Episode Transcript
[00:00:00] You.
[00:00:05] Hi, everyone. Today I want to do a year in review in preparation for 2024. In January, we're going to be publishing my exhaustive report on predictions for the year. I've actually put a lot of time into this, and I won't spill the beans yet, but let's just think back about what we've just been through this year. Interestingly enough, the entire year, people were worried about a recession, and it didn't happen. In fact, economically and financially, we had a really good year. The inflation in the United States and around the world went down. We did have to suffer rising interest rates, and that was a shock, but that was long overdue. I really think the problem we have is we had low interest rates for far too long, to be honest. Consumer demand was very high. The business environment was good. The stock market ended the year on an all time high, nearly an all time high. The Nasdaq is almost at an all time high. The seven super stocks did extremely well. The big tech companies, the big retailers, the oil companies, many of the consumer luxury goods companies did extremely well. And the only companies that didn't do well were the companies that couldn't make it through the transformation that's going on. And then, of course, we had the Supreme Court overturning affirmative action in education, which led to a political backlash on diversity and inclusion. The woke mind virus by Elon Musk, further pushing back on DEI programs, which has made chief diversity officers life difficult. We've had continuous debate about politics, which 65% of Americans are sick of. Two wars, which have been very significant for many of you. I know a lot of you have closed down operations in Russia, and anybody doing business in Israel, I know, is having a tough time. And then we've had this continuous period of time where every piece of data about employee engagement shows that employees are burned out, tired, stressed. They feel that they're overworked. Yet wages went up by 5% or more. People who changed jobs saw raise wages of 8% or more. And the unemployment rate is very low. So there are a lot of jobs. So you could ask yourself, why are people stressed? And I think it's a continued overhang of the pandemic. The remote work challenges, the complexities and inconsistencies in hybrid work. And something else that's going on, and that is that the younger part of the workforce, who are going to be living a lot longer than people who are baby boomers, are basically saying, I don't really want to kill myself just to get ahead. I want to have a life I want to quietly quit. If you guys don't take care of me, I'm going to work my wage, meaning I'm going to work as hard as I'm paid, no more than that. And that mentality has created an environment for the four day work week, which I think is coming probably a little quicker than you realize. Unions, which are being sponsored by the Biden administration, but are in fact rising at sort of an all time increase in about 25, 30 years. Push for pay equity, which is a good thing to do. It's complicated. You can read it better than the predictions, but we've got to do it. And incredibly big demand for career reinvention, career development, growth, coaching, mentorship, allyship and support amongst the younger part of the workforce because they feel that they have been left behind. And that means that if you're in retail or hospitality or one of the other industries that hires a lot of younger people, you have to accommodate this tremendous demand for growth and flexibility in that part of the workforce. These are things that became very, very clear in 2023, and there was a lot of pressure on HR to figure out what to do with AI. Now, I think the biggest thing that happened in 23 was AI. AI has transformed the conversations we have about everything from media to publishing to HR technology to recruiting to employee development to employee experience, everything. You guys probably know, I'm very high on AI. I think it's going to have a huge transformational effect on our companies and on our jobs and our careers and our personal lives, in our health, our ability to learn, the way we consume news. I mean, there's just going to be thousands of things that are going to be transformed by AI. And of course, many of you are dealing with it and trying to understand it. And many of you that I talked to have been told by your ceos, we need an AI strategy for the company as well as in HR. And the AI strategy in HR is one thing, but the bigger thing is the rest of the company is dealing with AI, too. So we're going to have to be a part of all that, the transformation, the new jobs, the new roles and so forth. And then, of course, the other big thing this year is we launched Galileo, which about 500 or so of you have been playing with. And we're going to introduce the version for everybody in the membership in February. So you're all going to get access to it starting in February. It's basically ready to go. And then sometime in the summer, we'll launch it to the JBA community and to the broader community of HR. And I'll talk more about that in a minute. So given all of that that happened in 2023, most of which is positive, with some negatives thrown in, of course.
