Episode Transcript
[00:00:00] Okay, you guys, it's the end of 2025, and we're going to be introducing a big report in January on the 2026 agenda. But I'd like to recap 2025 and reflect on some things that happened that I think you need to just reflect on. And the big theme is not about tech. We'll talk about that a little bit. But the way we completely stopped or ignored our focus on human capital issues to focus on AI, productivity, technology and the economy.
[00:00:32] So I just want to reflect on that and give you some things to think about for the year ahead. The first is when the Trump administration joined here in the U.S.
[00:00:40] almost immediately, they eliminated all of the DEI programs in the federal government and virtually decimated the DEI agenda on anybody that had anything to do with being a contractor or relationship with the feds, including going into universities and into law firms, to eliminate DEI practices. Now, to the point that I noticed on Twitter X that the head of the EEOC now has a post asking white people who feel that they've been discriminated against to file EEOC suits and that they were welcoming white Americans to raise issues of discrimination against them. Now, I don't want to get into the political side of this, but I don't think the problem of diversity and inclusion has gone away. It's gotten worse because now we have, in a sense, the demonization of immigration as a new theme around the world and racial profiling of Hispanics as potential immigrants, illegal immigrants, and so forth. What we did in our companies is we stripped DEI off our websites, we stopped talking about it, SHRM quickly jumped away from it, which I think is a problem. But I won't get into shrm.
[00:02:03] And many of you even let your DEI leaders go or redeploy them into different roles. I have not talked to a single HR leader who does not still believe in this. And most of you know that this is still a vitally important part of running an organization and managing a company. And it maintains an important role in your success with your customers, with your supply chain, with your leaders.
[00:02:28] But it was wiped off the agenda. Number two, women. For most of my adult life, starting my working career in the 70s, women have been disaffected at work, underpaid, under positioned, and finally reached a point now that women don't take care of the kids full time and the men do that or other people do it, where women have reached a parity in many roles. We know that in the chro role, for example, 65, 70% of them are women. But they're still paid less than men in many cases. That agenda also disappeared. In fact, the reverse agenda is now very commonly discussed, that it's the men who aren't graduating from college, it's the men who are having a hard time finding jobs, suffering from addiction, bad behaviors, and 60 to 65% of people graduating from college are women. Should the men be filing EEO lawsuits, EEOC lawsuits against women? I obviously doubt it. But that's also an interesting thing that's changed. Yet that agenda issue remains. And for those of you that are women, the Harvey Weinberg stuff and everything else, I'm sure you're still aware of those issues. And I doubt they've disappeared as fast as they seem to have. And by the way, I actually got a funny email from Lean in, Sheryl Sandberg's old organization, talking about wage disparity amongst women. And it seems so strange to even get the email because nobody talks about it. The bigger issue here is pay equity, which is an issue because when AI creates variations in productivity amongst people and we're going to have to deal with pay in a very different way, we're not going to have pay equity programs like we did in the past. Number three, the issues of well being. For some reason, we haven't talked about that much this year. It was obviously very big coming out of the pandemic, and we had lots and lots of tools and investments and studies done on well being. It doesn't seem to be on the national agenda, except for the fact that the happiness in the United States is at an all time low. We here in the richest country in the world are, are now 24th in terms of happiness and we've dropped a lot. I think we dropped five or six places or more. Once again, the human capital agenda seems to have been demoted under the economic agenda of building data centers, investing in AI, winning the war against China and so forth. Okay, so that's number three. And then number four is this interesting and passionate rush to implement AI as fast as possible. And most of the business people I talk to are scrambling around almost like they're paranoid that if they don't implement AI fast enough, the world is going to collapse around them. The funny thing about AI is if you really look at what it is, it's great stuff. It does all sorts of wonderful things and we're big fans, we're a big part of this. It's a technology that uses massive amounts of compute capacity and energy to produce modest amounts of productivity. So right now in the US and around the world we've invested, I don't know, $2 trillion, which has come out of debt, private equity and VC firms and sovereign wealth funds to build data centers all over the place. Luckily there aren't a lot in California because it's too expensive here. But raising energy prices, which in exchange may or may not improve productivity. But everybody is afraid to be left out and it may make income inequality worse or better. We don't know. And we don't want to have any laws against AI, at least at the federal level, because oh no, God forbid we should slow down this arms race, where in California we actually passed a law called SP 53, which is pretty good, that actually asks or requires the large AI providers to take some responsibility for their, the quality and the outcomes of their products.
