This morning, Perceptyx, an employee engagement and experience provider, announced it acquired Cultivate, an employee listening tech vendor. This acquisition is representative of a broader shift we’ve been talking about within the employee engagement and experience market. As such, we’ll cover what is happening in this space and then dive into the specifics of this acquisition.
Evolutions in the Employee Engagement & Experience Market
As we mentioned in our 2021 study, People Analytics Tech: Deep Dive into Employee Engagement & Experience, vendors in the employee engagement and experience space offer capabilities that enable customers to do four things:
The first item, “Collect and analyze perception data directly from employees,” and the last item, “Highlight areas of concern and recommend actions to users,” is where employee engagement and experience vendors have typically focused. We’ve seen these vendors increasingly dip into the other two items over the last few years.
In addition to this evolution, the employee engagement and experience market has been converging with others. As we wrote in our summary of Peakon’s 6-month integration into Workday, the following areas have been coming together for years:
- Employee engagement/experience
- Performance management
- People data integration
When you look at the intersection points of all these areas and vendors, you get a chart that looks something like Figure 2 (note, we are in the process of conducting our 2022 People Analytics Tech study, so the vendors’ names will be updated shortly).
As we said before, we are seeing so much overlap because vendors and customers realize that it is no longer realistic to separate these concepts. How do you understand engagement without also understanding performance feedback? And how do you give performance feedback without also giving recognition? And how do you understand any of this without solid people analytics?
Given this backdrop, let’s turn to this acquisition.
Who is Cultivate?
Cultivate is an AI-powered coaching platform that absorbs data from other systems – such as email – and provides feedback to managers about how they are communicating with their team members. It uses a combination of data and insights to make managers aware of behaviors and suggest ways to change them. For example, a manager may get a prompt telling her that she is sending less than 5% of emails to her team after work hours—which is good—but that prompt may also identify the individuals to whom she is sending after-hours emails. In our 2021 study, Coaching Tech Landscape: Humans and Robots, we call Cultivate a “coach on the shoulder.”
Some of the things we like most Cultivate include (check them out in our PAT tool):
- The use of AI to make specific individualized suggestions on how to improve digital behaviors and relationships
- Personalized nudges delivered before specific events, such as 1:1s, via email or chat, instead of requiring managers to access dashboards
- Partnered with Harvard Business Publishing (HBP) and mapped HBP’s library of leadership content to Cultivate signals, to pair suggestions and opportunities with HBR’s bite-size learning content on how to take action
Why did Perceptyx buy Cultivate?
It may not be immediately apparent why an employee engagement and experience vendor bought a vendor that’s a “coach on the shoulder,” but there are two really smart reasons for this buy:
- The underlying technology
- Building out and augmenting Perceptyx’s overall product offering
Cultivate has some of the most sophisticated NLP and AI capabilities on the market to understand employee tone, sentiment, and behaviors. This capability can be integrated throughout Perceptyx’s offering. This will widen and strengthen Perceptyx’s ability to deliver insights on qualitative data.
Further, this underlying technology will allow Perceptyx to better offer the other two items in Figure 1:
- Collect and analyze passive data on interactions/work/environment
- Integrate and analyze different data that drive employee engagement and experience
Specifically, Cultivate will enable Perceptyx to move from offering point-in-time perception data to truly “ubiquitous” listening by ingesting passive data on employees’ interactions, looking for patterns, and providing employees with feedback. Incorporating these data into Perceptyx’s overall data analytic capabilities will make the solution more robust. It can start to give the why around employee engagement and experience, not just the what.
Finally, this acquisition – along with the July 2021 acquisitions of Waggl and CultureIQ – enables Perceptyx to better build out its comprehensive employee engagement and experience offering.
As shown in Figure 3, they now offer:
- Ask: Employee surveys (the historical Perceptyx survey product)
- Sense: Lifecycle surveys (again, historical Perceptyx) and always-on listening (Cultivate)
- Dialogue: Crowdsourced idea-generation and voting (Waggl)
- Develop: Multi-rater feedback (historical Perceptyx) and recommendations (Cultivate via HBR mapping)
All of this is anchored by the Perceptyx People Insights Platform, which provides a single location to understand and understand all these different insight “channels.” It also provides a way to prioritize the following steps and act.
We are fortunate to know both companies very well and are very positive about this acquisition. We have long thought a lot of Joe Freed, CEO of Cultivate, his team, and the technology they’ve built, and are pleased to see them align with Perceptyx, another company we respect immensely. This acquisition will round out Perceptyx’s offerings while enabling the Cultivate team to maximize their impact in the market significantly. We think this is a very sound decision for all and will provide some significant benefits to customers.
That said, I would likely as soon stop breathing as stop having concerns and questions. Given that, here’s what we are going to be watching:
- Ethics and monitoring: We all know there’s a fear out there of extensive monitoring by companies – especially with so many people working from home – and lots of people are searching for monitoring tools.
(Just Google “big brother monitoring” and see what the autofill provides. Don’t worry; I will wait here – go do it. Oh, you also found “big brother monitoring tool free download”? So surprising!)
Now, Cultivate has historically avoided this issue by making their tool opt-in – so employees have the choice of whether they leverage the software – and ensuring that only employees get individualized data and recommendations. Companies and managers only get high-level summaries of what is happening. So far, this seems to be working – our understanding is that, to date, Cultivate has seen less than 5% of folks either opt not to participate or opt-out once they have participated.
Perceptyx will have to continue to hold that line on opt-in and privacy with this acquisition, and they have indicated to us that they plan to do so. Further, there will be questions about how passive data should be combined with engagement data. The ethics and privacy considerations around these questions are not necessarily defined, let alone answered. This will be something for Perceptyx to work through in tight concert with their customers in the coming months.
- Acquisitions everywhere: Perceptyx has acquired three companies in nine months, which is a rapid clip for any company, let alone one that has fewer than 500 employees. Perceptyx is aware of the challenges this can create and is rapidly integrating its acquisitions and reconfiguring teams. Hence, there aren’t historical Perceptyx and new acquisition teams, just new teams. Even so, the frequent evolution of teams, additions of new people, combinations of cultures, etc., will be challenging, and making everyone work together well will be a constant effort for months to come.
- Slowing evolution to PM and recognition offerings: As mentioned in Figure 2, we see vendors increasingly adding performance, recognition, and learning to their engagement offerings as customers look for less fragmented solutions and easier data integration across core talent management activities. We understand that Perceptyx was also headed down this path before these acquisitions and that these events will slow down their addition of these offerings. On the one hand, this will allow Perceptyx to focus more specifically on employee engagement and experience – on the other hand; it may prevent them from keeping up with some of their competitors. We will watch how these acquisitions impact their customer growth rates and satisfaction.
Despite these concerns and questions, the bottom line on this acquisition is that it is a good thing. Congratulations to the Cultivate and Perceptyx teams on an exciting new future ahead of them!