The Tale Of Performance Management Tools: 15Five, Lattice, BetterWorks, And More…
The market for online performance management software has been fascinating. For more than a decade vendors have been building new tools to enable goal management, check-ins, feedback, and alignment. And now we’ve added surveys and feedback to the mix.
This week 15Five, one of the fastest-growing vendors, announced the acquisition of Emplify, a leading provider or manager-enablement survey and feedback tools. And that deal, which is significant, marks a major change in the market. Companies are no longer looking for performance management tools that automate HR processes: they now want “manager enablement” platforms that just make teams more productive, engaged, and aligned.
Here’s what’s going on.
Back in the early 2000s companies like GE and Microsoft popularized the idea of “rank and yank” performance management. You give everyone in the company a set of goals, you align these goals to the corporate financials, and then periodically (annually or quarterly) you “evaluate people” against their goals, and give them a performance rating. (Typically a 1-5 scale, just like Yelp star ratings.) The company creates a forced distribution (ie. only 10% of a population can get a 1, 20% a 2, etc.) and we force people into distributions.
If you’re a rough and tumble culture (which GE and Microsoft were at the time), you take the bottom 10% and you let them go each year. So there is what I call a “competitive assessment” process taking place, and people are essentially competing with each other for top ratings. I experienced this at Deloitte personally, and was frustrated that my entire 7 years there I was never rated higher than a 3.
This kind of worked because it was hard to find a new job and the employers were calling the shots. But sometime in the early 2000s companies like LinkedIn, Glassdoor, and Indeed democratized the job market and people started just “leaving” these cultures, forcing companies to rethink the process.
Donna Morris, the CHRO of Adobe at the time (now at Wal-Mart), pioneered this new idea that maybe we shouldn’t just “evaluate” people but we should check-in regularly and managers should serve as a coach. So a whole new concept of “performance development” and “performance coaching” took over. This led to the idea of “continuous performance management” and all the tools were changed.
Suddenly people didn’t want these older goal-management systems like SuccessFactors, they wanted “check-in” tools from vendors like Reflektiv, 15Five, Lattice, and later BetterWorks, HighGround (now part of Kazoo), TinyPulse, and others. So Performance Management no longer looked like a top-down HR process, it looked more like a “team enablement application.”
I have to give 15Five a lot of credit for figuring this out early. Their platform, which has more than 3,000 customers and is growing at nearly triple-digit rates, is widely loved by managers. In fact when I talked with their customers most of the users said “we love this, we use it every day for our ongoing discussions, team management, and project alignment. Is it used by HR? Yes I think they use it too.” In other words, the center of gravity shifted.
Now that we have a world of highly agile work practices, people working on multiple projects with multiple leaders, and lots of gig workers in the company – we need this new breed of tools. So we’ve moved from a world of “top-down” performance management to “continuous performance management” to what I’d call “team-led or manager enabled” performance tools.
Where do all these vendors fit? Well this is a massive and fast-growing market (every company with more than 200 employees ends up using a tool like this), and the vendor market has changed. And I would not be surprised to see Microsoft and other vendors jump in.
Let me paint you the picture.
Traditional Performance Management
On the left column are the traditional vendors, many of which have added check-ins, OKRs (a form of goal management), development (Lattice Grow, for example), and pulse surveys. The convergence between performance management and feedback is now clear: companies want a tool that not only facilitates conversations, but also lets the company or leader sent surveys and get feedback, see results vs. other teams, and give managers suggestions.
Reflektiv, one of the early pioneers, was recently acquired by Learning Technologies Group as they failed to grow and execute on their plan. HighGround, another innovative vendor, was acquired by Kazoo (a rewards company) and is now sold as an integrated solution. BetterWorks, a company I’ve spent a lot of time with, is now one of the leaders in OKR-based performance management and recently acquired Hyphen, to round out its survey, feedback, and analytics.
Products like 15Five, Lattice, and BetterWorks have more advanced 9-box grids, for example. 15Five informs the succession process through types of feedback from others. BetterWorks can analyze feedback based on a variety of diversity measures. And Lattice introduced Grow, a development planning and career pathing system.
Manager Enablement or Team Management
In the second column we have tools that focus primarily on team and manager enablement, with HR features included. This group, which is led by 15Five, is growing like crazy. In fact the Pandemic has accelerated the need for team-enablement tools, and most of these systems are widely purchased by team leaders or CEOs, with HR coming along for the ride. 7Geese was recently acquired by Paycor (I always loved that company name), and Workboard, which was developed as an OKR platform, is now being sold primarily to business people.
