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Introduction: Rewriting the rules for the digital age

by Bill Pelster, Jeff Schwartz
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28 February 2017

Introduction: Rewriting the rules for the digital age 2017 Global Human Capital Trends

28 February 2017
  • Bill Pelster United States
  • Jeff Schwartz United States
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  • Introduction
  • Forces for change driven by the digital revolution
  • The 10 human capital trends
  • New game, new rules
  • HR scorecard: How well is HR keeping up?
  • Join us: Riding the wave to its crest
  • Appendix

The accelerating rate of change in business, the economy, and society challenges both business and HR to adopt new rules for leading, organizing, motivating, managing, and engaging the 21st-century workforce. 

Introduction

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The 2017 Deloitte Global Human Capital Trends report reflects seismic changes in the world of business. This new era, often called the Fourth Industrial Revolution1—or, as we have earlier labeled it, the Big Shift2—has fundamentally transformed business, the broader economy, and society.

We title this year’s report Rewriting the rules for the digital age because a principal characteristic of the new era is not merely change, but change at an accelerating rate, which creates new rules for business and for HR. Organizations face a radically shifting context for the workforce, the workplace, and the world of work. These shifts have changed the rules for nearly every organizational people practice, from learning to management to the definition of work itself.

All business leaders have experienced these shifts, for good or for ill, in both their business and personal lives. Rapid change is not limited to technology, but encompasses society and demographics as well. Business and HR leaders can no longer continue to operate according to old paradigms. They most now embrace new ways of thinking about their companies, their talent, and their role in global social issues.

We have developed a “new set of rules” to make sense of this changing landscape. These rules reflect the shifts in mind-set and behavior that we believe are required to lead, organize, motivate, manage, and engage the 21st-century workforce. While it is hard to predict which emerging business practices will endure, it is impossible to ignore the need for change. This report is a call to action for HR and business leaders, who must understand the impact of change and develop new rules for people, work, and organizations.

This report marks the fifth anniversary of our annual deep dive into human capital trends. This year, our survey included more than 10,000 respondents from 140 countries, fueling our analysis of the social, economic, political, technological, and cultural issues facing business and HR leaders and employees worldwide.

Forces for change driven by the digital revolution

We found a fascinating tapestry of issues as we looked at the survey data, spoke with clients, and interviewed business leaders around the world.

It is abundantly clear that technology is advancing at an unprecedented rate. Technologies such as artificial intelligence (AI), mobile platforms, sensors, and social collaboration systems have revolutionized the way we live, work, and communicate—and the pace is only accelerating. This causes stress for individuals as well as societies; research shows that employees and organizations are more “overwhelmed” than ever.3

Business productivity has not kept pace with technological progress. Data from the US Bureau of Labor Statistics and other sources show that productivity growth remains low despite the introduction of new technology into the business environment. In fact, since the 2008 recession, growth in business productivity (gross domestic product per hour worked) stands at its lowest rate since the early 1970s (1.3 percent).4 At the same time, companies themselves are being disrupted more quickly. For example, only 12 percent of the Fortune 500 companies from 1955 are still in business, and last year alone, 26 percent fell off the list.

What appears to be happening

The problem, illustrated in figure 1, is the ever-increasing gap between technological sophistication and the amount of work actually performed. The result is income inequality, wage stagnation, and social and political unrest around the world. Companies with low productivity now lose quickly to competitors, as most stock market valuations are driven by IP and services, not by physical or capital goods.

What causes this gap? We believe the problem comes down to human capital strategies—how businesses organize, manage, develop, and align people at work.

In his 2016 book Thank You for Being Late, Thomas Friedman refers to a graph created by Eric “Astro” Teller, CEO of Alphabet’s Google X division, which suggests that technology is increasing at an ever-faster rate while human adaptability rises only at a slower, linear rate.5 While we partially agree with his conclusion (we believe individuals do and will adapt to technology very quickly), we think that it is also critical to understand the relationship among the four interlocking issues shown in figure 2.

