If HR Transformation is dead, what is the future of Human Resources?

For over 70 years we have developed the concept of Human Resources against the background of an economic reality in which organizations are the dominant form for how we think about work, be it in a profit or not for profit context. Almost all of our mental models and approaches to HR, organizational development, change management, people development, talent management, reward management and many other HR-related interventions have been designed and developed with the idea that human beings in organizations are an asset that can and need to be managed.

Almost all tested methods and HR interventions are built on theories and science that were developed many years ago. Over the years we have fine-tuned and further developed these models; in essence, we are extrapolating the past into the present with a view that further improvement will make them resilient and robust when faced with the unknown.

Yet, we are on the brink of a new era and that we are at risk of turning a flagship product into an “end of lifecycle” phenomena if we do not start adjusting ourselves now to a new reality, or even better, involve ourselves to shape this new reality. We will need some kind of “creative destruction”, a term coined by Joseph Schumpeter to describe the disruptive process of transformation that sustains economic growth.

What is this brink of a new era?

When we started reading some years ago about Singularity University, it started to dawn that something big was looming around the corner. Most of these developments have been in the making for 20-30 odd years, but only now do they start to approach their breakthrough; this is the result of what has been christened as “exponential growth”. This describes a phenomenon that is different from linear growth (which we have been largely accustomed to over the past 40-50 years). Exponential growth essentially means that after a certain period of slow growth, developments suddenly accelerate at an unprecedented rate. This technology explosion is simultaneously invasive, disruptive and transformative, and it leads to old and tested business models no longer being able to count on automatic survival. We already know that the average half-life of a business competency has dropped from 30 years in 1985 to 5 years today, we know that in the last 15 years 50+% of the S&P companies have disappeared; and in the next 10 years another 40% is predicted to disappear. We need to accept that company valuations accelerate; it took Google 8 years to get to 1 Billion Market cap, Facebook 5 years, Tesla 4 years, Uber 3 years, Snapchat and Oculus Rift less than 2 years. And especially with highly leveraged business models, largely driven by incredibly high valuations, it is now possible for new market entrants to disrupt existing industries. The investments that Google and Uber can put in self driving technology is completely driven on a high valuation of their (low asset) business. Existing market dominators, like Ford, Daimler and others are struggling to keep up and their core business at the same time is attacked from a number of different players, some of them without any previous history to the automotive industry. This picture from CB Insights illustrates the attack on this industry. But automotive is not alone, virtually every industry is attacked from multiple directions at the same time; CB Insights calls this “unbundling”.

With reference to Gerd Leonhard, there are (at least) 9 megashifts rolling over us in an unprecedented speed and intensity (and some of the words may not yet exist in English) Robotization, Virtualization, Digitization, Datafication, Personalization, Cognification, Augmentation, Disintermeditization, and Platformization. BCG identified 60 major trends and grouped them in 12 interrelated primary forces with dramatic changes in the supply and demand for talent, leading to a revolution how work gets done in organizations.

Technologies, business models and distribution innovations will radically disrupt every sector. Technology is eating every industry and technology adoption is faster than ever. More so, the pace keeps accelerating and as a result of this, we will soon be confronted with massive societal and ethical questions (which should not lean solely on the shoulders of government and authorities). What was unimaginable a few years ago is now rapidly becoming reality. Some examples to name a few are customized babies, robotic companions, personalized food, 3D printed housing, solar roads, lab engineered luxury, bioengineered chemicals, neuroprosthetics or enhanced workers.

The organization models of today are to quite some extent the product of the industrial revolution, with post-war evolutions, complemented and enhanced by breakthroughs in technology in the 80’s and 90’s. They often are command and control mechanisms, built around a hierarchy and a matrix in combination with regional models and business unit structures. We have worked hard in the recent decades to make them more efficient (Kaizen, Lean, 6-Sigma, workout, process reengineering, outsourcing, offshoring, nearshoring) and we have tried to make them more effective (7S-model, culture changes, leadership development, commercial capability building, organizational design to name just a few) and alongside the background of these fairly inefficient and ineffective models, a large consulting industry has developed that has attempted to make these “old” models become scalable and more efficient and effective.

