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THE CHANGING WORLD OF WORK, WORKERS, AND ORGAN IZATIONS

W ork, workers, and organ izations are changing in signifi cant ways, and at an ever increasing rate, and there is every rea- son to believe that both the degree and the rate of change

will continue to increase. Most of these changes have signifi cant and profound implications for how talent should be managed.

Simply stated, many of the old princi ples and practices concerning what makes for good talent management are obsolete as a result of the changing nature of work, workers, and organ izations. What used to be good or best practice—or at least good enough practice— with re spect to how people are recruited, selected, trained, developed, rewarded, and evaluated simply does not fi t today’s workforce and workplaces. Th ese strategies, practices, and policies have become increasingly obsolete, and virtually every activity that organ izations engage in with re spect to how human capital is managed needs to be changed to become a best practice in this new world of work. Th is includes many of today’s best reward, se lection, and development practices.

So far the talent management princi ples and practices of most organ- izations have not changed signifi cantly in response to this new world of work. Th ey still follow a job- based bureaucratic model, focusing on job descriptions, equating fairness with sameness and se niority, and are managed by human resources (HR) functions that are not

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C o p y r i g h t 2 0 1 7 . B e r r e t t - K o e h l e r P u b l i s h e r s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Academic Collection (EBSCOhost) - printed on 5/10/2020 12:00 AM via TRIDENT UNIVERSITY AN: 1457718 ; Lawler, Edward E..; Reinventing Talent Management : Principles and Practices for the New World of Work Account: s3642728.main.ehost

2 Reinventing Talent Management

changing as fast as the world of work is. Th is has resulted in numerous books and articles that are critical of HR, some of which suggest “blow- ing it up.”

Th ere is considerable evidence that the HR functions in most organ- izations are not strategy driven and are not changing as fast as they need to. Table 1.1 pres ents data from my global survey of large corporations. Th e survey, which is done every three years, mea sures the views of se nior HR executives on talent management and their organ izations’ practices. It is the only study that has mea sured change in HR practices on a global basis. Th e results show that between 1995 and 2016 there were no signifi cant changes in how HR spent its time. In every country

Table 1.1 Percentage of current time spent on vari ous HR roles in the United States

HR ROLES

MEANS

19951 19982 20013 20044 20075 20106 20137 20168

Maintaining rec ords: collecting, tracking, and maintaining data on employees

15.4 16.1 14.9 13.2 15.8 13.6 15.2 13.2

Auditing/controlling: ensuring compliance with internal operations, regulations, and legal and union requirements

12.2 11.2 11.4 13.3 11.6 12.5 13.0 12.0

HR ser vice providers: assisting with implementation and administration of HR practices

31.37 35.05,7 31.37 32.07 27.82 30.4 25.71,2,3,4 25.92

Development of HR systems and practices: developing new HR systems and practices

18.6 19.2 19.3 18.1 19.2 16.7 19.0 20.96

Strategic business partners: being a member of the management team; involvement with strategic HR planning, orga nizational design, and strategic change

22.0 20.36,7 23.2 23.5 25.6 26.82 27.12 28.12

Source: Edward E. Lawler III and John W. Boudreau, Global Trends in Human Resource Management: A Twenty- Year Analy sis (Stanford, CA: Stanford University Press, 2015). Results from 2016 are new, and were not included in the 2015 book. Note: 1,2,3,4,5,6.7,8 Signifi cant diff erences between years (p ≤ .05).

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Changing World of Work, Workers, and Organ izations 3

studied HR has spent and continues to spend most of its time on rec ord keeping and providing administrative ser vices.

Th e good news is that the major changes that have and will occur in the world of work are identifi able and will likely to continue to be. As a result, it is pos si ble to make fairly defi nitive statements as to what the world of work will be like in the future. Th is in turn means that it is pos- si ble to specify what organ izations should do with re spect to talent management to be eff ective moving forward.

Talent management should become increasingly strategy driven, skills based, per for mance focused, agile, segmented, and evidence based. Before specifying in detail what talent management should look like, it is impor tant to identify recent key changes in the world of work and why they demand new approaches to talent management.

