The “80/20” rule is commonly applied to workers’ compensation claims: namely, that 80 percent of the cost comes from 20 percent of the claims. What if you could consistently predict whether a claim would fall in that costliest 20 percent so you could handle it in a way that mitigates the risk?
Workers’ compensation insurance is a mandate and virtually all employers carry this expense, whether they self-insure or insure through an insurance carrier or a state fund. While the costs vary by state, industry, employer size, and type of worker, it’s safe to say that the potential spend can be significant; loss ratios of 70 percent are not uncommon (for example, a large insurance company may have $1 billion in worker’s comp premium and $700 million in associated claim losses).
Tracing a claim—where is the potential opportunity?
A typical workers’ comp claims process begins when an insurance carrier (or a company’s internal claims department or its third-party claims administrator) receives a First Report of Injury (FROI) detailing an incident. This is the critical decision point because limited resources must be allocated to a subset of claims. Considering the 80/20 rule of thumb, where 80 percent of the cost comes from 20 percent of the claims, you will want to apply your limited resources to the costliest, most risky 20 percent.
For example, say the FROI documents a slip-and-fall injury. Depending on the nature and severity of the injury, a claims department assigns a junior, mid-level, or senior adjustor to handle the claim. Perhaps a nurse consultant is also assigned, an independent medical exam is required, or another type of intervention is called for.
This quickly becomes an issue of resource allocation optimization—determining how to most effectively handle that claim in a way that yields a favorable outcome for the patient while managing costs and resources. If the claims department had a way to know up front if that claim was in the riskiest 20 percent, it could handle it accordingly. However, identifying those risky claims has not traditionally been easy.
At Deloitte, we’ve done studies with insurance companies looking retrospectively at their closed claims that fell in that worst 20 percent. A panel of senior claims adjustors was asked to review those claims (blindly) to see if they could identify, based on the information known on day one (FROI) when the claim was initiated, which of those claims fell in the 20 percent category. In every study, senior adjustors could only correctly identify about 35 percent of those claims as being high cost/high risk.
This percentage is particularly significant considering that companies don’t have a panel of senior adjustors reviewing every newly arising claim. Claims come in, are quickly reviewed, and then acted upon. It’s not hard to imagine an even lower percentage of correctly identified high-cost/high-risk claims in actual day-to-day practice.
This is where the potential for significant savings opportunities lies. If claim complexity and severity is only identifiable up front about one-third of the time, the challenge—and opportunity—lies in figuring out how to identify the remaining two-thirds of risky claims. This is where analytics comes in.
Applying analytics to improve claims risk management
Analytics involves data science, data mining, and looking at information about claims that adjustors would not typically take into account, combined with mathematical analysis of the various risk factors to estimate the potential severity of a claim and whether it falls in the costliest 20 percent.
Currently, claims analytics solutions exist from various vendors, but vary in their ability to correctly identify risky claims. The more sophisticated approaches integrate with the organization’s risk management information system (RMIS) and provide not only higher accuracy but also higher levels of specificity. So for example, they not only identify a claim as potentially high risk in general (e.g., a lower-back sprain vs. a cut finger) but also score its level of risk within this type of injury (e.g., whether it is likely to be in the costliest 20 percent of lower-back sprains) and provide rationale for why that score was assigned.
Having this analytical assessment up front aids in assigning the right level of resources to effectively manage individual claims to mitigate cost and risk and achieve more favorable outcomes for the injured employee. Without this assessment, organizations risk devoting more resources than necessary to some claims, while not devoting enough resources to others.
Significant cost savings are possible
Deloitte has conducted multiple long-term (five-year) actuarial studies with organizations using our analytics solution design. Comparing the “before state” to the five years after implementing our solution, the organizations’ average claim cost had been reduced 12–15 percent each year. This is particularly noteworthy because worker’s compensation claims costs typically mirror health care costs and rise every year.
For a company that spends $700 million annually on workers’ compensation losses, a savings of 12–15 percent means $84 million¬ to $105 million in savings every year.
Evaluating vendors and solutions
While these types of analytics solutions have become more prevalent over the last 10 years or so, their results vary greatly. Insurers and self-insured companies would be wise to consider potential tools with a critical eye, especially looking at whether a potential solution demonstrates results over time. Because workers’ comp claims have what actuaries call a “long tail,” meaning they can take years to close, shorter-term results, say of only a year or so, cannot be actuarially accepted. Workers’ compensation measurements can take up to 5 years to actuarially evaluate and book to your financials, and results can only be booked if the actuaries accept the results.
Therefore, longitudinal case studies of 5 years (i.e., 60 months) are the benchmark to look for when evaluating vendors and solutions. These studies should include 2 accident years of workers’ comp data before implementation of the solution to provide a baseline, and then 60 months of solution usage after implementation—all to measure the Accident Year 1 impact.
If this seems like a considerable amount of effort, consider the potential payoff: Double-digit savings on workers’ comp claim costs every year make the due diligence effort well worth it.
Also consider that insurance companies are increasingly using these advanced predictive analytics models and it may be in your business interests to do the same. A 2017 study by Rising Medical Solutions1 found that 24 percent of insurers surveyed were using advanced analytics in 2014; by 2016 that number had risen to 32 percent.
In other words, roughly one-third of insurers (your competitors perhaps?) could already be realizing analytics-driven savings on workers’ claims costs that they can potentially pass on to customers in the form of lower premiums. Delaying your own use of claims analytics could soon put you at a disadvantage in today’s highly competitive marketplace.
Matt Carrier is a principal in Deloitte Consulting LLP and the national leader of its Underwriting Excellence practice, which consults with insurance clients in the areas of underwriting, product, and pricing/rating. Matt is also a property and casualty actuary and has a US patent for an insurance predictive modeling application.
Frank Zizzamia is a managing director in the Human Capital practice of Deloitte Consulting LLP. He is the founder of Deloitte’s Insurance Analytics practice and has been awarded several US patents for his work in insurance analytics. He has several additional insurance claim predictive modeling patents pending.
“The rise of the social enterprise” emphasizes the need for realignment among the C-suite to focus on business’s evolving role in society
Posted on May 9, 2018.
We were excited to debut the 2018 Deloitte Global Human Capital Trends report, The rise of the social enterprise, recently at Bersin, Deloitte Consulting LLP’s IMPACT conference to an enthusiastic audience of HR leaders and practitioners. Everyone in the room and beyond—with thousands more watching our first-ever livestream of the launch— got the first glimpse of this year’s trends. The trends reflect seismic changes underway as organizations are increasingly judged not only on their relationships with workers, customers, and communities, but also their impact on society at large—transforming them from business enterprises into social enterprises.
Filling society’s leadership gap
Increased transparency and heightened political awareness have drawn widespread attention to business’s role in society as a driver of change. Organizations find they are increasingly expected to exercise their ability to do social good, both externally for customers, communities and society, as well as internally for their employees. True social enterprises must take a total stakeholder approach to pressing public issues to maintain reputation and relevancy.
Among the many factors contributing to the rise of the social enterprise, we see three powerful macro forces driving the urgency of this change.
First, the power of the individual is growing, with millennials at the forefront.
According to the Deloitte Millennial Survey 2017, 86 percent of millennials think that business success should be measured in terms of more than just its financial performance.1 In fact, 77 percent of this year’s trends survey respondents cited citizenship as important or very important. Millennials’ high expectations for corporate responsibility are a strong contributor, with 76 percent regarding business as a force for positive social impact.2
With more pressure on businesses to be good citizens and engineer solutions to critical social challenges, citizenship must be a core part of an organization’s identity and mission. But despite the emerging link between social impact and companies’ financial performance, only 18 percent of trends survey respondents say citizenship is a top priority in corporate strategy. Thirty-four percent have few or poorly funded citizenship programs, and 22 percent are not focused on this at all.
Second, businesses are being expected to fill a widening leadership vacuum in society.
There is a widespread perception that political systems are growing more and more polarized and less and less effective at meeting social challenges. Citizens are looking to business to fill the void on critical issues such as income inequality, health care, diversity, and cybersecurity to help make the world more equal or fair. This expectation is placing immense pressure on companies— consumers and employees alike are holding companies’ feet to the fire when it comes to how they treat their employees, communities, and society at large. At the same time, it is also creating opportunities. Organizations that engage with people and demonstrate that they are worthy of trust are polishing their reputation, winning allies, and influencing or supplanting traditional public policy mechanisms.
