Knowledge Center: Article
Future of Work
Preparing your organization for the future of work6/8/2018 Malcolm Sclanders
The companies of the future will require very different strategic capabilities to win in the changing world economy. The concept of creative destruction, in which innovation and new business models fuel the rise of new companies that rapidly overtake incumbents, is well established, but the pace has only accelerated in recent years. Research from the Yale School of Management suggests that 75% of the current S&P 500 will be replaced within 10 years,1 largely due to the fact that many organizations are ill-equipped and unprepared to deal with—let alone maximize—the opportunities that creative destruction affords.
Multiple forces, many related to workforce trends, are causing disruption. Five generations will be working simultaneously, from baby boomers to Generation Z—though by 2025 millennials will dominate, making up 75% of the workforce. Each generation has vastly different expectations for work, with younger generations voicing a preference for a flexible and customizable work environment. Furthermore, research from the University of Oxford suggests that up to 47% of US employees are in jobs that could disappear in the next decade or two, largely due to the influences of technology.2 Increasing mobility, continued globalization, and changing behaviors—for example, the amount of personal information individuals are willing to share in the public domain—will also cause ripple effects. And companies are increasingly recognizing the importance of diversity and inclusion in building the strongest possible workforce. (See “The CHRO’s critical role in promoting ethnic diversity.”)
These disruptions will cause significant change in every industry. In response, the C-suite is turning to the chief human resources officer for direction. Yet many CHROs are struggling to craft effective talent strategies to ensure that their organizations have the requisite capabilities to remain competitive. In an environment where the very nature of talent attraction and retention is constantly shifting, the path forward can seem opaque. By confronting five challenges, however, companies can begin to build the organizational capabilities needed to support the workforce of the future.
While we can’t know exactly what the workforce will look like in the coming years, we can draw some assumptions based on current research. For the sake of illustration, consider a company that is currently composed of 100 employees. In 10 years, the company may look like this:
- The company will consist of just 60 employees, thanks to advances in automation—and many of those employees will fill new roles in areas such as data science, artificial intelligence (AI) engineering, behavioral science, and resource management.
- Permanent employees will comprise just half of the workforce, with the other half being freelancers from the gig economy.
- One in three employees will not come into the office but will instead split their time between home and shared working spaces provided by third parties, such as WeWork.
- Three in four employees will be millennials, and Generation Z will be entering the workforce as well.
These changes can have far-reaching consequences for everything from organizational structure to how companies invest in real estate and IT systems.
Five challenges to watch
An overarching theme of the workforce of the future is the need for new and different approaches to talent. Today’s HR functions, however, tend to maintain relatively undifferentiated employee brands and value propositions, and most companies lag in their understanding of how the needs of current and potential employees are changing. CHROs can look to other functions in the organization to draw insights on how to use segmentation to support strategy. For example, marketing departments at most companies have grown adept at segmenting customers and tailoring engagement strategies.
To build a segmented strategy for their future workforce, CHROs must acknowledge and address five workforce challenges:
- Keeping your brightest and best. While each industry has different specialized needs—for example, insurance companies need actuaries, and banks often seek top financial analysts—demand for employees with a variety of technological and analytics skills will cut across industries. The resulting imbalance in supply and demand will increase attrition and costs for many of the sorts of skilled workers critical to a company’s future, such as mathematicians, data scientists, and actuaries.
- Embracing the multigenerational workforce. The days of undifferentiated talent approaches are over, and companies must learn the nuances of their new, more varied workforce. Millennials, for example, appear more likely than others to leave their jobs after just a few years, and the attributes they seek in an employer are different, too. The key to keeping this cohort is to focus on factors beyond compensation and benefits, such as flexible work arrangements, more varied career opportunities, and greater recognition of achievements.
- Tuning into the gig economy. Companies that have relied on a permanent workforce will need to make a significant shift toward the gig economy, as workers of all generations (but again, particularly millennials) prefer the flexibility of freelance careers.
- Embracing diversity. A significant body of research has shown the importance of a diverse workforce in terms of age, gender, and ethnicity, among other categories. Yet BAME (black, Asian, and minority ethnic) talent and women struggle to advance in many companies. Companies will need to take radical actions to significantly shift these imbalances.
- Evolving the company culture continuously. Creating a work environment that encourages collaboration and places a greater focus on employee well-being, including nutrition, will be critical to improving employee performance. As people search for inspirational environments and lead ever more technologically connected lives, physical space will play a stronger role in company culture. (To learn more about technology’s impact on real estate and the way people use buildings, see “Real estate in the augmented age.”) According to a recent UK survey, 48% of survey respondents indicated that workplace design has a notable impact on their decision to stay at a job.3
The path forward
Winning companies can accelerate their performance by building their future workforce capabilities (FWCs) in three stages (figure; click for a larger view).
1. Infancy. For many organizations, the infancy stage is about getting the basics right and building capabilities. Companies at the beginning of the journey will need to start by developing a clear understanding of the current gaps and surpluses in their workforce. This stage involves gaining an in-depth understanding of the current workforce. Adopting a broad perspective is a necessity: one company, for example, sought to catalog the positions that its employees had held since joining the organization but didn’t delve into the employees’ previous work experience before joining the company. The result was an incomplete inventory of the capabilities and potential of its workforce.
2. Intermediate. In the next stage, companies will link talent and workforce capabilities to strategic planning. For example, one bank simultaneously worked through possible strategic scenarios and the type of and shape of the workforce it will need to execute them. Investments will be needed to develop global data workforce systems, people, and processes capable of supporting strategic decision making.
3. Advanced. In the most mature stage, companies will shape their business strategy based on their future workforce capabilities, ensuring that the company has the right workforce with the right capabilities in the right place. Companies in the advanced stage have recognized that they cannot rely on the marketplace to provide a sufficient supply of talent. Instead, they have implemented a new approach to building the workforce of the future both internally and externally. A large telco, for example, has completely revamped its learning and development and hiring strategies, placing far more emphasis on grooming current employees for opportunities than attracting top talent.
Tomorrow’s workforce will look fundamentally different from today’s, so CHROs must acknowledge the macro trends in employee attraction and retention and take a proactive approach to building skills and capabilities. Leaders should focus on formulating answers to the following questions: How do I accurately identify the type of workforce I need? How am I going to optimize the benefits of trends such as automation and the gig economy? And how am I going to transition from what I have today to what I need for the future? The answers to these questions will support the development of more effective talent strategies and give companies a better shot at surviving the ongoing disruption.
About the author
Malcolm Sclanders (email@example.com) is a principal in Heidrick & Struggles’ London office and a member of Heidrick Consulting.
A version of this article was originally published by Changeboard.
1 Bourree Lam, “Where do firms go when they die?” Atlantic, April 12, 2015.
2 Carl Benedikt Frey and Michael A. Osborne, The Future of Employment: How Susceptible Are Jobs to Computerisation? Oxford Martin School, University of Oxford, September 2013.
3 Tiffany Paczek, “What really contributes to wellness in the workplace?” Facility Management, October 25, 2017.