Business Strategy = People Strategy

With every New Year comes a rash of predictions of what that new year will bring. This year is no exception and I’ve read a series of interesting articles from many sources about the new world of work and what 2024 (and beyond) offers. While the detailed points of those predictions obviously vary, I’m struck by how some of the themes are common across so many commentators, geographies and industries. And secondly I’m struck by just how novel the themes actually are compared to what leaders have traditionally been exercised by. The themes may have first germinated a year or two ago, but they are very different to the issues that businesses and leaders were grappling with for the previous two decades (or longer). We are still in the early days of facing a new landscape that is challenging our leaders who, by definition, do not have years of deep experience in these areas and are having to work out their answers in real time. In a nutshell, the world of work is on the cusp of changing dramatically and profoundly and has already started this transition. This has implications for everyone involved: employees and what being at work is going to be all about, employers and how they will compete (or even survive) and societies as a whole as the basis of how economic activity creates value itself changes. As ever at a time of disruption and dislocation, there will be winners and losers. However, recognising the current situation and facing the brutal facts is half the battle in succeeding, so let me call out what I see as some of the key issues leaders need to solve for, plus the implications this may have on all of us.

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Firstly, how work gets done has changed permanently in many areas of business and jobs. We all know since Covid that many roles can be delivered remotely and thank goodness that’s true because without that, the world’s economy would have shut down completely in 2020. However, 4 years on and we have not yet found the solution to how we enshrine the best of a pre-Covid and a post-Covid working environment. For many traditionally office-based roles, the pendulum has distinctly swung away from ‘largely remote’ as was predominantly the case in the immediate aftermath of Covid, to ‘largely in-office’ for an increasing number of companies globally. On a weekly basis I read about the next large, global corporate that is requiring greater presence from its employees in the office, in person. It started with location split approximately half-in, half-out, then moved to 3 days a week in-office and many are now on 4 days in, including Mondays and Fridays. It’s not just the banks, who were the quickest to return to an office-based work mode, who are moving back to something more akin to a pre-Covid style either. Just the other week I opened the news to see that Boots, the venerable pharmacist operating in multiple countries around the world, is now stipulating 5 days a week in the office for its headquarter teams. Yes of course there are many organisations who would claim they have embraced a far more flexible routine and some that are even trialling 4 day weeks, but the direction of travel is distinctly shifting to greater ‘presence’ and sentiment seems set to continue to shift that way.

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Why is this ? There are many reasons in my view. Reinforcing a culture and a sense of belonging, onboarding new joiners effectively, creative ideation, training people better, etc. I subscribe to the view that all such examples tend to work better when people are physically together. However the one reason that seems to stand out most prominently in my view is the quest to increase productivity. It may be called something else, but ultimately it’s about somehow getting more output from the workforce. Many organisations (and countries) have seen productivity stubbornly stuck at the same plateau for years. It has been oft-predicted that the shift to remote or flexible working would unleash productivity gains as employees avoided arduous commutes, felt more trusted and engaged with their organisations, or simply got more done because they had fewer distractions. Of course there are examples of how we deliver more from this approach – I know from personal experience that there are certain tasks in my role where I am far more productive by being somewhere quiet, away from the office. But if we look at a macro level and ask if productivity across the economy has increased, and whether most organisations are benefiting from this Holy Grail, the answer seems to be a resounding negative. The reaction then seems to be to increasingly have the people back in the office, defaulting to a long-established belief that presence equates to things getting done better. All well and good, but the problem is that these days, this approach does not sit well with a very large cohort of employees. Many people (but not the majority, to be clear) insist on fully remote roles. Based on multiple survey data, the vast majority of employees see the benefit of a hybrid solution and look forward to their days in the office as they bring camaraderie, a sense of belonging, training and learning opportunities amongst many other important benefits. But people also want to retain their flexibility to work remotely for a reasonable part of the week. There remains a disconnect between what the employer is requiring and what the employee is requesting and there are cases now where this disconnect is even leading to the threat of industrial action. Clearly the whole hybrid working agenda remains a work in progress and will remain high on the list of challenges as organisations seek to gain more from their workforce and individuals seek to defend the flexibility they have garnered over recent years. There are no easy answers, but this will strain the employer-employee social contract, particularly while the skills mismatch is as acute as ever and employers and employees consider how hard they can push their respective cases.

