Episode Transcript
[00:00:06] Happy weekend, everyone. Today, I would like to spend some time talking about Labor Day and celebrating it in the United States. The first Monday of September is a celebration of the labor movement and the role and importance of labor in the United States and the economy. And I think most of us in the world have similar feelings about the importance of workers, employees, labor, whatever you want to call it, in our lives, in our businesses, and in our society. And I don't believe that there's a difference between management and labor. But I think at the time this day was commemorated, it probably was commemorating union labor as opposed to management or other leadership. So a couple things that I just want to highlight for you to think about this weekend. Number one, if you look at the GDP growth in any country around the world, and there are countries that are succeeding at different rates in economic growth, the United States just announced that our GDP growth grew at an annual 3% last quarter, which is really high. You look at other countries that are growing quickly. Ireland, for example, countries that are growing more slowly, like in the UK, China. The revenue or GDP per worker in all of them, is skyrocketing. And that isn't just inflation. That is a result of all sorts of automation, technology, business process improvement, business process innovation that allows us to generate larger amounts of value. Revenue is basically a measure of value per hour of labor. And so as a result of that economic effect, wages tend to go up. And we're all talking about inflation at the moment. And inflation is slowing, but it's still been quite a period of time. The last four or five years, wages have also been going up as well. Every quarter it changes. Sometimes wages go up above inflation. Sometimes wages go up below inflation. But at this point in time, in virtually every country, there is a labor shortage, at least a skills shortage. And if you look at the demographics and the birth rate and the fertility rate and the marriage rate, that's going to continue to get worse. So the role of labor, the importance of labor, the value of labor is increasing. Now, the counterbalancing force of that, of course, is automation. And you can read the reports I talked about in some of the articles I published recently, that various economists have different opinions on how quickly I will or will not replace labor. There was an article in the Wall Street Journal this week, I don't believe the data is correct, and I've reached out to them, but which claims that the number of jobs in retail have dropped by 59%. It came from something from ziprecruiter, and I haven't been able to get hold of the source. So if you believed anything like that was true, you would conclude that that isn't because food service jobs are going away, it's because food service is being automated. And if you go to McDonald's, for example, where I used to work as a young man, you can order and pick up your food without really talking to anybody.
[00:03:19] And there's only a couple people in the stores now because so much of it's been automated. So, you know, as we continue to celebrate the role of labor and honor the role of employees, we also have to reflect the fact that we're all in businesses where we are replacing employees with machines. When I was in Europe over the summer, several of the financial services companies I met with had very specific programs to automate call center operations and specific numbers of people that they knew would be either let go or redeployed. So I think given where we are in the cycle of AI, and my experience with our AI is that this is going to become a radically improving or rather accelerating process of more and more automation, impacting white collar jobs, not just blue collar jobs, and making labor, the labor force look different. Now, interestingly enough, if you look at the issue of education in the labor force, for most of my career, starting the seventies when I got out of college, we've had this narrative that a college degree is really important, and the more education you get, the better for your career. And that's certainly been true in my case. But it's not true for everybody, because in the US, at least, based on the data that's coming out from litecast, and you've seen this elsewhere, manual or human labor, like nursing, or plumbers or pipe fitters, or welders, or construction people or truck drivers, where you really don't need a college degree, you need a credential and you need skills, but you don't necessarily need a PhD, master's degree, even a bachelor's degree are actually underserved. So the unfortunate and weird situation we are in now is even though everybody wants to get a college degree and there's even degree factories where you can get them without really learning a lot, it's not clear that that's where the labor market is going. So we have this labor market that's really changing a lot. It's going to result in a much younger labor force because the baby boomers are starting to retire at a rate of speed that's even higher. The general population of the labor force will be young, which means that the money that we have to allocate for retirement and pensions is going to look like a burden. We're going to have a tremendous demographic diversity where most older workers will work for younger workers. Certainly that's been my experience in my late career at Deloitte. But most of us in our early days, it was always the other way around. Immigrants or people of different nationalities or backgrounds are very likely to be honored. And I revered in the workforce because we're going to need them to grow our countries because so many countries have a low birth rate. I think immigration policies, if you read the article that came out in the Economist last week, are going to become much more focused on attracting immigrants and educating immigrants as opposed to demonizing immigration, even though populations are not happy about it. And generally speaking, for those of us that are in HR and senior HR people, we're going to spend even more time thinking about what I call the irresistible organization. And that means building programs in our companies to attract people, retain them, give them power, give them authority, develop them, pay them fairly, give them a sense of transparency at work, give them career options, be clear on their responsibilities so they don't feel confused. Give them flexibility in their work location and in their work styles, including, by the way, not just generational and racial and gender diversity, but cognitive diversity. And all of those things that felt like strange left wing ideas when they started are going mainstream simply out of business necessity and the business pragmatism that we have in terms of the political season that we're in right now. You could make a big debate about immigration based on theory and your own fears of immigration or whatever you hear. Eventually, in a very short period of time, there's going to be a pragmatic reality that a lot of companies won't be able to find the people they want, and they're going to get in their planes and go to Washington and they're going to tell their representatives, you need to fix this immigration problem because we need more people. Now. That also gets to this issue of developing labor.
