YouEarnedIt Acquires HighGround: Performance Management Market Heats Up
As I described in an article a few weeks ago, innovation in performance management reigns. The annual appraisal is going the way of the dinosaur and almost every company I talk with is focusing on continuous conversations, agile and transparent goals, and new culture-based models for coaching, career development, and skills improvement. The big question is what software platforms will really make this all work well?
There are three huge changes taking place.
First, the ERP players (ADP, Oracle, SuccessFactors, Workday) all have solid performance management solutions, but they are designed around year-end reviews and most are still a work-in-process for continuous, feedback-centric solutions.
Second, there are dozens of very innovative startups companies, including vendors like BetterWorks, Reflektiv, HighGround, Lattice, Impraise, Standout, Zugata, 15Five, 7Geese, and more. And while the ERP players certainly want to succeed in this space, most are happy to partner with these vendors if it makes their core platform more competitive.
Third, the entire category is starting to converge. Just as we had integrated talent management suites in the early 2000s, we are now beginning to see “21st century talent platforms” in this new world, bringing together the features of goal setting, feedback, and reviews with features like pulse surveys, rewards and recognition, wellbeing, and of course learning.
The result: a massive new market is opening up.
To get you thinking, let me share a slide I put together over a year ago… and this is now starting to happen right before our eyes.
If you think about an employee’s experience at work, they don’t want to have to log into Outlook for email, Slack for messaging, Jira for work projects, and a bunch of HR tools to get feedback, set goals, send kudos, and find training. They want it all together. So at an increasingly accelerating rate, this is what is starting to happen. And investors, CEOs, and various technology players are looking at how to make this happen fast.
Now let me discuss a few important things that just happend in the last few weeks.
YouEarnedIt Acquires HighGround
In the last few weeks, YouEarnedIt, a mid-market provider of employee recognition and rewards solutions (with over 400 customers), acquired HighGround (an innovative next generation performance management platform), and then subsequently received an investment by Vista Equity Partners.
Why did this deal happen? HighGround was one of the new continuous performance management tools in the market, and started to see how fast the space was growing. The company was founded by a successful entrepreneur and built a platform that includes feedback, continuous goal management, social recognition, and a little functionality for employee development. The CEO was very aggressive and won deals at United Airlines, Patagonia, and Hitachi as some of its early clients.
As the company started to see the rapid growth in the space (and the deep pockets of competitors), leadership decided that rather than raise money they would merge with an existing player that could expand the product capabilities and sales team. And that led them to YouEarnedIt. (A screen shot of YouEarnedIt is shown below.)
While one may not initially think about recognition and rewards as part of performance management, it really does belong there. When you “appreciate” someone at work, and give them points or a reward, that interaction should go into the performance management system, so we can see who are the most well-regarded people in the company. Traditional performance management was all manager-driven: in the 21st-century approach, everyone contributes to your evaluation.
Other vendors are moving this direction too. Globoforce introduced Conversations into their successful recognition platform, essentially telling customers that “recognition is just a special form of feedback.” They have seen early success.
Look at the types of functionality you can get for feedback and goal alignment, it’s quite impressive (BetterWorks screenshots). And many of these tools now embed feedback apps in Outlook, Slack, and other productivity apps – so you can give and get feedback without even logging into the system! (Reflektiv pioneered this.)
Engagement and pulse surveys are also coming to performance management. TinyPulse, a fast-growing mid-market engagement tools company, introduced performance management over a year ago and has been highly successful. Glint, a leader in enterprise culture and engagement platforms, is working on its own performance management system also.
Adding fuel to the fire, one of the other big benefits of these new platforms is the amazing level of analytics now available, letting companies immediately see which managers are not talking with their people, who is not keeping up with their goals or projects, and even patterns of discrimination or bias in ongoing conversations. All this data (plus organizational network analysis) is flowing into these platforms, giving these systems one of the most valuable business databases one could imagine. Most of the vendors are building AI engines to analyze this data, so these are moving from “performance management tools” to “intelligent management systems” sooner than I had imagined.
One vendor, Zugata, uses AI to capture feedback algorithmically (sending carefully worded emails to your colleagues to get developmental feedback on your behalf), so the system can automatically give you development tips directly from your peers. ADP Compass also does this, and we can expect others to do the same.
The Role of Investors in Consolidation
Many of the vendors in these spaces have investors with deep pockets, and they want their companies to become major platform providers over time. This is difficult to do, but companies like Workday, Ultimate Software, ServiceNow, and Salesforce are showing that it’s possible. So when you see a company like Vista Equity get involved, you know the market is poised for growth.
