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FALL 2016

PEOPLE • ORGANIZATION • INNOVATION

THE KEY TO BUILDING A BETTER

FUTURE

Human Capital The Hidden Value How One in the Age of of High-Performance Firm Flipped Machine Learning Work Design to Flex


partnering FOR PROGRESS Wharton Executive Education: Best-in-Class Executive Development Programs Developing your employees’ potential is a win-win-win. They become more effective in their role, your organization gains competitive ground, and you are the hero who made it all happen. The key is finding the right educational partner. As one of the world’s leading business schools, Wharton offers exceptional learning development experiences infused with global perspectives and data-driven, evidencebased research. We’ll work with you to find the best programs for your business situation, empowering your employees with the skills they need to make an immediate impact.

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elcome to Talent Economy, a new conversation on the future of business and the role talent plays in it. Our aim is to ensure you and other business leaders are equipped with the right intelligence to navigate today’s complex business environment, where talent is the most valuable resource executives have in their quest to find competitive advantage. Think of Talent Economy as your one-stop shop for information, analysis and insights in the new economy. Between our website, TalentEconomy.io — a hub of content that includes video, podcasts and other digital media — and our quarterly journal, Talent Economy is a chance for leaders to think bigger picture on their strategies to attract, retain and develop their talent. Each quarter in the journal you’ll

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T a l e n t E c o n o m y • F a l l 2016

find quick-hitting leader stories that address some of the most challenging issues influencing talent in the economy. Then, with our features section, you’ll find essays, analysis, opinion and journalism addressing at length some of the most vexing talentrelated issues of our times. Each journal features a new and unique theme. With that comes an expansive package of stories and analysis featuring Talent Economy’s accomplished group of writers as well as top thought leaders throughout the human capital industry. These themes aim to address various challenges that leaders are experiencing in their pursuit of talent, from managing talent in a globalized business environment to the evolving dynamic regarding the employer-employee social contract. The themes will pinpoint the most prominent issues executives face and address them with a vigor and depth that is unmatched. This issue’s theme aims to answer a basic question: What constitutes today’s talent economy? And why should executives care? It’s no secret that for decades the business of managing talent has been delegated to the world of human resources. And while

The business of talent, in short, needs to be elevated, not delegated. You’ll read, for instance, on the ways machine learning and predictive analytics are transforming workforce planning and the value of creating a high-performance culture, as well as an in-depth case study on tax services firm Ryan LLC’s dramatic transition to a flexible work environment. The strategy shift alleviated highperformer turnover and allowed the company to expand its profitability amid an otherwise turbulent economic environment. In our “Insider” feature, we sit down with Facebook’s head of strategic workforce planning, Ross Sparkman, to discuss the evolution of the discipline and the disruptions artificial intelligence will bring to the talent economy. Talent is the world’s most valuable resource. With Talent Economy, both in print and online, our goal is to help leaders make the most of it. Frank Kalman, Managing Editor fkalman@talenteconomy.io

ILLUSTRATION BY ANNA JO BECK

Editor’s Note

many HR leaders have contributed mightily toward companies’ ability to successfully manage their talent, our current times require a higher focus. Thanks to a massive skills shortage and quickly changing attitudes around work, among a host of other macroeconomic factors, executives face a talent market that is exceptionally challenging.


CONTRIBUTORS LAUREN DIXON is an associate editor at Human Capital Media and a 2014 graduate of University of Missouri, Columbia. Dixon writes, edits and reports for Talent Economy and HCM’s other publications, Chief Learning Officer and Workforce.

ALEC LEVENSON is an author, economist and senior research scientist at the Center for Effective Organizations at the University of Southern California in Los Angeles. His work focus includes human capital analytics and organization design.

ANNA JO BECK is the art director for Talent Economy. She designed the magazine and created several of the illustrations throughout this issue. Beck studied illustration and design at the Art Institute of Boston, and her work has been awarded by American Illustration.

JOHN LIPINSKI is a human capital analytics data scientist at life insurer Humana Inc., based in Louisville, Kentucky. He is also the co-founder of HRanalytics101.com, a venture that aims to help HR professionals build capability in people analytics.

Volume 1, Issue 1

PRESIDENT John R. Taggart VICE PRESIDENT, CFO, COO Kevin Simpson VICE PRESIDENT, GROUP PUBLISHER Clifford Capone VICE PRESIDENT, EDITOR IN CHIEF Mike Prokopeak EDITORIAL DIRECTOR Rick Bell EDITORIAL ART DIRECTOR Anna Jo Beck GROUP EDITOR/ASSOCIATE EDITORIAL DIRECTOR Kellye Whitney MANAGING EDITOR Frank Kalman ASSOCIATE EDITORS Lauren Dixon, Bravetta Hassell, Andie Burjek COPY EDITOR Christopher Magnus EDITORIAL INTERNS Alice Keefe, Nidhi Madhavan CONTRIBUTING ILLUSTRATORS Klaas Verplancke, Jun Cen (heflinreps.com), Benoit Tardif (colagene.com) CONTRIBUTING WRITERS Geri Anne Fennessey, Sarah Fister Gale, Alec Levenson, John Lipinski, Kevin Wilde VICE PRESIDENT, RESEARCH & ADVISORY SERVICES Sarah Kimmel RESEARCH MANAGER Tim Harnett RESEARCH ANALYST Grey Litaker RESEARCH ASSISTANT Kristen Britt RESEARCH GRAPHIC DESIGNER Theresa Stoodley MEDIA & PRODUCTION MANAGER Ashley Flora PRODUCTION COORDINATOR Nina Howard VICE PRESIDENT, EVENTS Trey Smith EVENT CONTENT MANAGER Ashley Collins EVENTS MARKETING MANAGER Anthony Zepeda WEBCAST COORDINATOR Alec O’Dell EVENTS GRAPHIC DESIGNER Tonya Harris BUSINESS MANAGER Vince Czarnowski REGIONAL SALES MANAGERS Derek Graham, Daniella Weinberg ACCOUNT EXECUTIVE Brian Lorenz DIRECTOR, BUSINESS DEVELOPMENT & EVENTS Kevin Fields AUDIENCE DEVELOPMENT DIRECTOR Cindy Cardinal DIGITAL MANAGER Lauren Lynch DIGITAL COORDINATOR Mannat Mahtani LIST MANAGER Mike Rovello BUSINESS ADMINISTRATION MANAGER Melanie Lee LEAD GENERATION ADMINISTRATOR Nick Safir Talent Economy is published January/February/March, April/May/June, July/August/ September, October/November/December by MediaTec Publishing Inc., 111 E. Wacker Dr., Suite 1200, Chicago IL 60601. Periodicals postage paid at Chicago, IL and additional mailing offices. POSTMASTER: Send address changes to Talent Management, P.O. Box 8712 Lowell, MA 01853. Subscriptions are free to qualified professionals within the US and Canada. Digital free subscriptions are available worldwide. Nonqualified paid subscriptions are available at the subscription price of $125 for 6 issues. All countries outside the US and Canada must be prepaid in US funds with an additional $33 postage surcharge. Single price copy is $29.95.