In this segment, the 15Five story is important to understand. 15Five is now positioned in this white-hot “employee productivity” market where companies like Asana, Basecamp, Monday, and Trello reside. These platforms have become essential to fast-growing global companies and they fall somewhere between collaboration and project tools and HR performance tools.
Over time we will see these systems tightly integrated into Microsoft Teams, Slack, and Workplace by Facebook, and ultimately these become productivity and feedback tools for everyone. I would not be surprised to see Microsoft or Salesforce buy one of these vendors over time, and even Google (Google Workplace) may build or buy one too. Well-built HR platforms like HiBob have this functionality built-in.
By the way I left out ADP’s product Standout, which probably belongs here – this was another pioneering check-in tool but now that it’s owned by ADP it isn’t marketed as aggressively as the others.
The market for these two categories (the left two columns) is several billion dollars in size, as more and more mid-sized companies realize they just aren’t getting this kind of software from their core HR vendor. I also believe one of the reasons Workday acquired Peakon was to build out this kind of functionality.
Engagement, Feedback, Analytics
The third column is the multi-billion dollar market for survey tools, employee feedback platforms, and what Qualtrics calls “experience management.” This market, which includes Glint (owned by LinkedIn), the public companies Medallia and Qualtrics, and specialized vendors like Perceptyx, WillisTowersWatson, Peakon (Workday), and many more, is becoming a critical part of corporate infrastructure.
I have to give Qualtrics a lot of credit for marketing this space so well: their concept of “experience management” is right on. While I don’t think their toolset is as extensive as their product marketing, these platforms are a critical part of the “Continuous Feedback and Response” needs in companies, which I call Employee Engagement 4.0. (Our whitepaper explains.) Qualtrics alone is close to a $Billion company and I would guess that a third of this revenue comes from employee surveys and analytics.
These products are not performance management systems at all, but their signals and feedback are critical to this topic. When a team is unhappy or upset and survey results show problems, the data needs to be shared with managers immediately. This is what Glint is doing and this is why 15Five acquired Emplify, why BetterWorks acquired Hyphen, and why integrated feedback and performance is now the name of the game.
By the way, there’s more to come in this area. The startup Cultivate can watch and monitor your communications at work, giving you development tips on how to be a better manager. The tool then sends you nudges with simple recommendations like “maybe you should have meetings in the morning?”
Recognition and Rewards
The final part of this saga is the whole domain of rewards, recognition, and social rewards. This is also part of the puzzle. As much of our research points out, saying “thank you” is a huge part of performance. In fact, our studies found that companies with high-recognition cultures have 30% lower voluntary attrition, which is a significant finding.
This marketplace is similarly huge. Companies spend several hundred dollars a year per employee on rewards (anniversary pins, service awards, etc.) and this money is now being allocated to social recognition tools, points systems that can be redeemed for gifts, online Kudos (many of the performance vendors have “high-five” features), and social recognition systems. We implemented Achievers at my old company years ago and it became one of the most popular tools in the team.
Today this market, which is big and well established, is crossing into performance management and vendors like WorkHuman (formerly Globoforce) offer check-ins, conversations, and feedback as part of their platform. After all, recognition is a strong form of feedback, and Feedback is the Killer App. If you can encourage leaders and team members to give each other open feedback, nothing but good things will happen.
Where This Market Is Going.
This was a nascent, creative market for many years and few companies (other than SuccessFactors) were able to break out. That has all changed. Lattice is now valued at 1 $billion, and companies like 15Five, Lattice, CultureAmp, and others are all experiencing rapid growth. I just had a call with one of the biggest investment banks in the world (big Oracle shop) and they have implemented one of these tools just to get managers to have more regular conversations with their teams. So every company is working on this.
While we once believed the big HR vendors would own this space, it’s now clear that isn’t true. There is so much innovation and user design needed, these platforms are unique and powerful in their own special way. Avature, for example, is now a player with its highly configurable platform. So it’s time to look at these platforms carefully and decide if one fits your needs. Read HR Technology 2021: The Definitive Guide, for more.
I’ve written many articles on this topic, let me mention a few. Perhaps the most popular was my discussion The Myth of the Bell Curve. This article details why a “bell curve” for performance is really a limiting idea, and points out why an “enablement platform” is so much better than an “employee performance assessment” tool.
A second article is about “Becoming Your Best Self” which discusses 15Five’s approach – a model any company can use with or without their product.
The third I’d encourage you to read is “Feedback is the Killer App,” which teaches you why and how feedback is so important to company performance.
Finally, let me encourage you to join the Josh Bersin Academy. Our program Performance Management Reimagined starts on May 3, and you’ll learn all about this topic and can discuss with thousands of your best friends.