Reviewing 2017 Human Capital Management Technology Forecasts: New wine in old bottles & old wine in new bottles
In early 2016 we reviewed dozens of human capital management (HCM) “thought leader” forecasts to see what trends were emerging in the field. The 2016 forecasts were compared to forecasts made in 2006 to see if anything had changed much over 10 years. Our overall conclusion was “the tools to address HCM challenges have changed considerably but most of the challenges are the same [although] some are more important now than in the past”. HCM challenges are primarily about attracting, hiring, managing, developing and retaining people – and people do not change much at a fundamental level. Or put another way, humans don’t evolve at the same speed as technology applications.
We revisited this study using 2017 forecasts. We started by compiling a list of 130 predictions and observations from 21 HCM thought leaders. We then grouped the list into 12 common themes. Finally, we added one more layer of analysis drawing inspiration from Oregon Pinot Noir grown near the first author’s home. We created an HCM technology “Wine Bottle Index” based on three dimensions.
Old vs New Wine: The age of a wine does not determine its quality, but it does influence its familiarity. We know a lot about old wine. It is substantive enough to hold up over time. New wine is often intriguing, but it is unclear if it will last or quickly fade away. In the same sense, longstanding HCM challenges may not be that novel but they are still important. Newly identified HCM challenges may be intriguing to think about, but that does not mean their importance will last over time.
A ‘1’ on the wine scale means the fundamental concept associated with a trend is “old wine”; it is not a new idea or challenge. For example, several 2017 forecasts emphasized the importance of “employee engagement”. The concept of employee engagement dates back at least twenty years. We know a lot about the causes and consequences of employee engagement. Compare that to 2017 forecasts about moving toward total transparency around compensation levels driven by online information sharing sites like Glass Door. Although the idea of transparency is not new, this sort of total transparency was neither feasible nor even considered 20 years ago. It is unfamiliar. We don’t know much about its impact or how it will play out over time.
Old vs New Bottles: The design of the bottle has a big impact on people’s willingness to purchase a wine. An old bottle may do a great job holding good wine, but new bottle designs can increase consumption of that wine across a broader audience. The same is true for HCM methods. Old methods can be effective. For example, some companies have successful management training programs that have not changed much in years. But new methods fuel innovation and adoption of HR practices. For example, development of pulse survey methods that embed questions into ongoing work activities is spurring interest in employee engagement among companies that had little interest in traditional annual engagement surveys.
A ‘1’ on the bottle scale means little has changed in the methods used to address the HCM challenges associated with a trend. A ‘5’ means the methods are radically transforming due to technology, innovation, or in most cases, both.
Bottle size: We divided the trends into four categories based on their prevalence in the forecasts. From smallest to largest they are split, liter, magnum, and jeroboam. Larger isn’t necessarily better but it is likely to have a greater impact on the field of HCM overall.
Table 1 plots the 12 major trends based on the Wine Bottle Index. We added a 13th trend that only appeared in a few forecasts but we believe is worth mentioning as it represents a new category of HCM applications that is poised to grow rapidly over the coming years. In recognition that it is not like the others, we made it a white wine instead of a red. The following is a discussion of each trend and how it may influence future directions in HCM technology. The trends are addressed in order of their frequency in 2017 predictions.
Culture & Engagement – Very old wine in a relatively old bottle
Less than five years ago, many HR departments thought ping-pong tables, massage chairs and free snacks were the key to luring top Millennial talent into their workplace. Now these types of perks don’t attract top talent, and even high-ticket perks don’t create loyal employees.
Paychecks still matter, but value, purpose and development opportunities matter just as much (sometimes more).
Discussions about the role an engaging culture plays in attracting and retaining talent go back to at least the 1980s. There is nothing new about this trend. However, the importance placed on having an engaging culture for talent acquisition and retention does change over time. When the labor market is down, employees are willing to forego cultural compatibility in exchange for a steady paycheck. When the labor market heats up, employees become more focused on finding a company that offers more than just a source of income. Given the current labor market, it is not surprising that culture and engagement are highly prominent in 2017 predictions. However, we saw relatively little innovation in the methods discussed for creating and sustaining an engaging culture other than greater use of pulse surveys to provide more ongoing feedback about cultural engagement and alignment.
