Events

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 
• Recognition 
• 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: 

1. The underlying technology 
2. 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.  

Comments/Concerns/Questions 

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! 

Today Workday provided an update on its acquisition of Peakon, now called “Workday Peakon Employee Voice,” roughly six months since the deal closed. Before getting into the details of this update, we’re going to provide some context on the employee engagement and experience market. We’ll then turn to the goals of the acquisition and what we can tell so far about how well Workday Peakon Employee Voice is meeting those goals.

The Employee Engagement & Experience Market

Growing Rapidly

As we wrote earlier this year, employee engagement and experience technology has been a lifeline for leaders hampered by work from home and unable to interact directly with their employees. It enabled leaders to keep a check on employee pulse throughout the pandemic, especially as fatigue, burnout, and stress levels have all boomed. It has also helped leaders to understand changing perceptions of return to office plans and adjust at a much faster velocity than ever before. Further, leaders are increasingly using these solutions to better understand diversity, equity, inclusion, and belonging (DEIB) within their organizations.

The pandemic did not create the employee engagement and experience market – it was going full steam ahead before March 2020. However, the events of 2020 turned that steam into rocket fuel. As a result, the employee engagement and experience market was one of the fastest growing people analytics tech segments in 2020, and when we complete our study of 2021, we expect it to be THE fastest growing segment. Further, we believe that growth will continue well into the future, as senior leaders have just begun to really grasp the power of people data.

Quite Crowded and Complex

Yet, the employee engagement (eng) and experience (exp) market is quite crowded and complex, especially when you consider all of the vendors who have added employee engagement to their core offerings. For example, let’s take 4 areas we’ve seen converging for the last 3 years or so:

• Employee engagement / experience
• Performance management
• Recognition
• People data integration

When you look at the intersecting points of all these areas and vendors, you get a chart that looks like Figure 1. There are approximately 30 vendors by our count in the employee engagement or experience market, and we are certain there are more than we have on this chart (if you’re one of them, feel free to email us at [email protected], and we will get you on our list).

We are seeing so much overlap because vendors and customers realize that it is no longer realistic to keep these concepts separate. 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?

As a result, we are seeing a need for significant data integration – which is leading to interesting data partnerships, such as the People Intelligence Alliance, as well as acquisitions.

And Very Acquisitive

And there have been lots of acquisitions – and on multiple levels. For example, there have been acquisitions where somewhat larger engagement / experience or performance providers bought each other, such as:

• Culture Amp (Eng/Exp) purchased Zugata (PM) in 2019
• Betterworks (PM) purchased Hyphen (Eng/Exp) in 2020
• Perceptyx (Eng/Exp) purchased Waggl (Eng/Exp) in 2021
• LTG / People Fluent (Core HR, Learning, etc.) purchased Reflektive (PM and Eng/Exp) in 2021

Many of these vendors bought their smaller counterparts so as to expand their feature set, acquire new customers, increase engineering capabilities, etc.

But we’ve also seen the much bigger HR Tech vendors buying best-of-breed engagement / experience solutions, such as:

• Microsoft purchased LinkedIn / Glint in 2018
• SAP purchased Qualtrics (2018), then sold it in 2021, but maintained a majority ownership stake
• Workday purchased Peakon in 2021

These bigger vendors’ reasons for purchasing employee engagement and experience platforms were different: it was a customer value and data play. They were looking to do three things:

• Provide a high-quality engagement / experience solution for customers
• Create or round-out their offerings in the four areas highlighted above
• Integrate data from these different talent areas more smoothly

Given those three goals, how is Workday’s acquisition of Peakon going, 6 months in?

The Integrated Product: Workday Peakon Employee Voice

As we wrote in the acquisition blog, we think this purchase made a lot of sense. In short, it filled a hole in capability for Workday, Peakon is a solid product, and there was strong cultural alignment between the two orgs. Let’s talk though, about how this acquisition is performing, given the goals mentioned immediately above.

Goal 1: High Quality Engagement Solution

The new, integrated product, Workday Peakon Employee Voice, appears to be following Peakon’s pre-acquisition trend of delivering strong customer value. Customers are using the solution to take insights on topics such as engagement, diversity, equity, inclusion, and belonging (DEIB), and health and wellness and turn them into action through conversations, personal dashboards, team collaboration, and contextual learning resources.

Customers are rewarding Workday Peakon for the offering, as indicated by:

• Commercial success of the new product has been significant, with Peakon experiencing a dramatic acceleration of its business
• Growth has come from new Peakon customers as well as existing Workday customers

In addition, according to Workday, early customer feedback has focused on the ease of use of the platform, the ability for employees to provide feedback easily to leaders, and the use of natural language processing (NLP) to classify comments more easily (especially as positive, neutral, or negative) so they can respond much faster.

Workday is selling the product within its larger suite of products as well as a separate SKU. This is important, because it means that customers outside the Workday HCM ecosystem can still buy it.

Given all the above, it appears the acquisition is very much so meeting this goal.

Goal 2: Round Out Talent Offerings

As mentioned above, a second reason many of these large HR tech providers bought the smaller engagement / performance management vendors was to round out their overall talent offerings.

Peakon clearly ticks this box when it comes to employee engagement and experience (as discussed immediately above). What’s not yet totally clear, though, is the extent to which it does the same for the performance management offering.

Workday’s current performance management offering could use some improvement, especially when it comes to serving more agile performance management approaches. Prior to acquisition, Peakon offered Grow, which was its performance management solution targeted at organizations leveraging a more agile approach. This product is still available to customers, so in this way Workday ticks this box.

However, Grow is not yet integrated into the broader HCM suite in the same way as Workday Peakon Employee Voice. This means that Grow and the existing Workday performance management solution do not talk to each other yet. As a result, there isn’t really a way for existing Workday performance management customers to seamlessly adopt the agile approach offered by Grow.

Workday indicated performance management is a high area of interest and they plan to continue building out the capabilities of Grow and to integrate them into their standard performance review capability. We don’t yet have a timeline yet on when that might happen, though.

Goal 3: Integrated Data

The opportunity to integrate Peakon and Workday data together is one of the most exciting aspects of this acquisition – and one Workday is working on now.

As many of you know, Workday offers its VIBE^TM Index (VIBE stands for Value Inclusion, Belonging, and Equity), which provides insights on a wide variety of diversity characteristics in the following areas:

• Hires
• Promotions
• Leadership
• Belonging
• Attrition

Yet, VIBE only has insights on the current state and how it compares to benchmarks – it gives little insight into how an organization got to that point.

This is where Peakon’s insights – specifically from its Include product – come in. Workday is integrating Workday Peakon Employee Voice insights into the VIBE^TM Index, so that leaders will be able to both see what is happening and why. You can imagine a world where, instead of just sharing stories on how representation has changed (as shown in Figure 2), the VIBE^TM Index could also share how key drivers of engagement or turnover have changed for a specific population, and what that might portend for the future.

This integration of Workday Peakon Employee Voice data into VIBE^TM is still in process, but should be available relatively soon. Workday is also working to integrate Workday Peakon Employee Voice data into other parts of its People Analytics solution as well as into Prism, but those are not yet available.

Given all the above, we see Workday working quickly to meet this goal, though it hasn’t been fully achieved yet.

Looking to the Future

Looking forward, there are lots of other interesting ways Workday Peakon Employee Voice capabilities could be integrated into both other aspects of Workday as well as into the overall flow of work.

Our understanding is that Workday is looking to use Workday Peakon Employee Voice strategically throughout the employee experience, by asking targeted questions at specific trigger points (e.g., return to office, return from parental / care leave, 30/60/90-day milestones). The solution is currently integrated with both Microsoft Teams and Slack via the company's Workday Everywhere initiative and we image they will come up with additional ways to put the solution into the everyday flow of work.

