Rethinking the People Agenda

The role of the Chief Human Resources Officer (CHRO) has undergone a revolution. Growing more and more to become a true business function, HR has become a strategic partner with other key roles in the C-suite to morph organizations into businesses of the future. Technology, new generations in the workforce and a greater emphasis on leadership is giving CHROs an opportunity to create a future-ready organization. But with great opportunity comes great challenges. We gathered HR leaders from major companies in Milan in May 2019 to discuss how to successfully rethink their approaches to HR.

Complexity

Just by picking up a copy of The Economist or the Financial Times on any weekday, we are reminded of the extreme level of complexity characterizing today’s global business environment – and our global HR agenda. Much has been written about the way these challenges can be categorized or grouped, but the ones our clients continually grapple with are:

• Technology implications in HR processes

• Globalization accelerating competition for global talent

• Demographic challenges versus growing economy

• Leadership pipelines thinning

• Talent migrating toward tech companies

• New generation of talent requiring new demands

• Challenge of retaining millennials

Among those trends, there is one that immediately generated a long and rich debate among the attendees at our event: technology and its major implications for the HR agenda. “HR tech is already here,” one attendee noted, and many agreed. Nearly every HR process has been impacted by major technology innovations, being either redesigned or completely reinvented. According to our research, there are currently almost 4,000 companies – some of them being early stage – that are active in providing new IT tools to improve general HR activities, such as payroll, performance evaluations, recruiting, retention, organizational design and development. In particular, there have been major improvements in the recruiting process by optimizing the coding/wording of the position, creating a digital marketplace to best match candidates and position and real-time feedback apps to monitor employee engagement.

In addition to recruiting technology, Artificial Intelligence (AI) deserves a special mention. AI is the major source of innovation that most forward-thinking companies are investing in. Here again, the implications span almost every HR process. Some companies are using predictive algorithms to optimize workforce planning. Some are using AI in the recruiting process – especially in video interviews to infer from visual cues if a candidate is being truthful and authentic. Others are training their salespeople with the help of a digital simulator reproducing a real-life selling dialogue.

Event attendees had many questions and suggestions about the intersection of technology and HR. Some of the questions that arose were:

• Today we can count on a huge amount of data to make better decisions, but how can we guarantee the quality of the data?

• How can we guarantee the AI processes are unbiased?

• Can we control the ethical implications of AI managing such a large amount of user information?

Another major question that emerged was, “What is the real purposes of tech innovations? Is it for cost-reduction, or is that merely an implication of tech investments?” Many HR leaders shared their concerns that business leaders often are not fully aware of what technology can actually do and why and how they can improve most of HR process.

HR and organizational development was also a hot topic that was discussed at the event. One attendee said, “Many times data are analyzed without proper attention to the organizational implications.” Another added that “The analytical perspective would need an equally strong holistic view.” This led many attendees to agree that it would be useful to have a “philosopher” in every organization to ensure organizational challenges are properly faced as well as to guarantee that broader and holistic perspective would not be lost.

Complexity is also underscoring how the HR role is dramatically evolving.
 

“When I have to make an investment, I have to crunch my numbers, explain the ROI, the productive implications, etc.,” one of the participants said. All of these topics led to a shared challenge articulated by the attendees: What should HR do in the future to bring added value to the leadership team? How can the HR function survive, add value and develop leadership, without focusing purely on cost reduction?

Five Generations at Work

While few organizations can claim they have mastered managing diversity, the complexity has increased with the introduction of more millennials and generation Z into the workforce. By 2025, millennials will account for 75 percent of the global workforce.

At the same time, due to structural and long-term demographic issues, there is an increase in life expectancy and a decrease in birth rates, creating a workforce in both developed and emerging markets that is aging and shrinking. By 2050, world’s population will grow by 32 percent, but the working age population will expand by just 26 percent, with the constant decline in ranks of workers globally.

The shifting demographics show the number of workers over the age of 40 increasing significantly, with the the number of workers aged 55 and older in continuous growth and significant change in the gender composition as well. As a result, most workplaces will have five generations working side by side (Traditionalists, Baby Boomers, Generation X, Millennials and Generation Z/2020), which will require CHROs to manage extreme age diversity. How we adjust for this will be key to success. Attendees shared several thoughts that HR leaders will need to keep in mind:

• “In Italy, one-third of the employable population is over 50. This means that policies need to be adapted to leverage the senior talent as well, not only focusing on attracting the new talent into the organization.”