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Contents

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22 28

18 COVER STORY

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ANALYSIS

Today’s talent economy is more dynamic than ever, thanks to advances in technology, a changing labor market and shifting attitudes around productivity.

12

Recent investment in skills shortage is emblematic of talent economy challenges.

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Managing talent is different today. Here are questions leaders should rethink.

FEATURES

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Succession is best solved when CEOs themselves plan for their replacements.

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equate high performance with 28 Leaders engagement. But how engaged people

Is the practice of “benching” top employees to keep them from competitors worthwhile?

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LLC’s in-office culture was 42 Ryan driving away talent, so the tax services

Layoffs are a harsh reality, and communicating them requires a special tact and balance.

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Generation Y have a unique set of standards when it comes to how they’re paid.

learning is emerging as an 22 Machine important tool in people analytics.

Here’s how CEOs can apply it properly.

are depends on work design.

firm shifted to a flex-work environment.

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EDITOR’S NOTE

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Welcome to Talent Economy, a new HCM publication.

DASHBOARD

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Data and insight on the talent economy from Talent Tracker.

INSIDER

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Facebook’s Ross Sparkman on planning, people analytics and AI.

BOTTOM LINE most interesting 50 The and revealing quotes from the Fall issue.


Be first. Be fast. talenteconomy.io


Dashboard: EMPLOYMENT DATA AND INSIGHT ON THE TALENT ECONOMY FROM TALENT TRACKER.

Unemployment, Second Quarter 2016*

3.7% 3.8% Asian

4.1% 4.2%

4.9% 6.6%

White

Latino

Gender Distribution by Occupation*** Sales and office occupations

9.1% 7.6%

male

Black

female

Service occupations

Total Unemployment*

5.3%

2015

4.8% 2016

male

female

Management, professional and related occupations

male

female

*16 Years and Over

Production, transportation and material moving occupations

Average Weekly Income** Asian

White

Latino

Black

male

$796

$714

$610 $756

$699

female

Natural resources, construction and maintenance occupations

$920 $1,127

$1,027 **Workers 25 Years and Over

Talent Tracker is a proprietary tool developed by Human Capital Media that integrates U.S. Census Bureau, Bureau of Labor Statistics and National Science Foundation data.

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male ***20 Years and Over

female


A new era in business where talent, ideas and innovation are what drive sustained growth.

A new management reality that requires a modern, flexible and constantly evolving approach.

A publication and community of forward-thinking C-suite leaders who understand how pivotal talent is to success.

Sign up now to be part of the movement at talenteconomy.io


The Talent Economy Executives need to recognize talent as the ultimate competitive differentiator in the modern economy. by Frank Kalman problem that has plagued the global economy for years. The world is flush with people, but finding those with in-demand skills to contribute to the global economy has grown increasingly difficult. People are abundant; talent is scarce.

I

n August, the Obama administration announced an unusual investment.

Pressured by the fact that many Americans were leaving the country’s higher education system with loads of student debt but few skills needed in the economy, the administration said it would inject as much as $17 million in loans and grants for students to undergo training at eight for-profit entities outside of traditional college. Included among the institutions were coding schools and online education providers, as well as General Electric Co., which agreed to provide students in the program with training at one of the company’s jet engine plants. Most striking about the announcement was the apparent indictment of U.S. colleges. Not only was the government saying colleges weren’t properly doing their jobs to equip the workforce with skills companies need — especially those in emerging and highly skilled fields — but it was turning to the private sector to help fix the problem. Beyond the surface, however, the development spoke to a larger 12

Enter Talent Economy. Given the dearth of skilled talent, business executives are challenged with a growing need to elevate their focus on cultivating it. And as our cover section shows, the stakes of managing this resource properly are high. Capital and infrastructure are both needed to start and maintain a successful business, but without the proper talent, both are exponentially insignificant. Leading in the modern talent economy is a multidimensional endeavor that expands beyond the skills shortage. Adding to the complexity are evolving norms around the nature of knowledge work as well as new technologies and attitudes that have changed what constitutes productivity and performance. Driving much of the shift are emerging generations of talent, namely Generation Y, also known as millennials. Now the largest generation in the workforce, those born roughly between 1980 and 2000 are upending traditional corporate norms and changing the future course of business. Take, for instance, one of our leading examples, appliance manufacturer Whirlpool Corp. Now more than 100 years old, the company in the past decade has moved to operate

T a l e n t E c o n o m y • F a l l 2016

more like an early stage startup in Silicon Valley, not a century-old manufacturer. Gone is the firm’s traditional dull office environment. In is a new headquarters specially equipped for openness and collaboration, technology and a new, more productive culture. The result has come in the form of streamlined decision-making that has led to faster execution. Both have helped Whirlpool curtail the economic headwinds brought on by the 2008 financial crisis and a string of new global competitors in the industry. Other companies have taken similar steps; however, laggards remain. Perhaps the most challenging aspect to managing in the talent economy is what’s ahead. Just as technology and globalization have dramatically altered the nature of the global workforce, continued innovation is poised to challenge executives further. The rise of artificial intelligence and robotics are among a host of evolving advancements likely to topple executives’ current ability to assess and manage talent. Despite these weighty challenges, the future of the talent economy remains positive. Executives intent on taking control of their organization’s talent strategy are poised to benefit. Those who overlook talent’s impact on the future of the economy and their organization’s ability to succeed in it will be at a drastic competitive disadvantage. Now is the time to act.


Talent Questions Leaders Should Rethink by Kevin Wilde

As leaders continue to grapple with the challenges posed by the talent economy, here are five questions they should reconsider. Old: “How quickly can we fill that open job?” Better: “What abilities will we need in the future?” Staff openings need to be elevated from replacing “inkind” employees as fast as possible with assessing and determining which skills and capabilities the company is likely to need in the future. Old: “What’s/who’s the problem?” Better: “What’s the deeper meaning of that?” Talent problems are often the most vexing for business leaders. Too often managers want problems to go away quickly, and as a result they tend to reach for superficial responses. Slow down the “quick fix” answer or avoidance behavior by facing the talent issue with a deeper level of curiosity and inquiry. Old: “Does that feel right?” Better: “What evidence and data leads us to that answer?” The world of people management is now catching up to the rest of the business. Talent metrics and predictive

analytics are replacing gut-feel and uniformed opinions. Challenge staff to describe talent situations with relevant data, trends and numeric analysis. Push them to justify resource investments with return-on-investment application and commitment. Old: “What can you do?” Better: “What can we all do together?” Gone are the days when business leaders delegate the work of talent to the human resources department with fragmented efforts. More effective approaches integrate the sub-disciplines of HR — recruiting, compensation, training, etc. — into a more holistic perspective. Old: “Is this promotion or removal too soon?” Better: “How can we make this stretch promotion work and/or address this performance issue now?” Leaders often overestimate the risk of accelerating a promising person into a bigger role and underestimate the negative impact of ignoring underperformance. In both situations, the better move is to lean into action. Make bigger bets on potential and apply supporting resources to make a “stretch” promotion successful. Likewise, making room for upgrades often means treading into uncomfortable conversations and actions with lower-performing employees. In both cases, the risk of inaction is much higher than taking bold moves.