[00:05:34] Where are we going next? Well, you're going to read all about this in the predictions report, but let me give you just the high level story. For about a decade I've been, well, actually for two and a half decades, but really for a decade I've been writing about this flattening of organizations, breaking down of hierarchies, creating what I used to call the networked organization. And this is now mainstream and we've decided to call it the dynamic organization. And what we mean by this is that as you read about in the dynamic organization research or in the post industrial age study, it's discussed to some degree in both, is the functional hierarchies of jobs, careers, organizations and companies are being broken down for really good reasons. The reason we have functional hierarchies, job levels and siloed business functions, is because they're patterned after the industrial age when companies made money by selling products and services at scale. And the automobile industry, the oil and gas industry, the manufacturing industries, the CPG industries, even the pharmaceutical companies are essentially building things, bringing them to market, launching them and selling them and producing them through distribution in that order. And so we designed our companies to build stuff and sell stuff in that order. And we built large organizations for R and D, large organizations for product management and product design and product packaging, large organizations for marketing, large organizations for sales, large organizations for business development and distribution, on and on and on, supply chain, et cetera, including finance and HR. And all of these ten or 15 business functions had their own hierarchies. And you worked your way up those hierarchies. And when I graduated from college in 1978, you went into one of those hierarchies. You were an engineer, you were a salesperson, whatever it was, and you worked your way up. And at some point in your career you crossed over and did other things. But that was fairly unusual. That wasn't really the career path. You worked about 30, 35 years and then you retired. And a lot of companies had management and labor, and they were separate. Now, all of those artifacts, by the way, which helped us build most of the HR things we use today, everything from performance, management succession, career goal setting, leadership development, on and on and on. Even pay are being disrupted and broken down for good business reasons, not just because somebody kind of liked it or employees liked it, but for business reasons. Companies don't survive the disruption and the innovation of their competitors, if they can't move quickly into new markets, if they can't evolve products, if they can't do new science, if they can't stay ahead of technology. And the idea that all of these new ideas are going to come out of R D is crazy. I mean, it used to be true. R D is still important. But some of the most innovative companies in the world don't have R D departments. The R D department at Microsoft didn't even invent any AI that worked. The company had to partner with OpenAI, a company that has less than a thousand employees. OpenAI is a tiny little company and so I can say that about every business function. So what we've been going through in the dynamic organization and we've studied this in detail, you can get into the details, you really should, because this is c level stuff, is that we've got to build the organizations flatter. We've got to simplify the job titles and descriptions so people can move around. We have to organize people into cross functional teams, we have to motivate and train people to work across the functional silos. We have to build agile working groups, we have to redo performance management around teams and projects, not around individual goals and cascading goals. We need to build pay equity into the system so you're paid fairly regardless of where you started. One of the problems with the hierarchy is you get a raise every year based on your performance appraisal. And after a few years your pay may have been quite a bit different than somebody sitting next to you simply because of your performance appraisals. But you may not be delivering any more than them. Now that wasn't fair. If you came into the company with a background in marketing, you made less money than somebody who came into the company with a background in engineering. But five years later you might be doing the same stuff but making different amounts of money. And then there's of course gender and age and other things. So pay equity has got to get fixed. We've got to have developmental careers and talent marketplaces and open job opportunities and mentoring for people. And these people practices are the facilitation of becoming more dynamic. And the problem of not being dynamic is what happened at Salesforce. Salesforce, who's run by kind of a megalomaniac entrepreneur, hired thousands of salespeople during the last upcycle, right after the pandemic a year later, laid half a bunch of them off. Facebook did this, a lot of tech companies did this. Google's going to probably be doing a layoff, et cetera, because these companies thought that the only way to grow is to hire more salespeople or hire more engineers or hire more whatever. The quantity of people in one of these business functions doesn't necessarily drive your growth and profitability. It is the way they work together and what they do, not how many of them there are. And this whole idea that we're going to grow the company by hiring, hiring, hiring is gone. It doesn't work anymore. It's still a part of the growth part of the company. Of course, you're always hiring to replace people, to bring new skills, et cetera, and to bring new perspectives. But in a dynamic organization, a lot of the growth comes from within. People grow too. And even though the word growth mindset has been a little overused, you have to have an organizational growth mindset so that we will grow as an organization. Example of this is Intel. Intel lost their way in the manufacturing industry of semiconductors, by the way, also in the