Let me point out a little history. In May of 2009, Vista Equity acquired SumTotal Systems, which itself was the integration of Docent, Click2Learn, and some other small talent management players (for $160M at the time). They used their “software company playbook” to help SumTotal grow, and then it was acquired by Skillsoft in 2014 (five years later, for an undisclosed price but likely 3-4 times what they paid). So Vista Equity is what one would call “smart money” – they are not only as an investor but also as an operator. And when I see them jump into this market I ask myself “how many other VCs, boards, and investors” are thinking the same thing.
CEOs and investors in this space are now asking “Should we buy a recognition company?” “Should we buy a wellbeing platform?” “Should we buy an engagement toolset?” and on and on.
Is The Market Really Ready? Yes.
Are companies really ready for this new generation of software? Absolutely yes – in fact they’re anxiously awaiting.
In the mid-market, where companies like integrated solutions, they’re ready to buy today. ADP now offers its own integrated performance solution (Standout) and just launched a new rewards and cash management system Global Cash Card. I spoke with ADP about this deal in June and they told me the cash awards, gifts, and cash management market is exploding. There are lots of standalone players out there (Fond, Rewards Gateway, Achievers) and all these companies are growing primarily in the mid-market.
Ultimate Software is further proving this thesis. The company’s acquisition of Kanjoya (engagement tools) has already resulted in more than 300 clients, just recently they jumped into employee self-service with the acquisition of acquisition of PeopleDoc, and is likely ready for more. Vendors like Zenefits, Namely, Gusto, and other midmarket and SMB payroll providers are constantly looking for integrated solutions – because their customers love one-stop shopping HR platforms.
For larger companies, the next-gen performance market is just as hot, but the platform issue is tricker. Many have already experimented with continuous performance management (IBM, Adobe, Deloitte, Cisco, GE, NY Life, Goldman Sachs, Wal-Mart, and many more), and in almost every case they see tremendous.y positive results. Research done by NLI and our group at Deloitte both show that employee engagement goes up, productivity goes up, and managers learn how to manage their teams better.
On the topic of buying a new platform, however, bigger companies are more nervous. Many just spent tens of millions of dollars on a new cloud-based HCM system, and they are hoping it manages all these talent practices too. So they drag their feet, they evaluate these smaller vendors, and they get nervous about bringing in a new tool. (SuccessFactors in particular, who has been working on a continuous performance management tool for several years, promotes the benefit of enabling companies to do it “the old way” and “the new way” at the same time.)
Well to me the answer is now clear: it’s time to make a change. I’ve talked with companies using these new tools and they generally find them amazing. And with the right amount of change management and design, they can really change the way management works.
I recently read John Doerr’s book “Measure What Matters” and it is an amazing story of how of the highest performing companies execute through hands-on management and OKRs (objectives and key results). Even though OKRs are not well understood by many HR departments, they really work when done well, and these tools make them scalable and easy to manage. I”m a big fan of online tools to manage teams and projects, and these systems are all headed in that direction. (BetterWorks has built an entire platform based on Doerr’s management experience.)
Of course, none of these tools works without a plan (you can’t just “turn them on” and expect everyone to suddenly have better performance), so you do have to design a process people understand. But with the right amount of HR strategy and consulting they offer a transformational change. And this is why the vendors are jockeying for position and the feature sets are getting built out.
By the way, I would remind HR departments that these systems are replaceable. If you buy a great product from one of these innovative vendors and they are later acquired or fall behind, you can replace this level of software relatively easily, while keeping your ERP still in place. (One may argue its even better to operate this way so you aren’t totally dependent on your ERP for this rapidly evolving category of solution.)
Where Does This Leave The Market?
It’s still early days here. This acquisition, while interesting, is not going to change the market the way SAP’s acquisition of SuccessFactors did. But it is a spark in the fire that is likely to heat up the market even more. All the private companies in this space are growing, and the big players are not taking this sitting down. While I don’t believe the ERP vendors will compete with these smaller vendors soon, ultimately the winners will be acquired because there is so much new software to be built.
As I talked about in the article “Continuous Performance Management: Innovation Reigns,” these integrated tools are really a new market and one that will grow very fast. We will see more deals like this in the coming quarters, and these companies are tuning up their sales, marketing, and services to compete. I believe we are in the early days of a wholesale replacement of traditional talent management software, and these small vendors are inventing what’s coming next.
(I’ll be detailing much more of this in my upcoming HR Technology Disruptions report this Fall and my presentations at the HR Technology Conference, Unleash, and other events around the world.)
All I can say is stay tuned. We are going to have some amazing new tools in the months ahead. Investors, this is a great place to be. And vendors? Just keep your eye on the ball – there’s a lot of growth for everyone in the market, and it’s getting hotter by the minute.