From everything we can tell, it appears the acquisition of Peakon is going well, and we are excited to see Workday work to get these integrations – particularly data and of the performance management products – completed. By doing this, Workday will be able to realize its customer value proposition of delivering one data model and a seamless experience more fully. We look forward to continuing to hear from customers as this happens.

Earlier this year, we started our inquiry into a really important question:

What are the skills that contribute to DEIB (diversity, equity, inclusion, and belonging), specifically fostering diversity, creating equity, enabling people to feel included, and building a culture of belonging in the workplace?

We’re now about 70+ articles, 20+ interviews, and 2 roundtables with ~50 people each into this project, so we thought it useful to pull up and summarize what we’ve learned so far. Here are 4 insights we’ve identified to date:

• The roles of senior leaders, managers, and employees differ
• Lots of skills appear to be important
• Skills increase by level
• Same skills, different context

The roles of senior leaders, managers & employees differ

We asked a wide range of folks about the specific roles and responsibilities that different employees have in fostering a culture of DEIB—focusing specifically on how those roles and responsibilities vary by level.

Senior Leaders

So far, we’ve consistently heard that the role of senior leaders is to set the tone, and reinforce appropriate skills and behaviors. Some of the specific responsibilities include the following:

• Champion, vocally support, endorse, and promote DEIB efforts
• Drive the agenda for culture change, set goals, and create accountability
• Develop policies, procedures, and practices by seeking input from a diverse group of employees to build structures for DEIB culture
• Model the behaviors of the DEIB culture and foster an environment in which people feel safe
• Challenge organizational / systemic / policy disparities
• Evaluate DEIB initiatives and change programs periodically to assess their effectiveness

Managers

Managers, by contrast, are responsible for creating the conditions that allow a culture of DEIB to thrive. Some of the specific responsibilities in doing that include:

• Create psychological safety within their teams that’s required for DEIB to be a reality
• Set clear expectations for employees and hold them accountable
• Model appropriate behaviors for employees
• Foster an inclusive workplace by raising awareness for the needs of team members, ensuring equitable practices and development of their teams
• Proactively seek out different perspectives, understand people’s challenges, and find solutions with their interests in mind

Employees

As you might expect, employees are generally expected to focus on activities that are within their control, such as improving themselves and engaging in appropriate behaviors. Interestingly, even though we’ve heard about the power of grassroots efforts with DEIB, starting or engaging in those efforts isn’t an explicit expectation we’ve heard anyone mention.

Here are some of the specific responsibilities we’ve heard:

• Identify opportunities to learn about DEIB and improve their own level of understanding
• Engage and participate in DEIB initiatives at the workplace
• Provide honest and useful feedback about DEIB initiatives
• Proactively take initiative to advance DEIB (e.g., improving DEIB communication, avoiding microaggressions, and showing empathy)
• Feel safe in exhibiting vulnerability in how they show up in the workplace

Lots of skills appear to be important

After establishing the DEIB roles / responsibilities of employees at different levels, we then asked folks to identify the skills that these different groups need to fulfill those responsibilities. As you might expect, this exercise generated a LONG list of skills—at one point, we had more than 75 discrete skills identified as critical to creating a culture of DEIB!

Which skills have been mentioned most frequently? They include:

• Communication skills (including listening, storytelling, nonverbal communication, etc.)
• Empathy
• Giving feedback
• Flexibility
• Self-awareness

But there are a lot more than that. We are not going to share the comprehensive list because we are going to be testing that list in our upcoming survey. And we don’t want to bias you too much before you take our survey on this topic, which you can take RIGHT HERE. (Sneaky how I did that, wasn’t it?!)

This exercise, though, has generated 2 primary insights:

1. The issue of whether something is a skill or competency seems to really trip people up. Based on our previous research, Skills vs. Competencies, we know a lot of folks struggle to articulate the difference between a skill, a competency, a behavior, and a trait. We addressed this issue in that report, saying it doesn’t really matter as long as everyone in your org knows what you’re talking about.

However, for this study, we’re finding that people haven’t really thought about the basic building blocks for creating a culture of DEIB—instead, they’ve focused on more abstract competencies (e.g., inclusive leadership) or outcomes (e.g., everyone feels included). Therefore, when we ask them to identify the skills to create that culture of DEIB, they struggle to answer it succinctly.

2. There’s no real clarity on which skills are most critical. While this is a core reason we started this research, the breadth of perspectives on critical skills for DEIB is remarkable. This could be due to:

• • Unique org-specific factors that influence DEIB skills (e.g., culture, leader type, individuals’ perceptions)
  • A lack of deep thought about the skills that drive DEIB
  • A challenge in separating DEIB skills and knowledge
  • Or some other factor

We’re continuing to explore this subject through our survey.

Skills increase by level

When we began this research, we saw a number of skills frameworks that implied that the DEIB-related skill sets of employees, managers, and senior leaders may somewhat overlap, but are largely discrete, such as shown below:

However, this was not reaffirmed by our interviews. Instead, we consistently heard from folks that DEIB skills build by level—and rarely are any skills subtracted. In other words, the skills sets are additive, whereby managers need more skills than employees, and senior leaders more skills than managers. We’ve illustrated this concept in this graphic below:

The idea of additive skills is incredibly helpful, because it can influence how we construct expectations of employees by level and how we teach these skills.

Same skills, different contexts

We’ve also consistently heard that DEIB skills shouldn’t be taught separately from other leadership skills—but that’s exactly how they’ve been taught for decades in many orgs. Some of the reasons we heard for this contradiction include:

• All DEIB-related training was done by groups outside the learning or leadership function (i.e., provided by a centralized D&I team or employee resource groups)
• The learning or leadership development team’s lack of knowledge about relevant DEIB-specific contexts to build into existing leadership training
• The lack of a mandate for learning or leadership development teams to integrate DEIB-specific content into existing leadership training

We heard loud and clear that this approach needs to stop—as it makes DEIB “another” thing that people must do. Instead, leaders should be integrating DEIB contexts into existing leadership skills trainings, which will then normalize the everyday use of skills that help create a culture of DEIB.

What happens next?

Well, there you have it: 4 initial findings. As mentioned above, this blog is a progress update—not a final report—on what we’ve seen to-date, so these are definitely not our final findings. However, we like to “think out loud” with our research process, and so wanted to share where we are at the moment.

The next step in our process is to get quantitative data to understand this topic at a larger scale. We now have a survey open—anyone employed at an org with more than 100 people is eligible to take it—and we’d appreciate you sharing your insights. Once that survey closes, we’ll analyze the data, conduct some additional final interviews, and publish our final report in September.

We’d love to hear what you think of what we’ve learned so far. Also, we’d love it if you would take the survey or participate in the final round of interviews in August (feel free to email us at [email protected]). We’re looking forward to unveiling our final research this fall!

It really comes as no surprise that LinkedIn Learning is jumping on the LXP bandwagon. As organizations have begun the trek from “you’ll learn what I darn-well tell you to learn” to “Look! It’s Netflix for learning!” to, finally, “Let’s help you build skills – it’s good for you and it’s good for the company”, it makes logical sense that LinkedIn would eventually go here. Read their announcement.

Here’s what we know:

It’s free (for some, and for now).

LinkedIn Learning is offering LinkedIn Learning Hub for free to existing LinkedIn Learning Pro product customers for 1 year. We’re assuming this is a way to quickly build market share and allow those orgs that are thinking about dipping their toes in the LXP market to experiment.

This is particularly savvy as organizations are thinking more broadly about learning – no matter how good LinkedIn Learning content is, it’s likely not enough on its own for any organization. LinkedIn Learning Hub gives LinkedIn Learning the chance to offer more value to existing customers by creating a new product in a hot category.

This move may cost LinkedIn a bit of money upfront in customer service and integration unless they have an incredibly easy interface to connect both content, data, and employee information and expect it to be turnkey. But it also provides them with further opportunities to connect with and build relationships with existing customers.

