Organizational Behavior - Top 10 Managerial Skills
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Week 8 Citations (Accenture UK Careers, 2016) Accenture UK Careers. (2016, June 3). The Workforce of the Future. [YouTube]. Retrieved October 15, 2020, from: https://youtu.be/W451tsBftDw (Deloitte Insight, 2018) Deloitte Insight. (2018). The rise of the social enterprise: 2018 Deloitte Global Capital Trends. (J. Kaji, K. Edelman, A. Khan, N. Garia, M. Budman, R. Thomas, & P. Devan, Eds.) United Kingdom: Deloitte Development LLC. Retrieved December 9, 2020, from https://www2.deloitte.com/content/dam/insights/us/articles/HCTrends2018/2018-HCtrends_Rise-of-the- social-enterprise.pdf (Fw:Thinking, 2013) Fw:Thinking. (2013, October 23). Working in the Office of the Future. [YouTube]. Retrieved December 9, 2020, from: https://youtu.be/QnUztQc3TTA (Gupta-Sunderji, Are you cut out for supervision?, n.d.) Gupta-Sunderji, M. (n.d.). Are you cut out for supervision? Retrieved December 9, 2020, from Turning Managers Into Leaders: https://www.turningmanagersintoleaders.com/Quizzes/transitiontoleadership.htm (Gupta-Sunderji, Do You Give Effective Feedback?, n.d.) Gupta-Sunderji, M. (n.d.). Do You Give Effective Feedback? Retrieved December 9, 2020, from Turning Managers Into Leaders: https://www.turningmanagersintoleaders.com/Quizzes/givingfeedback.htm (Gupta-Sunderji, How emotionally intelligent are you?, n.d.) Gupta-Sunderji, M. (n.d.). How emotionally intelligent are you? Retrieved December 9, 2020, from Turning Managers Into Leaders: https://www.turningmanagersintoleaders.com/Quizzes/emotionalintelligence.htm (Gupta-Sunderji, How well do you delegate?, n.d.) Gupta-Sunderji, M. (n.d.). How well do you delegate? Retrieved December 9, 2020, from Turning Managers Into Leaders: https://www.turningmanagersintoleaders.com/Quizzes/delegation.htm (Gupta-Sunderji, What is Your Coaching IQ?, n.d.) Gupta-Sunderji, M. (n.d.). What is Your Coaching IQ? Retrieved December 9, 2020, from Turning Managers Into Leaders: https://www.turningmanagersintoleaders.com/Quizzes/coachingiq.htm (MindTools Content Team, n.d.) MindTools Content Team. (n.d.). How Good Are Your Management Skills? Retrieved December 9, 2020, from MindTools: https://www.mindtools.com/pages/article/newTMM_28.htm (Smith, 2013) Smith, M. K. (2013, April 4). Peter Senge and the learning organization, The encyclopedia of pedagogy and informal education. Retrieved December 9, 2020, from INFED: https://infed.org/peter-senge-and-the- learning-organization/
The rise of the social enterprise 2018 Deloitte Global Human Capital Trends
Deloitte’s Human Capital professionals leverage research, analytics, and industry insights to help design and execute the HR, talent, leadership, organization, and change programs that enable business performance through people performance. Visit the Human Capital area of www.deloitte. com to learn more.
COVER AND CHAPTER ILLUSTRATIONS BY TRACI DABERKO
Experience Deloitte’s Global Human Capital Trends like never
before. Access the new HC Trends app featuring exclusive content.
The rise of the social enterprise
CONTENTS
INTRODUCTION: THE RISE OF THE SOCIAL ENTERPRISE | 2
THE SYMPHONIC C-SUITE: TEAMS LEADING TEAMS | 17
THE WORKFORCE ECOSYSTEM: MANAGING BEYOND THE ENTERPRISE | 25
NEW REWARDS: PERSONALIZED, AGILE AND HOLISTIC | 33
FROM CAREERS TO EXPERIENCES: NEW PATHWAYS | 41
THE LONGEVITY DIVIDEND: WORK IN AN ERA OF 100-YEAR LIVES | 49
CITIZENSHIP AND SOCIAL IMPACT: SOCIETY HOLDS THE MIRROR | 57
WELL-BEING: A STRATEGY AND A RESPONSIBILITY | 65
AI, ROBOTICS, AND AUTOMATION: PUT HUMANS IN THE LOOP | 73
THE HYPER-CONNECTED WORKPLACE: WILL PRODUCTIVITY REIGN? | 81
PEOPLE DATA: HOW FAR IS TOO FAR? | 89
2018 Deloitte Global Human Capital Trends
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IN 2018, we are witnessing seismic changes in the workforce, the workplace, and the technologies used in the world of work. Based on this year’s global survey of more than 11,000 business and HR leaders, as well as interviews with executives from some of today’s leading organizations, we believe that a fundamental change is underway. Organiza- tions are no longer assessed based only on tradition- al metrics such as financial performance, or even the quality of their products or services. Rather, organizations today are increasingly judged on the basis of their relationships with their workers, their customers, and their communities, as well as their impact on society at large—transforming them from business enterprises into social enterprises.
In many ways, social capital is achieving a new- found status next to financial and physical capital in value. In a recent survey, for instance, 65 percent of CEOs rated “inclusive growth” as a top-three strate- gic concern, more than three times greater than the proportion citing “shareholder value.”1 Today, suc- cessful businesses must incorporate external trends, perspectives, and voices by maintaining positive relationships, not just with customers and employ- ees, but also with local communities, regulators, and a variety of other stakeholders. Building these
relationships challenges business leaders to listen closely to constituents, act transparently with infor- mation, break down silos to enhance collaboration, and build trust, credibility, and consistency through their actions. This is not a matter of altruism: Doing so is critical to maintaining an organization’s repu- tation; to attracting, retaining, and engaging critical workers; and to cultivating loyalty among customers.
The 2018 Deloitte Global Human Capital Trends report showcases a profound shift facing business leaders worldwide: The rapid rise of what we call the social enterprise. This shift reflects the growing importance of social capital in shaping an organization’s purpose, guiding its relationships with stakeholders, and influencing its ultimate success or failure.
Introduction The rise of the social enterprise
WHAT IS A SOCIAL ENTERPRISE? A social enterprise is an organization whose mission combines revenue growth and profit- making with the need to respect and support its environment and stakeholder network. This includes listening to, investing in, and actively managing the trends that are shaping today’s world. It is an organization that shoulders its responsibility to be a good citizen (both inside and outside the organization), serving as a role model for its peers and promoting a high degree of collaboration at every level of the organization.
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In past Global Human Capital Trends reports, we have noted the movement of many organizations toward a “network of teams” operating model that aims to enable greater collaboration and internal agility.2 Now, this movement has been joined by the growing shift from an internal, enterprise focus to an external, ecosystem one (figure 1). Organizations on the leading edge of both of these changes em- body our concept of the social enterprise: an organi- zation that is alert enough to sense, and responsive enough to accommodate, the gamut of stakeholder expectations and demands.
The last decade: Building toward today’s tipping point
Why has this shift occurred? We believe that it is driven by social, economic, and political chang- es that have grown since the global financial crisis.
Despite the economic recovery the world has seen since 2008, many people feel frustrated that finan- cial gains have failed to improve individuals’ lives, address social problems, support political stability, or mitigate technology’s unintended consequences. People today have less trust in their political and social institutions than they have in years; many ex- pect business leaders to fill the gap.
This point was made this year by BlackRock chief executive Laurence Fink. In his annual let- ter to CEOs, Fink noted that people are increas- ingly “turning to the private sector and asking that companies respond to broader societal challenges” and demanding that organizations “serve a social purpose.”3 Fink stated that shareholders, includ- ing BlackRock itself, are now evaluating companies based on this standard. A New York Times report suggested that the letter could be a “watershed mo- ment on Wall Street” that raises questions about
“the very nature of capitalism.”4
Deloitte Insights | deloitte.com/insightsSource: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. The evolution of the social enterprise
Ecosystem External focus
Enterprise Internal focus
Functional Siloed operating model
Symphonic “Network of teams”
operating model
LE V
EL O
F EX
TE R
N A
L FO
C U
S
LEVEL OF COLLABORATION AND INTERNAL AGILITY
Increased engagement with external
actors
Increased collaboration and internal integration
Traditional organization
Social enterprise
2018 Deloitte Global Human Capital Trends
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Among the many factors contributing to the rise of the social enterprise, we see three powerful mac- ro forces driving the urgency of this change.
First, the power of the individual is grow- ing, with millennials at the forefront. For the first time in mature markets, young people believe that their lives will be worse than their parents’— and they are actively questioning the core premises of corporate behavior and the economic and social principles that guide it.5 Among this group, social capital plays an outsized role in where they work and what they buy, and 86 percent of millennials think that business success should be measured in terms of more than just financial performance.6 Millennials comprise a majority of the work- force in many countries, and their power will like- ly grow over time.
This shift in power to the individual is be- ing propelled by today’s hyper-connected world, which enables people to track information about companies and their products, express their opinions to a wide audi- ence, and sign onto so- cial movements, globally and in real time. Back in 2015, we called this trend toward greater transparency “the naked organiza- tion”;7 in 2018, individuals know and expect even more from companies than they did three short years ago.
Second, businesses are being expected to fill a widening leadership vacuum in society. Across the globe, people trust business more than government. The 2018 Edelman Trust Barometer reported that people worldwide place 52 percent trust in business “to do what is right,” versus just 43 percent in government.8 In the United States, in particular, trust in government has hit a four-year low, at just 33 percent.9 There is a widespread per- ception that political systems are growing more and more polarized and less and less effective at meet- ing social challenges. Citizens are looking to busi-
ness to fill the void on critical issues such as income inequality, health care, diversity, and cybersecurity to help make the world more equal and fair.
This expectation is placing immense pressure on companies, but it is also creating opportunities. Organizations that engage with people and demon- strate that they are worthy of trust are burnishing their reputation, winning allies, and influencing or supplanting traditional public policy mechanisms. CEOs such as Amazon’s Jeff Bezos and Salesforce’s Marc Benioff have an unprecedented ability to ac- tivate their companies for the good of society.10 Consider the organization jointly created by Ama-
zon, Berkshire Hathaway, and JP Morgan Chase to lower health care costs for employees—tackling an issue that government cannot solve on its own, while also promising to deliver business ben- efits.11 On the other hand, companies that appear aloof, tone-deaf, or dis- engaged face harsh head- lines, negative attention on social media, and tough questions from a range of stakeholders.
Third, technologi- cal change is having
unforeseen impacts on society even as it creates massive opportunities to achieve sustainable, inclusive growth. Advances in ar- tificial intelligence (AI) and new communications technologies are fundamentally changing how work gets done, who does it, and how it influences soci- ety.12 For instance, machine learning was not in the mainstream three years ago. Today, it is simultane- ously one of IT’s hottest areas—and a source of tre- mendous anxiety about potential job losses. People increasingly realize that rapid technological change, while holding out the promise of valuable oppor- tunities, also creates unforeseen impacts that can undermine social cohesion. Many stakeholders are alarmed, and they expect businesses to channel this force for the broader good.
People today have less trust in their political and social institutions
than they have in years; many expect business leaders to fill the gap.
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The good news is that technological advances can open up new opportunities for businesses to have a positive impact on society. Reflecting this view, 87 percent of C-level executives say that Industry 4.0—the industrial revolution brought about by the combination of digital and physical technologies—will lead to more equality and sta- bility, and 74 percent say business will have more influence than governments or other organizations to shape this future.13
Becoming a social enterprise
Foundational to behaving as a social enterprise is to listen carefully to the external as well as the in- ternal environment—not just business partners and customers, but all parties in society that an organi- zation influences and is influenced by. In today’s world, the listening opportunity is greater than ever if organizations truly take advantage of the people data they have at their fingertips. The increasingly
2018’S 10 HUMAN CAPITAL TRENDS: IMPORTANCE AND RESPONDENT READINESS Respondents generally agree that, while each of the following trends is important, most organizations are not yet ready to meet expectations.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends, 2018.
Figure 2. Trend importance and readiness
The symphonic C-suite
People data
From careers to experiences
Well-being
Hyper-connected workplace
New rewards
Citizenship and social impact
AI, robotics, and automation
The longevity dividened
The workforce ecosystem
Very important or important Very ready or ready
7%
6%
8%
7%
85%
85% 42%
84%
84%
37%
49%
82% 45%
72%
69%
77% 37%
31%
30%
34%
65%
77% 51%
46%
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hyper-connected nature of the workplace means that interactions between and among workers and the outside world can be a tremendous source for analysis if managed appropriately. Leaders need to take a proactive approach to managing this wealth of information and leveraging it to keep an eye on the trends both inside and outside of the workplace.
Being a social enterprise also means investing in the broader social ecosystem, starting with an organization’s own employees. It means treating all workers—on- and off-balance-sheet—in a fair, transparent, and unbiased way. Leaders should seek to provide a work environment that promotes longevity and well-being, not only in an individual’s career, but also in the physical, mental, and finan- cial spheres. By doing this, an organization invests both in its own workforce and in the workforce eco- system as a whole, which benefits both the organiza- tion and society at large.
Finally, a social enterprise seeks to actively man- age its position in the social ecosystem by engaging with stakeholders and strategically determining and pursuing the kind of relationship it wants to maintain with each. This cannot be done in a siloed way. Hence, this year we have provided a set of ac- tions that C-suite leaders can take related to each trend. Each area of focus requires strong collabora- tion amongst leaders both across the organization and outside of it. Leaders should form relationships with the governments and regulatory bodies that shape the “rules of the road,” work collaboratively with them to create and sustain a fair, just, and eq- uitable marketplace, and partner with communities and educational institutions to help sustain a steady flow of talent with the right skills for the organiza- tion—and the broader economy—to thrive.
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2018’s 10 human capital trends
The 10 human capital trends we explore in this year’s report come together to create an integrated view of the social enterprise.
From the top: The symphonic C-suite
TREND 1. THE SYMPHONIC C-SUITE: TEAMS LEADING TEAMS
Behaving as a social enterprise and managing the external environment’s macro trends effectively demands an unprecedented level of cross-function- al vision, connectivity, and collaboration from C- suite leaders. To do this, they must behave as what we call the “symphonic C-suite,” in which an organi- zation’s top executives play together as a team while also leading their own functional teams, all in har- mony. This approach enables the C-suite to under- stand the many impacts that external forces have on and within the organization—not just on single functions—and plot coordinated, agile responses.
The symphonic C-suite is the next stage in the ongoing evolution of leadership models. This new model is necessary to help leaders to understand, manage, and respond to the complex social capi- tal issues that organizations face, enabling them to tap opportunities, manage risks, and build rela- tionships with internal and external stakeholders. What’s more, the symphonic leadership model is vital for growth: Our survey finds that respondents who indicate their C-suite executives “regularly col- laborate on long-term interdependent work” are a third more likely to expect their companies to grow at 10 percent or more during the next year than re- spondents whose CxOs operate independently.
The C-suite must lead an organization’s re- sponse to the other nine trends highlighted in this report. The pace and complexity of the changes involved, and the high stakes of success or failure, elevate these as C-level issues, which cannot be del- egated or approached in silos. Only a symphonic C- suite team is sufficient for the scale and speed of the following nine trends. In our chapter on the sym- phonic C-suite, we call out specific actions execu- tives can take to drive greater collaboration.
The power of the individual
As the power of the individual grows, organiza- tions are revamping their approaches to workforce management, rewards systems, and career models to better listen and respond. In particular, as work- ers and networks outside the organization grow in importance, companies are striving to build effec- tive ongoing relationships with every segment of the workforce ecosystem. In this year’s report, we have included actions for the individual worker to consider in influencing and managing their person- alization and career experiences. The challenge is to figure out how to appropriately address each indi- vidual’s preferences and priorities while engaging with a more diverse set of workers and workforce segments than ever before.
TREND 2. THE WORKFORCE ECOSYSTEM: MANAGING BEYOND THE ENTERPRISE
Business leaders and chief human resources of- ficers (CHROs) recognize the need to actively and strategically manage relationships with workforce segments beyond the enterprise, which increasingly affect how an organization delivers services and in- teracts with customers. When asked to forecast the makeup of their workforce in 2020, 37 percent of survey respondents expected a rise in contractors, 33 percent foresaw an increase in freelancers, and 28 percent expected growth in gig workers. Orga- nizations are finding ways to align their culture and management practices with these external talent segments—engaging the workforce ecosystem for mutual benefit.
TREND 3. NEW REWARDS: PERSONALIZED, AGILE, AND HOLISTIC
Leveraging their power as individuals, employ- ees are asking for more personalized, agile, and holistic rewards, including a focus on fair and open pay. While companies recognize this overall shift, only 8 percent report that their rewards program is “very effective” at creating a personalized, flex- ible solution. Early experiments are exploring how to develop a holistic variety of rewards and match them to individual preferences, across diverse tal- ent segments and on a continuous basis.
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TREND 4. FROM CAREERS TO EXPERIENCES: NEW PATHWAYS
In a 21st-century career, the individual and his or her experiences take center stage. Instead of a steady progression along a job-based pathway, lead- ing organizations are shifting toward a model that empowers individuals to acquire valuable experi- ences, explore new roles, and continually reinvent themselves. However, 59 percent of our survey re- spondents rate their organizations as not effective or only somewhat effective at empowering people to manage their own careers. Improvement in this area is essential to attract critical talent, especially as technology shifts the skills landscape.
Filling society’s leadership vacuum
Leading companies are developing strategies that address societal concerns such as longevity and well- being—and doing so in ways that help improve pro- ductivity and performance. Those in this vanguard are finding rich opportunities to build social capital and become a leading voice on key societal issues.
TREND 5. THE LONGEVITY DIVIDEND: WORK IN AN ERA OF 100-YEAR LIVES
Forward-looking organizations see extended longevity and population aging as an opportunity. Twenty percent of this year’s survey respondents said that they are partnering with older workers to develop new career models. This longevity divi- dend enables companies to both address a press- ing societal issue and tap into a proven, committed, and diverse set of workers. However, doing this re- quires innovative practices and policies to support extended careers, as well as collaboration between business leaders and workers, to tackle shared chal- lenges such as age bias and pension shortfalls.
TREND 6. CITIZENSHIP AND SOCIAL IMPACT: SOCIETY HOLDS THE MIRROR
An organization’s track record of corporate citi- zenship and social impact now has a direct bearing on its core identity and strategy. Engagement with other stakeholders on topics such as diversity, gen- der pay equity, income inequality, immigration, and climate change can lift financial performance and
brand value, while failure to engage can destroy reputation and alienate key audiences. Many or- ganizations are still catching up: 77 percent of our respondents say that citizenship is important, but only 18 percent say this issue is a top priority re- flected in corporate strategy.
TREND 7. WELL-BEING: A STRATEGY AND A RESPONSIBILITY
As the line between work and life blurs further, employees are demanding that organizations ex- pand their benefits offerings to include a wide range of programs for physical, mental, financial, and spir- itual health. In response, employers are investing in well-being programs as both a societal responsibil- ity and a talent strategy. More than 50 percent of survey respondents view a variety of such programs as “valuable” or “highly valuable” to employees, but big gaps remain between what employees value and what companies are delivering.
Leveraging technology for sustainable growth
Organizations are looking to capitalize on the benefits of a surge of new AI-based software, ro- botics, workplace connectivity tools, and people data applications, while also mitigating potential downsides and unforeseen effects. These tools and investments can help to redesign work architecture, lift productivity, and enhance people efforts, but or- ganizations must also pay attention to and respect their impacts on the workforce as a whole.
TREND 8. AI, ROBOTICS, AND AUTOMATION: PUT HUMANS IN THE LOOP
The influx of AI, robotics, and automation into the workplace has dramatically accelerated in the last year, transforming in-demand roles and skills inside and outside organizations. Perhaps surpris- ingly, those roles and skills focus on the “uniquely human” rather than the purely technical: Survey respondents predict tremendous future demand for skills such as complex problem-solving (63 percent), cognitive abilities (55 percent), and so- cial skills (52 percent). To be able to maximize the potential value of these technologies today and
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minimize the potential adverse impacts on the workforce tomorrow, organizations must put hu- mans in the loop—reconstructing work, retrain- ing people, and rearranging the organization. The greatest opportunity is not just to redesign jobs or automate routine work, but to fundamentally re- think “work architecture” to benefit organizations, teams, and individuals.
TREND 9. THE HYPER-CONNECTED WORKPLACE: WILL PRODUCTIVITY REIGN?
New communications tools are rapidly entering the workplace. Seventy percent of respondents be- lieve workers will spend more time on collaboration platforms in the future, 67 percent see growth in
“work-based social media,” and 62 percent predict an increase in instant messaging. But as these tools migrate from personal life to the workplace, orga- nizations must apply their expertise in team man- agement, goal-setting, and employee development to ensure that they actually improve organizational, team, and individual performance and promote the necessary collaboration to truly become a social en- terprise. Like the outside world, organizations are becoming hyper-connected; can they also become hyper-productive?
TREND 10. PEOPLE DATA: HOW FAR IS TOO FAR?
The rapid increase in data availability and the advent of powerful people analytics tools have
generated rich opportunities for HR and organiza- tions—but they are now also generating a variety of potential risks. While more than half of our sur- vey respondents are actively managing the risk of employee perceptions of personal data use, and a similar proportion is managing the risk of legal li- ability, only a quarter are managing the impact on their consumer brand. Organizations face a tipping point: Develop a set of well-defined policies, secu- rity safeguards, transparency measures, and ongo- ing communication around the use of people data, or risk employee, customer, and societal backlash.
A call to action
The 2018 Global Human Capital Trends report sounds a wake-up call for organizations. The rise of the social enterprise requires a determined focus on building social capital by engaging with diverse stakeholders, accounting for external trends, creat- ing a sense of mission and purpose throughout the organization, and devising strategies that manage new societal expectations. At stake is nothing less than an organization’s reputation, relationships, and, ultimately, success or failure.
In this new era, human capital is inextricably tied to social capital. This reality demands a funda- mental pivot in how organizations do business to- day—and how they prepare for the human capital challenges of the future.
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Appendix A: Trend importance by region, industry, and organization size
Table 1. Trend importance by region
Global Americas Europe, Middle East & Africa Asia Pacific Latin & South
America North
America Africa
Central & Eastern Europe
Middle East
Nordic countries
Western Europe Asia Oceania
The symphonic C-suite 85.0% 91.7% 84.8% 88.8% 81.5% 83.4% 80.1% 76.9% 90.6% 88.3%
People data 84.8% 88.2% 85.0% 89.3% 81.4% 86.4% 84.7% 77.2% 90.1% 85.6%
From careers to experiences 84.1% 87.2% 80.6% 84.7% 80.3% 81.3% 81.4% 79.8% 91.6% 87.3%
Well-being 84.0% 88.2% 78.9% 88.0% 75.1% 84.8% 83.3% 80.1% 91.6% 86.6%
The hyper- connected workplace
82.1% 85.5% 84.6% 85.0% 72.8% 79.9% 84.3% 78.9% 83.6% 89.0%
New rewards 77.4% 85.3% 71.1% 85.6% 74.8% 85.0% 58.8% 69.8% 87.5% 65.6%
Citizenship and social impact
76.7% 81.0% 76.1% 86.8% 63.6% 76.6% 67.8% 72.0% 83.0% 82.8%
AI, robotics, and automation
72.4% 70.4% 64.5% 70.7% 67.0% 74.5% 83.0% 69.2% 84.1% 73.2%
The longevity dividend 69.1% 74.8% 59.7% 73.2% 58.1% 70.5% 63.8% 69.2% 76.5% 66.7%
The workforce ecosystem 65.4% 72.4% 53.8% 71.2% 61.0% 70.3% 58.0% 60.1% 76.5% 61.5%
n = 11,070 Note: Figures represent the percentage of respondents rating each trend “important” or “very important.” Source: Deloitte Global Human Capital Trends survey, 2018.