Why CEOs Should Plot Their Own Succession by Geri Anne Fennessey Last year was a banner year for chief executive departures. Roughly 17 percent of the world’s public companies changed CEOs in 2015, according to a study by professional services firm PricewaterhouseCoopers, the highest such figure in 16 years.

While that number is discouraging on its own, it is made more worrisome when paired with other indicators showing that most firms are woefully bad at CEO succession. A 2014 survey conducted by the National Association of Corporate Directors, for instance, showed that twothirds of U.S. public and private companies say they have no formal CEO succession plan. Moreover, according to research from executive search firm Korn Ferry, just one-third of the executives who told the firm that F a l l 2016 • T a l e n t E c o n o m y

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their companies have a succession plan also said they were satisfied with it. The reasons explaining firms’ poor succession track record are varied. Most boards and bosses are busy running the company’s day-to-day business, and an uncertain and ever-changing economic environment has made planning beyond a few years seem futile. But a prominent reason is that, in many firms, the CEOs themselves aren’t responsible for planning their eventual replacement. That responsibility traditionally falls on a firm’s board of directors — a constituent typically mired in other governance matters and one that is likely hesitant to broach such a sensitive subject with a sitting CEO. After all, what leader wants to spend time thinking about who is fit to replace them?

was an executive development program of about 40 people who only got into the program because Welch handpicked them and signed off on them coming. That’s him planning his own succession.” Another reason CEOs need to take the reins of their own succession is to ensure the next boss is homegrown. According to the PwC study, industries with the highest average CEO turnover are the ones that continue to hire externally. “Your good leaders are embedded in the field,” Tichy said. That means the firm’s CEO needs to be the one spotting bright leaders and grooming them for the top role.

Companies should evaluate their CEOs based on their ability to build a strong bench of internal candidates.

It’s time for CEOs to lead that effort, and it’s time for boards to be stricter in encouraging CEOs to do so. For starters, markets react far better to firms that have solid CEO succession plans in place. Consider the preplanned shift of Sundar Pichai into the top spot at Google Inc. while Larry Page, the former chief — and Pichai mentor — moved into the CEO slot at parent company Alphabet Inc. That move contrasts directly to industry giants United Airlines Inc. and Volkswagen AG. Both recently experienced sudden CEO departures without ready successors, and both saw the markets react negatively to the unrest. To be sure, having a CEO lead the process of planning their replacement isn’t easy, according to Noel Tichy, a professor at the Ross School of Business at the University of Michigan and author of the 2014 book “Succession: Mastering the Make-or-Break Process of Leadership Transition.” That’s why it’s important for firms to have an established infrastructure around internal leadership development. Tichy, during his time as Jack Welch’s HR head at General Electric Co., worked to develop Crotonville, the firm’s internal leadership development facility in New York. “The role of Crotonville was really developing leadership,” Tichy said. “It wasn’t functional or about engineering. It 14

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Some firms have instituted specific tools to help CEOs plan their own succession. Professional services firm Deloitte LLP, for instance, has a sponsorship process that it uses to bolster leadership development toward eventual CEO succession planning, according to Mike Fucci, the firm’s chairman of the board. Last year the firm appointed an internal candidate, Cathy Engelbert, to the top job. A longtime Deloitte leader, Engelbert was plucked from the head role in the firm’s audit subsidiary. “Unlike mentorship, which is more vertically focused, sponsorship is more horizontal,” Fucci said. “It has helped us bring someone to the succession table who maybe wasn’t ‘in line’ and might not have been considered otherwise. When the vertical pipeline is disrupted the diversity of leaders widens.” CEOs who plot their own succession can also make sure the next leader maintains their vision and continues to embody the company’s values. Bottom-line results are critical factors in assessing CEO success, but companies should also be evaluating the success of their CEO based on their ability to build a strong bench of candidates within the company. For companies with self-imposed mandates or a value system focused on minority or gender-diverse hiring, the CEO needs to be accountable for making sure the pipeline includes diversity as well. Female CEOs, in particular, remain a persistently small group.


This puts further significance on CEO-led talent reviews. SAP SE is one such firm whose CEO, Bill McDermott, has put high emphasis on internal talent reviews as a means to plan for future company leaders, according to David Swanson, the software company’s global lead of human resources. “Bill and our chief human resources officer conduct two formal executive talent reviews each year,” Swanson said. “These are spirited conversations about individuals; it’s not a tick-the-box exercise.” He continued: “Bill will go back and ask what have we done with this person — how are we getting them ready?” Perhaps most important, taking a hands-on view of CEO succession planning has grown in significance thanks to demographic shifts in the workforce. With the majority of the workforce now made up of millennials, an age group primarily under the age of 30, companies will face an inevitable loss of critical knowledge in the coming years.

This should put further pressure on current CEOs to put measures in place to ensure leadership skills are properly passed on now. “There is a leadership cliff that’s looming in many organizations,” SAP’s Swanson said. “Domain knowledge is exiting, millennials who are coming in are maybe not connected with the vision, values or purpose of an organization.” The future of succession planning is at risk if the CEO doesn’t make sure potential successors are not just in the pipeline, but that they understand the company’s broader mission. Failing to do so will continue to encourage hastily enacted plans that favor external hires or those with contrasting experience or values. While these reactionary efforts ultimately fill the role, the bumps the company takes as a result are bad for business.

When Firms ‘Bench’ Top Talent by Frank Kalman When word got out that Google Inc. had a secret “bench” program  —  in which veteran executives are put in limbo for brief periods before being reinserted later — some observers likely wrote the practice off as Google being Google.

But is Google enjoying a luxury others can’t afford? David Dotlich, president of Pivot Leadership, a boutique strategy and leadership consulting firm, said yes. “The practice in my experience isn’t that widespread,” Dotlich said. Most CEOs he works with have the opposite problem: they’re so stretched with work that they don’t have enough qualified people to complete it.

Here’s a company with deep pockets that can afford to pay its executives to do nothing; then, when it’s ready, can put them back in motion when their skills are needed. It’s no wonder that roughly one-third of Google’s first 100 hires still work at the company, as its HR boss, Laszlo Bock, wrote in his 2015 book, “Work Rules!”

Then there’s the talent perspective. Why would executives want to be benched? “Most people look at their career as something dynamic where you have to keep going,” Dotlich said. For some executives, being on the bench is about taking a break. Executive burnout is real, as shown in a 2013 Harvard Medical School study. It found that 96 percent of senior leaders reported feeling burned out to some degree.

