The Next Frontier - Ordre | CRHA · Sources: Digital Media & Society, World Economic Forum in...

September, 2016

© 2016 Willis Towers Watson. All rights reserved.

The Next Frontier

Talent, Culture, and Risk

John Bremen, Head of Human Capital & Benefits North America

© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 2

“The best way to predict your future is to create it.”

- Peter Drucker


If Facebook were a country it would be the third-largest

in the world.

Source: facebook.com.


The number of text messages sent and received in one day

exceeds the population of the planet.

Source: wikipedia.com.


Baby Boomers are retiring at the rate of

one every 9 seconds between now and 2029.

Source: USA Today Money


The average U.S. student today will have 10 to 14 jobs

before age 40.

Source: U.S. Department of Labor.


Percent of children entering school today who will end up in jobs that do not exist yet

65%

Source: Scott McLeod and Carl Fisch, quoted by World Economic Forum Future of Jobs Report, Davos, 2016


Estimated cost of customers switching companies due to

poor service (U.S.) $1.6 Trillion

Source: Accenture Global Consumer Pulse Research, 2016


Percent of industrial accidents caused by human error

90%+

Source: Willis Resilience, October, 2013

Why do we talk about Human Capital Risk?


11 deaths Financial charges: $53.8bn 4.9m barrels of oil Significant environmental risks Brand erosion

Presenter

Presentation Notes



Source: Willis Resilience October, 2013

200,000

Accidental deaths in Medicare hospitals every year

99,180 114,500

38,000 Commercial aircraft land in an unstable condition every year

22,000 Accidental deaths in Medicare hospitals every year

Documents lost by the US IRS every year

Mismatched shoes shipped every year

Cheques deducted from the wrong bank account every hour

The path to 2025


What matters to today’s forward-thinking CHRO… Fr

eako

nom

ics

Creating the enterprise-wide leader

Neuroscience of learning and leadership

Skillset of a 2025 college grad

Technology implications on human behavior

Psyc

hom

etric

s Disruption of technology on talent markets

Creating global community in virtual environment Speed to performance

Defining a rewarding career

Five generations of talent

Work life integration

Defining the new success measures

Transparency over authenticity

Speed to innovation

“State” of the state”

Sustainable (and creative) platforms

Fixa

tion

on m

illen

nial

s Can we afford Gen Z?

Aging workforce…the perfect storm of bad

Speed/agility of making “new” happen

Profile of a 2035 college grad

The employee experience

Technology-driven cultural transformation Virtual management

What’s on the mind of HR executives when it comes to risk


Four of top five responses involve human capital risk

Quiz time!


1. How old are the oldest Generation X employees today?

52

Quiz time!


36 2. How old are the oldest Generation Y

(also called “Millennials”) employees today?

Quiz time!


Z 3. What is the name of the generation entering the workforce today?

Pace of change


Time to reach 50 million users

Source: Attributed to Carl Benedikt Frey and Michael Osborne (Oxford Martin School, University of Oxford) and G. Kofi Annan, author; note: some figures disputed

Telephone Radio TV Internet Angry BirdsSpace

75 Years

38 Years

13 Years 4 Years 35 Days

Talent aspirations have changed…and so have the risks…


Then Now

Skill shortages today


What’s going on?

Percentage of companies that are having difficulty attracting talent

Source: Towers Watson Talent Management and Rewards Study, 2005 - 2015

0%

10%

20%

30%

40%

50%

60%

70%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Critical-skill Employees All Employees

Talent shortages in 2021: Not pretty for mature markets


Global talent heat map

The gap between the growth in demand and the growth in supply of talent, 2011 to 2021

Source: Oxford Economics

Growth in the college-educated talent pool


Source: Oxford Economics

Tertiary educated (talent): E7 and G7 countries

–1% 0% 1% 2% 3% 4% 5% 6% 7% 8% % growth, 2010 – 2021

India Brazil

Indonesia

Turkey

China

Mexico

U.S.

Canada

France

U.K.

Italy Japan

Russia

Germany

Pressures to attract and retain top talent persist in Canada


Source: 2015 Towers Watson Talent Management and Rewards Pulse Survey #1 (Canada)

28% are reporting difficulty keeping critical-skill employees.

More than half (56%) also report having problems attracting critical-skill employees.

Talent mobility is increasing


46% said hiring activity has increased compared to last year.

38% indicated that turnover is rising.