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Table 2. Trend importance by industry
All industries
Consumer business
Energy & resources
Financial services
Life sciences
Manufac- turing
Profession- al services
Public sector
Real estate
Tech, media & telecom- munica-
tions
The symphonic C-suite 85.0% 86.4% 83.6% 85.6% 85.6% 84.9% 86.3% 77.1% 82.6% 87.4%
People data 84.8% 85.8% 83.9% 89.2% 85.0% 81.2% 84.0% 78.6% 79.1% 89.8%
From careers to experiences 84.1% 83.9% 83.3% 86.1% 82.8% 81.2% 84.5% 78.6% 86.1% 88.9%
Well-being 84.0% 83.4% 85.3% 84.4% 85.3% 82.6% 83.5% 79.7% 88.1% 86.5%
The hyper- connected workplace
82.1% 79.1% 79.9% 85.0% 80.4% 74.4% 86.2% 77.0% 81.1% 90.0%
New rewards 77.4% 79.7% 75.3% 79.2% 74.4% 77.7% 79.3% 65.8% 81.6% 80.2%
Citizenship and social impact 76.7% 76.6% 80.5% 78.9% 80.7% 73.1% 74.8% 77.7% 70.1% 75.9%
AI, robotics, and automation
72.4% 69.2% 75.7% 80.7% 73.1% 75.7% 71.0% 55.9% 65.2% 77.0%
The longevity dividend 69.1% 67.7% 73.9% 67.8% 70.0% 71.0% 67.0% 69.7% 76.1% 65.7%
The workforce ecosystem 65.4% 65.0% 66.7% 63.4% 58.5% 60.9% 73.0% 58.9% 66.2% 69.3%
n = 11,070 Note: Figures represent the percentage of respondents rating each trend “important” or “very important.” Source: Deloitte Global Human Capital Trends survey, 2018.
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Table 3. Trend importance by organization size (number of employees)
All respondents Large (10,001+) Medium (1,001
to 10,000) Small (1,000
or fewer)
The symphonic C-suite 85.0% 84.1% 85.2% 85.3%
People data 84.8% 88.3% 86.4% 82.2%
From careers to experiences 84.1% 85.3% 84.6% 83.2%
Well-being 84.0% 84.6% 83.9% 83.8%
The hyper-connected workplace 82.1% 84.7% 81.1% 81.5%
New rewards 77.4% 73.5% 76.8% 79.5%
Citizenship and social impact 76.7% 81.7% 77.7% 73.7%
AI, robotics, and automation 72.4% 82.4% 73.0% 67.4%
The longevity dividend 69.1% 69.5% 69.2% 68.8%
The workforce ecosystem 65.4% 64.7% 62.9% 67.2%
n = 11,070 Note: Figures represent the percentage of respondents rating each trend “important” or “very important.” Source: Deloitte Global Human Capital Trends survey, 2018.
Appendix B: Survey demographics
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 3. Respondents by region
7%
6%
8%
Oceania
Middle East
Nordic countries
Africa
Central & Eastern Europe
North America
Latin & South America
Asia
Western Europe
3%
4%
5%
7%
9%
15%
16%
19%
23%
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Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 4. Respondents by industry
Professional services
Technology, media & telecommunications
Financial services
Consumer business
Manufacturing
Energy & resources
Public sector
Life sciences
Real estate
Other
15%
13%
13%
13%
11%
9%
8%
6%
2%
11%
Deloitte Insights | deloitte.com/insights
n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
24%
27%
49%
1,000 or fewer employees
10,001+ employees
1,001 to 10,000 employees
Figure 5. Respondents by organization size (number of employees)
Deloitte Insights | deloitte.com/insights
n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
HR
Non-HR
62% 38%
Figure 6. Respondents by job function
2018 Deloitte Global Human Capital Trends
13
Deloitte Insights | deloitte.com/insights
n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Mid-level
Vice president
Individual contributor
C-suite
Figure 7. Respondents by level
51%
10% 6%
33%
Table 4. Country in which respondent works
United States 1,344
China 817
India 724
Belgium 649
Germany 429
Mexico 407
South Africa 354
Brazil 337
Canada 322
Norway 302
France 261
Japan 236
Spain 232
Australia 229
Ireland 212
United Kingdom 202
Poland 198
Turkey 161
Ukraine 160
Russian Federation 158
Finland 154
Colombia 152
Ecuador 139
Netherlands 136
Costa Rica 133
Uruguay 126
Greece 125
United Arab Emirates 108
Italy 106
Nigeria 102
Other 2,055
Total 11,070
Source: Deloitte Global Human Capital Trends survey, 2018.
The rise of the social enterprise
14
1. Deloitte, The business case for inclusive growth: Deloitte Global’s inclusive growth survey report, January 2018.
2. Tiffany McDowell, Dimple Agarwal, Don Miller, Tsutomu Okamoto, and Trevor Page, Organizational design: The rise of teams, Deloitte University Press, February 29, 2016; Josh Bersin, Tiffany McDowell, Amir Rahnema, and Yves Van Durme, The organization of the future: Arriving now, Deloitte University Press, February 28, 2017.
3. Larry Fink, “Larry Fink’s annual letter to CEOs: A sense of purpose,” BlackRock, accessed January 30, 2018.
4. Andrew Ross Sorkin, “BlackRock’s message: Contribute to society, or risk losing our support,” New York Times, January 15, 2018.
5. Deloitte, The 2017 Deloitte millennial survey: Apprehensive millennials: Seeking stability and opportunities in an uncertain world, 2017.
6. Ibid.
7. David Brown et al., Culture and engagement: The naked organization, Deloitte Insights, February 27, 2015.
8. Edelman, 2018 Edelman Trust Barometer: Global Report, 2018, p. 5.
9. Ibid., p. 11.
10. Marc Benioff, “Marc Benioff on inequality in an age of innovation,” Wall Street Journal, January 17, 2018.
11. Carolyn Johnson, “Amazon, Berkshire Hathaway and JP Morgan Chase join forces to tackle employees’ health- care costs,” Washington Post, January 30, 2018.
12. Heather Stockton, Mariya Filipova, and Kelly Monahan, The evolution of work: New realities facing today’s leaders, Deloitte Insights, January 30, 2018.
13. Deloitte, The Fourth Industrial Revolution is here—are you ready?, Deloitte Insights, January 2018, pp. 3–4.
ENDNOTES
2018 Deloitte Global Human Capital Trends
15
The rise of the social enterpriseThe rise of the social enterprise
The symphonic C-suite Teams leading teams
IN the last two years of our global research, the most important human capital trend identified by our survey respondents has been the need to break down functional hierarchies and build a more networked, team-based organization. This year, this trend has reached the C-suite. Senior leaders now realize that they must move beyond their functional roles and operate as a team. In this new construct, C-suite executives combine business unit and func- tional ownership with cross-functional teaming to run the organization as an agile network.
The urgency around this issue is clearly reflected in our survey results. Fifty-one percent of the respon- dents we surveyed this year rated “C-suite collabora- tion” as very important—making it the most impor- tant issue in our 2018 survey—and 85 percent said that it was important or very important. Addition- ally, we found that respondents at organizations with the highest level of CxO cross-collaboration were the most likely to anticipate growth of 10 percent or more. Stunningly, however, 73 percent of respon-
dents told us that their C-suite leaders rarely, if ever, work together on projects or strategic initiatives.
The message is clear: Senior leaders must get out of their silos and work with each other more. To navigate today’s constantly changing business envi- ronment and address cross-disciplinary challenges, a company’s top leaders must act as one.
We call this new, collaborative, team-based se- nior executive model “the symphonic C-suite.” Like a great symphony orchestra, a symphonic C-suite brings together multiple elements: the musical score, or the strategy; the different types of instru- mental musicians, or the business functions; the first chairs, or the functional leaders; and the conductor, or the CEO. In this model, C-suite members not only lead their own area of responsibility, but also collab- orate with other functional leaders, work on teams that affect the enterprise’s strategic direction, and influence and inspire networks of teams through- out the organization. In short, the goal is a sym- phony of specialized experts playing in harmony—
As the business environment becomes more competitive and digital disruption continues, organizations have become more team-centric, networked, and agile. While these approaches are taking hold in sales, operations, and other functional areas, a big problem remains: The C-suite must change as well. Rather than behave as independent C-level functional experts, the C-suite itself must now operate as a team. We call this trend the “symphonic C-suite,” and our respondents viewed it as the most pressing human capital issue facing organizations today.
2018 Deloitte Global Human Capital Trends
17
instead of a cacophony of experts who sound great alone, but not together.
A turning point in C-suite evolution
This wasn’t always the way C-suites behaved. In the 1800s and early 1900s, the CEO stood alone at the top, making most of the important decisions and delegating responsibility to functional manag- ers in the business. This model was later extended to create a series of “specialist heroes,” each with a “C” in his or her title: chief financial officers, chief information officers, chief human resources officers . . . the list goes on and on. Each was given responsi- bility to “own” his or her domain, operating under a “divide and conquer” model.1
With this increased specialization, however, a new dynamic emerged: The individual CxOs did not, as a rule, work closely together. This made sense in a relatively static, predictable business environment where most problems had readily identifiable root causes, were limited in scope, and required deep functional expertise to solve.
But the current business environment is a far cry from what it was in the 1980s, which saw a huge in- crease in the number and type of functional C-suite roles.2 Frequent marketplace disruptions, a global economy, and the accelerating rate of technological change mean that the problems companies now face are more difficult, more complex, and more multi- dimensional than ever. More and more problems are of the “wicked” variety—problems with multiple roots and drivers that cannot be effectively solved by one party working alone.
C-SUITE COLLABORATION CORRELATES WITH HIGHER GROWTH EXPECTATIONS Respondents from organizations where C-suite executives regularly collaborate on long-term interdependent work were the most likely to anticipate growth of 10 percent or more.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n= 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Influence of C-suite leadership style on company growth
CxOs regularly collaborate on long-term
interdependent work
CxOs manage functions independently but
collaborate to share ideas or troubleshoot
problems
CxOs manage functions independently with little
cross-functional collaboration
CxOs occasionally partner on ad hoc
initiatives or projects
Degree of C-suite collaboration
SHARE OF EACH COHORT EXPECTING GROWTH OF 10% OR MORE IN THE NEXT YEAR
34%
26% 25% 22%
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In a dynamic environment demanding both cross-disci- plinary collaboration and deep functional expertise, operating as a symphonic C-suite makes a great deal of sense, allowing leadership teams to tackle issues that no single func- tion can satisfactorily address. For instance, today’s digitally savvy, well-informed consum- er is demanding that businesses deliver not only good products, but a great end-to-end customer ex- perience—from the time he or she becomes aware of a product through the end of the product’s life cycle. Rising to this challenge demands that organizations work across functions to understand and fulfill cus- tomer needs at every touch point.
As another example, consider a company’s need for agility in navigating rapidly shifting markets, technologies, competitors, and customer expecta- tions. If an executive team does not operate as an integrated decision-making unit, they risk moving too slowly to align the organization with the de- mands of its time and place. HP’s decision to split its businesses, for example, was made in an inte- grated fashion among its C-suite—which allowed the company to rapidly respond to shifting market- place needs.3
An integrated approach can work for long-term planning as well. At Cummins Power Systems, a leader in energy and power systems, the C-suite works tightly together to build a 15-year plan for its products, services, and business model. The HR,
IT, and other support teams then use this plan to build their own 15-year plans. This process has helped Cummins maintain its market lead- ership and renowned employment brand for
many decades.4 In a sense, the symphonic C-suite’s evolution can be seen as a logi- cal extension of the movement to networks of teams that has been occurring for some time at lower
organizational levels and across the broader economic and social landscape. Functional units are organizing around teams, initiatives, and agile projects; businesses are building ecosystems and networks; even public institutions are forming new coalitions. And in these efforts, what has be- come clear is that cross-functional teams can often get work done more quickly and effectively than a siloed, top-down approach. Why should C-suites be immune to this effect?
What could a symphonic C-suite look like?
Not every problem, of course, requires every C-suite officer to get involved. The experience of companies such as General Electric suggests the im- portance of the “G3” team of the CEO, CHRO, and CFO,5 while other experts emphasize the “golden triangle” of the CFO, CMO, and CIO.6 Some pro- fessional services leaders highlight the value of
The message is clear: Senior leaders must get out of their silos and work with each other more.
To navigate today’s constantly changing business environment and address cross- disciplinary challenges, a company’s top
leaders must act as one.
2018 Deloitte Global Human Capital Trends
19
the “leadership dyad”—a close team of two senior executives focused on resolving conflict.7 Alliances between the CMO and other functional leaders can determine marketing success for a digital business.8
Here are some specific ways that a symphonic C-suite might configure and reconfigure itself to ad- dress different types of challenges:
• Digital business models. The transition to digital business models is at the top of the strategic agenda for many businesses today. A high-performing digital business aims to de- liver its products and services to customers as an integrated experience. To achieve this, the chief marketing officer (CMO) and chief infor- mation officer (CIO) can work together so that front, middle, and back-office systems converge to provide a seamless customer experience. For instance, used-car retailer CarMax’s CMO and CIO worked together to design a digital experi- ence that would allow customers to choose ve- hicles using interactive online tools, as well as offer them a more satisfying experience overall.9
• The future of work. Redesigning work and workforces to integrate robotics and artificial in- telligence technologies, as well as to capitalize on new employment models such as gig workers and crowds, is a complex and growing opportunity
across industries and functions. CIOs and CFOs can work with each other and with business lead- ers, supply chain executives, and the CHRO to pilot and implement automation solutions and redesign work around new platforms in a way that creates meaningful jobs, careers, and devel- opment opportunities for people.
• Brand protection. In a connected and trans- parent world, both customers and employees— some of whom may be one and the same—are in- extricably linked to corporate brand. CMOs and CHROs, along with the chief risk officer, could collaborate to manage an organization’s total in- ternal and external brand.
• Innovation. Chief innovation officers and chief research officers can play a critical role in driv- ing innovation across other functions as well as across the business. When one team inno- vates, those innovations can affect work in other teams, allowing all teams to learn together.
Cultivating the symphonic C-suite
The transition of C-suites to full “symphonic” mode still appears to be in its infancy. Fifty-four percent of the respondents in our 2018 Global Hu- man Capital Trends survey told us that their com- panies are not ready, or only somewhat ready, for the level of executive-team collaboration they be- lieve is now required.
Where can C-suites start? A first step is for the CEO to review priorities for each C-suite leader and determine how each can have an impact more broad- ly across the organization. Next, cross-disciplinary
In the next few years, we expect that the
need for ever-greater cross-functional
collaboration will drive continued evolution in the C-suite, as well
as in the leadership development pipelines
that feed it.
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20
THE BOTTOM LINE The movement toward the symphonic C-suite is proving to be one of the most powerful and urgent trends for organizations worldwide. CxOs at leading companies understand that working, collaborating, and interacting as a team is now essential—and they are reorganizing around this model. We expect this trend to accelerate as organizations begin to recognize that the symphonic C-suite—teams leading teams—is the most effective way to tackle the complex issues businesses face today.
Table 1. What role does the C-suite play in acting as a team? How can individuals adjust?
All C-suite executives Incorporate collaboration and teamwork into daily routines, prioritizing interaction, information-sharing, and real-time decision-making across functions. Introduce incentives for your own direct reports to drive integrated thinking and cross-functional collaboration.
CHRO
Update leadership profiles to build a pipeline of future-ready executives and shift the organization’s culture to encourage greater collaboration across business units, functions, and geographies. Consider expanding the use of “networks of teams” in areas in need of innovation or disruption.
Individuals As a leader or manager, think through ways you can spend time working in teams across functions, silos, and organizational boundaries. Encourage greater cross-functional collaboration among executive leaders.
Source: Deloitte analysis.
projects should be prioritized so that CxOs can form specific alliances and align their efforts to drive suc- cess. Last, executive teams need to put those cross- disciplinary projects on the agenda, not only for themselves, but for the organization as a whole to in- crease the visibility of their collaboration to the rest of the workforce as a model to follow.
In executing this shift, teamwork, influence, and expertise gain in value. No longer can C-suite ex- ecutives succeed only through authority—they must create followership among their peers. The need for CxOs who can do this means assessing potential leaders in new ways.
Achieving C-suite collaboration also requires performance management systems and career paths
that facilitate teaming and give leaders cross-func- tional experience. For example, L’Oréal Group has reimagined its performance management systems to emphasize the importance of teamwork, adopting a new credo: “The team is the new hero.”10 Our own survey shows that CxOs with experience in a greater number of functions prior to reaching their current level are more likely to indicate that their organiza- tion’s C-suite regularly collaborates.
In the next few years, we expect that the need for ever-greater cross-functional collaboration will drive continued evolution in the C-suite, as well as in the leadership development pipelines that feed it.
2018 Deloitte Global Human Capital Trends
21
1. Eamonn Kelly, The C-suite: Time for version 3.0?, Deloitte University Press, March 31, 2014.
2. Ibid.
3. Josh Bersin, conversations with HP executives.
4. Josh Bersin, conversations with Cummins CEO and CHRO.
5. Ram Charan, Dominic Barton, and Dennis Carey, “People before strategy: A new role for the CHRO,” Harvard Business Review, July–August 2015.
6. Karen dela Torre, “Partners for success: CFOs, CMOs, CIOs,” Oracle, accessed January 24, 2018.
7. Laura Empson, “Leadership dyads: The ideal leader is two people,” Thomson Reuters, May 2, 2017.
8. Laura McLellan, “Five reasons CMO alliances with C-suite peers fail, part 1,” Gartner for Marketers, July 25, 2014.
9. Diana O’Brien, Jennifer Veenstra, Timothy Murphy, “Redefining the CMO,” Deloitte Review 22, January 22, 2018.
10. Jérôme Tixier (CHRO, L’Oréal Group), interview with the authors, March 8, 2018.
ENDNOTES
The rise of the social enterprise
22
2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterpriseThe rise of the social enterprise
The workforce ecosystem Managing beyond the enterprise
THE composition of the workforce is chang-ing dramatically. Globally, there are approxi-mately 77 million formally identified freelanc- ers in Europe, India, and the United States.1 In the United States, more than 40 percent of workers are now employed in “alternative work arrangements,” such as contingent, part-time, or gig work.2 This percentage is steadily rising—increasing by 36 per- cent in just the past five years—and now includes workers of all ages and skill levels.3 In this year’s Global Human Capital Trends survey, 50 percent of the respondents reported a significant number of contractors in their workforces; 23 percent reported a significant number of freelancers, and 13 percent reported a significant number of gig workers.
All of this suggests that, in simplest terms, the traditional employer-employee relationship is be- ing replaced by the emergence of a diverse work- force ecosystem—a varied portfolio of workers, tal- ent networks, gig workers, and service providers that offers employers flexibility, capabilities, and
the potential for exploring different economic mod- els in sourcing talent.
While it may be appealing to hire contractors quickly or to outsource technical or service work, taking advantage of the emerging workforce eco- system’s benefits brings a variety of new challenges, and our research shows that most companies are not fully ready. When asked to forecast the makeup of their workforce in 2020, 37 percent of this year’s survey respondents expected growth in the use of contractors, 33 percent in the use of freelancers, and 28 percent in the use of gig workers. But despite this anticipated growth, only 16 percent told us they have an established set of policies and practices to manage a variety of worker types, pointing to an enormous gap in capabilities.
The challenge is not just the tactical one of find- ing enough of the right people to execute particular tasks at particular times. To drive real value through the new workforce ecosystem, organizations need to understand how to appeal to and engage with
Today’s workforce has become a dynamic ecosystem. Only 42 percent of this year’s survey respondents tell us that their organizations are primarily made up of salaried employees, and employers expect to dramatically increase their dependence on contract, freelance, and gig workers over the next few years. As alternative work arrangements become more common in the broader economy, HR and business leaders are rapidly trying to plan and optimize their own workforce ecosystems, pressured by the need to improve service, move faster, and find new skills.
2018 Deloitte Global Human Capital Trends
25
workers of all kinds. And not all workers in this eco- system have traditional views of what an employer- worker relationship should look like. Consider the common aspirations of millennials and Generation Z: A recent study found that 75 percent of workers in these generations plan to start their own busi- ness;4 more than 70 percent want their work to sup- port their personal interests, and only 12 percent believe that an invention they create should belong to their employer.5
The challenges of managing the workforce ecosystem
Our interviews and survey data suggest that most non-traditional workers are managed tactical- ly, often handled by the procurement department, with few consistent talent strategies in place. In this year’s Global Human Capital Trends survey, only 29 percent of respondents said that their organiza- tions track these ecosystem workers’ compliance with work contracts, and only 32 percent track their quality of work.
ALTERNATIVE WORK ARRANGEMENTS ARE ON THE RISE Respondents expect a substantial increase in their organizations’ use of contractors, freelancers, and gig workers over the next two years.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Anticipated use of each labor type in 2020 relative to today
Contractors
Freelancers
Gig workers
Crowd workers
Increase Stay the same Decrease
37%
33%
28%
21%
46%
52%
56%
62%
16%
15%
15%
18%
To drive real value through the new
workforce ecosystem, organizations need to understand how
to appeal to and engage with workers
of all kinds.
The rise of the social enterprise
26
The sheer variety of today’s work arrangements makes it hard to even understand what types of workers are employed, let alone manage them stra- tegically. As shown in figure 2, the workforce eco- system ranges from full-time workers to freelancers, gig workers, and crowds who focus on projects and tasks but may have little understanding of or inter- est in an organization’s overall strategy. Organiza- tions may expect these workers to be well trained and ready to work, but in reality, they need support, guidance, and performance measures if an employ- er wants to optimize the entire mix.
Making things even more difficult is the fact that the HR software market has historically not built many tools to help employers manage non-tradi- tional workers. Only in the last few years have ven- dors such as WorkMarket (just acquired by ADP) and Fieldglass (acquired by SAP in 2014), as well as startups such as RallyTeam, Fuel50, and others, started to offer contingent, gig, and project man- agement tools to help companies manage and com- municate with the broader workforce ecosystem.6
In most cases, once they see the problem as strate- gic, organizations build their own tools and apps to manage the most-used types of contingent workers.