• “Talent needs to be searched for in a different way and everywhere in the organization.”

• “As a country, typically, Italy does not celebrate or promote the young talent. Even though the new generations are entering the workforce, in reality, people in Italy are very protective of their ‘chairs.’”

To attract and retain younger talent, HR will need to take into account the environment they grew up in. They have been immersed in collaborative technology from an early age new generations and are accustomed to sharing and connecting with each other, with an emphasis on mobility. They have a different set of expectations and characteristics; they desire on-demand learning experiences and are interested in performance enablement over performance management, demanding their employers to articulate the purpose for the organization. At the same time, HR leaders will also need to find new ways to leverage more experience talent. “Talent is not only the young, smart, neo graduate. Even the ‘senior’ managers are part of the talent pipeline,” one of the participants commented.

In this context, it is important to note that talent is not correlated with age. It is expressed through the ability to learn over the time and with the curiosity that activates and enables such ongoing learning attitude. “The objective is to deliver a personalized experience to all generations,” an attendee said. However, this customized experience creates a greater challenge for HR. “In this on-demand, tailor-made environment, safeguarding the consistency in the messages delivered is not an easy task,” an HR leader explained.
 

In addition, HR leaders must also handle this tailored messaging in an environment where talent is migrating quickly and where individuals are treating their careers differently. Employment for life is a thing of the past, with 66 percent of  millennials expected to leave their jobs within five years or less. This makes developing and living the right employee value proposition a core value for long-term success and competitiveness.

While globalization is putting pressure on the competition for talent, legacy organizations are coming under pressure to attract the best and brightest employees. However, top multinational companies can no longer rest on their laurels, assuming that the best and the brightest in each market will automatically turn to them for a rewarding career. Locally owned companies, start-ups and technology driven companies are attractive opportunities and are luring talent away from large corporations.

The challenge is to create the common language across all generations in the workforce. Defining the values that will connect these subgroups together, such as feeling respected (especially considering different life paths), being listened to, having opportunities for cross-generational mentoring, receiving effective communication (tailored in the delivery to the target audience) will need to be the guiding principles.

Creating a sense of purpose, aligning the organizational purpose with the purpose of individual employees, together with delivering on-demand, tailor-made experience are some of the levers for talent attraction and retention. Loyalty is higher among millennials who feel they are receiving good professional development, especially related to their leadership skills. “With millennials, the focus shifts from the defined career path to creating a learning journey,” and attendee said. This is in particularly true for women, who are more inclined to stay with their employers, if they are offered fair leadership opportunities. Being passed over for leadership roles is an important factor in decision making on whether to leave.

It’s not only employees who are on a learning journey, but the organizations themselves. Given the structural and demographic changes that are reshaping the organizations, companies must create a learning environment, thus becoming true learning organizations.
 

What Does It Take to Be a Great Leader of the Future?

It is difficult to be a leader in the best of times; it is exponentially harder to be a leader during current times. How can you best prepare to lead amid uncertainty and complexity?  What are the key traits for future leaders?  Today, leaders cannot only have the “proper” competencies set. If HR leaders want to be successful in such a complex time, they must go far beyond the well-known competency model. 

At Egon Zehnder, we have developed a framework that will help to explain this new approach to leadership.
 

The five fundamental elements in the illustration above detail what new leaders must be prepared to tackle if  to be successful in HR.

• Leaders must be able to master complexity, integrating the perspectives of multiple stakeholders (internal or external) to help drive necessary change.  It is especially vital for leaders in a multinational organization to be able to distill the implications of an ever-changing landscape and drive simplicity on which the corporation can act.

• Secondly, leaders also need to be able to orchestrate creativity, encouraging a culture of ideas and problem-solving at all business levels, both for internal engagement and change but also to engage external stakeholders.

• The third skill needed is the ability to grow emotional commitment to drive change. Emotion is the flywheel of change. It generates the momentum that leads more and more employees to take the initiative, providing the catalyst. It is about capturing and leveraging what it is that makes the company an inspiring and meaningful environment for them. It is only by cross-linking what the organization stands for with the meaningful elements at the personal, emotional level that each individual finds their answer to: “Why do I get out of bed in the morning for this?”

• The fourth requirement is to define the broader purpose for which the organization stands.  Without the ability to anchor the business in society, going forward, organizations will be unable to obtain and retain their “license to operate.”  As many examples have recently shown, a company is not a universe in its own right that can create its own reality, regardless of the approval or disapproval of society at large. In fact, it is only with the positive legitimation of society that value can be sustainably created.