Third, technological change is having unforeseen impacts on society even as it creates massive opportunities to achieve sustainable, inclusive growth.
Advances in artificial intelligence (AI) and new communications technologies are fundamentally changing how work gets done, who does it, and how it influences society.3 People increasingly realize that rapid technological change, while holding out the promise of valuable opportunities, also creates unforeseen impacts that can undermine social cohesion. Many stakeholders are alarmed, and they expect businesses to channel this force for the broader good.
In the past year, organizations have become laser-focused on how automation-induced job shifts will impact individuals. Our trends research shows that more than 4 in 10 companies believe automation will have a major impact on jobs, and 61 percent are now actively redesigning jobs around AI and robotics. Additionally, 72 percent of HR and business leaders rated the topic of AI as important or very important, yet only 31 percent feel ready to navigate changes. At the same time, 42 percent believe AI will be widely deployed in their companies within 3-5 years.
The power of the individual requires a holistic approach to jobs and careers.
Against this backdrop, companies and individuals realize the traditional career model is becoming defunct. Forty-seven percent of those surveyed consider building new career models and skills as very important. More than 54 percent have no programs in place to build the skills of the future, and only 18 percent feel they give employees opportunities to develop themselves. To be true to their role as drivers of change in the social enterprise, companies need to work to develop and implement robust solutions to decrease the growing skills gaps.
Tackling the issues requires a cohesive, C-suite-led response.
According to this year’s research, a lack of C-suite integration is the No. 1 thing holding companies back from tackling today’s human capital challenges. Respondents overwhelmingly point to the need for a symphonic C-suite—a team-based, cross-disciplinary approach to tackling complex issues—with 85 percent calling this trend important or very important. Survey results show companies where C-suite executives regularly collaborate are one-third more likely to be growing 10 percent more than companies whose leadership operates in siloes. However, nearly three-quarters (73 percent) of respondents reported their C-suite isn’t working together despite the need for increased collaboration on human capital challenges.
Explore the report like never before
This is just a sampling of the rich insights and data that can be found in the 2018 Deloitte Global Human Capital Trends report. More than 11,000 business and HR executives responded to this year’s survey, and many leaders were interviewed in depth. You can access the full report via Deloitte’s digital-first HC Tends mobile app.
The app is conveniently accessible across mobile devices, tablets, and desktops and features new ways for our clients to interact with the survey data, including video stories from leading companies on how they’re addressing the Trends, easy access to related research and insights, a calendar of regional Trends events, and more.
1 Deloitte, The 2017 Deloitte Millennial Survey, accessed January 24, 2018.
3 Heather Stockton, Mariya Filipova, and Kelly Monahan, The evolution of work: New realities facing today’s leaders, Deloitte Insights, January 30, 2018.
As the future of work unfolds, adaptable learning organizations will likely stay ahead of their competition, attract the best and the brightest prospects, and manage market movements with their customer base with more agility. Learning leaders are well positioned to lead the charge to develop an adept workforce that can not only respond to rapid shifts in markets, but also thrive in them as well.
At Deloitte’s 7th annual Chief Learning Officer Forum, a select group of senior learning and business leaders convened to focus on the theme Learning Undone—rethinking learning to better align with what the business and workforce need to navigate the future of work. A wide range of leaders representing various disciplines of business, technology, science, government, consulting, and learning zeroed in on the learning function’s mandate to equip the organization and its people to operate digitally and effectively however and whenever the future of work unfolds.
The following key takeaways, gleaned from our sessions, provide insights on what business leaders should consider to prepare for a future of work where anything is possible.
In today’s world we are not so much interconnected as interdependent. Shifts in worker types, proximity to offices, and cognitive technologies are all impacting the future talent landscape. There’s an increasing need for digital fluency in people at all levels—from frontline workers to executives—and for building a digital organization with consumer-grade employee experiences to help attract and retain talent and better shape employees’ careers.
The implication for learning: The workforce is evolving rapidly, and learning’s ability to keep up is at a crucial moment: accelerating learning is critical. Above all, the learning function is charged with making sense of the future and translating it into learning experiences that help people deliver what the business needs.
Minds + Machines
Right now, too much of our workforce is focusing on menial tasks that may soon be taken over by machines. Instead, they should be focused on the human aspects of work that machines cannot replace.
The implication for learning: Re-prioritize work so that humans are focusing on things that matter and machines are handling the rest.
The rate of change is steadily increasing to the point where technology is changing much faster than humans are capable of. We are at a time now where technology has surpassed human adaptability—so how can humans cope?
The implication for learning: Make building the skill of agility a priority. There is no “do later”—it’s “do now” in today’s world, and that is enabled by lifelong learning and, within that lifetime, the ability to learn faster.
Data and more data—for what?
We have more data available to us than ever before — and will have more tomorrow than today. But value lies in transforming “data” into information and information into knowledge and knowledge into insights to drive business outcomes.
The implication for learning: Leverage data and analytics to better understand what the workforce is doing and use those insights to take action, reprioritizing work so people are focused on the top strategic imperatives of the business.
Ownership—yours, mine, and ours
The responsibility for learning must no longer be confined to the learning function. The learning team’s new role is as a catalyst and enabler of learning, while the business and individuals themselves are owners. For individuals, learning is fast becoming the new currency. In this sense, “millennial” is no longer just a generation; it’s a mind-set reflecting a shift from “I go to work for a salary/promotion/bonus” to “I go to work in order to develop my skills.”
The implication for learning: Learning’s focus should be on the future needs of the workforce, rather than what’s currently needed. Why? Because by the time we’re ready to address today’s needs, the need has passed. The learning team should engage the business and the workforce to better understand their needs for the future, and then align learning opportunities accordingly.
CLO resurgence and renaissance
As the organization’s learning leaders, CLOs are a catalyst for change and must seize their role as revolutionaries. The time is now to change how we think about learning—not just thinking outside the box, sbut with no constraining box at all. Technology is finally catching up to help us meet the demands of the business and of learners, and also improve the learning experience. What may seem far-fetched today could easily be reality tomorrow. CLOs need to be prepared to build a culture of courage. This culture can move individuals and organizations to challenge the status quo, take risks, fail fast, and keep pushing to develop everyone’s agility and facilitate ongoing, lifelong learning.
Our thanks to all of the Forum presenters and participants who shared their organizations’ journeys and their personal insights to create a valuable learning experience for all.
Amy A. Titus is a managing director, Organization Transformation and Talent, for Deloitte Consulting LLP. She is the co-dean of Deloitte’s Chief Learning Officer Forum and is responsible for helping to bring talent, learning, organization improvement, and change solutions to her clients.
Josh Haims is a principal in Deloitte Consulting LLP. He is a senior leader in Deloitte’s Learning Solutions practice, co-dean of Deloitte’s Chief Learning Officer Forum, and sponsor of the Banking & Securities Learning Executive Roundtable.
Terry Patterson is a senior manager in the Human Capital practice of Deloitte Consulting LLP, helping clients achieve their business goals with talent practices that are designed and executed to support more engaged, more capable people within a positive, high-performance culture.
Joanne Kim is a manager in Deloitte Consulting LLP’s Learning Solutions practice. She helps clients enable impactful learning experiences for their organizations.
By 2025, millennials (those born between 1982 and 2003) will make up 75 percent of the global workforce, and a significant portion will begin to assume managerial and leadership positions. Their values, expectations, and demands will continue to shape the future workplace. They are likely to cause change within an organization as well as crave to be part of it. As millennials’ dominance in the workforce grows, their voices, needs, and opinions have started to shape the way organizations manage change.
Over the years, marketers have learned that millennials are informed consumers who expect honest content1 that is tailored specifically to their needs.2 They are more likely to trust reviews from their friends, and strangers who are like them, over experts.3 This type of behavior extends beyond their personal choices and influences their professional ones. When it comes to a desired work environment, millennials tend to seek out an organization that exemplifies their values. They desire an employee experience that offers a blending of their work and personal lives.4 And they want to be a part of the solution and contribute to transformative success. This has fundamental implications for how an organization operates and how it communicates with and motivates its millennial workers.
