Episode Transcript
Speaker 1 00:00:14 Hey everyone, it's Josh person here. It's the end of May. We have a four day holiday weekend in the United States, so it's a little bit of time to reflect and I wanna give you some thoughts on what I call the calm. Before the storm. We've already been through a storm, of course, starting in February of last year. We went through a pretty deep storm with the pandemic, which of course required us to reorganize our lives and our businesses and our companies and our stock portfolios and our families. And lots and lots of things happened. And in many parts of the world, it's not over, but it is starting to end and many companies are going back to work and the economy's booming. So we're really entering a new era over the next year and a year and a half that I think is going to be incredibly violent in a way, in a positive way.
Speaker 1 00:01:04 And so let me give you the themes of what I believe the storm is that are coming. The first storm, of course, is the job marketing economy. A lot has been written on this, I've written a lot about it. Uh, the unemployment rate is plummeting. The job market is creating jobs very quickly. Most of them are service jobs. The manufacturing economy is constrained. In fact, supply chain for parts and products is very tight. My daughter's been trying to get a couch for her apartment now for two months, and it's still two months away. I ordered a new laptop today that it's not supposed to be available for 90 days or longer, but there's also a supply chain for people that's being constrained. We don't have enough workers, we don't have enough skills, we don't have enough labor, we don't have enough manufacturing people. So most of you who are employers and HR people are going to be doing a lot of work on internal mobility and re-skilling and very creative recruiting practices, including throwing money at people to make up for this exploding economy.
Speaker 1 00:02:04 I think it's great when the economy goes up, but I wanna remind you that it's very stressful too. <laugh>. I've been through a lot of economic booms, at least five or six of them in my career, and they're not always fun. It's hard to hire people, it's hard to keep up. Everybody is worried a little bit about whether they're growing as fast as they could or should compared to their peers. And there's not a lot of room for error during a growing economy because the companies that grow fast are growing exponentially faster than you are. So CEOs and shareholders get pretty hammered when you don't keep up. So that's number one. And I think that will be a pretty stormy period for the next year or two. It'll be fun, but it'll be tough. The second part of the storm is the financial storm. And I'm not a financial analyst, but I've spent a lot of time in the financial markets.
Speaker 1 00:02:53 And what appears to be happening is because the interest rates around the world have been low for, for so long and negative in a lot of parts of the world, people have been putting their money into all sorts of alternative assets. The stock market is one, of course, it's at, it's at an all-time high from a lot of indicators. So it's gonna drop at some point. Companies are trading at enormously high multiples. You know, the historic range for many, many decades of the stock market is a price to earnings ratio of around 14 or 15. It's in the twenties. A lot of companies are trading at 20 to to 30 times revenue. And of course the money that isn't going into the stock market's going into Bitcoin or cryptocurrencies, which are very, very volatile. NFTs, non fungible tokens, which are another form of currency where you can buy things that are electronic.
Speaker 1 00:03:43 And the reason for all of that chaos is to some degree a combination of low interest rates and not a lot of alternatives, and also a sense of fluidity of value. And to some degree, when you're bored, you know, when you're home from the pandemic and you don't have a lot of things to do, you don't see your earnings going up, you don't see your income going up, you tend to play games. And so there's a lot of gaming going on in the financial markets. And of course there are people that benefit from that. The hedge fund traders can benefit from it if they trade. Well, the venture capitalists are doing very well right now because so many companies are going public. But for those of us that work in larger, more traditional companies or have more traditional portfolios, we're gonna have to sort of wait this out.
Speaker 1 00:04:26 So, so I think there's a second storm coming of the shakeout of the financial market and the federal investments in the economy could be a part of that. The third storm is the United States Federal Government. There is about to be a 6 trillion budget passed in the United States. We are going to really deal with the issue of income inequality and infrastructure and education in the United States. We will see higher taxes, we will see higher estate taxes, higher capital gains taxes, and a lot of that money is going to get channeled back into the economy through infrastructure projects, telecommunications, healthcare, and my neighborhood in Oakland, they're talking about tearing down a massive freeway to rebuild parts of the city, which I think would be fantastic. And that's basically a zero sum game. All of the money that gets taken out of the economy and taxes goes back in.
Speaker 1 00:05:18 So if you're a wealthy person and you have a reasonably high net worth, it may feel kind of irritating that your tax rates go up. But actually your business life has gotten better because the economy is more vibrant. There are more jobs. And depending on what you do for a living, you probably benefit on the other side much more heavily than you pay in taxes. And that's gonna be a big change over the next year or two. And we're just at the beginning of feeling that storm. Now there's a lot of yelling and screaming going on in Washington about it, but, but it's no question in my mind that if you put that aside, this is absolutely going to happen in the United States. And you, the United States as an economy is somewhere around half the global economy. I don't remember the statistics, but the US is so much bigger than all of the other countries that we are, in a sense, defining many of the things that happen in the other parts of the economy.