What is really happening

In figure 2, curve 1 illustrates the exponential rate of technological change. More than 50 years after the formulation of Moore’s law—which holds that computing power doubles in capability every 18 to 24 months—mobile devices, sensors, AI, and robotics affect our lives more quickly and more pervasively than ever before.

Curve 2 posits that individuals are relatively quick and adept at adopting new innovations. Deloitte research, for example, finds that US citizens now look at their mobile phones 8 billion times a day,6 forcing industries such as media, retail, transportation, and even restaurants to build digital products and services to capture individuals’ time and attention.

As shown in curve 3, however, while individuals adapt to technology relatively rapidly, businesses and organizations move at a slower pace. The business practices of corporate planning, organizational structure, job design, goal-setting, and management were largely developed in the (first) industrial age, and companies must constantly revise them to keep up. The gaps between curves 1, 2, and 3 show the need for organizations to adapt to technology and lifestyle changes. They are a major focus of the trends discussed in this year’s report.

Finally, curve 4 represents public policy, including policies around income inequality, unemployment, immigration, and trade. These issues, which directly affect businesses through regulation, taxes, and legislation, adapt at an even slower pace. Laws and policies on topics such as minimum wage, trade tariffs, immigration, and education only shift after years of public debate. The gap between public policy and the other three domains results in imbalances and challenges for business and HR leaders.

Understanding these four curves, and the growing gaps among technology, individuals, businesses, and public policy, is now essential to effectively navigating the world of human capital. HR has a unique role to play: It can help leaders and organizations adapt to technology, help people adapt to new models of work and careers, and help the company as a whole adapt to and encourage changes in society, regulation, and public policy.

Rapid and disruptive change is not new

The current uneasiness with the pace of technological change is not new. The 1980s, for instance, saw a rapid rise in computing power that resulted in automated teller machines, online systems, and the IT industry’s rapid growth. The world adapted well as people gained new skills and new jobs.

Today, a new set of digital business and working skills is needed. As we discuss in this report, companies should focus more heavily on career strategies, talent mobility, and organizational ecosystems and networks to facilitate both individual and organizational reinvention. The problem is not simply one of “reskilling” or planning new and better careers. Instead, organizations must look at leadership, structures, diversity, technology, and the overall employee experience in new and exciting ways.

Our global research

The 2017 survey is our largest and most extensive to date, with input from more than 10,400 business and HR leaders across 140 countries. Twenty-two percent of respondents were from large companies (more than 10,000 employees), 29 percent from medium-sized companies (1,000–10,000 employees), and 49 percent from small companies (fewer than 1,000 employees). Respondents from the Americas accounted for 31 percent of the total; Europe, Middle East, and Africa contributed 51 percent, and Asia Pacific 18 percent. Respondents represented a broad cross-section of industries, including financial services; consumer business; technology, media, and telecommunications; and manufacturing. Sixty-three percent of the respondents were HR professionals, with other business executives comprising 37 percent. C-level executives accounted for 30 percent (more than 3,100) of the respondents.

The appendix contains additional details on respondent demographics.

The 10 human capital trends

The trends in this year’s report identify 10 areas in which organizations will need to close the gap between the pace of change and the challenges of work and talent management (figure 3).

2017 trends by importance

Trend 1. The organization of the future: Arriving now

Given the pace of change and the constant pressure to adapt, it is not surprising that executives identified building the organization of the future as the most important challenge for 2017. In this year’s survey, nearly 60 percent of respondents rated this problem as very important, and 90 percent rated it as important or very important. This level of interest signals a shift from designing the new organization to actively building organizational ecosystems and networks. Agility plays a central role in the organization of the future, as companies race to replace structural hierarchies with networks of teams empowered to take action.