We predict the focus on culture and engagement will steadily increase over the coming years. This will be fueled by a growing shortage of skilled labor resulting from retirement of experienced employees combined with the digitalization of work increasing the demand for skilled workers. We also forecast a shift from associating culture and engagement with employee surveys to associating it with use of HCM talent management technology to directly change how the workforce is managed. Managing culture requires having well-defined values and goals and demonstrating them through daily decisions and actions. Creating engagement is largely about providing employees with a sense of purpose, support and recognition for their contributions. This starts with ensuring decisions related to staffing, pay, and promotion strongly reflect the company’s cultural values and beliefs. It continues with using technology to help and ensure managers are effectively engaging, coaching and recognizing their employees. We also expect to see greater use of social technology to build employee communities that support and celebrate important cultural values of the organization. For example, greater use of social sites promoting inclusiveness, environmental awareness, creativity, or other key values associated with a company’s culture.
Digitalization of HR Functions – Old wine in ever newer bottles
With digitally-minded millennials now the largest generation in the workforce, and with the digitally-native Generation Z about to enter it, organizations will begin to make the shift to fully, and to perhaps even almost exclusively, recruiting via social media.
For more than 20 years, industry analysts have steady called for increased use of technology to automate and transform HR functions. 2017 is no different. There is virtually no aspect of HR that is not being affected by technology innovations. One could argue technology is advancing so rapidly that almost any HR process developed over three years ago is bound to be out of date, simply because it was created under technological constraints that no longer exist. As the creation of new technology enables the creation of new processes this in turn stimulates creation of new technology. So the digitalization of HR largely feeds itself. Add the current availability of venture funding in technology centers like Silicon Valley, and we are in a growing digital storm. The question that is hard to answer is how much newly created HCM technology will stand the test of time. This is a non-trivial question, because it is very disruptive for a company to deploy a technology solution only to have that solution become obsolete three years later.
We believe the digitalization of HR will continue and grow even more frenzied. But we suspect that HCM technology innovation will increasingly start to fall into two categories: platform providers and application providers. Platform providers will support core HCM processes that need to remain stable over time. These processes support fundamental workforce operations and are not things a company can easily replace from one year to the next. For example, processes associated with staffing, learning, management and financial HR transactions. Application providers will create specialized functions that plug into these platforms, much the same way you install an application onto your smart phone platform. The real frenetic level of creativity is likely to initially happen among the application providers who can “fail fast”. Proven ideas built and tested in the “app world” will then slowly migrating into core platform solutions.
Fluid Work Arrangements – Newer wine in newer bottles
The workforce of the future won’t be all full-time employees. It will be blended, or composed of full time employees as well as consultants, contractors, freelancers, part time employees, and other contingent workers, collectively known as Gig Economy Workers.
The nature of what it means to work for a company is changing. Many employees still want traditionally defined, full-time jobs, but a fast-growing segment of workers want more flexible working relationships. These may take the form of contract work, part-time work, virtual work, self-defined work schedules, or alternative forms of compensation such as housing or social contributions in lieu of pay. Companies are adopting new forms of HCM technology to handle these more complex and varied work arrangements. Flexible work arrangements are also increasingly being used to engage employees who aren’t interested in a traditional job. These new work arrangements create new challenges associated with how to manage and engage people who may not technically be employees.
We expect to see a much more innovation in this area over the coming years. We forecast greater use of specialized technology to staff and coordinate highly diverse workforces and talent pools comprised of full-time, part-time, contractor, and alumni employees. In terms of talent management, two major challenges will need to be solved in this area: 1) how to engage contract employees while navigating legal regulations that often require companies to manage contract employees differently from full-time employees, and 2) how to build a sense of long-term commitment and career-development in a labor market increasingly dominated by part-time, “gig” employees. You don’t need to work for a company to feel a positive sense of engagement toward it, but it is not yet clear how a company can most effectively engage people who are technically not actually employees.