What we’d like to know:

• What will be the cost after the first year?
• What services will LinkedIn Learning add to accommodate their new LXP customers? Even the simplest LXP is significantly more complicated than a content portal.
• Will they leverage customers using the product to further develop the product to better compete with existing platforms?

It’s for learning.

LinkedIn is offering LinkedIn Learning Hub as an addition in LinkedIn Learning. That fact, and the name, “Learning Hub”, lead us to believe that LinkedIn is thinking about this product as firmly planted in the learning space. As such, it can easily find a line item on the L&D budget and also has the opportunity to be a fairly big disrupter to the LXP market.

While this is seems like a logical move, it could also be shortsighted given that other big LXP players (like Degreed or Edcast) are endeavoring to increase their footprint outside of L&D as they realize that “skills” isn’t just a learning problem; it’s a strategic problem that affects almost every people aspect of an organization.

Other players are increasingly emphasizing that learning happens everywhere, and not just as a result of consuming content, to build skills. Other ways of developing skills, most notably through experiences, are being developed and tested. (Incidentally, if you’re interested in the skills discussion, check out our podcast, Workplace Stories: The Skills Obsession.)

What we’d like to know:

• How does the product accommodate (and connect with) other technologies that are increasingly involved in developing/tracking/reporting skills and experiences?

It touts its data.

Not surprisingly, LinkedIn Learning Hub is touting data and insights from their Skills Graph, “the world’s most comprehensive skills taxonomy, with 36K+ skills, 24M+ job postings, and the largest professional network of 740M+ members.” LinkedIn has got some fantastic data – one of the very big advantages it has over others playing in this space.

However, how LinkedIn indicates it’ll used use that data is underwhelming. According to their introductory post by their Sr. Director of Product, James Raybould, all that lovely data will be used to “empower customers with richer skills data insights, personalized content, and community-based learning.”

These things are important – but at this point, we don’t see the ability to provide incrementally better recommendations for content as a game changer in the LXP space.

What we’d like to know:

• What do the richer skills data insights look like, and what can LinkedIn Learning Hub do with those insights beyond these basics in the near future?
• How will those insights be leveraged for some of LinkedIn’s other offerings? (e.g., we see how skills information could be really valuable to LinkedIn proper and their support of recruiting).

So far its data appears to be for the adults.

Data and insights about skills are touted as available to L&D functions through the admin portal so they can “identify skills gaps, pin key skills and track trends over time, benchmark themselves against similar companies, get insights on skills interest and learning activity, and track skill trends across content sources.”

One of the really powerful advantages we think LinkedIn has is their history of providing data to the employees themselves – those most empowered and most motivated to do something with it. We’d love to understand what kind of skills data LinkedIn Learning Hub will provide individual employees and how it can enable employees in their careers. With the strong focus many organizations have on employee experience these days, this seems like a no brainer and a pretty big selling point.

What we’d like to know:

• What information will be pushed down to individuals?
• How is this tool designed to help guide employees to new opportunities for growth and career?

It (like everyone else) has a skills taxonomy.

One of the biggest arguments about skills is what to call them and how they relate to each other. Many organizations lack a common language about skills, and one of the biggest frustrations is the lack of consistently between departments, businesses, and even technology. We don't know how to talk about skills. To solve this problem, many organizations either create skills taxonomies or adopt ones and tailor them to their needs so – at least internally – everyone is using the same language.

The LinkedIn Learning Hub's skills taxonomy may help some organizations create the consistency they crave. It also provides a way to more accurately benchmark against industry and/or regional norms for skills and skills development. Many providers of skills frameworks are moving towards ontologies (structures that show concepts and their relationships relationships and adapt to new information) rather than taxonomies (structured, formalized, hierarchical organizations). Although we haven't seen it, we're assuming LinkedIn may lean more toward ontology than pure taxonomy – important to their ability to do more cool stuff later.

What we’d like to know:

• How does the taxonomy stay current and valid given rapid changes most orgs are facing,
• How can it align with taxonomies that have already been adopted by organizations?

It appears to duplicate some of Viva’s offerings.

Less than 3 months ago, Microsoft, LinkedIn Learning’s parent company unveiled its new Employee Experience Platform, Viva. This tool “brings employee engagement, learning, wellbeing, and knowledge discovery directly into the flow of people’s work.” See our take on Viva here.

As a part of that offering, there is a native player for LinkedIn Learning content. Other things it does?

• Identify content that may work for individuals.
• Provide insights to individuals, managers, and leaders
• Connect information and experts across the organization

Clearly, there is overlap. It is unclear how these 2 systems play with each other, if at all. Given the overlap, it appears that there could be some cannibalization. Further, Viva will integrate with other LXPs – rendering LinkedIn Learning Hub even more redundant.

What we’d like to know:

• How does LinkedIn Learning Hub interface with Microsoft’s Viva?
• If orgs have implemented one, is the other necessary?
• Are there plans to create a massive experience platform that uses all data that Microsoft and LinkedIn have? Cuz that would be cool.

To sum up:

LinkedIn Learning Hub is an interesting move by LinkedIn Learning – one that allows it to increase its offering to existing content customers – likely necessary because while content has value, it is increasingly becoming only a small piece of the overall L&D picture. It’s also not a move completely without precedent. Skillsoft purchased SumTotal for the same reason years ago.

Offering it to existing Pro customers for free may increase market share quickly, allowing those experimenting with LXPs for the first time to see if it’s for them, and get them used to a product that will likely increase in functionality and polish in future. It may be a very good move for small and midsize organizations or larger organizations with constrained L&D budgets.

Two final observations: 1) LinkedIn Learning Hub is pretty basic. Nothing about this LXP is extraordinary – yet. That could change. 2) While Viva made one heck of a bang when it hit the market, LinkedIn Learning Hub entered with more of a whisper. Some of our friends at other LXP providers say there isn't yet much disruption to deals in their pipelines. LinkedIn Learning Hub may not yet have the heft of existing options.

We’re very interested in your opinion – what are your thoughts?

 

We read a lot at RedThread—both to directly inform our research and because we’re reading junkies. We also listen to a lot of podcasts. (In fact, in this piece, we use “reading” as shorthand for “consuming content,” regardless of whether we’re consuming a podcast, book, audiobook, or article.)

Part of our mission at RedThread is to accelerate the flow of ideas through the marketplace—and one way we do that is by sharing what we’re doing / thinking as soon as we’re doing it. In that spirit, we want to share what our team members are reading these days.

We’ve divided the list into 4 sections:

• Reading that directly informs our research
• Reading that keeps us up to date in the field
• Reading that broadens our horizons
• Reading that we plan to do

Throughout this post, all titles and images are hyperlinked to the source. Let’s dive in!

Reading That (Directly) Informs Our Research

These books, articles, and podcasts help drive our thinking on the specific topics we’re writing about currently—topics like purpose; diversity, equity, inclusion, and belonging (DEIB); people analytics; learning; and skills. Here are our top things to read in this category.

The Enlightened Capitalists

In this book, author James O’Toole gives a fantastic historical perspective on how businesses have approached purpose. We’ve been doing a lot of research on the topic of purpose—individual, team, and organizational—and found this book remarkably enlightening (pun intended). It helped us understand how our collective concept of purpose has changed over time and why purpose is such an important component of a business’s success, now more than ever before.

 

Reimagining Capitalism in a World on Fire

Also supporting our purpose research, this book’s author Rebecca Henderson describes how capitalism is on the verge of destroying the planet and destabilizing society. Capitalism is destabilizing the climate, driving human deaths and mass species extinctions. Wealth is increasingly unevenly distributed and many institutions that have historically provided stability—families, faith traditions, governments—are “crumbling or even vilified.”¹ What can org leaders can do to change the path we’re on? A lot—and this book offers a practical roadmap for how businesses can build a kind of capitalism that works for everyone.

