Episode Transcript
[00:00:00] Speaker A: Good morning, everyone. It's the end of February, and we're well into the rise of the super worker and AI throughout our companies. So what I'd like to do is give you some anecdotes of the conversations I've been having this week with four or five very large companies about their AI transformations and their organizational transformations. And, you know, I don't want to generalize what's going on in the world.
[00:00:27] Speaker B: But I will say there seems to.
[00:00:29] Speaker A: Be a big theme in most of the larger organizations we talk to, and that is simplifying the company, reducing bureaucracy, finding ways to improve productivity, and implement AI in the goal of reducing overhead and bureaucracy. And I think one of the things that's driving this is not just that the fact that the economy is slowing down and we have all these wonderful, incredible AI tools, but also, to be honest, the stories we're getting from the federal government and Elon Musk on this relentless effort in the United States to cut, cut, cut to try to improve the productivity of our federal government here, which unfortunately is taking place through, you know, anecdotes and stories and lots of unclear communications. But nevertheless, the theory that we can lay people off to improve productivity is being borne out and tested. Now, I would say that when I talk to companies about this, we generally have four different scenarios. The first scenario is, and by the way, one of the things I say.
[00:01:39] Speaker B: To them, before we even get into.
[00:01:40] Speaker A: The details, is, why are you doing this? What are you trying to accomplish? And I think that's really important because.
[00:01:48] Speaker B: Simplifying the company, reducing overhead, eliminating bureaucracy.
[00:01:52] Speaker A: Improving productivity is great for everybody. But to what end? Are you trying to grow faster? Are you trying to reduce expenses? Are you trying to get products out the door faster? Are you trying to move into new markets? Are you trying to finish a merger and acquisition? There are many business drivers behind this productivity mantra. And simply saying we want to be productive, frankly, isn't enough, because there's hundreds and hundreds and hundreds of ways to.
[00:02:20] Speaker B: Improve productivity that take you in different.
[00:02:22] Speaker A: Directions depending on where you want to go next. So that's the first comment I would make, is before you get bogged down in, let's go buy a bunch of AI because everybody would be more productive.
[00:02:32] Speaker B: Make sure you know what you're trying.
[00:02:34] Speaker A: To accomplish so you can focus your efforts and investments in the right areas. Now, the second thing that's come up significantly, and this has a huge impact on where we're going as HR professionals, is how do you do this? And one school of thought is that the cfo, driven by financial pressures, perhaps, and anecdotes and benchmarking, simply says, we have too many people. Our revenue per employee is too hot, too low. We've benchmarked ourselves against our peers, which, by the way, we've been doing this for companies. We can do this for you. We have lots of data, and therefore we're going to reduce 10%. And you guys go out there and figure out how to do it. And, you know, when that happens, of course, there's a whole bunch of planning.
[00:03:14] Speaker B: Of some kind, but it's usually done.
[00:03:16] Speaker A: In a very quick crisis way. And a whole bunch of people lose their jobs or a whole bunch of managers have to lay people off. And the expectation when you do that is that we will eliminate the people that are low performers, assuming we know who them they are, and then rebuild the company around the high performers. And that's been, to some degree, Elon Musk's strategy with Twitter. And I think the way he did it was kind of the opposite. And he said, who are the high performers? First, everybody else can go.
[00:03:43] Speaker B: It sounds a little bit weird.
[00:03:44] Speaker A: But anyway, the second way to do this is to take a architectural approach, which is actually the way most of the companies I've been talking to are doing it. And you look at the job architecture itself, and you start to analyze what are people doing.
[00:03:58] Speaker B: And you do find a lot of.
[00:04:00] Speaker A: Duplication and a lot of vagaries in people's jobs. Because, as I've talked about many times, we don't have rigor and rules around job architecture in many companies. So hiring managers just create jobs and great job titles, and we don't really know what they're doing at the corporate level. So there's a pretty good chance that some of these jobs being created are administrative support jobs to further something that could have been done through tools or could have been done somewhere else in the company. And we just create inefficiencies through growth. And I've actually kind of come to the conclusion that it's almost impossible to grow a company quickly without creating pockets and pockets and pockets of inefficiency, because we don't have time to look at the capabilities across the whole organization every time we want to do something. So we hire somebody new in this particular area. And then there's the issue that all of this hiring requires tons of onboarding and training, and no one ever spends enough time and money on that.
[00:05:02] Speaker B: So there's a learning curve for all.