Workforce Inclusion – Old wine in newer and far better bottles
Diversity and inclusion will remain a priority for the many organizations that have embraced it, and will become a greater priority for those who have not… Look for businesses to not just increase their commitment to diversity and inclusion, but for chief diversity officers to be involved in more strategic planning and decision-making.
Companies have been struggling to create diverse, inclusive workforces since the 1960s when prevailing social norms shifted to emphasize equity and equality across people regardless of gender, race, or ethnicity. Historically, efforts tended to focus on creating more diverse organizations but not necessarily more inclusive ones. For example, there are roughly equal numbers of men and women in the workforce now, which is a massive cultural shift from 40 years ago, but women are still frequently paid less than men performing similar jobs. After years of incremental success, we may be reaching a turning point that could result in major shifts toward more inclusive organizations. First, the percentage of women in the workforce has reached a critical level. Inequity will no longer be accepted when it impacts 50% of the working population. Women and the men who ally with them are refusing to wait for things to get better on their own. Second, the growing shortage of skilled labor combined with the inherent financial benefits associated with diverse workforces creates strong incentives for companies to attract and retain skilled employees regardless of their demographic characteristics. Simply put, companies can no longer afford to NOT have an inclusive culture. Third, advances in technology are making it possible to reduce bias before it happens by changing how companies make staffing, performance and compensation decisions.
We believe the move to create more inclusive workforces will grow even stronger over the coming years. This will be led by efforts to promote gender equity. The focus on gender equity will also support and align with efforts focused on reducing bias based on ethnicity, age, disability and other non-job relevant characteristics that should not unfairly limit an individual’s career opportunities. We believe the move to create more equitable workforces will become less about making people aware of inequity and more about using technology to reduce biases in human capital management decisions that create inequity. The ultimate goal is to prevent bias before it happens.
Artificial Intelligence, Machine Learning & Predictive Analytics – Somewhat newer wine, much newer bottles
Once upon a time, Siri was a funny voice in your phone we laughed at. But Siri and all her AI and machine learning friends have ambitions and grow up faster than humans. We humans and our deep learning machines will connect more intensely.
Many forecasts pointed to greater use of artificial intelligence (AI), machine learning and predictive analytic solutions to support HR functions. These methods use complex, iteratively developed mathematical models to analyze large amounts of data increasingly made available through the growing use of HCM technology. Many predictions talked about growing impact of these methods on HCM, although currently their use is primarily limited to specialized functions related to staffing and employee retention. The underlying mathematical models used by AI and machine learning are not that new, although they are constantly evolving. What is new is our ability to use these models on a more widespread basis.
Methods associated with artificial intelligence and machine learning are often presented in the context of “machines doing the thinking for people”. We believe this is the wrong way to think about it. We don’t believe machines are going to replace humans in HR. But they are enabling the creation of very sophisticated prediction models to address perennial HR challenges related to staffing decisions and employee retention. They are also enabling development of intelligent HR user interfaces that might finally make HR self-service applications something that managers and employees find easy and efficient to use. We believe there will be a lot more growth in this area. But we also much of the hype about AI replacing people will die down when people realize these are not “artificial human brains” but simply complex mathematical algorithms.
Employment Legislation – Outdated wine in ill-fitting bottles
Major changes that will impact the workforce are no-doubt forthcoming, while macroeconomic variables will affect hiring around the world. Organizations – with HR caught in the middle – will need to react with agility to keep pace with new legislation, interpret laws appropriately, and continue to retain top workers while remaining compliant.
Many forecasts predict changes to employment legislation and warn about the disruptive impact this could have on existing HR practices. People have long complained that existing employment legislation is overly complex and woefully out of date given the modern labor market and economy. Companies often struggle to use workforce technology invented less than two years ago without violating employment laws written more than eighty years ago. There are signs that this legislation may be updated, although nothing is certain when it comes to government actions. If labor laws do change, this could trigger a massive wave of innovation as companies scramble to adjust to a new regulatory environment.
Forecasting things as politically complex as labor legislation is a risky endeavor. We are confident some changes will be made to labor regulations over the coming years, but we would be hard pressed to say which laws are most likely to change. The only forecast we feel safe making is that companies will increasingly demand more flexible HCM technology that enables them to weather whatever legislative changes may come their way. Global organizations are also likely to push for more configurable HCM technology that can quickly adapt to changing labor regulations around the world.