G L O B A L A N D C O M P E T I T I V E O R G A N I Z AT I O N S

Organ izations now increasingly operate in global business, social, and po liti cal environments because the products, ser vices, and customers of most large corporations are multinational. Many industries are domi- nated by major competitors that are global in their operations; they pro- duce products that are created on a global basis and targeted at global markets. Th is is true for the energy, automotive, and information tech- nology industries, and for major ser vices such as fi nance, consulting, and advertising.

Yes, there are still many businesses that are local, but they represent a decreasing percentage of the total business that is done in such places as China, the Eu ro pean Union, and the United States. Even those organ izations that do not operate globally are significantly affected by the organ izations that do; they compete for labor with them, and oft en find themselves doing business with and at times competing with global organ izations.

One in ter est ing example of the growth of globalization in the last twenty years is provided by food ser vice and package delivery compa- nies, both of which continue to “go global” at a rapid rate. McDonalds and Starbucks are prime examples of U.S. national food ser vice organ- izations whose reach has become global in a relatively short period of  time. FedEx and UPS have both gone global with their delivery

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4 Reinventing Talent Management

operations. Information technology concerns such as Google and Microsoft have also gone global and in turn made it pos si ble to connect organ izations’ worldwide operations.

One of the most impor tant features of the global business environ- ment is the ability it provides to internationally source the production and delivery of products and ser vices. Information technology has made it pos si ble to globally source talent for soft ware development as well as phone sales and customer ser vice. Many of the most obvious exam- ples of this global sourcing are in the manufacturing sector: many prod- ucts are partly or completely produced in countries that have low labor costs and, in some cases, easy access to natu ral resources that aid low- cost production. As a result, an increasing number of organ izations now face global competitors rather than just local ones. Th is is true of both ser vice organ izations and manufacturing organ izations.

A major factor that has led to the highly competitive, rapidly chang- ing global business environment that exists today is the availability of fi nancial capital. Th ere is— particularly in developed countries—an increasing amount of venture capital available; as a result, individuals and organ izations who wish to create new businesses or grow existing ones can access the fi nancial backing they need relatively easily. Th ere is no reason to believe that in the foreseeable future this supply of capital will decrease; the best prediction is that there will be an ever greater number of start- ups on a worldwide basis in de cades to come and, as a result, the business environment will become increasingly competitive.

Strongly supporting the argument that more competitors will be cre- ated is the real ity that more technology will be available to create new businesses. What happened in the case of information technology— with smartphones, personal computers, and tablets replacing type- writers, telephones, adding machines, and mainframe computers, and with social media creating new businesses—is likely to happen in other areas.

Th e globalization of business makes talent a global resource, and that raises many talent management issues. Organ izations increasingly can and need to go where the “right” talent is available for the best price to be competitive. Th ey need not only to source talent globally to be com- petitive but also to make good strategic decisions about how they man-

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Changing World of Work, Workers, and Organ izations 5

age talent coming from diff er ent national cultures. One clear implication of this is that an increasing number of organ izations will need to man- age talent eff ectively on a global basis, dealing with governments and other cultures— and the complexities they create— with re spect to all talent management issues.

Perhaps the greatest impact the global business environment will have will be on the need for organ izations to consistently improve their per for mance. What is good enough today will not be good enough to- morrow. Th is point was captured in the quality lit er a ture de cades ago by the argument for continuous improvement, and it is even truer today. In fact, not just continuous improvement but dramatic improvement is oft en needed— not just in quality but in speed, cost, and innovation.

T E C H N O L O G Y I S A M A J O R D I S R U P T O R

Technology— particularly in the form of information technology and intelligent computing— will increasingly be a major disruptive force when it comes to how, when, and where work is done and how it should be managed. Many previously repetitive, tedious tasks have been taken over by technology, and virtually all organ ization communication has changed dramatically as a result of such advancements. Th ey will con- tinue to have a major impact on when, where, and how work is done as well as what work is done. Already many individuals can and do work anywhere, at any time and, in many cases, with anyone.

Th ere is also little doubt that we are just at the beginning of the in- formation technology revolution. What people do, and when, where, and how they do it, is going to change dramatically and continuously over the next de cades. How their per for mance is monitored and mea- sured is also sure to change.

