Episode Transcript
[00:00:06] Hello, everyone. Today I want to talk about three somewhat unrelated topics that are actually very related. I want to talk about the shooting of the CEO at UnitedHealth Group, briefly. I want to talk about income inequality and the American dream. And then I want to talk about AI. And then I'm going to talk about HR. I'm going to do this in 20 minutes. Okay? So I don't need to repeat the story of what happened in New York this week, but it's a symptom of many, many things going on in the United States. But the one that to me seems the most obvious is people are unhappy with their healthcare services and someone, an individual or a group of people, struck out and did something about it. And that is an indication of many things. Perhaps an isolated instance, by the way, but it's really a symptom of something that I see much, much bigger, and that is the activation of individuals. We call it, in the case of hr, employee activation. And the reason we use the word activation is because what's happened over the last several decades, but very acutely in the last 10 years, is employees and customers have risen up to take control of their situations and strike out or strike back or speak up in a very activated way. And the word activated means they can do something. Now, in the case of employees, there are a whole bunch of factors here. Employees can give you feedback, they can make comments on social media or internally, they can quit, rage. Quitting, it's called. They can create problems, they can steal things, they can break things and so forth. And as I'll talk about in a minute, they're kind of upset. A lot of the data that comes out the last few weeks shows that employee engagement levels are fairly low, trust levels are fairly low, and everybody is worried about AI. 70 plus percent of people surveyed by ADECO last month showed that the number one issue they're concerned about is what's going to happen to their job in the world of AI. So they're coming to work right now concerned. And you know as well as I do that their earnings are not keeping up with the standard of living and inflation. And that leads me to number two, the American dream. So for those of you that live in the United States, you know what I'm talking about. Others, you probably understand this concept. One of the visions of America, which has been true for a long time, is that if you come to this country, you can create a life where your children have a better and improved standard of living than you. Now, for me, born in the 1950s, this has very much been true. My father was a scientist. He was very well educated, had a good career. My brother and I have had a much more successful career financially than he did because we were well educated. We happened to be born at the right time. We were given opportunities to do lots of interesting things. We both had entrepreneurial instincts, et cetera, that worked great for people with college degrees. In fact, the standards of living of people with college degrees have continued to go up, but in a very narrow band. And as you know, income inequality in the United States is getting worse year by year with a very small number of people seeing the benefits of this growing economy. However, here two thirds of the workforce does not have a college degree. And if you look at the data on them, and I'll send you two links on the notes here, a very high percentage of them are making less money than their parents did at their age. And their expectations for future earnings are far below that of their parents. And so for those parents that did not generate enough wealth to pass to their children, they are going to live in a world where the children's potential lifestyle will be less than that of their parents. That's very upsetting to people. There's lots of contributions to that. You can blame immigration, you can blame outsourcing, you can blame automation, digital transformation, lack of education, many, many things. And a lot of people and companies are trying to fix this, of course, but this is the reality. Raj Shetty's research shows this. I'll show you the research from several other sources in the link. So here we have a workforce that is activated, a workforce that is under stress to some degree. Not everybody, but a large percentage, a very low unemployment rate, which means that there are jobs available. And with the exception of highly credentialed and highly certified jobs like nurses, most non college educated workers are worried about or are seeing their earnings and standard of living flat.
[00:04:49] Now add the inflation, this becomes much worse. People's expectations for their earnings are higher, my frustration levels are higher. And we have endless political arguments about the state of the economy. And you know that in the United States, for those of you who live here, the big real issue that somewhat drove the election was the fact that the lived economy here is not the economy you see on the front page of the Wall Street Journal. The GDP has been going up, the unemployment rate's been low, and everybody feels like they're falling behind. It's sort of weird, but that's the way it is. And I see evidence of that all over the place in all the research I look at, okay, so that's topic two, topic three, AI. There is absolutely no question in my mind, because we're so into this, that AI is going to radically transform White collar work, sales, customer service, healthcare, finance, hr, marketing, all of these jobs that have to do with information, data, creativity, words, writing, communications are going to be radically changed. And I have lots of examples. Examples, by the way, we're going to see a really significant report from us in January on the rise of the super worker. That's our predictions this year that explains this. And so we as HR people are going to be very involved in evaluating and implementing many forms of AI. Some will be tools like Galileo, some will be more integrated systems. And in those implementations we're going to have to make decisions about what happens to the people, what happens to the team, what happens to the organization, who's in what role, what roles change, who takes care of the AI, who takes care of the customer, who manages this, who's a leader. And then we get into issues about org design, pay, accountability, rewards, et cetera. And we've already had several years of efforts in many companies on pay equity. We're going to go through much, much more of that in the next few years with AI. And most CEOs and CFOs are going to look at this and they're going to say, well, this is great. We can buy all this AI stuff, capitalize it and we can get rid of this expense of labor. Because we treat labor as an expense and AI as capital. By the way, that's a big problem. I'm not going to change it myself, but we should really be thinking about labor as capital. And the tendency will be, and I'll give you an example of this in a minute, to reduce wages, let people go, reduce the size of the teams and measure our productivity as output or revenue per headcount. And we'll be really, really proud of ourselves about how small our companies have become. And my argument is that you will be making a huge mistake if you do that for many, many reasons. And it has nothing to do with the beginning discussion of income inequality. Yet, number one, these systems are not like ERP systems. You don't turn them on, teach people how to use them and walk away. They're non determinant learning systems. They get smarter and smarter and better and better over time. You literally have to train them, you have to manage them, you have to monitor them. And if you do that, they become exceptionally powerful in customer related and internal related