Trend 2. Careers and learning: Real time, all the time

The concept of a “career” is being shaken to its core, driving companies toward “always-on” learning experiences that allow employees to build skills quickly, easily, and on their own terms. This year, careers and learning rose to second place in rated importance, with 83 percent of executives identifying these issues as important or very important. At leading companies, HR organizations are helping employees grow and thrive as they adopt the radical concept of a career described in The 100-Year Life.7 New learning models both challenge the idea of a static career and reflect the declining half-life of skills critical to the 21st-century organization.

Trend 3. Talent acquisition: Enter the cognitive recruiter

As jobs and skills change, finding and recruiting the right people become more important than ever. Talent acquisition is now the third-most-important challenge companies face, with 81 percent of respondents calling it important or very important. Our chapter on talent acquisition highlights how leading organizations use social networking, analytics, and cognitive tools to find people in new ways, attract them through a global brand, and determine who will best fit the job, team, and company. A new breed of cognitive technologies is radically transforming recruiting, which stands at the early stages of a revolution.

Trend 4. The employee experience: Culture, engagement, and beyond

Culture and engagement are vital parts of the employee experience, and leading organizations are broadening their focus to include a person’s first contact with a potential employer through retirement and beyond. Today, companies are looking at employee journeys, studying the needs of their workforce, and using net promoter scores to understand the employee experience. Workplace redesign, well-being, and work productivity systems are all becoming part of the mandate for HR.

Trend 5. Performance management: Play a winning hand

For the last five years, companies have been experimenting with new performance management approaches that emphasize continuous feedback and coaching, reducing the focus on appraisal. This year, companies are moving beyond experimentation to deploy new models on a wide scale. Even though HR technology tools have not quite caught up, new approaches to performance management are working, and they are increasing productivity and changing corporate culture.

Trend 6. Leadership disrupted: Pushing the boundaries

As companies transform and digital organizational models emerge, leadership needs change as well. Eighty percent of our respondents say that leadership is an important issue, and 42 percent call it very important. Organizations are clamoring for more agile, diverse, and younger leaders, as well as new leadership models that capture the “digital way” to run businesses. While the leadership development industry continues to struggle, companies are pushing the boundaries of their traditional leadership hierarchies, empowering a new breed of leaders who can thrive in a rapidly changing network.

Trend 7. Digital HR: Platforms, people, and work

As the enterprise as a whole becomes digital, HR must become a leader in the digital organization. This means going beyond digitizing HR platforms to developing digital workplaces and digital workforces, and to deploying technology that changes how people work and the way they relate to each other at work. Fortunately, the path to digital HR is becoming clearer, with expanded options, new platforms, and a wide variety of tools to build the 21st-century digital organization, workforce, and workplace.

Trend 8. People analytics: Recalculating the route

Data about people at work has become more important than ever, but the focus of people analytics has changed. Formerly a technical discipline owned by data specialists, people analytics is now a business discipline, supporting everything from operations and management to talent acquisition and financial performance. Readiness to capitalize on people analytics remains a challenge, however. Only 8 percent of organizations report they have usable data, while only 9 percent believe they have a good understanding of the talent factors that drive performance.

Trend 9. Diversity and inclusion: The reality gap

Fairness, equity, and inclusion are now CEO-level issues around the world. Executives can no longer abdicate diversity strategies to the CHRO or chief diversity officer. A new focus on accountability, data, transparency, and “diversity through process” is driving efforts around unconscious bias training and education throughout the business community. Despite these efforts, however, we see a reality gap. Issues around diversity and inclusion continue to be frustrating and challenging for many organizations. 

Trend 10. The future of work: The augmented workforce

Robotics, AI, sensors, and cognitive computing have gone mainstream, along with the open talent economy. Companies can no longer consider their workforce to be only the employees on their balance sheet, but must include freelancers, “gig economy” workers, and crowds. These on- and off-balance-sheet workers are being augmented with machines and software. Together, these trends will result in the redesign of almost every job, as well as a new way of thinking about workforce planning and the nature of work. Change is already taking place: In this year’s survey, 41 percent of our respondents have either fully implemented or made significant process in adopting cognitive and AI technologies, and another 35 percent report pilot programs.