Organ izations are increasingly going to need to be able to quickly change what they do and how, when, where, and how well they do it, as well as deciding who will be responsible for doing it. And they will need to change as technology makes certain products and ser vices ob- solete as well as the means of producing them. Just as no one sits at a typewriter today and prepares letters, in the future it is very unlikely that people will sit at a personal computer and send e- mails. It is inevi- table that, increasingly, manufacturing tasks will be done by smart

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6 Reinventing Talent Management

machines and by companies that globally distribute production based not just on labor costs but also on the quality and nature of the work- force, infrastructure, and technology in other countries.

Technology is driving and enabling the economy and organ izations to use an increasing number of part- time and freelance crowdsourced workers who do work that has traditionally been done by full- time em- ployees. Th e app economy is upon us, and it creates the opportunity for organ izations to use vari ous types of employment relationships that are fl exible, adaptable, and can be driven by their changing needs for both skilled and unskilled workers.

Technology is impacting where and how work is done, and we are just at the beginning of this revolution. People will increasingly have the ability and all the tools needed to do many kinds of work and to connect with others around the clock and year round— virtually any- where in the world. A key issue is how organ izations develop a work- force, and how they coordinate and evaluate the per for mance of individuals who are not necessarily colocated but can communicate quickly and easily with each other.

Advances in computer hardware, algorithms, and data analytics will increase the work that machines do and migrate many kinds of work from individuals to technology- based operations. Intelligent computers are now capable of learning, playing complex games, responding to cus- tomers, and performing complex medical diagnoses and even some surgeries. Th is is an area where the rate of change is likely to accelerate as digital assistants are able to provide an increasing number of ser vices in response to voice commands and IBM Watson– type computer sys- tems are developed. In addition, the Internet is creating a world in which machines can connect and perform in ways that once required humans. Th ree- dimensional printing is changing manufacturing, and virtual real ity is changing entertainment.

Th e challenge for organ izations is to fi nd the optimal balance be- tween human- and machine- controlled operations and decision mak- ing. It is unclear how the new technologies will aff ect the total number of jobs that exist, but one clear outcome is that there will be fewer and fewer simple repetitive tasks, less human monitoring needed, and less su- pervision performed by man ag ers. Another result will be that an increas- ing number of employees in complex organ izations will be “knowledge

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Changing World of Work, Workers, and Organ izations 7

workers” of one kind or another. Others will be talent that will be asked to work anywhere, at any time, on complex assignments that involve developing new technology and programming it. And more and more knowledge work will be done by computers as they develop more ana- lytic and decision- making capabilities.

Th e best estimates tell us that organ izations are just at the beginning of the disruption caused by changes in how, where, when, and with whom people work. Technology is moving rapidly in terms of the capa- bility it has to solve prob lems, pro cess data, learn, manufacture prod- ucts, monitor activities, and connect people. Global organ izations are likely to be leaders in the use of technology to increase their eff ectiveness in the areas of cost control, product design, production, marketing, sales, and internal operations. In order to do this they will need to be leaders in changing how they manage talent.

W O R K F O R C E D I V E R S I T Y

In most organ izations, many changes in the composition of the work- force have already taken place. Th ese organ izations’ workforces are much more diverse than they were just ten years ago, and there are many reasons to believe that we will see continued growth in their diver- sity; this is particularly true in developed countries that have laws against discrimination based on age, race, sexual orientation, gen- der, or gender identity. Th e growing emphasis in technical and man- agement education on the inclusion of minorities and women is another major contributor to workforce diversity. Th e age range of the workforce is going to go up, the gender balance is going to shift , and the workforce is going to include more transgender and ethnic minority people. Overall, most organ izations will have increasingly diverse workforces with re spect to every impor tant characteristic of human beings.

Diff er ent age groups think about careers, and the features of organ- izations, in diff er ent ways. Th is seems to be a product of not only aging and maturation but also of the real ity that people from diff er ent gen- erations have diff er ent experiences at any given age. As a result, they look at work diff erently at any given point in time. Every new generation is likely to think, act, and look at work and careers diff erently when

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8 Reinventing Talent Management

compared to how previous generations did when they were that age, because the world is in a constant pro cess of change.