Millennials and change management
The strategy for managing change for a millennial workforce remains true to change management principles, although there is no one-size-fits-all-approach. From our perspective, four areas could be key to the success of any change effort involving millennials.
Communication Consistent and open communication during times of change can help reduce unrest and quiet the grapevine. As digital natives, millennials are particularly receptive to digital communications. Given that the average millennial globally touched his or her smart phone 43 times a day,6 the possibility of millennials reading these messages on their mobile phone is very high. A comprehensive mobile strategy can help ensure communications are mobile-friendly—meaning short, crisp, to-the-point and, of course, interactive!
Learning and development Change is an opportunity to learn more and explore a new reality. Learning for millennials is not just limited to enhancing skills in their current role, but also includes acquiring new skills. Times of change can present new opportunities for organizations to encourage millennials to make lateral career moves and gain a variety of skills. A multinational computer storage company encouraged its employees to move within different functions and gain skill sets beyond their core working requirements. Front-end team members worked with the back-end team for six months to understand the production cycle. This also encouraged the younger workforce to gain a holistic perspective of various organizational units.
Training delivery Many workplaces are moving away from traditional push methods of learning like classroom training or an instructor-led walk-through of a new system. Digital enablement of workplaces has opened the door for new and innovative ways of learning, such as nano-learning, to address millennials’ desire for developmental learning on the go.
For example, a financial services company undergoing a technology transformation wanted to share the findings of a change impact assessment with stakeholders. This could have been handled in a classroom session. However, considering the majority of younger workforce members, the company wanted to create something interactive and easy to access. So, role-based training packets were created and uploaded to an internal site. Users could simply visit the page and click on a role relevant to them to see what was changing and what their new responsibilities would be.
The 2017 Deloitte Millennial Survey7 highlighted that millennials feel most influential and, in turn, accountable in the workplace. Yet, just over half of millennials surveyed (55 percent) do not feel engaged with work.8 This is an important point for businesses to acknowledge, as it offers a platform to build each employee’s sense of purpose and, ultimately, a more engaged workforce. Millennials, when involved, can bring their best ideas and suggestions to the table and contribute to a successful transition in times of change. While customized processes and policies can attract millennials, proactive engagement practices should be in place to motivate and retain them. Employee engagement needs to happen from the very beginning of a change journey.
For example, a data storage firm faced immense attrition, particularly among millennial employees, during merger & acquisition activities. Seeking ways to better engage employees to help avoid turnover, the company invested time in thinking through and evaluating its engagement policies, including capturing reactions, especially from millennials, to every engagement event conducted. The results helped the organization develop an engagement calendar for the following year using the tactics its research found to be most effective. This led to more informed and engaged employees, and reduced incorrect information circulating in the organization.
Tailored solutions: A case in point
It’s important to remember that a millennial audience doesn’t automatically require new change management solutions, but rather tailored solutions. Consider the case of a leading cloud computing company that was deploying new reporting capabilities to improve data-driven decision-making for 10,000 global users, over 40 percent of whom were millennials.
The change management team used traditional techniques, namely stakeholder analysis and audience assessment, to reveal that the organization thrived on using an internal social media platform for communication and collaboration. It also revealed a consensus-driven approach to problem solving and an open culture in terms of sharing information—both of which were driven significantly by its young workforce and the need to be in sync with it.
The stakeholder and audience research led to a tailored change management approach that shifted away from communicating via email and having users spend hours in a training classroom to providing bite-sized information and a platform for learners to interact and collaborate. The existing social media platform was pulled into service and became a key component of driving the change and generating excitement about the transformation. It was used to share not only top-down updates but also updates from employees themselves. Moreover, users shared not only status messages but also interesting pieces of information through pictures. This approach peaked during user acceptance testing of the solution, when employees were asked to upload pictures of themselves wearing the specific colors of their groups and to share key learnings. The approach generated a significant response from locations across the world, with groups trying to outdo each other. This broad acceptance and high level of engagement led the program to meet its stated goals and expected benefits.
This case demonstrates the continued value of the core tenets of change management, while demonstrating that tactics should be modified to meet the needs of the audience. Above all, millennials need information about changes their organization is undergoing, presented using an approach they can relate to. They want to be made partners in the journey and incentivized to make the trip.
Abhay Raina is a senior consultant in the Human Capital practice of Deloitte Consulting LLP, with experience in change management, communications, organizational alignment, organization design, process design, learning strategy and development, and talent strategies.
Divya Jyoti Behl is a senior consultant in the Human Capital practice of Deloitte Consulting LLP, with experience in change management, learning & development, and organization strategies. She is also a part of the Bersin Center of Excellence, which provides insights driven from robust and academically backed research.
Vaqar Merchant is a consultant in the Human Capital practice of Deloitte Consulting LLP with experience in technology adoption, change management, learning solutions, and organization design. He has worked on a range of ERP and process implementations developing change and training strategies, and a variety of learning interventions.
Supriya Sawant is a consultant in the Human Capital practice of Deloitte Consulting LLP with experience in technology adoption, change management, and learning solutions. She has primarily worked on design and development of training packages for ERP and process implementation projects.
Crafting the employee experience: An ongoing series
As our Simply Irresistible Organization model shows (see below), there are five essential elements of employee engagement success: meaningful work, supportive management, positive work environment, growth opportunity, and trust in leadership. In this article (the third of five, you can read the first two here), we’ll discuss the issue of a positive work environment.
Let’s start by stating the obvious: your work environment can make or break your experience at work. And by “environment” we don’t just mean the physical space, we mean the space, the culture, and the way you are appreciated.
In our research we’ve developed a simple model that identifies four key elements of a positive work environment. Let’s walk you through them.
Flexible work environment
The first element of a positive work environment is flexibility. A workplace can’t aspire to be “irresistible” if it isn’t flexible. Studies show that 68 percent of women say they’d prefer more free time to more money, and 80 percent of men would like to work fewer hours.1
Flexibility can mean many things. At one of the largest telecommunications providers in Asia, the company’s “All Roles Flex” policy is an example of flexibility. At this telecommunications and media company, any role is eligible for some virtual or remote work by default.2 This is not insignificant for a company with so many sales and service locations throughout the region.
Flexibility also means offering a workspace that accommodates different modes of work, including a focus on productivity, innovative space (often called creative space), exercise, outdoors, and passion activities.3 For those of you interested in viewing the art of the possible, here is a video of how Deloitte leveraged workplace design trends in our Amsterdam office, The Edge, one of the greenest office buildings in the world. This building lets people work wherever they want; they can use their mobile phones to order coffee and food; and the lighting is automatically designed to keep people energized while conserving power throughout the day – employees can even adjust the lighting in their area via a smartphone app.
In terms of actual office or workspace design, you can consider a model like the following to decide who needs an office, a desk, or other workspaces, like a team room.
Not everyone needs a full-time office—but some people do.
While there’s been a lot of effort to reshape environments to make them more enjoyable and flexible to accommodate changing worker preferences and needs, massive societal and economic disruptions are making the transition to the future of work an issue that is top of mind for many of our clients. Click here4 for more on this subject.
A humanistic workplace
A workplace should also be humanistic. Some anecdotes are well-known. For example, a global technology leader, consistently rated in the top ten of Best Places to Work,5 has a pet-friendly workplace where its employees are extremely well fed—for free; and employees can give each other “massage credits” for a job well done on projects, redeemed for a free one-hour massage on campus.6
At Deloitte we have an empowered well-being subsidy covering 50 percent of wellness/fitness activities up to $500 each fiscal year, a “Corporate Athlete” Program taught at Deloitte University, meditation/yoga classes to keep us centered, and an extended Family Leave program that offers US employees, both women and men, 16 weeks of paid family leave.7 We don’t all work for these companies, but food, celebrations, internet-enabled commuting shuttles, and even laundry services are all becoming more common across a wide range of industries. These are no longer just “perks;” they are essential elements of helping us make work fit into our lives.