[00:07:38] I hate the word labor because it's really the wrong phrase. But whether you're a nurse or a retail worker or a salesperson or you're working in a retail store or you're driving a truck or whatever, those are human beings who have careers and aspirations and lives and hobbies and families and children and other things on their minds besides their job. The fact that we define them as labor is strange because it's as if their whole definition is by the work they do. That's not true, of course. The more we think of them as employees or humans or people or whatever word you want to use, the better we're going to be at investing in our people. And so, you know, if I think back about Labor Day, it's kind of a backwards looking approach to the situation now. You know, for somebody like me and who's worked in HR for a long time, and a lot of you in HR, these are kind of easy things to understand. You know, they're not necessarily easy for business to understand. So give me, let me give you a funny story. Just this morning, there was a kind of an interesting podcast in the New York Times talking about tipping. And what happened in the United States, and probably a lot of other countries was during the pandemic, when a lot of the delivery workers and service workers and food service workers were taking big risks of being together and serving us as consumers. We tipped them a lot. We used to tip you remember, what happened is all of a sudden we were willing to tip people a large amount of money for delivering us food or products that we needed because we didn't want to go out in public and get sick. Well, that tipping thing took off. And now if you check out if almost any e commerce site, in a drugstore or a coffee shop or virtually anywhere, not the grocery store yet, but that's probably coming. It asks you, would you like to give a tip? And both Trump and Harris have already stated that they don't want to tax tips, which is a ridiculous idea. You can see how quickly this took off. Well, where did that come from? What that is, is, it's, in my mind, a reflection on all of our personal minds that we do care about labor. We do care about the work that people do, did for us. We do care about the Uber driver or the Doordash driver who got up in the middle of the night to deliver us the pizza that we really wanted. And we do respect their work. And if they're underpaid, we're willing to help. Now, on the business side, we have to take the same perspective. I've looked at data many times over the years, including looking at companies like Costco, Walmart, Target, even Neiman Marcus and Nordstrom's. And you do tend to find that the companies that pay above average wages are more profitable companies. That sounds strange. It sounds like it's the opposite of this labor cost, labor expense formula. But of course, as you know, when you raise wages in general, you get more qualified people. You create an environment where people have more willingness to throw extra energy into their jobs. They're not wasting a lot of their time trying to deal with other financial problems that they have at home that pull them away from their work. And they respect the company, they respect the products, and therefore they can respect the customers. So I think this tipping thing that came out of the pandemic is actually an interesting driver of this issue that we need to compensate labor effectively for the rapid increase in general productivity they've created. Now, the word productivity is another big topic. There are many ways to define productivity, revenue per employee, there's economic productivity and so forth. And I've had debates with economists about this. But generally speaking, if you have, and you're going to read more about this in the talent density work and the report I'm about to publish in the Harvard Business Review, the more productivity your people are, the fewer of them you need. And so companies that hire a lot of people and have a lot of turnover tend to not think about talent density because they're used to this cycle of replacement. But in reality, if we treat labor as an appreciating asset, as we all are, human beings are really the only appreciating asset we have in our company, and we invest in them and we pay them well, they will prevent us from having to hire more and more and more people and deal with issues like turnover. And you all know that turnover is maybe the most expensive error or problem we have in an organization. The cost of replacing an employee can be 50% of the salary, 100% of the salary. It's a very significant number, to say nothing of the culture issues and customer service and education training issues that you run into when you keep replacing people. So I think there's a long term economic and business and societal focus on taking better care of people as part of Labor Day, too. You know, the final thing I'll talk for a couple minutes about is unions. Joe Biden was, at least in my lifetime, the most pro union president that I can remember, usually in the United States, and this is true in different countries, I know. But here, the political system tends to be neutral on unions because union participation, except in the government, has really been declining pretty rapidly with the expectation that employers are going to compete for labor and take care of their employees better and better. The Biden administration changed that. They really decided that to deal with either the income inequality issues in the United States or the political pressures, they would get very strongly behind organized labor. And there is a lot of value in