“A key role of senior management and Human Resources is helping the majority of employees see what’s right with change rather than what’s wrong.”
Marisa Harris, author, speaker, and former Vice President of Human Resources for CIT Group, Inc.
“Six economic sectors will account for as many as 85 percent of all new jobs in this decade: health care, business services, leisure and hospitality, construction, manufacturing, and retailing. Business services, for example, could create as many as 5.7million of them.”
“Assuming current trends, the United States will not have enough workers with the right education and training to fill the jobs likely to emerge. By 2020, there will be up to 1.5 million too few college graduates to meet demand — and 5.9 million more Americans without high school diplomas than employers can use.”
“40 percent of the executives whose companies plan to hire next year said they’ve had unfilled openings for six months or longer because they cannot find qualified applicants. The skill gap goes beyond the well-known shortages in technical fields; there are growing shortages of welders, nutritionists, nuclear technicians, and nursing aides, employers say.”1
When we interview executives, we are often told that people dislike change. They much prefer the status quo. If so, consider the following:
You get the picture. People do not resist change when they perceive it to be an attractive opportunity or better than the status quo. People resist change when they think it will be risky or will threaten their comfort zone or will not be worth the effort. This is when fear can kick in, and you ask what if:
These are the types of questions we explicitly discuss with close friends or mull over privately. Scientists have identified chemical responses in our brains that go back to our early days as humans: flight or fight responses that quickly trigger defense mechanisms designed to avoid threats or potential pain. As David Rock and a number of neuroscientists have discovered, this response does not have to involve physical pain. Psychological and social pain triggers chemical responses in our brains similar to those triggered by physical pain, leading to avoidance behavior or attempts to prevent changes that threaten our lifestyle.6
In spite of such chemical-alert flags, nearly half the senior executives whom we have interviewed in preparing this book were proponents of taking more risks along life’s path. Most of these executives said they would advise a son or daughter to take more risks early in life, more than they had personally taken. They shared cautionary tales about times when they had stagnated or were nearly sidetracked because they did not take opportunities that involved some amount of risk. In contrast, they became almost euphoric about epiphanies they had experienced when they had taken a reasonable risk and developed professionally as a result of the experience, even when such events did not always feel positive in the moment.
Why Discuss Change?
If we are going to respond to the talent challenges and changing assumptions about talent covered in the last chapter, we have to be fully equipped to help our organizations — and ourselves — adapt more rapidly in this uncertain new marketplace. We must overcome the fear of the unknown and equip ourselves with better tools to manage in this environment. Change is the new normal.
Managers do not adapt fast enough to ensure that their organizations thrive, or even survive, in the new economy. The global marketplace has by now arrived in your town, and it is challenging almost every traditional assumption about work and in many cases about family, friends, technology, and personal lifestyle. In this book, I focus on the world of work, where most of us spend over 50 percent of our waking hours.
If you doubt the impact of this new global marketplace on the world of work, consider the following:
Talent Trends to Watch
In my earlier book, Reinventing Talent Management, I discussed 10 global trends that are changing the world of work (see Table 2.1 for a capsule summary of those trends). All 10 trends have continued despite the recent recession and are even more likely to influence the importance of people to business performance in the next decade.
Table 2.1 Thumbnails of 10 Trends to Watch
| Trend 1: Global Competition. With global barriers coming down and technological reach expanding, there are far more suppliers offering more products than customers can consume. Many businesses will survive based on their ability to differentiate their value in a cluttered marketplace characterized by new forms of competition. |
| Trend 2: An Uncertain Labor Supply. In the past decade, labor supply and demand curves have crossed in many occupations and regions. In some regions, there is an abundance of labor but not necessarily suited to the demand. In others, there are shortages because countries, cultures, or regions simply have not had the birth rates to fuel labor growth. Beginning in 2008, a global recession led to downsizing of workers in many areas, creating high unemployment and surplus workers. While some demographers predict severe labor shortages by 2015 in industrialized countries, others share the view that prolonged economic weaknesses and technological substitution will abate this risk. |
| Trend 3: Uneven Distribution of Talent Niche shortages are likely to appear in the near-term. Some places like Hawaii, jobs such as nursing, and industries like high tech and energy have been struggling to find the right talent for many years. Emerging industries like “green” technology are desperately seeking talent in fields like wind and solar power, bio-ecology, marine food harvesting, and clean energy. |
| Trend 4: Managing Diverse Workforces in Diverse Places. Demographic trends also will change substantially the look and behavior of our workforce. Organizations progressively employ individuals all over the world (e.g., various religions, languages, nationalities, races, cultures). Generational differences are a specific form of diversity that will challenge current and future leaders. |
