Human Capital Trends 2020: A memo to HR

Host: Sam Shindler-Glass

Speakers: Richard Coombes, Partner and Bob Hughes, Director at Deloitte.

SS: Welcome to the bonus episodes of the Humanising the Future of Work podcast series. During these sessions we’ll be taking a deep dive into Deloitte’s 2020 Global Human Capital Trends report, focusing on the trends we expect will have the biggest impact across work, workforce, and workplace.

Hello and welcome to the fifth and final podcast in our 2020 Human Capital Trends series. I’m Sam Shindler-Glass and I’m delighted to be joined by Richard Coombes and Bob Hughes. Both are leaders in our HR transformation practice and are perfectly placed to discuss this year’s final chapter of the report, A Memo to HR.

So it’s straight into the first question. Over the past ten reports, there have been at least 13 distinct chapters on the topic of HR. So why do you think HR departments have found it so difficult to be more than a back-office function over the last ten years?

RC: I’m not sure that is entirely the case, to be honest. I think quite a few HR functions have made bigger strategic impact over the last decade of our Trends report and have made significant progress. I think two things to think about. One is, sometimes the economic environment, particularly the financial crisis and certainly some of the post-COVID environment, is going to force HR to once again look at cost-cutting measures, downsizing, and transacting some of the harder bits of HR. Therefore it doesn’t really have the time to focus on the talent.

The second thing is, the world of work is fundamentally changing. If you look at the Trends report, and putting the human back into work is at the centre of it, more is expected of HR. So I don't think it’s a bar or a threshold that stays in the same place. I think the expectation is on impact and driving business outcome, this goes up and up and so HR still has to go on that journey to provide bigger impact.

BH: I think I’d add, Sam, as well that there’s been a big focus on BI in HR functions over the last few years, particularly if I think about large things like cloud transformations, etc., which has really absorbed a lot of cost, a lot of time, and a lot of investment by HR functions to, in effect, focus on the operational. I think the legacy of Ulrich has also created a legacy really where there’s an overly focus on the back office. So operational excellence, cost of HR, and all those metrics surrounding it came to the fore and have been driving that forward at sometimes the expense of the additional value-adding pieces that HR needs to add to help their businesses grow and survive in a very changing world.

SS: Excellent. So, Richard, you talked about the pressure of cost-cutting and time limits and the way the world of work is fundamentally changing. Bob, you mentioned the legacy of the Ulrich model. Both of those have created pressures on HR departments and created this readiness gap. So how can HR departments start to bridge that gap between where they are currently and where they need to get to to support the new world of work?

RC: Yes. I think it’s important to say that if you look at two halves of HR, one is, run the function, do the basics, payroll, etc. and the other one is, impact the business. There’s no question that the HR function still has to focus on those basics, get the transactions right, run that as efficiently and effectively as possible because that creates the capacity and the ability to focus on the other side, right? So I don't think we should shy away from the fact that there is a transaction element and an efficiency element, whether that’s through automation, AI, etc.

So I think the other side of the house… HR has to change its focus. I think it has to focus on business outcomes, so driving productivity. I think it has to focus on employee experience and recognising that everyone’s individual experience of work is different. I think particularly in post-COVID times it has to focus on stewardship in its broadest sense, not just wellbeing but, is the organisation doing the right thing for its people and for society as a whole?

That is going to take a couple of things. One is, HR needs to increase its scope of influence to look beyond its own function to work cross-functionally in an organisation and even outside an organisation with an ecosystem of partners or elements of society. I think HR needs to also start to focus on the future rather than today’s work. What is the work of the future? What is the organisation that we want in the future? And start driving some of those future-of-work strategy conversations in the organisation.

But it means a change of mind-set, so confidence, agility, it means a change of capability, so thinking about human-centred design, the real sharp edge on commerciality and understanding the business, and it means operating in different ways and a far more flexible and fluid way rather than being siloed. So there’s a lot that can be done. It’s not a journey of five minutes.

SS: Thanks very much. That leads us quite nicely into the next question around… Yes. You mentioned automation and AI. There’s the new role of human-centred design and business acumen. Is that important? So, Bob, as people who are budding HR professionals or people who have been in the profession a long time, how are their skills going to need to change? How is the core skillset of HR professionals more broadly going to change over the next five years?