organized labor in a lot of ways. Things like safety benefits, retirement, career fair pay. While they sound like good business decisions. A lot of companies don't think about them that way. And the labor unions, while they do displace the role of management to some degree, force companies to think this way. I think the most iconic experience of that I've seen in the last year or two was when Howard Schultz got hauled up in front of Congress to talk about the labor unions and Starbucks and was unfortunately, sort of in denial about the reasons for this and walked out of there fairly sheepish, thinking to himself, we got to do something about this. They've now had their second new CEO since that happened. And I think the reason that they're going through that transformation at Starbucks is because he and the rest of the leadership team at Starbucks have come to the conclusion that, yes, if our employees are not productive, happy, engaged, and feeling that their jobs are accomplishable in the hours that they work, our customers are not happy, our profits are not happy, and our products are not going to be healthy. So unions have a very positive impact. I mean, I don't really know what happened at Boeing, but obviously there were people at Boeing that had a lot of concerns about what was going on in 737. Nobody listened to them. I don't know if they were labor union employees or not, but there's a situation there. You can see what's going on at Southwest Airlines. There's lots of examples of companies where we haven't listened to employees well enough. The management team has been focused on profits or the stock market, and a union changes that balance now. So whether you're pro union or not, I think we're going to be in probably a growing union participation for a while while we get through this process. And of course, in the United States, one of the most frustrating things about labor is the massive income inequality we have here. There's many reasons for the income inequality of the United States. It's not the tax system. The tax system doesn't have a huge impact on it, although the tax system does contribute a bit. But one of the reasons we have income inequality here is that we've, for the last 50 years that I've been alive, the United States has grown very, very rapidly. And the people that had the opportunity to get good degrees and were born at the right point in time could ride this up. I happen to be one of those people. I was just born at the right time. 1956 was the same year that Bill Gates was born. It was a good year to be born, to be honest. And the people that were born later had to deal with other economic issues and were not able to take advantage of the growth that some of the older people had. And so the wealth is misallocated in the United States. So unions may be another reaction to that. The final thing I'll sort of say relative to Labor Day, is it's always. It's funny, it's usually a warm, sunny day in the United States in early September. People take time off and they go to the beach or they go to the park and they have a picnic, or they go for a walk through the neighborhood. I think it's a time, at least for me, for all of us, to remember that every employee, every worker, every teammate that we have in our company is important. Every human being, in some sense, is equal. Doesn't matter what their job is, doesn't matter how tall they are, what color they are, what gender they are, what cognitive strengths they have or don't have. And we as HR people are really, in some ways, being asked to honor that. Now, I know, as we talked about a couple of weeks ago with the New York Times article about HR, a lot of employees think HR lives and breathes for the employer, not for the employee. But I think most of you know that is not true, that one of the most important things we have to do, and this is why this is such a complex profession, is we have to insert ourselves in the middle, representing the employee. By the way, we're all employees, including the executives and the management and power structure in the company, and make sure that not only do the leaders of the company understand the best way to manage people, but they're respectful and clear and understanding of the value of their quote unquote, labor. And when there's a strike or a protest or a complaint, we need to activate those people, because employees or labor tend to know more about the company than management, a lot more, because they're in it. And even though they may not be organized, or they may be organized, we need to listen to them. That's a tricky process. Obviously, you know what's happened at companies like Google where the labor has sort of revolted against management, but that is a lot of our job. So I think this is a fascinating topic. It's a dynamic that we live in, in our profession. You know, I always like Labor Day because it's a chance to take a deep breath before all the tech stuff happens in the fall. I hope you have a chance to relax. This weekend we're going to be at the HR tech conference, the workday rising conference, the unleashed conference in Europe. So any of you that want to talk to us. We will be at those three events for those of you that are there. And we have a ton of announcements coming out in our company in the fall that are going to be very fun for you to learn about. So I hope you enjoy your weekend. Long, long weekend in the US. Think these things over a little bit. I hope this was a little bit of help and a little bit of inspiration on this wonderful career in HR that we're all a part of. Thanks, everybody. Talk to you next week.