Culture of recognition
This gets us to our third area of a positive work environment: a culture of recognition. Continuous recognition, both monetary and non-monetary, is a powerful engagement tool, even if it’s as soft as a “thank-you.”
The Harvard Business Review has cited “recognition given for high performance” as the most impactful driver of employee engagement and The Aberdeen Group has found the No. 1 way leading organizations improve employee engagement is through employee-recognition programs.8
We also studied this topic and found that “high-recognition companies” have 31 percent lower voluntary turnover than companies with poor recognition cultures.9 These companies tend to build a culture of recognition through social reward systems (tools that give people points or kudos to reward others), weekly or monthly thank-you activities, and a general culture of appreciating everyone from top to bottom.
Key to enabling success here is to create a social environment where recognition can flow from peer to peer, freeing managers from being the “gatekeepers” of praise.
Companies that build this culture can see tremendous impact. For example, when JetBlue implemented a peer-to-peer recognition system focused on company values, employee satisfaction surged by 88 percent.10 And there are physiological effects as well: Researchers have proven that when you thank someone, it releases oxytocin, a hormone that makes people more relaxed, collaborative and happy.11
Fair, inclusive, diverse work environment
Of course, a workplace should also be fair, inclusive, and diverse. This isn’t an HR strategy, it’s a business strategy—teams within inclusive cultures outperform others by a staggering 80 percent.12 People perform better when they’re comfortable being themselves.
In a study we did a few years back, we found that while 71 percent of organizations try to foster diversity and inclusion, only 11 percent had such an environment.13 Even worse, only 23 percent held their CEOs accountable for building a diverse and inclusive environment; instead leadership often delegated this work to a director within HR.14
While most business leaders now believe having a diverse and inclusive culture is critical to performance, they don’t always know how to achieve that goal. We urge you to read more on this topic; here are eight powerful truths that can help turn aspirations into reality.
Stay tuned for part 4, where we will discuss the attributes of an environment rich in “growth opportunity.”
Josh Bersin is the principal and founder of Bersin, Deloitte Consulting LLP, a leading research and advisory organization focused on corporate leadership, talent, learning, and the intersection between work and life.
Josh is a published author on Forbes, a LinkedIn Influencer, and has appeared on Bloomberg, NPR, and the Wall Street Journal, and speaks at industry conferences and to corporate HR departments around the world.
Burt Rea is a Managing Director in Deloitte Consulting LLP’s Human Capital practice and leads the issue-based offering for “Creating the Simply Irresistible Organization Experience” for Deloitte US. With over 26 years of consulting experience at Deloitte, Burt has advised numerous global clients on their talent and employee strategies—from retention and recruiting innovation, to workplace redesign for new and flexible ways of working, to digital learning experiences to captivate employees.
12 Victorian Equal Opportunity and Human Rights Commission, Waiter, is that inclusion in my soup? A new recipe to improve business performance, November 2012, http://www.humanrightscommission.vic.gov.au/index.php/ our-resources-and-publications/reports/item/529-waiter-is-that-inclusion-in-my-soup-a- new-recipe-to-improve-business-performance-nov-2012>.
Often overlooked in the design of an organization’s HR operating model is the role of the manager, particularly the extent to which managers should be involved in delivering people-related services and how to equip them with the right tools and resources to do so. With research suggesting that managers account for over 70 percent of the variance in employee engagement,1 defining the people leadership expectations of managers-and helping them deliver on those expectations-is a key factor in any organization’s success, and can lead to higher ROI in terms of workforce performance, innovation, and company loyalty.
In a rapidly changing world of work with near-constant competitive disruption, organizations are eagerly searching for ways to maintain consistent growth. To identify these opportunities for competitive advantage, organizations have been looking beyond investment in their market-facing products or services and considering ways to invest in their workforce and employee experience. Leadership teams are looking to HR to play a vital role in driving business results by attracting and developing the right talent–from traditional to open talent / gig sources. Yet, while 80 percent of surveyed executives consider the workforce’s experience to be very important or important, only 22 percent consider their organizations to be excellent at building a differentiated experience.2
To help correct this mismatch between expectations and perceived abilities and enable HR to have a positive impact on business results, many organizations have been developing a “fit for purpose” HR operating model that is tailored to the organization’s strategy, working environment, and business needs. The “High-Impact HR Operating Model” aims to deliver a different type of value to the business: enabling managers with effective programs that yield a more productive, creative, and agile workforce, equipping workers with capabilities for future jobs, and building future leaders. However, all too often this effort focuses only on the shifts required of the HR function and fails to consider the shifts required of managers.
Developing managers is crucial for High-Impact
As frontline leaders, managers are critical to business outcomes, and their position in the organization deserves focused consideration. Any conversation about the role of managers within the High-Impact HR Operating Model should consider advancing the characteristics of effective managers. Some of the most important manager capabilities involve people management skills designed to drive innovation, productivity, and engagement, leading employees through change, coaching and developing employees; energizing, motivating, and recognizing employees; and driving organizational culture.
Also important in the discussion is the type of work the organization asks managers to do. While manager “self-service” became quite common years ago, many organizations still grapple with how much autonomy is right for managers in making people decisions. On the surface, most complex organizations we work with want managers to feel empowered and to focus on coaching and development of the people they lead. Yet, when decisions include compensation, performance, or succession, discussions about the need for guardrails and control return.
Engaging managers and business leaders in a collaborative dialogue about the future role of the manager and the corresponding shifts in HR’s role is critical to driving meaningful change to the employee experience. This collaborative approach between the business and HR in identifying the HR services that need to be delivered, aligning on which services managers will be responsible for delivering, and providing upskilling and capability building opportunities for managers enables managers to become equipped for their changing role.
Defining the manager role
Organizations should consider taking a fit-for-purpose approach to craft the right people leadership role that positions managers to positively impacting the worker experience as part of their broader accountabilities to drive business results. Engaging managers as part of designing the future HR operating model enables shared ownership from the start and can include:
Collaboratively define the Moments That Matter when managers should play an active role in the worker experience and lifecycle of processes
Provide experiential learning for managers to grow new people leadership capabilities
Equip managers with on-demand and intuitive content they can access to refresh knowledge of how they can positively impact the worker experience
Establish metrics to measure manager effectiveness in people leadership and impact on the worker experience
“Fit for purpose” includes manager fit
Realizing a High-Impact HR Operating Model requires a holistic vision and approach—and that includes maximizing the role managers can play. Impactful managers drive performance and cultivate innovation through their day-to-day impact on the experience of the organization’s workforce. How are you engaging the managers in your enterprise as key players in your HR operating model?
Arthur Mazor is a principal with Deloitte Consulting LLP and the practice leader for HR Strategy & Employee Experience and HR Service Delivery globally. He collaborates with complex, global clients to achieve high business impact with a focus on transforming human capital strategies, programs, and services.
Gary Johnsen is a specialist leader with Deloitte Consulting LLP and the deputy leader of the HR Strategy & Employee Experience practice. He helps complex organizations design and deploy innovative HR strategies, operating models, and HR customer experiences along with enabling processes, tools, and capabilities that build the bridge between business and HR.
Justin Clark is a manager with Deloitte Consulting LLP in the HR Strategy & Employee Experience practice, focusing on Business HR and how it can drive real value for the business.
Bryanna Ransom is a manager with Deloitte Consulting LLP in the HR Strategy & Employee Experience practice, helping clients design and implement “fit for purpose” HR operating models.
This post is the third in a three-part series on the exponential professional, focused on how professionals, organizations, and regulatory bodies can bridge the gap between the professional of today and the exponential professional of tomorrow.
John, a property insurance underwriter, reviews satellite images and property data identified as a potential significant risk by cognitive technologies. Jane, an actuary employed by an insurance company, reviews a financial report produced by a bot and ponders how the company should respond to the increased claim costs highlighted in the report. John and Jane are exponential professionals who are employed in a future workplace transformed by rapidly developing technology. Such professionals rely heavily on deliverables produced by cognitive technology, and augment that technology with their uniquely human skill sets.
