Does your company have what it needs to compete in the Fourth Industrial Revolution?
A continual state of disruption is the new normal. According to Klaus Schwab, founder of the World Economic Forum, the speed of current breakthroughs—thanks in large part to evolving technologies—has no historical precedent and is being felt in every industry and in every country. Experts call this the Fourth Industrial Revolution, and it's characterized by a fusion of data, technology, and connectivity that blurs the lines between the physical and digital spheres.
Schwab notes that the Fourth Industrial Revolution will have a major impact on customer expectations, product enhancement, collaborative innovation, and organizational forms. Talent development is uniquely positioned to deal with the effects these issues will have on business. To help their companies not only measure up but excel in this changing environment, talent development professionals will need to be proactive in addressing three key trends: agility, artificial intelligence (AI), and using culture as a competitive advantage.
Agility takes the lead
To address the economic, technological, and social forces dominating the Fourth Industrial Revolution, leading companies are adopting agile management practices. Agility—being aware of external and internal changes so you can adapt strategy, structures, processes, people, and technology to deliver better results—is about working smarter, not harder.
Agility in business isn't a new idea. Agile methodologies emerged from the software development industry, and for nearly two decades, companies have applied agile methodologies to implementing and integrating complex technological systems. A new wave of business agility is helping leaders extend the benefits of speed, responsiveness, and adaptability more broadly throughout the organization.
Three-quarters of respondents to a McKinsey & Company survey identified organizational agility as a top-three priority on their units' agendas. In addition, 37 percent said their organizations are carrying out company-wide agile transformations.
"Rapid changes in competition, demand, technology, and regulations have made it more important than ever for organizations to be able to respond and adapt quickly," McKinsey reports. "In such environments, the need to demonstrate agility is top of mind."
Leaders are most likely to apply agile practices to customer-related activities such as sales, service, and product development and management. But McKinsey also found that at least four in 10 respondents are directing agile methods to internal strategies and processes, and roughly one-third said they are applying agility to talent management.
According to Talent Wins: The New Playbook for Putting People First, authors Dominic Barton, Dennis Carey, and Ram Charan proclaim that talent is the new determiner of business success, and agility is its philosophical underpinning. Agility, they write, is "the best way to constantly and nimbly match the right talent to the right strategic initiatives."
But agile talent management looks different from traditional agile principles. Peter Cappelli, director of Wharton School's Center for Human Resources, and Anna Tavis, a professor of human capital management at New York University, describe talent management's version as "agile-lite." They explain in a Harvard Business Review article that organizations are applying the general principles of agile to specific areas of talent management.
For example, a recent Deloitte survey reveals that 79 percent of global executives rate agile performance management as a high organizational priority. Cappelli and Tavis explain that as businesses adopted agile in core operations, individuals worked on shorter-term projects of various lengths with more cross-functional teams that different leaders often run. In this environment, the notion of an annual performance review makes little sense. Employees need more frequent feedback from multiple sources to identify appropriate and relevant goals, track performance, and ensure skills are up-to-date. Deloitte's data confirm that employees also want a more flexible and agile approach to goal-setting and feedback.
Identifying skills gaps and creating employee development programs to address those gaps is another connection point between agile and talent management. Agile methodologies lean heavily on the idea of small teams that adapt quickly to new information. Pinpointing reskilling or upskilling needs as teams constantly revise goals and tasks is crucial. Talent analytics play a central role in this endeavor. What's more, the talent development function's ability to create a culture of learning, information transparency, and coaching will "enable companies to respond nimbly and quickly to new challenges and opportunities," McKinsey reports.
An essential element of the Fourth Industrial Revolution is the accelerated adoption of AI. Four in 10 respondents to Deloitte's 2018 Global Human Capital Trends survey believe that AI will be widely deployed at their organizations within three to five years. A quarter of survey respondents said they are using AI to perform routine tasks, with 16 percent using it to augment human skills and 7 percent to restructure work entirely.
Simply defined, AI is an area of computer science that explores the capability of machines to perform tasks that normally require human intelligence, such as reasoning, planning, learning, and understanding language. Some refer to this as machine learning, and its successful application requires three features: smarter data models, easy access to unlimited amounts of data, and cheap and powerful cloud computing—all of which are commonplace today.
"Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data," says Schwab.
No doubt, it is impressive what AI can do, but it's important to remember that it cannot think for itself. And while many workers are afraid that a long-term repercussion of AI is job loss, most experts agree those fears are unfounded. Instead, there will be a shift in the type of work people do. For example, Deloitte reports that Morgan Stanley equipped 16,000 financial advisers with machine learning algorithms that automate rote tasks, freeing up advisers to focus on client service.
In addition, workspaces and workflow likely will need to be redesigned to ensure that humans work alongside machines effectively. Case in point: As self-checkout machines become ubiquitous in stores, cashiers can become checkout assistance helpers who answer questions or troubleshoot the machines.
"Understanding the unique capabilities 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," according to Deloitte. "If anything, humans and their innate skills seem to be growing more important as the need to devise, implement, and validate AI solutions becomes widespread."