As Business Insider initially reported in May 2015, Google’s bench program is viewed as a way for the company to keep its talented executives off the market or from leaving to start their own companies. Certain executives at the firm rotate out of an active role for months or even years at a time while continuing to get paid.

Benching isn’t the only way companies can address burnout. But for companies with financial flexibility, providing top talent time to recharge while still contributing could be beneficial to their continued productivity, said Russell Clayton, an assistant professor of management at Saint Leo University in Florida.

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“You’re not necessarily giving them a vacation,” Clayton said, “but you’re just putting them off to the side as they’re recharging.” Executive benching may actually save money. “Turnover is expensive, so companies don’t really want great executives leaving their organization,” said Tamar Elkeles, chief people officer of mobile-technology firm Quixey. According to a 2012 study by the Center for American Progress, a progressive think tank, roles at the senior executive levels have disproportionately high turnover costs. The typical cost of losing someone making $50,000 or less annually is about 20 percent of that person’s salary, the CAP study showed. Meanwhile, losing a specialized executive could cost a company up to 213 percent of that person’s annual salary.

Instead of letting prized people walk out the door, companies can move them around to less-intensive roles for short periods of time, a practice Elkeles often observed at Qualcomm, where she previously served as chief learning officer. Elkeles said this is now common in Silicon Valley, where founders often start as involved leaders who later pull back into advisory roles. Oftentimes, company founders aren’t fit to lead large teams; having them act as advisers allows them to add value while others take on the task of managing. “I was at Qualcomm for almost 24 years,” Elkeles said, “and in order for me to stay engaged and compelled with the work that I was doing I was constantly managing new projects and new opportunities and new experiences. That’s a way to keep talent — is to move talent, to rotate talent, and to enable [people] to contribute for an entire career.”

Dignity, Layoffs Don’t Have to Be Mutually Exclusive by Rick Bell It often starts with hushed voices in an executive office. The firm’s human resources department hasn’t circulated in months, yet here they are — suddenly mingling

Executives contemplating a reduction in force would do well to follow the lead of Zenefits, the health benefits and HR software company that admittedly took a battering earlier this year following a series of much-publicized gaffes. If there was a textbook example of transparency during layoffs, Zenefits nailed it.

This is the morale-draining ritual that plays out in the days leading up to layoffs. In some instances, the news cuts swiftly and employees are blindsided. But in most cases, it’s a slow accumulation of clues pointing toward an inevitably bad conclusion.

Newly appointed CEO David Sacks turned last spring’s dreaded announcement into an authentic, gracious farewell to departing staff members while urging remaining employees that the book on Zenefits is far from over. He said that “great people” were being let go and reasoned it wasn’t “their fault.” It was time to “move forward and rebuild” he wrote; “make everyone proud,” he concluded.

Layoffs normally are delivered with dead-eyed insensitivity. Seen are the headlines — “150 Laid Off By XYZ Inc.” — often followed by a terse, oneparagraph statement from the CEO with terms like “synergies” and “rightsizing.”

Were all wounds immediately healed? Unlikely. But Sacks did what a good leader should do: over-communicate. There was no finger pointing; no one was thrown under the bus for what transpired. It was a message of fairness, dignity and respect.

Yet a reduction in force doesn’t have to be cold, cruel and callous. Yes, layoffs hurt. Those laid off have just had their lives radically altered, and those who survive mourn the loss of their colleagues, all while picking up the pieces to move on.

Laid-off employees received a generous severance package along with transition assistance. Those who remained carried on knowing they had the full support of management to right the ship. There was arguably no

among a now-jumpy workforce.

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better recruitment tool for a flailing organization than that single letter to the staff that was simultaneously made public. While there may be quick agreement on why, where and when, there is no singular way to plan and perform layoffs — arguably because settling on the who becomes the most

emotional aspect of a reduction in force. The closed-door meetings and hushed conversations will occur when layoffs are inevitable. But as Sacks and Zenefits showed, honesty, transparency and respect go a long way to rebuilding the trust between management and employees after the initial pain wears off.

How to Pay Gen Y by Lauren Dixon As of May 2015, the Pew Research Center declared Generation Y, also known as millennials, the largest generation in the United States workforce.

reimbursement an attractive compensation benefit for millennials, according to Brendan Duke, associate director for economic policy at the Center for American Progress, a nonprofit public policy research firm. “We know that happy workers who don’t feel stressed out by their financial situation are better workers,” Duke said.

At about 53.5 million strong, those born between 1980 and 2000 have stormed the economy with their own brand of work style and skill, as well as their own expectations of how they should be compensated for their work.

Then there’s paid leave. The U.S. is the only industrialized country that doesn’t provide paid family and medical leave on a national level. That means it’s up to employers, states and local governments to define how paid leave benefits should be offered. As some employers like video streaming service Netflix Inc. recently rolled out generous paid leave policies, others would be wise to follow. Providing employees access to paid leave to care for children and aging parents helps provide them flexibility to continue to contribute even as they tend to family and other personal needs.

While most millennials are like other generations and hope to be compensated commensurate with their experience, some of their compensation preferences are unique and don’t always have to do with money, according to Lydia Frank, senior director of editorial and marketing at online compensation data and software firm PayScale Inc. Millennials are a savvy bunch. They don’t just want to know what they’re going to be paid; they want to know why as well. As a result, Frank said companies should be open with their pay practices by explaining how salary and other compensation offerings are determined. “Millennials especially have an expectation that they can get access to better information,” Frank said. “They just want to understand why they’re paid what they’re paid, which at the core of it really isn’t unreasonable.” Moreover, with U.S. student loan debt standing at a whopping $1.2 billion, it’s fair to assume that a lot of millennial talent is more focused on paying off their loan balances than saving for retirement. This makes tuition

Still, for most millennials, monetary rewards and compensation are only part of what makes a company an attractive place to work. According to a survey from financial services firm Fidelity, a majority of young talent say quality of life at work is more important than a fat paycheck. Additionally, many of the 25- to 35-year-olds surveyed said they’d be willing to give up an average of $7,600 in yearly salary for a better work environment that includes career development offerings and work-life balance. Finally, young employees need meaning in their work. Leaders should articulate the purpose of the organization and showcase how millennials can create lasting impact through their work. Even if compensated fairly in other areas, if young workers aren’t engaged in the purpose or mission of the organization, it’s going to be difficult to keep them engaged. F a l l 2016 • T a l e n t E c o n o m y

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Sparkman is responsible for leading workforce planning for a company skittish on thinking further than six months out. It’s a culture that contrasts starkly to Sparkman’s prior role with GE, where decision-making was strictly top-down and planning was a yearslong endeavor.

Talent Economy spoke with Sparkman more on the contrasting cultures, the rise of workforce planning and people analytics, and the inevitable workforce disruption from artificial intelligence. Edited excerpts follow.

•••••••••• TALENT ECONOMY:

How has the field of workforce planning evolved over the past decade?