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No discussion around productivity can be held without referencing the impact of AI. It’s undoubted in my view that AI will enable more work to get done, and more quickly, than in the past, so could be a key to unlocking productivity. The challenges however are manifold. Does the use of AI mean we will need fewer workers to deliver the necessary output and put masses of jobs under threat of extinction ? Or does AI free people up from the drudgery side of their jobs to be creative and use their human skills to greater advantage ? The debate reminds me of the advent of offshoring of many roles 20+ years ago when organisations started to consider whether specific tasks or roles could be moved from being domestically delivered to offshore delivered, leveraging a bigger resource pool at lower cost. Back then, people worried that it would spell the end of millions of skilled roles in the West. Undoubtedly it led to dislocation, but it did not wipe out whole sections of talented people as new skills were required and developed and job categories evolved. It’s now perfectly normal to tap into global talent to get work done, and most of us seem to be a winner from that shift. I see AI doing the same, albeit AI has the potential to be deployed (and add value) to a hugely varied set of issues and so will have a far more profound impact. Again, there will be winners and losers but the best way to improve the chances of winning are to embrace the concept, be open-minded about use cases and start to build and test these ideas. Far better in my view to get started and see where it takes you and what you can learn than get stuck in analysis paralysis because you can be sure someone else is moving forward even if you’re not. And are the productivity gains real ? Yes, for sure. I see a rapidly increasing number of examples across a range of industries as diverse as design, legal, scientific research, technology, medicine, financial services, even recruitment, where the results are clear. The trick however will be in designing what new skills we need to develop in the workforce as a myriad of traditional tasks are handled better by the machine. That has the potential to be extremely powerful and could unlock significant gains, so the people agenda in any organisation is inextricably linked to the technology/digital/AI strategy.

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Which brings me onto my next theme that businesses are having to deal with: people engagement. Looking back over many years, the social contract between employers and employees has changed 180 degrees and feels as though its changing again. When I first entered the workforce, there was often an implicit understanding that an employee would be looked after by the company over many years, and that that was reciprocated by a sense of loyalty in return. All that changed dcades ago and the bonds between employers and employees became stretched to a level where in many organisations they were barely perceptible. Companies increased and downsized workforces in rapid fashion, share prices soared when companies announced massive layoffs (of the very people they earlier claimed were their greatest asset) and not unsurprisingly given that lack of long term commitment from employers, employees became very quick to move when they found something marginally better. The social contract became a more transactional one and that has been the case for a long time in many places. But now, smart businesses are starting to shift back towards a more relationship model. Not to say jobs-for-life are coming back – I don’t think that was a good idea in the first place. But in a world where the skills we need to compete are in such rapid and unpredictable flux, I see more and more businesses being thoughtful about building workforces around adaptability, potential and willingness to continually learn, as opposed to the more embedded approach of hiring for the currently-required skills, to then let those people go when the skills become less relevant or the market goes down. Organisations are thinking more and more about how to retain the talent they have, accelerated by massively increased employee choice that makes switching jobs easier. So many skills today are transferable across industry silos – for example, every company is a digital company, so these skills are very transferable. Add in the fact that many parts of the world today face almost full employment while declining working age populations means there will be an ever-decreasing pool of talent, and it’s clear why companies are starting to think about retention and development as opposed to hiring and firing. The implication of this is that the beliefs we have traditionally followed in our recruitment processes become much less relevant. What becomes crucial is the ability to deeply understand what makes a person tick, as opposed to whether they can evidence that they are experts in the latest programming language or the most recent changes to accounting rules. Personally, I don’t see that the world is particularly well set up to make that shift just yet. Procedures need to be changed, tools developed that can garner the necessary insights and hiring managers convinced that we are building workforces to cope with whatever is coming next as opposed to simply being able to deal with the present. Organisations also need to reconsider the investment they make in their people to stay at the forefront of capability. I have heard many times in the current transactional model why money spent on training and development is not the best use of funds as the individuals will leave anyway, reinforced by their new-found skills that their current employer has paid for. Why pay to create someone else’s star employee ? The relationship model however accepts that people move on at some stage, but that if they can be developed in the meantime, add value and potentially stay a while longer because they see the mutual benefit in that, then the returns are positive for all. Expect therefore to see the rise of multiple HR products that help manage this transition, from engagement tools and people science insights, to skills assessment and personalised learning, to deployment and internal role matching. And as the newcomer startups join the fray to solve one of these point issues, expect the big platform providers to embark on an acquisition spree to own these capabilities and build them into their own enterprise ecosystems, in effect seeking to create a one-stop shop around the people agenda. Just the other week Workday acquired HiredScore, an AI-enabled matching tool for recruitment. It’s not much of a stretch to see how these separate AI ‘modules’ will be built into data-rich people platforms that enable companies to do a better job at people and skills assessment, development and deployment.

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In conclusion, we have a rich and new HR agenda and top of the long list of issues on any leader’s mind in my opinion are the social contract between employers and employees, the quest for increasing productivity and the advent of new technologies that will both unleash productivity but also create great dislocation. Personally I have not seen such a rich mix of deep issues that will transform how we think about skills, jobs and getting work done and it feels as though we are just in the foothills of exploring these issues. Over the next few years we will see them all evolve in ways we cannot yet predict. What is strikingly obvious though is the need for our HR communities and experts to step forward and lead these challenges and be at the forefront of enabling business change. The right people agenda will be the driving force behind commercial success for many of us, and that puts the HR function firmly at the centre of the business strategy like never before.