Culture Amp announced today it acquired Zugata, a continuous performance management technology company. I was thrilled to hear about this acquisition – Culture Amp’s first – as it has real potential to both increase the competitiveness of the talent management technology landscape and significantly benefit both Culture Amp and Zugata’s customers. In this blog, I’m going to explain what is happening more broadly in the market and then specifically focus on this new acquisition.

As I wrote last year, talent management practices are converging; in particular, the following areas are coming together:

  • -Performance management (PM)
  • -Employee engagement
  • -Recognition
  • -Learning / career management

This is happening because organizations are trying to better “listen” to employees by more holistically collecting feedback (on employee engagement, experience, and performance) and using that insight to drive culture. This shift is a natural outcome of the massive changes we’ve seen in performance management across the last eight years or so, where more frequent performance conversations and seeing the manager / employee relationship as critical to employee engagement have become the norm. In this new world, the employee and manager are the center of these talent management practices, and they are using technology tools to regularly check in on, enable, and encourage performance, engagement, and experience.

Unfortunately for HR technology customers, though, there has been a hole in the technology market. Many of the traditional talent management systems vendors have not been able to create this employee-centered system that enables continuous, circular feedback and development opportunities. Further, the best-of-breed solutions have – as you would expect – only focused on their primary silo, and not offered enough capabilities to provide the experience either.

But that began to change about 18 months ago. We’ve recently seen a wave of acquisitions and capability build-outs to meet these multiple needs (and I’m sure this list is not comprehensive):

So, in short, you can see that a lot of previously best-of-breed vendors are bringing together at least three of these four capabilities.

Which brings us to today’s announcement. I was thrilled to hear about this acquisition for many reasons (detailed below), but the biggest one is that it allows Culture Amp to go beyond its traditional employee engagement / experience offering and now provide performance management, recognition, and some aspects of learning, via Zugata.

Let’s talk about why this makes sense for Culture Amp first. For years I have urged Culture Amp to think more about how to serve the performance management space, given the above trends and the strong demand from their customers for a PM solution (many Culture Amp customers have been customizing their solution for years to meet performance management needs). Second, Culture Amp’s customers are deeply passionate about their product and driving meaningful, data-driven change in their organizations. If there is a technology vendor that could further help the performance management revolution, Culture Amp is it. Finally, Culture Amp is competing in the highly-competitive employee engagement / experience market, and a performance management offering helps them further differentiate their product.

So why Zugata? For the last few years, I have had a short list of innovative PM solutions, and I’ve told anyone that asked that they should check out Zugata (someone finally listened!)  There are lots of reasons I like Zugata, in addition to the fact that they offer performance management, recognition (praise only, no rewards), and learning.

First, I love how Zugata incorporates organizational network analysis (ONA) into its continuous feedback technology. By doing this, Zugata can help identify the people an individual has worked with the most in a given period, and then solicit ongoing feedback from the most relevant folks. Further, since Zugata is doing this, it can avoid over-asking for feedback from any one individual, which is a real challenge in the continuous PM era. In addition, this built-in ONA capability can help people understand who they work with the most and the composition of their own network – which can be useful for understanding where the network may need to be built more.

Second, Zugata offers natural language processing (NLP) of performance feedback and allows leaders to analyze key themes. For example, an organization can use NLP to identify the feedback given to high performers in the company to understand the behaviors / attributes that are being rewarded the most (frequent positive mentions) versus the least (infrequent or negative mentions). The company can then compare those highly rewarded behaviors / attributes to the published values / behaviors / attributes to see if the company is “walking the walk” in terms of what is valued within the culture. Further, as I’ve written about in our research on diversity and inclusion (D&I) technology, Zugata allows organizations to see if specific words or capabilities are being commented on for one gender more than the another (e.g., focusing on work output more for men and personality more for women). This can help an organization begin to root out unconscious bias that is occurring within performance management.

Third, Zugata uses the data within its system to suggest specific learning opportunities, offering an expanded development library from the likes of Lynda.com and Skillshare. While there are a lot of technologies that do this, what has impressed me most about Zugata is that it uses the information on who has what specific strengths and then can suggest mentor matches for folks who need to develop those specific strengths. Further, if a mentor is not available within a company, organizations can leverage Zugata’s relationship with The Muse, and given their employees access to career coaches. This represents a focus on extending beyond content to recommending relationships, which is an important shift.

Finally, I am excited about this acquisition because I think there is a strong culture fit between these two companies. Culture Amp remains laser-focused on culture (as you would expect), and in particular cares deeply about diversity and inclusion. As you may expect from my commentary on Zugata’s D&I capabilities, Zugata also cares about making the corporate world more diverse, inclusive, and equitable.

This acquisition is likely to force the market to advance. It will no longer be enough for these providers to loosely stitch together the different capabilities (engagement / experience assessments, performance management, recognition, and learning), given the number of players who will offer those capabilities. Instead, technology vendors will have to provide an increasingly seamless solution that has a clear vision of the value it provides to workers, managers, leaders, and HR. This will benefit everyone.

I should not conclude without mentioning, as always, there will be challenges for both companies in managing and executing the integration. And, as we all know, most acquisitions are not successful. However, I am very bullish on this one and wish Didier and Srinivas and their teams well as they continue their efforts to become one big Culture Amp team.

Disclosure: We do not serve on the Board of Directors of any companies mentioned and are not receiving any compensation for this post. We have no positions in any companies mentioned and no plans to initiate any positions.