 

Caste: The Origins of Our Discontents

A number of people recommended this book to us, including Deborah Quazzo, Managing Partner at GSV Ventures and one of the guests on our “Is Purpose Working?” podcast season. Isabel Wilkerson writes about the existence of a invisible caste system in America and how that system influences us all. She shows how a rigid hierarchy is embedded in our society and institutions, feeding racist policies and beliefs in ways we often do not see. The book supports the research we’re doing on DEIB.

 

How to Be an Antiracist

This powerful book reshapes the reader’s notions of what it means to be racist. Starting from the idea that there are very few people in the world who think, “Yes! I’m racist!”, author Ibram X. Kendi helps readers understand that racism is fundamentally a problem of systems, policies, and institutions that foster inequity and invite individuals to (sometimes unconsciously) hold beliefs and commit actions that also foster inequity. The book paints a compelling picture of how we can all be antiracist by actively and continuously pushing ourselves, our communities, and our institutions to promote equity. This book supports our research on DEIB.

 

Reading That Keeps Us Up to Date in the Field

We love these sources—none of which, you’ll notice, are books—because they reflect some of the most leading-edge thinking on the topics we care about. If you like RedThread’s research, then you’ll probably find these resources helpful, too.

Articles by Matthew Daniel

Matthew is a longtime learning leader who writes about skills, talent, and learning. One of our favorite quotes:

Ultimately, we in L&D may be robbing our organizations of some of the greatest potential in talent, because they sit in the frontline and they're non-exempt employees—and so they just don't get access to content, or the systems, or the programs, or the mentoring, or the class.²

Matthew is a very forward-leaning thinker in the talent and learning space. He’s a regular contributor to CLO Magazine and posts valuable content regularly to LinkedIn.

Learning Tech Talks

This podcast, hosted by Christopher Lind, gives one of the most comprehensive (and entertaining!) perspectives around on learning tech—vendors, challenges, opportunities, ecosystems, and more. Each episode features a learning tech vendor talking about the problems they’re trying to solve. We like it because it’s not salesy, it’s always informative, and Christopher has an amazing ability to synthesize what’s going on in the space.

 

David Green’s Monthly Roundup of People Analytics Articles

Every month, David Green posts on LinkedIn a summary of the top articles published that month on people analytics and related topics. Each post contains a dozen or more articles, each summarized in at least a paragraph, often with helpful charts and graphics. This single monthly post is a great way for us to keep up to date on what other people are saying in the field.

 

HRTech Weekly Podcast

Stacey Harris and John Sumser at the HR Examiner host a weekly podcast, “HRTech Weekly One Step Closer.” They cover topics ranging from HR tech trends to analysis of tech vendors, recent mergers and acquisitions, and the implications of senior leaders’ movements between orgs. This weekly show is another fantastic way we stay current on others’ thoughts in the field.

 

McKinsey & Company Research on the Future of Work

McKinsey has been publishing a lot on skills, reskilling, upskilling, and the future of work. The company’s findings are well-researched and highly informative. These articles help keep us current on others’ work on the topics of skills and learning—for example:

Learning itself is a skill. Unlocking the mindsets and skills to develop it can boost personal and professional lives and deliver a competitive edge.³

McKinsey Quarterly, August 2020

Reading That Broadens Our Horizons

Curiosity may have killed the cat…but it sure makes us better researchers! We read a lot of stuff that’s not directly related to our research projects or even our areas of focus. These books, podcasts, and Facebook groups (yep) help us stay on our intellectual toes and keep us growing, learning, and thinking.

More: A History of the World Economy from the Iron Age to the Information Age

Author Philip Coggan writes the weekly Bartleby column for The Economist. Here, he’s provided a sweeping history of trade, industry, and growth in the global economy from ancient Rome to the 21^st century. We enjoy his style of putting complex information about management and the world of work in an easy to comprehend and interesting format that’s very appealing.

 

 

Prediction Machines

We’ve been talking about how AI will disrupt our lives and work for some time now—but how, exactly, will that happen? Authors Ajay Agarwal, Joshua Gans, and Avi Goldfarb explore the economic implications of the price of AI, which is declining in a way that’s similar to how the price of computing declined in the 1980s and 1990s. The book was recommended to us to truly understand AI disruption.

 

 

Profiles in Courage

In 1954, then-Senator John F. Kennedy decided to write a book profiling 8 of his predecessors: Senators from history including John Quincy Adams and Daniel Webster. The book won a Pulitzer Prize in 1957 and became a classic on courage in the face of difficulty and pressure. It’s an exceptional view into leadership in different times—with real implications for today.

 

 

The Rise: Creativity, the Gift of Failure, and the Search for Mastery

This book is an amazing exploration of failure—what it is, what it isn’t, and how failures are part of the journey to successes. Author Dr. Sarah Lewis, an associate professor at Harvard, has a background in art and culture—and uses these lenses in her lyrical, insightful, and practical exploration of the true nature of failure. (Hint: It’s not what we tend to think.)

 

Raising Kids with a Growth Mindset

This resource isn’t a single article or book—it’s a private (though very large) Facebook group of parents learning to live and parent with a growth mindset. Although most of the discussions focus on how to help children, the lessons and insights that group members share are often equally—if not more so—relevant to adults. We’ve found it to be some of the most helpful self-awareness and growth content available anywhere.

Reading That We Plan to Do

You probably won’t be surprised that we have long lists of things we want to read, but haven’t yet. Here are the top few.

The Making of Asian America

Given current events, we think it’s tremendously important to better understand the history of Asian-Americans in our country. Asian immigrants and their descendants have played a major role in U.S. history, but much of this influence has been overlooked or forgotten. This book by Erika Lee, a professor, author, and historian at the University of Minnesota, was recommended to us as a comprehensive, engaging, and fascinating way to learn something we should already know: how Asian-Americans have shaped the history of the United States.

 

The Remote Work Revolution: Succeeding from Anywhere

Looking ahead to post-pandemic life, we’ve recognized that work—like life—will never look the same. In this new environment, employees want to know how to stay connected while maintaining work-life balance; managers want to know how to lead remote teams; and orgs want to know how to enable great work to be done. We’ve heard that this book by Tsedal Neely answers many of these questions. It’s a practical guide for leaders, managers, and teams as they figure out what works best for them and their organizations.

 

You Are Your Best Thing: Vulnerability, Shame Resilience, and the Black Experience

We are looking forward to reading this product of a collaboration between Tarana Burke and Brene Brown—something that combines Brown’s work on vulnerability with Burke’s work on shame resilience. They bring in Black authors, artists, activists, and more to share their stories—resulting in a “stark, potent collection of essays on Black shame and healing” within a space where we can “recognize and process the trauma of white supremacy…be vulnerable and affirm the fullness of Black love and Black life.”⁴

Brave New Work: Book & Podcast

This resource started as a book and has continued on as a podcast about the way we work. Author Aaron Dignan explores the “operating systems” of organizations—the things that comprise organizational culture—and how we can improve the ways we work.

 

 

The Making of a Manager: What to Do When Everyone Looks to You

There’s increasing research that, to improve performance, employee engagement, and other key metrics, orgs should focus on helping their managers become better managers and leaders. This book by Julie Zhuo is a practical guide designed to do just that. Each chapter focuses on a specific aspect of management—for example, holding effective meetings (and canceling unnecessary ones)—and offers specific advice to new managers learning the ropes.

 

 

More Reading

For more sources related to our current research agenda, check out these lit reviews:

• Learning Content in the 2020s: What the Literature Says
• Choosing Learning Tech: What the Literature Says
• The Changing Perspective on Mobility
• Competencies vs. Skills: What’s the Difference?
• Skilling: 5 Themes in the Conversation
• The Purpose-Driven Org: What the Literature Says

What Are You Reading?

