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Author's profile photo Christopher Koch

Employee Skills: A Social Contract for the 21st Century

HR blog 1 illustration.jpgIn the 1930s, the effects of a bad economy were highly visible: Long bread lines and rickety carts with hand-written signs offerings apples for a few cents apiece.

Today, the unemployed often suffer behind closed doors, alone. They have food and a roof over their heads but face a bleak future. It’s one reason that in the U.S. anyway, the suicide rate among men in their fifties, the group arguably most vulnerable to long-term unemployment, underemployment, or a significant drop in income after reemployment, was 50% higher in 1999-2010 than the previous decade.

Disconnected from Suffering

And there’s another difference from the old days. Companies used to suffer right along with their laid off workers because their businesses depended on the local economy.

Today, of course, global sources of revenue and labor mean that stock prices can soar for companies based in struggling economies with high unemployment.

An Insidious Problem for Companies: Skills

All of which gives companies a chance to ignore the deeper problems of a global economy. But companies can’t afford to do that. They have an insidious problem lurking under the surface of high stock prices: a shortage of employees with the right skills coupled with a less loyal workforce.

Product life cycles are too short and competition is too volatile to go back to the days of long-term employment and job security as a lure for top talent. The consequences for companies are that the best and brightest, or at least those with the hottest skills, leave and cost a lot to replace – if they can be found at all.

An Ecosystem Approach to Employment

Research that we’re doing here at SAP is showing that in order to thrive in the future, modern companies must develop new ways to engage workers in an ecosystem of employees, outsourcers and freelancers.

HR is Part of Strategy Now

That means that HR must come out of the backwater of benefits administration and become a major part of overall company strategy. Companies must take a more active role, empowering individuals to find education with a faster ROI in a more practical approach, in parallel with more formal academic education.

But for all this to work, a number of things need to change:

  • Stop leaving hiring to chance. Companies hire the people they need when they need them rather than planning for the people they’ll need five years from now.
  • End the functional approach to (and in) HR. CEOs must stop equating HR with payroll and benefits and HR departments must learn to speak the language of business.
  • Maintain relationships with ex-employees. Companies must nurture formal alumni networks and actively use them for recruiting, or even for helping former employees continue their career development.
  • Find the right balance of training. We’re seeing some compelling arguments that companies are underinvesting in training — employees are frequently left to their own devices, but can’t always afford to acquire new skills on their own.
  • Formalize informal learning. Social media can form the foundation for an informal internal training system among peers and mentors. But companies have had mixed results from these efforts so far.

What else should companies be doing? Please help with our research by contributing your thoughts.

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      Author's profile photo Caroline Lewis
      Caroline Lewis

      Great post - as an HR leader, this strikes a chord!.  I think your comments on HR as a profession are spot on.  Fortunately, the tide has really started to turn in HR over the past 15-20 years, but not all over the globe and not in all industries.  We're fortunately at SAP to have a strategically, business-first focused HR organization, but all too often that's not the case. 

      To your point, the finger cannot just be pointed at HR, but what leaders should expect from HR.  Leaders are responsible for managing talent, HR knows the business drivers to partner with their leaders effectively to create frameworks to properly assess and develop the leaders not just for today but for tomorrow.  Of course, HR has to be up to the task.

      Ultimately, tools like SuccessFactors' BizX suite put these tools right in the hands of leaders with the ability to manage talent in an integrated way.

      I'm curious though, how do you see a social contract applying in a world that is becoming more of a freelance economy?  What is the role of leadership, HR and even corporations role with employees?  I'm curious to hear your view. 

      Author's profile photo Christopher Koch
      Christopher Koch
      Blog Post Author

      Hi Caroline,

      It's a great question. I think skills are going to become a new currency of value between companies and their employees. In the U.S., we have Congress asking for higher visa caps for good reasons and for bad reasons. Good reasons are to bring new blood into the U.S. economy; bad because as you know, neither companies nor governments are investing much in education and training these days.