What role does talent development play in this evolution? McKinsey predicts that AI will accelerate demand for not only advanced technological skills like programming but also social and higher cognitive skills, such as creativity, critical thinking, and complex information processing. Deloitte's 2018 Global Human Capital Trends report concurs. More than half of respondents expect to see an increase in demand for cognitive abilities (55 percent), social skills (52 percent), and process skills (54 percent). Even more companies—63 percent—believe complex problem solving will be a critical skill in the future.
This puts additional pressure on the already existing skills gap, says McKinsey, as well as the need for new credentialing systems. "Training and retraining both midcareer workers and new generations for the coming challenges will be an imperative," states James Manyika, chairman and director of the McKinsey Global Institute and a senior partner at McKinsey.
But preparing workers for the effective rollout of AI isn't the only touchpoint between talent management and AI. Our field already is using AI every day. Consider automated resume scanning and tracking systems. This technology presents recruiters with massive job applicant pools, but it takes a lot of time and energy to sort through them, costing companies more money overall to find qualified candidates. AI algorithms that sort applicants offer a practical solution to this problem. Deloitte notes that AI is being used to create chatbots that can interact with job candidates and even score video interviews. As a side benefit, AI may aid efforts to eliminate bias from the candidate-selection process.
AI also will improve how we use learner analytics and make it easier to gauge how quickly employees learn new knowledge—or if they are struggling. An AI algorithm "will learn about employees as they learn about the content, creating a constant loop of feedback for improvement," explains Jaeques Koeman, CEO of Amsterdam-based EdTech company EDIA. Based on that feedback, AI can adapt the training content to fit the employee's needs.
For instance, Koeman notes that "if multiple employees are struggling with a certain part of the training, then the AI will be able to notify the instructional designers to adjust that part of the training." He points out that AI also can add additional content to clarify any confusion or provide more context for an unclear situation. In other words, AI can help a learning solution "automatically update itself to be better and more efficient," Koeman explains.
Culture for the win
Schwab contends that the emergence of global platforms and other new business models prevalent in the Fourth Industrial Revolution means that talent and culture "will have to be rethought." Historically, though, company leaders have disagreed about the value of organizational culture on the bottom line.
The 2018 Global Human Capital Trends report notes a significant shift in how organizations are assessed. No longer is it just about financial performance, says Deloitte; today, businesses are "increasingly judged on the basis of their relationships with their workers, their customers, their communities, as well as their impact on society at large."
Gallup research agrees, revealing that companies with a well-defined culture have a competitive advantage in the marketplace and are proved to boost performance outcomes across many measures. For example, culture can improve diversity and inclusion, safety, innovation, and compliance.
In fact, Gallup reports that when eight in 10 employees feel that the mission or purpose of their company makes them believe their job is important, organizations realize a 41 percent reduction in absenteeism and a 33 percent improvement in quality. Unfortunately, that figure is currently stagnant, with just 40 percent of U.S. employees connecting with organizational culture and purpose.
Research also shows a direct link between employees' understanding of the culture and key measures of business health. One of those measures, according to Gallup, is a company's ability to attract top talent. Although culture can often feel vague, the data are clear: Seventy-one percent of workers told Gallup that they use referrals from current employees of an organization to learn about job opportunities. "Strong cultures create employees who are brand ambassadors," notes Nate Dvorak, a researcher focused on predictive analytics at Gallup.
Denise Lee Yohn, author of Fusion: How Integrating Brand and Culture Powers the World's Greatest Companies, expands on this idea: "When you create an interdependent and mutually reinforcing relationship between how your organization thinks and acts on the inside and how it is perceived and experienced on the outside, you create great power for your organization."
Another business health measure is employee engagement and retention. According to research Deloitte reported, companies with a culture that practices a growth mindset, creates stretch assignments, and openly discusses mistakes to promote learning are three times more profitable and have up to four times better retention than those that do not.
But there's a problem: Gallup research shows that just 23 percent of U.S. employees strongly agree that they can apply their organization's values to their work every day, and only 27 percent strongly agree that they believe in their organization's values.
What's the solution? "Instead of operating with culture in an HR silo and brand in a marketing silo, companies must integrate and align culture building and brand building," suggests Yohn. And that presents a prime opportunity for talent development.
Squad Rules and Roles
Agile organizations replace some of the traditional hierarchy with a flexible, scalable network of teams. These small teams—also called "squads"—are clustered into focused performance groups that share a common mission. Research from McKinsey & Company notes two common elements of agile teams:
Teams are cross-functional. Mission leaders ensure that the knowledge and skills to deliver desired outcomes reside within the team. Squad members' long-term job function becomes a robust community of knowledge and practice responsible for attracting and developing talent, sharing knowledge and experience, and providing stability and continuity over time as people rotate between different operating teams.
Teams are self-managing. The team defines the best way to reach goals, prioritize activities, and focus its effort. Different team members will lead the group based on their competence rather than on their position. These groups ensure clear, accountable roles so that people can interact across the organization. Squad members proactively and immediately address any lack of clarity about roles with one another, and treat roles and people as separate entities.