TECHNOLOGY AND INNOVATION ARE DRIVING A GREAT UN-BUNDLING
Companies are emerging with bigger bangs and disappearing with faster busts.
The average half-life of a business has dropped from 30 years in 1985 to 5 years today. In the last 15 years 50+% of the S&P companies have disappeared; and in the next 10 years another 40% is predicted to disappear.
Valuations are accelerating: It took Google 8 years to get to 1 Billion Market cap, Facebook 5 years, Tesla 4 years, Uber 3 years, Snapchat and Oculus Rift less than 2 years.
A lot of this is because of highly leveraged business models - a lot of it because the new business models are asset light. The biggest taxi company has no taxi's, the biggest accommodation Company has no hotels, the biggest employment advertisers have no newspapers, the biggest fashion retailers increasingly don't have garment factories, etc. Asset heavy companies like GE and Ford and banks and retailers are weighed down by balance sheets and old-style Companies, it seems, are just not nimble enough.
It is inevitable that the nimble future employer will also have fewer (but not no) employees. Jobs will gradually decompose into “pieces of work” that can be performed almost anywhere for a limited period of time. The focus will not be on managing and controlling risks associated with having a large workforce but by leveraging humans that come and go ("Gig Economy").
However in an un-bundled world - the effectiveness of the Company will become more and more leveraged around the employee experience. The simple reason is that valuable skills will easily be able to walk straight into your competitors human ecosystem, and if that "feels better" than yours, they are lost to you.
THIS IS WHY WE ARE STUCK AND WHY OUR CULTURE IS AT WAR WITH OUR STRATEGY
We increasingly have business models that require customer-centricity, nimbleness, adaptability, and speed. Yet we have an employee experience that is one of uncertainty, dis-empowerment, stagnant wages, and change-fatigued. Loyalty went out the window in the last cost-round.
Fear is the most dominant emotion in many businesses today. Engagement scores have been dropping for years and the speed of transformation, and the need for transitions, is only accelerating.
At the heart of this is that we are trying to manage people through a risk lens, an asset lens - as if they were a human resource. Our generations of development of people management practices has left us woefully ill-equipped to confront the faster, un-bundled future.
At the heart of it lies the essential difference between employee engagement and employee experience. The first is really about management, the second is about people. The first is cognitive (what do you think of us), the second is emotional and experiential (how do you feel about being here). Understanding this viscerally will determine who wins and who loses.
THE DEATH OF TODAY'S HR PRACTICES - AND THE RISE OF AX
We will no longer have people joining companies as employees, we will no longer need an EVP, need offices, offer careers, recruit in 58 days on average, train people, offer benefits, have unions. We will work with individual market pricing, rather than with salary bands. Capability will be the new currency of organisations, not incumbency. We will no longer have a company-wide consistent performance management system. Almost all our HR practices will have to change or they will become obsolete. Of all the practices that will change - none more so than the focus on employee engagement. Companies will quickly change their focus to EX (employee experience) - or more correctly to AX - associate experience, because many of the most important people in the human ecosystem of the Company will not be employees, and never would want to be.
HOW COMPANIES ARE DEFINING AX/EX
“Create a culture that attracts talent and retains highly engaged employees, which in return offer an extraordinary customer experience to our high end and highly demanding customers.”
“How the associate lives things in and outside the company.”
“In all we do, we start with people. Each moment that matters in an individual’s relation with the Group, from recruitment all the way to the exit dialog, is designed around our people – employees, managers and HR professionals – with ‘simplicity’ and ‘user-friendly’ as guiding stars.”
“A person’s feelings and responses based on their interactions with our organization during the entire journey.”
“The way our people relate, connect, identify and interact with the organization leading to optimal engagement, collaboration, free flow of energy & ideas, high wellbeing, and a sense of purpose.”
“Creating a platform for personal development and creative self-expression.”
Note the differences between an employee engagement Vs an AX/EX mindset.
WHY IT MATTERS
This silent revolution is also material in its impact. Research done recently by Jacob Morgan found the following comparisons of EX vs. non-EX companies. A lot of this is answered by a simple realisation - your customers and employees want you to, and you will make more money.