Rewriting the rules for the digital age: 2017 Deloitte Human Capital Trends

New game, new rules

The game has changed, and so have the rules. In this year’s Global Human Capital Trends report, we supplement each chapter with a table highlighting the shift from old rules, which dominated past thinking about how to run an organization, to a set of new rules, which define how leading companies now think and operate. These new rules reflect not only insights from our survey, but also our work with companies around the world that are setting the bar for performance in today’s global economy. They are the result of years of thought and practice, as well as our observations of leading companies in every industry, geography, and size.

Put directly: Any organization that is not playing by the new rules will likely fall behind. We hope these insights can serve as a strategic roadmap to help organizations to not simply adapt, but to thrive in the emerging business environment.

HR scorecard: How well is HR keeping up?

Each of the 10 trends we discuss affects the role of HR, which in turns leads to a serious question: How well is HR keeping up?

Over the past five years, we have tracked what we term the “HR scorecard,” which measures how well HR executives believe their teams can address the talent issues around them. This year, HR is struggling. Last year, 39 percent of HR teams felt their capabilities were good or excellent, but this year that proportion has dropped to 36 percent, below the capability we measured in 2015 (figure 5).

HR performance scorecard, 2014–2017

Why the slip backwards?

We believe that the HR function is in the middle of a significant identity change. Not only do HR organizations need to structure themselves for service delivery efficiency and excellence in talent programs, but they must now also focus on the employee experience, employee productivity, and the entire realm of work, job, and structural design. The new rules provide a mandate for many HR organizations to reorient themselves and focus their people on the changing human capital issues their companies face.

HR leaders are clearly being asked to step up to the challenge. The profession is lighting up with new ideas, and HR teams are rapidly using the new rules in some of the most innovative ways we have seen in years.

2017 HR scorecard by job function (“How do you rate your HR capabilities?”)

Join us: Riding the wave to its crest

Humans are marvelously adaptable. We have every confidence that even in these days of rapid change, leaders and workers will adapt, as they have in the past. The question is: Will organizations ride this wave or watch it crash over themselves?

The opportunity for leading organizations is not only to use these trends to guide business success, but to help pull society toward the crest of the technological wave—an important consideration when business is increasingly invited to play a social as well as an economic role. We invite you to join us on this journey.

Appendix

Trend importance ratings by region

Trend importance ratings by industry

Trend importance ratings by organization size

Survey demographics

Deloitte’s Human Capital professionals leverage research, analytics, and industry insights to help design and execute the HR, talent, leadership, organization, and change programs that enable business performance through people performance. Visit the Human Capital area of www.deloitte.com to learn more.

Credits

Written By: Bill Pelster, Jeff Schwartz

Contributors: David Mallon, Julie May, Jen Stempel

Cover image by: Lucie Rice

Acknowledgements

The 2017 Global Human Capital Trends report is the result of a year-long effort by a global Deloitte team that includes authors and researchers from 11 countries representing every region of the world. The report has been shaped by the daily experiences of our many consulting practitioners working with our valued clients to address their most strategic people issues; innumerable interviews with business and HR leaders; and the voices of more than 10,000 survey participants from 140 countries.

 

Orchestrating these many strands into a single report is not an easy undertaking. Please join us in thanking the inspired and tireless team who has driven the development and production of this year’s report and survey:

 

Julie May for overall management of the Global Human Capital Trends program. We appreciate the focus, effort, and challenging perspectives you bring to the team, as well as the way you keep us moving forward through our many long discussions to get to a finished product. We are also grateful for your ability to weave together the efforts and perspectives of the many country champions, authors, and subject-matter experts involved in producing this global report.

 

Jen Stempel, Bernard van der Vyver, David Mallon, and Luke Monck for sharing your experience and insight. Your willingness to engage in debate helped us shape the themes of the report.

 

Elizabeth Chodaczek, Alejandra Arrue, Mia Farnham, Anna Martin, and Lauren Shevlin for managing all the many details of such a complex undertaking.