Today, many people become professionals through meticulous qualification and training, including basic education, continuing education, work experience, and awareness of professional resources. Each of these methods of learning will need to change to meet the needs of the exponential professional. Consider the case of a professional under the apprenticeship model, where work experience is a large component of qualification. Entry-level employees often master their occupations by painstakingly working through manual processes that trace through the details. In a future world, where machines manage these entry-level procedures, new ways of learning will be required to train professionals on the ins and outs of the business. Traditional education, continuing education, and new ways of training will be required to fill in the gaps; and corporations, professional organizations, and individuals will need to adapt accordingly.
Many professions have regulatory bodies whose purpose is to advance the field through involvement in education and provision of other professional resources. These professional organizations will also need to adapt to meet the development needs of the exponential professional. One way professional organizations can accomplish this is by increasing involvement in higher education so that graduates have a better understanding of how to apply their skill sets to their future profession. They can also help schools identify which enduring skills are most vital to the profession and transcend specific roles. Examples, as discussed in Post 2 , include critical thinking, communication, creativity, social perception, and resilience.
Additionally, organizations need to expand their professional standards to include expectations on professional interaction with both exponential technology and the gig economy. For an example, as standard legal protections do not automatically apply to contractual workers,1 how will entities maintain control and ownership of proprietary information when dealing with a professional in the gig economy? Lastly, the organizations should expand the flexibility and adaptability of continuing education offerings to meet the needs of a fluctuating environment where high-value skills change frequently.
Employers will also play a major role in creating the exponential professional.2 First, employers have a big hurdle to overcome in teaching their employees to adopt, trust, and augment cognitive technology. Getting a truck driver to trust an autonomous vehicle will likely be difficult. Convincing a financial analyst to understand a new role in leveraging, challenging, and augmenting analyses produced by a bot will also prove to be complex. These organizations will need to engage professionals in identifying new opportunities, deploying new technologies, and redefining methods of training.
Second, employers should create new roles and facilitate employee training in new ways to supplement learning. For example, rather than learning through manual processes, junior-level employees may instead perform independent analysis to validate and understand output produced by the machines. As another example,3 the CEO of a large telecommunication company shares with the employees where the company is going and what skills are required to be a lifelong employee. The firm then partners with vendors to create nano-degree courses for each skill and offers employees $8,000 per year to take those courses. Such training could supplement learning lost from automation of manual activities, would help employees enhance other enduring skills, and may utilize new technologies such as virtual reality or chatbot simulation. A 2015 Deloitte Global Human Capital Trends study found that more than two-thirds (69 percent) of the C-level executives surveyed believe that company culture will have a critically important impact on their organization’s ability to realize its mission and vision.4 So, company culture and employer support is crucial when creating the exponential professional.
The final group responsible for developing the exponential professional are the professionals themselves.5 In an environment where technology is constantly updating and professionals frequently market themselves to employers, lifelong learning will take precedence over reliance on a specifically tailored skill. According to one estimate,6 the half-life of an acquired skill has fallen to 5 years. Another statistic suggests that approximately 50 percent of the material comprising the first year of a four-year technical degree is obsolete by the end of the program.7 This means that the exponential professional must be resilient to change, which can be accomplished by focusing on the development of learning abilities to prepare themselves for constant learning over the course of their career. Professionals should also stay abreast of technological trends and apply their learning abilities to quickly master cutting-edge technical skills.
Government bodies can also help facilitate the development of the exponential professional. Example actions include:
Offering support for lifelong education
Updating education materials more frequently to keep up with rapidly changing workforce requirements
Reassessing policies around income, health care support, and other benefits to efficiently serve freelance workers and members of the gig economy
However, not all skills are destined to expire. An Oxford University study identified a set of “essentially human skills” that are becoming more important than ever in the workforce.9 The identified skills consist of the enduring, uniquely human skills discussed in Post 2 , and exponential professionals need to establish this set of enduring skills as their core competencies. Thus, professionals should always be alert to emerging high-value skills and should engage in constant learning and tuning of relevant skill sets.
A shared culture promoting lifelong learning between regulatory bodies, employers, and professionals is necessary for development of the exponential professional. An exponential professional that properly leverages this “always be learning” mind-set can augment technology in the future workplace to achieve groundbreaking results.
Darryl Wagner is a principal in Deloitte Consulting LLP and the Global Actuarial, Rewards & Analytics Leader.
Caroline Bennet is the National Leader of Deloitte Actuaries & Consultants, the Insurance Leader for Deloitte Australia, and Leader of FSI Consulting, and is a member of the Global Deloitte Actuarial, Rewards and Analytics Executive Team.
Contributors: James Dunseth, Trent Segers, Wes Budrose, Nate Pohle, Ajay Parshotam, Mehul Dave, and Corey Carriker
After a year of research and another enormous survey of business and HR leaders around the world, we just released the 2018 Deloitte Human Capital Trends, entitled “The Rise of the Social Enterprise.” What we found, after detailed analysis of the data and many interviews with business leaders, is that businesses today are entering a whole new era of management: one that is focusing on the businesses less as a “company” and more as an “institution,” integrated into the entire social fabric of society. I know that sounds a bit high-level, but the detailed trends make it clear and real.
65 percent of companies surveyed now rate “inclusive growth” as one of their top three goals, eclipsing strategies like “growing market share” or “being the category leader.”
“Citizenship and social impact” were rated critical or important by 77 percent of our respondents, and this topic was rated the “least ready” issue among the executives we surveyed.
The need to create 21st century careers, improve the relevance of reward systems, focus on employee well-being, and address the issue of longevity in the workforce all rated as top 10 issues in the human capital agenda.
The trends we found, which are listed below, are topics one would have considered “soft” or “nice to do” in a prior age. Today, because of the power of each individual in the world of work, they are urgent.
One of the trends we identified is that companies today must be “social” in a truly external sense. Customers, stakeholders, communities, business partners, and employees all have an enormous impact on a company’s brand, growth, and profitability. Being a “social enterprise” means going beyond a focus on revenue and profit and clearly understanding that we operate in an ecosystem, and all these relationships are equally important.
Interestingly, the biggest challenge we found in this research is that C-suite executives are not operating or organized effectively to deal with this new world. If you think about the trends we highlight in the study, each cannot be addressed without an enterprise-wide, cross-functional approach. So the idea of having a C-suite executive who owns various functional areas alone simply does not work.
In fact what our research found was that a new model, which we call the “Symphonic C-suite,” is key, and companies should take on these issues as a team, creating a model we call “teams leading teams,” instead of the siloed functional ownership we see in the C-suite today.
For me personally this work is always among the most exciting things I do here at Deloitte, and this year’s report speaks to the need to find mission, trust, and value in our lives. We are living in a world of tremendous economic growth and technology revolution, yet also one of income inequality, contentious debate about nationalism, and lots of concerns about diversity, inclusion, fairness, and equity at work. I think our research shows that all these topics are now coming together, and business leaders must address them in an integrated and strategic way.
One more point of introduction. As you read these trends and think about how they impact your organization (whether you are in HR or line leadership), I think you’ll find that there are two real dimensions of transformation taking place.
Figure 1: The Two Dimensions of the Social Enterprise Paradigm
First is the horizontal axis—moving from an organization that operates as functional groups to one that operates as a “network of teams.” I’ve written about this extensively before (last year it was discussed in detail in the 2017 trends) and this trend has accelerated. This year I’ve met with banks, manufacturers, insurance companies, and health care providers who are all moving toward a “networked organization” model.
Second is the vertical axis—where every part of the company (sales, marketing, product strategy, engineering, HR, and finance) looks at the impact of external factors on the company and the company’s footprint in the external world. As one of our clients put it (a consumer goods company), customers now do business with companies that are local, companies that do good things in the community, and companies that do good things for society. This goes far beyond “corporate responsibility” into really being a good citizen, and redefining value propositions in this way. And this means doing a much better job of managing data, by the way, an issue that has become “front page” around the world. (One only has to read the news to see how today even the technology industry is impacted by this trend.)
Highlight of the 10 trends
Let me briefly highlight the trends here (in order of urgency from the research), and I encourage you to read the whole report, download the app, and attend one of our webinars highlighting the research.
