Episode Transcript
Speaker 1 00:00:08 Everybody. Today I'd like to talk about a really interesting topic that is not ai, at least for a week. And that is the question, have we entered the post-industrial age? And the answer is yes. And so what I'm gonna give you is a contextual perspective on why so many things in HR and business have changed and what we need to do about it. And this is a dialogue that Bill Pester and I have been working on for the last several months that we will explain further at our conference. So let me go back to a little bit of history, a lot of which is discussed in my book, which is the industrial age. In the industrial age, which was really when most of us grew up in, in from the 18 hundreds to the 19 hundreds. And the early two thousands, we had businesses or companies that made money and increased their profits through industrial scale.
Speaker 1 00:01:08 And so we would build things, cars, locomotives, railroads, oil companies, product companies, consumer package, good companies. We would do r and d, develop them. And then much of our business scale was in the manufacturing, distribution, sales and marketing. And what we did, and what we found at the time was that the more we could grow the volume of the business, the more we could grow the profit of the business because we could gain market share. We had pricing power, then we could improve our supply chain to reduce our costs and make more and more and more money. And the reason for that was that there was a shortage of ip. It was hard to steal other people's information. And the level of disruption between industries or between products companies was somewhat stagnant. Now compared to today, it didn't feel stagnant at the time, but it lasted a long time.
Speaker 1 00:02:05 And then in that model, we operated in a talent environment where talent was abundant and we could replace people as needed. So while we didn't treat people like mechanical objects, we did in a sense because we built jobs and architectures around jobs and companies so that we could quickly import new people, put them into these jobs, train them, and we could measure their productivity by traditional performance management. And then if they quit or left, we would replace them with somebody else. And they were, the human beings were replaceable objects a fit into a job, sort of like a puzzle piece. We'd design a job and then we would fit a person in there, like a puzzle piece. And, and that actually worked really in my early career. That's kind of what the job market was like. And those of us that wanted to have good careers tended to stay at the same company for a long time.
Speaker 1 00:03:03 And by the way, careers only lasted about 30 or 40 years. People retired around in their sixties. And so we had a 25, 30 year career, maybe a 40 year career at the most. And then we retired. And the company was designed around that talent model. In fact, talent management, as it was defined in the early two thousands, was a process-based approach from pre-hire to retire. We used to call it where we would step people through this talent process from job to job role to role moving up the pyramid, using the leadership pipeline until we each reached our Peter principle where we had tapped out and we would, you know, kind of continue in that job as long as we could until we retired. And that actually worked very well for companies, and it worked very well for people because the companies were stable so we could get our retirement benefits from those companies and live a happy life on and on.
Speaker 1 00:03:59 And then in the early two thousands and late 1990s, as the internet started to pick up, it was around 1998, by the way that the internet started, wasn't that long ago, everything got disrupted. Information flowed quickly between businesses, between industries, people started changing jobs much more quickly. Tools like monster.com and LinkedIn and and others made it very transparent how to find a job. And it became socially acceptable to jump around from company to company. And as soon as people started jumping from from company to company, intellectual property jumped from company to company and everybody got disrupted by somebody else. And then of course, the digital era started in the early two thousands and people started to digitize their businesses. And the non-digital companies got disrupted by the digital companies witness amazon.com. And everybody realized they had to be digital, not just do digital. And we built this new industry, the post-industrial age, where we suddenly discovered over time that our intellectual property and our time to market were much more important than our industrial scale.
Speaker 1 00:05:09 Yes, we need industrial scale, but that is really a commodity now. It's really how quickly you can iterate how well you understand your customers. Maybe you need to get rid of the middle man. In fact, we're just about to introduce a bunch of research on consumer package goods. And the big trend in CPG is eliminating the middleman. So the CPG companies who develop food or other consumer products know who you are and know what you're buying and know what you want, because that helps them stay ahead of these branded products that come out from Amazon or somebody else that basically disrupt them. So everybody wants a direct relationship with their customer. And business cycles and product cycles move faster. In fact, here's an interesting piece of information that'll sort of surprise you. You know, the average longevity, the age that we die, is somewhere in the late seventies to early eighties, depending on the country and the location, sometimes a little bit beyond that.
Speaker 1 00:06:06 Well, according to JP Morgan Chase, historic research on businesses, 75% of companies go out of business within 15 years. So we have jobs now and careers and work where the humans outlived the companies by fourfold. And we are living longer despite the recent interruption in that trends. So we now have companies where, and we've automated more and more and more. So let's think about the amount of automation that's happened just in our recent lifetime with internet tools and communication tools and zoom, things like that. Then you add AI to that, the co-pilots from Microsoft and everybody else, this industrial scale stuff is really not a differentiator anymore. Now the differentiator of high value companies is time to market, closeness to customers, deep skills in new technologies and new domains, understanding the competitive landscape extremely well, culture and all of the people practices. So in the post-industrial age, we are all running people-centric companies.