When we put these megashifts in the context of the exponential growth of technology, it would be a miracle if the organizations of today can handle and manage these revolutions, let alone whether they can transform from working in an “old economy” to a “new economy”.

How does the organization of the future look?

We cannot talk about organization if we do not first talk about work. Organizations after all are constructs that we have invented to get work done; it is as simple as that.

We have built structures and processes to make sure that work is organised and ideally the model that we chose facilitates an efficient and effective use of all necessary resources. This “old” concept of work and organization is built around the notion that work is translated into jobs, and that we find human beings who can staff these jobs. As mentioned earlier, in this model human beings are an “asset” that need to be “managed” and for this we have developed a myriad of interventions, like job grading and classification systems, performance management systems, engagement initiatives, learning programs, succession plans, talent management initiatives, talent acquisition departments and this list can go on and on and on. And we have developed all kinds of similar interventions for finance, for supply chains, for marketing and other functions inside the company.

This corporate architecture is largely designed to withstand risk because you “own” the assets and resources. But what if the concept of organization, the concept of a job and the concept of work are all being reinvented and is it now all about having access to resources and assets, rather than owning them?

In tomorrow’s world, we will not have jobs anymore. Jobs will gradually decompose into “pieces of work” that can be performed almost anywhere for a limited period of time. We will no longer have employees, as they too will be “decomposed” into separate capabilities. These capabilities and the available work will be matched by a “matching engine” (you could call this the “uberization” of work) and as a result, a worker will be engaged for a part of their capability for a limited period of time for a very specific piece of work, irrespective of the location. You can also call this the “packetization” of me.

Now, think this through; we will no longer have people joining companies as employees, so, we will no longer need an EVP, we may no longer need offices, no longer offer careers, we work with individual market pricing, rather than with salary bands. We no longer have a companywide consistent performance management system. There is no limit to fantasy, however, there is one certainty; the organizations that we know so well today will no longer be needed in the future and together with this, almost all our HR practices will have to change or they will become obsolete.

This is where the exponential organization is coming in. The book “Exponential Organizations”, written by Salem Ismael, Michael Malone and Yuri van Geest provides quite some food for thought. They have identified 10 elements for the organization of the future and we have taken a few of these to illustrate the point:

• Staff on demand is possibly one of the most impactful changes in managing organizations. It is no longer necessary to be somewhere physically for a job, we can now connect with each other virtually (and in the future through holographics), we will have abundant access to data of workers and with deep machine learning and algorithms, we will become increasingly better at building an effective match between work and worker. Already now we witness an explosive growth of the “off payroll employee” (Jon Younger calls this the “agile talent”), this growth will continue and in less than a decade, we can expect to have more than 50% no longer on our payroll and in 20 years from now (and possibly earlier), this may go to 80+%. Today there are already more than 800 virtual marketplaces!

• Community and crowd; as the borders of companies are becoming fluid and the internet is further penetrating daily life, we will see the emergence of communities and the company of the future will actively engage users, customers, alumni, vendors, partners, fans, staff on demand (the extended workforce), shareholders and other stakeholders in the development of products. They also use crowds for creativity, innovation, validation and funding. You may start thinking of a GitHub for HR

• Algorithms; the company of the future will be run on algorithms that come in two types; machine learning, which is the ability to accurately perform new unseen tasks, built on known properties learned from training or historic data, based on prediction. Deep learning is the second “neural” algorithm, which allows a machine to discover new patterns without being exposed to historical data

• Engagement is the new mantra in the quest to interact with all communities and crowds, including your own employees and the blended workforce. And these engagement interventions are available digitally. This also plays into the current and future generations who on top of this are much more purpose driven. Deep data insights allows us to really get under the skin of motivation psychology. Think of engaging the millennial generation through gaming. Engagement also covers the emergence of the “employee journey” and “candidate journey” where the learnings from consumer marketing will be transferred to the HR domain and behavioral economics will become mainstream in HR

• Experimentation the future organization is not about managing risk, it is about constantly taking risk, they think in scalable bottom up learning, rather than top-down information dissemination. Good examples of experimentation are Hackathons, kickstart innovation workshops, skunkworks, garage, prototyping, A/B-testing, lean start-up, incubators. The thinking behind this is to fail fast. This approach is very different from the classic linear product development with many sequential steps to validate progress