[00:06:30] So there's that which is also tilting towards the economic side and not towards the human capital side. So if I think about those five things, the diversity agenda, the gender agenda, gender equality, and that of course you can throw in transgender into that. The issue of income inequality and pay equity. By the way, we do have a lot of income inequality and it's getting worse. The issue of well being and then the issue of AI's impact on human living conditions, working conditions, our energy infrastructure, the cost of energy. I just read a really interesting study by the new senator in Arizona who was very impressive to me and something like 53% of Americans do not have enough money to heat their homes or cool their homes every year or every on a regular basis. So we actually now have a problem of energy costs or electricity costs, not energy and electricity. My point is that we really spent a lot of time this year, at least in all the conversations I've had, mostly talking about technology transformation, implementing AI, experimenting with AI, creating productivity projects, finding ways to re engineer, stop hiring, reduce hiring, et cetera. And I was just listening to a podcast from the folks at HubSpot talking about their AI implementations and they were describing how they're using AI for customer service. But you could hear in their tone of voice their defensiveness about not being behind hurry. If you don't get into AI fast enough, you're going to be destroyed. I'm not denying this is obviously happening. I'm not denying that it isn't good. We need to to exploit this technology as fast as we can. But I just was reflecting that in 2025 there was very little discussion in the mainstream business climate about the human capital effects. On the other hand, let me give you my perspectives on 2026. 2026 is going to be more of the same. We're going to talk about the economy, we're going to talk about productivity, we're going to talk about super agents. I'm going to tell you all about super agents and describe them to you next year. You're going to read about the cost of AI. You're going to read about the AI blueprint for hr. We're building many exciting things that are really good. But I also think we have to force ourselves to revisit these human capital issues because our companies are filled with people and we're not going to eliminate that many jobs. No implementations of AI have I seen yet have replaced all the people. We have found projects we've worked on where we've been able to save 20, 30% or more of the headcount in L and D, in ta, in hr, through agents. But those people didn't necessarily got laid off. They worked on other things, performance consulting, business partner types of roles, or they're going to have to manage these agents. So we're not talking about that much job destruction from the way I see it. And everything that I've concluded this year is that the reason younger people are having a hard time finding a job is just because the economy slowed down a lot. And we actually have had a very struggling economy in the US because of the tariffs. Demand has flagged a little bit in the consumer sector, not too much, but a little bit. High price of healthcare, costs of housing and childcare and so forth have held people back. So companies just haven't been interested in hiring when they're spending all this money on AI. And their IT budgets are going up by 62%. So we're not going to wipe out half the jobs in your company, but you're going to have wide disparities of who uses AI and then wide disparities in productivity, which leads to issues of pay equity. Again, if you think about 2026, you really need to take the human capital issues seriously. There's an interesting sort of piece I was reading the other day. AI is a socioeconomic technology in the sense that it affects sociology or social issues, just like it affects productivity and data issues.
[00:10:46] Because people that know how to use AI and build AI and use AI have enormous productivity and earnings power that those who don't use AI do not have.