INSIDER • • • • • • • • • •

Facebook’s Ross Sparkman by Frank Kalman

For starters, I think it’s become a little bit more mainstream now. I think typically when I talk to any type of HR practitioner, and even people outside of HR, they’re definitely familiar with what workforce planning is, but to some extent there’s still some confusion around it. I think in the past 10 years it’s definitely become a lot more data driven than it used to be. I think that it’s also more cross-functional now in terms of it being a part of finance, being a part of operations, being a part of HR. TE :

Ross Sparkman’s résumé includes more than a decade of work in the United States Navy, a consulting gig with Deloitte and a short stint running people analytics for a unit of General Electric Co. But perhaps his most interesting job is the one he currently holds.

FROM THEN 18

As head of strategic workforce planning for Facebook Inc., Sparkman has a front-row seat for arguably the most fascinating startup success story of recent times. Based in the social networking giant’s expansive open office in Menlo Park, California,

Ross has a bachelor’s in marketing to go along with his master’s degrees in predictive analytics, HR and business administration.

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You’ve led workforce planning at GE Aviation and now at Facebook. How were those two jobs similar and how were they different? SPARKMAN : When you think about a company like GE, a 130-year-old company, you’re talking about a company that’s been through many

Began his career as an HR generalist for the United States Navy from 1999-2007.

PHOTOS BY STEVE MALLER COURTESY OF FACEBOOK INC.

ROSS SPARKMAN :


transformations and deals with many types of industries. I think my observation in terms of the difference between the two companies is that a company like GE is in a much more steady state when it comes to planning; there’s not this hypergrowth that you would see with an organization like Facebook. I think a lot of the processes are well embedded in the organization in terms of how planning is done. Not that there’s not still opportunity, but I think there’s more general accepted practices and definitions around what it is in a company like GE. I think it’s also a lot more of an eclectic workforce at a company like GE, because you know you have manufacturing and you have this sort of finance factor and high-tech now. So you have all different types of skills in a company like GE with different growth phases across the different businesses at GE, so I think there’s much more matrix sort of complexity at a company like GE, but I also think there’s more sort of maturity at a company like GE. Facebook, on the other hand, is probably exactly the opposite. We are a very young company. We’ve only been around for 12 years. We’ve experienced a lot of the growing pains of moving from a startup to a midsized company. And so I think at Facebook we are much more inclined to make decisions that are quicker. I think that we are much more comfortable using data to make decisions and more comfortable with ambiguity and uncertainty, just in the internal and external environments.

TE :

Do you have an example of how those differences change your approach to workforce planning? SPARKMAN :

When I did workforce planning at GE, I took a much longer-term view of the types of plans and how we would execute on them — so I’m looking three to five years out with a little more confidence than

A company like Facebook, Google or Pinterest, for example, we obviously are looking for extremely technical skills — we’re looking for machine learning, AI, software engineers, iOS software engineers, because these are the individuals at our company that drive our business models. But we’re not just looking for average sort of

WHEN I DID WORKFORCE PLANNING AT GE, I TOOK A LONGER-TERM VIEW OF PLANS. AT FACEBOOK, SIX MONTHS IS A LONG TIME TO PLAN.

I would at Facebook. At Facebook, one of the first things that I was told is six months is a long time to plan. We’re just so dynamic. So my first shift was adjusting how I thought about timelines and planning. And I think to that end, I’ve been trying to mold Facebook a little bit in the sense that I think there’s still some opportunity to plan past six months to a year, and so we’re kind of coming to this situation where we’re kind of meeting in the middle. We’re not going to do these longer-term sort of plans, but we’re still going to do more than six months. TE :

How are the roles you might plan for different at the two companies?

Led global strategic workforce planning and people analytics for GE Aviation.

SPARKMAN :

workers; we’re often looking for the crème de le crème. And the fact is that in this labor market right now they don’t necessarily exist, at least not here. So there’s a really strong supply-demand issue that we’re facing, and the question becomes where do we get these individuals? Do we start to try to develop our own internally? Do we go overseas? Do we poach competitors? What’s the best way to meet the demand for the skill sets that we need? And obviously we have very ambitious plans. I mean, we’re trying to connect the whole world. To do that requires a certain level of skill and a shared number of people to help do it. The short answer is yeah,

Currently the head of strategic workforce planning at Facebook Inc. in Menlo Park, California.

TO NOW

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we’re definitely looking for a lot of technical type skills. GE is also going through a revolution in its business model. It’s moving toward a lot higher-skilled workforce also in certain areas. It’s still in traditional manufacturing, but I think it is positioning its business right now to move into the digital area. It actu-

uncertainty is we’re willing to use the data — not just use it and analyze it, but make decisions off of it and make decisions off of it quickly. A lot of these initiatives that you may see in the media sometimes around parental leave, anything that has to do with people, are all based off of analysis that we’ve

MACHINE LEARNING ALGORITHMS ARE GOING TO BE SO GOOD THAT THEY’RE GOING TO BE ABLE TO PROGRAM THEMSELVES.

ally is trying to compete to a certain extent with the Googles and the Facebooks of the world. Its challenge is its perceived brand is maybe not as sexy as maybe some of these companies in Silicon Valley. But make no mistake, there is definitely a part of their business model reliant on having these types of skills in the future. What you can see then is the trend in general is whether you’re a company like GE that’s been around for 130 years or a company like Facebook, both are converging on this sort of high-tech skill set. TE :

What lessons can CEOs of more mature businesses learn from a company like Facebook on workforce planning? SPARKMAN :

The biggest difference in terms of the impact that workforce planning has on a company like Facebook versus GE is that to my earlier point about the interaction with the C-suite. We’re not afraid to make decisions off of the data and we are a little bit more comfortable with uncertainty. And the reason we’re a little bit more comfortable with 20

Talent Economy

conducted. We always put forth the data. We run the cost-benefit. We think through all the constraints. And we come up with a bunch of scenarios. Based on those scenarios we make a decision and we make a decision quickly, and we move to market with the decision. That’s

really how we approach everything at Facebook. It’s kind of this fail fast approach, where we put the data forth, test it out and see what happens. If it doesn’t work out, then we adjust. It’s just that simple. I think GE is still pretty mature in how it approaches workforce planning, but other companies are not as comfortable with being able to use the data to make decisions because they haven’t done it in the past. It’s not part of their culture. So while they might be doing the planning, when the data suggests that they should take a certain action or go down a certain path, maybe they’re a little bit more hesitant than they should be. I think you have to make the commitment if you’re going to do it, make good decisions off of it, even when we only have data that helps reduce the uncertainty by 10 percent, that’s still beneficial than if you have 0 percent, which is just a guess. The second thing that a lot of companies can take from us is the importance of having that executive support. You can’t just have one person that’s driving workforce


planning and people analytics. You really have to make a commitment from the top to go after it and to become an organization that is going to always bring data to the table before making decisions. This doesn’t mean that you have to leave intuition at the front door. It just means if you’re going to make a decision, any type of decision with the people, to try to do any type of planning with people, much like if you were going to do some planning around to purchase a $5,000 piece of machinery. You’re going to go through and calculate net present value and the internal rate of return and return on assets from the purchase. You’re going to do the same with people. You need to be able to make decisions and you need to have that support from the leaders on those decisions, and if you don’t, and you don’t have comfort with that, you’re just never going to have an effective workforce planning function or people analytics function in place. It’s going to be hard to gain steam. TE :