That the problem is strategic is becoming beyond debate. Aside from the opportunity cost of failing to capitalize on alternative work arrangements, new workforce models can create legal, security, privacy, and other risks. For instance, more than one-third of our respondents (42 percent) worry about the loss of confidential information due to the use of contractors, and 36 percent are concerned about the reputational risk that could arise from a nega- tive perception of non-traditional employees. Some
38 percent worry about the instability of a non- traditional workforce, and 39 percent worry about violations or changing government regulations in managing or categorizing these workers.
Engaging the workforce ecosystem
What can organizations do to engage these in- creasingly important ecosystem workers, even as they turn away from the very idea of being “employ- ees”? Our research and experience point to several important components of success.
First, organizations should extend their talent management approaches to workers across the en- tire ecosystem. HR teams should work with legal and IT to give gig and contract workers clear perfor- mance goals, secure communication systems, and the right amount of training and support to make them productive and aligned with the company’s strategy. Cummins, for example, a global leader in
power, energy systems, and engines, considers its contractors “a part of the family,” and tries to give them the same focus as full-time employees.7
Second, HR should get more involved in sourc- ing and selection decisions for alternative workers. Today, more than a third of our survey respondents say that HR is not involved in sourcing (39 percent) or hiring (35 percent) decisions for contract em- ployees. This suggests that these workers are not subject to the cultural, skills, and other forms of as- sessments used for full-time employees. Since alter- native workers can make up 30 to 40 percent of the workforce, organizations should carefully consider
Deloitte Insights | deloitte.com/insightsSource: Deloitte analysis.
Figure 2. A wide range of worker types
TRADITIONAL Organization-led
OPEN Employee-led
FULL/PART-TIME EMPLOYEES
JOINT VENTURES
CONTRACTORS FREELANCERS GIG WORKERS CROWDS
2018 Deloitte Global Human Capital Trends
27
under what circumstances they should be screened like regular employees, if at all.
Third, organizations should provide ecosystem workers with onboarding and development oppor- tunities. Perhaps because organizations fear these workers will become categorized as “full-time em- ployees,” nearly half of the HR respondents to our survey (46 percent) say they are not involved in on- boarding alternative workers, and more than half (55 percent) do not support training for this popula- tion. Again, this shows a lack of understanding of the workforce ecosystem’s importance. Most em- ployers are currently treating alternative workers as unskilled labor, not as professionals.
Fourth, companies should consider workforce brand and incentive programs that cover the range of ecosystem workers. What can alternative work- ers do to make more money? What skills and ca- pabilities should they develop? How will they be measured? HR should formalize these practices for the ecosystem rather than waiting for procurement to do it.
Success stories show the way
The challenges raised by the workforce ecosys- tem are all manageable, and companies can ben- efit from taking an integrated view of the problem. Consider a large pharmaceutical company whose in-house scientists had been struggling with a tech- nical challenge for months. When the company en- gaged external talent for the problem, it found the solution in just six days.8
Businesses such as Fiverr, E-Lance, Doordash, and others have learned to manage contingent and gig workers. Many are growing at rapid rates while exploring approaches to improve alternative work- ers’ lives. A recent coalition led by Fiverr, Care.com, DoorDash, Etsy, Postmates, and others, working with Stride Health, has launched an initiative to help freelancers access health care programs and insurance in the United States.9 As freelancers, gig, and crowd workers become a growing proportion of the workforce, improving programs like these and integrating alternative and full-time workforces will grow in importance.
THE BOTTOM LINE The growth of new workforce models is redefining the employer-worker relationship, and many organizations have the opportunity to draw upon today’s variegated labor market. HR and business leaders should proactively form new leadership alliances—especially between HR and procurement—to develop integrated workforce strategies and programs that can help an organization take advantage of the breadth of workforce options available today.
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Table 1. What role does the C-suite play in capitalizing on the workforce ecosystem? How can individuals adjust?
CHRO
Develop workforce management strategies that leverage open talent workforces to meet the organization’s changing needs. Work with managers supervising contingent workers to shift their focus toward these workers’ engagement and productivity, instead of concentrating strictly on task performance. Create development opportunities and performance management approaches to help give off-balance-sheet workers access to learning experiences and coaching while engaged with your organization.
CFO
Understand the financial implications of the workforce ecosystem and work with business leaders to understand the financial benefits that can be achieved by managing this extended workforce. The significant potential implications for the balance sheet make it important to take a proactive view of how an organization’s changing workforce composition can affect a large cost item on the P&L.
CIO
Work closely with HR to create an IT infrastructure to help effectively manage the workforce ecosystem. Help your organization move past the use of different systems to manage full-time employees vs. alternative workers. Aim to develop a single workforce management solution that can provide full and consistent visibility to the workforce as a whole.
Chief risk officer
Consider what new policies may be needed for managing employment responsibilities within the workforce ecosystem, including policies around issues such as protecting confidential information and managing reputational risk. Work closely with HR to determine where new policies may be needed, and constantly monitor (and, where appropriate, seek to influence) the regulatory environment around how employers engage with new worker types.
Individuals Use the open talent economy to your advantage. Employers who have embraced the workforce ecosystem and are using different types of work arrangements can help you gain the experiences you need to increase your attractiveness in the employment market.
Source: Deloitte analysis.
2018 Deloitte Global Human Capital Trends
29
1. Ben Matthews, “Freelance statistics: The freelance economy in numbers,” www.benmatthews.com, January 8, 2017.
2. Elaine Pofeldt, “Shocker: 40% of workers now have ‘contingent’ jobs, says U.S. government,” Forbes, May 25, 2015.
3. US Government Accountability Office, Contingent workforce: Size, characteristics, earnings, and benefits, April 20, 2015.
4. Lovell Corporation, The 2017 change generation report: How millennials and Gen Z are redefining the future of work, 2017.
5. David Stillman and Jonah Stillman, GenZ @ Work: How the Next Generation is Transforming the Workplace (New York: HarperCollins, 2017).
6. Matthew Lynley, “ADP acquires workforce management software startup WorkMarket,” TechCrunch, January 22, 2018.
7. Josh Bersin, conversations with Cummins executives.
8. Kathryn Moody, “‘The world is changing’: Why the contingent workforce isn’t going away,” HRDive, May 9, 2017.
9. Globe Newswire, “Leaders in tech assemble to drive healthcare enrollment for over 3.5 million independent workers,” press release, October 31, 2017.
ENDNOTES
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2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterpriseThe rise of the social enterprise
New rewards Personalized, agile, and holistic
REWARDS are in the midst of a transition from the strictly standardized to the highly personalized. Companies at the forefront of this wave are creating rewards programs that are delivered more continuously, aligned more closely with individual preferences, and based more fully on an employee’s whole contribution—to the team and the organization. These companies understand that effective rewards programs require a person- al relationship with each worker. Done correctly, this new approach to rewards can become a huge competitive advantage.
Yet our research indicates that few companies are making this transition successfully. Yes, they understand the need; 76 percent have reinvented performance management to be more continuous. However, 91 percent of companies still follow the utterly conventional practice of conducting salary reviews only once a year—or even less often.1 Even worse, organizations rate their rewards program with a net promoter score of -15, and only 21 percent would recommend their program to others.2
Many business as well as HR leaders recognize the problem. In this year’s Global Human Capital Trends survey, 37 percent of respondents rated rewards as very important, yet only 9 percent indi- cated that they were “very ready” to deal with this challenge.
From this low baseline, we did additional re- search to try to understand how well rewards sys- tems are driving business outcomes. The results are shockingly poor (table 1).3
These low numbers point to a serious problem. While other talent strategies have evolved, rewards practices are lagging behind.
What is wrong with rewards?
We see three major areas where today’s rewards programs are out of line with employee preferences.
First, employees respond favorably to agile com- pensation programs that provide raises, bonuses, or other incentives more often than the traditional
For decades, designing rewards programs was a relatively straightforward exercise of finding the right mix of compensation and traditional benefits such as health insurance and vacation time. Those days are over. Leading organizations now understand that a personalized, agile, holistic rewards system is essential to attracting, motivating, and developing talent. So why are so many companies falling short, even as they realize their rewards programs are outdated?
2018 Deloitte Global Human Capital Trends
33
once-a-year rewards system. And companies have a strong incentive to implement these programs. A study by Globoforce found that employees who re- ceive regular small rewards, in the form of money, points, or thanks, are a staggering eight times more engaged than those who receive compensation and bonus increases once a year.4
Our research shows that 20 percent of compa- nies give workers performance ratings more than once per year, but only 9 percent adjust salary at that pace.5 Compounding the problem, most remu- neration programs are inflexible and narrowly fo- cused on experience and tenure.
Second, organizations are missing an opportu- nity to better understand worker preferences and tailor a wider range of rewards to a more diverse workforce. Rewards programs remain primarily fo- cused on traditional (on-campus, on-balance-sheet) workers and traditional types of benefits such as
AN ALIGNED REWARDS STRATEGY CORRELATES WITH HIGH GROWTH EXPECTATIONS Respondents from organizations whose rewards strategies were highly aligned with organizational goals were the most likely to anticipate growth of 10 percent or more.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n = 11,069 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Influence of rewards strategy alignment on organizational growth
Highly aligned Aligned Somewhat aligned Misaligned
Rewards strategy alignment to company goals
SHARE OF EACH COHORT EXPECTING GROWTH OF 10% OR MORE IN THE NEXT YEAR
29% 26%
22%
17%
Table 1. Rewards’ perceived effectiveness in driving business outcomes
Business outcome
Percentage of respondents rating their organization’s rewards programs “very effective” in achieving
this result
Motivating talent 3%
Growing and developing talent 5%
Attracting talent 6%
Retaining talent 8%
Aligning with business goals 12%
Source: Bersin, Deloitte Consulting LLP, High-impact total rewards research, 2018.
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health insurance, sick leave, and overtime pay. Many exclude elements such as flexibility, develop- ment, recognition, and other incentives, particu- larly for contract or other off-balance-sheet workers.
While some first movers are shifting toward truly personalized rewards, most companies are still struggling to customize and communicate re- wards tailored to the individual. Only 8 percent of organizations in this year’s survey said that their rewards program was “very effective” at creating a personalized, flexible solution. And just 9 percent of companies in a recent study reported that they use data and analysis, such as conjoint analysis, to a great or very great extent to understand employee preferences.6
Third, most rewards programs are not seen as “fair.” For instance, upon surveying more than 4,000 workers at the 10 biggest technology com- panies, Blind found that only 45 percent of those highly compensated employees felt they were “fairly paid.”7 At many companies, the process for deciding pay is considered political or arbitrary, which has a huge impact on retention and turnover. Lack of transparency compounds the problem: A study by Payscale found that employees who do not under- stand the pay process are 60 percent more likely to leave the organization.8
Topics such as pay for performance, pay fair- ness, and pay equity are nothing new; HR depart- ments have debated them for decades. What makes things different today are workers’ increased expec- tations—for transparency and flexibility around re- wards—and their greater access to information, in- cluding salary data via websites such as Glassdoor, Fishbowl, LinkedIn, and others.
First movers: Aligning rewards with preferences
Companies that fundamentally revamp their rewards programs to make them more varied and personalized are seeing positive results. Some of these companies are taking creative approaches to achieving greater alignment among rewards strate- gy, individual preferences, and com- pany goals.
For example, a major apparel manufacturer now offers people three elements of remunera- tion. Each element is based on a different set of criteria: Increases in base pay reflect an employee’s alignment and growth in core values; bonus amounts are entirely tied to the achievement of specific goals; and incentives and long-term stock options are awarded based on leadership activities and 360° feedback. This flex- ible system empowers employees to decide if they want to focus on core teamwork, achieve stretch goals, or move into leadership roles.
Or consider a European consulting firm that gives new employees a range of rewards options when they accept an employment offer. The new hire can choose salary or stock options; an extra week of vacation or higher pay; and a higher bonus based on results or a more modest increase in base pay.
Companies at the forefront of this wave are creating rewards programs that are delivered more continuously, aligned more closely with individual preferences, and based more fully on an employee’s whole contribution—
to the team and the organization.
2018 Deloitte Global Human Capital Trends
35
Patagonia has an innovative compensation and rewards model that aligns with its culture and iden- tity. It goes beyond the historic mix of traditional benefits by adopting an unconventional approach to rewards that caters to employees’ lives both in- side and outside of work. This includes 26 three- day weekends per year, a surfing policy that allows employees to surf or do other exercise during work hours, and extensive family benefits such as on-site day care to support parenting and breastfeeding. Patagonia strongly believes in hiring passionate and motivated people who stand behind what they believe, and has seen a rise in performance and productivity when they are rewarded accordingly. The company encourages employees to treat work as play and regards its own workers as the ultimate customers, which means it places a special empha- sis on how it treats and rewards them.9
Supporting continuous performance management
Changing talent management approaches are a key driver of the evolution in rewards. A 2016 study found that three-quarters of employees said that their companies should change performance management practices, and less than 40 percent of corporate leaders said that these practices helped achieve business objectives.10 In a 2017 study, more than 70 percent of companies reported designing
“continuous performance management” practices.11
A few pioneers have begun to create “continuous rewards” to match. For example, one consumer fi- nance firm now both pays out its broad-based cash incentive plan and processes promotions twice a year, aligning with its semiannual approach to per- formance reviews and ratings.
Cisco’s head of rewards favors an approach of continuous experimentation that involves listening to employee needs as well as understanding com- petitive benefits and rewards in the market. To pro- mote transparency and trust, the company regularly benchmarks its total compensation against that of competing firms and gives employees a view of how each job family is paid compared to competitors.12
Keeping it personal
Surprisingly, rewards are perhaps the last area of human capital to become personalized, even though personal preferences may be the most im- portant in this area. As a result, companies that per- sonalize rewards—or better yet, create an individual relationship around rewards with each worker—can seize a distinct advantage in the talent market.
Our view is that a system that offers a variety of rewards and a way to personalize them is the only structure with the required flexibility to meet the diverse needs and desires of today’s variegated workforce. Talent today wants a custom rewards ex- perience that reflects how they live, work, and com- municate—not a one-size-fits-all approach rooted in the past.
Talent today wants a custom rewards experience that reflects how they live,
work, and communicate—not a one-size- fits-all approach rooted in the past.
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THE BOTTOM LINE Most organizations now recognize the need to reshape rewards with a more personalized, agile, and holistic approach, matching other talent management strategies. The few organizations that have translated recognition into action have expanded their definition of rewards and looked beyond traditional approaches to design and delivery. The field remains wide open for organizations to experiment and test new tools in the effort to boost rewards’ efficacy by establishing a personalized relationship with each worker.
Table 2. What role does the C-suite play in capitalizing on new rewards? How can individuals adjust?
CHRO
Recognize that overhauling talent management is not complete without a corresponding overhaul of rewards. Use analytics to determine what workers value in their rewards to appropriately align rewards programs and generate a market advantage for your organization. Revisit your rewards approach on an ongoing basis to reflect the continuing evolution of the workforce and their priorities.
CIO Work with HR to expand your organization’s analytics capabilities in the rewards space, and promote ways to use people analytics more broadly across the organization. Rewards will continue to be an area where employee insights can be incredibly beneficial.
CFO Collaborate early and often with HR to understand how changes in rewards structures can affect the workforce’s overall cost, as rewards make up a significant portion of the human capital balance sheet.
Chief risk officer Monitor regulations in the rewards space to understand how new laws and policies could impact your organization’s rewards strategy— especially with respect to rewards for gig workers.
Individuals Tell your employer what you want and expect in your relationship with the organization. Many organizations are now open to new ideas for a variety of different rewards. It’s up to you to make your voice heard.
Source: Deloitte analysis.
2018 Deloitte Global Human Capital Trends
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1. Bersin, Deloitte Consulting LLP, Performance management research, 2017.
2. Bersin, Deloitte Consulting LLP, High-impact total rewards research, 2018.
3. Ibid.
4. Society for Human Resource Management and Globoforce, 2018 SHRM/Globoforce employee recognition report, 2018.
5. Bersin, Deloitte Consulting LLP, High-impact total rewards research, 2018.
6. Ibid.
7. Josh Bersin, conversations with Blind executives.
8. Dave Smith, “Most people have no idea whether they’re paid fairly,” Harvard Business Review, December 2015.
9. Dean Carter (CHRO, Patagonia), interview with the authors, February 2, 2018.
10. Alexia Elejalde-Ruiz, “Companies are scrapping annual performance reviews for real-time feedback,” Chicago Tribune, April 22, 2016.
11. Bersin, Deloitte Consulting LLP, High-impact people analytics research, 2017.
12. Josh Bersin, conversations with Cisco executives.
ENDNOTES
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2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterpriseThe rise of the social enterprise
From careers to experiences New pathways
AS rapidly advancing technologies and team-centered business models drive organiza-tions to redesign themselves, leaders are also struggling to create new career models and build new skills across the workforce. In this year’s Global Human Capital Trends survey, “building the 21st- century career” emerged as the third-most-impor- tant trend; 47 percent of respondents described it as very important. Yet only nine percent of respon- dents are very ready to address this trend, demon- strating the challenge’s urgency.
What is a 21st-century career? We define it as a series of developmental experiences, each offering a person the opportunity to acquire new skills, per- spectives, and judgment. Careers in this century may follow an upward arc, with progression and promo- tion at various times—but they will look nothing like the simple stair-step path of generations ago.
This year, 61 percent of our survey respondents told us they are actively redesigning jobs around artificial intelligence (AI), robotics, and new busi- ness models, and 42 percent believe automation will have a major impact on job roles over the next
two years. This disruptive change has huge implica- tions for workforce needs, including skill develop- ment. However, many learning and development (L&D) departments are falling behind. A separate 2017 employer survey found that more than half of the respondents did not have learning programs to build the skills of the future.1
The skills of the future may not be what you think
As technology advances, skills are becoming obsolete faster than ever. But—contrary to conven- tional wisdom—the greatest value now lies beyond purely technical skills. In fact, the most valuable roles are those that enable machines to pair with skilled, cross-disciplinary thinkers to innovate, cre- ate, and deliver services.2
Many of today’s fastest-growing jobs are in fields such as health care, sales, and professional ser- vices that are essentially human, but can be aided and augmented by machines. Indeed, the most in-
In the 21st century, careers are no longer narrowly defined by jobs and skills but through experiences and learning agility. The ongoing transformation of work, the need for people and organizations to constantly upgrade capabilities, and shifts in employee preferences demand new approaches to learning, job design, performance management, and career development.
2018 Deloitte Global Human Capital Trends
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demand technical roles have shifted from STEM to STEAM, where the “A” stands for arts.3 A re- cent Burning Glass study found that even data and analytics jobs now require skills such as writing, research, problem-solving, and teamwork.4 Scott Hartley writes in his book, The Fuzzy and the Te- chie, that the best technology and products come from innovations that blend the arts and sciences together: “We need both context and code, data lit- eracy and data science.”5
Organizations are beginning to understand this new skills landscape. In this year’s survey, compa- nies list complex problem-solving, cognitive abili- ties, and social skills as the most needed capabili- ties for the future. Businesses are clamoring for workers with this blend of skills, not pure technical competency.
Shaping new career models
This demand means that companies should not just reform their L&D programs, but may also need to fundamentally reshape their career models. That starts with scrapping the traditional “up or out” career ladder in favor of careers where people can continuously reskill, gain new experiences, and re- invent themselves at work. Careers today can last as long as 70 years,6 so individuals must be able to pivot throughout this journey to align with evolving jobs, professions, and industries.
Although organizations are recognizing this shift and responding, many challenges remain. Nearly three-quarters of our survey respondents (72 percent) indicate that career paths at their com- pany are not based on the organizational hierarchy, simple moves up the organization chart. Still, only
A DISCONNECT BETWEEN DEVELOPMENT PROGRAMS AND TODAY’S CAREER PATHS Though nearly three-quarters of respondents indicate that career paths in their organization are not based on a traditional organizational hierarchy, almost half still base their development program on the skills needed for these defined paths.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights
n = 11,069 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Traditional skill development vs. nontraditional career paths
Develop through experiences or collaborative learning
Develop for skills needed to advance in defined career paths
Nontraditional—do not follow organizational hierarchy
Traditional—progress through organizational hierarchy
Development aligns to defined career paths. . .
. . . but career paths are
nontraditional. 53%47%
72%
28%
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20 percent said that their organizations develop people through experiential learning, and just 18 percent feel they give employees the ability to ac- tively develop themselves and chart new pathways for their careers. More than half of the respondents (54 percent) said that they had no programs in place to build the skills of the future, and internal mobility is still often driven by tenure, title, and in- ternal politics.
This fundamental mismatch between career pathways and the development employees need to be successful leaves people feeling frustrated and powerless. Not surprisingly, nearly 60 percent of re- spondents this year rated their organizations as only somewhat effective or not effective in empowering people to manage their own careers.
Solutions will not come from the education in- dustry, leaving the responsibility squarely with or- ganizations. While educational institutions are de- veloping more multidisciplinary degrees, research shows that degrees are not all that matters. High- performing organizations evaluate and hire candi- dates for attributes such as work ethic, values, and potential as well as for their experience and skills.7
Learning reinvented
One significant enabler of a 21st-century ca- reer is an organizational focus on building a cul- ture of learning. According to research, companies that practice a growth mind-set, create “designed growth” and stretch assignments, and openly dis- cuss mistakes to promote learning are three times more profitable and have up to four times better re- tention than those that do not.8
The corporate learning market is shifting to help companies find and deliver these solutions. A vast ar- ray of new self-directed learning tools have entered the market,9 enabling employees to find content, take courses, and share information like never before.
Building on these tools, companies such as Visa, Ingersoll Rand, IBM, Walmart, and others are cre- ating learning networks and knowledge-sharing systems, using new platforms to curate content sourced both internally and from massive open on- line courses (MOOCs).10 Salesforce, SAP, and other large vendors are now opening up their content to workers for free, helping people find the training they need with the click of a mouse.11
Careers in this century may follow an upward arc, with
progression and promotion at various times—but they will look nothing like the
simple stair-step path of generations ago.
2018 Deloitte Global Human Capital Trends
43
THE BOTTOM LINE For organizations and business leaders, there is a new imperative: Examine, understand, develop, and implement a variety of solutions to support 21st-century careers. Only a focus on experiences, new career models, data-driven tools, and L&D offerings will enable companies to develop, retain, and reinvent the right talent at the right time.
Others are pushing further, applying advanced technologies such as augmented reality (AR) and virtual reality (VR). For example, BMO uses an AR application that allows employees to interact with a digital layer over their physical workplace, provid- ing on-demand access to learning materials and us- ing gamification to encourage exploration.12
Companies like Shell are transforming their ca- reers and learning capabilities into interactive digi- tal experiences that use both AR and VR to accel- erate knowledge and augment the job experience. Shell is also responding to the increased pace of change by emphasizing experiences early in em- ployees’ careers. “We cannot foresee what campus hires will be doing five years from now but we do know we will always need the best talent for our business, so we are focused on accelerating develop- ment to innovate, collaborate, and make a business impact” says Jorrit van der Togt, Shell Executive Vice President, HR Strategy and Learning.13
The new imperative: Reinvention within organizations
Successful organizations are providing tailored solutions that empower individuals to reinvent themselves within the company. This is key both to enabling workers to navigate 21st-century careers and to allowing employers to access the skills of the future.