R D. They're reinventing themselves internally. They didn't hire some guru to tell them what to do. They know what to do. They just need to get around to doing know. Google has more AI engineers than OpenAI anthropic and all the other little guys put together, but they didn't execute well. Now they're executing better. They're going to stomp out the other guys in AI to some degree once they get it going. That's part of being a dynamic organization. You guys know better than anybody how dysfunctional it is when there are multiple groups in the company doing competing things and they're not working together because they don't know about each other, or they don't talk to each other. There's no cross fertilization or they're protecting their turf. All of these are the things that get in the way of being a dynamic organization. And the reason it's relevant in the next year is this has taken hold. These things like talent marketplaces and career pathways and skills based organizations, this, that, and the other skills based hiring, skills based pay, skills based careers, skills based development, et cetera, these are symptoms of the companies. Your companies need to be more dynamic. They're not just good HR tech ideas or somebody who just dreams something up. These are solutions to a really big issue that the hierarchical, functional companies from the early 19 hundreds don't operate very well anymore. Now this isn't an a b switch type of thing. This is an evolution, but it's taking place very quickly. And the reason we came up with this concept of systemic HR is we have to do the same thing. The HR function itself operates in silos. We've got the recruiting group, we've got the DeI group, we've got the comp group, we've got the L D group, we've got the business partners. We've got the group that does compliance. We've got the group that worries about well being. We've got. Somebody over here is doing an ex project. Somebody over there is doing a data management project, a people analytics group. Great. Okay. Those are all great functional areas that belong in HR. But if they're not working together on the problems that the company has, and I mean the big problems, growth, profitability, productivity, M A, et cetera, then who cares? Then you're at level one or level two in systemic HR. We built a systemic HR initiative around business problems. Companies kept telling us about not dreaming up what we think a new HR operating model could be. This is the big deal for 2024. Now, there's another reason and another accelerant of this, and that is AI. For those of you that have used Galileo, and I hope you all get a chance to use it this year. It's absolutely unbelievable how AI can pull together information, data, text from many, many sources in the company and make sense of how it all works together. You know as well as I do, if you've worked in sales, if you've worked in marketing, if you worked in finance, these are siloed groups. Very few companies have a truly integrated data management system for all of their customer data match to their sales, data match to their revenue, data match to their marketing, data. I mean, it's a nice idea, but it doesn't really happen very often, and it takes tens to hundreds of millions of dollars and many, many systems to do that. Well, AI does this almost automatically. So when you pull together a tool like Galileo, and you use our research as part of the corpus, and you add data about employee turnover, for example, in your company, or pay variations, you'll see the relationship between pay and turnover just by asking a question.
[00:15:25] You don't have to go spend four months doing an analysis and trying to figure out if the analysis is any good. And that's happening all over the company in sales and customer service and r and D and marketing everywhere. So this more integrated, dynamic organization is happening before your eyes. Now, I'm not talking about the customer go to market stuff, because that's not really what we do in HR, but of course, this has a big impact on what you do as you go to market. But internally, in 2024, this is the context for almost everything we're going to be working on now. The other context is the labor market you've read about from us and others. How tight the labor market is now. 3.83.7% in the United States, unemployment. Well, it's not going to get any better. I mean, even if we do have a recession, which is questionable, there aren't enough people to hire. The fertility rate is low. It's going to take 20. Even if everybody had three babies right now, which takes a year anyway, it would be 18 to 20 years before those people come to work. So all of the developed countries, US, UK, Canada, Germany, Japan, the Nordics, everywhere you go, with the exception of India. But by the way, including China and Russia, the fertility rate has been low for a long time. And there aren't going to be enough people. They're going to be fewer and fewer people, which means that you're going to have to be much more integrated in your hiring. And look at the four r's, recruit, retain, reskill, redesign. We're going to be involved in job stuff, a lot of career reinvention inside of the company, serious look at developing skills, not hiring skills, and using the tools we have as hr professionals to help the organization improve productivity without just hiring and hiring and hiring. I measure the success of companies by two things. One is their endurance. How well have they fared over ups and downs? The second is their revenue per employee. Companies with low revenues per employee tend to be poorly managed companies relative to their peers. Of course, there's a lot of industry differences. And when we went through our industry work, healthcare, consumer goods, pharma, banking, we could see the high performing companies were very efficient on a headcount basis. And the other reason that that's a very important factor is that we're living in a service economy. As I was doing the research for the predictions, I was reading a lot of stuff. And interestingly enough, in the United States, more than 70% of our gdp is now service services.