The symphonic C-suiteAs I discussed above, the most urgent trend we identified was the need for C-suite executives to operate in a more integrated way (we call that “symphonic”). Today it’s as if each C-suite exec (CEO, COO, CFO, CMO, CHRO, CTO, etc.) is leading their own set of instruments, playing the music they think will contribute best to the overall orchestral performance. Of course in the symphony this would be a disaster, and the analogy plays out well in business as well.
Consider the issues of gender pay equity or data privacy, for example. No one C-suite executive can “own” this problem, because it impacts every part of the company. Ditto for problems like “improving well-being” or “reducing attrition” or “improving our employment brand.” The latest survey from The Conference Board found that “attracting and developing talent” is now the No. 1 topic on the minds of CEOs—that issue, along with the others I mentioned, cannot be owned by the CHRO alone.
People data: How far is too far?We are all bombarded with news about AI, autonomous vehicles, and a never-ending discussion of the potential role of computer intelligence in our lives. What our research found is that this enormous issue— that of taking better responsibility for our data— is high on the minds of business leaders.
As I was writing this trend, I had the opportunity to interview the head of research for one of the largest technology companies in the world. He told me that we still don’t really know how to make AI “safe,” because all this data we are collecting can predict and recommend actions that might be biased, single-minded, or ultimately just dangerous. Of course tools that predict attrition or recommend new learning programs are useful, but what happens when systems “recommend a salary” or “recommend a performance rating?” That kind of software can change our human behavior and clearly changes our perceptions of an individual.
With the GDPR (General Data Protection Regulation, a new EU regulation) now becoming law, companies must do a much better job of managing, stewarding, and securing data about people. Too many stories have come out about data leaking into the wrong hands, and often the ramifications of this release are not initially known. While the HR profession is very excited about the opportunity to finally use analytics to make better decisions, this year our research shows a need to focus on privacy, security, governance, and “auditing” of these systems in a much bigger way.
From careers to experiences: New pathwaysThis trend, which has accelerated in importance each year over the last four years, is the one I personally think is most important. Everyone in the working world is now concerned about the future of their career in a world of AI, robotics, and ever-changing technologies and jobs.
I’ve done many presentations on the Future of Work in the last 18 months, and in every case I find people astounded about the way new jobs are being created at a faster rate than we have seen in decades. Today the jobs of “machine learning engineer” (which didn’t exist three years ago), “social media curator,” or “robotic system trainer” are growing at astounding rates, while all our traditional roles in sales, marketing, finance, and HR are changing as well.
What we found in this research is that companies now understand that their “upward path” career models are often very limiting, so they want to create models for “facilitated talent mobility”—models that give people hope, new skills, and continuous development in areas the company needs. But this is turning out to be harder than they thought, and the tools and systems to make this an institutional process are not quite ready.
The L&D market and new tools for continuous learning are arriving this year, so this trend will be one you want to read—and one you want to put on the top of your list of issues to address this year.
Well-being: A strategy and a responsibilityI was at a recent meeting of HR executives and one of the vendors cited a statistic that blew my mind: one in six Americans now take a psychiatric drug to help with depression, anxiety, or sleep.1 In today’s digital world of work, there’s a new level of stress in the workplace, which in turn creates a variety of issues with sleep and well-being, which in turn creates medical conditions (heart disease, diabetes, overweight, etc.) that reduce our health.
The trend is not that health care is an important benefit for employers: rather the trend is that this is now a strategic issue that impacts workforce productivity, profitability, and employment brand. As I’ve surveyed this market and talked with many companies about this issue, I think we’ve reached a point where “employee engagement” is almost a meaningless phrase if it does not embrace the need to “make work healthy” and help people bring their “best selves” to work every day.
I won’t cite all the statistics here, but as you read this trend you’ll see that well-being is now a key corporate strategy and one that must be measured through performance and productivity metrics, not simply those that reduce the cost of insurance.
I think this topic also crosses the boundary into citizenship and responsibility—if you are not building an organization that helps people stay healthy and happy, you are not fulfilling your responsibility as an employer, and that impacts your customer brand.
The leading practices for well-being at work are all being invented now, as our organizations become more “real-time” and demanding by the day. I think you should read this trend as a wake-up call and think hard about whether you are putting the right level of focus and energy into this topic.
The hyper-connected workplace: Will productivity reign?As a professional in my early 60s, who grew up in companies that had no voicemail, no email, and no electronic communications at all (except fax machines), I am particularly sensitive to this trend. Today, whether we like it or not, we are all “over-instrumented” and “overloaded” by messages, communication tools, and more intelligent systems telling us what to do.
At this point in time, based on the research we’ve done (and many of my own studies), I believe we work in an environment where technology is ahead of our ability to adapt. As we talked about in last year’s trends, economic productivity has not kept up with economic growth (or salary increases for that matter), and this is a funny paradox when you consider how many successful technology providers there are.
As we discovered in this trend, almost every company now has multiple systems for messaging and communication, we are all implementing internal social networks at work, yet we have very few rules, models, or practices to help people figure out how to use all this “stuff” without wasting their time.
I met with a vendor last week who has developed algorithms to monitor your email traffic and office calendar, and immediately give you recommendations on when to “push out a meeting” or “not respond to a message” in order to give you more thinking time to be productive. Our latest L&D research found that employees have only 24 minutes a week to “learn” on the job, so a new breed of micro-learning tools are emerging to help us time-slice our development.
As we discuss in this trend, this is a problem yet to be solved. I certainly hope that AI and analytics tools will give us smarter suggestions about what to ignore and what to do, but unfortunately, we are all human and we often respond to things in ways we cannot fully understand. (Look at how easy it is to create “clickbait” on social networks). Let’s not let our companies turn into “clickbait” factories for our people, and in this trend we tried to give you some examples of how to deal with this issue.
New rewards: Personalized, agile, and holisticThis trend is one I’ve been wanting to write about for some time, and I think the time has come. As a global business and HR community, there has been a lot done to make jobs more flexible, make careers more agile, and help managers become better coaches and mentors to our people. But what we have not yet done is figure out how to pay, reward, and recognize people in a way that is similarly modern and “digital” in this new world of work.
I’m not saying people aren’t paid enough—the trend in compensation is upward and companies are now working very hard to improve fairness, transparency, and completeness in the compensation world. What is missing is a new design for agile, personalized, and holistic rewards, one that is relevant to each individual and gives organizations the flexibility to offer just what is needed at the right point in time.
The compensation and rewards industry is massive, and in most companies salary and benefits are the single biggest expense. But when we asked companies if their compensation strategies aligned to the company’s business priorities, we were shocked to see that only 20 percent of companies answered yes. This has to change.
Today, as we discuss in the trend, organizations need to do a much better job of paying people in ways that matter to them, creating more transparency in the process, and giving people more information about why compensation decisions are made the way they are. Everyone feels personally invested in their pay, bonus, and benefits, so in many ways this is the most powerful lever we have as leaders.
Just to give you a sense of the disruption ahead in this area. One of the larger payroll providers told me in the last few months that they see a trend toward “instant pay”—people getting paid every day for the work they did that day. Bersin recently started providing services for “conjoint analysis” of various pay and benefits programs (letting employees value how much they truly mean to them, rather than evaluate them based on the cost), and found that different segments of employees have vastly different desires for how they want to be rewarded.
These are important issues, along with the topic of fairness, gender pay equity, and generational pay equity, that have to be addressed now—and they fall into the category of “being a good citizen” and “focusing on the employee experience,” not just “being competitive in the market.”
Citizenship and social impact: Society holds the mirrorThis topic, which was rated important by 77 percent of companies around the world, is the one where companies feel the most behind (51 percent feel unready to deal with this issue). Why? Because it’s quite confusing and often unclear what to do.The issue we write about here is the need for CEOs and business leaders in general to take a stronger position on their responsible role in society. While business leaders are not “elected” like politicians, in many ways they are “elected” by their boards and employees, so they must think about everyone in the ecosystem in the interest of the company.
Companies themselves, as Larry Fink from BlackRock and Marc Benioff from Salesforce have stated often, are valued based on their responsibility to society, so even CEOs who don’t want to deal with this issue are being asked to be more active in public issues. A recent article describes the conundrum “activist” CEOs face in their jobs and points out that while any position you take on social issues is likely to alienate someone, your employees and shareholders now want you to say something. So it’s not a topic that can be ignored anymore.
