP or if you're Oracle, you're going to say, we're the big comfort blankets of the software industry, come to us, don't go to these flaky fly-by-night start up software as a service companies. Software as a service was pitched by some as being recession-proof technology, but some of the results that have come out from companies don't appear to back that up — why can companies have confidence that you're going to be around in a year's time or a year and a half's time, or two years' time?

Stuart

Well, first of all, we've beating every single metric since we've been public, every single metric; we've improved our bottom line 48% as points in the last four quarters, so the trajectory towards the strength of cash flow richness and profitability is pretty overwhelming, we've improved our gross margins from 53 to 67% in the last year, and basically we have a renewal base of customers that are contractually locked up, so even if they wanted to leave, they couldn't leave, and so we didn't go down this quarter, we got it up, but of course there's less visibility than there has been and there is for all companies, and so we have to be very careful, and we have been, we've told people that we've moved up our cash flow targets a quarter, and the only way you can do that is of course if you're executing even better than you would have been in a good environment, because surely when it's a bad environment you can move those numbers up, you're doing even more focus on those types of expense numbers, and that's what we're doing — careful, but investing, so we have this renewal base, and we've told the world that there's more than 100 million, and we know how profitable that renewal base is, and so that's what's putting us in a very very strong situation, then we have $100 million in the bank, which we don't need, so that puts us in a pretty robust place.

Lars

You made two references in your keynote today to Europe, one about how the product was perhaps better suited, or more ideally suited, towards European companies, simply because of the culture of those companies; secondly you also made another comment saying that you'd under-invested in certain areas of implementation in Europe — could you expand on those?

Stuart

Yeah, so first of all I'm European, and I've worked in European companies, and actually pretty much every single country in Europe. I speak seven European languages, close to fluently in most of them, and having had that first-hand experience with how Europeans think and operate, and now having lived the other half of my life in the United States, I just see that there is more of a humanistic view in Europe, and it's just, we don't think of it like that ourselves as Europeans, but it's just something that's very clear to me, and so that's probably why unions play as big a role as they do in Europe, and I thought you could avoid unions, but why not work with unions, and find a way of making them productive together, and I think that's one of the opportunities we have here. So it's unions, but it's also just the way people look at themselves in general, and how they operate together as human beings, and this system allows you to find out how to do that at a better level, talk to people at SuccessFactors, assist them, it will allow you to get more engagement, more involvement, more discussion around things that matter, so having with the COO of Deutsche Bank in Frankfurt a month ago, having met with the COO of Cisco in San Jose three days later, I'm seeing these guys are looking for tools that allow their employees to get more involved and get more part of the company fabric in a way they're not.

Lars

Finally, if you had a piece of advice to give to an HR director or a talent management manager of any sort of large organisation today, what would it be?

Stuart

It would be to do everything that you have in your stomach that you should be doing and you're afraid of doing — do it earlier, do it last week — seriously do not hesitate to execute now on the boldest and most aggressive move to change the organisation for more profitable performance. You need to do it now, and people look back a year from now and wish they'd done more, it's just the reality of going back to the last four recessions, the ‘60s, the ‘70s, the ‘80s, 2001 — people wish they had done more earlier, and that's why, to answer the last question you asked in full, we've decided to invest more in Europe, because we think it's more needed now, and we think that because of the geographic differences, we need to have people in all the geographies ready to handle the issues.