If you were to advise a CEO on the greatest potential talent risk they need to pay more attention to, what would you tell them? SPARKMAN :

I think the biggest risks right now over the next 10 years or the most underestimated risks over the next 10 years is the impact that artificial intelligence and machine learning is going to have on automating the workforce. And let me elaborate on this. What I mean by this is that this is going to happen. The machines, the robots, are going to replace a lot more roles much faster than I think many people are aware. I do a lot of work with machine learning, and I’m well versed in understanding the potential benefits and risks that these types of advanced analytics can provide to an organization. And what’s going to happen is you’re going to

have organizations that are going to be able to adapt their business models through repurposing their workforces that becomes redundant because of automated skills and are going to be able to realize cost savings that are going to be able to become a competitive advantage to their workforces. I think they’re basically going to be able to develop a talent model that is f lexible enough to leverage this machine learning and this AI. I think the companies that don’t see this coming right now, and who are not starting to think through this, especially the larger companies where there are a lot of manufacturing type roles and repetitive type skills sets — service industry call centers — these types of roles are really going to be quickly impacted. So the companies that don’t have a plan in place for this are going to find themselves at a disadvantage. From a CHRO perspective, then it becomes, Ok how do we deal with the workers that might find themselves out of a job? How does the contingent workforce and the contract workforce play into all of this? These are all variables and factors that could come into play in the next 10 years. I think there are very few roles that aren’t going to be touched by these

advances in technology. Even the software engineers writing code could potentially find themselves redundant because these machine learning algorithms are going to be so good that they don’t need the software engineers to even program them anymore — they’re going to be able to program themselves. So these are the types of things that pose a talent risk or opportunity, depending on how you think about it, for most organizations that they need to start thinking through.

Frank Kalman is the managing editor of Talent Economy. To comment, email editor@talenteconomy.io.

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BY JOHN LIPINSKI ILLUSTRATIONS BY KLAAS VERPLANCKE

Why machine learning is quickly becoming the most important ally for business leaders.

S

eismic evolutionary shifts are afoot in the talent economy, the kind that James Watt brought to the Industrial Revolution, Henry Ford to the assembly line and Google to the internet search engine. These developments have spawned the creation of tools and disciplines to help business leaders forge new insights on everything from customer lifetime value and conversion rates to future sales and earnings. Machine learning, broadly defined as

the subfield of computer science that automates learning to enable pattern recognition and predictions, is one such field that is slowly transforming how leaders evaluate their businesses and make decisions — and it is increasingly being applied to assess human behavior and labor economics. Machine learning is fundamentally about automated systems learning to identify patterns and relationships in data. In some cases, these machines learn to predict a specific outcome such as who will buy a product or quit a job. In other instances, machine learning can help leaders determine how to effectively group people and their behaviors using thousands of variables, including demographics, job performance and online activity. Many of these core analytic techniques have been around for years,

while others are relatively new. The real difference for business leaders in assessing the risks associated with human capital is not the rise of new algorithms but the sudden availability of massive data and the accompanying processing power. What is emerging is a novel assemblage of opportunities and insights, bringing the expertise and power of computer science and machine learning together with human capital and labor allocation to ask, answer and act on new questions. According to New York University economist Paul Romer, economic growth arises when people rearrange resources in ways that make them more valuable. The rearrangement of human capital — of recruiting it, developing it and retaining it — in the context of machine learning — exemplifies this desired growth. And while machine learning has already been

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used in many other industries and disciplines, its use in evaluating and managing talent is still relatively young.

To understand the impact of machine learning, it’s first helpful to understand the current state of human capital and talent analytics. Briefly, human capital and HR analytics can be divided into three levels: descriptive, predictive and prescriptive. Descriptive analytics answers questions about the history and state of talent within the organization. In terms of traditional human resources, this usually comes down to reporting what already happened in terms of annual turnover, internal hire rate, number of promotions, and location of top talent. These descriptive metrics are where most human resources analytics functions typically focus their efforts. Predictive analytics takes a step beyond the descriptive and helps leaders answer questions about what is likely to happen in the future. Predicting future events such as em-

ployee turnover can help guide retention, promotion and recruiting efforts. But predictive analytics is more than just predicting who will stay or leave. It can also be used to predict who is likely to succeed in a role; how changes in compensation strategies will impact the overall workforce; which employees are likely to be injured on the job; or even how a reorganization is likely to impact employee movement and communication. The third tier is prescriptive analytics. Prescriptive analytics tells executives what they should do. In some industries, the line between the predictive and the prescriptive is clear. In the airline industry, predictions about regular and discounted seat sales directly feed optimization models that prescribe how fares should be changed and marketed to optimize profit per flight. But this line is not always so clear when it comes to talent. For example, if a predictive model says that a subset of applicants are likely to quit within the first month, this may suggest a clear course of action. Without the aid of any formal optimization model, those applicants probably shouldn’t be hired. The underlying challenge for leaders is that people and organizations are messy. Optimizing airline ticket sales is one thing; changing behavior at the level of individuals, teams and organizations to achieve optimal performance is another. Given this messiness, it makes sense to define prescriptive talent analytics in practice as a combination of the descriptive and the predictive, of bringing subject matter expertise and analytics together to develop and rigorously test ideas. Said differently, prescriptive talent analytics is less about formal optimization and more about systematic experimentation and honest assessment. Try it, measure it and see what happened to figure out what works best. Knowing what executives using this data should do means figuring out the impact of decisions and actions within an ongoing, dynamic process — not hunting for a predetermined, permanent endpoint on a linear path. In many ways, successful leaders have always been using prescriptive analytics. The only change now is the availability of better data and new techniques to understand it.

So what about machine learning? If almost all traditional human resources functions are still focused on reporting yesterday’s events (descriptive analytics) how can data-driven leaders move further toward more predictive models? To maximally leverage the potential of machine learning, leaders need to do three things: capture context, 24

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collect dynamic data and obtain the talent capable of uncovering insights. If these conditions are met, machine learning can deliver a measurable competitive advantage and a new way to approach the talent economy both inside and outside the organization. Talent analytics often begins and ends with the individual employee. On the surface this seems reasonable, because performance is often seen as occurring at the individual level. It’s also easy because most human resources data files are broken down into rows according to individuals.

their jobs. That might sound reassuring, but team-level context might qualify this highly generalized observation. For example, is company tenure still a protective factor when leaders or co-workers bolt for greener pastures? Alternatively, maybe a disproportionate number of those in the five-plus years group are actually poor performers in a part of the company with a strong tolerance for weak performance. In that case, they are sticking around for all the wrong reasons. These examples tell us that talent analytics professionals need to be more creative and aggressive in constructing contextual data and folding it into their descriptive and predictive analytics practices. Massively powerful machine learning algorithms for prediction are nice, but they won’t help much if the data is not sufficiently rich.

