I tend to have a somewhat cynical view toward predictions about human capital management (HCM). This is because the fundamental challenges facing HCM remain fairly constant from one year to the next. These include things like finding and hiring the right people, aligning and engaging people around the company strategy, and developing and retaining critical talent. In my experience, most HR predictions reflect incremental improvements in existing practices that might be called “old wine in new bottles.”
However, over time one can see significant changes in broad social values and beliefs related to the nature of work and labor that have a profound impact on HCM overall. I refer to these as “tectonic shifts” since they are deep level changes that underlie and drive a range of surface level changes to HR methods and processes, similar to how movement of tectonic plates drives changes on the surface of the earth. Past examples include the shift in societal beliefs toward worker rights that occurred in the early 20th century that led to things we now take for granted such as paid vacations, five-day work weeks, workplace safety, and collective bargaining. Or changing attitudes over the last 40 years toward the role of women in the workplace that led to widespread shifts in their career paths and development and emphasis on gender equity in organizations.
Society drives change
What makes tectonic shifts different from other trends in HCM is they are not driven by companies. They are driven by changes in social values and beliefs about the nature of work itself. For example, adverse impact regulations were not created by companies seeking to improve workforce productivity. They were created by a shift in societal beliefs about the role that race and gender should play in employment. In 1900 it was commonly accepted practice to make employment decisions based on people’s ethnicity, age, or gender. This changed with the civil rights movements during the 20th century, and by 2000 the majority of people felt that employment decisions should be made based on people’s skills and contributions, and not their demographic traits.
Most tectonic shifts in HCM ultimately lead to more efficient labor markets and productive workplaces. But these shifts are not always embraced by organizations. They may force companies to change even if company leaders would prefer to stick with the status quo. Sometimes these tectonic shifts manifest themselves gradually, similar to the slow growth of mountain ranges, and sometimes they lead to violent change akin to earthquakes. This has certainly been the case if one looks at the past 100 years of history around things like equal employment opportunity, worker’s safety, or fair labor practices.
The coming tectonic shifts
The following are the tectonic shifts that I believe will fundamentally alter how companies structure jobs and engage employees over the next five to 10 years. These are not the only major changes we will see. But I believe they reflect deep seated shifts in how people and societies view the nature of work and labor.
1. Work will not be defined by what people do, but by what people learn
For almost the past 100 years the concept of a career has been divided into four basic stages. Up to around 23 we go to school, from around 23 to 30 we choose a career path, from 30 to 65 we work in the same basic types of jobs, and after about age 65 we stop working. The assumption was people would not make major changes in the nature of their work past the age of about 30.
This concept is being completely obliterated by digitalization and automationcompletely obliterated by digitalization and automation. Anyone who thinks they will be doing the same thing in 15 years that they are doing now is setting themselves up for job loss and unemployment. As more people accept the reality that no type of work is safe from automation or radical transformation, employees will expect and even demand that work enable them to learn new skills to prepare them for future jobs. Forcing someone to work full-time in a job that does not enable them to learn new skills may soon be viewed as labor exploitation since it is setting them up for eventual unemployability. When people talk about their careers, they will no longer ask each other, “What do you do?” They will ask, “What do you learn?”
How companies can prepare for this shift:
- Incorporate learning into the design and staffing of jobs — Ensure that jobs give employees opportunities to perform novel tasks and develop new capabilities. This may require rethinking how jobs are managed to balance short term operational needs with long-term talent development goals.
- Create coaching cultures — Ensure managerial practices focus on providing employees with ongoing feedback and developmental guidance. A good place to start is to replace traditional backward-looking performance appraisal methods with future-focused continuous performance management methods.
2. Increasing workforce agility will become a top priority for business leaders
It is often said that the only constant is change. It is now more accurate to say the only constant is an ever-accelerating rate of change. The only way companies can survive in the modern economy is to excel at adapting to changing markets, technologies, and business landscapes. Just ask any CEO this question: “Does your company’s success depend on the ability to get employees to do things in the future that are different from what they did in the past?”
As the pace of change continues to increase, the only way business leaders can ensure company success is to create agile workforces that effectively anticipate and react to change. This requires tapping into people’s innate capacity for learning, growth, and innovation. How people react to change depends largely on whether they are motivated, supported, and safe. When these conditions exist, people see changes as positive opportunities for growth. When these things are missing, people become disillusioned, depressed, anxious, and fearful.
How companies can prepare for this shift:
People are most agile when they feel motivated, supported, and safe. This can be achieved in part through implementing three types of HR processes.
- Use goals to connect people’s jobs to meaningful outcomes — Motivation grows as people see a link between what they are doing and things they value as important. Making sure people feel a sense of ownership over well-defined, meaningful goals is critical to a purpose driven culture.
- Create social collaboration communities — Feeling supported is about creating communities that encourage and enable learning. People do better when they are part of a group that appreciates and supports their development contributions.
- Build supportive and inclusive cultures — Safety is about giving people confidence and security that they are cared for as people. It is about creating a community that values and supports the health and well-being of its members. This is largely about promoting workforce diversity, inclusion, and well-being.
3. Empirical staffing methods will become a widely accepted part of hiring
Despite marketing hype, I believe there are not that many places where “big data” is likely to have a major impact on HCM practices. But one area ripe for data driven transformation is staffing. Staffing represents the ideal situation for data driven methods like machine learning because it involves well defined decisions that have measurable outcomes.
