Episode Transcript
Speaker 1 00:00:11 Hey everyone today. I want to talk about the economy and the job market and business, climate, and culture. And we're in a period of time where the economy is uncertain. COVID has resurfaced in many parts of the world and Elon Musk and other business leaders are really driving the conversation about the economy in a very misleading and perhaps dysfunctional way. Now I'm not claiming to be the world's number one economist, but having an opportunity to talk to thousands and thousands of companies and lots and lots of business leaders I do. And it gives you some perspec. We just completed the most spectacular conference. I have ever inducted the irresistible conference. We had about 450 very senior HR executives join us at USC. The name of the conference is irresistible and the whole focus is what I called irresistible by design and the thesis behind it is that in a world where we have an uncertain economy, a war, political instability, the media shifting from left to right, very uncertain conditions in the inflation and job market and standard of living for most workers.
Speaker 1 00:01:25 The most valuable strategy you have as a company, because you are transforming is to take care of your employees. And I know that sounds simplistic, and it sounds like HR geeky stuff, but I'm serious. If you don't design your company around the needs and skills and capabilities and energy of your people, you are not going to have a great company. I think we're witnessing a great example of that right now at Tesla. Tesla was first to market with the electric car. My brother-in-law works there. He's been there since the beginning. It is a very hard working difficult place to work, but it inspired a lot of engineers to go there because of the mission. They are not the only game in town anymore. There are great electric cards from Ford, from Mercedes, from Audi, from Rivian. My son drives Rivian, which is an incredible car.
Speaker 1 00:02:21 And yes, the Tesla has kind of got this brand to it. But there are alternatives this week, the CEO of Tesla, who you all know, decided to send out an edict that if you're not coming into the office, you're a slacker and we'll let you go. So everybody's coming back, whether you like it or not. And those of you who don't want to come back can just leave the company because we didn't want you anyway. So what he's basically saying is you, as a person are irrelevant to me, you are replaceable. And if you don't do what I say, because I run the company as one individual person, we can let you go. And by the way, I've been to Tesla and I visited with Tesla and I've met people at Tesla. And it was a very interesting experience. I had a great tour of the plant and met a lot of people, including most of the people in the learning and depart development department and some of the people in the HR department.
Speaker 1 00:03:16 And two weeks later, I called them back and they had all quit. I mean, all of them, I didn't ask why. And actually some of them I'm beginning to rediscover at other companies that is not the way to build a great company. Now, the Tesla stock has plummeted. And I think the reason it's plummeted is because the whole stock market is plummeted, but just watch what happens over the next couple of quarters. Tesla does not have the market for EVs to itself. And when people leave or come to work disgruntled, they don't perform at their best. And the company suffers. I mean, I don't need to give you too many examples of this, but I'll give you another one. Boeing, Boeing is an iconic, incredibly successful company. They invented the, they really invented jet travel for consumers. I mean, when I was a kid, if you flew on a Boeing 7 0 7, I mean, it was, it was groundbreaking.
Speaker 1 00:04:07 And of course you all know what happened with the 7 37 max. There have been movies about it in a whole congressional investigation. They started focusing primarily on financials. They moved the entire headquarters out of Seattle to get away from the engineers. So they would've a place for the finance people to work by themselves in Chicago and focus primarily on the stock price, lost track of the product. Airbus caught up to them and low and behold, they pushed the envelope on the 7 37 max and many bad things happened. And they are still recovering from that. And I think they'll go back to their culture and fix it. But that's what happens when you don't think about employees, cuz employees were speaking up throughout this whole process. I mean, I could give you example. After example of this, Microsoft went through this when Satya Andela came in, IBM is going through this transformation.
Speaker 1 00:04:56 And what we talked about all week with these senior leaders, including the C H O of Oracle, the C H of Walmart, the C H O of L'Oreal, the C H O of Microsoft. We talked about why building an irresistible experience. An irresistible company for employees is the right strategy. Employees are not labor. Employees are not a cost. Employees are your company. And there are many, many reasons for this. A lot of it has to do with the way technology is automated away. A lot of the routine work that's left. Most of the work that's left in your company is human value add work. And so if you're not treating people well in all of the aspects of that, that you can read about in my book and at our, in our research, you're gonna underperform. And that's just a business story. Now at this particular point in time, the signals are going in multiple directions.