You might have noticed from this article that we love reading. We want to hear from you: What are you reading these days? What questions are you trying to answer for yourself?

Share your favorites with us at [email protected]!

Last Friday, we suggested that February would provide us with another strong next segment of HR tech market watching (did you take that popcorn out of the microwave like we advised?!). And wow, do we have a good one on our hands!

Today Microsoft announced Viva, a single employee experience platform “designed to empower people and teams to be their best.”

This announcement fundamentally reshapes the employee experience and people analytics tech market.

 

Those of you who know us well know that we don’t throw that type of language around lightly — and thus had to write a long blog to share our thoughts (#Sorry #NotSorry).

We’re going to explain what this new product is, why it’s such a big deal to the employee experience and people analytics tech market, and the implications for Glint (the engagement solution Microsoft bought 2.5 years ago).

What is Microsoft Viva?

For those of you who have been following along, you know we've predicted Microsoft would enter the employee experience market for years, especially following its acquisition of GitHub, LinkedIn, Lynda.com (now LinkedIn Learning), and Glint. That day has finally come.

Built on top of Microsoft 365 and Teams, Viva offers four modules (see Figure 1), which combine existing Microsoft offerings into a single solution:

• Connections – Creates a “digital campus” where all policy, benefits, communities, and other centralized resources are available. (Available this summer.)
• Insights – Combines Microsoft Workplace Analytics, My Analytics, and Glint to provide employees with insights on how they work, and gives managers and leaders information about their teams, burnout risk, after-hours work, etc. (Available now.)
• Topics – Leverages Project Cortex to identify knowledge and experts across the organization, generating topic cards, topic pages, and knowledge centers (including people – not just information) for others to access – a “Wikipedia of people and information” for the org. (Available now.)
• Learning – Integrates LinkedIn Learning (formerly Lynda.com), Microsoft Learn, and other external sources (including LMSs or LXPs such as Cornerstone and Skillsoft) into a single location within Microsoft. (Available this summer.)

For the newbies here, let’s clarify a few things: What is employee experience and how does tech support it?

Let’s take a step back here and provide a definition, as folks like to throw around the term “employee experience” like a magic eight ball (shake it and a different definition comes out each time!).

We define employee experience as:

Employees’ collective perceptions of their ongoing interactions with the organization¹.

 

Within that definition, there are some nuances, which we illustrate in Figure 2. The main point is this: employee experience encompasses the entire experience – not just tech.

However, tech vendors – who have been largely responsible for popularizing the term – have only generally focused on a subset of employee experience:

• Improving and measuring employees’ tech experiences
• Measuring employees’ collective perceptions, primarily (though not solely) through surveys

Until a few years ago, vendors tended to stay in one of those two boxes. However, we’re seeing more overlap than we used to, such as employee experience vendors moving more into employee engagement (e.g., Qualtrics or Medallia) or HCM vendors offering employee surveying solutions (such as what we talked about last week with the Workday / Peakon acquisition).

Despite all the great things about employee experience vendors, many of them face 3 important challenges:

• Surveys are limited in scope. Surveys can only report on the specific items in the survey, only measure employees’ perceptions (vs. what actually happened), and can only be done with limited frequency (#surveyfatigue).
• Experience data are incomplete. Even in vendors that extend beyond survey data, they are often still limited in terms of the data available: the data necessary to truly understand how employees work exists outside these vendors’ solutions.
• Integration and analytics capabilities are limited. Many (though not all) of these solutions are not built to integrate varied data types at scale or to conduct deep analytics, limiting their ability to explain employee experience outside of the data they capture or integrate.

As a result of these challenges, many employee experience vendors partner with multi-source analysis platforms (e.g., Visier, Crunchr, OneModel, SplashBI, HCMI Solve and others in our people analytics tech tool), which specialize in data integration and deep analysis. Those tools’ core capabilities are integrating varied data sources and deriving meaningful insights from a lot of data. A prime example of this is the announced partnership between Visier and Medallia.

In sum, employee experience vendors, to date, have only covered part of employee experience – leaving open space for someone who can (at least claim to) do it all.

Why is Viva – and Viva Insights in particular – such a big deal?

Microsoft Viva has the potential to do three really important things:

• Cover nearly all digital aspects of employee experience, unlike any other vendor on the market
• Integrate expansive amounts of passive, continuous behavioral employee data with perception data (only for Glint / Microsoft / Workplace Analytics customers)
• Seamlessly provide deep analytics and insights of these larger data sets via Glint and Microsoft Workplace Analytics

These three capabilities are why we think this announcement fundamentally reshapes BOTH the employee experience and the broader people analytics tech market.

 

Let’s start with the first two points about the breadth of employee experience and data types. Through its combination of offerings, Viva will have access to continuous, passive, behavioral data in the areas that most of the other employee experience and people analytics vendors do not:

• Work Relationships: LinkedIn (who you know, inside and outside your company), Office 365 (also who you know, but combining that with email, calendars, Teams, Yammer, SharePoint interactions, etc.)
• Work Environment: Office 365 — including SharePoint — products (where work is getting done), but also Connections (the central hub) and Topics (the “Wikipedia of the org”)
• Org practices: Office 365 (how work is getting done and with whom), Topics (where and with whom information resides), LinkedIn Learning (what people are learning), and Glint’s performance development capabilities (360s, anytime feedback, development goals, and manager nudges)

Viva Insights will also be able to address the other areas existing experience vendors cover, such as improvement and analysis of highly repeatable experiences and employee engagement / experience surveys (Glint).

Finally, Viva Insights will provide an integrated, deep analytics platform with the combination of Glint, Workplace Analytics, and My Analytics (for employees). There will be no need for customers to marry two different vendors and hope they can sort out data integration challenges. Viva Insights should do all of this, seamlessly, and then integrate it into Teams and Office 365. It is important to note that all of the above is only possible if companies are customers of the relevant products (e.g., Glint and Workplace Analytics), but there are no additional integration costs.

With this offering, Viva has the potential to fill the gaps left in the employee experience market, and thus fundamentally change it.

What does this mean for Glint?

First, it is critical to note that Glint will continue to operate as a standalone offering, in addition to being integrated into Viva. The integration of Glint into Viva – and the inherent integration of Glint with Workplace Analytics that comes with it – means that Glint’s aperture of employee experience is much bigger, and moves beyond employee engagement (perception) data to include passive, continuous behavioral data. Glint, through these integrations, will be the only vendor that will be able to do this at such scale.

The primary benefit of this is leaders will be able to connect how people feel to how people work.

 

The specific types of questions they will be able to answer are things like:

• What work patterns and habits correlate with specific employee perceptions?
• How do those sentiments influence how people work and collaborate?

Practically speaking, that means leaders can tell if manager 1:1s, large team meetings, or growth in after-hours work is impacting employee engagement as well as other perceptions.

Given the recent (and critical) focus on mental health and wellbeing, this connection of data sources – and literally being able to see what people are doing and how it is affecting them – could be a game changer for many customers, and thus for Glint, as well. Customers will be able to access this analysis either within Workplace Analytics (Figure 3) or Glint (Figure 4).

 

Glint is very likely to get a super-charge to their business as a result of this announcement.

There are numerous reasons for this:

• Glint gets more looks. Existing Microsoft and Workplace Analytics customers looking for an employee engagement solution will be more likely to look at Glint due to the integration.
• More actionable data. The integration with Viva and Workplace Analytics will give Glint customers the ability to access data that tells leaders which behaviors (as measured by all these passive data sources) are resulting in different outcomes, and as such those data will be highly actionable.
• Data where people will use it. The integration of Glint data into so many other Microsoft products means customers won’t have to step out of the apps they use to access the data. It will be presented in the course of the normal workday, enhancing the likelihood of action and thus impact.

Also, looking forward, there are many future product offerings Glint could develop as a result of gaining access to this richer data set (e.g., organizational network analysis (ONA), targeted manager offerings based on more relevant, real-time data).