[00:18:05] So the people you have, the humans in your company, are the product. And if you're not getting good output per dollar of revenue per human, you're not running the company very well. And there's things that have to be fixed, management things. There's all sorts of other issues this year, how we're going to develop mid level managers better. How are we going to rethink the employee experience and engagement thing, which is 25, 30 years old and is in need of some updating. How are we going to implement AI in L and D and replace a lot of these old L D systems that everybody kind of hates, but we're stuck with what's going on with the ERP vendors. What about implementing talent intelligence? I'm going to keep pushing the message of talent intelligence and how important that is, whether you think of it as a sourcing and recruiting or an internal mobility or just a strategic planning initiative, and then your own comfort and familiarity with AI, which we're going to help you a lot with, with all the stuff we're doing. By the way, if you just use Galileo, you'll learn about AI just from using it. And then there's this issue of systemic HR and developing your team, your function, your operating model to be more adaptive and more dynamic. So I look back on 2023 and feel that it was one of the most fascinating and fun and enriching years that I've had. I am always amazed and impressed and energized by you, by you guys who were out there on the firing lines, dealing with these complex issues and companies with old technologies and all sorts of changes going on and how you're adapting. I continue to be more impressed and more excited about the HR profession every year. I think a lot of people who aren't in HR think we do a lot of compliance and administration stuff and we fire people. That is the tiniest part of what we do.
[00:20:05] I'm a little bit, I guess, disappointed that Sherm and some of the professional development organizations or professional organizations in this domain don't totally understand how strategic this has become. If you want to be a senior HR executive or a senior HR practitioner, you're going to become a consultant. There's no two bits about it. You're going to have to learn a lot of things. You're going to pick a lot of it up from your job, your careers, your experiences, your companies, and then you're going to become a valued consultant. And there's no question in my mind that over the next decade or two, it's going to become a bigger and bigger issue, how we manage people and companies. And I don't mean manage like supervised, I mean develop, move, retain, pay, et cetera, culture, all of those things. And so I leave 2023 very energized about what's to come and very excited about AI. And if you're afraid of AI, just take a deep breath and relax. It's not going to bite you. There's nothing evil here. It's a data driven system. If you don't have your data act together, you're not going to get a lot of good value out of AI. But I talked to Donna Morris at Walmart last week. I talked to nickel at IBM. I've talked to a lot of senior HR execs in the last couple of weeks about AI, including some senior folks at Microsoft the other day. They're all seeing huge returns on investment from the early implementations, and you're going to have a lot of options and you're going to have a lot of new tools and there's going to be vendor shakeout, et cetera, which is.
[00:21:43] So anyway, you can read all about this in January. The predictions is a chance for me to give you some deep perspectives on where I think things are going. Recap things that have happened over the last couple of years. Give you some perspectives for the years ahead. Year ahead, and we would be more than happy to walk through these things with your team. As you look at it, we'll be doing a big webinar. I'll probably put together a video, but nothing can really replace a good Q and A, too, so stay tuned for that. I hope you have a really nice holiday season. Take a deep breath. Try to not read the news. All it does is kind of get you upset. The world is never perfect. It's never been perfect. It wasn't perfect in the past. It won't be perfect in the future. But the environment that you live in and the environment that you create can be enriching and enjoyable and productive and healthy and fun and entertaining if you decide. And I think you all have the opportunity to make those decisions. So anyway, have a great holiday. It has been a pleasure and an honor for me to serve and work with you all this last year, and I'm really looking forward to 2020 before bye for nowhere.
