Ventana Research Analyst Perspectives

There is a sea change happening in the Human Capital Management systems market. Historically, the predominant orientation of human resources departments has been about mission and goals from an employer’s perspective, spanning areas such as regulatory compliance, workforce costs, efficiency and effectiveness levels, and actions needed to improve skills and overall impact. This rather one-sided focus is now in the rearview mirror of many successful organizations. There’s a new orientation or operating lens as it relates to the enterprise’s workforce: “What does a worker need to be extremely effective but also have a high-quality ̶ if not positively memorable ̶ experience at work?”

At Ventana Research, we believe HCM is a mindset where the entire enterprise owns responsibility for maximizing value and competitive advantage from its workforce. Elevating the employee experience is foundational to this mission. This is why the employee experience and considerations around delivering a superior EX, in particular, have been a major focus in my research and writing. HCM systems and innovative capabilities for delivering a superior employee experience are also a major component of my 2021 market research agenda.

There’s a simple reason I emphasize this topic: A great employee experience materially contributes to a great customer experience, and customers that have terrific experiences usually remain customers and become ambassadors of the brand. An EX-focused HCM strategy can ensure employees are employer brand ambassadors. Knowing that their needs, interests and goals (aka their agendas) are being truly valued by the organization is a solid starting point on the journey to a superior EX, but it extends beyond that. The totality of experience is considered ̶ it’s not just about using technology.

In late 2019, HCM software vendor SAP SuccessFactors announced a new and fairly unique product direction and market positioning called Human Experience Management ̶ or HXM. SAP SuccessFactors sees HXM shifting the focus from supporting traditional HR processes to delivering experiences that serve employees first and, as a result, serve the business better. HR process optimization is not being left behind but rather expanded in scope. The HXM product vision and strategy encompasses what team members are feeling, thinking about and doing at work ̶ both daily and during pivotal moments for them or the organization ̶ that influences their contribution and engagement levels, which naturally impacts the enterprise.

HXM uses tools and capabilities that noninvasively and in anonymized fashion “listen” to employee needs and concerns, including through very targeted and condition-driven pulse surveys coupled with alerts and recommended actions going to appropriate leaders. A range of other capabilities are also designed to enhance job satisfaction, accelerate career growth and clarity via individualized learning and development plans, and actually achieve major personalization across the entire employee journey. There are myriad opportunities for HR technology as employees traverse their unique journey with an enterprise. The ability to personalize at scale is obviously a machine learning phenomenon, but it’s also important to note another key HXM platform underpinning: The ability to gather, combine and analyze employee experience data ̶ or “X data” ̶ with operational or “O” data. The vendor deserves credit for promoting this concept within the HCM software market and demonstrating its value to organizations.

HXM is all about turning intelligence regarding what's going on with employees into actionable guidance for all relevant stakeholders, leading to improved business outcomes. The notion of listening and reacting to employees and managers via smart but noninvasive technology is a capability area I expect will receive substantially increased investment as we come out of an extremely challenging period. At Ventana Research, we see HXM as a vehicle for ensuring each employee’s work experience is contributing to their engagement, retention, productivity and value creation.

Incidentally, the fact that SAP recently took its acquired Qualtrics survey platform company public is confirmation of the demand for tools that can tap into the sentiments and behaviors of the workforce, customers and any other constituencies. We assert that, by 2023, most enterprise-grade employee survey tools will feature targeted and auto-generated follow-on questions that enable greater employee experience insight. Listening to employees also yields another significant organizational benefit: These technology investments invariably contribute to better organizational agility by virtue of being out in front of both business risks and business opportunities emanating from or affecting the workforce.

SAP SuccessFactors has been transitioning to this new refined market position in HXM for the past two years. New positioning often gets formed by either adapting existing offerings into a new framework with commonly understood characteristics and capabilities for demonstrably driving customer value, or by designing and building approaches from the ground up. SAP SuccessFactors’ HXM journey might have taken a combination of both paths but it has clearly been amassing market validation points. As of this writing, it has several marquee customers willing to embrace this new HXM product vision, possibly because previous investments in HR technology didn’t help them achieve their most strategic HCM goals.

One piece of guidance I would offer to organizations considering adopting and investing in the HXM product vision and strategy from SAP: Ensure that the organization is ready to optimally and fairly react to workforce cues, signals and triggers that indicate some action or attention is needed to achieve better results. The organization must also be ready to embrace the notion of large-scale personalization efforts. What may seem totally logical as a new operating model or approach still needs effective change management and syndication of the idea, as well as clarity around how the employee experience and people management approaches will change.