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3 Ways People Analytics Technology Is Evolving to Meet the Moment

May 17, 2022 Talent Management
Priyanka Mehrotra of RedThread Research
By Priyanka Mehrotra, Stacia Sherman Garr LinkedIn

People analytics technology is being talked about everywhere, whether it be fear-mongering stories about the tracking of employees at Wall Street banks or more tame articles about how monitoring employees became “the new normal” during the pandemic.

The reality is that people analytics technology — defined as any technology designed intentionally to collect and use people data — helped many organizations make better decisions during the pandemic and through this return-to-office phase of work.

RedThread Research chart on growth of people analytics technology market
Fig. 1: People Analytics Technology Market Size, 2016-2022PHOTO: RedThread Research, 2022.

Given the criticality of this technology to making important people management and business decisions, we have focused on studying the growth and evolution of this market for the last three years at RedThread Research.

The result is the release of the findings from our latest study, People Analytics Technology 2022.

The headline: In 2021, the market reached its largest size yet, at over $3 billion, with a 53% growth rate for 2020-21, and 80% compound annual growth rate (CAGR) for the past five years (Fig. 1). Vendors indicated that growth was driven by both new customers and established customers who expanded their user base.

Companies are investing in people analytics now more than ever before. Their needs, driven by the uncertainty and volatility of the pandemic, have evolved over the past two years. People analytics technology vendors are delivering on those needs in three ways:

1. Employee Engagement and Experience

Employee engagement and experience were top priorities for companies during the pandemic and the vendors continued to double down on them. According to our research, the largest vendor category (42%) serves the employee engagement, experience and voice of the employee space. This category was the dominant category in 2020 as well, with 34% of vendors focused on it (Fig. 2).

RedThread Research graph showing size of people analytics technology categories
Fig. 2: People Analytics Technology Vendor Categories, 2021 vs. 2020PHOTO: RedThread Research, 2022

2. Addressing Practitioner Data Challenges

In 2021, employers continued to require data on employees to understand and improve their well-being, engagement and experience at work. They also needed additional data to understand the broader context around the causes behind employee dissatisfaction and attrition. Increasingly this has meant looking beyond HR data.

Conversations with vendors along with the results of the survey revealed that vendors helped customers meet their data challenges in 2021. That data indicates that vendors are focusing more on:

  • Collecting and connecting disparate internal organizational data (e.g., sales, CRM, learning data) as well as external data (e.g., labor market, social media data).
  • Combining active data collected directly from employees with passive data such as metadata or data from collaboration tools, such as Slack or Teams.

This greater focus on data capabilities also showed up when we asked vendors about their differentiating capabilities. In 2020, vendors focused on setting themselves apart based on their domain expertise and methodology. In 2021, they looked to differentiate themselves by providing capabilities around data integration, collection and engineering (Fig. 3).

RedThread Research chart on changes in people analytics technology capabilities 2020 vs. 2021
Fig. 3: Changes in Primary People Analytics Technology CapabilitiesPHOTO: RedThread Research, 2022

We also heard from several vendors who are offering data-as-a-service capabilities. These allow people analytics practitioners to bring together disparate data within one tool, create a consistent data stream, and export it to a data lake or run additional analysis on the tool of their choice, such as Tableau and Power BI.

While this is great news for professionals deeply involved in people analytics, vendors also need to think about delivering capabilities that target other users such as business, HR and people leaders. Few vendors are doing that.

Our data revealed that while 93% of vendors currently focus on people analytics professionals as their primary end user, barely half of them report business and people leaders as current users of their tools.

3. Making Business Changes to Address Customer Needs

People analytics technology vendors have also made changes to their approach and business to meet customer needs. Our research indicated that:

  • About half of the vendors have adjusted their products, roadmap and/or marketing strategy to meet the needs of the changed 2022 environment.
  • More than 30% of vendors are offering greater technical and administrative support as well as resources to customers as part of their subscription.
  • Nearly a quarter (23%) of vendors have changed their sales and pricing model.

Those aren't the only changes afoot. Our briefings with vendors also revealed they are actively engaging with the wider customer community to understand emerging issues and working to help customers solve them through better data capabilities, partnerships and expansion into other talent areas.

As customers face more nuanced challenges while navigating the complexities of hybrid work, we expect to see more vendors make such business changes.

What Should Buyers Be Thinking About?

While it is certainly good news for companies that vendors are thinking and proactively solving their needs, there are a few things organizations looking to purchase people analytics technology should consider when selecting a tool that works for them:

  1. Support provided by the vendor. This will change depending on where an organization is in their people analytics journey but, nevertheless, it is important to have a clear understanding of the additional support a vendor can provide besides technology. Over 30% of vendors said they conduct monthly check-ins with their customers and provide people analytics-specific collective/community intelligence, such as access to forums and group events. The latter can be particularly helpful for organizations just starting on their people analytics journey to learn from others about different use cases.
  2. Approach to data ethics, privacy and security. Most vendors that participated in our study have a strong approach to data ethics and security. Over 70% of them report designing guidelines and policies for data collection, access and insight sharing. The majority of them (78%) also help customers align their key stakeholders around those same issues.

The complimentary executive summary of the people analytics study will soon be followed by a more detailed member-only report, as well as an updated People Analytics Technology Tool and a related webinar on July 13, 2022. 

About the Authors

Priyanka Mehrotra is a senior analyst at RedThread Research, where she studies human capital management and people analytics.

Stacia Sherman Garr is co-founder and principal analyst at RedThread Research and a thought leader on talent management, leadership, diversity and inclusion, people analytics and HR technology.

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