• Autonomy is the driving force behind self-organizing, multidisciplinary teams operating with decentralized authority, which contrasts diametrically the classical command and control organization. In this concept, it is the team that decides who joins the team, it is no longer a manager who “commands” that decision. The most recognized approach to this these days is Holacracy which has blended agile technologies with the lean start-up approach and turned this into a new governance. While it may be too early to tell whether Holacracy is sustainable, it is already evident now that autonomy is required in the world of tomorrow where agility is necessary

• Social Technologies create horizontal and totally pervasive communication, replacing classic top-down approaches. Social technology combines workflow, file sharing, virtual collaboration with advanced video technology, totally transparent task management that facilitates fast conversations, decision cycles, learning in a cloud context within a cooperative culture. Our millennials and the generations beyond already operate in this atmosphere; they don’t know anything else.

The conclusions that Ismael et all draw are that information accelerates everything. We will witness a drive to demonetization with disruption being the new norm, where “experts” tell you how it can be done, as opposed to managers or staff departments who tell you why it cannot be done. Five-year plans will become obsolete, small will beat big, assets won’t be owned but rented, trust will beat control and versatility will replace rigidity. In this world, everything is measurable and anything is knowable.

In summary, the future organization will be an ever evolving, malleable “asset light” company with a small core of on-payroll employees, surrounded by multiple layers of physical and virtual communities; where ideas, innovation, products, manufacturing and financing are sourced through the crowd; where everything is “datafied” and managed through algorithms and dashboards, collaboration happening through social technologies in a culture of autonomy and permanent experimentation.

It is in this new reality that we need to redefine the role of HR.

How will the face of HR change?

It begs the question whether the role of HR is still one that is required in a new organizational reality and whether HR capabilities are the ones that are required for the future. CHREATE, the global consortium under the stewardship of John Boudreau and Ian Ziskin, is possibly coming closest, having attempted already in 2015 to define the new reality of HR. They identified five forces of change (social and organizational reconfiguration, an all-inclusive global talent market, a truly connected world, exponential pattern of technology change and human & machine collaboration). These 5 forcers lead to two core themes: the democratization of work and technological empowerment. With this in mind they designed four potential scenario’s for organizational realities:

• the “uber” empowered world,

• a turbocharged version of today,

• a world in which work is re-imagined and

• one scenario where the current state continues to evolve.

Based on all the above, they went on to identify quite an extensive set of 2025 HR capabilities and also 5 new roles that may be needed for the future organization:

• Organizational Engineer,

• Virtual Culture Architect,

• Global Talent Scout, Convener and Coach,

• Data, Talent and Technology Integrator

• Social Policy & Community Activist.

To name just a few, they see a pattern of new capabilities emerging, replacing the ones of today. Employee Brand becomes Employee Experience; Change management will become Agile Leadership, Employee Engagement transitions into Community Engagement; Sourcing and Talent Attraction will turn into Talent Relationship Building; Learning & Development becomes Community Development & Boundaryless Careers.

It is evident that the classic client relationship of HR towards a business is no longer the prime driver of value in the future. HR of the future is a spider in a web of multi-stakeholders where on and off-payroll workers are serviced with equal importance, where they consult on corporate careers as well as on a company independent career, where they play an active role in “crowd and community management”, and this is a world where most decisions will be based on readily available data (and no longer on opinions). They will play the role of an all-encompassing talent broker, connecting leaders with top talent.

In the new world of organizations, with the employee experience at its core and building on the work of Lucy Adams, we also expect that Human Resources will see a massive shift away from the current “de-humanized” HR process landscape, where employees are managed as assets. We do expect that the learnings out of marketing in customer centricity will make inroads into HR and that we will increasingly start designing an HR context that is built around segmentation and totally individualized “experiences”. With this in mind, we expect to see that consumerization will transform HR from the outside in; personas, journeys, touchpoints, channel management and design thinking will become a standard part of the HR vocabulary. TI people is already helping HR organisations with this transition. We expect a future HR context where adult people are again treated as individual human beings; in other words, it allows us to “re-humanize HR”. Building on this trend, and this is already quite prevalent today, we expect to see a significant rise in usage of the “Employee Experience”: no longer is the process telling us how we need to operate, but it will be the individualization of the HR experience.