Speaker 1 00:05:53 On the one hand, the economy is still growing. We have a very constrained job market nurses, truck drivers, retail workers, hospitality workers. There aren't enough of them. And most of the people who have those kinds of jobs are either fed up or looking for more money. So employers are having a hard time hiring in those jobs and they want to keep those people happy because they're representing the product and service to customers. So you have to raise wages and take care of hourly workers. On the other hand, there is a war. There is a lot of inflation interest rates are going up. The stock market has plummeted by the way, don't confuse the stock market for the economy. The stock market is basically a big gambling casino. Sometimes people go to the casino and they bid up the prices and sometimes they don't. It has nothing to do.
Speaker 1 00:06:42 What's going on in the real economy. There's a, there's a slight relationship, but I wouldn't directly FL the two. And as the stock market goes down, people feel a little bit poorer. They spend less money and there's no question we're gonna have an economic slowdown. And what generally happens in economic slowdowns is people tend to stay where they are. They do a little bit less job hopping, although there's, they're still job hopping about 20% of Americans change jobs, even during recessions. And that means that theoretically, you could treat people a little bit less generously as an employer, but let me warn you. That is not a good idea. I mean, I'm old enough to have been through four or five of these business cycles. I was laid off during one of them myself, and we've studied it and looked at it in a lot of detail in many, many companies.
Speaker 1 00:07:31 And what generally happens is when you lay people off, especially if you do it indiscriminately like Elon Musk's tweet today, they leave with a very bad taste in their mouth. I remember talking to the C H O of a, of an aerospace company that went through this. And what they basically told me was that the employees that leave that company have said to them, not only am I leaving, but I am never going to work for you again. And what happens when you leave or lose people under those conditions, they do all sorts of things that hurt you. They don't buy your product. They talk about what a bad company you are. They don't, uh, recommend your company to their friends, et cetera. And that's a, a little bit of a death spiral. So even if the economy slows down, you're going to have to take care of your people.
Speaker 1 00:08:19 Now, what we talked about in the conference is that this is a design problem. This is not a benefits problem. This is not a problem of simply giving people more stuff. So what does this idea of irresistible by design really mean? Well, I think a good way to think about it is the old versus the new in the traditional model of employment and HR. We give people benefits. We give them what is called the deal, pay rewards, vacation insurance, an office, flexibility, a computer, maybe some mental health benefits, a gym pass, et cetera. And these are gifts or rewards. We give to people to compensate them for the work that they do for our companies. And that's all historically based on the model of management and labor, where labor is doing the work and management is defining the work. But if you think about the way companies work today, where virtually every employee is a creator, a consultant, a service worker, a designer, an engineer, the benefits or the deal is really a very small part of the work experience.
Speaker 1 00:09:31 You know, a lot of the work experience is do I like the people? Am I growing? Am I doing things that I'm interested in? Am I contributing to society? Am I doing things of value to the customers or peers or stakeholders that I have, do I feel empowered by the company? Am I inspired, blah, blah, blah. All of those non intangible energy, creating things are not in the compensation and benefits package. They're in the rest of the company. And so irresistible by design is about thinking about all of those things. In the context of the business model, the products and services we develop and sell, and the technologies and what's happened in the last decade is technology has automated away. So much routine work. It's unbelievable and created a whole bunch of new grunt work. I mean, in our particular case, I'll just tell you about what goes on in our company.
Speaker 1 00:10:28 And I've been doing research and publishing now for 22, 23 years, we used to sit down and write stuff. We don't do quite so much of that anymore. We interview people, we record them, we tape record them. We transcribe it, we edit it. We talk about it. We curate it, we design it. We send it to different people. I mean, it's completely different now. So instead of paying people based on the number of pages they wrote, or the number of reports they published, that doesn't really make any sense anymore. We wanna incent people and train people and empower people how to capture content and get good ideas and put them into actionable form in a much more design oriented way. So we need to design our work, our jobs, our pay around this new world of what it really means to do research today. It's not the same as it was 20 years ago.