BH: Yes. Thanks, Sam. I think it’s a really interesting question and it’s something at the heart of the profession certainly for now and in the future. I think I’d start with saying, HR has to keep up with and in effect be ahead of, in many cases, where the businesses are and their organisations are. We’re seeing significant material change around digital, around data. We’re seeing brand-new businesses. The COVID pandemic has only accelerated some of those changes. So understanding what makes a business tick and how businesses are leveraging data, how they’re leveraging digital, etc. to drive growth is really critical.

I think there’s a piece around understanding what that means for HR in terms of new jobs, so things like, as Richard mentioned, human-centred design. So where is that capability? Where is the cognitive and chatbot trainers in HR? How are people designing and building an end-to-end experience of human experience and robotics and chatbot, etc.? So all of these are, I think, part of the HR capability. Things like data-savviness are really critical as well as just understanding really how a business runs and how to engage with a business. So the consulting skills, advisory skills, influence skills are really coming to the fore.

RC: Yes. I’d add a couple of things. I think Bob’s right. If you look at some of the future-of-work narrative, we talk about technology augmenting humans at work, so taking some of the drudgery out, the processing or the data collection, to leave people doing what makes us inherently human, creativity, problem-solving, influencing. I think that’s exactly the same for HR. If you want to impact the business, A, you’ve got to get the insight into how the business operates and the analytics behind it, but then you’ve got to be creative, agile, problem-solve to get the problem solved.

I think the other thing HR needs to do is focus on execution. It has not always been the best function at quickly implementing, sensing, testing, agilely re-implementing if it needs to. So I think actually implementation is an important skill for the function, but it’s probably worth saying that we… I said this on another podcast recently. Actually, if you look at the people who now want to come and work in HR, I think it’s fantastic. There is some awesome young talent coming into the function with a lot of those traits and mind-sets because they can see the impact that HR can have on organisations, that HR can have on the experience people have at work, and therefore can improve society. So I think there’s a bright future for the function if it starts to pick up some of these capabilities.

SS: Yes. That exciting future for HR talks to what both of you have described and talked about so far in terms of, actually in the future there’s going to be an expanded focus and influence for HR. Now, that can seem broad and daunting for many, so actually what does HR need to focus on in order to achieve this?

BH: So if I kick off and just give a… Actually it’s a recollection as you’re asking the question, Sam, of back in the day when I was in HR in a large organisation. I was actually a CLO in the HR function and I remember my CHRO telling the HR team about, stop thinking about process, start thinking about business outcome [?]. I think that’s something that is an absolute focus for really all HR professionals and functions, is thinking about the outcome of the work they’re doing rather than the way the work is designed or the activities, the processes.

So there’s a danger sometimes that HR is very inward-looking and I think we that with sometimes language. So again, as an example, in HR we talk about something like talent acquisition, but if you ask any person joining a company, they don’t talk about being acquired by that company. They just simply say, I’ve got a new job, or, I’m joining a new company. So understanding it from the human perspective, the employee perspective, the user perspective and then designing around that, I think, is really core and that’s where I think we’ve seen that rise of employee experience as a key tenet of HR.

That’s a move, if you want, taken from the consumer experience idea, but recognising that the contract between employees and an employer is fundamentally changed over the last ten years and increasingly so. So we talk about that consumer-grade experience. It has a downside, by the way, in that it can be sometimes a bit transactional. So I pay a price and I get a service, but that focus, if you want, designing for the user in mind is something that I think is a really important part and continues to be a really important part of where HR’s focus is.

RC: Yes. I agree with you, Bob. I think in terms of breadth, I mentioned it just now. Not only working across a company, but if you think about the immediate response to COVID, HR and IT worked hand-in-hand to get everyone out of the office, safely working remotely, and connected to the organisation. That’s just a great example of how, to deliver a business outcome, HR needs to work with IT, with facilities, with finance. If you’re looking at employee experience, some of the process controls or risk frameworks in organisations actually might need to change or IT security policy and so HR has to work across and influence across the entire business.