It all sounds so good. What could go wrong?

The sections above outline what could be. We all know that the reality can be harder.

First, much of the success of this product requires the different parts of Microsoft to collaborate with each other effectively. We all know that large companies don’t always do that. Further, much of this product involves successfully stitching together existing products and, again, that is often easier said than done, due to tech debt, tech limitations, and in some cases, egos.

Second, one of the big selling points here is that all the data actually integrates and everyone has access to what they need. Even though Microsoft is one company, it is highly unlikely that much of this data is on a similar architecture (especially when you factor in the number of acquisitions being pieced together here – oy vey!). I imagine that a lot of this data alignment work has been done, but we all know the devil is in the details when it comes to data integration. Further, a company has to be customers of all these various solutions in order to reap the benefits of data integration.

Finally – and this is the elephant in the room – there are issues of data privacy and ethics. All these data together – especially data coming from work productivity apps – presents some really thorny issues. We’ve been told that the following data privacy steps have been taken:

"Leaders and managers using Viva Insights in Glint—currently in pilot—can see only aggregated, de-identified results based on the confidentiality thresholds built into Glint. The Glint dashboard will never display Viva Insights information about an individual's work patterns."

While these are all real and meaningful steps to take, there will likely remain other questions, such as:

• Will employees be told that these types of data will be collected and what will be done with them?
• Will employees have the ability to opt out?
• What are the ethical implications and unintended consequences of looking at all these data together? (Perhaps the most important question of them all.)

What does this mean for the broader employee experience, people analytics, and HR tech market?

There are a lot of broader market implications of this announcement, but we have space for just a few:

• Passive / continuous data is now a must for employee experience vendors. Employee experience and engagement vendors that don’t have a way to access continuous data need to figure it out and FAST.
• Multi-source analysis platforms may be the next area of acquisitions. Given the pressure this puts on seamlessly combining lots of data with platforms that can analyze it, we may see some of the multi-source analysis platforms be purchased by bigger HCM or employee experience providers.
• Big money is here for real in the employee experience market. In case you needed more convincing after last week’s heady news of the $27 billion valuation of Qualtrics and the Workday acquisition of Peakon, this deal should reinforce one thing: BIG money is now here in employee experience and HR tech. And it is going to crash plenty of other parties.

As we all know, the proof will be in the pudding when it comes to how well this new offering serves customers. However, it has all the pieces to be truly transformational for our industry, and we expect it to drive some quick responses from competitors. The next segment of HR Tech watching should be another good one.

Until next time, stay well and safe — and please, don't forget the popcorn!

As many of you can see from the headlines, yesterday’s Qualtrics IPO was incredibly successful, with the stock closing 51% above its initial price, and the end of day stock price on Thursday valuing the company at $27.3 billion.

What we wanted to think about, though, is: What does this really mean for Qualtrics, SAP, and the broader employee engagement / experience market?

Let’s start with Qualtrics.

For those of you who have been following the story, you know that SAP bought Qualtrics for $8 billion before its intended IPO in 2018. They held the company for roughly 2 years, and then, as of yesterday, raised approximately $27 billion from the public markets. While that is a phenomenal return on investment for SAP (more on them later), Qualtrics also got a lot out of this little detour on its journey to IPO.

First, Qualtrics achieved a scale it would have struggled to reach on its own. SAP took Qualtrics leaders under their wings, expanded Qualtrics’ international offerings and capabilities, brought Qualtrics into verticals (e.g., supply chain) they were not in previously, and generally taught them the ropes of being a public company. This mentorship – if we can call it that – of Qualtrics leaders means the company is likely more prepared to execute at scale than at least some of its competitors.

Second, the last 2 years have given Qualtrics an opportunity to broaden its strategy and focus on being much more of a platform player across the entire process of designing and executing customer or employee experience, as shown by Figure 1. We imagine that the SAP experience has encouraged Qualtrics to dream bigger when it comes to knitting together their platform with a combination of partners who can deliver the services aspect of their work.

Finally, SAP’s obvious focus on human capital (among other factors) may have influenced Qualtrics to focus more on their people experience business (which they call EmployeeXM) moving forward. While Qualtrics has been saying they were making this shift to focus more on EmployeeXM for some time, the reality of the shift was most recently exemplified by the move of Jay Choi, formerly leader of EmployeeXM, to Chief Product Officer over all Qualtrics products (CX, EX, PX, and BX).

Critically, the last two items underscore why it was increasingly important for Qualtrics to become more independent. If the company was going to make a broader platform play and focus more on employee experience, it needed to build beyond the SAP ecosystem and expand to a broader set of potential partners (including SAP competitors such as Workday, Oracle, and some of the HRIS systems targeted at SMBs).

Net-net: the road through SAP to IPO gave Qualtrics scale, a broader experience management strategy, and a greater focus on employee experience — plus a ton of cash.

But the big winner in all this is SAP.

First, there’s the crazy amount of money SAP just made from this IPO. We couldn’t find a public source for their exact profit, but given that they bought the company for $8 billion and it just got valued at north of $27 billion, we think SAP did more than just *alright*.

But here’s where SAP was really smart.

SAP gets to pocket those billions AND it retains financial control over Qualtrics. “Wait…WHAAAT?!?” you might be thinking (especially after having read above about the importance of Qualtrics’ independence).

Yeah, right at the top of their S-1 (the financial document a company has to file to go public), is the statement that Qualtrics was offered with two levels of stock: Class A and Class B.

“SAP will own all 423,170,610 shares of Class B common stock…Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to ten votes…This means that, for the foreseeable future, investors in this offering and holders of our Class A common stock will not have a meaningful voice in our corporate affairs and that the control of our company will be concentrated with SAP.”

Buried on page 47, the S1 states:

“As a result, SAP will have the ability to control all matters affecting us, including:

• the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies;
• any determinations with respect to mergers, acquisitions and other business combinations;
• our acquisition or disposition of assets;
• our financing activities;
• […a whole bunch of other things, omitted for brevity…] and,
• the strategy, direction, and objectives of our business.”

So, SAP made a ton of money and it still – in legal terms, even if not in day-to-day operations – maintains control over Qualtrics.

Is this (not so tiny) distinction going to matter? We give it a cautious “maybe.”

As we wrote about before, we’d been hearing that Qualtrics already had an incredible amount of autonomy for an acquired company before this spin-out. Further, we’ve also been told that the primary reason for this spin-out is a need for greater independence.

However, things can change fast. The spin-out was at least partially due to leadership transitions, initially precipitated by former SAP CEO Bill McDermott leaving (now CEO at ServiceNow) and reinforced by the sudden departure of SAP’s American co-CEO, Jennifer Morgan. While founder Ryan Smith plans to remain as executive chairman and Zig Serafin as CEO, they can’t stay forever. Should SAP leadership change or become dissatisfied with Qualtrics’ leadership, they could certainly make significant changes.

Change is not the plan for now, but plans change.

In short, SAP made a ton of money and still has the keys to the castle, though they say they aren’t involved in the running of the kingdom.

Perhaps the biggest story is how much money just got put into the EX tech market.

Perhaps the biggest news here, though, is that through this IPO, BILLIONS of dollars just got put into the hands of SAP and Qualtrics – and they will use them. Sure, there will be product innovations and maybe customer service improvements. But what is most likely to happen?

You guessed it: acquisitions.

(Read here for more on our thoughts on why acquisitions are going to be the name of the game for the people analytics tech market in 2021.)

Let’s just focus on Qualtrics (SAP is too wily a beast to make these types of predictions). If we look at where we place them on our people analytics tech 2×2 (see Figure 2), you can see there’s still quite a bit of room for them to move to the right on our “continuous analysis” axis. In short, this means we think there’s still a lot of opportunity for Qualtrics when it comes to using digital exhaust and unstructured data to understand employee experience. Qualtrics have themselves called out (in Figure 1) their intent to focus heavily on continuous listening (#surveyfatigue).