Some employers are targeting both goals at once through means such as using data-driven career development tools to identify the best “next move” for employees.14 For instance, IBM has created AI- based self-assessment tools to help employees find training, job openings, and career paths most rel- evant to their personal needs.15
When effective, programs like these will allow employees to find, pursue, and excel in the kinds of experiences they need to grow. This helps organiza- tions to retain employees and equip them to meet current and future work demands, powering a new career pathway that benefits both the individual and the organization.
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Table 1. What role does the C-suite play in enabling today’s careers? How can individuals adjust?
CHRO
Work with the business to understand what new skills will be required to work differently in the future. Identifying these skills can help you plan ways to transform your organization’s offerings and programs—from its learning infrastructure to its career architecture—to create a better, more attractive experience for today’s top talent.
CIO
Work with HR to embed digital technologies into the learning process in ways that allow learning experiences to extend beyond the classroom and align with workforce expectations around accessibility and availability. Learning can also be a great opportunity to experiment with new advancements in AI and cognitive technologies.
Chief risk officer
While considering criteria such as passion, cultural fit, and learning agility when evaluating job candidates can result in better long-term hiring decisions, it can also open up the organization to significant risk. Review hiring policies and practices to manage potential downstream risk.
Chief marketing officer
Offering new career models and experiences can help bolster an organization’s employment brand, especially considering that many millennials say they place a high value on continuous learning and career development. Think beyond marketing’s typical role to leverage your skill set toward promoting your employment brand and increasing your competitiveness in the talent market.
Individuals
Drive your own career advancement by broadening your focus beyond traditional career paths to also consider alternative career experiences that may increase your overall value to employers. Seek opportunities to build “essentially human” skills such as creativity and problem-solving even if you hold a more technical role.
Source: Deloitte analysis.
2018 Deloitte Global Human Capital Trends
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1. Dani Johnson, High-impact learning organizations: Maturity model and top findings, Bersin, Deloitte Consulting LLP, 2017.
2. Josh Bersin, “Catch the wave: The 21st-century career,” Deloitte Review 21, July 31, 2017.
3. Matt Sigelman, “By the numbers: The job market for data science and analytics,” Burning Glass Technologies, February 10, 2017.
4. Ibid.
5. Scott Hartley, The Fuzzy and the Techie: Why the Liberal Arts Will Rule the Digital World (Boston: Houghton Mifflin Harcourt, 2017).
6. Bersin, “Catch the wave.”
7. Robin Erickson and Denise Moulton, “Six key insights to put talent acquisition at the center of business strategy and execution,” in Robin Erickson and Denise Moulton, High-impact talent acquisition, Bersin, Deloitte Consulting LLP, 2018.
8. Johnson, High-impact learning organizations.
9. Josh Bersin, HR technology disruptions for 2018: Productivity, design, and intelligence reign, Bersin, Deloitte Consulting LLP, 2017.
10. Research currently underway at Bersin on Visa and Ingersoll Rand, 2017–2018, publication forthcoming; Josh Bersin, conversations with IBM and Walmart executives.
11. Salesforce, “Welcome to Trailhead,” accessed March 2, 2018; conversations with SAP CHRO.
12. Based on client work performed by Deloitte.
13. Jorrit van der Togt, executive vice president, HR strategy and learning, Shell, interview with the authors, February 16, 2018.
14. Stacey Harris and Erin Spencer, Sierra-Cedar 2016–2017 HR systems survey, Sierra-Cedar.
15. IBM, “IBM Watson Career Coach for career management,” accessed March 2, 2018.
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The rise of the social enterprise
The longevity dividend Work in an era of 100-year lives
ONE of modern science’s greatest achieve-ments is longevity: the unprecedented length of human lives today. Average global life expectancy has rocketed from 53 years in 1960 to 72 years in 2015—and it is still climbing,1 with life expectancy projected to grow by 1.5 years per de- cade.2 Longevity, combined with falling birth rates, is dramatically increasing the share of older people in populations worldwide.3 Looking ahead, the number of retirees per worker globally is expected to decline from 8:1 today to 4:1 in 2050.4
These demographic facts have profound impli- cations for individuals, organizations, and society. In this era of longevity, an individual’s career can last far longer, spanning generations of technolo- gies and businesses. Companies can employ people into their 60s, 70s, and beyond as the pool of tra- ditional “working-age” (20- to 54-year-old) adults shrinks. For their part, many individuals find the need—financially and/or emotionally—to stay in the workforce past “traditional” retirement age.
In our 2018 Global Human Capital Trends sur- vey, 29 percent of the respondents rated longevity as a very important issue, and another 40 percent rated it as important. Respondents in Japan in par- ticular, whose population is rapidly aging, were es- pecially concerned about the issue, with 41 percent saying that it is very important.
The looming impacts of global aging
Population aging poses a workforce dilemma for both economies and organizations. Thirteen countries are expected to have “super-aged” popu- lations—where more than one in five people is 65 or older—by 2020, up from just three in 2014.5 These include major economies such as the Unit- ed States, the United Kingdom, Japan, Germany, France, and South Korea. China’s 65-and-older population is projected to more than triple from
Rising life expectancies and an aging global workforce present organizations with unprecedented challenges and untapped opportunities. Companies that plan, design, and experiment with workforce strategies, workplace policies, and management ap- proaches for longer working lives can reap a longevity dividend. Those that lag behind face potential liability concerns and skill gaps. Creating ways for people to have mean- ingful, productive multi-stage and multidimensional careers is a major opportunity to engage workers across generations.
2018 Deloitte Global Human Capital Trends
49
approximately 100 million in 2005 to over 329 million in 2050.6 In fact, analysts have estimated that 60 percent of the world’s population over 65 will live in Asia by 2030.7
Compounding the challenge, almost all devel- oped economies now have birth rates below the re- placement rate of 2.1.8 This means that companies in these countries must either attract workers from abroad or tap into the maturing workforce. For a view of the challenges ahead, one needs to look no further than Japan—the world’s oldest coun- try—where a shortage of roughly 1 million em- ployees in 2015 and 2016 is estimated to cost nearly $90 billion.9
New research is being conducted to help organizations shape their talent and business strategies for an era of longevity. The MIT AgeLab, for example, works with businesses, government, and other stakeholders to de- velop solutions and policies aimed at engag- ing the elderly population. The AgeLab uses consumer-centered thinking to understand the challenges and opportunities of longevity in order to catalyze innovation across busi- ness markets.10
Older talent as a competitive advantage
As talent markets grow more competitive, organizations often find it valuable to keep older workers on the job rather than replace them with younger ones. Our research shows that older workers represent a largely un- tapped opportunity: Only 18 percent of this year’s respondents said that age is viewed as an advan- tage in their organization. But leading companies are beginning to focus on this talent pool as a com- petitive advantage.
The older labor pool represents a proven, com- mitted, and diverse set of workers. More than 80 percent of US employers believe that workers aged 50 and more are “a valuable resource for training and mentoring,” “an important source of institu- tional knowledge,” and offer “more knowledge, wis- dom, and life experience.”11 The UK government in- centivizes employers to retain, retrain, and recruit
older workers, and it is committed to policies that support lifetime learning and training and decrease loneliness and social isolation.12
Proactive organizations are tapping into the older talent pool by extending their career models, creating new development paths, and inventing roles to accommodate workers in their 50s, 60s,
and 70s. This year, 16 percent of the respondents we surveyed for this re-
port say their companies are creating special roles for older workers, and
20 percent are partnering with older workers to develop new career models. Organizations could find great value in older workers’ ability to serve as mentors, coaches, or experts. Taking on these kinds of roles allows older workers to “pass the baton” to younger generations, while making room for ambitious younger workers.
Many companies are also experimenting with workplace changes to help older employees remain in the workforce. For instance, BMW increased productivity on an assembly line staffed with older workers by 7 percent in just three months through simple changes such as providing cushioned floors
Proactive organizations are tapping into the older talent pool
by extending their career models,
creating new development paths,
and inventing roles to accommodate workers in their 50s, 60s, and 70s.
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and adjustable work benches.13 Home Depot and other organizations are engaging older workers with flexible scheduling options and part-time posi- tions.14 Further, as many as one-third of retirees are willing to work part-time, offering opportunities to leverage this group on a contingent or gig basis.15
Reskilling also plays a role in successful strate- gies to utilize older talent. One global telecommu- nications provider encourages senior workers to re- invent themselves and invests in programs to help them acquire new technical skills.16 Software engi- neers who have built careers on older technologies such as COBOL or C++ can use this experience to learn mobile computing, AI, and other technologies at a very rapid rate.
An interesting and little-known fact, moreover, is that older people are among the most entrepre- neurial of workers across age groups. Between 1996 and 2014, the percentage of older workers (aged
55–64) starting new ventures increased—ex- ceeding (by 68 percent) the rate of entrepreneurship among millennial entrepre- neurs (aged 20–34), which actu- ally decreased during the same period.17
The new challenges of an aging workforce
The transition toward older talent can present challenges. Older workers may have specialized workplace needs and can attract resentment from younger workers, and they often enjoy higher sala- ries because of their tenure. Organizations looking to assimilate an older worker population may face
ARE OLDER WORKERS AN ADVANTAGE OR A DISADVANTAGE? Perceptions of workers over 55 years old spanned both extremes, though these perceptions varied significantly by country.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights
Note: Chart shows the six countries with more than 100 responsesshowing the greatest deviation from global "disadvantage" percentage. Number of responses: Italy = 106, China = 817, Netherlands = 136, global = 11,070, South Africa = 354, United Arab Emirates = 108, Ecuador = 139. Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Organizational perception of workers over 55
Disadvantage No impact Stay the same
Italy
China
Netherlands
Global
South Africa
United Arab Emirates
Ecuador
32% 53% 15%
31% 53% 16%
30% 57% 13%
16% 62% 22%
17% 54% 29%
13% 62% 26%
20% 61% 18%
2018 Deloitte Global Human Capital Trends
51
the need to design new wage policies, create more flexible rewards programs, and train young lead- ers to manage people across generations (including team members who may be their parents’ age).
Pensions are another area where longevity im- pacts organizations. The World Economic Forum es- timates that a $70 trillion global retirement savings gap exists today, highlighting the sharp difference between retirement needs and actual retirement income. Moreover, this gap is projected to grow to $400 trillion by 2050.18 Helping older adults to work longer and manage their retirement savings will be a vital need for companies in order to avoid the negative productivity effects of financial stress.
Our Global Human Capital Trends research shows that many organizations are unprepared to deal with the aging of global workforces. Nearly half of the respondents we surveyed (49 percent) report- ed that their organizations have done nothing to help older workers find new careers as they age. Rather than seeing opportunity, 20 percent of respondents view older workers as a competitive disadvantage, and in countries such as Singapore, the Netherlands, and Russia, this percentage is far higher. In fact, 15 percent of respondents believed that older employ-
ees are “an impediment to rising talent” by getting in the way of up-and-coming younger workers.
Based on these findings and our anecdotal ob- servations, we believe there may be a significant hidden problem of age bias in the workforce today. Left unaddressed, perceptions that a company’s culture and employment practices suffer from age bias could damage its brand and social capital.
Age discrimination is already becoming a main- stream diversity issue and liability concern. More than 21,000 age discrimination complaints were filed with the US Equal Employment Opportunity Com- mission in 2016.19 The problem is particularly acute in Silicon Valley’s technology industry, where older software engineers are often pushed to take lower- paying jobs or look for work outside Silicon Valley because of the emphasis on the “youth culture.”20
The demographic math is undeniable: As na- tional populations age, challenges related to en- gaging and managing the older workforce will in- tensify. Companies that ignore or resist them may not only incur reputational damage and possible liabilities, but also risk falling behind those orga- nizations that succeed in turning longevity into a competitive advantage.
THE BOTTOM LINE Staying competitive in a world of unprecedented longevity demands that organizations adopt new strategies to engage with older talent. Traditional assumptions—that learning ends in one’s 20s, career progression ends in the 40s, and work ends in the 60s—are no longer accurate or sustainable. Rethinking workforce strategies across multiple generations to account for longer lives will require open minds and fresh approaches.
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Table 1. What role does the C-suite play in capitalizing on longevity? How can individuals adjust?
CHRO Create a comprehensive engagement plan designed to appeal to the older worker’s specific needs to foster an environment where they can maximize their productivity.
CIO
Chief operations officer
Develop approaches for IT and the broader workplace environment to enable older workers to be productive. Determine what accommodations can or should be made.
CFO Identify ways to manage defined benefit and other retirement programs in the context of longevity to help circumvent longer-term financial issues.
Chief risk officer Review relevant policies related to age discrimination. Consider proactively implementing bias training to help ensure that the workforce understands how to create a fair work environment for older workers.
Individuals
The key to career longevity is constant reinvention of skills and competencies. Take advantage of training opportunities to learn new skills beyond your current job’s day-to-day activities to make yourself as attractive as possible in the job market. Also consider looking beyond traditional, full-time jobs: Older workers may find substantial opportunities as part of the gig economy.
Source: Deloitte analysis.
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1. World Bank, “Life expectancy at birth, total (years),” accessed January 18, 2018.
2. Caryl Rivers and Rosalind Barnett, The Age of Longevity: Re-Imagining Tomorrow for Our New Long Lives (New York: Rowman & Littlefield, 2016).
3. World Bank, “Fertility rate, total (births per woman),” accessed January 18, 2018.
4. World Economic Forum, We’ll live to 100—how can we afford it?, May 2017, p. 4.
5. Sarah O’Connor, “World will have 13 ‘super-aged’ nations by 2020,” Financial Times, August 6, 2014.
6. Howard French, “China’s twilight years,” Atlantic, June 2016.
7. Tomomi Kikuchi, “Asia will be home to 60% of world’s elderly by 2030s: Deloitte,” Nikkei Asian Review, September 21, 2017.
8. Wikipedia, “Sub-replacement fertility,” accessed February 28, 2018.
9. Alexander Martin, “Lack of workers hobbles Japan’s growth,” Wall Street Journal, November 15, 2015.
10. Massachusetts Institute of Technology, “About AgeLab,” accessed March 7, 2018.
11. Transamerica Center for Retirement Studies, Baby boomer workers are revolutionizing retirement: Are they and their employers ready?, December 2014, p. 21.
12. Department for Work & Pensions, Fuller working lives: A partnership approach, February 2017; UK Department of Business, Energy and Industrial Strategy, Industrial strategy: Building a Britain fit for the future, November 2017; Lee Mannion, “Britain has appointed a minister to help combat loneliness,” World Economic Forum, January 17, 2018.
13. David Champion, “How BMW Is planning for an aging workforce,” Harvard Business Review, March 11, 2009.
14. Steven Greenhouse, “The age premium: Retaining older workers,” New York Times, May 14, 2014.
15. Elaine Pofeldt, “Why older workers are embracing the gig economy,” Forbes, August 30, 2017.
16. Josh Bersin, conversations with company executives.
17. Derek Ozkal, “Millennials can’t keep up with boomer entrepreneurs,” Ewing Marion Kaufmann Foundation, July 19, 2016.
18. World Economic Forum, We’ll live to 100—how can we afford it?, p. 7.
19. Elizabeth Olson, “Shown the door, older workers find bias hard to prove,” New York Times, August 7, 2017.
20. Jon Swartz, “Ageism is forcing many to look outside Silicon Valley, but tech hubs offer little respite,” USA Today, August 4, 2017.
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2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterprise
Citizenship and social impact Society holds the mirror
CORPORATE citizenship is no longer simply a corporate social responsibility (CSR) pro-gram, a marketing initiative, or a program led by the CHRO. It is now a CEO-level business strategy—defining the organization’s very identity. Issues such as diversity and inclusion, gender pay equity, income inequality, immigration, and global warming are being openly discussed by individu- als, families, and political leaders around the world. And our research shows that many stakeholders are frustrated with political solutions to these problems and now expect businesses to help address these critical problems.
In a letter to investors in early 2018, BlackRock CEO Laurence Fink indicated that people are “turn- ing to the private sector and asking that companies respond to broader societal challenges.”1 This senti- ment, confirmed by this year’s Global Human Capi- tal Trends research, prompts CEOs and the entire C-suite to hold their companies to higher standards. In this year’s Global Human Capital Trends survey,
77 percent of our respondents cited citizenship as important and 36 percent rated it as very important.
The term “citizenship” can refer to everything an organization does that impacts society. We define it as a company’s ability to do social good and account for its actions—both externally, among customers, communities, and society, and internally, among employees and corporate stakeholders.
Why is citizenship critical now?
What is driving the intense focus on citizenship for organizations and society?
First, organizations now operate in a highly transparent world. Internal and external behavior is almost impossible to hide.2 In 2017, dozens of stories about gender bias, unequal pay, and poor executive behavior made the headlines. Any mistreatment of customers can be instantly filmed and shared with a global audience. And in 2018, for the first time,
The social enterprise must evaluate its actions based on its impact on society, not just the bottom line. As stakeholder expectations rise, an inauthentic or uneven commitment to citizenship can quickly damage a company’s reputation, undermine its sales, and limit its ability to attract talent. For organizations, a new question is becoming vital: When we look in the mirror held up by society, do we like what we see?
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most US public companies will be required to disclose their “CEO pay ratio,” which com- pares the CEO’s compensation to employees’ median pay.3
Second, it is now clear that mil- lennials, who make up over half the work- force in many countries,4 tend to have sky-high expectations for corporate responsibility. A 2017 study by Deloitte found that millennials are becom- ing increasingly sensitive to how their organizations address issues such as income inequality, hunger, and the environment. Eighty-eight percent of mil- lennials believe that employers should play a vital role in alleviating these concerns, and 86 percent say the business success should be measured by more than profitability.5
Third, corporate citizenship now directly im- pacts customer and employee brand. A recent Nielsen study found that 67 percent of employees prefer to work for socially responsible companies, and 55 percent of consumers will pay extra for prod- ucts sold by companies committed to positive social impact.6 The Deloitte millennial study mentioned earlier found that millennial employees who believe that their employer supports the local community are 38 percent more likely to stay at that employer for five years.7
Finally, more and more businesses are becoming embroiled in issues of political, social, and economic controversy. These debates are challenging CEOs to take political positions on behalf of their employees
and customers. Kenneth Frazier, the CEO of Merck, believes that “business exists to deliver value to society.” He has taken vocal political positions and redefined how the pharmaceutical industry contrib-
utes to society.8 High-profile global commentators such as Nicholas
Kristof and Yale professor Jef- frey Sonnenfeld have called
on businesses to seize their potential to help ad- dress social problems and improve lives.9
Good corporate citizens outperform others financially
An organization’s financial performance ap- pears to be linked to its citizenship record. Watch- dog groups have created hundreds of CSR and “best places to work” indexes, including Fortune’s Most Admired Company list,10 the Dow Jones Social Re- sponsibility Index,11 and many others. A new meta- study found a direct correlation between CSR index ranking and profitability,12 and a longitudinal study of purpose-focused companies found that they out- performed their S&P 500 peers by a factor of eight.13
The investment community is paying attention. A study of 22,000 investment professionals found that 78 percent have increased their investments in CSR-focused firms.14 Some investors also evalu- ate organizations through online rating platforms such as Glassdoor, understanding that employment
The term “citizenship” can refer to everything an organization does that impacts society. We define it as a company’s ability to do social good and account for its actions—both externally, among customers, communities, and society, and internally, among
employees and corporate stakeholders.
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brand correlates directly with the quality of hiring and retention.
Many organizations are responding to the de- mand for good citizenship and the growing link between social impact and financial performance. Target recently announced that it would increase pay for all 320,000 of its retail employees to $15 per hour by 2020—twice the US federal minimum wage. The company also offers employees shop- ping discounts, tuition reimbursement, and flexible schedules in its efforts to “do well by being good.”15 Salesforce donates 1 percent of its profits to chari- ties and gives employees a full week of “volunteer time off” each year.16 Unilever directs employees to
ARE ORGANIZATIONS WALKING THE TALK? While 77 percent of global respondents cited citizenship as important, only 18 percent said that it was a top priority reflected in organizational strategy.
Explore the data further in the Global Human Capital Trends app.
avoid a singular focus on ROI and instead imple- ment “USLP”: Unilever’s Sustainable Living Plan.17
Organizations across many industries are put- ting citizenship at the core of their mission. Tesla defines its business as “accelerating the advent of sustainable transport.”18 This has helped the com- pany broaden its value statement to give investors a sense of societal impact. CEO Elon Musk regularly speaks about the importance of electric vehicles in preventing “environmental catastrophe.”19 And Bank of America focuses on responsible growth, “guided by a common purpose to help make finan- cial lives better through environmental, social, and governance leadership.”20
Deloitte Insights | deloitte.com/insights
n = 11,069 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Description of organization’s social responsibility programs
Not a focus/not well-developed or invested inHigh on our list
of priorities
A top priority and reflected in strategy
SOCIAL RESPONSIBILITY IS . . .
56%
26%
18%
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THE BOTTOM LINE In the era of the social enterprise, stakeholders are taking an intense look at organizations’ impact on society, whether it is how well a product meets people’s needs, how a manufacturing plant affects the community, or how employees feel about their jobs. This mirror—held up to businesses by society—reflects an organization’s identity for all to see, and burnishing that reflection is now vital for success.
Needed: An integrated, authentic citizenship strategy
Despite these high-profile examples, many other organizations appear to be failing to effectively inte- grate citizenship into their overall strategy. In this year’s Global Human Capital Trends survey, while 77 percent of our respondents cited the issue as im- portant, only 18 percent said that citizenship was a top priority reflected in corporate strategy. Another 34 percent had few or poorly funded citizenship pro- grams, and 22 percent admitted to having none at all.
In 2018, we believe that companies have a unique opportunity to make citizenship a core part of their strategy and identity. Moving beyond frag- mented programs, CEOs and executive committees should communicate a single, comprehensive, and authentic strategy that defines who the company is, what it says, and what it does. Then, they should hold organizational leaders accountable for results.
Some of the most successful corporate citizens are already moving in this direction. Such an effort is necessary to measure, understand, and improve the many impacts that make up corporate citizenship.
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Table 1. What role does the C-suite play in pursuing citizenship? How can individuals adjust?
CHRO Focus on embedding the organization’s citizenship strategy into its overall talent strategy so that citizenship becomes more than a series of one-off programs. Make citizenship integral to creating an engaging experience for the workforce.
CIO Promote corporate citizenship efforts through the use of technology- based channels, such as social media. Use technology in a way that creates positive perceptions of your organization’s culture, identity, and treatment of customers and employees.
CFO Work with HR and marketing to promote citizenship-based programs to help increase overall shareholder value.
