Engagement Trends to Watch
Employee Engagement Market Trends
While engagement is at its highest levels since 2000 (according to Gallup numbers), the small ebbs and flows over the last few years have kept engagement right around 30 percent, while disengaged employees continue to make up a consistent majority. Even though engagement has been the focus, not much has changed.
One has to wonder: If employee engagement is so critical, studied, and sold by consultants and service and technology companies, why haven’t we seen any significant change in outcomes over the past decade? Is it an indictment of our approach or the technology? Or is changing the way we do business really that difficult?
Part of the challenge is that employee engagement is a far-reaching thing — certainly one that goes beyond our tighter category definitions of recognition and rewards, wellness and well-being, and engagement measurement. In a sense, employee engagement is about the complete employment experience. It’s not just about having a good boss, being at a good company, having the right opportunity for the right skill set, or having the technology stack. It’s all of that and a host of other issues a company may or may not be able to control. For example, age, race, gender, and personal issues can all play a role in how engaged we are at work. Meanwhile, the span of control required to root out bad people or bad processes can take time to implement and a great deal of commitment to see it through.
Instead of being discouraged, the industry should be looking at it as an opportunity to change the situation for the better. We at The Starr Conspiracy talk to companies addressing these issues every day and are encouraged by the innovation and progress we see coming from all corners. Some of the trends we see driving engagement overall are:
Measurement is becoming more granular, and response times are decreasing. Engagement measurement is changing from an annual activity delivered by companies like Gallup to a more frequent event happening in real time. Right now, tools like pulse surveys and employee Net Promoter Scores can offer a day-to-day look at engagement, with a more comprehensive look on an annual or quarterly basis. Because of the amount of data companies can collect about employees today, they’re being forced to monitor engagement intelligently. The next frontier is the ability to gather data outside of active measurement — data such as sentiment analysis — to get a true sense of engagement beyond self-reported results.
Employee engagement is the destination, but there are many routes to get there — expect collisions. There’s also a growing sense that no single employee engagement solution is the “right” or “only” way. As a result, many of these categories are beginning to collide and cannibalize features from one another at a pace that will only continue to accelerate. Recognition providers are leading the charge and, rightfully so: They arguably make up the key axle of engagement’s spoke and wheel. Those who don’t already have a wellness solution are working on building one, or are working on increasing their partnerships. Measurement and reporting might only be a feature with some recognition providers, but it needs to go deeper if they want to compete with stand-alone services and technologies.
- The need for rigor, process, and proof is increasing. To be blunt, much of the science behind measuring effectiveness, ROI, and optimal processes in engagement is insufficient. The companies that invest most heavily in engagement are taking a proverbial leap of faith in doing so. As executives continue their march toward engagement as an ultimate employee measure, we expect someone to crack the nut on engagement ROI and add some rigor to the category. But today, it’s the Wild West with a few competing sheriffs — consulting and advisory firms, technology providers, and analysts and media — all playing a role in defining employee engagement. Whoever can figure out the ROI piece first has a first-mover advantage that will be hard to overcome.
Though we feel the trends covered so far are true for the overarching engagement category, other, more specific trends are separately affecting the individual market segments we’ve focused on. Let’s look at the trends we see driving each segment.
Recognition Market Trends
The recognition and rewards category has some of the oldest historic brands that still exist in the human capital space. For example, Engage2Excel (formerly TharpeRobbins) has been in existence since the late 1800s. It specialized in pins, medals, and awards for all kinds of companies before turning its attention to employee recognition. Michael C. Fina is better known for its consumer brand of fine jewelry and home decor than its history in employee recognition.
Unfortunately, the category has not aged well, especially for legacy players. Some of the most notable companies in the category are resisting the transition from being primarily rewards-based solutions to becoming recognition-based solutions. They’re at risk of getting eclipsed by the next wave of fully baked employee engagement solutions. Furthermore, the peer-to-peer recognition approach that’s central to a lot of the technology is being adopted by companies in the engagement measurement, wellness, and talent management spaces.