Source: 2015 Towers Watson Talent Management and Rewards Pulse Survey #1 (Canada)

Generational population changes are afoot


New demographics: Generation Y has arrived — Generation X are emerging leaders — Generation Z is on the cusp

Baby Boomers

Generation X Generation Y Generation Z

Age in 2016 53 – 70

Estimated population size (Canada) 9 million – 10 million

Individualistic Loyal Career-focused

Age in 2016 37 – 52


Entrepreneurial Self-reliant Globally minded

Age in 2016 21 – 36


Group-oriented Idealistic Socially conscious

Age in 2016 6 – 20

Estimated population size (Canada) TBD

Realistic Aware Technology native

1946 – 1963 1964 – 1979 1980 – 1995 1996 – 2010 Z Z Z Y Y Y X X X

What will 2018 look like for your organization?


Illustrative company demographic shift

Pre-Boomer Boomer Gen. X Gen. Y Gen. Z

2008

2013

2018

What we know: Employees are seeking a different employment relationship


“The days of employment being the only important means for getting work done are passing.”

— Lead the Work, Boudreau, Jesuthasan and Creelman, 2015

“A career today…can mean two years or less…” — Fast Company

“Relationships with organizations are getting weaker” — Matthew Bidwell, Wharton

“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute”

— Simon Sinek

“Independent workers are more engaged than most employees” — 2014 IBM Smarter Workforce Institute Study

of Independent Workers

Current outlook for Human Capital Risk:


Four near-term trends impacting talent productivity and quality…

1 Skill

Shortages

2 Contingent Workforce

3 Alternative Work

Arrangements

4 Workforce Wellness

The emerging economy


Technology, digital media and robotics are transforming work and jobs

Sources: Digital Media & Society, World Economic Forum in collaboration with Towers Watson; Towers Watson Research;also reference McKinsey & Co

A truly connected world

collaboration…

Hum

an & m

achine

Social and organisation

Reconfiguration

All inclusive Glo

bal t

alen

t mar

ket

Disintermediation of work is already happening…


Industrial revolutions and work: The contingent workforce


Source: John Boudreau, Ravin Jesuthasan and David Creelman

Second Industrial Revolution

Late 19th – early 20th century “The assembly line” Features: Underpinning for Coase’s theory of the firm Companies as social institutions Organization of work into jobs Jobs as careers

Fourth Industrial Revolution/Second Machine Age

2000s - “Uberization” Features: Mobile, sensors, AI and machine learning Companies as platforms Disaggregation of work into activities Talent on demand

Third Industrial Revolution/First Machine Age

1960s – 1990s “Nikefication” and core competencies Features: Technology enablement and the web Companies as the nexus of contracts Streamlining of jobs to enable outsourcing

Our organization is a place containing employees doing work.

Our organization organizes work and talent.

Our organization is a fixed set of functions that work together to create value.

Our organization is a malleable set of functions and deciding which ones get done inside the organization is a big part of strategy.

This will require a fundamental paradigm shift in how work and our organizations are organized


Supply chain Manufacturing Retail stores Marketing

IT R&D

Supply chain Manufacturing

Retail stores Marketing IT R&D

R&D Retail stores

Presenter

Presentation Notes

We need to begin to think about the organization as more than what happens within the walls of our company - we need to (and particularly as HR Professionals) begin to think about how we can organize work and talent both within and outside or our borders. For example, we may need to depend on alliances to deliver parts of the value chain. Additionally, we may need to think more openly about how to move functions in and perhaps outside of our organization. This certainly had wide ranging implications for how we attract and retain talent.

The reality: The employment relationship is changing


It is not only coming, it is already here…what risks does it create?

Traditional employment Outsourcing

Free agents Alliance

Talent platforms Volunteers!

What is the disaggregation of work?


Have we done this before?

Pull out work activities that can be completed outside the company at the same

or better level of skill

Data Analytics Software or Application Programming Other?

Pull out work activities that are easily completed and either time or milestone

bound?

Delivery (pay by delivery) Driving (pay for the ride) Call center (pay by the hour or the call)

The big debate on the new work: Opportunities or risks?


Opportunities

Transportability

On-demand training

Boundary less careers

Precise work-worker matching

Rewards segmented to match needs

Worker Empowerment

Alternative work arrangements

Risks

Risk shifted to workers

Employers stop training

Death of the career

Commoditization

Rush to lowest cost

Worker exploitation

Loss of continuity

Contingent workforce: Opportunities or risks?


Alternative work arrangements: Opportunities or risks?


Financial wellness risks are very real for the U.S. workforce


Percent of Gen Y saving for retirement

43%

75%

Source: Market Watch, February 17, 2016 Source: Market Watch, September 15, 2015

Those with

company- sponsored plans

Those with no

company- sponsored plans

82%

of Gen Xers said they won’t have enough

saved to retire comfortably

What do we mean by “Human Capital Risk”?