Organ izations are just beginning to feel the full impact of age discrimination legislation and increases in life expectancy. Th ese factors are leading more individuals to continue working into their sev- enties and eighties, and to a workforce that has more age diversity. Th is is likely to become even more common as health care delivery systems improve and people have longer life expectancies— particularly in less- developed countries as their health care systems improve. Another contributor to longer work careers is likely to be the need to earn enough money to “aff ord” retirement.

Organ izations can no longer assume that they are dealing with a homogeneous group when it comes to the many features of individuals that are age related. Th ey need to be able to manage and or ga nize adults of virtually all ages.

Overall, organ izations must be able to manage individuals that dif- fer in age, gender, race, sexual orientation, and national origin. As a re- sult, there will be very few organ ization and talent management issues for which there is an eff ective “one size fi ts all” approach.

S U S TA I N A B L E P E R F O R M A N C E

Th e demand that organ izations perform well has expanded over the last several de cades in the sense that it is not enough for them to improve solely in terms of the quality of the products and ser vices they produce and their fi nancial per for mance. Th ey are increasingly being asked to perform better in how they impact the environment, the society in which they operate, and their employees.

Th e social movement that demands that organ izations perform bet- ter in the social and environmental areas has gained considerable mo- mentum in the past de cade and will continue to do so. It has resulted in new laws involving pollution and how employees are treated. Not sur- prisingly, it is putting the greatest amount of pressure on organ izations in developed countries. Th ey are under pressure to change the way they operate and to change the way their suppliers and subsidiaries in devel- oping countries operate and do business when it comes to their im- pact on the environment and how they treat their talent.

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Changing World of Work, Workers, and Organ izations 9

As the world becomes more conscious of the importance of sustain- able corporate per for mance, there is little doubt that corporations will increasingly be held accountable for their global impact on the environ- ment, their employees, and the socie ties in which they operate. Th e de- mand that corporations meet what are oft en called triple- bottom- line standards and report on their per for mance is growing. As of yet this is certainly not being undertaken by a majority of the corporations in either the developed or the developing world, but there is signifi cant movement in this direction.

Prime examples of organ izations moving toward triple- bottom- line per for mance accountability are Google, Starbucks, and Unilever; they are ahead of the curve and showing some positive results. Th e more suc- cessful they are, the more pressure there will be on other corporations to follow their lead and perform well in all the areas of corporate sustainability.

A C C E L E R AT I N G C H A N G E

Th e changes discussed thus far in globalization, diversity, technology, and sustainability point to a very strong and impor tant point: the rate of change is likely to continue to be rapid and increasingly disruptive with re spect to traditional models of how organ izations are designed and how they manage their talent. Most of our models of talent man- agement and organ ization design assume a stance toward change that is episodic— that is, they argue for an analy sis of the situation, an im- plementation of changes that are needed, and a period of stability until the next period of change needs to occur.

It is now well established that the traditional change model is no lon- ger appropriate because it operates too slowly. What is needed instead is a continuous change approach in which organ izations are agile and ca- pable of constantly changing the ways in which they operate. Th ey cannot rely on periods of stability during which they can perfect recent changes and plan for the next ones. Rather, they need to be constantly experi- menting and changing what they do and how they operate in order to respond quickly to the rapidly changing environments they face. To do this they must have talent management practices that support experi- mentation, agility, and change.

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10 Reinventing Talent Management

TA L E N T I S C R I T I C A L

For de cades, many chief executive offi cers (CEOs) and se nior executives have said that talent is their organ ization’s most impor tant asset. In fact, this may not have been true for many of them, and it is clear that they have not acted according to this mind- set. Without question, for a few organ izations talent always has been their most critical resource and they have treated it that way. But in the future talent will be the most impor tant asset for virtually every organ ization. Simply stated, the changing nature of the work organ izations do and the rapidly chang- ing, highly competitive environment they face will make it impossible for most organ izations to perform well without the right talent. As a result, talent will become the asset that makes the diff erence between winning and losing.

For most organ izations, talent has always been a major expense. In developed countries, a common estimate is that 70  percent of the costs of a typical organ ization goes to pay and benefi ts. If you add to that the cost of recruiting and managing talent, the total cost of labor oft en ex- ceeds 70  percent by a signifi cant amount. Th us, it has always made sense to do a reasonable job of managing wages, benefi ts, staffi ng levels, and work per for mance.