Performance Management Transformation – Moderately new wine in newer and newer bottles
The sense of urgency around performance management redesign/improvement will continue, driven by HR and leaders’ noise about the process. That noise seems to be driven by both lack of agreement about the purpose of PM (Improve performance? Evaluate? Develop?), well-intentioned attempts to make it easier and Quixotic attempts to make people enjoy goal-setting, coaching and reviewing.
Performance management transformation was a new thing five years ago. Now it is fairly common. Over the past few years many companies have made significant changes to methods used to align goals and expectations, provide ongoing feedback and reward and recognize contributions. Technology has been central to this change, enabling creation of processes that were simply not possible five years ago. The hype around “getting rid of ratings” that was once widely associated with these changes is being replaced by more balanced approaches that recognize that improving performance management is more about what you create than what you get rid of. Companies are leveraging cloud, mobile technology to develop better methods to align company goals with employee career objectives, provide continuous coaching and feedback, and make fair, effective and transparent decisions that impact employees’ compensation, career opportunities and development.
We forecast that much of what is now considered innovative in performance management will soon become mainstream. Within a few years, companies that cling to traditional “once a year” annual reviews will be the exception. These companies will find themselves struggling to compete for talent with companies that have more engaging continuous performance management methods. We also expect to see a steady improvement in the design of technology that facilitates ongoing, continuous performance dialogue between managers, direct reports, peers, and even people outside of the company.
Manager & Leadership Development – Rediscovered old wine being moved to new bottles
It is often said that employees join companies, but leave managers. 2017 will see a renewed focus on giving people managers – many of whom are Millennials managing for the first time – the skills, abilities, tools, and technologies needed to develop connections with their employees, nurture top talent, and execute the organization’s vision on the front lines.
First and second level managers are a critical to changing a company’s culture or executing its strategies. Managers are in the middle of aligning what the company needs the workforce to accomplish with what employees are willing and able to do. For years, people downplayed the value of managers with some even calling to eliminate managers altogether. This trend of “manager bashing” appears to have turned around. Companies are realizing that managers are core to creating a highly engaged, agile workforce. The concept of managers is certainly not new, and the basic elements for being an effective manager have been known for decades: helping employees set meaningful goals, providing ongoing support and coaching, and recognizing people for what they have accomplished. What is new is increased use of cloud and mobile technology to enable and ensure managers do these things effectively and consistently.
We believe the focus on manager development will grow much stronger. As companies develop stronger managers, the problems associated with poor managers will become more pronounced. This will increase pressure to ensure all managers are managing their employees appropriately. We believe a particularly strong emphasis will be placed on using technology to support more effective manager-employee dialogue tied to performance management and career development.
Transforming Organizational Structure – New wine stuck in outdated, extremely old bottles
The hierarchical pyramid organizations stuffed with redundant roles described in libraries of role descriptions are end of life. We can no longer use these illusionary walls between people.
Many predictions called for replacement of traditional hierarchical organizational structures for new models that emphasized teams, dynamic and shifting relationships, or task activities and employee experiences. These alternative approaches to organizational structure offer compelling advantages over the traditional organizational chart. But, like matrixed organizations, they also have the potential to create additional complexity and confusion.
We believe this trend will continue simply due to the limitations of existing organizational structures. It is somewhat amazing that companies continue to rely on hierarchical organization charts whose basic format goes back to the Roman Empire! The challenge is no one seems to have a sustainable, easy to understand tool to replace the hierarchical organizational chart. Companies need some method to structure roles and accountabilities within a company. What is wanted is some effective technology solution to replace the traditional organizational chart. Once this technology solution is developed, and we believe that it will be developed at some point relatively soon, then we expect to see transformation of organizational structures spread rapidly across companies.
Organizational Transparency – Very new wine in very new bottles
While the prospect of a negative Glassdoor review strikes fear into the hearts of HR recruiters, increased transparency is a good thing! It represents an enormous opportunity for companies with great leadership to stand out in a competitive talent market.