[00:05:03] Speaker A: Of the new people in the company. And lo and behold, Your talent density has gone down and your revenue per employee has gone down. So that's, you know, the second approach, which is let's look at the job architecture and use information that we have about the company and about the jobs with the business leaders and decide where do we have pockets and groups and roles that can be consolidated, automated, eliminated, or shared so that we can improve productivity. That requires you as an HR person to be a consultant, not just an HR program designer or program administrator. And we are more than willing to teach you how to do that because that's a very important new role of hr, which I'll talk about in a minute. The third way to do this is to delegate and create innovative solutions. So I was actually talking to Bill about this this week when we were going through all these calls. And you know, one of the companies we talked with is a very big, well known, iconic company. And it is clear that what happened to them was the senior management team.
[00:06:06] Speaker B: Moved away from their core in the.
[00:06:08] Speaker A: Engineering domain that they do business into the domain of making more money. And they outsourced tons and tons and tons of things because it was cheaper. And they lost their core value proposition as an engineering company.
And so now they ended up with employees who were mostly just project managers managing the work of contractors.
[00:06:30] Speaker B: By the way, this is what's happened in the federal government too.
[00:06:32] Speaker A: The federal government. I've heard this from many people in the federal government over many years, outsource more and more and more things, which means the people left aren't the specialists, they're just program administrators. And that actually creates more bureaucracy because now you're at the mercy of your outsource provider to understand how to improve your company. And I'm not a big fan of outsourcing things that are core and strategic unless you manage them very, very closely with senior people. And so the theory in this mode is let's, rather than from the top.
[00:07:05] Speaker B: Down, try to redesign things. Let's go to the business leaders in.
[00:07:09] Speaker A: Each functional area and say, I want you to spend the next 30 days coming back with a plan on how to be 15% more productive in your business area. And here are your options. You can implement new technology, you can share or leverage technology that already exists in the company, which obviously is preferable.
[00:07:27] Speaker B: You can share talent with other teams.
[00:07:29] Speaker A: You can reskill people, you can reorganize your team, or you can lay people off. And what'll happen, of course, is most managers won't pick the last option because that's not really the way they work, but they might. And that's another way to get really great innovative ideas.
[00:07:45] Speaker B: Now, while this is all going on.
[00:07:47] Speaker A: And we're implementing AI and experimenting with all these wonderful agents and things, there's another important part of this, and that is what is the company trying to do? If you're intel and you're trying to turn the company around and get into technologies that you don't have yet, if.
[00:08:04] Speaker B: You'Re Boeing and you're trying to rebuild.
[00:08:06] Speaker A: Your engineering capabilities, if you're Starbucks and you're trying to rebuild your customer experience, if you're Nike and you're trying to rebuild your channel and innovation strategy, those are part of this project.
[00:08:20] Speaker B: Because if you don't know from the.
[00:08:22] Speaker A: Top what is the most important thing or two or three things that we're trying to do here, you can't make all of the myriad of detailed decisions on how to reorganize jobs around this.
And, you know, we've been talking about this for a long time and we've done research and a course on Org design and talked about Agile org design for a long, long time. But now it is really front and center for everybody. And one of the interviews that I'm going to be podcasting for you later is with the Chro of Standard Charter, who Tanuj, who is one of the most maybe brilliant chros I've met, and she's going to talk about how she did this at the Chro level. Now, one of the things we're doing in our Chro Insights research, and we're going to talk more about this throughout.
[00:09:09] Speaker B: The year, is that in some sense.
[00:09:11] Speaker A: For those of you in hr, I know a lot of you are and a lot of you aren't. This is part of your job. It isn't really a good idea for you to wait for someone else to decide that we're going to have a layoff or we're going to have a restructuring, or we're going to have a reorg and then ask you to do the implementation.
[00:09:29] Speaker B: You should be monitoring this and involved.
[00:09:32] Speaker A: In this and leading this from the beginning. And that, to me, is one of the new roles of the Chro. You could think of the Chro as the Chief Productivity Officer, the Chief Organizational Ingenuity Officer, who's always looking at the organization and finding the dysfunctionalities which are always there and what we can do to improve skills, improve alignment, improve efficiency and reduced bureaucracy. And that means eliminating middle management on.
[00:10:02] Speaker B: A regular basis or reducing the levels.
[00:10:05] Speaker A: Of management training and enabling management and so forth. So this is to some degree, not just emblematic of the AI age, but. But it's emblematic of the ongoing transformation of what we do in hr. And I don't think it's just about business acumen or understanding how to read a P and L. It's much, much more complex than that.