Then also again, as I said earlier, it also has to look outside the organisation. So are there partners you can work with? What are other organisations doing? What’s the ecosystem that I can work with to achieve what I want to achieve? So whether it’s working with universities to shape curriculums to get the right people into your organisation or other examples, you just have to think broadly, enterprise-wise, and even beyond.

SS: Actually, on that, Richard, I know HR historically has almost taken or had a reputation for taking a policing role of sorts in the organisation, particularly as it pertains to adherence to policy. If HR is taking that role in terms of guardianship and stewardship of the organisation and looking out, how can HR make sure it doesn’t almost become a police force for, what’s the right thing for the organisation to be doing?

RC: Yes. You have a damning view on the history of HR there, Sam. I do agree. It’s a little bit… If HR gets into that administrative tailspin of process and control, then, yes, you’re right, they get perceived as policing. I guess it’s the nature of stewardship that I’m talking about. It’s looking after the wellness of the entire organisation, looking after the impact the business is having on its employees, and looking after the impact on society and that can come in multiple ways.

So empowerment of leadership or leadership operating in the right way with proper respect and inclusion actually means that you probably don’t need some of those processes and controls because some of the people aspects certainly will be transacted in a better way. I quite often think particularly some of the HR process is put in place because poor line management exists and you’re having to… It’s almost a quality control through process. So just by thinking holistically, I think some of those controls and policing can be taken out.

Also I think we keep banging on about employee experience, but if you ask the employees, what’s getting in the way, how do you feel about working for the organisation, you will very quickly find that some of the process control steps bureaucracy in organisations is, whether it’s HR process or something else, right at the forefront of what is driving frustration with the organisation. So actually I think in the human-centred product mind-set, HR probably has a role to start taking some of those out to improve the experience that people have in the organisation but obviously not in a crazy way. You still have to have an element of control and we still have employment laws, but it’s finding the right balance, right?

SS: From a harsh view initially at the beginning of that question to an exciting view of the future. To steal your phrase, Richard, I’m surprised I’m getting to see it first. The idea that it’s never been a more exciting time to be an HR professional…

RC: Sam, you’ve stolen it.

SS: I know. COVID-19 has put HR at the forefront and given HR that chance. What can HR take from the last three months and really take forward as the return to work begins?

BH: I’ve been talking to clients this week on those very subjects. It’s a very interesting one, especially… We’re recording this on the first week when, in the UK, schoolchildren are going back to school. Parents are starting to appear more and more going back to work. I was at the train station today. It was the first time I’ve seen the platform to a degree crowded as I get the train to work. So we are in an inflection point and we’ll continue to have future inflection points.

I think the big thing around this is… If I think about the last time we had a large-scale, if you want, crisis, and this one is worldwide and the previous one was a financial crisis, the response was very much CFO-led, so really thinking about financial retrenchment, balance sheet, etc. This time a lot of the response is CHRO-led. The implicit people impact of COVID has really placed HR in the crosshairs and at the forefront of making those changes. So it’s a really challenging time but a really opportune time for HR to make a difference.

I think how it then approaches some of the choices it has already made and then, importantly, how it makes some future choices about coming back to work, about safety at the workplace, about the changing of contract, the nature of work, the businesses it stays in and gets out of all become critically important for the proposition that company or that organisation is making to its employees. So real challenging times but really opportune times ahead for HR.

RC: Yes. Your question, Sam, on, what can it learn… Well, if you look at what happened, the crisis is always a great focus for organisations, right? So HR ruthlessly focused on getting people home, safe, wellbeing, and productive. It stopped all that other peripheral stuff. I bet if you ruthlessly looked at the portfolios of most HR functions, there’s a lot of stuff that they’re doing that really isn’t driving that business outcome. So continue that. Be ruthless about focus, right?

Speed… So the homeworking policies were rewritten in hours whereas normally HR would take three months and polish it endlessly to make sure it was perfect. 80% was good enough and they operated with speed and agility, reviewed it, flexed if they needed to, and that is exactly the same approach HR needs to take. I think I already said it was a cross-business response, certainly working with IT facilities, and that’s the way they have to think. It really was also a focus on, how do we get people working in different ways but keep productivity up?