Human Capital risk comprises risks “from” and “to” human capital, with each dependent on the other

Risks to human capital Skill shortages Competitive threats Poor

management/leadership Misaligned culture Unclear organization/roles Unclear expectations Insufficient information/tools Low motivation/engagement Physical health Financial concerns

As risks to human capital increase, so do risks created by human capital… and vice versa

Risks created by human capital Compliance Discrimination Accidents/Loss Property hazard/damage Productivity/Efficiency Quality Service Financial Differentiation/Strategy/Brand Innovation

What companies are doing


Human Capital Risks spectrum

Fundamental risks Compliance Accidents/property loss Discrimination/

Inclusion Up-time Employee health Financial solvency/

funding requirements

Differentiation risks Discretionary effort

(“engagement”) Innovation Differentiated service Health and wellness Financial wellness Continuous improvement Proactive hazard

mitigation

Engagement risks Productivity Efficiency Presenteeism Retention/turn-over

Quality Service levels

All Companies

Most Companies

Leading Companies

What companies are doing: Human Capital factors used to mitigate risk categories


Talent Factor

Workforce Planning

Candidate Assessment

Pay/ Rewards

Health & Welfare Benefits

Retirement Benefits

Culture/ Environment

Training

Employee Productivity/ Competitive-

ness

Quality and

Service Risk

Customer Risk Economic Risk

Compliance Risk

What companies are doing: Key practices based on human capital risk strategy


Competitive Positioning 25th – 50th percentile Median Above Median

Selection Process General Assessment Broadly Targeted Assessment Highly Targeted Assessment

Workforce Planning Active Sophisticated Highly evolved

Total Rewards Strategy Workforce-Specific Broadly Segmented (focus on key groups)

Highly Tailored/ Segmented (with significant

employee choice)

Pay Focus Company-specific Tailored for key roles Highly tailored by role/ individual

Health Focus Ensure program access Company-sponsored healthcare

Strong focus on physical wellness and choice

Financial Focus Ensure basic financial fitness

Company-sponsored savings programs

Strong focus financial wellness and choice

Risk Culture Compliance-adherence Process-focus Strong personal accountability

Differentiation Risk Strategy

Engagement Risk Strategy

Fundamental Risk Strategy

Human Capital Factor

What are the top ten Total Reward trends broadly…


.

.

.

Align to Worker Value Proposition

Strategic employment and alignment of programs to fit work completed

Pay for work vs. Role

Increased total rewards choice for workers

Renewed focus on financial fitness

Continued focus on wellness

Expansion of Voluntary Benefits

Leverage an integrated talent platform within the organization

More tailored total rewards

Emphasis on work environment


Consumer-driven HR The good news: Companies already have been doing this

Corporate social responsibility

Flexible benefit programs

401(k) plans (defined contribution) Paid time off

Flexible work arrangements

Virtual workplace Voluntary

benefits Wellness programs

Private health care exchanges

1980s 1990s 2000s 2010s

Cafeteria style

What companies are doing: Key to reducing Talent Risk: Treating employees like consumers


Percent of employees believing that their organization should understand them to the same degree that employees are expected to understand external customers

Percent of employees reporting having an employer that understands them in this way

Source: 2014 Global Workforce Study, Towers Watson

Reducing talent risk: Savvy segmentation


Understanding the relationship between cost and perceived value


STI—2X $67.5M

Merit Increase —+50% $6.5M

401(k) Match—$1-for-$1 to 6% $9.0M

Merit Weighting—Greater performance differentiation $0

STI Weighting—Greater performance differentiation $0

401(k) Company Contribution—6% $4.5M

Medical—Premium -20% $2.4M

Vacation—+2 days $3.1M

STI—Half ($34.7M)

Merit Increase—Half ($5.5M)

Merit Weighting—COLA $0.0

401(k) Match—$1-for-$1 to 3% ($4.5M)

Medical—OOP +20% ($1.1M)

Medical—Premium +20% ($2.4M)

STI Weighting—Based on company performance $0.0

401(k) Company Contribution—4% ($3.2M)

Vacation— -2 days ($1.9M)

Note: Modeled impacts of various reward changes on value in Total Rewards are not additive due to the “portfolio effect.” Modeled impact assumes all other programs stay the same. Changes in value of Total Rewards are point increments or decrements to current value of Total Rewards of 79.5 (from valid conjoint data only).

