Episode Transcript
[00:00:00] Good morning, everyone. Okay, we've had Tariff Liberation Day yesterday and the shakeout has been felt everywhere. It's now time to think about what's next. So what I'd like to do is take 15 or 20 minutes and talk about the impact of the new tariff regime on HR and what you're going to likely want to do. So, first of all, you've probably all read and heard about the tariff, the reciprocal tariffs that the, the Trump administration launched yesterday. And they're using a flood the zone strategy of announcing 130 tariffs at once. Apparently there were 130 tariffs announced, which means that for a company, an employer, it's pretty hard to tell what the implications are going to be globally, except that it's going to be very expensive to sell into the United States unless you're doing business and manufacturing goods in the United States. And today, Friday, so far, it's only early in the morning.
[00:00:59] Various parts of the world have already created reciprocal tariffs. China, for example, and the Europeans are considering tariffs on services, which means that all the Internet services and professional services would be tariffed to retaliate against the United States. So there's lots of uncertainty. And since most of you, in fact virtually all of you, probably work in companies that are global, it's not clear what's going to happen or what to do. If you're a retailer and you have lots of manufacturing in Thailand or Vietnam, you know you're going to feel a huge pinch here because your cost of goods just went way up, at least if you want to sell in the United States. But I'm not sure where you go except back to the US and for those of you that are in the manufacturing industry, let me just take a few minutes and talk about it. I talked with the founders of Drop about it last this week. And you know, manufacturing isn't all blue collar work. There's a new regime of manufacturing work which is a much more complex set of skills. We actually unlocked a lot of this in our industry research, our GWI research. So if you decide you want to move semiconductor manufacturing to the United States, or furniture or whatever it may be, you've got to buy and build machines and equipment and you need process engineers and you need technical people, software engineers and labor. So, you know, when Trump has people with hard hats sitting in the audience in the Rose Garden, it's very misleading. There are assembly jobs, but the assembly jobs are the low wage jobs. In fact, I did an analysis and I put this on LinkedIn a couple of days ago. The Average, quote unquote manufacturing worker, which refers only to the blue collar type of work, assembly work, only makes about 50 to $55,000 a year, which in the United States isn't poverty wages, but it's certainly not a high wage. Whereas a software Engineer or a PhD in data, of course makes two to three times that, or at least 50% more. So, you know, this idea that you're going to move a bunch of plants here and hire a bunch of people to do these low wage jobs may not be as easy as it sounds because we have labor unions, we have a very high cost of living in a lot of parts of the United States, much higher than the Vietnam and China. So it's not an easy decision to pick up and move the Apple manufacturing from China to the US. Now, Apple has announced that they're planning on investing in the US But I don't know if they're really going to build massive manufacturing plants here that hire a lot of people. They'll probably build massive manufacturing plants that are very automated. So there's going to be a lot of discussions in companies about what kinds of manufacturing strategy we need, where we place it, and therefore what labor needs we will have. And labor is not as mobile as you think. You know, years ago we had a very dynamic economy where people picked up and moved a lot. They don't move as much. So labor is a constraint. If you move or build a plant in a city where you don't have enough labor or the right kind of labor, that's now your problem. So it may be a benefit in the case of you training people in that city, you may actually find people that want to work in your plant that are easy to train and really motivated. But you also might find a lack of technical skills or other skills if you're not careful. So I think what's going to happen in HR going forward is a couple of things that are really important. The first is you need to be very good at talent intelligence. Now, talent intelligence is a total buzzword. It means almost nothing. There's so many vendors using it. But what I think of it as is using labor market data, skills data, jobs data, to figure out what skills you need, what skills you have, and where in the world is the best location to either source those skills, source a plant, or source a manufacturing R and D and center. And, you know, I think sophisticated companies do this all the time. I talked last time about, you know, the automobile manufacturer in Europe that moved their plant into a small city because the labor pool was Perfect for them. But those kinds of discussions, first of all require you to understand the skills of a manufacturing team. And according to my conversation this week, they're very complex. It's not as simple as looking for blue collar label that can do assembly. There's a lot of other things needed. You need supply chain skills and supply chain engineers. So that's number one. Now, in order to do a good job of talent intelligence, you can call Lightcast, you can call drop, you can use Galileo. By the way, the new version of Galileo that's coming out next week has the entire Lightcast data set in it. I'm going to talk more about that later because we're going to launch it on Tuesday or Wednesday. But you can literally go into a system like Galileo now or one of these other platforms and you can ask it for skills by location, skills, skills by job title, demand by skill, demand by job title, and do that kind of analysis. So I think that's going to be a really big topic in a lot of companies to deal with this new regime of complex new decisions to be made about where to locate manufacturing facilities. The second thing that's likely to happen is prices of many things are going to go up because basically the tariff is a tax. I mean, it sounds more complicated than it is. It's really just a tax, but different type of tax. And so the US is essentially saying that we need a trillion dollars of tax revenue to pay down our debt, so we're going to take it out of