Speaker 1 00:11:17 That's true in sales that, you know, if you work in a Starbucks store, what I hear from the people I talk to at Starbucks is the reason they're having problem with unions is not because they're not paying people. Well, it might be a little bit of that. It's that the job got very, very, very complicated. They've got phone orders, they've got mobile orders. They've got people standing in line. They've got 85 different ways to make coffee, cold, hot, and warm sugar, no sugar. And, and the job just got very difficult and somebody didn't sit down and think, what can we do in the product and service for customers that leverages and takes advantage of our people in the best possible way. That's a new design problem. And I see this going on all over the place. We had a fascinating conversation with the head of HR, for Bosch power tools, and they make drills and sand and lathes and different tools that construction people use and home builders use in their homes.
Speaker 1 00:12:12 And he said, we were, we were functionally organized. We had sales, marketing, engineering, and then product lines for the different tools. And we could tell we needed new technology. We were getting AI into some of the software behind the tools where there's more advanced vision systems being connected to these things. And then of course the architectural tools that people use in front of our equipment is becoming more automated. So he, he said, we wanted to redesign the team to leverage these new technologies and to build better products and services. And he said, we decided we don't know how to do this. Let's have the employees figured out. So they built what we call employee centric, design process, where the employees took a step back and looked at what they were trying to do. And what they came up with was spectacular. What they came up with, and this was written in a case study is a structure around problems, not products.
Speaker 1 00:13:07 And what they did is they said, look, one whole category of problems we solve for our customers is beating holes in things, eliminating material and surfaces for other construction projects, you might think about a drill that does that, but you might also think about a saw that does that. Or you might think about a hammer that does that. So why don't we design one business unit around this problem of creating and aligning and eliminating and reducing the material for the construction process, cetera, et cetera, into different parts of their business. He said, and once we did that, we realized we don't need a central engineering group. We need an engineering group that works on those problems because that problem isn't always a drilling problem. Sometimes it's a measurement problem. Sometimes it's a depth of field problem, and there's all sorts of other aspects to it.
Speaker 1 00:13:58 So what basically came out of that is redesigning the jobs and the work around the problem they're trying to solve. And this is what our org design research is all about. So, so irresistible isn't about adding more benefits and doing employee surveys and giving people mental health and coaching and all that. Those are all great things to do, but it's really thinking about your company as a system of people doing great things on behalf of your business and your customers in the best possible way, and constantly thinking about what we can do to make it better and easier for the employees on behalf of the customers. Now, as you know, for all of you that have been on planes or dealt with customer service organizations, when the person you're interacting with in the company is maybe not able to do their job well, they take it out on you.
Speaker 1 00:14:49 Flight attendants is the best example. Flight attendants are some of the hardest working well-meaning people in the world, but you know, when the plane's impossible to use, or the bathrooms are full, or there's no room in the galley, or there's no room to walk down the aisle, they can't do their jobs well. So those planes are not designed for flight attendants. They're designed for passengers. I would imagine there's people in Boeing and Airbus that have been thinking about that a lot. And if you look at the old planes versus the new planes, the new planes have bigger gales, they have more room for the flight attendants to operate so they can do their jobs well on behalf of us, that wasn't the original idea for those planes. They didn't really think about flight attendants in the beginning. And I think you can take that irresistible by design idea, and you can extend it into all sorts of interesting areas of your company.
Speaker 1 00:15:37 Now, why is this more relevant now than ever before? Well, first of all, if you read my book, which is coming out this fall, you can learn a lot about the details of this, of why this is happening. And what's so important about it and also what to do about it. But I think the big story is this. We are in a period of time when a lot of things are colliding at once. And I mean a lot, we have the economic uncertainty, the end of a 14 year growth cycle, the war, the political instability, the internet cybersecurity, the pandemic, the semi response, but not really response to the pandemic, the demographic issues in the world, which are very significant by the way, people are living longer, but we're not having enough babies. So everybody's getting older, which affects the workforce, tremendously. The dislocation in the education system, with all this massive amount of student debt that people are carrying around in the United States, gun laws.