Now, I could argue that productivity isn’t just, could I log in from nine to five? It’s a bit deeper than that, but actually again that focus on, are people working in a productive way, has been fantastic. Obviously they’re dialling up wellbeing, but it’s been wellbeing with a very individual focus. I think we’ve done a lot of work looking at our employee base working remotely and trying to continually survey and check people are okay.

What’s become really clear is, the only thing that you can predict is that it’s an individual’s personal circumstance that dictates whether they’re finding it hard or easy. You can’t bucket people by generations, by, do they flat-share, by, do they have children? There’s an element of that, but it’s proven that you really have to understand the context of the individual. That’s all we’re saying in the employee experience world. The HR and managers need to understand their people.

So there’s so much stuff to build on. We say, how do you bottle the brilliance? I think it’s a perfect opportunity for HR to look at what was successful and make sure that they don’t go back to where they were.

SS: Actually a lot of what you talked about, broader trends… I know specifically that rewriting of policy in hours and flexing it quickly speaks to that organisational agility but also agility on the ground. So to what extent is the shift that HR needs to make unique or is the shift towards greater agility and more team-based working where you bring in the entire organisation where everyone is heading?

BH: I think a lot of these things have been borrowed or learnt, if you want, from other areas. So I think about… Adjunct [?] working project management has now in a way… Teams organise [?], etc. becomes more and more to the fore into other areas and other functions. Equally, things like human-centred design have come from a digital product world, but I think what’s important is both for an HR function to understand them firstly and understand how they’re applied and what they actually mean and why they’re there.

It’s very easy to just go, let’s call people, say, scrum masters and things and think we’re agile, but actually then being able to apply them in a thoughtful way and understand that particularly, and the piece for HR that’s unique, is [unclear] human element. That’s about everything from organisational design to behavioural psychology and having an understanding of that. So applying those kind of things to both the HR function and then helping businesses and organisations adopt them becomes really critical.

So it’s very easy for companies to say the word agile. It’s very hard for organisations to move that way. I’ve certainly worked with some clients who have told me that HR is the blocker to that happening rather than the enabler. So I think the ways of working, more modern ways of working that are relevant to the right and appropriate circumstances, is something that HR needs to focus on for itself and equally to help its organisation adopt those ways of working.

RC: I realise I broke my own rule in my previous answer because I said agile and I’m really not a fan because agile is an IT development methodology and, as Bob said, people confuse it with, how do I make my function or my business more fluid, flexible, fast-moving, greater impact? I think that’s what HR and all businesses are trying to do, right? So if your business is looking to be more adaptable and more flexible, then HR should absolutely do that as well and, I would argue, be at the forefront of that. We’ve been seeing that for quite a long time, right?

So more flexibility and fluidity over allocation of in-business [?] HR resources, a tighter coupling of COEs and business partners in cross-functional teams to solve particular business problems… I think HR has been on that journey. I think there’s more work to do. I think, as Bob says, the critical thing is to work out where that flexibility and fluidity is required and not just try and blanket-put it across the entire business or the entire function. Just make sure you’re doing it for a specific reason.

It’s also worth saying, people talk about agile or OD. The OD is only one element of being agile. It’s about mind-set. It’s about governance. It’s about psychological safety for the teams. There’s certainly discipline and control because agile with no discipline is just chaos, right? So I think we talked about mind-set, capability, and everything earlier on. I think HR going far more fluid and flexible is just underpinning all those transformations.

SS: Fantastic. I think no better ending than the series to talk about the unique people context that is being faced.

RC: Can I say one more thing, Sam?

SS: Yes. You can.

RC: If people read the Memo for HR and the opportunities there, I’m going to repeat my phrase. There has never been a better time to be an HR professional if you want to make an impact on how people experience work and therefore on society as a whole. So I think the challenge is clear, but it’s a really exciting one that the function needs to take.

SS: No better ending than talking about the unique people context as a nice way to finish the series and about the potential future for HR. Thanks very much, Richard and Bob, and thanks to all of you for listening to our series at home. Head to the Deloitte website for more information about the Human Capital Trends Report and look out for the 2021 survey, which should now be available to fill in.