There is increased focus on providing employees and job candidates with greater transparency into company talent decisions and work environments. This is largely fueled by the growth of public sites like Glassdoor that provide an unfiltered view into company life. It is also related to employee concerns with equity and a desire to work for companies where the “rules of the game” are clearly defined and consistently followed. At the most extreme are calls for total transparency around historically confidential topics like compensation.
While people have advocated extreme levels of transparency in the past, very few companies have pursued this concept. A move to high levels of organizational transparency would be unchartered territory for most companies. Nevertheless, companies may soon find that they can either share the data themselves or have someone else share it for them via a 3rd party internet site. We forecast this trend to continue and expect to see considerable innovation in this area. This will include new developments in recruiting marketing and social outreach technology as companies strive to find effective ways to publicize sensitive information related to pay levels and communicate the “intangible benefits” they provide beyond pay.
Employee Recognition – Old wine in new types of bottles
A workplace that overlooks employee recognition stands to lose out in terms of attracting talent, let alone keeping it.
The importance of employee recognition is certainly not new. What is new is the growing use of innovative forms of recognition and development that enable employees, managers and customers to formally and informally praise and reward people through a variety of mechanisms. Companies are increasingly incorporating recognition tools into mobile applications, social collaboration platforms, integrated talent management platforms and gamification models. We forecast this trend to increase as companies explore new and different ways to promote manager, peer, direct report, team-based and customer-based recognition. We also expect greater use of analytics to determine what forms of recognition provide the greatest value. This includes looking at things such as who provided the recognition, how often it is provided, and the form it takes (e.g. tangible rewards, money, time off, simple expressions of appreciation, etc.). As recognition technology generates more data, we hope to see some major leaps forward in our understanding of how to maximize the power of this ancient form of employee motivation – letting people know they are appreciated.
Digitalization of HR Profession – Somewhat newer wine in somewhat older bottles
For HR, I see the “new normal,” as the convergence of consumer marketing with digitization of HR creating a more personalized employee experience powered by artificial intelligence. This means a growing number of HR roles will become more specialized and technical.
The field of HR is constantly expanding the use of technology and many HR activities are becoming much more data driven. This digitalization of HR is not new. But some people believe it will soon change the nature of HR itself. They predict HR will move from a people-centric field to a technology-centric field. That traditional HR “generalist” jobs will be replaced by more specialized technology oriented roles focused on configuring and administering different types of HCM technology systems and analyzing HCM data.
Our view is there will be considerable growth in technical and data-oriented HR jobs, but these jobs will be in addition to more traditional people-centric HR roles as opposed to replacing them. The field of HR needs more individuals who can speak the language of data and technology. But HR will still require individuals who are experts in working with people as well as machines. We believe the most valuable HR professionals will be ones that are equally comfortable engaging with both people and technology, and who understand the interaction between HCM technology and workforce culture and productivity. A true HR/IT professional is neither a specialist in HR nor a specialist in IT – they are a specialist in both.
Health & Well-Being – a new category of wine in need of a new type of bottle
During our review of forecasts, we were surprised that little mention was made about the growing importance of workforce health and well-being. We believe this area will become a major focus of HCM over the coming years. Interest in workforce health and well-being is being driven by several factors. The move to an “always on” world is literally burning people out. The increasingly competitive nature of business is demanding companies take care to ensure their employees are mentally and physically performing at peak levels. The rising costs of healthcare are making employee health and wellness a major factor affecting company profitability. And increasing research is showing that companies can significantly improve employee health and wellbeing by changing how they manage their workforce.
We believe improving workforce health & well-being will become one of the top priorities for many HR organizations. We forecast increasing development of technology designed to enable employee health and wellness and create healthy work environments. We also predict greater inner-connectivity between HCM process technology and technology designed to support health & wellness programs.
We hope you enjoyed this tour of the 2017 HCM wine cellar. We did not see much in the forecasts that we would consider to be extremely new or unexpected. There were some fancy new bottles but not that much truly new wine. In fact, some of the largest trends, such as Culture & Engagement and Digitalization of HR Processes are based on very old wine. Just because something has been around for a long time does not mean it lacks value. But it may need to be put in a new and more attractive bottle for people to recognize its worth.