Speaker 1 00:07:16 And by the way, we don't need as many people, but we do need a lot of them. And so we are now competing for talent based on skills, based on fit, based on culture, based on learning agility, based on passion, based on an ambition, not based on how quickly you can screw a bolt into a factory plate or you know, come to work on time and and do your shift in the uh, warehouse. There's a fair amount of that, obviously still going on. But that kind of work is also intellectual property work. In fact, as I say, many times in the new world work, not jobs, every human being changes the job. You don't become the job, the job becomes the person in the old model, the person became the job and the new model, the job becomes the person. If I'm working in Starbucks and I'm serving coffee, I'm gonna do it the way I think I can add the most value.
Speaker 1 00:08:10 I'm gonna obviously comply with the company's policies and practices, but I wanna bring myself to work. That's what makes the job interesting to me. And so we have suddenly reached a world where our companies are very much dependent on the intellectual property of our humans. Which leads me to second way of thinking about this. And that is, in the old industrial age, human beings were an expense. We really, all of the financial systems that measure financial performance, look at payroll and benefits and leave and all those other things, we pay people as an expense. You get no ROI on that. Well, in the new world, human beings are an asset. Now, we don't account for them as an asset yet, but I think this will be coming. But every dollar we spend on pay, on development, on benefits, on management, on whatever we want to think about for humans, for people, makes them better at their job, makes them better at understanding your company, makes them better at serving your customers.
Speaker 1 00:09:14 And we are investing in them. And as I've said many times, human beings are the only appreciable asset we have. Every other asset we have, depreciates human beings appreciate. The more passionate and skilled and aware and knowledgeable somebody becomes in your company, the more valuable they are. So we now in the post-industrial age, need to think about investment in people as a capital investment. Now, unfortunately, the CFO doesn't see it that way yet, but I think many do. In fact, even the CEO of NVIDIA talks about the development of people in Nvidia in a very long term way, as does Moderna, as do many of the emerging next generation winners or what we call pace setters in every industry. Now, there are other implications of this as well. How do we measure productivity? In the industrial age, we looked at the number of widgets somebody produced, we created goals or OKRs, and we said, your goal is to produce 17 widgets per hour.
Speaker 1 00:10:21 If you do 15, you're substandard. If you do 18 or more, you're above standard and we'll give you a bonus at the end of the month or the end of the year if you do 20 or higher than that, blah, blah, blah. And basically that's the way we build performance management guys. Unfortunately, it was patterned after that. But in this new world of IP and human-centered value creation, how would you measure productivity? You would measure it by the quality of the service, by the quality of the product, by the quality of the program that this person developed or was part of developing, measured through the profitability and growth of that thing. And then that person's relative contribution as uh, perspective by others around them. Did they contribute? Were they a good teammate? Did they bring new ideas? Were they collaborative? Were they willing to take feedback and so forth.
Speaker 1 00:11:14 And so now we have a measure of performance or productivity that's really about the person and the person's growth and the person's contribution, not the output. And that leads to this idea of working at the top of your license. As Bill and I have talked about extensively, there's a very important idea that came out of our healthcare research where they look at nurses who are licensed professionals with all sorts of training in care and taking care of various medical practices and processes. And what they do in the healthcare industry is they say everything you do in your shift as a nurse that is not nursing is basically something we should get rid of because we want you to work at what is called the top of your license. Well, that idea applies to every job in every company. Now, if you're an HR person, if you're a recruiter, if you're a marketing person, if you're a salesperson, you don't wanna spend time typing things into Salesforce or filling out a form or putting data into a project management spreadsheet, that is not the job you have been hired to do.
Speaker 1 00:12:23 Can we automate that? Can we eliminate that? Can we train you in a way that you don't need to do that? Can we organize our companies in a way? You don't need to do that in the new post-industrial age, we thrive on skills, the development of great skills and cutting edge skills. By the way, by the way, just one thing on skills. The pacesetter research shows that the companies that outperform don't just have more skills, they have newer skills. They have what are called salary enhancing skills, not salary declining skills. There are skills that make you more valuable, and there's skills that don't make you more valuable. And companies that thrive tend to build those skills and identify those skills and create those skills quickly. So in this post-industrial age, we're basically building our talent model around constant skills development, about designing work so that people can operate at the top of their license about creating leadership that facilitates that jobs where individuals can add value in unique ways and gives people more empowerment, and then of course gives people flexibility to operate in a more productive manner when they have to work from home or remotely or whatever the the situation may be.
Speaker 1 00:13:39 So many, many of these things that we have kind of stumbled across in hr, the talent marketplace, the skills technology, the skills inference, skills-based hiring are not because we wanna be a skills-based organization. They're because of the post-industrial age, they're because of the economy, they're because they're because of the way companies add value. I think this narrative about the skills-based organization is great, but it's a little misleading. The skills-based organization isn't a goal in itself. It's a means to an end. It is part of designing and building a company that can scale and grow and make money and compete in the industrial age. Let me give you an example. We have a panel of really interesting CHROs speaking to our conference next month, one of whom is from one of the most, I won't mention the name of the company, one of the most iconic and well known pharmaceutical companies in the world.