| Trend 5: Skill and Mind Shifts. Skilled jobs are being deployed to lower-cost locations, and critical remaining ones will need to be staffed and managed in different ways. A large number of emerging job opportunities will include roles and tasks that are not capable of being reengineered or outsourced abroad such as tasks requiring on-site services. |
| Trend 6: Technology. Over the past decade much progress has taken place in the development of better databases and connectivity that allows organizations and individuals to connect personal and work preferences, demographic information, performance data, benefit preferences, customer ratings, safety, and a host of other valuable information. Technology is also a substitute for labor in jobs that are repetitive and formulaic. If it can be automated, it will! |
| Trend 7: Leadership Succession Gaps. Many organizations are already suffering from a lack of top leadership talent, and this gap will only increase in the upcoming years. The heightened level of competition for leadership talent will be a great advantage for free agents, but will prove increasingly cost prohibitive for organizations and their shareholders. |
| Trend 8: The Cost of Talent Mistakes Are Growing. As strategic talent becomes scarcer in many industries and jobs, and as human capital becomes a larger portion of overall corporate assets in many industries, the cost of talent mistakes are more important to the bottom line. The quality of selection processes, onboarding, training, developing, and coaching talent will be crucial to retaining it. Also, when workforces shrink to bare bones minimums, the cost of keeping low engaged, misaligned, or insufficiently skilled workers is unsustainable. |
| Trend 9: Paucity of Human Capital Measures. Many organizations are lacking good people measures on their balance sheets. When measures do exist for an organization’s talent, they are often tactical and rearview metrics that do not adequately capture the value of the workforce or predict important business outcomes. In order to manage talent well, leaders will need to understand how to measure talent more effectively. |
| Trend 10: Low Readiness for Change. There is no doubt that we are in a period of much higher uncertainty and risk today than in the last five decades. Few organizations are sufficiently prepared for the talent challenges that face them. Managing transformation and building agile organizations have now become essential to survival because change is ubiquitous. |
Given the enormity of the global changes that have taken place in the years since Reinventing Talent Management was published, I will discuss five themes — economics, globalization, technology, generational diversity, and networking — that integrate and update some of the trends that were discussed in the prior book. Although several other trends listed in Table 2.1, such as weak talent metrics, scarce leadership bench strength, and readiness for change, are significant, they were covered in Reinventing Talent Management. Each of the following themes has serious implications for talent optimization.
Economics
In the long run economics prevail over most other forces, even political ideologies. Communism imploded largely because it was not viable economically; people cannot live in squalor indefinitely when others have more inviting life-styles. Authoritarian governments in the Middle East have begun to crumble — consider the dramatic changes in countries such as Egypt and Libya, where people are looking for decent jobs and a higher standard of living, in addition to political freedom. The world continues to have an expanding population with far more suppliers than buyers. These strains put enormous pressure on suppliers, such as your company or government, to produce value or face a dim future, if not obliteration.
The recession further exacerbated the imbalance of suppliers and customers. New businesses sprang up as individuals lost jobs due to corporate downsizing and became entrepreneurs. Firms that were stable in a robust economy, such as the bookseller Borders, went belly up in the face of shrinking margins and more intense competition, sometimes from unanticipated directions. Because many firms are desperate to find and retain customers, buyers have more options. It now requires more ingenuity to attract and keep customers.
A reverse supply and demand curve is also taking place in certain labor markets. For example, a worldwide shortage of science and engineering majors is leading to enormous competition to find these skills, especially in certain disciplines such as chemical engineering or geology. Computer programmers and systems analysts are also in short supply. Many regions face shortages of critical care nurses and other medical specialties as lifetime expectancies increase in developed countries or access to medical personnel is scant in developing countries.
Today, with decreasing birthrates in most industrialized nations, fewer workers will likely support an aging and longer-living population. Demographers tell us that it is just a matter of time before we run into overall labor shortages by region, as well as by specific talent. Areas of India will have excess manual labor for a long time, while getting someone to mow your lawn in Hawaii or shovel your snow in Switzerland may be impossible.
Globalization
Globalization continues to accelerate the pressure to produce value. Trade agreements, reduced tariffs, and instant communications mean that competitors can come from anywhere, bringing their unique differentiations, including cost. That is why your firm or your function may be outsourced to India, China, Malaysia, or to another supplier across the street. And if you are an Indian firm, you are now facing the increasing likelihood that something you do may be done more cost-effectively in China, Thailand, or Africa. Globalization has put organizations around the world on the same competitive plane — something that has never occurred on this scale in the history of the human race.