In today’s world, and depending on industry, maturity, technology adoption and many other factors, we can easily argue that 50-60% of the work in HR is related to administration and operations; typically, this is assigned to a kind of shared services or operational HR environment, including first line employee support. We predict that service centre technology will be pervasive, will become increasingly standardized and especially in high volume environments progressively be replaced by chatbots with AI and deep machine learning capability. Companies will increasingly realize that there is no competitive advantage having a shared services environment inhouse, especially as we see the quality of the service improving significantly. Cloud based technology platforms will become the norm and we will hardly see any company argue that their admin back office processes need to be customized to their needs. We will successively learn to “let go” of this capability and pass it on to external service providers. We can expect that also ERP/ SaaS solution will be replaced by a next generation solution, similar like bitcoin or blockchain.

Strategic workforce, organization and technology planning, will become a “winner”. It includes the technology infrastructure required to “get work done”; it includes the agile workforce, how AI and predictive analytics are used for competitive advantage. The algorithms for the workforce will be developed there. Org design will be part of this. The worker of the future will come with own apps and they will sell access to their data to a company. A new capability that will find its place is around data science and technology, as both will explode in the next few years in scope and impact. It is likely that these capabilities need to be sourced externally or from other functions, or it will become a shared function for the organization, and not one purely for HR alone.

Team and organizational learning will become a Netflix for individualized and team learning, where interventions are in a push and pull environment always available anytime on any device. This capability will facilitate the learning of virtual teams. OD will morph into this, supporting a variety of transformations. We predict that the pure strategic CoE activities in talent and reward will no longer necessarily be sitting “inhouse”. Companies will discover more and more that sourcing this capability externally has advantages: more flexibility, scalability, easier access to latest insights. We don’t see learning and leadership development staying inhouse; possibly a program manager will, but the rest can be (crowd)sourced externally.

Customer and Employee experience creation; we expect that marketing and HR will come closer and closer and eventually merge as the worker of the future will increasingly be one element of the marketing mix. Talent Acquisition will “just” be another form of customer acquisition. Data driven and technology enabled workforce attraction and engagement (and this may include health and wellness) will likely be a winner. Reward will also sit there and become another marketing tool (just like price is one for product). This area will also drive the re-humanization of HR practices. Community and crowd management also belongs there; they “own” engagement. All these activities will be performed, in our view, by the crowd and not necessarily sourced from an HR department and this is also how we see the role of the HRBP evolving.

In summary and closing

We are at the brink of a transformative change in work and how we can think of work and organisations. These disruptions require a completely new approach to HR; extrapolating the past is no longer sufficient and will quickly lead to obsolescence.

And lastly

Over the recent years we have researched extensively the changes in the DNA of Human Resources and the Future of Work. And all of this has resulted in workshops that we hold in-company for groups between10 and 100 HR leaders, either in a thought provoking keynote or as a half-day or full day workshop. In any of these interventions, we aim to create (the start of) a new paradigm of thinking for Human Resources, one that is very much needed to survive in the world of tomorrow.

We also organise the annual conference ‘The BEYOND HR Forum’, this is THE place to get immersed in the future of HR. On July 5 and 6, 2018, in Amsterdam, it will feature a range of keynote speakers and workshops, all centred around and focused on “HR around the corner”. We recommend you to benefit from progressive insights that are relevant for the future of the HR function. Visit www.beyondhrforum.com for more information.

About the author

Ruud Rikhof is co-founder of KennedyFitch and a Human Resources executive with and a Human Resources executive with 25+ years of experience with IBM, Novartis, Bristol-Myers Squibb, The Nuance Group, UBS and SHV (one of the largest family owned company in the Netherlands). He has worked in global, regional and local roles and served client populations of up to 20.000 employees and led HR teams of 50+ HR Business Partners and was based in Amsterdam, Vienna, London, Munich, Basel and Zurich. At KennedyFitch he focuses predominantly on executive search for the Human Resources Function.

Email: ruud.rikhof@kennedyfitch.com

LinkedIn: https://www.linkedin.com/in/ruudrikhof

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