Speaker 1 00:06:09 And the EU is doing the same thing. And the EU is experiencing a lot of the same economic trends that we are a little bit behind us. And underneath that federal stimulus is the problem in the United States that we have incredibly high income inequality and it's been getting worse year after year after year. The statistics on this are just staggering. It's not good for the political system, it's not good for everybody's lifestyle. We have people with guns running down the streets, shooting each other because of the economic stress that people feel homelessness. And so that's the third storm that we're gonna feel is this rapid and massive change of the social system getting involved in the economy. And I'm not gonna take a political position on that for this podcast. The fourth that I think is massive from the standpoint of view as a business person or an HR person, is this idea of companies as marketplaces.
Speaker 1 00:07:04 When I was at Deloitte in 2015 or 16, I wrote a big study on the rewiring of corporations and the flattening of organizations and the reduction in hierarchy and the moving to companies as networks. And there's been a lot of books written on that and a lot of thinking going on there. And we're building a huge organization design program in our academy right now to help you understand that. But the essential change is that everything about how an organization operates, which was defined in the early 19 hundreds around the railroads and the oil companies where we had management and labor, and everybody in the company was either management or labor. The labor had a union to try to give them as much power as possible. The management decided what to do and the labor did it. All of that is going away. Every job in every company is a value creating job.
Speaker 1 00:07:56 Every job, at least 90% of the jobs are service related jobs. Even a truck driver is a service person because he or she is providing services and making decisions and um, adding value in their own personal way to their job. Obviously sales, retail, and all of you that work in design, h r, it, you're all service workers basically. And so what that means is that every single part of the management infrastructure that was built for hierarchies, how we hire people, how we pay people, how we define job levels and job titles, how we decide who to promote what a manager is versus an individual contributor, all of that is under attack. And this is going to be a storm. It has been a sideline discussion and a niche market for many companies. And a lot of you have built agile organization models. We had Alex, the the c r O of Telstra on a webinar about a month ago, and she went through the details of how Telstra has designed the, the entire company around Agile.
Speaker 1 00:08:58 This is gonna be the theme of the next year or two. And one of the reasons I think this storm is coming is the pandemic proved to everybody that it was possible everybody who was debating it but not doing anything about it, found out that the only way they could respond to the pandemic was to create highly diverse, multi-functional teams that iterated every day on the safety issues, the back to work issues, the workplace issues, the travel policies and so forth. So they all got familiar with, oh, you know, this isn't as hard as we thought. Maybe we don't need all this hierarchical decision making. Maybe we don't need a bunch of committees that have to decide before anything happens. Maybe we can really empower these teams if we manage them well. And, and by the way, maybe we should set up performance management practices that facilitate that.
Speaker 1 00:09:42 Maybe we should set up career mobility that facilitates that. Maybe we should have an internal talent marketplace so people can find projects to work on that take advantage of their skills. And people doing projects can find experts much more quickly than calling the friend across the hall. So this is massive and my experience as an analyst in all the calls I'm in, every single company is doing this. The symptoms of this are purchasing and doing RFPs on talent marketplace software, decomposing jobs into fragments of jobs, weird job titles being created every day that are more strange and different than ever before. And that's because there really isn't a clear definition of a lot of these jobs. One of the big pharmaceutical companies we work with a lot told me that the science of pharmaceuticals is changing so fast. They can't post a job title and a job description.
Speaker 1 00:10:35 They look for people with certain scientific experience and they try to get them into the company because they know that there will be work for them and there will be a job for them because of their skills and experience. I just spent some time with Chevron over the last couple weeks. They're going through the same thing for alternative energy. I have to believe Exxon, shell, bp, all the rest of the oil companies are doing back flips to figure out what technologies they need. Another incredible story of success is Ford. The F-150 Lightning, which seems to have come outta nowhere, is the results of two or three years of effort to build skills in all the electronic systems it takes to run an ev. I remember talking to Ford about this two or three years ago when they were essentially crowdsourcing engineering expertise inside the existing engineering organization to find the skills they needed for EVs.