 

Junko Kaji, our editor extraordinaire; Sonya Vasilieff and Troy Bishop on the Deloitte University press design and media teams; and the rest of those at Deloitte University Press who helped to create this insightful and beautiful publication.

 

Katrina Drake Hudson, Christy Hodgson, and Laura Elias for leading our innovative marketing program and helping us adopt the new rules of the digital world in our own work. Thanks as well to Melissa Doyle, Susan Ostaszewski, Stephen Soyland, and Lesley Stephen for managing the global public relations program.

 

Ankita Jain, Udita Arora, Mukta Goyal, Shivank Gupta, and Maansi Pandey for leading our research efforts and managing a global survey with more than 10,000 respondents in multiple languages. Many thanks and much appreciation to the research team: Saylee Bhorkar, Diptarka Chakraborty, Srishti Dayal, Garima Tyagi Dubey, Karan Gurung, Rachit Jain, Swati Jain, Ashish Kumar Kainth, Harsh Khandelwal, Navti Narang, Sangeet Sabharwal, Sonia Sharma, Goral Shroff, and Manan Vij.

 

And finally, a special thank you to Brett Walsh, leader of our global Human Capital practice, and Jason Geller and Erica Volini, the leaders of our US Human Capital practice. We are grateful for your support and guidance every step of the way in producing this report.

Endnotes
    1. Klaus Schwab, The Fourth Industrial Revolution (World Economic Forum, 2016). View in article

    2. John Hagel, John Seely Brown, and Lang Davison, “The Big Shift: Measuring the forces of change,” Harvard Business Review, July–August 2009. View in article

    3. Jeff Schwartz et al., The overwhelmed employee: Simplify the work environment, Deloitte University Press, March 7, 2014, /content/www/globalblueprint/en/insights/focus/human-capital-trends/2014/hc-trends-2014-overwhelmed-employee.html?id=gx:el:dc:dup682:cons:awa:hct14, accessed January 13, 2017. View in article

    4. Bureau of Labor Statistics, “Labor productivity and costs,” https://www.bls.gov/lpc/prodybar.htm, accessed January 13, 2017. View in article

    5. Thomas L. Friedman, Thank You for Being Late (Farrar, Straus & Gioux, 2016), pp. 213–219. View in article

    6. Deloitte, “Deloitte survey: Americans look at their smartphones in the aggregate more than 8 billion times daily,” PRNewswire, December 9, 2015, http://www.prnewswire.com/news-releases/deloitte-survey-americans-look-at-their-smartphones-in-the-aggregate-more-than-8-billion-times-daily-300190192.html, accessed January 13, 2017. View in article

    7. Lynda Gratton and Andrew Scott, The 100-Year Life (Bloomsbury, 2016). View in article

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Talent , Digital Transformation , Human Capital , Global Human Capital Trends

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Bill Pelster

Bill Pelster

Principal |Human Capital

Bill has more than 25 years of industry and consulting experience. In his current role, Bill is responsible for leading the Bersin by Deloitte research and products practice and is a senior advisor to the Integrated Talent Management practice. A well-respected speaker and author, he has recently led, supported, or authored key research pieces including Talent 2020, Human Capital Trends, and The Leadership Premium. In his previous role as Deloitte’s chief learning officer, Bill was responsible for the total development experience of Deloitte professionals, and was one of the key architects of Deloitte University, Deloitte’s $300 million learning facility outside Dallas. Bill is a former US board member for Deloitte Consulting LLP.

  • bpelster@deloitte.com
  • +1 206 716 6103
Jeff Schwartz

Jeff Schwartz

Principal

Jeff Schwartz, a principal with Deloitte Consulting LLP, is the US leader for the Future of Work and author of Work Disrupted (Wiley, 2021). Schwartz is an adviser to senior business leaders at global companies, focusing on workforce and business transformation. He is the global editor of the Deloitte’s Global Human Capital Trends report, which he started in 2011.

  • jeffschwartz@deloitte.com

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