I won’t go much further here, but let me cite one more interesting fact. A recent study of product buyers was asked to qualify their buying preferences for vendors that had CEOs that took strong positions on social issues vs. those that did not. They found that random customers were 40 percent more likely to buy from companies who’s CEOs took positions they felt good about than those who did not, so the power of dealing with this issue is high.
AI, robotics, and automation: Put humans in the loop This is a trend we all see every day: companies are now waking up to the fact that nearly every job (including HR) is being impacted by AI and automation, and there are wide variety of new jobs being created. As I like to describe it, AI does not “eliminate jobs” it “eliminates routine work,” which in turn creates new jobs. And as economists have found, only about 6 percent of the jobs in the world are focused on “building machines” (i.e., software engineers) so 94 percent of us have to learn to “use the machines,” again changing how we do what we do.In this trend we highlight how quickly companies have awakened to this trend and how well they understand the topic. What they do not yet know is how to redesign jobs, how to redesign work, and how to build the new skills that are needed. And in the realm of HR, AI and cognitive tools are radically changing the landscape.
One of the issues we raise in this trend is the need for business and HR leaders to understand that AI is a technology, not a solution. It may create smarter decisions and higher quality outputs, but it has to be monitored and trained. And AI is dependent on data, so in order for companies to have great cognitive solutions for customers or internal operations there has to be a strong focus on quality data.
I believe we are in the first inning of a lot of job and organizational redesign driven by automation and AI, and this trend highlights some of the issues to consider.
The longevity dividend: Work in an era of 100-year livesThis trend is a fascinating one, and opens up a topic that most of us understand and will live through in our lives. We are living longer, we are working longer, yet all our talent models, pay practices, and cultural values have not yet adapted to the change.Let me highlight this issue with a few facts. In most developed economies the birth rate is below replacement. This means that in order for the economy to grow, we are going to need more people—so the economic incentive for people to work longer is here.
At the same time, we still live in a world that highly values youth. We are just coming out of a decade of research on millennials and now the Gen-Z workers are here. This cohort is similarly skilled and ambitious and there is a tendency for business and HR leaders to leverage these groups. I was at a meeting with 200 of the top execs from a large client and the CEO looked around the room and said “there are almost no millennials in here; we need to fix this.”
I absolutely agree. It’s important to build companies that promote, develop, and challenge young people and companies that do this find themselves filled with new ideas, new work practices, and lots of excitement and growth.
At the same time, the baby boomer population is almost as big as the millennial cohort and as baby boomers work into their 70s, 80s, and beyond, they make up a similarly important segment of the workforce. Today I believe we are “negatively biased” against age (the 2018 Deloitte Global Human Capital Trends study found that 41 percent of companies believe “age is a competitive disadvantage” in their organization). Yes, older people might make more money and older people may have older skills, but believe me (spoken as a 62-year-old “young person”), we are just as anxious to learn, contribute, and grow as anyone else.
As we discuss in the report, there are some innovative programs and ideas out there, but generally speaking most corporate talent models do not understand or incorporate this “seasoned workforce” well. I won’t try to solve the problem in this article, but let me simply leave you with the thought that this will become an increasingly urgent problem, and the sooner you think about it the better.
The workforce ecosystem: Managing beyond the enterpriseThe last trend, but by no means an unimportant one, is the recognition that the “workforce” of today is not a set of full-time, salaried people. We live in a world where contingent, gig, and crowd-based workers make up a significant percentage of the workforce and these “alternative work arrangements” are now the fastest growing segment.Our research found, as we have seen in prior years, that companies are not yet ready to deal with this new world and while some embrace these alternative work arrangements well, most are nervous about how to manage this ecosystem well. Companies are concerned about legal issues, intellectual property, proprietary work practices, and a variety of cultural challenges.
As we have all seen in the ride-sharing and home-sharing industry, these are problems that can be solved. Once you come to the conclusion that your workforce won’t all be full time salaried people, it’s simply time to sit down and decide how you want to manage this new part of the ecosystem. There aren’t quite enough HR tools and systems to do this easily yet, but as you’ll see from the research, the market is moving fast.
My research shows that most of us still do like to be part of a “team” or organization in our careers, but there are periods of time and many individuals who prefer to work as contractors, agents, or specialists. Thanks to technology this is easier than ever, and our research shows that companies that learn how to manage this ecosystem can create a new, more flexible balance sheet and often move faster, gain deeper skills, and grow at a much faster rate.
Bottom Line: A new paradigm for business is here
As I look back on all we’ve studied for this report and the 10 trends we highlight, I am left with the conclusion that “being a social enterprise” is a paradigm shift in management. Not only must we deal with the 10 trends above, but we have to recognize that business today cannot operate by only considering employees and customers. We now need a set of strategies, investments, and values..
A merger, acquisition, or divestiture (M&A) is typically viewed primarily as a means of transforming the front office to achieve revenue synergies or unlocking cost synergies through the size and scale of a new business. But there’s another, often missed opportunity that could be just as powerful: using M&A as a catalyst to launch the HR function onto a new path. It’s a chance to take advantage of disruptive business and workforce dynamics and transform HR into an organization that creates and delivers sustainable value, even in the face of disruption.
M&A transactions often place significant stress on an organization and its employees. The idea of adding HR transformation to post-deal integration activities may be daunting, but not doing so may prevent the new organization from realizing its full potential.
HR transformation can quickly become an imperative during M&A. Whether the transaction is a small bolt-on or a large “merger of equals,” the number of employees served by HR will increase. The newly combined population, coupled with M&A-related cost synergy expectations, often makes transformation a necessity. In the simplest terms, HR will be expected to do more while also spending less. Transformation may be the only way to achieve that expectation.
To use M&A as a catalyst, the HR function should start with understanding the drivers behind the deal. Why is your organization buying or selling? What is the intended impact to the business—is it about growing revenue, scaling costs, or both? What does the future strategy of the business mean for employees and customers? By connecting the deal value drivers to the future direction of the business, HR will have a starting point to make transformative decisions of its own.
Timing the transformation
HR’s first major decision is deciding when to transform: should it be before or during the M&A, or should HR transition its current model into the new business and then transform later? In an earlier post, we discussed why M&A should be a critical competency for HR, but whether or not an organization has strong M&A capabilities, the decision of when to transform will serve as a guiding principle for how to organize HR to support the business during the M&A.
Several factors to consider when making the transformation decision could indicate that transforming during or shortly after an M&A might be a smart move to make:
Case for funding—M&A events often come with the opportunity to tap into one-time budget dollars for transformation related to the M&A transaction. Given that integration requires significant investments in contract resources, consulting spend, and system upgrades, executives typically carve out budgets specifically for the integration. This can present an opportunity for HR leaders to deliver a business case for why HR should transform during the M&A and request funding for transformation activities, especially if the transformation is aligned with potential synergies. By classifying transformation activities as a one-time integration expense, HR can concurrently fold the costs into the integration budget and potentially benefit from a large return on this initial investment.
Synergy targets—If the M&A requires each function to find and contribute to cost synergy targets, HR should approach finding the synergy targets with an eye toward delivering a more sustainable, cost effective and efficient model, which will still enable and deliver value to the business through future disruption.
Integration as a launchpad—At first glance, it may seem prudent to avoid a sweeping HR transformation on top of an already challenging integration. However, many integration activities can be a launchpad for transformation efforts, as long as each activity is viewed through a transformative lens. For example:
– Identifying weaknesses. Integration provides opportunities to revisit HR programs and processes that may not be efficient. Integration typically includes a detailed analysis of current-state HR activities at both legacy organizations and, as a result, sheds light on areas of inefficiency. HR leaders can capitalize on this period of self-reflection and conduct a non-biased inventory of what’s working (and what’s not).– Optimizing vs. harmonizing. A common goal of integration is to harmonize HR programs and processes across the legacy organizations. In many cases, the focus is on maintaining business continuity throughout the transaction and achieving the “new normal” as quickly as possible. However, when HR leaders undertake transformation as part of integration, they can expand the focus beyond harmonization to optimization. For example, a typical integration may include consolidating legacy HR shared services centers. A transformative integration, on the other hand, may identify opportunities to more efficiently deliver HR services, including technology-enabled improvements and process redesign.