Chief risk officer
Proactively manage risks associated with citizenship activities to guard against damage to the corporate brand even when the intention is positive. As much as good corporate citizenship can benefit an organization, leaders also should be mindful of unintended consequences, especially in today’s sensitive political environment.
Chief marketing officer
Collaborate with IT and HR to position the corporate citizenship strategy in ways that strengthen the organization’s overall brand, leveraging data and insights from social media.
Individuals Speak up and take action. Tell your employer what you expect from your organization’s internal and external behavior, and volunteer to help make life better for your community, colleagues, and customers.
Source: Deloitte analysis.
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1. Larry Fink, “Larry Fink’s annual letter to CEOs: A sense of purpose,” January 2018.
2. David Brown, Veronica Melian, Marc Solow, Sonny Chheng, and Kathy Parker, “Culture and engagement: The naked organization,” Global Human Capital Trends 2015: Leading in the new world of work, Deloitte, February 27, 2015.
3. Peter Eavis, “S.E.C. approves rule on C.E.O. pay ratio,” New York Times, August 5, 2015.
4. Deloitte, The 2017 Deloitte millennial survey: Apprehensive millennials: Seeking stability and opportunities in an uncertain world, 2017.
5. Ibid., pp. 6–11.
6. Nielsen, Doing well by doing good: Increasingly, consumers care about corporate social responsibility, but does concern convert to consumption?, June 2014, p. 2.
7. Deloitte, The 2017 Deloitte millennial survey.
8. Adi Ignatius, “’Businesses exist to deliver value to society,’” Harvard Business Review, March–April 2018.
9. Nicholas Kristof, “Is the business world all about greed?,” New York Times, January 24, 2018.
10. Fortune, “The world’s most admired companies,” accessed February 16, 2018.
11. RobecoSAM, DJSI 2017 Review Results, September 2017.
12. Harmony J. Palmer, “Corporate social responsibility and financial performance: Does it pay to be good?,” Scholarship@Claremont, December 3, 2012.
13. Rajendra Sisodia, David Wolfe, and Jagdish Sheth, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Upper Saddle River, NJ: FT Press, 2007).
14. Schroders, Global investor study: Global perspectives on sustainable investing, 2017, pp. 3–7.
15. Target Brands, “Target’s raising its minimum hourly wage this fall, and that’s just the beginning . . . ,” September 25, 2017.
16. Salesforce, “Take the pledge” and “Employee volunteering & giving,” accessed February 28, 2018.
17. Leena Nair (CHRO, Unilever), interview with the authors, February 2, 2018.
18. Tesla, “The mission of Tesla,” November 18, 2013.
19. Chris Woodyard, “Icons: Elon Musk doesn’t let up at Tesla, SpaceX,” USA Today, April 17, 2013.
20. Bank of America, “Responsible growth,” accessed January 24, 2018.
ENDNOTES
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2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterprise
Well-being A strategy and a responsibility
MANY major organizations are rethinking their reward and development programs to include some version of holistic, end-to- end well-being programs, which are now both a re- sponsibility of good corporate citizenship and a key element of an enterprise talent strategy. This invest- ment responds to the needs of workers, companies, and corporate leaders, and is being addressed by a growing number of well-being resources and tools.
We first wrote about the “overwhelmed em- ployee” in 2014. While the issue of highly stressed workers is not new, the relentless pace of business today has made the problem worse.1 Driven by the always-on nature of digital business and 24/7 work- ing styles, studies now show that more than 40 percent of all workers face high stress in their jobs, negatively affecting their productivity, health, and family stability.2 Hourly workers might complain of inflexible schedules, while white-collar work- ers often complain of an endless stream of emails and messages that make it impossible to disconnect
from their jobs. In some countries, individuals are working more hours and taking fewer vacations than ever.3 And, according to Deloitte’s millennial survey, a majority of surveyed millennials in 19 out of 30 countries report that they do not expect to be “happier” than their parents.4
In response, the digital well-being market is ex- ploding. More than $2 billion in venture capital has been invested in this area over the last two years, creating a flood of online videos, apps, and tools to help assess, monitor, and improve all aspects of health.5
Well-being emerges as a strategic priority
The corporate wellness marketplace began de- cades ago with a highly specific focus on employee physical health and safety. Today, however, the definition of wellness has expanded dramatically to
As the line between work and life blurs, providing a robust suite of well-being programs focused on physical, mental, financial, and spiritual health is becoming a corporate responsibility and a strategy to drive employee productivity, engagement, and retention. While organizations are investing heavily in this area, our research reveals there is often a significant gap between what companies are offering and what employees value and expect.
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include a range of programs aimed at not only pro- tecting employee health, but actively boosting per- formance as well as social and emotional well-being. These now include innovative programs and tools for financial wellness, mental health, healthy diet and exercise, mindfulness, sleep, and stress man- agement, as well as changes to culture and leader- ship behaviors to support these efforts.
Propelled by these innovations, the corporate wellness market—including health care programs, screening, assessment, education, and apps—has reached nearly $8 billion in the United States alone, where it is expected to hit $11.3 billion by 2021.6
And as the market has grown, so has leadership’s understanding of the critical role these programs
Explore the data further in the Global Human Capital Trends app.
play in defining an organization. For example, two- thirds of organizations now state that well-being programs are a critical part of their employment brand and culture.7
Yet despite increased corporate attention and in- vestment in well-being, our research indicates that companies must do a better job connecting well- being programs with employee expectations. As the chart below illustrates, substantial gaps remain in many areas between what employees value and what companies offer to their employees.
It is our view that expanding well-being pro- grams to encompass what employees want and value is now essential for organizations to treat their people responsibly—as well as to boost their
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Well-being: What employees value vs. what employers offer
Highly valuable or valuable Offering program
59%
Flexible schedule
Telecommuting
Designated office space for wellness
Reimbursement for well-being expenses
Healthy snacks
Employee assistance program
Mental health counseling
Wellness counseling
Health monitoring or cessation programs
Back-up daycare
86%
60%
21%
24%
50%
35%
70%
26%
63%
67%
60%
27%
30% 63%
67%
27%
53% 8%
32%
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social capital and project an attractive employment brand.
Research has found that student loan support is one of the most highly regarded well-being ben- efits, as are volunteerism and opportunities for local citizenship.8 Salesforce, for example, prides itself on giving employees seven days of “volunteer time off” each year to help them feel purpose at work.9
Well-being plays a crucial role in multinational food company Danone’s overall business strategy, which is based on the two pillars of economic and social growth. The company’s Dan’Cares program provides medical coverage for most significant health-related risks, and the company has imple- mented a global parental leave policy. The aim is not only to support worker well-being, but to posi- tion Danone employees as health ambassadors.10
Lendlease, a multinational construction, prop- erty, and infrastructure company, focuses not only on using the physical workplace to support well-be- ing, but also on developing policies and leadership approaches that embed well-being into its culture. The company’s work environment features “neigh- borhood” tables, working walls, focus points for activities that require concentration, and enclosed
pods and breakaway areas that foster collaboration and social
interaction.11 Lendlease’s Well- ness Hub, a preventative care facility
that occupies two floors of its corporate headquarters, offers employ-
ees the use of dedicated rooms—the “Consulta- tion Room,” the “Con- templation Room,” the
“Carer’s Room,” and the “First Aid Room”—as well as
adjoining areas for physical activity and training.12 A highlight of the Wellness Hub is a six-meter-high breathing wall, which contains about 5,000 plants that accelerate the removal of air pollutants and cools the surrounding space—while also improv- ing energy efficiency and reducing air conditioning costs. The company’s leave policy includes two days during which employees can volunteer their time to a charity of personal interest. Across its inter- national regions, Lendlease continuously rolls out well-being initiatives, including three annual well- being days and extensive health initiatives around diet and exercise that incorporate inclusive and supportive health assessment approaches.13
Well-being benefits are particularly important to younger employees. Millennials, who now make up more than half of the workforce in many countries, spend almost twice as much on “self-care” as baby boomers do.14 This has fed the growth of consumer apps for mindfulness, cognitive-behavioral therapy, and online personal and professional coaching,15 all of which are also available as employer programs.
Advancing from health to well-being to performance
As the definition of well-being expands, organi- zations now see well-being not just as an employee benefit or responsibility, but as a business perfor- mance strategy. In this year’s Global Human Capi- tal Trends survey, only 23 percent of respondents told us that their well-being program was designed to reduce insurance costs. In contrast, 43 percent believed that well-being reinforces their organiza- tion’s mission and vision, 60 percent reported that
Today, the definition of wellness has expanded
dramatically to include a range of
programs aimed at not only protecting
employee health, but actively boosting
performance as well as social and
emotional well-being.
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it improves employee retention, and 61 percent said that it improves employee productivity and bottom- line business results.
There is growing evidence to support the idea that well-being drives performance. Research shows that the costs of lost productivity are 2.3 times high- er than medical and pharmacy costs.16 Complicating the range of potential employer responses, these costs often occur when an employee is actually at work. A study at Dow Chemical Company found that “presenteeism” costs reached an average of $6,721 per employee per year.17 No wonder, then, that the focus on well-being now extends to helping employ- ees perform well at work, not just avoid absences.
New solutions, indexes, and tools
Driven by intense demand and an influx of ven- ture capital, many new well-being solutions have entered the market. Vendors such as Castlight Health, Limeade, VirginPulse, and others now of-
THE BOTTOM LINE Well-being is becoming a core responsibility of good corporate citizenship and a critical performance strategy to drive employee engagement, organizational energy, and productivity. It is also a growing expectation among the talent companies most want to recruit, access, and retain. No longer an optional or narrowly focused element of the rewards menu, well-being is now front and center as a business imperative for leading, high-performance companies.
fer corporate platforms that allow employers to de- liver a wide range of employee well-being solutions through an integrated app.18
VirginPulse, for example, offers an employee app that is used as frequently as Facebook and whose active users are 65 percent more engaged, have 32 percent lower turnover rates, and deliver 9 percent higher productivity than their peers.19 De- loitte has developed its own “Vitality” app to help their professionals better manage their energy, and now offers a “Well-being Index.” Other vendors are developing similar indexes to help organizations benchmark their well-being programs.
CEOs and CHROs are getting the message. Just as productivity, citizenship, and inclusion have risen in importance, so has the importance of well- being moved up on the agenda. Aetna CEO Mark Bertolini summarizes the importance and impact of well-being programs: “If people can’t make ends meet at home with food, benefits, health, and health care in particular, how can they be present, engaged knowledge workers when they come to work?”20
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Table 1. What role does the C-suite play in promoting well-being? How can individuals adjust?
CHRO Well-being is a personal matter, so it needs to evolve as individuals’ needs evolve. Invest in ways to take a constant pulse of employee’s needs, even looking at ways to leverage predictive analytics to stay ahead of trends in this space.
CIO
The cornerstone of a sustainable well-being strategy is the integration of technology to promote, track, and manage well-being programs. Avoid offering a multitude of disparate apps that may provide bells and whistles, but defeat the purpose of an integrated platform that can increase the value of well-being investments.
CFO The link between well-being and productivity is clear. Work with others on the executive team to quantify the financial costs and benefits of continued investment in well-being programs that can improve the bottom line.
Chief risk officer Consider ways to manage the increased focus on personal data and the associated risks. With more technologies and applications in use around well-being today, getting involved early can help to put the appropriate controls in place to guard against future adverse impacts.
Chief marketing officer
Position well-being programs as critical components of your employer brand and rewards strategy, and as integral to your organization’s performance and productivity strategy.
Individuals Look for and take advantage of well-being programs available through your employer, and consider these programs when making employment decisions—to join, stay, or leave.
Source: Deloitte analysis.
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1. Jeff Schwartz et al., The overwhelmed employee: Simplify the work environment, Deloitte University Press, March 7, 2014.
2. EKU Online, “Work-related stress on employees health,” accessed March 2, 2018.
3. US Travel Association and GfK Public Affairs and Corporate Communications, Overwhelmed America: Why don’t we use our earned leave?, August 2014.
4. Deloitte, The 2017 Deloitte millennial survey: Apprehensive millennials: Seeking stability and opportunities in an uncertain world, 2017.
5. Global Wellness Institute, “Global Wellness Institute releases report and survey on ‘the future of wellness at work,’” press release, February 17, 2016.
6. IBISWorld, Corporate Wellness Services in the US, February 2016, p. 5.
7. Proprietary research by Limeaid.
8. Proprietary research by BugInsights, acquired by Deloitte in January 2018.
9. Salesforce, “Employee volunteering & giving,” accessed February 28, 2018.
10. Danone, “Rewards & recognition,” accessed February 28, 2018.
11. Duncan Young (head of workplace health and wellbeing, Lendlease), interview with the authors, February 28, 2018.
12. Lendlease, “Lendlease taking employee health and well-being to the next level at new global headquarters,” press release, September 26, 2016.
13. Young interview.
14. Christianna Silva, “The millennial obsession with self-care,” NPR, June 4, 2015.
15. Amy Fleming, “Can apps improve your mental well-being?,” Guardian, September 12, 2016.
16. Leonard Berry, Ann Mirabito, and William Baun, “What’s the hard return on employee wellness programs?,” Harvard Business Review, December 2010.
17. Ibid.
18. Josh Bersin, HR technology disruptions for 2018: Productivity, design, and intelligence reign, Bersin, Deloitte Consulting LLP, 2017.
19. Proprietary research by VirginPulse.
20. Making Sen$e editor, “Good pay, good worker, good company? Aetna CEO thinks so,” PBS, May 28, 2015.
ENDNOTES
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2018 Deloitte Global Human Capital Trends2018 Deloitte Global Human Capital Trends
The rise of the social enterprise
AI, robotics, and automation Put humans in the loop
THE adoption of automation, robotics, and arti-ficial intelligence (AI) is accelerating dramati-cally. Forty-one percent of respondents to this year’s survey rate this topic as very important. Almost half (47 percent) of this year’s respondents say that their organizations are deeply involved in automation projects, with 24 percent using AI and robotics to perform routine tasks, 16 percent to aug- ment human skills, and 7 percent to restructure work entirely.
Expectations for AI and robotics have also in- creased significantly. This year, 42 percent of the respondents we surveyed believe that AI will be widely deployed at their organizations within three to five years—up from 38 percent last year. But de- spite these expectations, many organizations may still be coming to grips with AI’s potential uses. In- deed, a 2017 survey of 1,500 senior executives found that only 17 percent of them were familiar with both the concept of AI and its applications at their com- panies.1 This finding is consistent with our own re-
sults: Our analysis of the “readiness gap” for this is- sue shows that, while 72 percent of our respondents see this area as important, only 31 percent feel ready to address it.
Accelerating experimentation, shifting to implementation
As more organizations rush to embrace these technologies, the marketplace for AI tools and ro- botics is booming. Leading companies such as Mi- crosoft, IBM, Facebook, and other technology gi- ants are heavily investing in this area. At the same time, analysts believe that more than $6 billion has been pumped into over 1,000 AI start-ups in the last three years, in industries ranging from transporta- tion to health care, and across a range of special- ties—including HR.2
Organizations outside the tech world are also forging ahead with implementation. Coca-Cola used
AI, robotics, and automation have gained a rapidly expanding foothold in the workplace, faster than many organizations ever expected. While organizations are increasingly using these technologies to automate existing processes, true pioneers are radically rethinking work architecture to maximize the value of both humans and machines— creating new opportunities to organize work more effectively and to redefine the human workforce’s skills and careers.
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AI analysis of data from self-service soda fountains to help make the decision to launch Cherry Sprite.3 Morgan Stanley equipped 16,000 financial advisers with machine learning algorithms that automate rote tasks, freeing up advisers to focus on client ser- vice.4 In health care, AI and robotics are speeding up patient service, improving medical record-keep- ing, and monitoring employee well-being.5 Overall, AI tools are projected to create nearly $3 trillion in business value by 2021.6
AI and robotics open exciting new capabilities for HR. Software can now recognize faces and iden- tify gender,7 listen to voices and identify mood,8
and decode video interviews to identify education level, lying, and cognitive ability.9 Analytics tools are intelligently selecting candidates,10 identifying employees’ career options,11 and coaching manag- ers on improving their leadership skills.12 And the potential doesn’t end there: AI is even being used to create chatbots that can interact with job can- didates, identify and score video interviews, and understand the sentiment of engagement surveys. Every major human capital management cloud provider is now implementing algorithms, mak- ing it important for organizations to maintain accurate data and carefully review these tools for accuracy and potential bias.
AI and people are smarter together
Leading companies increasingly recognize that these technologies are most effective when they complement humans, not replace them. Amazon now has 100,000 robots in operation,13 which has shortened training for holiday workers to less than two days.14 Walmart recently deployed virtual real- ity technology to improve its in-store training and effectively simulate customer environments.15 Man- ufacturers such as Airbus and Nissan are finding ways to use collaborative robots, or “co-bots,” that work side by side with workers in factories.16
There is also growing recognition that AI tools require human oversight. Behind the scenes, major tech firms have tens of thousands of humans con- tinuously watching, training, and improving their
Leading companies increasingly recognize
that these technologies are most effective
when they complement humans, not replace them.
algorithms.17 As the CEO of CrowdFlower—a start- up that provides algorithm trainers—puts it, an algorithm is only as effective as “the quantity and quality of the training data to get [it] going.”18 This realization has given rise to new jobs with titles such as “bot trainer,” “bot farmer,” and “bot curator.”
In the HR technology domain, vendors of re- cruitment chatbots such as Textrecruit’s Ari, Hire- mya.com’s Mya, and Paradox.ai’s Olivia display the growing adoption of natural language processing. The hard part is often not decoding human language but training the software to ask the right questions, provide the right answers, and avoid alienating the job candidate. One vendor says it has taken over a year to train its chatbot to intelligently screen hour- ly job candidates.
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The need for human involvement complicates the widely held view that AI will automate every- thing. If anything, humans and their innate skills seem to be growing more important as the need to devise, implement, and validate AI solutions be- comes widespread. Understanding the unique capa- bilities that machines and humans bring to different types of work and tasks will be critical as the focus moves from automation to the redesign of work.
WHAT HUMAN SKILLS ARE NEEDED TO USE AI EFFECTIVELY? Respondents have a clear understanding of the human skills needed to manage AI, robotics, and automation, such as complex problem-solving, cognitive abilities, and social skills. Yet many also said they do not have a plan to cultivate these skills.
Explore the data further in the Global Human Capital Trends app.
Moving from job redesign to work architecture
Research suggests that while automation can improve scale, speed, and quality, it does not do away with jobs. In fact, it might do just the opposite. As Boston University professor James Bessen has reported in his research, occupations with greater levels of computerization and technology experi- ence higher, not lower, employment growth rates.19
What’s more, in many cases, the newly created jobs are more service-oriented, interpretive, and social,
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Expected emphasis on workforce skills as AI/robotics are integrated in the enterprise
Technical skills
Complex problem solving skills
Cognitive abilities
Process skills
Resource management skills
Social skills
Content skills
Sensory abilities
Psychomotor abilities
Physical abilities
Increase Stay the same Decrease
65% 27% 8%
63% 30% 7%
55% 39% 6%
52% 37% 10%
29% 57% 14%
53% 38% 8%
32% 56% 12%
18% 54% 28%
50% 43% 7%
54% 35% 12%
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playing to the essential human skills of creativity, empathy, communication, and complex problem- solving. Sales professionals, for instance, can lever- age AI tools such as Salesforce, Einstein, and others so they themselves can focus on human interaction, and health care workers can use intelligent ma- chines to free up time to communicate with patients.
Indeed, despite the surge of interest in AI and au- tomation, respondents to this year’s Global Human Capital Trends survey predict tremendous future demand for human skills such as complex problem-solving (63 percent), cognitive abilities (55 percent), social skills (52 per- cent), and process skills (54 percent). While 65 percent also predict strong demand for techni- cal skills, research shows that the tech- nical skills to create, install, and maintain machines account for only a small fraction of the workforce.20 Reinforcing this view, a recent World Eco- nomic Forum study found that the top 10 skills for the next decade in- clude essential human skills such as critical thinking, creativity, and people management.21
The irony here is that most companies are strug- gling to recruit and develop these human skills of the future. Despite having an increasingly clear un- derstanding of the skills needed in a world where humans work side by side with machines, 49 per- cent of our respondents told us they do not have a plan to cultivate them. We see this as an urgent human capital challenge requiring top executive support to transform organizational structures, cultures, career options, and performance manage- ment practices.
Rather than replacing humans outright, the in- troduction of new machines changes the skills and requirements the workforce needs to be able to take advantage of the new technologies. The greatest op- portunity this may present is not just to redesign jobs, but to fundamentally rethink “work architec- ture.” Doing this involves decomposing work into its fundamental components—for instance, assess- ment, production, problem-solving, communica- tion, supervision—and analyzing ways that new
combinations of ma- chines and humans working together can accomplish them, with each party bring- ing unique strengths to the task. Absent a thoughtful approach, organizations may not only risk failing to identify the skills they need to take effective advantage of technol- ogy, but also suffer damage to their em- ployee and corporate brand due to percep- tions around (real or supposed) workforce reductions.
Over the next sev- eral years, one of HR and business leaders’ great- est challenges will be to redesign many of today’s work and workforce configurations. This will re- quire them to ask fundamental questions about which work tasks and activities can be automated, what technologies to use, and what combinations of people and smart machines can effectively do the work.22 A renewed, imaginative focus on workforce development, learning, and career models will be important. Perhaps most critical of all, however, will be the need to create meaningful work—work that, notwithstanding their new collaboration with intelligent machines, human beings will be eager to embrace.
Despite having an increasingly clear
understanding of the skills needed in a world where humans work side by side with machines, 49 percent
of our respondents told us they do not have a plan to cultivate them.
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Table 1. What role does the C-suite play in capitalizing on AI, robotics, and automation? How can individuals adjust?
CHRO
With the adoption of new automation technologies, workers will need ongoing development and reskilling, with an emphasis on essential human skills such as critical thinking and problem-solving. Look beyond your organization to tap into a broader ecosystem of providers and solutions to access the content, training support, and infrastructure required to enable continuous learning.
CIO Consider ways to constantly monitor the external marketplace to keep pace with innovation. AI, robotics, and automation technologies are rapidly evolving, and IT can lead the way by identifying and introducing innovations that can drive greater value.
CFO
The rapid evolution of technology calls for an investment approach that allows for innovation. Consider rethinking the typical appreciation periods that are often the basis for technology-related business cases. Help your organization manage the financial implications of ongoing technology investments to mitigate potential negative balance-sheet impacts.
Chief operations officer
Identify the new operational roles that will be required to effectively incorporate AI, robotics, and automation into the workplace. For instance, organizations may designate people to identify new ways to use automation, to manage the “bots” on the ground, and perform other critical tasks. These roles are important to making automation work; without them, automation’s potential value may remain unrealized.
Chief marketing officer
Manage the potential external brand implications of increasing automation. Internally, identify areas where automation can increase marketing effectiveness.
Individuals Identify the skills that you believe will be required to succeed in a highly automated workplace. Adopt a lifelong learning approach and seek opportunities to develop your skills both inside and outside your employer.