processes. There's going to be A whole army of jobs around the management and training and usage of AI. Second, most experiences with automation that I have run into have shown that the problem companies have with growth is not that they're not automated enough, it's their customer experience. Target, for example. Target, magnificent company. I've interviewed them many times, visited them. Bringing luxury to affordable communities is struggling to continue to grow because their customer experience has really declined. It has nothing to do with automation. It has nothing to do with supply chain, the stores, the way, the lines in the stores, the service that people get, the experience. They're not going to Target anymore. They're frustrated with Target. Why do you think Starbucks is going through a massive redesign of their stores? It has nothing to do with the quality of the coffee or the supply chain of the coffee. It's the customer experience. It's the way people feel. It's the busyness of the employees. In fact, one of the problems Starbucks ran into, and we know this, is that they put a metric on the employees in the Starbucks to hurry up and create a certain number of coffee drinks per hour, which made it impossible for them to look up and say hello to their favorite customer who walked in. And that's, of course, commoditized Starbucks to the point that it's not growing at the rate it was. And I can give you another example I'm gonna give you in a minute. So, and by the way, consider a bank. I mean, one of the situations I talked to last week was about relationship banking, or what's often called wealth managers. You have a bank, you go in, you want to manage your money, you want to give them a bunch of your cash or whatever it may be, and you want their advice. You don't want an AI system to do that. You want a human to do that with the AI helping them, giving you the best possible information and streamlining the process so they don't tell you to call 5, 800 numbers to get support. And by the way, banks are notoriously bad because of that. Those are the things that are going to drive value. And behind those things, by the way, recruiting is a big part of this. I'll talk more about that when you read the report coming out in January. Is the employee and the customer experience that remains paramount. Now, if you take the mentality that the purpose of AI is to reduce the number of humans and reduce our cost of labor, you're not going to see that benefit. You're going to end up with an automated company that loses market share to its competition and might be very exposed to the risks or limitations of AI. And by the way, AI is going to be a commodity. Everybody's going to have the same AI. You think the Microsoft copilot is a competitive advantage? No, everybody has it. You think Galileo is a competitive advantage? It is if you know how to use it. But everybody's going to have that. So these things that are very malleable, these new tools are going to have to be integrated into our business processes in a customized way so that we deliver the best possible value add employee and customer experiences around them. And that means that the jobs and the roles and the skills and the responsibilities of the humans are going to go up, not down. And that's my argument about what we call the rise of the super worker. Now, you're going to read all about this in January. I can't give you the whole story now, but I think we're entering a world where we, as HR people and as business leaders are going to have to think about human capital a little bit differently. Not just augmented by machines, but literally becoming super workers. Going back to the beginning of the conversation, what does this have to do with income inequality? And what does this have to do with activation? If we don't activate our employees, who by the way, have lots of options, they can work part time, they can change jobs, they may want to take a longer time on their career and take some time off, they may execute what is called rage quitting. They may just quit and just leave you with a hole with no warning. We can improve that. We can improve employee experience, we can improve customer experiences and we can have spectacular improvements and productivity output per hour, output per dollar, output per worker as well. But not by reducing the number of heads and the quality of work that people do. And we have examples of that. And let me close with one personal example. It's particularly bugging me. At the moment we have a reasonably good sized online commerce business for our Academy and for Galileo Pro. It's not huge, but it's pretty big. And we have a payment processor that we work with on that. And about a month ago they stopped paying us. And there is a page on their dashboard that says payouts, paused contact support. So you click on the button to contact support and you get a case field and you open a case and it goes into some chain of emails and you're supposed to hear something back and you don't hear anything back. Eventually you get an email from support from some human being with one first name, no last name, no employee number, and says, your case is under review. And you know what? Nothing happens. And they're holding a lot of our money. This has been going on for a month. We've had calls with case managers, by the way, none of the case management people have managers. None of them have last names. None of them have employee IDs. So when you call them, what they say is, we don't really know what's going on. We have a team working on it, but we don't know what they do. So you're going to have to wait. And we've waited four weeks for a significant amount of money with no resolution, no ability to escalate, no interest in them escalating. And in fact, I think a lot of them are probably in Singapore and probably don't even know much about the company they're working for. We're probably going to change payment processors when we get time. There was no reason for this to happen. But I'm sure the CEO of this company is very proud of themselves for reducing the cost of customer service and having very high levels of quote, unquote productivity. But it's obviously not working for us. And I'm not saying we're a giant customer, but we are a customer and we're experiencing it. And so I am seeing, and I'm sure a lot of you have this experience, exactly what happens when you use automation to reduce labor. It can go backwards, it can backfire. And in this particular case, in the age of AI, we have the most powerful form of automation we've ever seen. Systems that learn, systems that can aggregate many forms of data, systems that can take different actions, systems that can reason. So my suggestion to all of you is to take a look at the article I wrote this week on job design and think about what you can do in the coming year to help your company develop a strategy for super workers. And you'll see what a super worker is. As the report comes out in January, this, to me, is the real future of AI. Yes, companies are going to scale more. Yes, companies are going to be more productive. Yes, there's going to be more automation. But the human part of our businesses is never going to go away. And so whether you're a recruiter or a learning person, or a business partner or a line manager or a salesperson, your job is going to be that of a super worker. And if we consider that in our pay strategies, our reward strategies, our engagement and training strategies, and our management development, we're going to help our companies become spectacularly successful in the year ahead, a lot more will be coming on this topic, and I love to talk to anyone about it. We have lots of interesting projects going on in this area and you'll be seeing more soon. Thank you.