Ultimately, the next five years are really going to define where this category goes. Can it become central to the engagement puzzle? Or does it fall by the wayside? Here are three trends that we think will really define it:
The complete decoupling of rewards from recognition. Employee rewards were good business for the post-World War II era, and legacy recognition players have made billions reselling gold watches, luxury items, and travel. The gravy train is coming to an end. In its place is a more experiential and recognition-focused workforce. As recognition providers look to increase their technology footprint and expand to other engagement subcategories, they’ll continue to push their rewards business further down the ladder — until it’s completely outsourced or an afterthought.
Hub and spoke or die trying. Ultimately, we think recognition can be the hub of a new engagement-focused technology stack. This requires bigger ambitions than just being a recognition provider. If companies want to compete going forward, they’re going to have to acquire or closely integrate other technologies that encourage engagement. The most important of these are wellness and engagement measurement. But it could be expanded to everything from learning and onboarding to corporate responsibility and volunteerism.
Full embrace of engagement. Despite what their outward messaging might suggest, many companies in the recognition space are simply hesitant to fully claim the mantle of employee engagement. Until they accept the mission of improving and solidifying employee engagement, we think that most recognition companies will struggle to grow and increase their market potential. Buyers in this market aren’t looking for solutions to recognize employees. They understand it has to be more systematic and encompassing than that.
Wellness and Well-being Market Trends
The idea that employee health is important to a company’s bottom line pre-dates even Ford’s early 20th-century assembly lines. Here in the 21st century, though, programs driven by insurers and early adoptees of wellness have given way to a category of services and technologies that is rapidly evolving.
Wellness was spurred by a rapid rise in health insurance premiums, often exponentially growing compared with inflation. An aging workforce that put off retirement further forced companies to take measures to reduce their healthcare costs. This was particularly true for companies that were self-insured.
That era of wellness lasted the better part of a decade before giving way to even more significant evolutions. We see three big shifts in this category, some of which are already taking place:
A shift to well-being. Physical and mental health have been the primary outcomes that wellness sought to change, especially in the last decade. A new wave of emphasis that focuses on a person’s entire well-being is a trend we see continuing for the near future. You might be in great shape physically. But if you’re not getting enough sleep, or your family life is a disaster, or you have bill collectors knocking at your door, you aren’t going to be at your best at work. We see vendors giving increased attention to programs that focus on the entire person, and even on their families. This crosses over significantly with at least a portion of the primary value proposition of employee assistance programs (EAPs). For wellness companies that want to jump directly into the well-being market, we see traditional EAPs being an attractive acquisition target. For software-focused wellness providers, the inability of traditional EAP services to scale have forced them to focus on what can they replicate with software and on what truly needs a human touch. Pay attention also to financial wellness. According to the Wellness Research Institute, 54 percent of consultants surveyed say their clients plan to implement these solutions in 2016 — the No. 1 response.
Integrate or wither. If this feels like a repeat from the recognition trends, we apologize. But the trend holds true for wellness, in a slightly different way. Consumer health applications and devices are all the rage today. For example, if your wellness solution has activity monitoring and you don’t integrate with the top five fitness trackers, you’re going to have a bad time. If you want to give rewards through your benefits, payroll, or rewards provider, you’d best get an integration that does the work for you.
- Reporting isn’t enough. Most companies don’t care that their employees walked 8,435 miles today. They care about outcomes. And they don’t care just about health outcomes, but also about changes to productivity, engagement, and, yes, even overall healthcare costs. We talk regularly with executives who don’t understand how wellness programs work and don’t think there is a carrot big enough to encourage people to get in better shape. For nonbelievers, a leap of faith into wellness has to eventually be supported by data. It would be best if that data were beyond reproach.
Measurement Market Trends
Engagement measurement is one of the newest categories in HCM and one of the most misunderstood. Even among our knowledgeable research panels, there were stark disagreements over who is actually measuring and analyzing engagement data and who is simply creating basic reports or dashboards that don’t drive insights.