Source: Deloitte analysis.
THE BOTTOM LINE In 2018 and beyond, we expect continuing rapid adoption and maturation of AI, robotics, and automation solutions. Leading organizations are working hard to put humans in the loop—rethinking work architecture, retraining people, and rearranging the organization to leverage technology to transform business. The broader aim is not just to eliminate routine tasks and cut costs, but to create value for customers and meaningful work for people.
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1. Thomas H. Davenport, Jeff Loucks, and David Schatsky, Bullish on the business value of cognitive: Leaders in cogni- tive and AI weigh in on what’s working and what’s next, Deloitte, 2017.
2. CB Insights.
3. Bernard Marr, “The amazing ways Coca Cola uses artificial intelligence and big data to drive success,” Forbes, September 18, 2017.
4. Hugh Son, “Morgan Stanley’s 16,000 human brokers get algorithmic makeover,” Bloomberg, May 31, 2017.
5. Novatio, “10 common applications of artificial intelligence in healthcare,” accessed January 24, 2018.
6. Bill McDermott, “Machines can’t dream,” Project Syndicate, January 24, 2018.
7. Sam Meredith, “A.I. can detect the sexual orientation of a person based on one photo, research shows,” CNBC, September 8, 2017.
8. Yonatan Sredni, “Listen up: Study shows your voice can tell if you have heart disease,” NoCamels, February 12, 2017.
9. Josh Bersin, conversations with HireVue executives and interviews with HireVue clients, October 2017.
10. IBM, “IBM Watson recruitment,” accessed March 7, 2018.
11. IBM, “IBM Watson Career Coach for career management,” accessed March 7, 2018; Fuel50, “Home,” accessed March 7, 2018.
12. Ultimate Software, “Ultimate empowers managers to become stronger leaders with new ‘Leadership Actions’ feature in winter 2016 release of UltiPro,” press release, January 15, 2016.
13. Nick Wingfield, “As Amazon pushes forward with robots, workers find new roles,” New York Times, September 10, 2017.
14. Laura Stevens, “How Amazon gets its holiday hires up to speed in two days,” Wall Street Journal, November 28, 2016.
15. Lucas Matney, “Walmart is bringing VR instruction to all of its U.S. training centers,” TechCrunch, May 31, 2017.
16. McDermott, “Machines can’t dream.”
17. Christopher Mims, “Without humans, artificial intelligence is still pretty stupid,” Wall Street Journal, November 12, 2017.
18. Ibid.
19. James E. Bessen, “How computer automation affects occupations: Technology, jobs, and skills” (Boston Univer- sity School of Law, Law and Economics Research Paper No. 15-49, October 3, 2016).
20. James Bessen, Learning by Doing: The Real Connection between Innovation, Wages, and Wealth (New Haven: Yale University Press, 2015), p. 79.
21. Alex Gray, “The 10 skills you need to thrive in the Fourth Industrial Revolution,” World Economic Forum, January 19, 2016.
22. Peter Evans-Greenwood, Harvey Lewis, and Jim Guszcza, “Reconstructing work: Automation, artificial intelligence, and the essential role of humans,” Deloitte Review 21, July 31, 2017.
ENDNOTES
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The rise of the social enterprise
The hyper-connected workplace Will productivity reign?
NEW communications tools raise a critical question for organizations: Are these tools actually increasing productivity, or is work turning into a chaotic, relentless series of messages, emails, conference calls, and chats? The move to- ward organizations designed around networks of teams adds a new dimension to this question.
In last year’s Global Human Capital Trends sur- vey, 88 percent of respondents were reorganizing their companies into a flatter, more networked team structure—2017’s number-one trend. This year, if anything, this trend is reaching further into the or- ganization. In 2018, 91 percent of respondents say that their organizations’ employees spend time on projects outside their functional area, and 35 per- cent say that employees do so on a regular basis.
A flood of new tools is fueling this shift, each promising to give people more intelligent ways of communicating with each other. The market has at- tracted top tech companies such as Cisco, Microsoft, Facebook, Slack, Atlassian, and others, which have all announced new messaging, chat, and video com- munications systems.1
Yet this year’s Global Human Capital Trends research uncovered a high level of anxiety about whether these new tools actually align with busi- ness goals. When asked about the productivity of the “new workplace,” 47 percent of respondents said that it is a very important concern. And from an economic standpoint, the problem has become critical, as global workforce productivity growth is at its lowest rate in almost two decades.2
The massive change underway
How is this change in workplace communication playing out? Research shows that the communica- tions behaviors, habits, and tools that people use in their personal lives are migrating into their work lives. Consider text messaging. Today, 74 percent of our survey respondents regularly use text mes- saging for personal communications; worldwide, 18.7 billion text messages are sent every day, with individuals between 25–34 years old sending and receiving more than 75 texts per day.3 As texting
The sheer number and variety of communications tools continues to expand, all of them promising to make workers more efficient and productive. In an effort to realize this promise, smart organizations are reshaping work practices, physical workspaces, and leadership approaches to ensure that greater connectivity means greater productivity in a network of teams.
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has become ubiquitous in our personal lives, it has also become commonplace at work, and 32 percent of our survey respondents expect its use to increase.
Many believe that tools such as social media and instant messaging will follow a similar path into the workplace. In fact, our 2018 survey results were striking: 44 percent of respondents believe that face-to-face meetings will decrease in the future, and 30 percent believe that phone and text usage will decrease. To replace them, 70 percent believe that workers will spend more time on collaboration platforms, 67 percent see growth in “work-based so- cial media,” and 62 percent predict an increase in in- stant messaging. No single mode of communication will be dominant; instead, the work environment will feature many different ways to communicate.
In addition, new, AI-based team management tools are starting to emerge. The newest versions of Office 365, G-Suite, and Slack now include AI-based recommendations to help individuals find the right document, respond to the right message, and un- derstand what is most important.4 One HR systems provider recently introduced a product that uses AI to read employee pulse surveys and give managers recommendations on how to improve their manage- ment style.
The impact of these new communications tools can be very positive. Consider how Mayo Clinic, one of the world’s leading health care organiza- tions, has improved teamwork, information-shar- ing, and patient care with technology.5 Through a mobile app called AskMayoExpert, physicians can
PHYSICAL MEETINGS LOSING OUT TO VIRTUAL COLLABORATION Face-to-face meetings and phone meetings are on the decline, while work collaboration platforms are on the upswing.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n = 11,070 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Expected use of communications channels in the next three to five years
Online collaboration platforms
Work-based social media
Instant messaging
Social messaging apps
Personal social media
Text
Phone/voice mail
Face-to-face meetings
Increase Stay the same Decrease
70% 26% 4%
67% 28% 6%
62% 32% 6%
33% 47% 20%
16% 40% 44%
50% 41% 9%
23% 48% 30%
32% 38% 30%
57% 36% 7%
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find information on diagnosis, treatment, cause, and prevention from other spe- cialists and sources in the network. Us- ers can ask and answer questions, and all information is tagged by topic, location, care process, and key fact. This highly in- teractive system is now widely used, with doctors obtaining access to experts more than 10 times a day.
Or take Starbucks. Just a few months after adopting Workplace by Facebook, 80 percent of Starbucks’ store manag- ers were actively using the tool to share knowledge, best practices, and support one another.6 Likewise, Walmart claims that an offering like Workplace is help- ing the company break down language barriers, in- crease knowledge-sharing, and even manage emer- gencies like Hurricane Harvey.7
The importance of management choices
While 2018 will see the continued introduction and adoption of many new and exciting tools, man- agement must still make important decisions about which tools to use and how to use them. Critically, this can often include the decision not to use cer- tain tools.
Managers must determine which tools are best for their organization, teams, and tasks based on a variety of factors, including culture, pace of commu- nication, and level of formality. For example, some companies may benefit from a wholesale leap to a collaboration tool, while others will need to retain email as a vital and valuable means of communica- tion. Whichever tools are selected, it is important to create standards and guidelines that align indi- vidual productivity with team and organizational productivity.
For instance, Autodesk, a leading provider of 3D design and engineering software, found that it was supporting 85 separate implementations of Slack, each used by a different team to manage work in its own unique way. While these teams were happy, there was no sharing of common best practices, and no ability to collaborate between teams.8
Guy Martin, Autodesk’s direc- tor of open source programs and team facilitation, decided it was time to “tie these teams to- gether.” The company adopted the principle to be “open by default,” and convinced all 85 project teams to share their channels in one overarching enterprise implementation of Slack. This made it necessary to cre- ate naming conventions and several gen- eral usage guidelines, but it resulted in a tremendous increase in company-wide collaboration. Today, Autodesk’s Slack community has more than 5,000 active members, leading to greater learning, open collaboration, and positive sharing—the ingredients needed to move away from a “collection of teams” to a “network of teams.”9
From connectivity and activity to teamwork and productivity
The proliferation of new tools and related pro- grams is impressive. Nearly half of this year’s survey respondents (46 percent) regularly use virtual meet- ing software, and 30 percent now use location-based videoconferencing. But greater use of communica- tions tools by individuals does not automatically
Managers must determine which tools are best for their
organization, teams, and tasks based on a variety of factors, including culture, pace of communication,
and level of formality.
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mean increased productivity for teams and organiza- tions. Indeed, while 71 percent of our survey respon- dents believed that these new tools improve their personal productivity, 47 percent were concerned about whether the tools are really driving productiv- ity overall.
Our research suggests that in today’s networked organizations, a combination of technology, physi- cal space design, new leadership approaches, and new work practices must all come together to achieve this goal. This requires collaboration be- tween HR, IT, and the business to build an integrat- ed, customized work environment.
Adaptable and flexible workspaces are one key to enabling productivity. For example, at ING Bank and Atlassian, agile teams work in co-located work- spaces with large whiteboards that show project
plans, shared goals, and project status.10 Some soft- ware firms like Skype and others not only give em- ployees private cubicles, but also lavish the work- space with gourmet cafeterias, quiet rooms, and even napping pods.11 This mix of physical spaces helps people work together or privately when need- ed and quickly collaborate on projects.
Moving beyond thinking of personal productiv- ity and technology tools in isolation is critical for organizations to achieve positive results. A combi- nation of culture, leadership, and incentives needs to come together for effective collaboration and productivity to reign. To do this, HR organizations must work with IT to bring their expertise in team management, goal-setting, and employee develop- ment to help make using the new wave of connectiv- ity tools productive, simple, and engaging.
THE BOTTOM LINE Companies are concerned about a potential disconnect between new communications tools and organizational goals. To help ensure that personal connectivity translates to organizational productivity, they are adapting their practices, workspaces, and leadership styles to capitalize on the power of these tools while mitigating potential negative impacts.
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Table 1. What role does the C-suite play in managing the hyper-connected workplace? How can individuals adjust?
CHRO
Create a deliberate strategy for using collaboration and communication platforms that extends beyond the technology, considering not only what tools to use, but ways to design the work environment to take effective advantage of those tools. This could involve adjustments to the physical workspace, different management techniques, and/or rewards or incentives to shape the way people use the available tools.
CIO
Take an inventory of all collaboration platforms currently in place across the organization. Develop a strategy for promoting connectivity in the workplace in ways that avoid duplicating systems and apps, and provide a platform that can help drive more data and insights with regard to how people interact, engage, and collaborate with one another. Such insights can be incredibly valuable as the organization works to drive up productivity.
Chief risk officer
Determine what risk policies should be in place around the use of collaboration and social tools in the workplace. For example, what information should be shared via social tools versus via private emails or phone calls? Consider implementing training for the workforce on ways to use collaboration and social tools in a way that manages privacy and other related risks.
Chief operations officer
Consider ways to embed collaboration tools into day-to-day work processes to increase adoption and help increase productivity.
Individuals
Think about how you can use collaboration tools to increase your own productivity without becoming overwhelmed. Are you regularly posting to internal social groups? Are you collaborating more often and more effectively? Using these tools effectively can help you to build your personal brand by expanding your networks, sharing your expertise more broadly, or promoting your achievements to those who may otherwise not be aware of them.
Source: Deloitte analysis.
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1. Josh Bersin, HR technology disruptions for 2018: Productivity, design, and intelligence reign, Bersin, Deloitte Consult- ing LLP, 2017.
2. Trading Economics, “United States nonfarm labour productivity,” accessed January 18, 2018.
3. Kenneth Burke, “73 texting statistics that answer all your questions,” Text Request, May 24, 2016.
4. Josh Bersin, conversations with product executives at Microsoft, Google, and Slack.
5. Kelly Cheng, Mayo Clinic: A case study in work environment redesign, Deloitte University Press, June 19, 2013.
6. Stuart Lauchlan, “Digital life at Starbucks after Schultz—new CEO commits to tech innovation,” diginomica.com, March 23, 2017.
7. Emily Price, “Facebook’s Workplace takes a big step forward by adding Walmart as a customer,” Fast Company, September 26, 2017.
8. Josh Bersin, conversation with Autodesk executives, January 2018.
9. Guy Martin (Director, Open @ ADSK, Autodesk), interview with the authors, February 8, 2018.
10. Josh Bersin, conversations with ING Bank and Atlassian executives, November 2017.
11. Josh Bersin, conversations with Silicon Valley executives.
ENDNOTES
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The rise of the social enterprise
People data How far is too far?
THE use of workforce data to analyze, predict, and improve performance has exploded in practice and importance over the last few years, with more growth on the horizon. In our 2018 Global Human Capital Trends survey, 84 percent of respondents viewed people analytics as important or very important, making it the second-highest- ranked trend in terms of importance.
What explains this surge? We see three converg- ing forces driving people analytics: • A growing emphasis on critical workforce issues
such as productivity and employee engagement, as well as on social issues such as diversity and gender pay equity, is raising CEO-level questions about the best way to lead and manage people.
• Big HR investments in people analytics are yielding many new sources of data. Our research shows that more than 70 percent of respondents are in the midst of major projects to analyze and integrate data into their decision-making.
• Organizations are growing more anxious about their ability to protect employee data—and for good reason. This year, only 10 percent of our respondents felt that their companies were “very ready” to deal with this challenge.
The growing power of people data
The people data revolution, predicted for years, has finally arrived. Sixty-nine percent of organiza- tions are building integrated systems to analyze worker-related data, and 17 percent already have re- al-time dashboards to crunch the avalanche of num- bers in new and useful ways.1 Among companies at level 3 and 4 in Bersin’s people analytics maturity model,2 90 percent have accurate, timely data, and 95 percent have data security policies in place. These leading companies are monitoring people data from
The domain of people analytics is growing rapidly, offering new opportunities to better hire, manage, retain, and optimize the workforce. As organizations collect more personal and business data about their employees, however, they raise growing risks and ethical questions about data security, transparency, and the need to ask permission. Organizations now need robust security safeguards, transparency measures, and clear communication around their people data efforts—or they could trigger employee privacy concerns and backlash over data abuse.
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many sources, including social media (17 percent), surveys (76 percent), and integrated data from HR and financial systems (87 percent).3 Creative orga- nizations are mining this rich variety of sources to create a comprehensive “employee listening archi- tecture,” providing new insights about the entire employee experience as well as data on job progres- sion, career mobility, and performance.
Advanced analytics can now track and analyze a dizzying amount of employee data, including data harvested from voice communications, personal interactions, and video interviews. Even the sen- timent of employee emails can now be measured and monitored.4 Several vendors now offer organi- zational network analysis (ONA) software that in- terprets email traffic to monitor employees’ stress levels and help spot fraud, abuse, and poor man- agement. Other ONA tools can analyze employee feedback and performance to identify management challenges, send coaching tips to different leaders, and identify key knowledge management resources, subject-matter experts, and organizational influ- encers based on their interactions and relation- ships—not necessarily their titles and roles.5
Heightened rewards, heightened risks
Analytics tools offer tremendous opportunities. But in the face of the obvious benefits, many execu- tives may be slow—or perhaps reluctant—to recog- nize the significant potential risks. Organizations are approaching a tipping point around the use of
people data, and those that tilt too far could suffer severe employee, customer, and public backlash.
Indeed, some organizations are now consider- ing the mere existence of data to be a risk. This is the premise behind requirements in the European Union (EU) and elsewhere that one must delete a data element immediately when it is no longer rel- evant to the processing need, or else face a variety of consequences due to the risk that retaining it pres- ents. Europe’s new General Data Protection Regu- lation (GDPR), slated to come into effect in spring 2018, expands upon this concept by defining high- risk data as that which is “likely to result in a high risk for the rights and freedoms of individuals,” and that, therefore, requires greater protection.6 Pri- vate sector actions should keep pace with forward- looking efforts that are designed to strengthen data privacy regulations. Companies that break the new GDPR rules will face penalties as high as €20 mil- lion, creating strong incentives for organizations to take data protection seriously.7
What risks are most pressing? Our 2018 sur- vey yields some important insights. This year, 64 percent of respondents reported that they are ac- tively managing legal liability related to their or- ganizations’ people data. Six out of ten said that they were concerned about employee perceptions of how their data is being used. However, only a quarter reported that their organizations were managing the impact of these risks on their consumer brand.
Organizations are approaching a tipping point around the use of people data,
and those that tilt too far could suffer severe employee, customer, and public backlash.
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Fears over employee privacy appear justified. Beyond the sheer quantity of data some organiza- tions have amassed, the mere existence and pos- session of sensitive data creates risk, regardless of volume. One employer, for instance, installed body heat detectors at desks to track how many hours people spent in the office. Employees reacted with outrage, swamping managers with complaints and leaking unflattering stories to the media.
Many employees fear that sensitive data may be vulnerable to high-profile cyberattacks—again with good reason. While 75 percent of companies understand the need for data security, only 22 per- cent have excellent safeguards to protect employee data.8 Research also shows that the 30 percent of companies that do not consider people data worth the exposure to data risk have no strong data gover- nance structures at all.9
PEOPLE DATA’S RISKS TO CONSUMER BRAND: A POTENTIAL BLIND SPOT? When it comes to using people data, organizations are actively managing risks around employee perceptions and legal liability, but only a quarter are managing the potential impact on their consumer brand.
Explore the data further in the Global Human Capital Trends app.
Deloitte Insights | deloitte.com/insights n = 11,069 Source: Deloitte Global Human Capital Trends survey, 2018.
Figure 1. Management of HR data risk levers
Legal liability
Employee perception of
personal data use
Employment brand
Financial cost
Competitive risk
Consumer brand
PERCENT OF ORGANIZATIONS ACTIVELY MANAGING IMPACTS TO EACH AREA THAT COULD ARISE FROM AN HR DATA BREACH
64% 60%
46% 42%
34%
25%
Emerging concerns about AI, algorithms, and machine-driven decisions
Data security is a long-standing risk, but there are new risks as well. Some experts worry that algo- rithms and machine-based decisions could actually perpetuate bias due to flaws in the underlying data or the algorithm itself. Understanding the potential for this type of risk is critical to preventing a new source of bias from seeping into an organization’s hiring or promotion processes.
The marriage of people data and algorithm- based artificial intelligence (AI) raises such con- cerns to a new level. Just as people may never know why a certain advertisement pops up on their Web browser, business leaders are beginning to realize that “data-driven decisions” are not guaranteed to be understandable, accurate, or good.
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Even advanced technology companies like Face- book and Twitter have discovered that AI without humans can be “stupid.”10 In response, they are hir- ing thousands of people to monitor their AI-based social networking and advertising algorithms.11 HR organizations must be rigorous in monitoring “ma- chine-related” decisions to make sure they are rea- sonable and unbiased.
Tech leaders are beginning to invest more re- sources in solving these problems. A consortium of data experts recently formed the Partnership on AI to Benefit People and Society, a group funded by Amazon, Apple,12 Facebook, Google, IBM, and Mi- crosoft. This group was established specifically to study and formulate leading practices on AI tech- nologies, to advance the public’s understanding of AI, and to serve as an open platform for discussion and engagement about AI and its influences on peo- ple and society.13 Ginny Rometti, the CEO of IBM, has also laid out a set of ethical principles for the use of data and AI.14
Staying on the right side of the tipping point
Despite the potential risks, the promise of people analytics remains too valuable for organizations to pass up. For example, GE, Visa, IBM, and others are developing a suite of analytics tools that find “non- obvious” job candidates and recommend training.15 GE’s HR analytics team is using data that tracks the
“historical movement of employees and relatedness of jobs” to help employees identify potential new opportunities across the company—regardless of business unit or geography.16 To boost productivity, Hitachi Data Systems uses smart badges to identify behaviors that contribute to employee happiness and performance, leveraging this data to rearrange workspaces and teams.17
We predict explosive growth in the coming year for smart products that leverage employee data. The spectrum of risks associated with the collection, storage and use of this data can and should be effec- tively managed. Strategies such as anonymization and encryption can allow organizations to make effective use of people data while managing the risks associated with storing and processing various kinds of personal information.
Creating a secure organizational context
It is now clear that companies using people data and analytics, as well as vendors that provide these services, need robust policies, security, transpar- ency, and open communication to address the as- sociated risks. These elements should work together to create a secure organizational context for the use of people data—one that reduces the likelihood of leakage, error, and abuse.
One important aspect of managing the risk of people data analytics is to know all of the places where personal data resides. Mapping the flow of personal data to and from systems, especially when those systems are connected to analytics engines, is essential for creating transparency and installing proper protections. The use of discovery, mapping, and classification tools can help organizations clas- sify both structured and unstructured data.
The IT, HR, and legal departments at leading or- ganizations are collaborating to make recommenda- tions about data risks and organizational responses. These companies have clear policies and communi- cations that explain to employees what data is be- ing collected and how it is being used. This helps to engage employees as informed stakeholders who understand and support the benefits of people ana- lytics for their work and their careers.
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THE BOTTOM LINE Organizations need to understand the trade-offs involved in the accelerating collection and use of employee and workforce data. Most have good intentions in collecting and using this data, but these troves of data also raise significant risks. Companies must be vigilant about data quality, data security, and the accuracy of machine-driven decisions. While this is a relatively new challenge for HR, it is rapidly, and rightly, becoming a top priority.
Table 1. What role does the C-suite play in capitalizing on people data? How can individuals adjust?
CHRO
Tighten collaboration between HR, IT, and risk to develop and communicate a useful, secure, and transparent people data strategy. That strategy should both push the envelope in leveraging data to gain greater insight into the workforce, and effectively manage the associated risks to guard against brand damage or legal consequences. If there is not one already in place, consider using a people data contract with workers to establish clear expectations of how data will be used.
CIO
Understand the flow of people data internal and external to the organization, and put the right security and IT controls in place to effectively manage the risk of the data falling into the wrong hands. Given how rapidly cyber risk is evolving, this is an area where ongoing monitoring and constant innovation is key.
Chief operations officer
Proactively review where automation is driving decision-making, and consider ways to put “humans in the loop” to help make sure that the right decisions are being made—especially as they relate to key operational processes.
Chief risk officer Get and stay involved. You play a critical role in protecting your organization from people data-related risks, from implementing appropriate protections to tracking regulatory changes to identifying potential privacy issues.
