For a perspective on this study, click to the EEA blog.
Despite being part of the business conversation for about a decade with little change in employee engagement statistics over that time, the employee engagement marketplace is in “early stage” with “huge” potential, according to the 2016 Starr Conspiracy Employee Vendor Brandscape report evaluating the marketplace and companies considered to be market leaders. The report is free and appears immediately on your screen following a brief registration process.
The Starr Conspiracy describes itself as “a strategic marketing and advertising agency dedicated to enterprise software and services companies.” Its Intelligence Unit provides market reports in the area of human resources technology.
According to the report, “The value of employee engagement in our minds is reinforced by one simple point: Employee engagement has become the global CEO dashboard metric for the state of the workforce. Why? Engaged employees and workforces correlate with an organization’s myriad strategic priorities: lower voluntary turnover, higher revenue per employee and lower customer churn, to name only a few. The rise of employee engagement corresponds with a new phase of the HR technology market over the past few years, a phase that we at The Starr Conspiracy call HCM 2.0.
Capital Management 2.0, the report states, describes the shift from the old model of “automation rather than innovation…process efficiency rather than transformation…and a top-down flow of information,” to “a focus on innovation, not automation…a flow of information that moves in all directions, not just from the top down…and a design for the 21st Century workforce”…“solutions [that] are designed based on how work actually gets done in today’s marketplace: mobile, social, collaborative, employee-centric and focused on delivering strategic value.
The authors note that, “many disparate categories within HR technology are battling for the attention of the employee engagement buyer: recognition, engagement measurement, wellness, next-generation learning and talent management, talent acquisition and assessments, workforce analytics, benefits and even employee communications. We believe that as employee engagement platforms emerge, they will incorporate some, if not all, of these solutions. Early attempts at a platform play are already emerging.” The best technology, the authors say, will provide an “engagement platform” that integrates all of the key engagement processes through a single interface.
For the purposes of this study, the authors break the industry into three components: recognition, wellness and engagement measurement – although they also acknowledge many other areas of the field, including all areas of talent management, rewards, culture activation and management, rewards and perquisites. Combined, the report estimates, the recognition, wellness and measurement businesses are the largest components, totaling nearly $50 billion in sales, with market penetration highest among recognition and wellness companies and much less in engagement measurement, where the authors see the largest growth opportunity.
So how could such established businesses be called “early stage”? The authors state that “The categories of recognition, measurement and wellness and well-being are changing rapidly. They’re moving from business models driven by services and merchandise to models driven by software and technology. This shift stimulates much of the unrest in these categories today. New players are getting traction with software-first or software-only approaches. Established players are playing catch-up – and in some cases are being left behind.
The authors are extremely bullish on the employee engagement market. “Within the $55 billion addressable market opportunity in recognition, wellness/well-being and measurement, we predict plenty of cannibalization, cross-pollination and growth. For smaller market share players, 100% year-over-year growth will be the minimum. For the largest competitive players, 15% to 20% growth will be possible. Explosive growth will be the rule, with an average compound annual growth rate of 12% to 15% for all players.” The authors believe measurement solutions have the biggest opportunities for growth. “Next-generation measurement solutions will deploy recognition, 360-degree feedback, goal management and career pathing tools to try to steal budget and market share from talent management and recognition budget buckets. As a result, we believe that the total addressable market for the measurement category could increase as much as 10-fold within three years.
The report ranks the companies it defines as market leaders in each key category. They put Sodexo Benefits and Award Services, O.C. Tanner and BI Worldwide at the top in recognition; Fitbit, Virgin Pulse and Healthways as the leaders in wellness; and Willis Towers Watson, Aon Hewitt and Gallup as leaders in engagement measurement. In all marketplaces, the leading companies have less than 50% of the total market.
The authors identify additional trends in each of the market categories, as well as the companies they think are gaining or losing traction. For all of the details, go to the Starr Conspiracy blog.