Will your people remain your greatest asset, or become your biggest problem?

First published on betterworkingworld.ey.com.

To build the workplace of the future, leaders must rethink their people, culture and organizational strategies.

New technologies are increasing the velocity of innovation and collaboration. While machines will enable digital innovation, the main driver for this innovation is people … exceptionally talented people.

But there is a severe shortage of digitally literate, socially savvy leaders capable of capitalizing on the innovation opportunities presented by the fusion of human creativity and new technology. And it’s that unique leader that is needed to create a prosperous and confident digital future. Those who do possess the right digital skills are generally not attracted to companies that don’t share their vision for transforming the working world.

For those companies that lack the forward-thinking vision and leadership to overcome the challenges of digital disruption, there will be a significant talent shortfall that will jeopardize their survival.

The digital revolution will disrupt everything we take for granted today about how work is done. For leaders who fail to embrace this new reality, the old mantra of “Our people are our greatest asset” could become “Our people are our biggest problem.” Companies that cannot change will be marginalized, becoming irrelevant to customers, shareholders and employees.

To avoid that unwelcome fate, here are the workplace changes that leaders need to start understanding and embracing right now.

A more diverse workforce

Diversity and inclusiveness in the workplace are increasingly critical to corporate success. In part, this is because organizations will need to recruit a more diverse workforce in the future, both to get access to the in-demand skills they need and to benefit from the business expertise of an aging population.

“Surviving in an age of constant disruption requires getting your staffing balance right — combining the digital skills and knowledge needed to innovate with the business sense and experience needed to survive for the long term,” says David Storey, Global Talent Leader, People Advisory Services, EY. “Don’t get too focused on age or ethnicity — but the different experiences and perspectives that people of diverse backgrounds can bring.”

Greater diversity in the workplace also brings with it a wider variety different viewpoints, which can be a critical enabler of innovation. As Jeff Wong, our Global Chief Innovation Officer, points out, “An open exchange of ideas is essential to challenging how we think and work — which in turn sparks innovation. Encouraging diversity of thought is key.”

However, effectively managing a diverse workforce will continue to stress and change the dynamics of the workplace. For example, Harvard Business Review states that for the first time in history five generations will soon be working side-by-side. As people work longer and delay retirement, internal career paths have changed. Grandfathers and grandmothers will be reporting to leaders no older than their grandchildren. Consider what impact that will that have on your company culture, workplace and staff.

A space for different faiths

Tomorrow’s workforce will demand a working environment in which everyone feels valued and where everyone’s differences are respected. But despite the fact that an estimated 84% of the world’s population is religiously affiliated[LVK1], there is often still an assumption that workplaces are purely secular spaces, where religion is a topic of conversation best avoided.

This assumption has made it difficult for organizations to address issues relating to religious difference. For example, in its 2013 Survey of American Workers and Religion, US nonprofit Tanenbaum reported that one-third of workers in the US had seen, or personally experienced, incidents of religious bias in the workplace.

To build a workplace fit for a more diverse future, organizations must make sure their employees feel that they can openly discuss their beliefs at work and can raise any issues they face relating to their religion.

Getting to that point will take some serious work. But that doesn’t mean businesses should bring in more religious education — teaching employees about different faiths, their practices and festivals. Religions are too complex and varied for such an approach to be wholly successful. Instead, organizations should focus their programs on increasing religious literacy — the skills and understanding people need to effectively respond to issues relating to religion and belief, as and when they arise.

The gig economy

Temporary (freelance) worker demand is rising rapidly, with predictions that 40% of the US workforce will be contingent workers by 2020, according to the Organisation for Economic Co-operation and Development (OECD). Most companies lack the ability to track, manage, forecast or effectively engage these workers. This shortcoming should be viewed as management malpractice. Managing contingent workers by “purchase order” fails to recognize the growing reality of the “gig economy” — and marginalizes the full talent and capability of those who choose to pursue a non-traditional career path.

As baby boomers retire and the gig economy expands, the nine-to-five corporate workplace will become far less prevalent. Traditional models of tenure-based corporate rewards (compensation, benefits, succession planning) need to be completely redesigned. The notion of retirement status will become a relic of a bygone age of outdated HR practices. Corporate-sponsored retirement programs (traditional pensions, health care) will largely disappear. Diversity of rewards programs will be essential.

Automated knowledge sharing

Traditional tools of knowledge management (classroom training, job descriptions, staff directories, electronic filing systems) will give way to new workplace strategies involving analytics, algorithms, big data and automation. People-driven machine workflows will become the new norm. Rigid organizational models that inhibit the free flow of ideas and information must be discarded and replaced.

Death of the office cubicle

Creating a next-gen workplace will cause a major disruption in the traditional design of workspace. Co-working space, with its informal and collaborative advantages, will become common. Office buildings are changing to reflect a shift from hierarchy to innovation. Lines between work and city will blur as office campuses mix in “community.”

The technology centers of the US’s West Coast have a 10+ year advantage over the rest of the world in leveraging this opportunity. As a result, tech companies will continue to draw talent away from more traditional manufacturing-based industries.

How can business leaders prepare for these changes?

  1. Assess the capability of your leadership team to accommodate and facilitate digital innovation and organizational change. A leadership coach skilled in digital leadership evaluation can assist you in this process. Reassign or replace leaders ill-equipped to lead change.
  2. Educate and engage your board in understanding, governing and supporting the internal process changes required to meet the current and future demands of a changing workforce. Consider expanding the scope of your compensation and benefits (or human resources) charter to require periodic strategy reviews of these initiatives and a regular update to the full board (at least twice a year).
  3. Have your HR teams focus on creating and enabling the important changes necessary to drive future success. Challenge or discard traditional roles, organizational structures and people processes that fail to reflect the new dynamics of future work. A “fast-follower strategy” will not work, because the key talent will be gone.
  4. See that a policy of diversity and inclusiveness is embraced and supported by all leaders. It will be demanded by younger workers, who will vote with their feet.
  5. Collaborate with thought leaders, academic institutions, professional associations, and public and private sector partnerships (e.g., Skills for America’s Future and Skills for Chicagoland’s Future) that employ a creative and consultative approach to delivering future-work solutions.
  6. Create clarity around career paths for critical digital talent, and establish the management processes needed to support contingent workers.

Failure to address the severity of the digital skills gap will yield paralysis in a time of rapid innovation and change. Make this an urgent priority — time is not your friend.

Also see: EY Labor and Employment Law Guide

This guide will allow easy access to significant issues and hurdles that may be encountered around the world, providing practical answers to enable companies to anticipate and mitigate potential risks.

EY Legal Services Contacts:

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Roselyn Sands – Global Labor and Employment Law Leader