[00:10:25] Speaker B: Now, the second part of this I.
[00:10:26] Speaker A: Want to highlight, and this is a little bit of an animated discussion on my part, is this national war against dei, which I am really just pained to observe. You know, the federal government fired the Joint Chiefs of Staff, head of the military, who's an African American man, because of a video he did during the George Floyd era. We've had a series of executive orders from the president about there being two genders, about eliminating investments in DEI and all agencies, about, you know, the mandatory focus on meritocracy, which is a veiled.
[00:11:06] Speaker B: Way of saying stop worrying about inclusion entirely.
[00:11:10] Speaker A: While that has all been coming out and we've all been watching it, and companies have quickly capitulated. Not all, but many. Many, you know, top brand companies have said, okay, we're going to do away with our DEI programs because you told us to. They're either faking it or they're doing it. It's. It's an incredible thing to watch.
And, you know, behind that is something even more interesting, which is this narrative that has come out that is the white males in the United States who are the ones that are the most ignored and disadvantaged, which is the most spectacular change that I could have ever imagined. And of course, it's true that men are not going to college at the rate of women. There's a lot of drug abuse, there's a lot of suicide, and there's things that white males have that are challenges relative to other people, but relative to people of different races. Immigrants, women, disabled people. I have a hard time believing that as a whole group, white males are the ones that are being the most attacked. But this is all part of the.
[00:12:14] Speaker B: Political climate we're living in.
[00:12:16] Speaker A: You know, there's all sorts of implications of this. And let me just mention 2. Getting back to what I talked to in the beginning. The first is we have reached this really staggering period of time in the employee experience where it is really different than it was before. Two pieces of research which are in our research cited, and for you to think about. Number one, if you look at the Gallup engagement levels, on average, the average of the 12 questions they ask all over the world were at one of the lowest levels we've ever been so generally speaking, employees are not that excited or happy about their companies and their jobs and their careers. And I'll explain why I think that is in a minute. And there is a similar study that's.
[00:12:56] Speaker B: Even more shocking from Edelman in the.
[00:12:58] Speaker A: Edelman Trust Barometer that shows that trust in corporate leaders, which has always been the highest over the years. Edelman's been studying this for more than two decades. As best I can tell, where usually it's the political and media that is not trusted. But now business leaders are reaching that same low level of trust. In fact, 60 to 70% of the respondents believe that CEOs are lying. They believe that CEOs are making too much money and they don't want to give anybody enough money to everybody else. That's the income inequality oligarchy thing. And 40% of the respondents now believe that it is okay for them to practice active, hostile activist behaviors against the company. Theft, damage or social media disclosure of information. Which gets back to what happened at UnitedHealth Group. So now I'm not trying to say that everybody's employees are rising up against them, but this data is uncontroversial. If you read it.
[00:13:58] Speaker B: There's an issue here. And the issue to me, as I.
[00:14:01] Speaker A: Understand it after looking at many, many studies, is, is to some degree income inequality and frustration, but a sense of fear and helplessness in many people that they can't get ahead, that AI is going to make it worse, and that people like Elon Musk are just out to get them. And, you know, I'm not saying that all of your CEOs are anything like Elon Musk. He's just a particular person. But, but this is a reality that you're seeing in the data about the workforce.
[00:14:28] Speaker B: So what it means is that if.
[00:14:29] Speaker A: You'Re interested in this mantra of productivity.
[00:14:32] Speaker B: And super worker and growth and AI.
[00:14:35] Speaker A: You have to accommodate the fears and.
[00:14:39] Speaker B: Uncertainties of the workforce you have today.
[00:14:42] Speaker A: By the way, you're not going to get rid of them all, regardless of what you might think and bring them with you. And interestingly enough, we're having a meeting this week with 35 CHROs talking about all this stuff.
[00:14:53] Speaker B: And we start hearing over and over and over again that the biggest issue.