Chief marketing officer
Constantly monitor both employee and consumer sentiment about how your organization is handling data. Because of people data’s potential negative impact on brand, it’s important for you to provide insights on where policies or actions should change to help avoid brand damage.
Individuals Decide what kinds of data you are comfortable sharing with your employer, considering both potential benefits and privacy concerns. Protect your personal data by monitoring your social media profiles so that your data is being presented the way in which you want it to be.
Source: Deloitte analysis.
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1. Bersin, Deloitte Consulting LLP, High-impact people analytics research, 2017.
2. Madhura Chakrabarti, The people analytics maturity model, Bersin, Deloitte Consulting LLP, 2017.
3. Madhura Chakrabarti, Seven top findings for driving high-impact people analytics, Bersin, Deloitte Consulting LLP, 2017.
4. Bersin, Deloitte Consulting LLP, Predictions for 2018: Embracing radical transparency, 2018.
5. Josh Bersin, conversations with vendor executives.
6. The General Data Protection Regulation (GDPR) is a regulation by which the European Parliament, the Council of the European Union, and the European Commission intend to strengthen and unify data protection for all individuals within the European Union (EU). It also addresses the export of personal data outside the EU. EU Publications, “Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation),” accessed March 8, 2018.
7. Cheryl O’Neill, “GDPR Series, part 4: The penalties for non-compliance,” Imperva, March 14, 2017.
8. Bersin, Deloitte Consulting LLP, High-impact people analytics research, 2017.
9. Mary Young and Patti Phillips, Big data doesn’t mean ‘Big Brother’: Employee trust and the next generation of human capital analytics, The Conference Board, 2016.
10. Christopher Mims, “Without humans, artificial intelligence is still pretty stupid,” Wall Street Journal, November 12, 2017.
11. Ibid.; Todd Spangler, “Mark Zuckerberg: Facebook will hire 3,000 staffers to review violent content, hate speech,” Variety, May 3, 2017; Benjamin Mullen, “Twitter is hiring people with ‘newsroom backgrounds’ as real-time curators,” Poynter, June 18, 2015.
12. Global Human Capital Trends 2018 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.
13. Partnership on AI to Benefit People and Society, “Goals,” accessed March 8, 2018.
14. Larry Dignan, “IBM’s Rometty lays out AI considerations, ethical principles,” ZDNet, January 17, 2017.
15. Andrew McIlvaine, “GE is reinventing talent management,” Human Resource Executive, September 14, 2017.
16. Josh Bersin, conversations with GE executives, November 2017.
17. Josh Bersin, conversations with Hitachi executives; AI Business, “Hitachi developing AI to improve workforce efficiencies,” September 28, 2015.
ENDNOTES
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2018 Deloitte Global Human Capital Trends
DIMPLE AGARWAL Deloitte MCS Limited | [email protected]
Dimple Agarwal is the global leader of Organization Transformation and Talent for De- loitte’s Human Capital practice, and also leads Deloitte Consulting’s own talent agenda in the United Kingdom. She consults at the C-suite level on operating models and orga- nizational design, HR and talent strategies, leadership strategies and development, and major transformation programs in the space of M&A, culture, and digital. In her 23 years of consulting, she has worked in the United Kingdom as well as in many Asian, African, and European countries. Agarwal holds a bachelor’s degree in psychology and a master’s degree in human resources.
JOSH BERSIN Deloitte Consulting LLP | [email protected]
Josh Bersin founded Bersin & Associates, now Bersin, in 2001 to provide research and ad- visory services focused on corporate learning. A frequent speaker at industry events and a popular blogger, he has been named one of HR’s top influencers by multiple commen- tators. Bersin spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. He has a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.
GAURAV LAHIRI Deloitte India | [email protected]
Gaurav Lahiri leads Deloitte India’s Human Capital consulting practice. He works with clients to align their organizations with their strategic agenda, including reviewing strate- gies, designing organization structures, implementing talent management programs, and formulating reward strategies to drive performance and motivation. Lahiri co-authored the 2007 book The Indian CEO: A Portrait of Excellence and has authored several papers on post-merger integration and change management. He graduated with honors in math- ematics from Delhi University and holds an MBA from the XLRI School of Management.
AUTHORS
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JEFF SCHWARTZ Deloitte Consulting LLP | [email protected]
Jeff Schwartz, a principal with Deloitte Consulting LLP, is Deloitte’s global leader for Hu- man Capital Marketing, Eminence, and Brand and the US leader for the Future of Work. He is the US leader of the Innovation Tech Terminal (ITT), linking the Israeli start-up eco- system with global clients. Schwartz is an advisor to senior business leaders at global companies, focusing on business transformation, organization, HR, talent, and leader- ship. He has lived and worked in the United States, Russia, Belgium, Kenya, Nepal, Sri Lanka, and India, and was based in Delhi and Mumbai from 2011 to 2016. He launched Deloitte’s Global Human Capital Trends research in 2011. Schwartz has an MBA from the Yale School of Management and an MPA from Princeton’s Woodrow Wilson School of Public and International Affairs.
ERICA VOLINI Deloitte Consulting LLP | [email protected]
Erica Volini is the US Human Capital leader for Deloitte Consulting. Throughout her 20- year career, Volini has worked with some of the world’s leading organizations to link their business and human capital strategies. She is a frequent speaker on how market trends are impacting HR organizations and the HR profession as a whole. Within Deloitte, she is a member of Deloitte Consulting’s management committee. Volini has a bachelor of science in industrial and labor relations from Cornell University.
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GLOBAL HUMAN CAPITAL LEADERS
HUMAN CAPITAL COUNTRY LEADERS
Global Human Capital leader Brett Walsh Deloitte MCS Limited [email protected]
Global Human Capital leader, Marketing, Eminence, and Brand Jeff Schwartz Deloitte Consulting LLP [email protected]
Global Human Capital leader, Future of Work Heather Stockton Deloitte Canada [email protected]
Global Employment Services leader Nichola Holt Deloitte Tax LLP [email protected]
Global Organization Transformation and Talent leader Dimple Agarwal Deloitte MCS Limited [email protected]
Global HR Transformation leader Michael Stephan Deloitte Consulting LLP [email protected]
Global Actuarial, Rewards, and Analytics leader Darryl Wagner Deloitte Consulting LLP [email protected]
Americas Verónica Melián Deloitte SC [email protected]
United States Erica Volini Deloitte Consulting LLP [email protected]
Canada Jeff Moir Deloitte Canada [email protected]
Argentina Maria Soledad Ruilopez Deloitte & Co. SA [email protected]
AMERICAS
Brazil Roberta Yoshida Deloitte Consultores [email protected]
Chile Marcel Villegas Deloitte Audit y Consult. [email protected]
Colombia and Peru Alejandra D’Agostino Deloitte & Touche SRL [email protected]
Costa Rica Sofia Calderon Deloitte & Touche SA [email protected]
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Dutch Caribbean Maghalie van der Bunt Deloitte Dutch Caribbean [email protected]
Ecuador Roberto Estrada Andeanecuador Consultores [email protected]
Mexico Tomas Fernandez Deloitte Consulting Mexico [email protected]
Panama Jessika Malek Deloitte Consultores [email protected]
Uruguay, LATCO Verónica Melián Deloitte SC [email protected]
AMERICAS (CONT.)
Asia Pacific & China Jungle Wong Deloitte Consulting (Shanghai) Co. Ltd, Beijing Branch [email protected]
Australia David Brown Deloitte Touche Tohmatsu [email protected]
India Gaurav Lahiri Deloitte India [email protected]
Japan Akio Tsuchida Deloitte Tohmatsu Consulting Co. Ltd [email protected]
EUROPE, MIDDLE EAST, AND AFRICA
EMEA Ardie Van Berkel Deloitte Consulting BV [email protected]
United Kingdom Anne-Marie Malley Deloitte MCS Limited [email protected]
Africa Pam Maharaj Deloitte Consulting Pty [email protected]
Austria Christian Havranek Deloitte Austria [email protected]
Belgium Yves van Durme Deloitte Consulting [email protected]
CIS Gulfia Ayupova CJSC Deloitte & Touche CIS [email protected]
Cyprus George Pantelides Deloitte Ltd [email protected]
ASIA PACIFIC
Korea Eric Seok Hoon Yang Deloitte Consulting [email protected]
New Zealand Hamish Wilson Deloitte [email protected]
Southeast Asia Mark Maclean Deloitte Consulting Pte Ltd [email protected]
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Czech Republic Pavel Šimák Deloitte Advisory s.r.o. [email protected]
Denmark and Nordics Filip Gilbert Deloitte Denmark [email protected]
East Africa (Kenya, Tanzania, Uganda) George Hapisu Deloitte & Touche Kenya [email protected]
Finland Eva Tuominen Deloitte Oy [email protected]
France Philippe Burger Deloitte Conseil [email protected]
Germany Udo Bohdal-Spiegelhoff Deloitte Consulting GmbH [email protected]
Ireland Valarie Daunt Deloitte & Touche [email protected]
Israel Maya Barlev Brightman Almagor Zohar & Co. [email protected]
Italy Lorenzo Manganini Deloitte Consulting SRL [email protected]
Luxembourg Basil Sommerfeld Deloitte Tax & Consulting [email protected]
EUROPE, MIDDLE EAST, AND AFRICA (CONT.)
Middle East Ghassan Turqieh Deloitte & Touche (ME) [email protected]
Netherlands Petra Tito Deloitte Consulting BV [email protected]
Norway Eva Gjovikli Deloitte AS [email protected]
Poland Michał Olbrychowski Deloitte Business Consulting SA [email protected]
Portugal José Subtil Deloitte Consultores SA [email protected]
Spain Joan Pere Salom Deloitte Advisory SL [email protected]
Sweden Victor Kotnik Deloitte Sweden [email protected]
Switzerland Myriam Denk Deloitte Consulting Switzerland [email protected]
Turkey Cem Sezgin Deloitte Turkey [email protected]
West Africa (Nigeria and Ghana) Joseph Olofinsola Deloitte & Touche Nigeria [email protected]
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ACKNOWLEDGEMENTS
The creation of Deloitte’s 2018 Global Human Capital Trends report was a team effort involving many practitioners from around the globe. The report leverages not only the results of our survey of more than 11,000 business and HR leaders, but also the insights from our many Human Capital partners from their interactions with business and HR leaders throughout the year.
We would not have been able to produce this report without the energy of our dedicated team:
Julia Epstein and Julie May, who helped to lead this program from the US and Global, and their team of Daniel Baicker, Tracy Martin, and Joycelyn Finley, who coordinated and executed all of the program initiatives and worked tirelessly with our global team.
Amy Farner, who led a flawless data design and analysis effort that generated our largest response in history. Her guidance and coaching was unwavering and we are forever grateful. Shivank Gupta and Mukta Goyal for their efforts on the survey and analytics, together with their colleagues: Udita Arora, Ushasi Bandyopadhyay, Archana Bhat, Saylee Bhorkar, Ananshi Chugh, Srishti Dayal, Ankita Jain, Rachit Jain, Bhumija Jain, Shruti Kalaiselvan, Ashish Kainth, Yasmine Kakkar, Sania Motwani, Sahana Nabaneeta, Anjali Naik, Divya Patnaik, Sangeet Sabharwal, Vrinda Sarkar, Sonia Sharma, Goral Shroff, Taneet Singh Ranhotra, and Manan Vij.
Christy Hodgson, who drove the marketing strategy and app branding and helped to bring together how the Human Capital Trends story was told. Her strategic mind and flawless coordination allowed us to increase the power of the story and the company videos. Melissa Doyle and Steve Dutton for their leadership in public relations.
Andrew Pollen and the Deloitte Digital team who partnered with us to lead the design and development of the new HC Trends web app. Nidal Haddad for his executive sponsorship from Deloitte Digital.
The Deloitte Insights team that supported the report’s publication, including Junko Kaji, who provided editorial guidance; Sonya Vasilieff, our Deloitte Insights art director; Sarah Jersild, who created the Deloitte Insights introductory video; Alok Pepakayala, who assisted the app development team; and Amy Bergstrom and Alex Kawecki, who led Deloitte Insights’ deployment efforts.
Sue Ostaszewski, Karen Miklic, Laura Elias, and Marykate Reese, who created the marketing assets, and Shannon Pincus, Caroline Regan Williams, Ayushi Agarwal, Christina Anderson, Maggie Godleski, Caroline Levy, and Devina Vimadalal, who drove the development of the company videos in the app. Deepti Agarwal, Angela Ayton, Bob Hughes, Lucy Matthews, Reuben Paul, and Gloria Viedma Navarro, who worked on the client-facing materials for this year’s report.
Mia Farnham, Alejandra Arrue, and Dany Rifkin for their support in conducting research to support the trends.
Jennifer Fisher, Michelle Machalani, and Susanna Samet for providing their expertise in diversity and inclusion and in public policy.
Jeffrey Winn and Elaine Loo for providing their expertise in cyber.
Vivek Katyal for providing his expertise and input on the people data chapter.
Stacey Philpot, Jeff Rosenthal, and Pushp Deep Gupta for their expertise and input on the C-suite chapter.
Walt Sokoll, Chetan Jain, and Leendert van der Bijil for their expertise in the HCM technology space.
2018 Deloitte Global Human Capital Trends
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Peter Senge and the learning organization. Peter Senge’s vision of a learning organization as a group of people who are continually enhancing their capabilities to create what they want to create has been deeply influential. We discuss the five disciplines he sees as central to learning organizations and some issues and questions concerning the theory and practice of learning organizations.
contents: introduction · peter senge · the learning organization · systems thinking – the cornerstone of the learning organization · the core disciplines · leading the learning organization · issues and problems · conclusion · further reading and references · links
Peter M. Senge (1947- ) was named a ‘Strategist of the Century’ by the Journal of Business Strategy, one of 24 men and women who have ‘had the greatest impact on the way we conduct business today’
infed.org: education, community-building and change Peter Senge and the learning organization
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(September/October 1999). While he has studied how firms and organizations develop adaptive capabilities for many years at MIT (Massachusetts Institute of Technology), it was Peter Senge’s 1990 book The Fifth Discipline that brought him firmly into the limelight and popularized the concept of the ‘learning organization’. Since its publication, more than a million copies have been sold and in 1997, Harvard Business Review identified it as one of the seminal management books of the past 75 years.
On this page we explore Peter Senge’s vision of the learning organization. We will focus on the arguments in his (1990) book The Fifth Discipline as it is here we find the most complete exposition of his thinking.
Peter Senge
Born in 1947, Peter Senge graduated in engineering from Stanford and then went on to undertake a masters on social systems modeling at MIT (Massachusetts Institute of Technology) before completing his PhD on Management. Said to be a rather unassuming man, he is is a senior lecturer at the Massachusetts Institute of Technology. He is also founding chair of the Society for Organizational Learning (SoL). His current areas of special interest focus on decentralizing the role of leadership in organizations so as to enhance the capacity of all people to work productively toward common goals.
Peter Senge describes himself as an ‘idealistic pragmatist’. This orientation has allowed him to explore and advocate some quite ‘utopian’ and abstract ideas (especially around systems theory and the necessity of bringing human values to the workplace). At the same time he has been able to mediate these so that they can be worked on and applied by people in very different forms of organization. His areas of special interest are said to focus on decentralizing the role of
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leadership in organizations so as to enhance the capacity of all people to work productively toward common goals. One aspect of this is Senge’s involvement in the Society for Organizational Learning (SoL), a Cambridge-based, non-profit membership organization. Peter Senge is its chair and co-founder. SoL is part of a ‘global community of corporations, researchers, and consultants’ dedicated to discovering, integrating, and implementing ‘theories and practices for the interdependent development of people and their institutions’. One of the interesting aspects of the Center (and linked to the theme of idealistic pragmatism) has been its ability to attract corporate sponsorship to fund pilot programmes that carry within them relatively idealistic concerns.
Aside from writing The Fifth Discipline: The Art and Practice of The Learning Organization (1990), Peter Senge has also co-authored a number of other books linked to the themes first developed in The Fifth Discipline. These include The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization (1994); The Dance of Change: The Challenges to Sustaining Momentum in Learning Organizations (1999) and Schools That Learn (2000).
The learning organization
According to Peter Senge (1990: 3) learning organizations are:
…organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.
The basic rationale for such organizations is that in situations of rapid change only those that are flexible, adaptive and productive will excel.
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For this to happen, it is argued, organizations need to ‘discover how to tap people’s commitment and capacity to learn at all levels’ (ibid.: 4).
While all people have the capacity to learn, the structures in which they have to function are often not conducive to reflection and engagement. Furthermore, people may lack the tools and guiding ideas to make sense of the situations they face. Organizations that are continually expanding their capacity to create their future require a fundamental shift of mind among their members.
When you ask people about what it is like being part of a great team, what is most striking is the meaningfulness of the experience. People talk about being part of something larger than themselves, of being connected, of being generative. It become quite clear that, for many, their experiences as part of truly great teams stand out as singular periods of life lived to the fullest. Some spend the rest of their lives looking for ways to recapture that spirit. (Senge 1990: 13)
For Peter Senge, real learning gets to the heart of what it is to be human. We become able to re-create ourselves. This applies to both individuals and organizations. Thus, for a ‘learning organization it is not enough to survive. ‘”Survival learning” or what is more often termed “adaptive learning” is important – indeed it is necessary. But for a learning organization, “adaptive learning” must be joined by “generative learning”, learning that enhances our capacity to create’ (Senge 1990:14).
The dimension that distinguishes learning from more traditional organizations is the mastery of certain basic disciplines or ‘component technologies’. The five that Peter Senge identifies are said to be converging to innovate learning organizations. They are:
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Systems thinking
Personal mastery
Mental models
Building shared vision
Team learning
He adds to this recognition that people are agents, able to act upon the structures and systems of which they are a part. All the disciplines are, in this way, ‘concerned with a shift of mind from seeing parts to seeing wholes, from seeing people as helpless reactors to seeing them as active participants in shaping their reality, from reacting to the present to creating the future’ (Senge 1990: 69). It is to the disciplines that we will now turn.
Systems thinking – the cornerstone of the learning organization
A great virtue of Peter Senge’s work is the way in which he puts systems theory to work. The Fifth Discipline provides a good introduction to the basics and uses of such theory – and the way in which it can be brought together with other theoretical devices in order to make sense of organizational questions and issues. Systemic thinking is the conceptual cornerstone (‘The Fifth Discipline’) of his approach. It is the discipline that integrates the others, fusing them into a coherent body of theory and practice (ibid.: 12). Systems theory’s ability to comprehend and address the whole, and to examine the interrelationship between the parts provides, for Peter Senge, both the incentive and the means to integrate the disciplines.
Here is not the place to go into a detailed exploration of Senge’s presentation of systems theory (I have included some links to primers
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below). However, it is necessary to highlight one or two elements of his argument. First, while the basic tools of systems theory are fairly straightforward they can build into sophisticated models. Peter Senge argues that one of the key problems with much that is written about, and done in the name of management, is that rather simplistic frameworks are applied to what are complex systems. We tend to focus on the parts rather than seeing the whole, and to fail to see organization as a dynamic process. Thus, the argument runs, a better appreciation of systems will lead to more appropriate action.
‘We learn best from our experience, but we never directly experience the consequences of many of our most important decisions’, Peter Senge (1990: 23) argues with regard to organizations. We tend to think that cause and effect will be relatively near to one another. Thus when faced with a problem, it is the ‘solutions’ that are close by that we focus upon. Classically we look to actions that produce improvements in a relatively short time span. However, when viewed in systems terms short-term improvements often involve very significant long-term costs. For example, cutting back on research and design can bring very quick cost savings, but can severely damage the long-term viability of anorganization. Part of the problem is the nature of the feedback we receive. Some of the feedback will be reinforcing (or amplifying) – with small changes building on themselves. ‘Whatever movement occurs is amplified, producing more movement in the same direction. A small action snowballs, with more and more and still more of the same, resembling compound interest’ (Senge 1990: 81). Thus, we may cut our advertising budgets, see the benefits in terms of cost savings, and in turn further trim spending in this area. In the short run there may be little impact on people’s demands for our goods and services, but longer term the decline in visibility may have severe penalties. An appreciation of systems will lead to recognition of the use of, and problems with, such reinforcing feedback, and also an understanding of the place of balancing (or stabilizing) feedback. (See, also Kurt Lewin on feedback). A further
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key aspect of systems is the extent to which they inevitably involve delays – ‘interruptions in the flow of influence which make the consequences of an action occur gradually’ (ibid.: 90). Peter Senge (1990: 92) concludes:
The systems viewpoint is generally oriented toward the long-term view. That’s why delays and feedback loops are so important. In the short term, you can often ignore them; they’re inconsequential. They only come back to haunt you in the long term.
Peter Senge advocates the use of ‘systems maps’ – diagrams that show the key elements of systems and how they connect. However, people often have a problem ‘seeing’ systems, and it takes work to acquire the basic building blocks of systems theory, and to apply them to your organization. On the other hand, failure to understand system dynamics can lead us into ‘cycles of blaming and self-defense: the enemy is always out there, and problems are always caused by someone else’ Bolam and Deal 1997: 27; see, also, Senge 1990: 231).
The core disciplines
Alongside systems thinking, there stand four other ‘component technologies’ or disciplines. A ‘discipline’ is viewed by Peter Senge as a series of principles and practices that we study, master and integrate into our lives. The five disciplines can be approached at one of three levels:
Practices: what you do.
Principles: guiding ideas and insights.
Essences: the state of being those with high levels of mastery in the discipline (Senge 1990: 373).
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Each discipline provides a vital dimension. Each is necessary to the others if organizations are to ‘learn’.
Personal mastery. ‘Organizations learn only through individuals who learn. Individual learning does not guarantee organizational learning. But without it no organizational learning occurs’ (Senge 1990: 139). Personal mastery is the discipline of continually clarifying and deepening our personal vision, of focusing our energies, of developing patience, and of seeing reality objectively’ (ibid.: 7). It goes beyond competence and skills, although it involves them. It goes beyond spiritual opening, although it involves spiritual growth (ibid.: 141). Mastery is seen as a special kind of proficiency. It is not about dominance, but rather about calling. Vision is vocation rather than simply just a good idea.
People with a high level of personal mastery live in a continual learning mode. They never ‘arrive’. Sometimes, language, such as the term ‘personal mastery’ creates a misleading sense of definiteness, of black and white. But personal mastery is not something you possess. It is a process. It is a lifelong discipline. People with a high level of personal mastery are acutely aware of their ignorance, their incompetence, their growth areas. And they are deeply self-confident. Paradoxical? Only for those who do not see the ‘journey is the reward’. (Senge 1990: 142)
In writing such as this we can see the appeal of Peter Senge’s vision. It has deep echoes in the concerns of writers such as M. Scott Peck (1990) and Erich Fromm (1979). The discipline entails developing personal vision; holding creative tension (managing the gap between our vision and reality); recognizing structural tensions and constraints, and our own power (or lack of it) with regard to them; a commitment to truth; and using the sub-conscious (ibid.: 147-167).