[00:10:58] So frontline workers, hourly workers, labor, service consulting, healthcare may see AI as a productivity tool in their scheduling or in their support or in their training. But to some degree, others who build AI or leverage AI more significantly may see a tenfold improvement in their productivity. And those people might see their wages go up a lot, while the hourly workers may not. There are social issues here that we're going to have to be aware of. I don't think any of the other ones have gone away. I think DEI is still on your minds. From where I live here in Oakland, California, there are lots and lots of workers who are not making the levels of income as others. And there's probably DEI issues there. I think the issue of women versus men is still an issue in work. I think the issue of well being and managing the irresistible organization continues to be an issue. I've written about that for 25 years. I've proven to myself in our healthy organization study that healthy companies take care of their people physically, mentally, economically, financially, as well as through skills and effort. And I've also we've proven that leadership is still the most important thing you have. And building super leaders, super managers, as we've written about and we're going to do more work on, is a part of this agenda. So my message for 2026 is going to be all sorts of exciting things about how to manage AI and build super agents and focus on upside scale, not necessarily job loss and productivity, going from individual productivity to organizational productivity, breaking down silos between functional areas.
[00:12:46] We're going to show you all that stuff next year. And I don't want to preview that quite yet, but I think the interesting observation going from the end of this year, especially around December, where we are with all the social unrest that we've been through the last couple of weeks, is we need to think about these human capital, human issues.
[00:13:04] We call it human centered leadership. We did a massive amount of work on this in the year or two after the pandemic when we pretty much prove in most companies that if you were human centric and you took care of the people, you could deal with the pandemic. You could deal with people working from home. You could deal with a lack of transportation infrastructure or a lack of travel or a lack of airfare or a lack of hotels. Almost all of these businesses that shuttered down during the pandemic came back roaring afterwards. And it's not only because of economic stimulus, it's because they took care of their people.
[00:13:42] And this transformation doesn't feel as scary as the pandemic, but it is scary to some people.
[00:13:49] So I think we have to take a similar perspective that the human capital side of this is not insignificant. Now, just to pile on that just a little bit to think about next year. The research that we've done already and the research that's come out from a lot of others shows that a significant amount of fear people are not changing jobs. The level of job switching is very low right now. And that's not only because it's hard to find a job. That's because people are a little bit insecure or nervous about their careers. And I think one of the reasons that young people who may or may not have had college degrees are a little bit struggling with their perspectives on the future is not just because maybe they don't like Donald Trump or they don't like the direction of the US but more that they don't know what's going to happen to their careers. Either AI is going to be the greatest opportunity in the world for them, or it's going to be the thing that makes their careers very challenging and difficult to understand.
[00:14:52] And we're in a very uncertain period. If you're a software engineer and all of a sudden most companies aren't hiring as many software engineers, and you just went to boot camp and got a degree in computer science and got out of school, and all of a sudden you can't find a job, you scratch your head and think, what job should I become? An energy engineer. The funny thing that's funny to me is in 1978, when I graduated from Cornell as a mechanical engineer, I was an energy engineer. That's what I studied. It was a big, really exciting domain at the time. Here we are 45 years later, almost 50 years later, and it is hot again. So maybe the hot career of the future is energy production, thermodynamics, nuclear, all that stuff that I studied a long time ago, because that's what's going to fuel our economy.
[00:15:37] While a lot of the intellectual jobs are slowly replaced a little bit by AI, not completely, but a little bit. These are big issues. The second reason I bring this up is not just to give you some perspective, but to share a very important study that we have done. The issue we face in AI is not just buying the right technology and building the right use cases and learning how to use it, and learning how to develop applications of it, and changing and managing the data and keeping it secure and all that. That's a big part of it, but it's also creating change in the organization, driving change. It's not change management, it's much more change enablement and creating what we call the dynamic organization. And two or three years ago, we did a pretty big study of this and it was one of the most in some sense important studies we've ever done because we found we originally studying the impact of internal mobility on company financial performance. And we found that there was a huge relationship. It's one of the most important factors in high performing companies is the ability to reskill and redeploy people internally because those capabilities enable transformation and change and innovation as opposed to holding it back. Because when people are afraid of losing their jobs, they don't want to innovate, they don't want to be part of a new team and they might even fight a new product or technology because it's threatens them. So this dynamic organization research found that there were about 40 or 50 human capital practices that are all interwoven rats nested together in this ability to be a dynamic company. AI is your maybe the most dynamic change we've had since the recovery from the pandemic. Because every job is changing and not only is the job itself changing as it's defined, but but maybe the job is going away and becoming a different job entirely and the job family is changing. I was on the phone with the CTO of Workday on Friday or yesterday and we talk about this. The big long term impact of AI I believe is rewiring our companies to work in cross functional workflows. The way customers perceive our products and services, not in functional silos, the way we set up our internal operations.