[00:14:56] Speaker A: They'Re facing isn't selecting tools or deciding what technology or working with it. It's the fact that people aren't trained. They don't understand what AI is. They don't understand how to use it. They're not sure what the words mean. They don't have common language. They don't have a growth mindset. They don't feel comfortable learning about this new stuff because they feel threatened. And you don't want to run a company with people who feel threatened. You want to run a company with people who have confidence and ambition and growth mindset and excitement and enthusiasm and alignment. So these sort of social, political issues of DEI trust activism are not really just social issues. They are business problems. And the fact that CEOs trust levels have dropped so significantly is a wake up call for us as we talk to senior leaders and work with senior leaders on this issue of what they do. And I don't know how everybody else feels about this. I'm in a fairly left wing part of the world. But when the CEO capitulates to the federal government and says we're doing away with dei, you know, we don't agree. We don't believe in gender neutrality equality anymore. We don't believe in trans rights, whatever it may be. I'm not going to pick anyone particular. How do you think the employees feel now? They may not speak up, you know, directly because maybe they're nervous about what it means about their jobs, but you're alienating your own people and in some cases alienating your customers.
[00:16:22] Speaker B: Good example of this is Target. Target, which is an amazingly well run company.
[00:16:27] Speaker A: I've met many, many people there over the years. I've been just incredibly impressed with that. Company is a leader in dei. I mean, we highlighted them in our elevating equity study.
[00:16:36] Speaker B: Very significantly because of what they've done. Their whole business model is built around.
[00:16:41] Speaker A: Bringing luxury to the life of every American, in every community, including low minority areas. They pulled back on their DEI investments publicly and suddenly there's all these little mini boycotts against Target. I'm sure they're scratching their heads right.
[00:16:57] Speaker B: Now about what to do.
[00:16:58] Speaker A: But my point is sometimes as a business leader you gotta be courageous. You've gotta do what's right for you.
[00:17:05] Speaker B: For your company, for your employees, for.
[00:17:08] Speaker A: Your customers, for your stakeholders and maybe push back on the political winds.
[00:17:12] Speaker B: The political winds blow around a lot.
[00:17:15] Speaker A: You know, I think it was Barack Obama who said, and I still believe this, even though it's a little hard to feel it at the moment, that the long term arc of humanity is up.
[00:17:25] Speaker B: Right now we're in a right wing.
[00:17:26] Speaker A: Movement and there's lots of maybe moving in the other direction going on here. But around the world, I think you as a business person have a much bigger role than just making a profit. As Milton Friedman would say, I don't think that's enough. And I think that goes to this issue of, of thinking about your organization.
[00:17:46] Speaker B: Over the long term.
[00:17:47] Speaker A: Whatever the wins are at the moment, the issues, the topics that are in the news, the latest, you know, kind of crisis that hit, you want your company to last much longer than that. I think if you look at these companies that have, you know, really suffered enormous problems, you know, the intel problems, the Boeing problems, other iconic companies that have sometimes disappeared, Enron for example, they.
[00:18:12] Speaker B: They probably lost their vision of their.
[00:18:14] Speaker A: 10, 15, 20 year hole in society despite Milton Friedman, despite all the, you know, sort of investor technique, sentiment on this. I do believe that business is a, an enterprise of adding value to society as well as to businesses and customers and employees. And when you think that way, you might have the courage to ignore some of these temporary pressures to do, you know, short term things. No question in my mind though, from these companies that I talked to this week, including banks, software companies, insurance companies, and a manufacturer, a very large manufacturer, that they are committed to redesigning their companies in this new era. And let me just close on this. None of us really know how far AI is going to go. I predict it's going to be spectacularly important in redesigning how our companies operate.
[00:19:09] Speaker B: The stuff that we're doing with Galileo.
[00:19:11] Speaker A: Is going to blow your mind. When you see what we announce in the next 90 to 120 days, you're going to be just sort of astounded. And so the way companies are going to operate five to 10 years from now is going to be very, very different. We will have super worker companies. We will have companies generating 2, 3, 4, 5 times more revenue per employee. We will have massive amounts of economic growth. It's going to take some experimentation and learning how to get there, but it is happening. So, you know, my inspiration to you this weekend as I go off to Europe to another tech conference is stick with this, learn as you go, Talk to us, of course, as much as you can, ask Galileo whatever questions you have and you will be happy because we are in the early stages of one of the most fascinating economic, business and workforce transformations that we've been involved in and certainly in my life. So that's kind of my thinking for the weekend next week. I think I'm going to talk about.
[00:20:13] Speaker B: Reasoning models for a while and give.
[00:20:15] Speaker A: You some information on some technology stuff we've been doing here and we've been learning about, you know, reach out to me, reach out to anybody in our company if you have any questions. Or concerns. We look forward to talking to you and continuing on this 2025 evolution. To the super worker organizations that I know we all want to build and prosper and grow in the years ahead. Thank you.