Given this, I’d expect Qualtrics to potentially push into the always-on employee listening space or passive organizational network analysis (ONA) — which could be paired nicely with active survey-driven ONA (again, see Figure 2).

Another area they might go into is the multi-source analysis space. These vendors pull in data from a very wide set of sources and provide detailed and complex analysis capabilities, primarily for people analytics practitioners and HR business partners, but also HR leaders, business leaders, C-suite execs, and employees. Given Qualtrics’ desire to be a data hub – and to understand the entire employee experience – we could see this as another reasonable direction.

Finally, the employee experience starts with talent acquisition. Labor market analysis capabilities would fit nicely into Qualtrics’ overall focus on end-to-end employee experience. Both of these latter two areas would jive really well with Qualtrics’ social science-heavy roots.

Despite all our conjectures above, it is worth noting that Qualtrics’ strategy is very much an ecosystem play. Therefore, Qualtrics may choose to invest instead in collaborating with a system of partners in these areas – or at least do that before acquiring or building the tech themselves. But invest they will – this money has to go somewhere to continue to fuel their growth.

What now?

Well, as observers of all this stuff, this is when we break out the popcorn and watch the show. Because we’re certain it WILL be a show in 2021. What do we expect to see?

• This IPO will allow Qualtrics to be MUCH more competitive in the employee experience / engagement market, as they invest this money into their product and services
• The employee engagement / experience tech ecosystem is likely to change, either via acquisitions or through intentional partnerships
• We’re going to see even more institutional / external investors in the HR tech space, given how well Qualtrics performed – which will fuel more growth in the broader HR tech vendor market – starting the cycle anew

For now, let’s all have a good weekend… and take that popcorn out of the microwave as we look to February to provide the next segment.

Just yesterday, we presented at the People Analytics & Future of Work Global Conference, and told the audience: “In 2021, we are going to see a lot more market consolidation.” And here we are, with example number one: Workday’s announcement today of its acquisition of Peakon (a Danish employee engagement provider).

Though smart, this is an unsurprising (and not market transforming) move on Workday’s part. Why?

Let’s start by examining why we expect market consolidation.

First, there have been huge investments in HR tech over the last decade – one estimate is that investors put nearly $5 billion into the industry last year alone – and that’s resulted in a highly fragmented market of specialized players across our entire HR tech industry.

This is nowhere more prevalent than with employee engagement and experience – the single largest (36%) and fastest growing category in our people analytics tech study. And that isn’t going to change:  due to COVID-19, social justice movements, remote work, etc., employee engagement and experience was by FAR the most in-demand people analytics area last year, with 63% of people analytics practitioners telling us they focused in this area in 2020 (a number we expect to see rise in 2021). Highly fragmented, lots of external investors, and quick growing = market ripe for consolidation.

Second, across the last year, we’ve recognized that we need more and higher quality data on our people. That requires that the data be easier to integrate. That can be done through an ecosystem that plays nicely with each other (similar to what Visier, Medallia, EMSI and others are doing with their “People Intelligence Alliance”) or by acquisition.

Right now, employee engagement / voice solutions are amongst the easiest to buy and implement (despite what some might tell you), as evidenced by the fact that a lot of these vendors went to a freemium model during the earlier parts of the COVID crisis and allowed potential customers to just turn the tech on themselves. However, what isn’t easy is the data integration piece: connecting engagement / experience / voice data to other data that can tell you something more meaningful.

So why did Workday acquire an employee engagement provider?

The most obvious reason is that Workday needed an employee engagement solution. As you can see in our people analytics tech 2×2, Workday has solutions in most of the other areas we cover, but it didn’t have an explicit employee engagement solution. (As an aside, to my knowledge they also don’t have an organizational network analysis solution – so you ONA providers might want to see if there’s any more Workday M&A budget available for 2021!)

But why wouldn’t Workday just build out their existing capability, instead of buying a company? A few reasons:

• High-quality engagement solutions are deceptively hard to build;
• There are a lot of really good independent engagement vendors open to being acquired (even after this acquisition!); and,
• This allows Workday to meet customers’ needs now, not in a few quarters’ time.

Further, the acquisition enables Workday to reinforce their single data model approach, as opposed to doing the ecosystem play – which we all know isn’t their main jam (though Prism allows data integration from external sources). By purchasing an engagement provider, they can ensure a single source of data truth when it comes to engagement data, which will make all the rest of their data offerings stronger.

There are lots of employee engagement vendors. Why Peakon?

Many of you may not know who Peakon is – I didn’t until about 18 months ago – but there’s a lot to like about them. First, Peakon is a high-quality platform, with engaged customers and devoted employees (similar to Workday).

Second, in addition to the engagement capabilities, Peakon brings two other offerings that will bolster the Workday toolbox: Grow (a performance solution) and Include (a diversity, equity, inclusion & belonging (DEIB) solution).

Let’s start with Grow. As we’ve written many times (such as here and here), we see performance and engagement becoming ever-more intertwined. Peakon’s solution is a primary example of how performance development and engagement can be bundled together effectively. This offering will surely bolster Workday’s performance solution, which is lacking in some of these capabilities.

Include will also strengthen Workday. This solution allows leaders to integrate DEIB analysis with the engagement offering. In some ways, these capabilities mirror Workday’s recently announced VIBE Index, which is a good thing, as there is overlap in vision. However, Peakon supplements Workday’s existing offerings in important ways:

• In-product features to safely report misconduct;
• Flagging of sensitive (including violence, criminal behavior, safety and wellbeing, etc.) comments for anonymous follow-up by HR; and,
• In-product links to micro-training on building more inclusive teams.

Finally, Peakon checks other important boxes:

• Financial: They completed a roughly $36 million Series B just under two years ago, which means they had significant funding, but not nearly as much as some of their competitors – and so were relatively affordable at the $700 million price tag. Given Peakon’s pricing, customer numbers, and growth rate, I imagine that the ROI on this investment will be very strong for Workday.
• Technical: Peakon is roughly 6 years old (depending on when you start counting) and thus has a modern tech stack and likely less tech debt.
• Cultural: There’s strong cultural and values alignment.

So, to sum it up, this is a good – but entirely predictable – buy for Workday. It doesn’t signal significant shifts in the market. It doesn’t fundamentally change things for the other engagement providers.

This deal is sound. It is smart. Well done, Workday and Peakon. We look forward to seeing how this works in practice.

 

SAP announced that it plans to take Qualtrics public at some nebulous date in the near future. This is after SAP spent $8 billion in cash to acquire the company in late 2018, just days before Qualtrics was due to IPO.

Why sell (some of) Qualtrics?

This is rare. Buying and selling companies on short-ish timeframes is usually the domain of private equity firms. But even those firms are typically operating on 3-5 year time horizons, after making significant changes to the company. SAP is selling Qualtrics after 18 months – and the only meaningful change we can see is a significant increase in Qualtrics’ revenue.

Three plausible reasons we can think of for the IPO are:

• Financial
• Change in leadership
• Post-acquisition blues

Today, a lot of ink has been spilled about the potential financial upside of selling Qualtrics – this article and podcast from Tech Crunch are especially good. Essentially, Tech Crunch is saying that, with Qualtrics’ run rate of ~$800 million in annual revenue, SAP could reasonably expect a 17.3 times revenue valuation of Qualtrics – putting it at about $13.8 billion on an IPO.

Therefore, even with the eye-popping cash investment of $8 billion, SAP could stand to make a lot of cash just for having bought and held Qualtrics for 18 months (kind of like if you bought a house in 2009 and sold it last year, but on an even shorter timeframe). SAP will remain the majority stakeholder in Qualtrics (at what percentage, we do not know), so it won’t be getting all that cash – but the potential IPO still represents a significant cashflow infusion to its business.