But this situation has changed. Most of the changes mentioned so far in this chapter concerning work and organ izations mean that decisions made about talent are increasingly becoming the diff erence- making de- terminants of orga nizational per for mance and not just key determinants of an organ ization’s costs. Diff erences in talent per for mance eff ective- ness increasingly lead directly to diff erences in overall orga nizational per for mance. Because of this, superior talent management results in superior orga nizational per for mance. Th ose organ izations that attract and retain the right kind of talent and treat it, reward it, develop it, and deploy it correctly, perform better than those that simply fi ll jobs with people.

Admittedly, in some organ izations talent does not make a great dif- ference with re spect to orga nizational per for mance. Many bureaucratic organ izations have been designed and structured so that individuals do not need to perform at a superior level; they simply need to perform at an adequate level. In many simple repetitive jobs in manufacturing, data

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Changing World of Work, Workers, and Organ izations 11

entry, and maintenance, there is no opportunity for talent to perform at an exceptional level, and there is little advantage to an organ ization if someone performs at an exceptional level; an adequate level is suffi - cient. Th is is particularly true with re spect to the work in an organ ization that does not make a great diff erence with re spect to orga nizational per for mance.

Th e situation is diff er ent, however, when the per for mance of organ- izations depends on advanced technology, knowledge work, and high- value- added work. In this situation, which exists in technology, fi nancial ser vices, the entertainment industry, and many other fi elds, the best- performing talent is many times more valuable than the rest because it can make a signifi cant diff erence in orga nizational per for mance. Simi- larly, in customer ser vice situations, when individuals have to deal with knowledgeable and discerning customers the diff erence between good ser vice and outstanding ser vice can have a direct and signifi cant impact on the bottom line of the organ ization. Th us, it makes sense for such an organ ization to focus on attracting, retaining, and developing individ- uals who perform at not just an acceptable level but an outstanding one.

Th e globalization and growing complexity of work are two additional changes that make talent an increasingly critical resource for an organ- ization; they make organ izations and work more complicated and require talent to have a broader understanding of management, orga nizational eff ectiveness, the global economic situation, and local cultures and norms to perform well. Th is means that getting the right talent may be more dif- fi cult, but it also means that it can provide a signifi cant competitive ad- vantage when that talent is obtained and managed eff ectively.

Th ere is one additional point to be made about attracting and retain- ing the right talent in today’s and tomorrow’s work settings: such eff orts have become more costly, and they will continue to be. It has always been true that training, turnover, and replacement costs depend on the complexity of jobs that are being fi lled. For some simple jobs, the cost is oft en only equal to a few weeks of pay; as a result, high levels of turn- over are not a major cost for an organ ization. With complex work, the need for talented and well- trained individuals makes the cost of turn- over much higher: it is oft en equal to six months or a year’s salary.

It is particularly impor tant that organ izations that perform knowl- edge work and complex customer ser vice work do an outstanding job

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12 Reinventing Talent Management

of attracting, retaining, and developing the right talent. Th ey can gain a competitive advantage by doing this simply because they have lower turnover costs, but that may be the least signifi cant result when com- pared to the resulting per for mance improvements that come from hav- ing a motivated engaged knowledgeable workforce.

One direct eff ect of talent becoming a more impor tant determinant of orga nizational eff ectiveness is that it brings more bargaining power: talented individuals can oft en “write their own tickets” when it comes to work deals. Th is has been true in sports and entertainment for de cades, and has resulted in some amazing compensation and benefi t deals; now it is increasingly becoming true for “superstar” executives and technical contributors. Th e amount of high- power talent most organ- izations need is going to increase as the complexity of their products, work, and ser vices increases. Th us, the eff ectiveness of an increasing number of organ izations is going to be determined by how eff ectively they attract, retain, develop, and manage their major talent.

Fi nally, the rate of change in the work environment and the agility required by organ izations to deal with it increases the importance of maintaining talent agility. Th ere is an increasingly high probability that yesterday’s talent is not the right talent for tomorrow. As a result, organ- izations need to have agile talent management practices that allow them to continuously and frequently change the skill sets of their work- forces. Talent agility is a diffi cult competency or capability to develop in organ izations, and it increasingly makes eff ective talent management diffi cult. It requires organ izations to take an agility point of view with re spect to talent management issues such as pay, training and develop- ment, and job security, as well as the best use of part- time, contract, and temporary talent.