      However, as global competition for skills heats up and employees become less loyal, companies will eventually come to see (I hope) that training becomes more of a quid pro quo for getting employees with the necessary skills as the payback of labor arbitrage continued to diminish.

      For example, an employee who leaves the company could be lured back by the promise of training in return for agreeing to work as a contractor for a certain period. It's a model that has worked well for the volunteer army. Why couldn't it work for companies, too?

      If a more robust ecosystem of freelancing develops with some basic benefits like access to healthcare and retirement savings plans over the long term, employees could potentially just string together contracting assignments rather than trying to break their way into long-term jobs and suffering a free fall when those roles go away.

      Author's profile photo Former Member
      Former Member

      Great Post!

      Author's profile photo Craig S
      Craig S

      Good blog.  This should also be a heads up to consultants and employees alike, as well as the new graduates.  The likelihood of life time employment in the future global economy is a thing of the past.  You are your own "organization" now, not an employee. 

      You must have your own mission, goals, support systems, ongoing education plans, and your own network of contacts and resources.  You will only be retained as long as your skills and abilities are required by a particular company. 

      Companies are becoming more like professional sport franchises.  They groom a few of their own, they draft from the ranks of the colleges, they hire the free agents when necessary.  Management of today has to be more focused on acquiring the proper balance of skills in their current personnel, not necessarily products or services.  Contracts, including employment rarely exceed 5 yrs.  Even organizational mission statements are obsolete in 5 years. 

      When you fail to hit home runs, score goals, or bring a high enough ROI for your skill set, you better be reviewing your "personal organization" cause you'll be an organization in search of a new customer.


      Author's profile photo Christopher Koch
      Christopher Koch
      Blog Post Author


      Good points. Another good analogy that applies to the new era of employment. The consistent attributes are flexibility, timeliness, and skills. One thing I would add is that companies cannot afford to continue to leave it entirely up to the marketplace. While employees must do everything they can to keep their education and skills current, we're already seeing that that is not enough. Companies continue to complain of a skills shortage despite high unemployment. Some innovative new approaches to training and being willing to fund training in return for employee commitments are needed on the company side, too. Thanks for the comment!

      Author's profile photo Craig S
      Craig S

      Yes.. that is why it's kind of like a sports team.  They still draft and train players in the minor leagues and hope to develop them into top notch team players.  But they still bring in the free agent, and they will trade very good young talent, for a good talent with a better fit.  So I agree that companies still need to train.  But I think as you mentioned the training might not be as much along technical lines as it may be more along the lines of management skills like critical thinking, prioritizing, how to select employees, how to run a team, how to get the right people in the right place, how to get the most from your various players, etc.. etc..

      Author's profile photo Christopher Koch
      Christopher Koch
      Blog Post Author

      Ah, yes. Now I see! Major league baseball teams invest in players who may never end up playing for them but they receive other compensation, as you point out. Great illustration of the need to make investments in the talent pool, take risks, and be flexible. Thanks again!

      Author's profile photo Former Member
      Former Member

      Great post Christopher

      Jack Welch, the former long-time chairman and CEO of General Electric once said, ‘When the rate of change outside your organisation outpaces the rate of change inside your organisation, the end is near’.

      I believe each employee should think about this at a skill-set level- when the rate of change of their skill-set in the market is faster than theirs, then the end is near. The issue then is not about linear or non-linear improvement to certain skill sets, sometime there is a complete change over of skill-sets required to stay in the same role/department. So the top skill-set is spotting a new wave and embracing new ways of learning. My recent blog touches upon changing business models and approaches. 

      Titanic, Icebergs And Network Leadership

      Author's profile photo Christopher Koch
      Christopher Koch
      Blog Post Author

      Hi Ramesh,

      That's a great point. Employees can't always expect to build incrementally on their current skills. Sometimes the market requires something completely new. But that also means that companies need to be willing to invest in building those skills if they want a vibrant pool to select from. Thanks for the comment!