Market Overview

The size of the domestic cloud-based employee engagement survey and diagnostics was estimated at 9,100 million yen for 2023 and 11,130 million yen for 2024 (122.3% of the preceding year), based on the sales at service providers.

The market was fueled by the introduction of human capital information disclosure mandate starting in FY2022 (fiscal year ending March 31, 2023). As listed companies began incorporating a human capital management approach, many viewed the disclosure of engagement scores and employee turnover rates as a means of ensuring transparency for shareholders. Meanwhile, intensifying competition for talent and worsening staffing shortages have driven companies to strengthen employee engagement—essentially, to invest more in retention and talent development.

Noteworthy Topics

From “Monitoring” to “Driving Action”

In recent years, indications of a gradual yet perceptible shift have appeared in Japan’s employee engagement services market. Initially, while many companies increasingly recognized the importance of employee engagement and began adopting surveys and communication tools, only a limited number succeeded in linking these efforts to actionable measures for organizational transformation. The majority struggled to determine effective utilization frameworks, leaving data underused and insufficiently integrated into continuous improvement processes.

Today, employee engagement is evolving from a focus on measuring to one on driving improvements. Based on survey data, companies are identifying issues specific to each department, prioritizing action items, and providing feedback to managers. In addition, they are conducting one-on-one meetings, reviewing performance targets and training policies, and refining HR systems to better reflect employee feedback.

Companies are increasingly incorporating the PDCA cycle into human capital management practices. This shift has been accelerated by the intensifying competition in talent acquisition. Businesses are at stake for structural challenges, such as persistent labor shortages, recruiting difficulties, high turnover among younger employees, and the loss of expertise due to workforce aging. In response, employee engagement has evolved from being viewed as an optional “preferred” initiative to a pragmatic, “integral” component of management aimed at enhancing employee retention.

In the last few years, top management involvement in employee engagement has increased rapidly among enterprises including SMEs.  A growing number of employers recognizes employee engagement as a key  for employee retention and morale enhancement. Furthermore, external support from partners like financial institutions has encouraged hesitant companies by making system implementation more accessible.
Employee engagement is no longer a niche initiative limited to leading enterprises; the market for employee engagement systems has entered a phase where most companies are prepared to implement such solutions as part of their core business infrastructure.

Future Outlook

The domestic cloud-based employee engagement survey and diagnostics market  is projected to grow 20.4% to attain 13,404 million yen in 2025. The number of enterprises disclosing engagement score as HCM data is expected to increase by the end of FY2025 (ending on March 31, 2026). Unlisted companies are also pursuing organizational improvement by measuring employment engagement, particularly from the standpoint of employee retention.
Nevertheless, as observed in 2024, employee engagement systems are competing with talent management systems. Under these conditions, market growth is expected to remain at around the 20% level.

Research Outline