This is all great and good, but we have to ask – Why does SAP want to sell Qualtrics now?

Financial

The first reason could be that SAP wants the cash. In today’s earnings call, the company mentioned a significant focus on cashflow in the midst of the pandemic (who is not looking at cashflow?!?). Selling part of Qualtrics generates a significant cash bunker for SAP.

It may also be that SAP thinks that we’re in for a significant long-term economic downturn, but that cloud-based businesses are still highly valued, so this is a good time to sell if they are ever going to. They may also, as they said, want to invest in other "strategic initiatives" (like S4/Hana), so are looking to free up some money.

No matter the reason, SAP can get a lot of cash – and everyone likes cash when the economy is tight.

Change in leadership

Another reason could be a lack of leadership alignment. When SAP bought Qualtrics, it was very much a meeting of the minds between Ryan Smith, Qualtrics’ founder, and Bill McDermott, SAP’s CEO. Since McDermott left SAP last October for ServiceNow, there’s been volatility at the top: SAP moved into a co-CEO model with Christian Klein and Jennifer Morgan, with Morgan moving on this past April.

It’s possible that the vision shared by Smith and McDermott for Qualtrics was fundamentally different than what has come to pass in the Klein era. Smith clearly still has a strong vision for Qualtrics, as reinforced by the fact that he’ll become the largest individual owner of the company (though, as stated above, SAP will be the largest institutional owner).

Post-acquisition blues

Finally, it may be that the realities of post-acquisition integration were just a harder road than anyone wanted to hoe. We all know that most acquisitions fail, and ones with significant cultural differences, even more so. SAP is a large, traditional organization. Qualtrics is a cloud-based start-up, with a very different culture. Those types of differences can lead to difficulties in everything, from alignment around customer integration to how they manage the partnership landscape to software and services integration.

While I don’t know the details of what has happened, as analysts we can say that the integration of Qualtrics into core SAP SuccessFactors’ offerings has been slower than we would have expected, given SAP’s overriding focus on creating a “human experience platform.”

Bottom line

Throughout the last 18 months, Qualtrics has remained remarkably independent – a point Smith reinforced in the earnings call today. It may make more sense to cut Qualtrics loose now instead of forcing a post-acquisition integration that may not have been working as some in top leadership seats hope.

What now?

SAP reinforced that it’ll remain the majority owner of Qualtrics, and that it intends to continue investing in the “human experience platform,” marrying operational data with experience data (which it neatly calls X+O data). SAP also stated that it’ll remain Qualtrics’ primary R&D partner, which will benefit both organizations. Qualtrics may especially benefit, as there are some innovative start-ups in SAP’s start-up ecosystem. Therefore, we still expect to see a tight and beneficial relationship there, and hope that SAP is able to leverage some of the innovation Qualtrics can offer.

Near term for Qualtrics

The IPO of Qualtrics will allow it to operate more independently, which may allow it to get back into important partnerships with either Oracle or Workday (depending on how close the relationship remains with SAP). It should also allow it to revert to its start-up cultural roots, in terms of how it attracts and retains talent, and how it operates on a day-to-day basis.

Qualtrics’ partnership with SAP’s sales teams likely fueled some of its strong growth over the past 18 months, so the company may face some headwinds as it transitions back to its own salesforce. That said, Qualtrics developed a strong set of COVID-19 resources for customers and has cited those offerings as part of its success in the last few months. Qualtrics is likely to continue building on those successes as, unfortunately, the need for COVID-19 support is unlikely to go away soon.

Further, as we have noted in blogs across the last year, employee experience is a hot market. It’s now even hotter than before, with so many CEOs and senior leaders recently seeing the importance of understanding employee sentiment in light of the pandemic. Qualtrics is a market leader in this space. Even though it won’t have SAP directly behind it anymore, based on today’s earnings call, it seems that Qualtrics will retain some significant cash from this IPO to fuel its future growth. Therefore, we expect to see it continue to do very well in the future.

Net-net: This seems like a good, though unusual, deal for all.

The steady drumbeat of COVID-19 news is reaching ever-greater levels – so loud that it seems to be deafening out almost anything else.

It would be hard for it not to. Here in the Bay Area we have the highest concentration of identified cases in California (and the 3rd highest in the country). Gatherings of more than 250 people have been banned. In-person classes at many local universities have been cancelled. Most of us parents are just waiting for school closures. My family has made the decision to avoid most public places (and you should hear how good my kids have gotten at the ABCs as they wash their hands). In many ways, these are scary times.

Focusing on the positive

But they are also times of opportunity, and I am trying to appreciate some of the unexpected good things that have resulted from these times. I thought I’d share them, as they might help you, too.

Here are some of the things I've gotten more of since the outbreak of COVID-19:

1. Time with my family. You should have seen the pure joy and hugs my children gave my husband when he told them he’d be working from home for at least the next two weeks. And when I told them I wouldn’t be traveling for the foreseeable future? It was the most excited screaming I’ve heard in months. Social distancing is bringing us closer together.
2. Thinking space. The spring is conference season, which means I tend to be on the road a lot. That isn’t going to be the case this year. It’s giving me some time to do deep thought work on some new and important research we’re doing on gender and performance management, how to create a responsive organization, using people analytics to create organizations of the future, and the talent experience at purpose-driven organizations.
3. Genuine connection. This might seem counterintuitive. But since everyone is going through this pandemic together, more of my calls start out with conversations about how people are doing, how their families are holding up, and how they are managing through the difficulties. I think we collectively need more of this, and less “business as usual.” At RedThread, we already have a culture of video calls, but this need for connection has only reinforced that tendency.
4. Time to breathe. Since I am not on the road, I’m actively taking that time that was booked on my calendar for “travel to airport” or “flight time” and going for walks or working out. So some of that breathing is heavy breathing, but all of it is making me more healthy.
5. Reflection. Most specifically, I’ve been asking myself, do I need to be on as many planes as I have been for the last few years? What are the tradeoffs I’ve been making in terms of my health, the environmental impact, and my family? And are they worth it? My eyes were really opened by Hacking HR’s Global Online HR Innovation and Future of Work conference last week, and specifically the power of technology like hopin. There is so much more we can do virtually if we are open to it.

COVID resources

For many of us, COVID-19 also provides an opportunity to show steady leadership in a time of instability. It is through strong leadership that we can help our teams, organizations, communities, and families manage effectively. We continue to see (and will continue to add here) resources that we think might be particularly useful to leaders during this time:

• Harvard Business Publishing: Resources to Effectively Lead Amid COVID-19
• Qualtrics: Here to Help
• Limeade:  Care in Crisis 
• Pluralsight: The Remote Work Guide
• Lars Schmidt: Coronavirus HR Comms & Resources Guide
• Gartner: Respond, Manage and Prepare for the Impact of Coronavirus
• i4CP: The Coronavirus Employer Resource Center
• MeQuilibrium: Coronavirus Uncertainty – Respond with Resilience
• Cornerstone: Cornerstone Cares
• Skillsoft / Sumtotal: Business Continuity Learning Center

A few articles to peruse

Finally, there are obviously a lot of articles out there on COVID-19 and your most reliable data source is the CDC and your state or county department of health. However, we've also done a lot of reading on this topic and were especially struck by the high-quality data analysis and insights in these 3 articles:

• Why Outbreaks like the coronavirus spread exponentially, and how to flatten the curve (Washington Post)
• Coronavirus: Why You Must Act Now (Medium)
• How Bad Is the Coronavirus? Let’s Run the Numbers (Bloomberg)

Final thoughts

We hope our reflections are of some use to you as you try your best to navigate these challenging times.

One final thing – while you are looking after your physical health, don’t forget your mental health. It’s quite possible we are in for a marathon, not a sprint, with this one. Good luck and now go wash your hands.