companies. Now, companies don't just pay it, they pass it on to their consumers and raise prices. You know, if my cost of goods went up, we would raise the price of our services and we have no choice, right? So these will result in higher prices, which then in turn creates lower demand for a lot of things. So we're in a high tax regime. And I know the plans are to lower the US income tax and have a no tax on tips and a few other little things like that. But generally speaking, what most economists are expecting is an increase in prices. So that changes the product mix in companies because when the price of a simple of a single raw material goes up more than another one, you may want to design things differently, you might want to go to market differently, you might want to reallocate resources. So the second impact of the tariff regime is organizational redesign. And this has been the hottest topic of the year. We have a great course on org design in our academy. You should check it out. It's one of the best courses we ever built. We Have a extensive research study on how to do org design that's in Galileo. And you know, so there will be projects and needs for you to work with manufacturing groups, product groups, engineering groups to redesign how people work around these changing products. And that gets into issues of recruiting or internal recruiting. Now, you know, I think I've mentioned this multiple times. All of the talent acquisition leaders I've talked to in the last two or three months have told me the biggest issue they have is internal recruiting. And I think the reason for that is not only these readjustment and realignment projects going on inside of companies, but also the CEOs are a little bit worried about hiring because of this economic slowdown and potential recession from all these tariffs. So this idea of hiring an internal mobility is really caught fire. And you don't need a talent marketplace to do this. I mean there are talent marketplace tools and vendors Gloat Eightfold has one, workday has one, SAP has one. There's a lot of them now, actually quite a, quite a few of them. But a lot of it is having good data about your people. There's a really interesting tool from SHL and we partner with SHL and Galileo. By the way, you're going to see an announcement next week on that that allows you to look at the 90 some odd soft skills that define virtually thousands of jobs. It's called the Universal Competency Framework. It's the most robust soft skills framework that I've ever seen and you really should check it out. We're going to announce the availability of the UCF in Galileo next week and it allows an employee to assess their soft skills in 15 minutes in a very complete way and then you can match those skills to against jobs. And the reason it assesses soft skills, and I mean the word soft is just a little bit of a loaded word, is it is the soft skills that are hard. It is the soft skills that are hard to change. The hard skills are easy to change. If I'm a software engineer and I want to go from Java to C, that might take me a couple of months to learn how to do. But I'm not going to learn how to become a P and L leader in a couple of months, that's going to take me a few years of experience. So. So there will be a need for you to get involved redeployment stuff if you're not already. And there's some great tools for it. So I would look at the SHL talent Mobility tool, I would look at the talent marketplace tools and just, you know, start thinking about that. And the issue in talent acquisition is not that they don't agree with it, but they're always not. Not always involved. So really, ideally, in order to handle these internal mobility needs, the recruiters should be scanning and scoping internally, and they should get to know the pools of talent inside the company as well as the pools of talent outside the company, because recruiters are really powerful, useful people for those kinds of activities. So that's number two. Number three is, I think it's pretty clear to me from the data that I'm getting from most of the companies that I talk to that things have slowed down now. The job numbers just came out today, and 228,000 jobs were created in March in the United States, which is a good number. The unemployment rate is 4.2%. So you could argue that the economy is strong, but every single economist is forecasting a slowdown in the United States, a significant one. The consumer sentiment is very negative. And CEOs see all this data and they're pulling back. I know the AI companies are investing like crazy in data centers and engineering stuff, but generally speaking, it looks like demand is going to come down from all this uncertainty. And so the third big issue relative to the new regime is systemic HR and tightening down the HR function itself. So I would guess that your chro is getting pressure on projects and initiatives to transform the company itself and transform the HR department at the same time. Bring in more AI, reduce the number of recruiters, reduce the number of L and D people, reduce the number of business partners, simplify the tech stack, all of that. That's always a healthy thing to do, but it hasn't happened in a while. And I think I've been through this before. I remember in 2008 when everybody was kind of throwing away all sorts of stuff. I think this is a really good experience. It may result in people changing jobs in hr, it may result in some downsizing in some different groups, call centers and so forth. But it means you've got to strap yourself in to the AI revolution. And as I've been talking about the last couple of weeks, and we're going to keep on this, we're doing a lot of studies. This is a revolution taking place. Talent acquisition is going through a revolution. Learning and development is going through a revolution. We're going to announce and launch a pretty massive amount of research at our conference on the learning and development industry, and it is going to change a lot. The traditional learning and development organizations are quite overstaffed. To be honest, not because they're doing anything wrong, but because they're not using the modern technology that's available. We talked to a company yesterday, I'm not going to mention the name because they're going to be at our conference. Hopefully 6,000 employees, pharmaceutical, very highly regulated, lots of compliance training, lots of normal leadership development, onboarding, hiring, professional skills, technical skills. 10 people in L&D, only 10.