Speaker 1 00:16:33 I mean just a lot of things black lives matter. And it isn't any one thing. Now I remember in the 1960s, it was the Vietnam war, at least for at least a good five to 10 years. That was it. And then it was race riots. And then it was the economy and inflation. We got all of that stuff right now, plus a whole bunch of more things. So if you're a CEO or a CFO or a COO, you can't pick any one of these things. You have to look at all of them. And I would argue that one single thing that will protect you from all of that uncertainty is taking really good care of the people in your company, because the people in your company are your company. They are not the labor. They are not the expense. They are not the cost. They are the business.
Speaker 1 00:17:25 You know, as well as I do that, the longer somebody stays with your company, the more valuable they become. They know the culture, they know the processes, they know the business, they know the competition, they know the customers, they know the industry. You don't want them to leave. When I see people like Elon Musk, cavalierly saying, if you don't wanna come to work, you can leave. He doesn't understand that that's a going out of business strategy. If you have no competition, you can act that way, but nobody has no competition, at least not for very long. So this idea of irresistible, I design, isn't really just HR. It's a business strategy. And I run into companies that think about this all the time. CEOs often learn this during tough times. I don't think bill gates really got it when he was running Microsoft. But Satya Adela definitely does.
Speaker 1 00:18:15 Cisco gets this. IBM gets this. Walmart gets, this, Salesforce gets, this, L'Oreal gets, this. Unilever gets this. These are companies that have been through many economic cycles, many business cycles. They've seen disruptions in their industries and they've eventually come to the conclusion that the business they're in is really developing and taking care of and aligning people. That is what business is all about. Now, if you're an engineer or product manager or scientist, yeah, you gotta do that too. I mean, you gotta invent the next drug and you gotta build the next product and you've gotta create the best car and all that stuff. But you can't do that unless the people are on board with you. It's impossible. And I watch Elon Musk. I don't know him, but I mean, I just don't think he thinks that way. And you can be successful for a limited period of time by ignoring the employees.
Speaker 1 00:19:13 I mean, I've worked for companies that were high turnover companies and they thrived for a while, but eventually something happened and they didn't thrive. And that's why the subhead of my book is the most employee focused enduring organizations. You want your company to endure because as good as it may be now, there's gonna be a period of time where something bad's gonna happen and you want the people in the company to rise up and take care of it with you. You want them to lean in with you. So this irresistible by design is a very important strategy. All the discussions we had about resilience and recovery and back to work and hybrid work and mental health during the pandemic were really a bunch of learning about this idea of irresistible by design. Now, where is this all gonna go? I'm not gonna give you any more on this podcast, but I, but I do wanna reinforce where we are right now.
Speaker 1 00:20:06 It's the summer of 2022. I have no questions in my mind that the economy's going to be very jagged for the next six months or a year. We probably are gonna have a continuing decline in the stock market. You're all gonna be struggling to figure out what to do about inflation in your customer base and products and services and in your employee base, but technology's not slowing down. So industry, transformation's gonna go faster. If you wanna get a sense of what's going on in industry transformation, read our global workforce intelligence research. It's coming out. Now, we've looked at banking, we've looked at healthcare, we're looking at consumer goods. We're looking at pharma. Every industry we talk to is completely reinventing itself. And that's a great, great thing. So we're gonna be going through reinvention, recovery and economic adaptability all at the same time for the rest of this year. If you don't think having an irresistible organization is the best success factor you have against all that, then, you know, gimme a call and I'll try to explain it to you. By the way, what we do for a living is we study this, we communicate it. We give you great tools and research, and we educate you and your management team and your HR teams on these topics. We are here to help you and coming out of our conference. I just wanna reinforce how important this topic is. And I look forward to hearing from you.