And with globalization, talent is now coming from many more places around the globe than was true even a decade ago. New economies are taking a center stage in talent supply and in competing for the top talent that is always in too-short supply. While the United States, Western Europe, and Japan dominated the talent space for many years, the BRIC countries (Brazil, Russia, India, and China) are now strong competitors for leading skills.
Talent distribution has become a significant human capital challenge. How do we convince nurses or chemical engineers to move from weaker economic regions to stronger ones, when they cannot afford the real estate trade-ups or the cost of living? Also, for personal or family reasons, many employees are strongly committed to a particular region such as Hamburg, Germany, and do not want to leave a six-generation community or church for perhaps a nicer job in Bavaria. We have capable talent in the overall global talent pool, but it may not be where we need it.
Technology
Technology continues to replace repetitive tasks. Decision automation may be one of the reasons that companies have rebounded from the last recession to profitability highs without having to rehire. Computers are increasingly replacing white-collar jobs by making decisions faster and often better. Look at the drubbing of two of the best human contestants on the TV game show “Jeopardy!” by Watson, an IBM computer. One of the most impressive things about Watson is that it has a good sense of the likelihood that its judgments are correct. This feature would enable it to respond directly to questions when it knows the answers but to call a human when its uncertainty is high. Watson’s abilities may be a real threat to phone support personnel. IBM teamed up with Wellpoint in fall 2011 to bring Watson’s skills to medical teams for diagnosis and selection of treatment options for complex health issues — an electronic version of TV’s Dr. House!18
IBM is using computers to decide how to staff consulting teams, and Intel is doing the same to restructure its manufacturing teams. UPS and several pharmaceutical companies are using computer decision making to position and deploy their sales forces. There is even a program that can take a baseball game box score and write an article about the game. So even writers may be at risk — unthinkable just a few years ago when judgment and decision making seemed beyond the purview of computers.
However, computers remain behind humans when it comes to ingenuity and high-touch skills. As a result, the specific talent required is becoming redefined. Scientists, creative people, artists, managers, HR professionals, and high-touch professionals, such as MRI technicians, nurses, massage therapists, plumbers, dog groomers, and landscapers, will continue to be in demand while any profession that can be automated, such as schedulers, bank loan officers, actuaries, and tax reviewers, will not.
Generational Diversity
Diversity continues to be an important trend — not only in the traditional usage of personal demographics — but culturally and gen-erationally as well. Senior executives interviewed for the book were quite concerned about generational shifts, and with them, about the different requirements to attract, develop, and retain talent. Baby Boomers continue to retire, although perhaps at a slower rate as a result of damaged investment plans. Although their exodus may have slowed, one talent implication is that organizational knowledge is being lost and must be recovered or replaced. Furthermore, given Baby Boomers’ shattered expectations for the future, a valid question is whether they are as aligned and engaged with their organizations as they were before the downturn.
The last several years have seen the emergence of Generation Y in the workforce with different expectations, skills, and perhaps drivers of Engagement. This generation grew up with computers and other advanced media and has made multitasking an art form. Try e-mailing your Millennial niece, nephew, son, or daughter. Forget it! E-mail is already a legacy system for them. For Baby Boomers, it was a new technology to be mastered! By the time this book is published, we may be well beyond IM and SMS. However, this media-gifted generation is often viewed as less balanced in their skills and abilities, with overall verbal and math skills shrinking to new lows in the United States. This reality is causing many organizations to jump into the education business, training for basic writing, language, and math skills.
I think it is important not to impute characteristics to this generation that are simply a function of life stage — not indelible markers that will remain fixed as they age. Baby Boomers are not behaving today in the same way they did during the Vietnam or Cold Wars. They had causes, wanted to change the world, had their own music, embraced new media (television), experimented with new social mores (drugs, free love), and were distrustful of established institutions and political systems. Sound familiar? All generations, in their early years, are typically more idealistic, perceive themselves to be unique (and therefore need identity symbols), and are at a different life stage before they have families, elderly or sick parents, and established careers. We must recognize this continuing flow of newcomers not so much as a generation but as fresh talent that will bring diverse ideas and a different skill mix to the table.
Many in this new generation of workers have not had an opportunity to work, at least not in jobs they had planned for. With the economic recession and high unemployment in many countries, many young people have struggled to obtain even rudimentary employment. This problem has shocked a generation that many believe has been “coddled” like no other before it. While they bring welcomed technology skills, will their engagement be as high as other generations when they enter corporations? Or will they even enter corporations, or eschew the structure and bureaucracy that accompanies most large organizations?