Time of large-scale change—During an M&A, other business functions will likely be undergoing significant change to varying degrees as well. Transforming the entire business at the same time requires substantial coordination vs. staggering the functional transformations. However, it also shortens the overall timeline during which the business is going through tremendous change. Employees will also likely be looking for and better prepared for high-volume change than they might normally be.
Managing transformative change
Certainly, adding more change—even transformative change—during an already change-heavy time is challenging. But there are ways to overcome common hurdles. For example:
Post-Day 1 uncertainty—M&A often generates a lot of uncertainty: employees may wonder if they will have a new job, a new manager, a new office, etc. HR, in tandem with Communications, is responsible for managing this uncertainty. Typically, organizations focus on pre-close communications, but post-close communications should be a priority as well. Creating a transparent, two-way communications process will likely help ease post-Day 1 employee anxiety and aid in retaining talent. Furthermore, a clear governance and decision-making model should be established to reduce role ambiguity among leaders.
Departmental roles and responsibilities—Integration is an important time for all functions to work together. While HR typically leads people-related change management, communications, and organizational design, it requires significant input from all areas of the business. Engaging with functional leaders early in the M&A life cycle will give HR an opportunity to understand their needs and consider their input on how employees should be managed pre- and post-close.
Employee mapping—Combining two organizations requires comparing HR processes and policies and determining new strategies for the combined entity. Differing salary ranges, titles, and benefits can be a hot-button issue. A good approach to successfully execute employee mapping is to research and evaluate industry standards and leading practices. Retaining both entities’ current compensation structures until the new year may provide enough time to complete necessary due diligence.
Endless “to-do” list—Completing myriad M&A-related tasks may feel overwhelming to HR staff members, especially since they must do so while also conducting regular business activities. To help ease the integration process, staff should first tackle the tasks that align with the new business strategy and have the most significant impact on employees across the entire organization.
Returning to business as usual—Once a deal closes, many employees will no longer view the integration as a critical focus area and return their attention to business as usual. While deal close represents the legal transfer of ownership, integration is not complete. HR leaders should charge their team with carrying out post-close responsibilities for both HR functional changes and enterprise-wide initiatives. Designating an integration leader to handle pre- and post-close responsibilities can help keep all processes moving forward.
With the proper mix of planning, process, and execution, HR leadership can harness the integration’s momentum to transform the function, optimize HR’s service delivery model, and better support the business and its employees. In our next post, we’ll look at more ways to make the most of HR transformation opportunities during an M&A.
Tom Joseph is a principal in Deloitte Consulting LLP and has more than 15 years of M&A consulting experience. He works closely to plan integration strategies, plan for an issue-free “Day 1,” manage enterprise-wide organization readiness, and design the cross-functional integration program.
Matt Usdin is a principal in Deloitte Consulting LLP’s M&A Practice and leads our US and Global Human Capital M&A practice. Matt has nearly 20 years of experience advising corporate and private equity clients on achieving M&A value in integration and divestiture transactions.
Kyle Forrest is a manager in Deloitte Consulting LLP and has 10 years of HR and M&A consulting experience. He works across the M&A deal life-cycle, partnering with clients on integration/divestiture strategy and execution and how to infuse digital behaviors and technologies within the HR organization.
HR professionals use virtual reality to facilitate employee training and increase retention. Sports reporters use natural language generators to automatically recap games and to highlight interesting statistics. Actuaries use cognitive computing to automatically evaluate data, compute results, and predict new patterns. Professionals across many industries engage employers in alternative work arrangements through the gig economy. This future of work is rapidly becoming reality as technology develops exponentially. Exponential professionals are those who capitalize on the shifting workplace by embracing new technology, leave behind traditional automatable tasks, and apply their uniquely human skill set to more high-value, strategic roles.
Over the last century, machines have replaced many tasks previously performed by humans in nonprofessional workforce segments. Advances in machine learning, robotics, and cognitive technologies are now also disrupting the professional workplace. Today, many professionals regularly perform repetitive, routine tasks that could instead be performed by a machine. Truck drivers transport material back and forth between point A and B. Financial analysts execute a checklist of activities to calculate and evaluate financial reports. Machines will soon be able to accomplish such tasks more efficiently, economically, transparently, and with fewer or no mistakes.
Consider the case of a life insurer that was using hundreds of spreadsheets and databases for financial reporting.1 Recognizing the need to modernize its financial reporting function, the insurer implemented a single vendor-based system solution combined with an automated end-to-end process. As a result, the financial reporting results were produced more reliably, in less time, and with three times the analysis available prior to this transformation.
An evolving role
The exponential professional will need to evolve his or her role to augment the capabilities of the machine.2 Machines are strong in executing routine tasks without bias; however, critical thinking, creativity, communication, social perception, and resilience are uniquely human abilities that characterizes the professional.3 When an autonomous vehicle replaces driving for the truck driver, the driver can focus on troubleshooting delivery issues, making decisions on the go, and building customer relationships.4 When a bot automatically performs an analyst’s financial reporting procedures, the analyst can focus on interpreting and communicating findings, asking new questions, and identifying new, forward-looking strategies. Furthermore, organizations today are driving a huge increase in demand for analytical roles. These roles are typically called “data scientist” or “analyst” and are growing rapidly, with the number of annual positions expected to reach 2.7 million by 2020.5 These jobs combine technical expertise with expertise in design, project management, and communication to augment exponential technology.
In addition to altered responsibilities, exponential professionals will need to adapt their professional judgment and conduct. Primarily, the professional will need to adapt to trust the work6 of the machine to benefit from it. However, machines are programmed by humans and thus prone to error. As such, professionals should also learn how and when to challenge the results of the machine. Currently, many professional standards worldwide discuss trusting or relying on the work of others. For example, Actuarial Standard of Practice #23 discusses the use of data and reliance on data created by someone else.7 The standard states that the accuracy and completeness of data provided to an actuary is the responsibility of the supplier, subject to review. To what extent does this change if the supplier of data is a bot? Similar professional standards will have to be created for the human-robot relationship for various industries and careers. Undoubtedly, professional standards and the professionals’ duty to their stakeholders and the public must not be compromised. On the contrary, professional quality inspection and review will likely be of added importance, attracting a greater proportion of the total effort in a more automated work environment.
Another aspect of professional conduct that is especially relevant for the exponential professional is mitigation of conflicts of interest. Professionals of today may find themselves conflicted between responsibilities to their employer, clients, professional organizations, government, and other stakeholders, such as the public. These responsibilities become increasingly complicated when the professional is a member of the gig economy and may be employed by several entities simultaneously. Consider the example of two different rideshare companies where drivers can work for both companies at the same time. When a driver is waiting at the airport and receives ride requests on both rideshare apps simultaneously, how does the driver choose which request to accept? Does the situation become more intricate if the vehicle in use has been arranged through one of the rideshare companies? The exponential professional will continually need to be on the lookout for conflicts of interest related to their professional assignments.
There is a large gap between today’s professional and the exponential professional when it comes to responsibilities and professional expectations. Regulating bodies, employers, and professionals themselves will all play major roles in bridging this gap. This will be discussed in detail in our final post in the series, Creating the exponential professional.
Darryl Wagner is a principal in Deloitte Consulting LLP and the Global Actuarial, Rewards & Analytics Leader and US ARA Insurance Services Leader.
Caroline Bennet is the National Leader of Deloitte Actuaries & Consultants, the Insurance Leader for Deloitte Australia, and Leader of FSI Consulting, and is a member of the Global Deloitte Actuarial, Rewards and Analytics Executive Team.
Contributors: James Dunseth, Trent Segers, Wes Budrose, Nate Pohle, Ajay Parshotam, Mehul Dave, and Corey Carriker
1 “Actuarial 20/20 Transform the function,” Caroline Bennet, Jason Morton, Bruce Fell, Stephen Keane, Roger Simler, Deloitte, 2016.
2 “Machines as Talent,” Global Human Capital Trends 2015, David Schatsky and Jeff Schwartz (Page 95).