6.4 5.4 5.3

4.6 4.5 4.5

3.9 3.7

-10.6 -9.5

-8.4 -7.8 -7.8 -7.7 -7.5 -7.2

-5.7

Changes in Value of Total Rewards Change in

Reward Cost


Using “big data” and workforce analytics strategically

Causal Analysis/

Controlled Evaluation

Projections/ Future-State

Modeling

Trending

Bench- marking

External Reference

Point

Directional Insight

Future Risk Management

Outcome Optimization

Return on Investment

How are we performing relative to benchmarks?

Foundational

Complex

Analytical Sophistication

How are we performing over time?

How do we predict performance?

How do we drive performance?

How are we performing today?

Internal Tracking

Dashboard/ Metrics

Reporting

Global Data

Warehouse How do we access data

to monitor performance?

Data Management



People productivity 1 People investment 2

Labor Cost Breakdown by Type

0

5

10

15

20

25

30

35

40

45

50

0

50

100

150

200

250

300

350

400

450

500

Q1-12 Q2-12 Q3-12 Q4-12

Empl

oyee

s ('0

00s)

Valu

e ($

M)

Profit Revenue Labor Employees

Workforce ROI Trend

Engagement by ROIP Type

Total Cost; $5

000

Total Human Capital Cost; 1

500

Labor Cost as a percentage of Total Cost

Other People Investment charts for consideration: 1. FTE vs. PTE cost by grade

2. Fixed vs. variable cost by grade



0% 20% 40% 60% 80% 100%

ABCDEFGHI 5+

4

3

2

1

0

Workforce Proficiency by Years

Turnover by Level

Labor Projection—Pivotal Roles

0% 5% 10% 15% 20%

ABCDEFGHI

Workforce Mobility

Overall Talent Flows

People capability 3 People risk 4

Examples of strong internal brands from global peers


“Where your work touches lives.” — Disney

“Do cool things that matter.” — Google

“Grow with us.” — Kellogg

“Help us build a smarter planet.” — IBM

“Inspired by purpose. Have your career validated 4 billion times a day.” — P&G

“Rock Solid® Total Rewards.” — Prudential

“Great people make great beer.” — Miller Coors

“Share your passion.” — BMW

Source: Company websites

Clarify the roles of the EVP and Employer Brand


Internally Externally

Communication Creating meaningful relationships and building engagement…

…between employers and their employees

…between companies and their customers

Value Proposition Defining the deal…

The Employee Value Proposition (EVP)

The Client Value Proposition (CVP)

Brand Building a connection…

Employer brand Corporate brand

The internal and external view need to be complementary

Chief employee experience officer


Personnel director Tactical Operationally focused Employee as cost Implement programs Local Manager/director

level

Vice president, HR Broader Organization focused Employee as resource Design programs National Vice president level

CHRO Strategic Business focused Employee as asset Direct programs Global C-suite level

Chief employee experience officer Futurist/strategist Differentiation

focused Employee as value Transcend programs Borderless Board advisor



CHRO

“I direct programs to balance the needs of employees, the

company and shareholders.”


“I create an employee experience that unleashes the potential of our talent to create incremental

value for our customers and shareholders.”

How can this help drive HR strategy and competitive advantage?


A new strategic framework for HR?


Product Leadership

Customer Intimacy

Operational Excellence

Treacy and Weirsema: The Discipline of Market Leaders

Application of strategy model to HR


Product Leadership

Customer Intimacy


The Discipline of Market Leaders

Program Design Compensation Benefits Learning and Development Work environment

Advice and Partnership Strategy Counsel Support Change/Implementation

Operations Administration Processing Compliance Data management

Future drivers of HR competitive advantage…


Product leadership

Integrated (Total Rewards)

Purchased rather than built

Private label

Technology-enabled

Customized




Operational excellence

Highly efficient/leveraged

Agile

Technology integrated

Globally deployed

Analytically-driven




New definition of customer intimacy for HR

Not new (but still critical): Internal consulting (insights and wisdom) Strategy Counsel Support Change/Implementation Advice and Partnership

Strategy Counsel Support Change/Implementation New: Focus on differentiated experience

for employees (consumer-driven) Segmentation Analytics and Insights Branding Employee Experience

How will you seek competitive advantage?


Product Leadership

Customer Intimacy


The Discipline of Market Leaders


Consumer Focus Segmentation Analytics and Insights Branding Employee Experience


The HR time spend continues to morph…


0%

25%

50%

75%

100%

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

Operations Program Design Employee Analysis

Percent of Time


Most people overestimate what they can do in one year and

underestimate what they can do in ten years.

- Bill Gates

The Next Frontier - Ordre | CRHA · Sources: Digital Media & Society, World Economic Forum in...

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Transcript of The Next Frontier - Ordre | CRHA · Sources: Digital Media & Society, World Economic Forum in...