Companies have been using artificial intelligence and other advanced statistical methods to guide staffing decisions for decades. Historically these methods were used sparingly due to the scarcity of data, the speed of computer processing, and general unease toward mathematical hiring systems. We now live in a world where computer processing is almost instantaneous and people are increasingly willing to create online profiles containing all types of information about themselves. The ability to efficiently find skilled candidates is also becoming more critical due to the scarcity of qualified labor. Companies need some way to identify talent across broad pools of potential candidates. The widespread adoption of data driven staffing assessment instruments is an obvious solution to these challenges.
How can companies prepare for this shift:
- Deploy data driven hiring techniques — This includes implementing workforce analytics to forecast hiring needs, recruiting marketing analytics to source candidates, statistically validated staffing assessments to guide hiring decisions, and machine learning to predict hiring outcomes.
- Create skills taxonomies and databases — One of the biggest challenges to hiring is knowing what qualifications and capabilities to look for in candidates. The more clarity companies have around the skills and knowledge needed to support their workforce strategies, the more effective they will be at leveraging the power of data to find and match candidates to job opportunities.
4. “Contract labor procurement” will be replaced with “engaging external talent”
External workers, such as contractors or temporary workers who are not on the company’s formal payroll, have become critical to business operations for many organizations. The ability to effectively employ, manage, and motivate external employees will become even more important as companies face growing talent shortages.
Many companies currently treat external workers somewhat like “second class” citizens. They are often managed by procurement and finance as though they were commoditized raw materials. People are not materials to be procured. They are talent to be engaged. Over the coming years the management of external workers will move out of procurement and cease to be treated merely as an operational cost. Instead it will become a critical strategic function within HR.
How can companies prepare for this shift?
- Develop a talent strategy for external workers — Approach external workers as an integral and critical extension of the company’s talent pool. Define methods and guidelines to ensure effective recruitment, selection, and development of external employees.
- Address the cultural issues associated with a blended workforce — Recognize the issues that arise when contractors and temporary employees work alongside full-time employees. Take steps to ensure external workers feel welcome and appreciated by the organization.
5. Compensation data will become public
To some degree this has already happened. Many countries have started requiring that companies publish pay levels for certain types of employees. Large amounts of informal pay data are also available through sites such as Glassdoor and PayScale. This move toward compensation transparency is being driven by three factors. The first is a growing demand for pay equity, particularly for women. The second is frustration around the use of pay secrecy by companies to manipulate employee pay levels. The third is the growing desire to increase the return on investment companies get from money spent on compensation. The motivational value of compensation depends on people understanding the relationship between their actions and the financial rewards they receive. This understanding cannot happen without transparency and clarity around compensation methods and philosophies.
How can companies prepare for this shift?
- Implement methods to ensure pay equity — The best way to ensure equitable pay is to use decision making processes that address and prevent bias before it happens. Then use data analytics to monitor for potential pay equitydata analytics to monitor for potential pay equity issues on an ongoing basis.
- Get comfortable talking about pay — As pay data becomes more public, companies will be challenged by their employees to explain why some people are paid more than others. Take steps to ensure your managers are equipped and able to effectively discuss pay questions with their employees.
6. Age will join gender and ethnicity as a key issue affecting workforce diversity
Individuals over the age of 60 represents the fastest growing segment of the population in the U.S. and elsewhere. People are living and working longer than they ever have in the history of mankind. As more older workers remain in the workforce, overcoming false stereotypes about aging will become an increasingly important issue. Companies that effectively address the risk of ageism will find themselves able to recruit from what is arguably the fastest growing source of skilled labor, and also the wealthiest segment of customers.
How can companies prepare for this shift:
- Rethink job design to support employment of older workers — Older workers are able to effectively perform most jobs, but as people move past their 60s there can be significant changes in their work preferences and capabilities to perform certain physical tasks. Companies should consider how jobs are designed and strive to make them more attractive to older employees.
- Address ageism alongside other diversity topics — Ageism is widespread in many industries and societies. Companies should take clear steps to address ageism just as they have taken steps to address sexism and racism.
7. Health care will become a major factor affecting labor costs and mobility
This is an issue that will particularly impact the United States. As health care costs grow, people increasingly make career choices based on access to medical care for themselves and their family. Being able to see a doctor should not be the primary factor determining someone’s job choice. But in the United State it often is. Small companies with limited resources will struggle to attract talent due to their inability to provide health care coverage. And large companies will find themselves employing large numbers people who are unengaged but afraid to leave for fear of losing existing health care benefits. The result will be a highly inflexible and costly labor market that will limit companies with operations in the US.
How can companies prepare for this shift?
- Reduce healthcare costs through use of well-being programs — Healthcare benefits can be a critical factor in attracting talent in the US. Employee well-being programs can help companies provide good healthcare benefits while minimizing healthcare costs.
- Shift operations to labor markets with effective healthcare systems — If US healthcare costs continue to rise as predicted, companies may want to shift operations to employ talent from labor markets that have more efficient healthcare systems.
Several of these tectonic shifts are already well underway, while others are just starting to emerge. The more companies prepare for these shifts in advance, the better they will be able to adapt and profit from them as they grow from subtle undercurrents to massive groundswells. These are certainly not the only shifts we can expect to see over the coming years. But they are ones that will have significant impact on HCM practices in the not-too-distant future.