• The final critical feature is the requirement to nurture and develop future talent in order to give the business strength and depth in its talent pool.  This is where each HR leader must take responsibility. The appetite and ability to invest in developing leaders to become their best self and investing in proper succession planning are key.

Egon Zehnder's framework helps us better understand what challenges a business leader faces today and maps a path to be truly successful. The traditional competencies model does not succeed in explaining the difference between a good leader and a great one. If all this is true, you must ask what is the level of awareness of your organization about new leadership challenges? Where does your company stand today? 

We surveyed 2,500 women and men with a range of leadership experience across seven countries in January 2019. We asked them how they defined great leadership, the importance of a diverse organization and how they prioritize and balance their professional and personal lives.

Today’s CHRO: Reshaping the Management Mindset

Our work and conversations with our clients have shown that many organizations still need to fully embrace the shift from the traditional competencies model to the new leadership framework. This change is becoming more important for companies’ future evolution. However, such a shift requires deep and persistent effort in order to be fully adopted. 

That is the reason why we are firmly convinced that every company needs to implement such strategic change, and that is exactly the new challenge that is asked of HR leaders: Promote, boost and develop a commitment to reshaping the management mindset. This change will impact all levels of the company. “When we recruit leaders, at all levels, we actually look for exactly the same leadership skills we look for in a CEO or C-Level executive,” an attendee said. In other words, it is not just about CEO and his/her first reporting line. Every leader in the organization will have to embrace this shift and master the new leadership skillset.

How does HR begin to create this change? Our experience suggests two major considerations that can be proposed. First, HR leaders need to internally promote a shared culture of continuous learning: changing leadership frameworks, leaving the traditional competencies model really asks the change agent to continuously challenge himself or herself. New leaders do not simply need to be aware of the necessity to change their leadership model; they also need to be committed to keep supporting those changes. In that sense, the company culture and environment will be crucial in providing all the conditions for the learning to be truly continuous.

Secondly, in order to shape the management mindset, HR leaders need to shape their own mindset first. Being ambassadors of a new leadership framework requires HR managers to master new leadership skills, such as managing multiple stakeholders, encouraging creativity, connecting with other employees both professionally at emotionally, ensuring alignment between individual and corporate purpose and developing next-generation talents.

Starting a Personal Transformation Journey

No matter how many leadership tools models or skills we learn, we cannot truly be effective as leaders, if we are not aligned with ourselves. To predict the development of executive ability and the speed of that development, Egon Zehnder has created a framework consisting of four traits, which we call our Potential Model. This model is key to a “personal transformation journey.”

4 Drivers of Potential

 

These four traits can also be seen as “four different voices” each individual has. “The self is not one-dimensional, rather each of us contain different selves; these different internal voices fight for our attention, where some are stronger and others are ignored,” wrote Erica A. Fox in her book “Winning from Within.”

Each “inner voice” is correlated with one of the four drivers, and plays a key role in expressing our potential; the better we are at listening in a balanced way to all four “inner voices,” the better we become at expressing all drivers of our potential. On the contrary, when only one “inner voice”prevails, the balance is compromised and the potential cannot be wholly exploited. To develop ourselves means to be able to leverage in a balanced way all our “inner voices,” all our traits of potential. The transformational journey starts here.

During our conversation with CHROs at the Milan event, we had a chance also to perform a quick experiment, asking our audience a few simple questions:

• What is the prevailing “voice” within your organization?
• What is the “voice” you would like to hear more within your organization?
• As CHRO, what is your prevailing “inner voice,” and which “voice” you would like to activate more?

Every guest had to choose 1 coloured Card, each representing the 4 “Inner Voices”. The majority of the audience raised the Warrior and Thinker cards (which are tied to Determination and Insight). This led the audience to acknowledge there is an opportunity to develop the Lover and the Dreamer (Engagement and Insight) within many organizations, and all agreed the CHRO has a leading role in this developmental journey.

In conclusion, CHROs today are operating in an increasingly important function which – with the right leaders in place – can have long lasting impact on individuals, corporations and, more importantly, society. Given the importance of becoming fully balanced and aligned with ourselves, it’s important to  reflect on the four dimensions of potential and think about what gives you energy and which dimensions might still be further developed. This is the beginning of our personal and organizational transformational journey.