C O N C L U S I O N

Recent major changes in work, the workforce, and organ izations are shown in table 1.2. Each change is rated on its importance with re spect to talent management and its potential for growth.

Th e globalization of work and organ izations is rated as highly impor- tant. Th is refl ects the tremendous impact globalization has on those who do work and how they should be managed. Moderate progression

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Changing World of Work, Workers, and Organ izations 13

in this trend is projected in the next de cade. Th ere are some parts of the globe that have not yet come into the world economy and are not likely to in the near future. But many regions are producing more educated workers and performing types of work that were not previously per- formed in those regions. Th us, globalization is rated as moderate in growth since the po liti cal instabilities that are likely to slow it down in some parts of the world are not likely to occur across the entire global business world.

Technology is rated as a highly impor tant factor in determining what work and organ izations will look like in the future. Th is refl ects the ex- pected accelerated rate of major advances in information technology, robotics, sustainably eff ective ways to generate energy, and changes in transportation, as well as in manufacturing capabilities. Its high impor- tance rating refl ects technology’s power to change the very nature of the work people do, where and how they do it, and how they are held account- able for doing it. It is rated as rapid in growth because of the many disruptive products that are likely to be created in areas ranging from communications to energy production.

Diversity is rated medium in importance; this is because although signifi cant changes are required in how talent is managed, as diversity increases many of them are not as substantial as those required by tech- nology and globalization. It is rated slow in future growth because the challenges that are involved in bringing new types of individuals (e.g., minorities, foreign nationals) into the workforce in many countries are and will continue to be signifi cant.

Th e move to more sustainability in business models is rated as medium in importance for talent management and as moderate in future growth. It is an impor tant factor in the careers and work choices of some individuals, but it is not an impor tant universal issue. It is also likely to lead to changes in how some organ izations operate, but it is not likely to quickly become a major objective for many. Th e reasons for this are clear: although in many developed countries there is increasing demand that organ izations behave in a more sustainable manner, this is not yet a high priority global action issue (even though it should be). Many parts of the globe have not made a strong commitment to sustainability and, as a result, a rapid change by corporations with re spect to how much attention they pay to it is not likely to happen.

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14 Reinventing Talent Management

Change is rated as highly impor tant and as rapid in growth. Th ese ratings refl ect the cumulative eff ects of globalization, technology, and sustainability as major drivers of how organ izations operate and per- form. Th ere is every reason to believe that this combination of forces will continue to increase in their impact and to create the demand for more agile and fl exible organ izations and talent management pro cesses.

Th e fi nal major change is the criticality of talent. Th is is of high importance because the many changes that are making talent more valuable and central to the eff ectiveness of organ izations require ma- jor changes in how organizations are managed. It is rated moderate in growth because, though it may not grow at an extremely rapid rate, it is likely to become increasingly true as technology, diversity, and change require organ izations to become more eff ective at talent utiliza- tion, talent development, and creating more agile talent management practices.

As can be seen in table  1.2, it is not a mystery where the world of work, workers, and organ izations is going; it will be more diverse, com- petitive, complex, and challenging to manage. Workforces will be more diverse, technology will be increasingly disruptive, demands for sus- tainable per for mance will increase, and competitive demands will be greater. Th e convergence of these changes will create a new world of work that will not just call for it; it will demand new talent management princi- ples and practices.

Th e challenge is to create organ izations with talent management sys- tems that are capable of responding to these changes. Talent manage- ment needs to be a priority in organ izations because it can be a major

Table 1.2 Major changes: importance and growth

Importance Growth

Globalization high moderate

Technology high rapid

Diversity medium slow

Sustainability medium moderate

Change/Agility high rapid

Talent Critical high moderate

Copyright © Edward E. Lawler III and Center for Eff ective Organizations at USC.

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Changing World of Work, Workers, and Organ izations 15

source of competitive advantage or, if managed poorly, a fatal fl aw. Th is brings truth to CEOs’ favorite adage: “ People are our most impor tant asset.” Today’s and tomorrow’s challenges are to translate that philoso- phy into talent management and organ ization design approaches that recognize it and eff ectively act on it.

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