Machine learning is fundamentally about automated systems learning to identify patterns and relationships in data using hundreds of variables.

The problem is that organizations are not just collections of isolated rows of “people units.” They are made up of people who are nested within a team within a company within a local economy. Organizations employ living, breathing people with leaders, direct reports, colleagues, mentors and, believe it or not, competitors and rivals. Overlooking the contexts that shape, constrain and unleash individual actions will lead to poor analytics outcomes that obscure reality.

Suppose an executive wants to understand the impact of education level on talent retention. When we look at our data we might see that having an MBA does not, on average, impact longevity with the company. Yet digging deeper might reveal something quite different, such as low turnover for MBAs in small labor markets like Fargo, North Dakota, but colossally high turnover for those in New York, Chicago or Atlanta. Unsurprisingly, the opportunities that an MBA affords depend on context. Our metrics need to reflect this. Larger companies can subscribe to services providing detailed labor market data. For smaller companies on a tight budget, even a few additional data points on regional unemployment rates from the U.S. Department of Labor can prove meaningful. In either case, these data can be integrated into established reporting processes that then feed into predictive and prescriptive efforts. To further understand the potential role of context, let’s consider a second example centered on company tenure. Let’s suppose that our data show that those with more than five years of company tenure are less likely to leave

Even if leaders don’t yet have the talent to implement machine learning processes, simply analyzing data with an eye toward nested contexts will enliven leader discussions and open up channels for leveraging more of what a talent analytics practice can truly offer.

The second critical piece for bringing machine learning to bear on talent analytics is understanding that behavior and decision-making unfold and emerge over time. To see the contrast between the standard, static view of talent and a truly dynamic one, let’s imagine that our retail segment is currently undergoing a massive reorganization. Some top leaders will go, reporting relationships will change and roles will shift. Intuitively, we know the internal dialogues would change for virtually all of our employees, and many of their behaviors would follow suit. But what do our standard, static human resources measures like age, tenure, role and education look like in the face of this uncertainty? Exactly the same. That’s a problem. Sudden changes in context change what people think about their jobs today and how they behave today — not seven months from now when their annual job satisfaction survey rolls around. The impact of our machine learning efforts will be blunted if our measures can’t detect these F a l l 2016 • T a l e n t E c o n o m y

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shifts. Fundamentally, adopting a dynamic mindset means shifting our gaze away from static demographics and categories and toward data that changes as finer-grained attitudes and behaviors change. Where should leaders look for dynamic data sources? This will certainly vary by industry, but oftentimes the data is there waiting to be tapped. One avenue is to look at the flow of talent within an organization. As a first step, leaders should quantify the historical flow of talent

Learning functions represent yet another largely untapped source of dynamic data, especially for larger organizations. Instead of looking at the number of courses completed or the number enrolled, leaders should instead ask who is signing up for online learning opportunities and actually completing the course. Is there measurable evidence of performance boosts after this learning? Are these learning-oriented employees looking to build new skills in preparation for movement to a new position inside or outside the organization? Are leaders actively supporting

The final piece of the puzzle for bringing talent analytics and machine learning together is finding the right analytical minds to do this work. between different levels and different segments of an organization for the past two or three years. This can include new hires and terminations but also the movement of talent up through the hierarchy or lateral movements. Having established a baseline, leaders can then compare more recent movement patterns to that baseline. This will allow them to detect meaningful, if subtle, changes. This kind of analysis can not only provide critical data about the culture of talent movement and development, but also yield early, measurable indicators that employee and organizational behaviors are changing in response to shifts in internal or external signals. Dynamic data is not just about putting out fires either. Some roles inherently require more fine-grained performance tracking that can be more effectively used to guide decisions and development. Call center metrics, for instance, can provide an incredibly rich set of dynamic insights that are often boiled away when reducing these data to a single measure like mean call handle time. Dynamically sensitive performance insights might be gained by instead asking what our best performers looked like early in their roles, how their performance metrics changed over time, and who among our new hires shows similar or different performance profiles over time. Sudden changes in individual or team-level performance relative to historical patterns might reflect issues that demand leader attention or intervention. It is also worth highlighting here that machine learning clustering algorithms are particularly well suited to identifying clusters of performance using such behaviorally rich data.

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their career development, or do our most ambitious learners leave when they realize no one cares about their development efforts? Perhaps the most basic piece in all of this is simply identifying who in an organization even has access to this data. If leaders are unsure, start some conversations, identify those responsible for these process streams and learn about their analytics needs and concerns. Often the insights gained from analyzing dynamic data is of value to both leaders and the process owners themselves. Bringing machine learning together with these dynamic data sources can dramatically improve what leaders can reasonably predict about the workforce. More important, it can also reveal something vital about the people, processes and the current state of a firm’s collective outcomes.

The final piece of the puzzle for bringing talent analytics and machine learning together is finding the right analytical minds to do this work. While the popular press is right to suggest that there is currently a shortage of data scientists in the market, the situation should self-correct over time as more students shift their studies toward the field. Still, analytical talent is out there. Where should leaders look? First, identify the sources of analytics talent already in the organization. Areas with a long-standing focus on analytics, such as marketing and any research function, stand out as likely candidates. Even if leaders don’t yet have an open data science role for their organization, it pays to start conversations with those who currently apply their


data science craft within the company. For small companies without any analytics talent, look to local data science network meet-ups or nearby universities with recently established analytics programs. Second, if there are cultural or organizational barriers to moving in-house analytics into the talent sphere, look for opportunities to strategically develop existing talent. If there isn’t bandwidth or budget to develop an intensive training program, start small. Find a handful of employ-

confidence will grow and the capacity of the talent analytics capability will too. Finally, if finding or developing in-house talent is simply not possible, look externally. When it comes to job postings, be sure to get the titles right. When looking for a “data scientist,” be sure that is the actual title of the position. This matters for the applicants’ job search tendencies but also in how they view the role in the broader context of their career. One might also do well to think broadly about the true possibilities of the role and use that as a selling point. The kind of people leaders will want to hire will be looking to use, develop and apply a broad range of skills, not just focus on a single, narrow need. Moreover, unlike some more established analytics functions, the questions in need of answers and the methods used in human capital analytics are not yet determined. This can be a major recruiting strength if properly emphasized. Finally, executives can also use the interview to broaden their understanding of what the role might become. It’s important to be honest about the likely growing pains inherent in these new analytics-intensive roles, but the right candidate may very well have a vision that goes beyond initial considerations.