[00:13:32] They have built GPT chatbots for everything. They use all the advanced AI for content and content development and learning. And they are the definition of the revolution going on in L and D. Same thing in TA and Talent Acquisition. Companies that implement these new agents in TA and you know who they are, and there's some really exciting new ones. The one we're working with right now is called Maki People. Amazing new company. We're going to have Maki CEO on the phone with me here the next couple of weeks. You'll get to meet him. Same thing, recruiting schedulers, maybe fewer recruiters, fewer sourcers, a lot less administration, a lot faster process. By the way, speeding up is the story here in L and D and in Talent Acquisition. These tools don't just reduce people, they actually speed the process faster. Time to recruit at the same quality or higher quality of course, means more revenue, more adaptability, higher OI in learning and development. You could argue that maybe the AI driven tools are not as snazzy as doing it by hand. Doesn't matter because you can do it 50 times faster. So instead of taking six months to build a course, you can build it in a few days. And if it's not perfect, you can iterate on it minute by minute and Translate it into 15 languages with the push of a button. So speed is the answer. And speed creates efficiency and iterative design and quality improvement too. So that's number three is there's all sorts of things in hr, of course, employee services, self service portals, all of those things are going to be the big theme of this new era that we've entered. Now. From my standpoint, as an older guy, I don't think this is a crisis that we're going through. Although the stock market is pretty volatile at the moment, I think this is a very big economic change and it's going to be slowed down for a while. It's just a lot of uncertainty. This flood the zone strategy going on in Washington is very difficult for CEOs and CFOs to make sense of and there will be new alliances and probably new trading partners around the world. Well, it's very exciting to me frankly that the Europeans are really coming together. All 27 countries of Europe now are sort of acting as one. And that's great. I mean I find the European countries, companies I work with, some of the best run companies in the world. I don't know what's going to happen here in the us. I think things are a little more chaotic here at the moment, trying to figure out what's going to happen next politically. But you know, these three things are going to be part of your world in HR for a while. Number one being talent, intelligence. Knowing the skills you have, knowing the skills you need, knowing the location of the skills and getting really good at analyzing that information which can be used for many, many things. For sourcing, for location analysis, for development, for internal mobility. Number two, really ramping up your skills at redeployment of people inside the company. This is discussed extensively in the Rise of the Super Worker. And number three, learning how to move faster and do more with less. I like to call it the lean mean HR department. The lean mean learning and development department. The lean mean talent acquisition department. We don't want to keep bulking up with more and more and more people because it slows us down. Now reductionism or minimalism, whatever you want to call it, is sometimes hard because sometimes you do have to redeploy people and let some people go. But the benefits are massive. You end up with greater talent density, you end up with faster time to market. Everybody feels more empowered about their jobs. And as HR people, where we have hundreds and hundreds of things to think about, we can get more focused on where we're going to spend our time and our energy. So that's a little bit of sort of reaction to the tariff. Now two more things and then I'm going to stop for today. Number one, irresistible. May 19th through 21st we're going to have two massive awards of two companies which we call the HR Heroes, both of which will be there. We have about at least 75 or more CHROs already signed up. So there'll be a lot of high level people there. It is a fantastic conference. It's definitely going to fill up. We're ahead of enrollments from the last few years and we have some massive announcements. You're going to see a big announcement for us in the AI area and a demo and a panel talking about this new, new announcement. Between now and then, we are announcing the new release of Galileo next week. I'm not going to give you all the details today. You'll hear about it next week. You'll be able to sit down and use Galileo and learn how to do all these hundred use cases at the Unleash conference in Vegas. We're doing a series of workshops there. Sign up through Unleash if you'd like to come. And we're going to have demos and you're going to be able to see how this all works. And then we have another, you know, pretty major announcement coming during that period of time that you'll I'll talk more about in a another podcast in a few weeks. For those of you in the uk, I will be in the UK the third week of April at the Learning and Development Technology Conference, giving a speech and talking about the revolution in L and D. And it's going to be a lot of the results of our big L and D study. If you happen to be there or if you can come, I'd love to see you. And I'm going to visit a few clients there. So if there's anything big in the UK that you would like me to take advantage of or talk to your company, just let me know. And every day looking at the stock market, trying to figure out what's going to happen next in Washington and make sense of all this. So let's, let's do our part to be a positive contributor to this new world of economics that we're living in. And I look forward to meeting and seeing all you guys at these events over the coming weeks. Bye for now.