Speaker 1 00:14:38 This is a company that essentially led us through the pandemic. They have grown from 750 employees to more than 7,000 in three years. Massive growth, very focused on culture and skills and all these things I just mentioned. And they have come to the conclusion that they do not want to be a company with more than 8,000 employees because they believe that through continuous improvement in skills, technology, science, and of course productivity enhancement and organization design, they can stay ahead of the market and outsource the industrial scale part of their business to maintain their edge and their high profitability from their science. That is the opposite of the management techniques of an industrial age thinkers. I think one of the things we suffer from in business is a lot of CEOs are using industrial age management techniques in a post-industrial age economy, and they are finding that it doesn't work very well, and they're surprised.
Speaker 1 00:15:41 Let me give you a very simple example. Two of the companies in the Bay Area that I know a lot about are meta, Facebook and Salesforce. Both of those companies are led by very smart, very hardworking CEOs who hired in both cases, tens of thousands of people more than they needed. Tens of thousands of people are being laid off in both of these companies. That is not just a number on the Wall Street Journal. That is a massive, massive number. How did they possibly hire tens of thousands of people that they don't need? Well, they were thinking about their company as an industrial scale company. They were thinking about their company along the lines that if we hire a hundred more salespeople, we'll get a hundred times more revenue. If we hire a hundred more engineers, we'll get a hundred times more product. If we hire a hundred more marketing people, we'll get a hundred times more leads, et cetera.
Speaker 1 00:16:38 I'm sure their mentality was more human beings, more growth, more scale, that isn't the way it works anymore. And they now know that. In fact, in the case of meta, I have talked to people who worked there. Apparently the way the workforce planning worked in many cases was a senior leader would go to Zuckerberg and present a project that was new. And if Zuckerberg approved it, they would get headcount for 20, 30, 50 people. And that was going on over and over and over all over the company. One of the important things we have to think about in HR is teaching our leaders how to think about leadership and management. In a post-industrial age, if you want people to operate at the top of your license, you don't just hire more and more and more people to do that. You focus on organization design and accountability and skills and productivity and very keenly focus on the role of a leader and a manager.
Speaker 1 00:17:36 What is that person's role and how do we train them and who are the right people for those roles? And how do we interconnect products between each other so that people can share IP and ideas and customer information between groups? Even if we do a merger and we wanna keep that company separate for a while, eventually we need to integrate it together. Those are the things that create growth and scale, not hiring more heads, more heads, more heads, and, and I feel you know, a little bit frustrated when I see this happening, but I understand it because we here in our company, and I know those of you that listen to me, we've had a lot of time to think about this. We've had a lot of time to observe it. We've a lot of time to study it. Most CEOs don't study human capital practices.
Speaker 1 00:18:20 Really. They have lots of opinions and personal experiences, but they need your help understanding this. So I just wanted to get this off my chest because as we entered the era of ai, which is going to be massive, this is going to become even more important. Everything I just talked about in the last 20 minutes is going to be accelerated like with gasoline on the fire by ai. AI is gonna make all these things go faster than ever. So if you're not thinking about skills and skills-based hiring and capability academies and internal mobility and constant improvements in productivity and learning about org design and letting people work at the top of their license and defining what that is and and giving people good feedback and thinking about the workforce as an asset, not an expense, you are gonna get clobbered by this AI stuff because this ai, AI stuff is going to turn the needle way, way over to the right full blast.
Speaker 1 00:19:25 And lots and lots of competitors are gonna enter your space with new ideas and new technology that you may not be ready for. One more quick thing for the podcast, irresistible is June 20th through 22nd. It's about four or five weeks away. It's about three quarters or more full. We've got about a hundred or so seats left. I encourage you to come bring your senior team. One of the big themes of that conference will be ai. We are going to introduce an AI product of our own. I won't tell you too much about it in this podcast, but I've showed it to quite a few people are pretty excited about it, and it's our own implementation of AI for our research. I think you're gonna find it staggeringly exciting and something that I know you're gonna want to use. We're going to have the head of AI implementation in Microsoft hr.
Speaker 1 00:20:16 Come talk to us. We're gonna have some other folks that cover the AI space also join us. And I promise to give you my perspectives on what this means for you as an HR professional. We have added a set of HR capabilities to the Global Capability project. You can go to the jba, the Josh Burton Academy, and you'll be able to assess yourself against those capabilities. And we're in the middle of refreshing the J B A to include even more courses, content and materials on ai. So that's something to think about. I hope to see you all there, and I look forward to having a fantastic time in LA or talking to you all online over the coming weeks and over the summer. Thank you.
