Why we need new solutions to perennial Human Resource challenges: employee experience and the future of work
“Does SAP do the same thing now that we did in the 1970s? In principle, yes, but how we do it is much, much different” – Hasso Plattner, Sapphire Conference, 2021
This statement by the founder and chairman of SAP captures an often overlooked truth about business. The fundamental challenges of running organizations change little over time. Things like controlling costs, managing inventory, and engaging people are perennial challenges in the sense they never go away. What changes are the nature of these challenges and the solutions used to address them. Unfortunately, because these challenges are familiar leaders may assume they know how to solve them without realizing that solutions that worked in the past will not work in the future. This is particularly true when it comes to perennial Human Resource (HR) challenges.
Most HR challenges are associated with attracting, motivating, engaging, and developing people. The fundamental psychology of people does not change much over time, despite the somewhat ageist claims about generational differences bandied about in the HR market. For example, employees are most effective at dealing with change when the experience of work makes them feel confident, appreciated, and fulfilled. This has always been true because it reflects basic human psychological needs. To use an analogy, challenges faced by HR leaders are a bit like challenges faced by party organizers. Both have to do with creating positive human experiences. For parties, this means getting people to dance. Dancing has been associated with great parties since the dawn of human history. A perennial challenge to throwing a good party is figuring out what music will inspire people to dance. But what it takes to address this challenge has changed over time based on people’s expectations about music, the types of songs available, and the technology used to play them. In 1920 people solved this challenge by putting some Jelly Roll Morton on a Victrola. Now we download a playlist by the Weeknd onto a smart phone. Whether we are building workforces or throwing parties, the basic challenges do not change because they are about psychological truths. Employees want to be appreciated at work and people want to dance at parties. But how we address these challenges constantly changes. And solutions that worked in the past can fail miserably now.
The role of employee experience in solving perennial HR challenges.
An issue facing HR leaders is getting organizations to realize that how the company solved HR challenges in past will no longer work in the future. Business leaders are often comfortable with the way things are. Their attitude towards rethinking how jobs are designed and reimagining how employees are managed is often “why change from what worked in the past?” Not realizing their beliefs reflect outdated assumptions about the world of work. This is particularly relevant when trying to get companies to invest in improving employee experience since the work experience senior executives have is often very different from that of other employees. For this reason, it is important for companies to constantly rethink how they address these seven core perennial HR challenges: designing organizations, filling roles, developing capabilities, creating engagement, increasing efficiency, ensuring compliance, and building culture.
Designing Organizations is about determining what jobs exist within the company, where they are located and how they are organized and compensated. It is particularly relevant when companies are restructuring due to growth, business changes, or acquisitions. Companies are notoriously bad at restructuring, with only about 20% of restructurings succeeding and 10% making things worse.[i] This failure rate may have been tolerable when restructurings were rare. But they are now frequent occurrences. For example, acquisition rates have increased by almost 700% in the past thirty years[ii]. The main reasons restructurings fail are due to people issues. In the past, companies approached restructuring primarily as a strategic financial activity with HR being a tactical afterthought. Going forward more attention needs to be placed on the employee experience. Recognizing that the top issue on employee’s minds during a restructuring is not “how will this help the company’s financials”. It is “how will this affect my job experience, career opportunities and work relationships?”
Filling Roles involves finding and hiring people to perform different functions. Including transferring people internally based on business needs. Filling roles has always been challenging and is getting harder. This is due in part to the size of the labor force declining relative to the size of the economy as result of decreased birth rates over the past 50 years. At the same time, digitalization is increasing demand for skilled employees. About 45% of companies do not have enough skilled workers, and this is likely to increase[iii]. In the past, companies assumed they could find talent when they needed it. This is no longer the case. To be successful companies must look at hiring from an employee experience perspective. People do not want to be qualified, selected, and onboarded. They want to discover opportunities, learn about possible roles, and be welcomed into organizations. This means filling roles based on what candidates want and not just focusing on what companies need.
Developing Capabilities is about providing people with knowledge and skills to perform current work and take on future responsibilities. Companies used to think about development in terms of training based on job requirements. Most development focused on making incremental improvements to employee’s existing capabilities. This approach worked when careers were more stable and linear. This stable view of career growth no longer makes sense for most jobs. Consider that 70% of the fastest growing jobs in the US did not even exist five years ago, and 54% of the workforce will require significant reskilling over the coming decade[iv]. It is not enough to train employees for their current job if their current job is likely to change or disappear in the not-too-distant future. Companies need a new approach that views development in terms of enabling people to do things in the future that are much different from what they did in the past. Creating development experiences that embolden, enable, and empower employees to take their careers in radically different directions that keep pace with a fast-changing world.
Creating Engagement is about guiding, inspiring, supporting and retaining employees to achieve the goals of the company. It includes balancing individual and team performance dynamics. Companies are not good at this. Only 21% of employees feel they receive highly effective coaching and support from managers. 70% of employees feel their company’s performance management process is ineffective[v]. Historically, companies have put little emphasis on ensuring managers and employees form strong collaborative work relationships. This lackadaisical approach toward the manager-employee experience will not work in a world where companies need employees to be fully engaged and employees can easily change jobs if they are not adequately supported in their roles.
Increasing Efficiency is about optimizing the time and money spent on workforce management activities. Using technology that helps employee to be more effective and more productive. Historically, companies have used technology to reduce workforces costs in ways that often made it harder for employees to do their work For example, 40% of employees are limited by lack of mobile technology and 55% of new hires struggle to access the resources needed to perform their jobs.[vi] Inefficient work experiences are a waste of time and a major source of frustration for employees. Simplifying how employees experience work is critical for companies seeking to build more agile and engaged organizations.
Ensuring Compliance involves managing employment regulations, laws, and contracts including payroll obligations. The shift to digitalization is increasing security and compliance risks. Data breaches and legal violations cost companies millions of dollars every year[vii] . Companies even struggle to pay people accurately with 33% of midsize companies making significant payroll errors annually[viii]. Compliance is not just about avoiding fines. When employees experience compliance issues it undermines confidence in the security and equity of the organization. Leading them to question whether to work for a company that cannot protect their privacy or ensure they will be treated fairly and equitably.
Building Culture involves making decisions and supporting behaviors that reinforce values related to things like safety, diversity & inclusion, wellbeing, and environmental sustainability. Culture has a massive impact on business performance. For example, diverse cultures have 30% more productive teams and safe work cultures have 86% fewer accidents.[ix] Culture also impacts the ability to attract talent, with 67% of candidates wanting to work in socially responsible companies[x]. An effective culture is critical to having a successful business in an increasingly competitive and fast changing world. Historically, many companies thought of culture in terms of slogans and statements about mission and values. But words alone do not create a culture. Employees now expect much more. They want the experiences they have at work to reflect the cultural values they believe in.
These seven perennial challenges will be familiar to anyone who has spent time in HR. That does not make them easy to solve. Looking at these challenges solely from a company perspective is inadequate in a world of shrinking labor pools, accelerating organizational change, and constant technological innovation. Solving them requires addressing more than what the business needs. It is equally about providing the experiences that employees want, expect, and increasingly demand.
[ii] Credit Suisse Equity Research; https://imaa-institute.org/mergers-and-acquisitions-statistics/)