A few years ago, an entrepreneurial group within payroll and workforce management giant ADP formed to develop a leadership software system backed by machine learning and guided by employees' frank feedback to their bosses.
The product they developed was infused with insights from behavioral economics. Named Compass, it was aimed at employees and managers at medium-sized and large businesses who wanted an automated, more affordable version of collaboration and professional training and life coaching.
Based on that most ubiquitous of workplace mediums, email, Compass starts with employee surveys about their direct managers.
Anonymous and confidential
The anonymous, confidential feedback is fed into machine learning algorithms that produce individually customized recommendations for the supervisors, accompanied by a flow of coaching and leadership development content.
The software, fairly simple and, by design, narrow in scope, won one of Human Resource Executive magazine's top 10 HR product of the year awards for 2017. ADP calls it a "talent activation" system.
Jerome Gouvernel, vice president and general manager of TalentX, a unit of ADP Ventures and chief overseer of the Compass project, said the system is designed to accommodate leadership styles within differing workplace cultures.
"When it comes to dealing with people, culture is huge," Gouvernel said. "What is desirable in terms of managing people's performance and leadership development will continue to vary from industry to industry, company to company, because it's very much aligned to culture."
ADP commissions new project
ADP already had in its portfolio a performance coaching system that came with its 2017 acquisition of The Marcus Buckingham Company, but Compass was commissioned as a new project by ADP's chief of HR.
"He said, 'Figure something out,'" Gouvernel said. "'I want to help people grow. I want to know who are my good leaders and retain the good ones, and where I have gaps.'"
Gouvernel said a central problem of HR tech is getting people to engage with talent management systems; Compass approaches this dilemma by enticing managers with "selfish" motives, the desire to improve as leaders.
First, ADP tried the app on itself, at workplaces in 23 countries.
"That's how we know it works," Gouvernel said.
ADP looks to behavioral economist
To build the leadership software, Gouvernel tapped Jordan Birnbaum, a former serial entrepreneur and finance industry executive who is now a vice president and chief behavioral economist at ADP Ventures.
Birnbaum, a founder of Juno, a free email service from the 1990s, noted that email -- despite gripes -- is still the most widely used workplace communication medium. (ADP is also building a text version.)
The Compass undertaking began as a way to create a more "feedback-rich" work environment at ADP, Birnbaum said. In looking at ways to create leadership software to do that, the Compass group looked closely at what influences employee engagement the most.
"The two things that are most impactful in determining employee engagement are the dynamics with a leader and the dynamics with peers," Birnbaum said.
A typical Compass assessment relies on a set of hard metrics about such workplace concerns as whether an employee feels recognized. That information is shared with the group leader, though not with the HR department, or the leader's boss.
"Research has shown that keeping the information confidential boosts development," Birnbaum said.
When the assessment information is aggregated and fed back to the leader, it is expressed positively, rather than in language likely to make the manager defensive.
"We're putting ourselves in a position to get the buy-in upfront instead of putting someone on their heels," Birnbaum said.
Financial services firm values coaching
The Bethesda, Md., company, Stone Street Capital, a Compass beta user that is planning on becoming a subscriber to the SaaS product, is finding good results with the leadership software.
"I was looking for any kind of internal HR feedback, 360-degree review kind of stuff," said Gary Milwit, president and COO of the 55-employee financial services firm. "I was most intrigued by how people in a company could evaluate their managers without having to be identified, and more importantly, I, as the president of the company, could not see any of the results."
Gary Milwitpresident and COO, Stone Street Capital
"It was the most pure form of feedback I'd ever seen," Milwit said. "It works because the people getting the feedback really want it and want to get better. Or they don't want to get better. For us, it was eye-opening. I got reviewed just like everybody else."
Most Stone Street managers participated in the first Compass assessment round in the second quarter of 2017.
Another round followed the next quarter and Stone Street is doing another assessment and coaching cycle in March 2018, using an updated version of Compass that Milwit said incorporates some of his company's suggestions for improving usability.
Coaching for development: Market opportunity
Another favorable review comes from Cliff Stevenson, an HR tech analyst at the Brandon Hall Group, who's looked at the Compass leadership software. ADP is not a Brandon Hall client.
The coaching aspect is significant because that kind of professional leadership support has generally only been accessible to big companies, Stevenson said, adding that the Compass system and products like it make it affordable to smaller organizations.
Brandon Hall's performance management research shows that coaching for development is one of the most critical factors affecting future manager success, indicating that the market for leadership software is substantial.
"What the system really does is it helps managers by sort of directing them and prescribing actions they need to do," Stevenson said. "It's based on workforce needs. We don't really have time to do these analytics ourselves, so using machine learning and algorithms to identify what's working and personalizing it makes it a powerful tool."
While ADP was an early entrant in this niche, with Compass, it is not the only player, Stevenson noted.
Big HCM vendors such as Ultimate Software and Ceridian also are making moves in the machine learning-backed leadership coaching and collaboration space, and independents like Zugata also are succeeding in this emerging market.