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Mental models. These are ‘deeply ingrained assumptions, generalizations, or even pictures and images that influence how we understand the world and how we take action’ (Senge 1990: 8). As such they resemble what Donald A Schön talked about as a professional’s ‘repertoire’. We are often not that aware of the impact of such assumptions etc. on our behaviour – and, thus, a fundamental part of our task (as Schön would put it) is to develop the ability to <href=”#_the_reflective_practitioner”>reflect-in- and –on-action. Peter Senge is also influenced here by Schön’s collaborator on a number of projects, Chris Argyris.
The discipline of mental models starts with turning the mirror inward; learning to unearth our internal pictures of the world, to bring them to the surface and hold them rigorously to scrutiny. It also includes the ability to carry on ‘learningful’ conversations that balance inquiry and advocacy, where people expose their own thinking effectively and make that thinking open to the influence of others. (Senge 1990: 9)
If organizations are to develop a capacity to work with mental models then it will be necessary for people to learn new skills and develop new orientations, and for their to be institutional changes that foster such change. ‘Entrenched mental models… thwart changes that could come from systems thinking’ (ibid.: 203). Moving the organization in the right direction entails working to transcend the sorts of internal politics and game playing that dominate traditional organizations. In other words it means fostering openness (Senge 1990: 273-286). It also involves seeking to distribute business responsibly far more widely while retaining coordination and control. Learning organizations are localized organizations (ibid.: 287-301).
Building shared vision. Peter Senge starts from the position that if any one idea about leadership has inspired organizations for thousands of years, ‘it’s the capacity to hold a share picture of the
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future we seek to create’ (1990: 9). Such a vision has the power to be uplifting – and to encourage experimentation and innovation. Crucially, it is argued, it can also foster a sense of the long-term, something that is fundamental to the ‘fifth discipline’.
When there is a genuine vision (as opposed to the all-to-familiar ‘vision statement’), people excel and learn, not because they are told to, but because they want to. But many leaders have personal visions that never get translated into shared visions that galvanize an organization… What has been lacking is a discipline for translating vision into shared vision – not a ‘cookbook’ but a set of principles and guiding practices.
The practice of shared vision involves the skills of unearthing shared ‘pictures of the future’ that foster genuine commitment and enrolment rather than compliance. In mastering this discipline, leaders learn the counter-productiveness of trying to dictate a vision, no matter how heartfelt. (Senge 1990: 9)
Visions spread because of a reinforcing process. Increased clarity, enthusiasm and commitment rub off on others in the organization. ‘As people talk, the vision grows clearer. As it gets clearer, enthusiasm for its benefits grow’ (ibid.: 227). There are ‘limits to growth’ in this respect, but developing the sorts of mental models outlined above can significantly improve matters. Where organizations can transcend linear and grasp system thinking, there is the possibility of bringing vision to fruition.
Team learning. Such learning is viewed as ‘the process of aligning and developing the capacities of a team to create the results its members truly desire’ (Senge 1990: 236). It builds on personal mastery and shared vision – but these are not enough. People need to be able to act together. When teams learn together, Peter Senge
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suggests, not only can there be good results for the organization, members will grow more rapidly than could have occurred otherwise.
The discipline of team learning starts with ‘dialogue’, the capacity of members of a team to suspend assumptions and enter into a genuine ‘thinking together’. To the Greeks dia-logos meant a free- flowing if meaning through a group, allowing the group to discover insights not attainable individually…. [It] also involves learning how to recognize the patterns of interaction in teams that undermine learning. (Senge 1990: 10)
The notion of dialogue that flows through The Fifth Discipline is very heavily dependent on the work of the physicist, David Bohm (where a group ‘becomes open to the flow of a larger intelligence’, and thought is approached largely as collective phenomenon). When dialogue is joined with systems thinking, Senge argues, there is the possibility of creating a language more suited for dealing with complexity, and of focusing on deep-seated structural issues and forces rather than being diverted by questions of personality and leadership style. Indeed, such is the emphasis on dialogue in his work that it could almost be put alongside systems thinking as a central feature of his approach.
Leading the learning organization
Peter Senge argues that learning organizations require a new view of leadership. He sees the traditional view of leaders (as special people who set the direction, make key decisions and energize the troops as deriving from a deeply individualistic and non-systemic worldview (1990: 340). At its centre the traditional view of leadership, ‘is based on assumptions of people’s powerlessness, their lack of personal vision and inability to master the forces of change, deficits which can be remedied only by a few great leaders’ (op. cit.). Against this
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traditional view he sets a ‘new’ view of leadership that centres on ‘subtler and more important tasks’.
In a learning organization, leaders are designers, stewards and teachers. They are responsible for building organizations were people continually expand their capabilities to understand complexity, clarify vision, and improve shared mental models – that is they are responsible for learning…. Learning organizations will remain a ‘good idea’… until people take a stand for building such organizations. Taking this stand is the first leadership act, the start of inspiring (literally ‘to breathe life into’) the vision of the learning organization. (Senge 1990: 340)
Many of the qualities that Peter Senge discusses with regard to leading the learning organization can be found in the shared leadershipmodel (discussed elsewhere on these pages). For example, what Senge approaches as inspiration, can be approached as animation. Here we will look at the three aspects of leadership that he identifies – and link his discussion with some other writers on leadership.
Leader as designer. The functions of design are rarely visible, Peter Senge argues, yet no one has a more sweeping influence than the designer (1990: 341). The organization’s policies, strategies and ‘systems’ are key area of design, but leadership goes beyond this. Integrating the five component technologies is fundamental. However, the first task entails designing the governing ideas – the purpose, vision and core values by which people should live. Building a shared vision is crucial early on as it ‘fosters a long-term orientation and an imperative for learning’ (ibid.: 344). Other disciplines also need to be attended to, but just how they are to be approached is dependent upon the situation faced. In essence, ‘the leaders’ task is designing the learning processes whereby people throughout the
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organization can deal productively with the critical issues they face, and develop their mastery in the learning disciplines’ (ibid.: 345).
Leader as steward. While the notion of leader as steward is, perhaps, most commonly associated with writers such as Peter Block (1993), Peter Senge has some interesting insights on this strand. His starting point was the ‘purpose stories’ that the managers he interviewed told about their organization. He came to realize that the managers were doing more than telling stories, they were relating the story: ‘the overarching explanation of why they do what they do, how their organization needs to evolve, and how that evolution is part of something larger’ (Senge 1990: 346). Such purpose stories provide a single set of integrating ideas that give meaning to all aspects of the leader’s work – and not unexpectedly ‘the leader develops a unique relationship to his or her own personal vision. He or she becomes a steward of the vision’ (op. cit.). One of the important things to grasp here is that stewardship involves a commitment to, and responsibility for the vision, but it does not mean that the leader owns it. It is not their possession. Leaders are stewards of the vision, their task is to manage it for the benefit of others (hence the subtitle of Block’s book – ‘Choosing service over self-interest’). Leaders learn to see their vision as part of something larger. Purpose stories evolve as they are being told, ‘in fact, they are as a result of being told’ (Senge 1990: 351). Leaders have to learn to listen to other people’s vision and to change their own where necessary. Telling the story in this way allows others to be involved and to help develop a vision that is both individual and shared.
Leader as teacher. Peter Senge starts here with Max de Pree’s (1990) injunction that the first responsibility of a leader is to define reality. While leaders may draw inspiration and spiritual reserves from their sense of stewardship, ‘much of the leverage leaders can actually exert lies in helping people achieve more accurate, more insightful and more empowering views of reality (Senge 1990: 353).
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Building on an existing ‘hierarchy of explanation’ leaders, Peter Senge argues, can influence people’s view of reality at four levels: events, patterns of behaviour, systemic structures and the ‘purpose story’. By and large most managers and leaders tend to focus on the first two of these levels (and under their influence organizations do likewise). Leaders in learning organizations attend to all four, ‘but focus predominantly on purpose and systemic structure. Moreover they “teach” people throughout the organization to do likewise’ (Senge 1993: 353). This allows them to see ‘the big picture’ and to appreciate the structural forces that condition behaviour. By attending to purpose, leaders can cultivate an understanding of what the organization (and its members) are seeking to become. One of the issues here is that leaders often have strengths in one or two of the areas but are unable, for example, to develop systemic understanding. A key to success is being able to conceptualize insights so that they become public knowledge, ‘open to challenge and further improvement’ (ibid.: 356).
“Leader as teacher” is not about “teaching” people how to achieve their vision. It is about fostering learning, for everyone. Such leaders help people throughout the organization develop systemic understandings. Accepting this responsibility is the antidote to one of the most common downfalls of otherwise gifted teachers – losing their commitment to the truth. (Senge 1990: 356)
Leaders have to create and manage creative tension – especially around the gap between vision and reality. Mastery of such tension allows for a fundamental shift. It enables the leader to see the truth in changing situations.
Issues and problems
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When making judgements about Peter Senge’s work, and the ideas he promotes, we need to place his contribution in context. His is not meant to be a definitive addition to the ‘academic’ literature of organizational learning. Peter Senge writes for practicing and aspiring managers and leaders. The concern is to identify how interventions can be made to turn organizations into ‘learning organizations’. Much of his, and similar theorists’ efforts, have been ‘devoted to identifying templates, which real organizations could attempt to emulate’ (Easterby-Smith and Araujo 1999: 2). In this field some of the significant contributions have been based around studies of organizational practice, others have ‘relied more on theoretical principles, such as systems dynamics or psychological learning theory, from which implications for design and implementation have been derived’ (op. cit.). Peter Senge, while making use of individual case studies, tends to the latter orientation.
The most appropriate question in respect of this contribution would seem to be whether it fosters praxis– informed, committed action on the part of those it is aimed at? This is an especially pertinent question as Peter Senge looks to promote a more holistic vision of organizations and the lives of people within them. Here we focus on three aspects. We start with the organization.
Organizational imperatives. Here the case against Peter Senge is fairly simple. We can find very few organizations that come close to the combination of characteristics that he identifies with the learning organization. Within a capitalist system his vision of companies and organizations turning wholehearted to the cultivation of the learning of their members can only come into fruition in a limited number of instances. While those in charge of organizations will usually look in some way to the long-term growth and sustainability of their enterprise, they may not focus on developing the human resources that the organization houses. The focus may well be on enhancing brand recognition and status (Klein 2001); developing intellectual
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capital and knowledge (Leadbeater 2000); delivering product innovation; and ensuring that production and distribution costs are kept down. As Will Hutton (1995: 8) has argued, British companies’ priorities are overwhelmingly financial. What is more, ‘the targets for profit are too high and time horizons too short’ (1995: xi). Such conditions are hardly conducive to building the sort of organization that Peter Senge proposes. Here the case against Senge is that within capitalist organizations, where the bottom line is profit, a fundamental concern with the learning and development of employees and associates is simply too idealistic.
Yet there are some currents running in Peter Senge’s favour. The need to focus on knowledge generation within an increasingly globalized economy does bring us back in some important respects to the people who have to create intellectual capital.
Productivity and competitiveness are, by and large, a function of knowledge generation and information processing: firms and territories are organized in networks of production, management and distribution; the core economic activities are global – that is they have the capacity to work as a unit in real time, or chosen time, on a planetary scale. (Castells 2001: 52)
A failure to attend to the learning of groups and individuals in the organization spells disaster in this context. As Leadbeater (2000: 70) has argued, companies need to invest not just in new machinery to make production more efficient, but in the flow of know-how that will sustain their business. Organizations need to be good at knowledge generation, appropriation and exploitation. This process is not that easy:
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Knowledge that is visible tends to be explicit, teachable, independent, detachable, it also easy for competitors to imitate. Knowledge that is intangible, tacit, less teachable, less observable, is more complex but more difficult to detach from the person who created it or the context in which it is embedded. Knowledge carried by an individual only realizes its commercial potential when it is replicated by an organization and becomes organizational knowledge. (ibid.: 71)
Here we have a very significant pressure for the fostering of ‘learning organizations’. The sort of know-how that Leadbeater is talking about here cannot be simply transmitted. It has to be engaged with, talking about and embedded in organizational structures and strategies. It has to become people’s own.
A question of sophistication and disposition. One of the biggest problems with Peter Senge’s approach is nothing to do with the theory, it’s rightness, nor the way it is presented. The issue here is that the people to whom it is addressed do not have the disposition or theoretical tools to follow it through. One clue lies in his choice of ‘disciplines’ to describe the core of his approach. As we saw a discipline is a series of principles and practices that we study, master and integrate into our lives. In other words, the approach entails significant effort on the part of the practitioner. It also entails developing quite complicated mental models, and being able to apply and adapt these to different situations – often on the hoof. Classically, the approach involves a shift from product to process (and back again). The question then becomes whether many people in organizations can handle this. All this has a direct parallel within formal education. One of the reasons that product approaches to curriculum (as exemplified in the concern for SATs tests, examination performance and school attendance) have assumed such a dominance is that alternative process approaches are much more difficult to do well. They may be superior – but many teachers lack the
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sophistication to carry them forward. There are also psychological and social barriers. As Lawrence Stenhouse put it some years ago: ‘The close examination of one’s professional performance is personally threatening; and the social climate in which teachers work generally offers little support to those who might be disposed to face that threat’ (1975: 159). We can make the same case for people in most organizations.
The process of exploring one’s performance, personality and fundamental aims in life (and this is what Peter Senge is proposing) is a daunting task for most people. To do it we need considerable support, and the motivation to carry the task through some very uncomfortable periods. It calls for the integration of different aspects of our lives and experiences. There is, here, a straightforward question concerning the vision – will people want to sign up to it? To make sense of the sorts of experiences generated and explored in a fully functioning ‘learning organization’ there needs to be ‘spiritual growth’ and the ability to locate these within some sort of framework of commitment. Thus, as employees, we are not simply asked to do our jobs and to get paid. We are also requested to join in something bigger. Many of us may just want to earn a living!
Politics and vision. Here we need to note two key problem areas. First, there is a question of how Peter Senge applies systems theory. While he introduces all sorts of broader appreciations and attends to values – his theory is not fully set in a political or moral framework. There is not a consideration of questions of social justice, democracy and exclusion. His approach largely operates at the level of organizational interests. This is would not be such a significant problem if there was a more explicit vision of the sort of society that he would like to see attained, and attention to this with regard to management and leadership. As a contrast we might turn to Peter Drucker’s (1977: 36) elegant discussion of the dimensions of management. He argued that there are three tasks – ‘equally
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important but essentially different’ – that face the management of every organization. These are:
To think through and define the specific purpose and mission of the institution, whether business enterprise, hospital, or university.
To make work productive and the worker achieving.
To manage social impacts and social responsibilities. (op. cit.)
He continues:
None of our institutions exists by itself and as an end in itself. Every one is an organ of society and exists for the sake of society. Business is not exception. ‘Free enterprise’ cannot be justified as being good for business. It can only be justified as being good for society. (Drucker 1977: 40)
If Peter Senge had attempted greater connection between the notion of the ‘learning organization’ and the ‘learning society’, and paid attention to the political and social impact of organizational activity then this area of criticism would be limited to the question of the particular vision of society and human flourishing involved.
Second, there is some question with regard to political processes concerning his emphasis on dialogue and shared vision. While Peter Senge clearly recognizes the political dimensions of organizational life, there is sneaking suspicion that he may want to transcend it. In some ways there is link here with the concerns and interests of communitarian thinkers like Amitai Etzioni (1995, 1997). As Richard Sennett (1998: 143) argues with regard to political communitarianism, it ‘falsely emphasizes unity as the source of strength in a community and mistakenly fears that when conflicts
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arise in a community, social bonds are threatened’. Within it (and arguably aspects of Peter Senge’s vision of the learning organization) there seems, at times, to be a dislike of politics and a tendency to see danger in plurality and difference. Here there is a tension between the concern for dialogue and the interest in building a shared vision. An alternative reading is that difference is good for democratic life (and organizational life) provided that we cultivate a sense of reciprocity, and ways of working that encourage deliberation. The search is not for the sort of common good that many communitarians seek (Guttman and Thompson 1996: 92) but rather for ways in which people may share in a common life. Moral disagreement will persist – the key is whether we can learn to respect and engage with each other’s ideas, behaviours and beliefs.
Conclusion
John van Maurik (2001: 201) has suggested that Peter Senge has been ahead of his time and that his arguments are insightful and revolutionary. He goes on to say that it is a matter of regret ‘that more organizations have not taken his advice and have remained geared to the quick fix’. As we have seen there are very deep-seated reasons why this may have been the case. Beyond this, though, there is the questions of whether Senge’s vision of the learning organization and the disciplines it requires has contributed to more informed and committed action with regard to organizational life? Here we have little concrete evidence to go on. However, we can make some judgements about the possibilities of his theories and proposed practices. We could say that while there are some issues and problems with his conceptualization, at least it does carry within it some questions around what might make for human flourishing. The emphases on building a shared vision, team working, personal mastery and the development of more sophisticated mental models and the way he runs the notion of dialogue through these does have the potential of allowing workplaces to be more convivial and creative.
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The drawing together of the elements via the Fifth Discipline of systemic thinking, while not being to everyone’s taste, also allows us to approach a more holistic understanding of organizational life (although Peter Senge does himself stop short of asking some important questions in this respect). These are still substantial achievements – and when linked to his popularizing of the notion of the ‘learning organization’ – it is understandable why Peter Senge has been recognized as a key thinker.
Further reading and references
Block, P. (1993) Stewardship. Choosing service over self-interest, San Francisco: Berrett-Koehler. 264 + xxiv pages. Calls for a new way of thinking about the workplace – arguing that notions of leadership and management need replacing by that of ‘stewardship’. Organizations should replace traditional management tools of control and consistency with partnership and choice. ‘Individuals who see themselves as stewards will choose responsibility over entitlement and hold themselves accountable to those over whom they exercise power’. There is a need to choose service over self-interest.
Heifetz, R. A. (1994) Leadership Without Easy Answers, Cambridge, Mass.: Belknap Press. 348 + xi pages. Just about the best of the more recent books on leadership. Looks to bring back ethical questions to the centre of debates around leadership, and turns to the leader as educator. A particular emphasis on the exploration of leadership within authority and non-authority relationships. Good on distinguishing between technical and adaptive situations.
Senge, P. M. (1990) The Fifth Discipline. The art and practice of the learning organization, London: Random House. 424 + viii pages. A seminal and highly readable book in which Senge sets out the five ‘competent technologies’ that build and sustain learning
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organizations. His emphasis on systems thinking as the fifth, and cornerstone discipline allows him to develop a more holistic appreciation of organization (and the lives of people associated with them).
References
Argyris, C., & Schön, D. (1978) Organizational learning: A theory of action perspective, Reading, Mass: Addison Wesley.
Argyris, C. and Schön, D. (1996) Organizational learning II: Theory, method and practice, Reading, Mass: Addison Wesley.
Bolman, L. G. and Deal, T. E. (1997) Reframing Organizations. Artistry, choice and leadership 2e, San Francisco: Jossey-Bass. 450 pages.
Castells, M. (2001) ‘Information technology and global capitalism’ in W. Hutton and A. Giddens (eds.) On the Edge. Living with global capitalism, London: Vintage.
DePree, M. (1990) Leadership is an Art, New York: Dell.
Drucker, P. (1977) Management, London: Pan.
Easterby-Smith, M. and Araujo, L. ‘Current debates and opportunities’ in M. Easterby-Smith, L. Araujo and J. Burgoyne (eds.) Organizational Learning and the Learning Organization, London: Sage.
Edmondson, A. and Moingeon, B. (1999) ‘Learning, trust and organizational change’ in M. Easterby-Smith, L. Araujo and J.
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Burgoyne (eds.) Organizational Learning and the Learning Organization, London: Sage.
Etzioni, A. (1995) The Spirit of Community. Rights responsibilities and the communitarian agenda, London: Fontana Press.
Etzioni, A. (1997) The New Golden Rule. Community and morality in a democratic society, London: Profile Books.
Finger, M. and Brand, S. B. (1999) ‘The concept of the “learning organization” applied to the transformation of the public sector’ in M. Easterby-Smith, L. Araujo and J. Burgoyne (eds.) Organizational Learning and the Learning Organization, London: Sage.
Fromm, E. (1979) To Have or To Be? London: Abacus.
Guttman, A. and Thompson, D. (1996) Democracy and Disagreement, Cambridge, Mass.: Belknap Press.
Hutton, W. (1995) The State We’re In, London: Jonathan Cape.
Klein, N. (2001) No Logo, London: Flamingo.
Leadbeater, C. (2000) Living on Thin Air. The new economy, London: Penguin.
Van Maurik, J. (2001) Writers on Leadership, London: Penguin.
O’Neill, J. (1995) ‘On schools as learning organizations. An interview with Peter Senge’ Educational Leadership, 52(7) http://www.ascd.org/readingroom/edlead/9504/oneil.html
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Peck, M. S. (1990) The Road Less Travelled, London: Arrow.
Schultz, J. R. (1999) ‘Peter Senge: Master of change’ Executive Update Online, http://www.gwsae.org/ExecutiveUpdate/1999/June_July/C overStory2.htm
Senge, P. (1998) ‘The Practice of Innovation’, Leader to Leader 9 http://pfdf.org/leaderbooks/l2l/summer98/senge.html
Senge, P. et. al. (1994) The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization
Senge, P., Kleiner, A., Roberts, C., Ross, R., Roth, G. and Smith, B. (1999) The Dance of Change: The Challenges of Sustaining Momentum in Learning Organizations, New York: Doubleday/Currency).
Senge, P., Cambron-McCabe, N. Lucas, T., Smith, B., Dutton, J. and Kleiner, A. (2000) Schools That Learn. A Fifth Discipline Fieldbook for Educators, Parents, and Everyone Who Cares About Education, New York: Doubleday/Currency
Stenhouse, L. (1975) An Introduction to Curriculum Research and Development, London: Heinemann.
Sennett, R. (1998) The Corrosion of Character. The personal consequences of work in the new capitalism, New York: Norton.
Links
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Dialogue from Peter Senge’s perspective – brief, but helpful, overview by Martha Merrill
fieldbook.com – ‘home to The Fifth Discipline Fieldbook Project’ – includes material on Schools that Learn and The Dance of Change
Peter Senge resources – GWSAE online listing includes interview with Senge by Jane R. Schultz.
A Primer on Systems Thinking & Organizational Learning – useful set of pages put together by John Shibley @ The Portland Learning Organization Group
Resources on Peter Senge’s learning organization – useful listing of resources from the Metropolitan Community College, Omaha.
sistemika – online Peter Senge resources
Society for Organizational Learning – various resources relating to Senge’s project.
Systems thinking – useful introductory article by Daniel Aronson on thinking.net.
Acknowledgement: Photograph of Peter Senge by Larry Lawfer (used with permission of SoL)
Bibliographic reference: Smith, M. K. (2001) ‘Peter Senge and the learning organization’, The encyclopedia of pedagogy and informal education. [https://infed.org/mobi/peter-senge-and-the- learning-organization/. Retrieved: insert date]
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© Mark K. Smith 2001
Last Updated on April 4, 2013 by infed.org
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