Speaker 1 00:11:25 And look where they are now. They have probably gonna be one of the most successful products Ford's ever created. And every single company has that opportunity if they decompose the hierarchy. And the reason I think this storm is gonna hit is the timing is perfect. We have a growing economy. We have all sorts of new HR tools, we have pretty good AI in the infrastructure inside of companies. We've learned a lot about this from the pandemic and the management. And these companies like McKinsey and P C G are promoting it cuz they can sell all sorts of consulting around it. So I think this is real and everything you can do to learn about flattening of organizations and empowerment and goal setting and teamwork and job sharing and internal talent marketplace is gonna be good for your career regardless of where you are as a manager or an HR person.
Speaker 1 00:12:15 The next disruption that I think we're gonna see during the storm is pay. And we haven't really talked about pay that much. There's been lots of research on why pay hasn't kept up. And the labor market bifurcating itself into highly paid and low paid workers. The need for pay practices and policies and labor unions for gig workers, everybody's pay is gonna go up. And I don't really think that's a good thing. It creates inflation, it raises expectations. People start to negotiate in unhealthy ways for their salaries. Budgets tend to get outta whack. I'm going back in time to the year 2000 when I was in the.com era and I told this story on an article. We were looking for Java engineers when I was a digital think, and also at the prior company we couldn't find them and we were paying, we had raised the pay for engineers to $275,000, $300,000, $325,000.
Speaker 1 00:13:09 I mean, this is the year 2000. This is 21 years ago. And it was nuts. We never were getting our money's worth for that, but we couldn't do any, there was nothing to do about it. So what that tells me, you know, as an employer is you've gotta be aware that your employment brand is much more important than pay because you'll never compete for dollars against a Google or a Facebook or an Apple or a Microsoft. They have unlimited dollars. But if your company is a great place to work, if you have a great mission, if you have a really great management team, if you give people a lot of opportunity inside the company, you'll get people that come to work for you. They'll love it. Pay is one factor, but it is not the most important factor at work. There are some companies, particularly investment banks, where all value is revolving around pay, where pay tranced, everything else in the evp.
Speaker 1 00:14:00 But that's very unusual and you'll find that for everybody that reacts well to that. There's probably 10 people who don't want to be a part of that culture. So that's gonna be an interesting time bomb that's gonna go off over the next couple of months. And for those of you in hr, I think it's well worth paying attention to. The next storm that's brewing is the storm for learning and skills technology. I've written a lot about this and I've come up with the name skills tech, and I think skills tech is a legitimate name for a whole category of software. And if you listen to the podcast I did on Skills taxonomies, you'll understand it's a little bit of a tricky area, but every software company that served business in the HR domain, everybody from payroll companies to learning companies to recruiting companies to rewards companies, even communication systems are capturing through AI inference data about who you are, what you're communicating with, who you're communicating with, what your mood is, what job experience you've had, what education you have.
Speaker 1 00:14:59 And there's no perfect or Bible on how to do this. So everybody's coming up with new models and I tend to look at a lot of these models as an analyst and they're fascinating, but everybody's in early r and d. Why I think it's a storm is that everybody's gonna be buying this stuff. Everything you buy for recruiting is gonna have a skills AI inference engine in it, and it's gonna try to match candidates to jobs. In fact, one of the recruiting companies I just talked to yesterday told me they have a new tool which is gonna be essentially an autonomous recruiter. Somebody will apply to a job, the system will scan their background and their social footprint and their resume and whatever assessment data they get, they will match them against an opportunity inside the company. They will send them a series of questions on their availability and pay and other screening criteria and they will schedule an interview with the hiring manager, be qualified, pre-screened, all done by ai.
Speaker 1 00:15:57 And I don't think that's such a bad idea. I I think that's actually gonna work. It won't be perfect, but it's a good idea in learning. Of course, this has been going on for about four or five years. You can log into an LX P or a learning platform and the system either through your company or you upload of information on terms of who you are and it immediately starts recommending stuff that you should be consuming. And it's pretty good. It's not perfect, but the more you click around and consume learning, the better it's gonna be. In fact, our academy does this too in, in your career, a talent marketplace, which is now the most common new product coming from every vendor in HR is an AI recommendation engine for jobs. So you have a job, you're busy, you're doing your thing, you're getting paid, you like your work, the system says, Hey, did you know this was a project going on so-and-so and you would be a good fit for it?
Speaker 1 00:16:44 Would you be interested in it? You go your manager and you just say, Hey, this looks like fun. And your manager goes, okay, great. Why don't you spend a couple hours a week on that? Let's see what happens. So you all of a sudden you've got something else to do facilitating this dynamic organization model. This is everywhere. Every vendor's working on this and the more sophisticated vendors have it working. We did a webinar, uh, early last week with, uh, Schneider Electric and Unilever and Matt Life and Novartis, and they are doing talent marketplace stuff now. And by the way, the word marketplace is a big word. Marketplace doesn't just mean you get to shop around inside the company for a job. It's a different financial and economic model. And so let me take a minute and talk to you about that one. If you look at Airbnb versus Hilton or Marriott, Airbnb is, I don't remember, five to 10 times the market cap revenues are much less, but the market cap is astoundingly higher.