[00:17:56] And that means a lot of jobs are going to be very different.
[00:17:59] Sales development rep job may turn into something completely different. A sales rep job, a customer service job, a product manager job. They're going to be much more cross functional. And these are going to be changes that are going to affect workers directly, employees directly. And they will either join in the crusade or they will resist. And if they resist, you go slowly. And we have this wonderful curve when we introduce the super manager study that shows that what happens when AI and other technologies change at a exponential rate and they are changing at an exponential rate, the organization does not change at that rate. People hold back, people are uncertain, people want to be trained, they're not sure what to do. The small number of people that love change are very happy about it. And then the rest of the the organization lags and waits and watches. These issues of getting ahead of the talent model and the focus on talent density and the diversity and inclusion and growth potential and role of leadership and career opportunities and culture and well being and support and investment in people are not going to be small. I'm not saying we may or may not talk about them in the public sphere because the current political environment is so focused on other things, but I think they're going to be just as important as ever. So anyway, reflecting back from 2025 to 2026 and thinking back about 2021 and 2022 and where we were then, let's brush off, dust off the old research on human centered leadership, the old healthy organization study the well being paradigm that you've considered over the years, the engagement, technology and tools that you have, and just make sure you're paying attention to it. Because if the economy continues to grow and it could slow down, we could have a recession, we could have a stock market crash, all sorts of things could happen. But regardless of that, your sustainability and energy to grow into this AI fueled world is very dependent on the health, well being, inclusion, fairness, culture and energy of your people.
[00:20:18] So as somebody who has spent 30 years studying HR, and as most of you, I'm really more of an engineer than a human capital person. But I am convinced that we're going to be thinking about these issues a lot next year. Because here's just one, the situation. You're going to be sitting at your company, you're going to be working on some project and you're going to be all excited about it. And then you're going to read an article about another company that's doing something that's either faster, more advanced or more sophisticated or more innovative than you. And you're going to scratch your head and say why didn't we think of that? And the reason is because of the humans. It's because of the people. It's because of the leadership. So let's go into 2026 in a positive note and let's think about the people while we think about the technology.
[00:21:08] If you think about AI as a socio technological change, you will be better off. Coined the phrase super worker and we coined the phrase super manager for a reason. Superman didn't understand his powers when he was a young boy. As he grew up, he learned to use his powers for good. But he had to learn that we have exactly the same situation in our companies. The more sophisticated companies that have done this for a long time, the Amazons and some of the big credit card agencies and others that have dealt with AI for a long time have learned about the socioeconomic impacts of this. But it will touch your entire talent system. Stay tuned for the Imperatives report. It's one of the things I spent a lot of time on later this year. Last year. This year I think you're going to be really excited about it. It's going to teach you a lot when we launch the report in January.
[00:22:04] We're also going to launch a whole course in Galileo. Learn to teach you about these new concepts to get you ready to bring your team into alignment on this stuff and you'll see that the human centered issues are just as important and interesting and fascinating and different as what's going to happen in AI. Okay, have a great Christmas. For those of you that are celebrating Christmas or Hanukkah, I will be around and I will probably do another couple of articles on other things. In the meantime, we have a lot of work about to come out on the frontline workforce on the new role of managers and the AI blueprint for hr. So stay tuned for all that and happy holidays, everybody. We'll keep close in touch and I really look forward to a very exciting 2026 together. Thank you.