When you look across the landscape of the employee engagement category, there’s more untapped potential in this market than in any other place. The reason is simple: We’re collecting incredible amounts of data today and doing incredibly little with it. Though there will always be a need for active surveying and measurement, that’s only a means to an end. Companies need data that can inform real-time feedback through accurate and actionable performance assessments at the individual and team level. Armed with current, real-time data that can be easily segmented and cross-tabbed, companies can activate culture in a way that correlates with tangible business results.
The culture activation piece is powerful, especially when combined with peer-to-peer recognition, goal management, 360 feedback, one-on-one coaching, and career pathing. As companies in this category add these features — as some already have — they are set squarely on a collision course with recognition and talent management. Measurement companies that focus on the culture activation component will grow by syphoning off budget and market share from other categories.
We also see a number of trends that should shape engagement measurement:
“We do analytics” isn’t good enough. Let’s face it, enough vendors have lied through their teeth, or overpromised and under-delivered on analytics, that buyers are rightfully suspicious of any claim. Companies need to be prepared to talk about how their software can drive insight. Can you help me identify certain areas where we can do better? Can you proactively notify me of changes? Can you tie into my financial and sales systems? It’s going to be show, not tell.
Say goodbye to the suggestion box. This is one of the more exciting trends for us. Can measurement software trigger warnings about business practices or processes before employees even realize there’s a problem? This is where passive engagement monitoring holds the biggest promise and the greatest potential, for employers to go all Big Brother on their employees. At this point, anticipating employee needs is only a question of data collection and proper analysis. And even data collection is largely happening, even if it’s tough to extract.
- Legacy players have a true upper hand — for now. Organizations like Gallup have so much historical data, and the internal intelligence to unlock that data, that it’s initially going to be difficult for companies to find a foothold. However, emerging players are aggregating large data sets in a short period of time. They will combine engagement survey results with core business data — financials, CRM, etc. — that can be integrated through large enterprise integration partners such as RedHat or MuleSoft, or new emerging players in workforce analytics such as OneModel. In a short period of time, category upstarts will be able to provide highly relevant business insights to customers in fraction of the time, at a fraction of the cost. That’s how newer players will put a dent in the market and mindshare that legacy providers currently enjoy.
So what do these trends mean?
Just as with talent management, different organizations will require different ways of engaging their workforce. For some, learning and collaboration will be the critical pillars. Others will point to well-being initiatives as the main imperative. Finally, we think recognition and measurement will be key to encouraging and understanding results. But even that will look different for each organization.
What seems to be changing is the ability for these systems to integrate with one another, to share and analyze data. No matter what stack of technology you choose, it’s becoming more possible to bring together a customized engagement ecosystem that makes sense.
With all of this in mind, vendors, buyers, and investors need to consider …
For HCM vendors, it’s time to partner with or acquire complementary solutions. It’s time to figure out your path forward to become an integral part of the engagement category. You can survive as a niche player in this space with deep integrations that go up and down the engagement and talent management categories. Those who want to lead and dominate the engagement category are going to have to bring in additional solutions to round out a more complete platform. For recognition vendors, that might mean acquiring a measurement or wellness provider, and integrating with a collaboration system and the top traditional talent management systems. For others, it could be aligning with a preferred partner, going deeper in capabilities, and being technology-agnostic.
For HCM buyers, the landscape is going to get more confusing before it gets clearer. It took more than a decade for the race toward talent management to shake out, and we see those same parallels within the engagement category. Despite the long history of some of its vendors, it’s a new day for this category. We expect to see more consolidation, more startups, and more innovation in the coming 18 to 24 months. For buyers on the forward edge of the adoption curve, that will lead them to try solutions that aren’t fully there yet, while more conservative buyers wait for clear winners to emerge.
For HCM investors, there’s a new category to pay attention to. While we’ve been bullish on engagement, investors have been relatively conservative with their investments in this category. We see great value in the investments already made and an opportunity to continue making early investments. We wouldn’t be surprised to see this category heat up in a hurry, as deeper adoption continues and compelling use cases reveal themselves.