• EX companies are 4.5x more frequently listed on Most Innovative Companies lists by Fast Company, Boston Consulting and Forbes, than non-EX companies
• 6x more frequently listed on Glassdoor’s Best Places to Work, Fortune’s 100 Best Companies for Millennials and LinkedIn’s Most In Demand Employers
• 3x more frequently listed on Brand Z and Forbes’ “Top Brand Value” companies
• 40x more frequently on the list of Exponential Organizations (companies whose impact is disproportionately large – 10x larger - vs. other organizations)
• 4.4x Average Profit vs. non-EX companies
• 2.9x Average Revenue per employee vs. non-EX companies
• 4.3x Profitability vs. non-EX companies
The KennedyFitch Centre recently surveyed Companies about the motives and challenges they have in building AX/EX.
HOW TO SHIFT TO AN AX/EX CULTURE
Three most important reasons for building EX:
1. Business growth
2. Engagement (Your employees are serving your customers, so best they were on-side)
3. Creating competitive advantage
Top four challenges:
1. Transforming the Culture – Given the radical shift to an outside-in, bottom-up culture required for successful EX, companies recognise the need for an equally radical transformation. Key to that will be to do something about the fear that holds the culture of many companies exactly where it is and incapable of change.
2. Leadership mindset – EX pioneers emphasised that the CEO and leaders at all level must be on board for EX to succeed
3. Complex Organization – Simplification is one of the keys to making EX work. HR has the most to simplify.
4. Lack of internal expertise in building the Employee Experience – given that most companies have never built EX, this is not a surprise.
AX/EX pioneers report using Marketing, Design, and Facilities experts - AX/EX will not be the purview of HR though HR will be important - especially in the 3rd challenge, simplification. A lot of HR practices were built to manage and control ever expanding work-forces of the past. That will need to be un-bundled and quickly. But it won't be easy - as an example, last year there was a trend to eliminating performance management. All that actually happened was that Managers stopped talking to their people about performance and engagement dropped 8% in Companies that too such a blunt approach.
Top four keys to success:
1. Top leadership and CEO support – EX touches so many parts of the organization, it needs sponsorship and complete support at the top
2. The goal is to become a Disruptor – EX Pioneers are convinced EX is a way to become disruptive and gain competitive advantage. It takes conviction. It takes courage.
3. EX is the centrepiece of Cultural Transformation – EX requires a complete transformation in the way of thinking and working
4. Involve many functions outside HR – EX is never an HR-only effort. EX Pioneers typically combine HR with Marketing, IT, Facilities, etc.
THE AX/EX PLAYBOOK
• HUMANISE IT. All CX/AX design is concerned with people as human beings, not as assets or capital. This means that we are about humanising work. It begins with insights and data about how we do our best work, how we learn, how we innovate - and most importantly how we feel.
• COMPLETELY TRANSFORM IT. New mindset and way of doing things, shifting to outside-in thinking, and organisations designed around the Employee, mirroring what is being done for customers.
• INCLUDE THEM ALL. The experiences people have both inside and outside the company – both those that are hired and those that are not, those that are full time employees and ‘agile talent’ e.g. contract or part-time, as well as consultants. Alumni are also included. All impact the customer. All are in your talent ecosystem.
• THE JOURNEY IS MORE IMPORTANT THAN THE TOUCH-POINTS: EX like its twin, CX, takes a more holistic view of all the interactions or ‘journeys’ an employee or customer has with a company or brand. These journeys include but are not limited to ‘Moments that matter’. Research shows that customers may score the overall journey somewhat lower than individual touch points.
• DESIGN IN STAGES NOT A CHECKLIST
1) Multi-channel listening,
2) Identify holistic journeys,
3) Listen for emotion,
4) Create personas,
5) Design experiences,
6) Test and prototype, and
7) Create and launch Digital People Strategy.
• EMOTION BEATS QUANTITATIVE. Companies historically gathered quantitative data on employees and customers. Both EX and CX seek to understand the feelings or emotions that employees and customers experience in their journeys. These emotions give far more insight into behavior and performance than typical quantitative engagement measures.
• NEW CAPABILITIES.
1) Design Thinking
2) Cognitive and Advanced Analytics3)
3) Behavior Science – specifically, what intrinsically motivates people (psychology)
• NEW ORGANISATIONAL DESIGNS. HR now works closely with or includes Design, Facilities, Branding, Digital/IT, Analytics, and coordinates with CX and Marketing. The classic Ulrich CoE model dies. HR itself may be replaced by EX
• SIMPLIFICATION. Treating employees like adults. let people exercise judgement, and radically re-design Performance Management, Learning, etc. The risk-mindset has to go.
• SPACE. Transform the physical spaces so that work is not somewhere that you go but something that you do - ABW, flexible working, etc.
Welcome to the new world where associate or employee experience is King.
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