Speaker 1 00:17:42 And the reason is Airbnb has no infrastructure. They don't, they don't run any facilities, basically a tech company. And what happens in Airbnb is they can instantly respond to demand. If a whole bunch of people want to go to Las Vegas or if they wanna go to Arizona because it's cold, all of a sudden a bunch of places are available in Arizona. And if somebody's house is crummy and they don't take care of it and maybe the appliances are broken, it gets poorly rated and people don't go to it, the marketplace manages itself. Now in companies, going back to the beginning of my podcast, we built systems around managers. The managers made all the decision who got hired, who got paid, who got promoted, who got this job, who got this assignment in a marketplace, we don't need managers so much. They're still there and they're still making a lot of decisions, but the system starts to intelligently operate and and allow mobility and change to happen without management.
Speaker 1 00:18:38 And that is a big deal. When we talked to the head of the open talent market at Schneider, Jean Pechi about it last week, she said The biggest disruption is the fact that managers in HR people have completely different jobs once we have this marketplace. So this is a big storm that's gonna hit you in the next year or two. And I think we've had a calm period during the pandemic of doing this kind of at a crisis, but it's gonna be a big change. Also, the final, uh, disruption or change that I'm gonna be talking about a lot over the fall, both at the HR tech conference in Vegas and then through all the research we're doing is work technology and HR technology itself. The HR technology market is absolutely different than it was two years ago. We still need core systems and we still need great data.
Speaker 1 00:19:25 We still need ease of use, we still need accuracy in these platforms. But the biggest thing that's changed is they are now experience management systems. Every company needs to and wants to design particular experiences for their people that are unique to their business area, at their company, their department, their country. They can't buy an off the shelf product like Workday and assume it's gonna be great for everybody. And I love Workday, it's a fantastic product, but most people tell me it's hard to use. And so they even wanna take Workday and turn it into a creator tool. That's why Workday built the Workday People experience. I happen to be working with a lot of vendors on some new things coming out this fall, and you're gonna see a massive barrage of creator tools, experience management tools, journey development tools and AI enabled employee-centric tools come into the HR tech space.
Speaker 1 00:20:18 And so the blending or the marriage between HR tech and work tech is here. And I would not be surprised depending on how many people come to the HR tech show in Vegas at the end of September, if you see almost every vendor talking about how their HR technology works with Microsoft, works with Google, works with Facebook, works with Slack, works with other productivity tools because the productivity tools market has exploded with growth. If you look at the, at what Salesforce paid for Slack, which I think they overpaid 45 billion companies like Loom, the new products that are available monday.com, which we use just this barrage of productivity tools, all of which are incredibly powerful, can be stitched together with HR technology in a whole new infrastructure that we've never seen before. And that is a huge storm of change. Now, for most of you in big companies, you can't adapt to all that immediately, but you have to look at it, you have to put it in your roadmap, you have to consider it.
Speaker 1 00:21:19 You have to reimagine what your employee experience will look like with these new tools. Anyway, this is a calm before the storm because a lot of the things I'm talking about are growing quickly, but they're not here yet. So the reason I wanted to put this into a podcast is give you some thoughts to think about over the summer. You can have plenty of time to deal with these issues, but I think come September of October, the issues of the tightening labor market, the change of the economy from the federal government, the change of wages and the need for new focus on employment brand and retention and attraction, the focus on work tech, the focus on skills tech, the focus on employee experience, journey, and creator tools. These are gonna be real. These are gonna be big deals for you. And the final thing I'll say is in the middle of it all is the need for HR people to stay up to speed and skill yourselves.
Speaker 1 00:22:13 You know, this is what I've been doing for three years since I left Deloitte, is focusing on the capabilities of hr. I know for a fact statistically that the number one thing you can do to improve the retention, attraction and employment brand of your company is to upskill hr. I have data to prove that if your HR people don't know what's going on, if they feel misaligned, if they feel behind the curve, if they're unaware of these issues, if you're not talking to each other, you're going to be held back. And that's really what we're here to help you with, is to make sure that doesn't happen. The good thing about all of this is that if you're an HR business person, this is gonna be a magnificent time for your career. We're going to have some amazing opportunities to add value in the economy to individuals, to society, to our companies, to ourselves, to our families. And so I'm really positive on the new world of hybrid work and the new world of work tech that we're going into in the fall. Thank you for your time and as always, I would love to hear from you on any of these topics.