As Baby Boomers retire over the next 10-15 years, members of the younger generations will have more choices and more clout because, for the first time since the Industrial Revolution, the size of the labor pool is shrinking relative to the world’s population. They are on the reverse side of the supply and demand curve. As economic conditions improve, they will increasingly become a more limited resource that will be able to bargain in earnest for their brains and brawn. Coupled with the increase of job substitution by computers — remember Watson? — they will also have a stronger voice because they will represent a higher percentage of shrinking workforces. Having a problem with five out of two hundred employees is less of an issue than when you have problems with five out of only 50 people, where they represent one in ten. This may have implications for collective bargaining or alternative work structures (for example, individual entrepreneurs, growth of smaller firms, professional cooperatives) as this group grows proportionately in the workforce.
Networking
Social architecture is evolving in new ways. Social networking is becoming the default way of connecting to family, friends, colleagues, alumni, business associates, interest groups, and organizations of all types. Facebook, LinkedIn, Twitter, and Google+, as well as many others, have connected people in new ways.19 The first three companies had over one billion registered users as of August 2011, and Google+ added 20 million users in its first few months. A number of organizations have begun to tap these incredible networking mechanisms to identify, select, and retain talent, while others continue to place ads in traditional places, seldom seen by the new connected generation.
Organizations are becoming more enlightened regarding the power of informal networks within their organizations. Borrowing from the fields of anthropology, sociology, and mathematics, organizations are just beginning to tap the enormous potential of knowledge and influence in these networks. For example, Karen Stephenson, an expert in the field of social capital analysis, tells me that organizational transformation can be effectively accomplished by identifying and engaging the “right” 5 percent of the workforce in the early stages of the transformation. Think about the implications of this for a merger or other transformative need.
Networks are not only social but provide the informal information highway for technical and business knowledge, decisions, and resources. Not all employees with the same resume are alike; when highly connected, well-trusted, networked individuals leave, their departure can be far more devastating to the organization than when someone with an equivalent resume but few connections leaves.
These trends suggest that to survive organizations will need not only to continue to increase the productivity of their workforce but to do so smartly, employing approaches different from those they may have used in the past. For those firms that do, the change is likely to be wondrous, offering new opportunities. For those that do not, the future is likely to be a long and painful road to disappointment.
Getting a Grip on Our Own Thinking
Even if we understand the exponential increasing changes that are taking place, one of the biggest challenges is our own thinking and habits.20 While most of the leaders we spoke with focus on the criticality of talent in their game plans, they struggle with how to best maximize their talent investment, given the trends and challenges of the new marketplace. Many organizations are still caught in legacy systems and traditional thinking. There are frequent cultural challenges as well, such as “not invented here” or antiquated beliefs that inhibit adaptation. To cite several prevalent examples, many organizations still widely believe that performance must be managed on a bell-shaped curve, that succession planning should be started early, that the talent faucet can be turned on as needed, that departing employees should not be rehired, or that outsourcing always reduces cost. Such ideas are holding many organizations back from their full potential.
A further challenge for most organizations is managing fundamental discontinuous change. Global telecommunications giants such as Verizon and AT&T, having moved from a regulated environment to a highly competitive one, must change their cultures to compete with — or perhaps partner with — high-tech organizations that are increasingly competing for their customers and product space. Few organizations are good at managing change despite the overabundance of books written on the subject. Many still view change as an event, or series of events, rather than a continuous process or a way of life. Even today change is more often thrust upon leaders and employees than managed or guided by them.
Those who have not changed sufficiently fast are typically acquired or go belly up. Borders, a retail book seller, is a recent case in point. The company proved unable to change as rapidly as needed to compete with Amazon and Barnes & Noble. Many of the leaders we interviewed were frustrated with this aspect of their organizational performance. It is time to recognize that change will be constant, that its rate will accelerate, and that smart organizations continue to build adaptability into the organizational mindset.
Taking the Reins
Understanding the global forces that buffet organizations and individuals today, along with the hopes and fears surrounding change, provides a context for going about the urgent task of transforming our thinking about talent management. With this groundwork laid, we can now drill deeper into the issue of talent optimization by identifying its very DNA, which is made up of the three People Equity factors of Alignment, Capabilities, and Engagement.
Based on the feedback of numerous executives, HR leaders, and researchers, the People Equity framework that we explore next is seen as more strategic, but also a simpler way to think about, leverage, and manage talent. As is true in the field of genomics, by understanding the cellular building blocks of talent, it becomes possible to recombine them in new configurations relevant to different strategies in different industries in different regions. Understand the DNA of talent, and you can measure and manage the factors that are most relevant in your business. Whether you are experiencing hyper-growth in Shanghai or Bangalore, driving innovation at a research center in Silicon Valley, managing a not-for-profit or government agency, merging two organizations, or restructuring businesses in tough economic markets, you will be equipped to optimize your talent.
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