ees with backgrounds in programming and statistics and invite them to help grow a people analytics enterprise. This can be done in part through any of a number of free, online courses. Beyond coursework, leaders should also seek out a knowledgeable, willing analytics mentor in the organization who can provide practical learning guidance. This will help mentees quickly overcome the frustrations that come with learning a complex set of new skills. Leaders should work with this mentor to identify a small, manageable project that will have a clear, practical application when completed. This will provide a tangible goal to keep the learner motivated and a concrete outcome that leaders can highlight as evidence of a growing analytics capability. When that project is completed, identify a new, slightly more challenging project that again pushes trainees without overwhelming them. Over time, their competence and

The age of machine of learning has arrived, but its contribution is lagging in human capital. While many companies are stuck at the descriptive level, a move to embrace what machine learning offers doesn’t mean abandoning regular reporting. Indeed, more complex machine learning methods depend critically on a clear question, solid data and accurate, descriptive analyses. Have these ground-level activities down before moving on to the complex techniques of the predictive and prescriptive levels. Once those are covered, there are three necessary conditions for a successful move up the analytics hierarchy: the addition of context-based data, dynamic data, and the talent to ask good questions and leverage machine learning to get actionable answers. Talent typically gets the most attention, but the quality of the question and the data is where it all begins. John Lipinski, Ph.D., is a data scientist in human capital analytics at health insurer Humana Inc., and co-founder of HRanalytics101.com. To comment, email editor@talenteconomy.io.

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BY ALEC LEVENSON ILLUSTRATIONS BY JUN CEN

Leaders usually equate high performance with engagement. But how engaged people are depends on work design.

G

o the extra mile. Give it your all. Put the team on your back. Peak performance.

These phrases describe a state of high performance. High performance happens when people go above and beyond their duties, contributing discretionary effort to help the organization accomplish its strategic objectives. People usually equate high performance with employee engagement.

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We certainly want engagement, yet it’s not the same as productivity and performance. Greater engagement often means greater productivity. But how engaged people are depends on the work design, and the work design itself can promote productivity separately from employee engagement. Individual ability also is a critical contributor. Together all three create the conditions required for sustained high performance. In this article I take an in-depth look at high performance, how it’s related to and different from engagement, and what leaders have to do to develop and sustain high performance.

There are three main contributors to job performance: state of mind, ability and job design. Engagement refers

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only to the first, yet the other two are arguably more important, especially for sustained performance over an extended time. In the short term, performance can be increased through greater effort. This is what people commonly call high performance: applying extra energy, time and persistence to accomplish stretch goals. Whether you’re running a 5K race, juggling multiple deliverables or working late to meet a tight deadline, you have to make a conscious effort to do the best you can — or risk falling short of your goals. Discretionary effort like this is what a lot of people mean when they talk about employee engagement. However, high performance cannot be sustained solely through perseverance and extreme perspiration. Sustained high performance happens through


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FIGURE 1 Individual capability

Individual performance

Job design

Role/job behaviors

Attitudes

Role/job task execution

TABLE 1 Generic Job Name

High-Performance Job Design Example

Traditional Job Design Example

Food and drink order taker

Starbucks barista

McDonald’s cashier

Call center customer service representative

Relationship manager for high net worth investors

Credit card marketer

Sanitation

Manufacturing clean room sanitation engineer

Janitor in office building

HighPerformance Work Design

TABLE 2

Traditional Work Design

Productivity/net business impact from the person/role

Higher

Lower

Competencies/skills

Higher competencies/ more education and training

Lower competencies/ less education and training

Autonomy/decisionmaking

Higher

Lower

Supervisor oversight

Minimal

Extensive

Compensation

Higher

Lower

Information sharing and communication flows

More info sharing/two-way communication top to bottom

Less info sharing/ mostly top-down communication

Supervisor spans of control

Larger

Smaller

Supervisor behavior

Coach and guide

Micromanage and control

Job design Traditional

High performance

Upper quartiles

Not aligned

Aligned

Median or lower

Aligned

Not aligned

TABLE 3 Compensation design

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the right combination of motivation (engagement), skills (competencies) and job design (role and responsibilities). Figure 1 lays out these three components, which need to be aligned to achieve sustained high performance. Two parts — motivation and competencies — are familiar to everyone and need little explanation. The third part — job design — is equally important but receives less attention. Because it is underutilized and not thoroughly understood, we need to dive deeper into it. Job design is often summarized as “roles and responsibilities,” meaning the job requirements. But that leaves out central aspects of the job that drive high performance. To illustrate, consider the job types and examples listed in Table 1. The first row is “food and drink order taker” jobs. The traditional job design example is McDonald’s cashier. The high-performance job design example is Starbucks barista. The second row contrasts a traditional call center representative (credit card marketer) with a high-performance example (high net worth relationship manager). The third row’s sanitation workers span from traditional janitors to the people who help maintain the integrity of manufacturing clean rooms at companies like Samsung and Intel. What differentiates the traditional job from high-performance jobs in Table 1? The traditional job designs’ work is more rote, involves less decision-making and supports lower priced/lower margin products and services. Table 2 provides a more general comparison, contrasting job aspects under the two approaches. High-performance work design often means giving people the leeway to make decisions as close to the front lines as possible while breaking down hierarchical ways of organizing and managing work. My colleague Ed Lawler has also called it high involvement work design because it usually more closely involves front-line employees in information sharing and decision-making. The early history of high-performance work design starts with W. Edwards Deming and his ideas for improving quality in traditional manufacturing lines. Deming’s ideas were first adopted by Japanese automobile and other manufacturers and included the use of continuous improvement and self-managing work teams. They have since become a common application in manufacturing industries around the world. Yet they are not universally applied because of the challenges of designing and operating the entire system according to the principles. The approach replaces traditional command-and-control management, which has decision-making higher up the


hierarchy, closer to where production and the delivery of services takes place. Do it right and you can improve product quality, decrease waste and increase customer satisfaction. Get it wrong and you end up throwing away money. The trade-off between compensation and job design is laid out in Table 3. Pushing decision-making down to frontline roles usually requires higher compensation for two reasons: leaders often need to pay more to attract highly skilled people, and the higher pay can be used to reward high performance. The job design and compensation are aligned when you have traditional job design and median (or lower) pay, and when you have high-performance job design and upper quartile pay. While the principle is easy to state, in practice things often get out of whack. Many leaders argue that their people should be more highly paid, especially if they don’t personally own the profit-and-loss. When labor costs are in someone else’s budget, there’s little incentive to make hard choices about distributing compensation strategically. This can lead to overpaying for some traditional jobs. Are the people who are overpaid productive? Usually, but that’s not the problem. The challenge is how to get the highest return from that money. Is it allocated based on true business need, or based on the power of the leader running the group? A much bigger problem is virtually every organization’s maniacal emphasis on cost containment. Keeping an eye on expenses is a good thing. However, it’s easy to meet short-term financial goals by scrimping on labor costs without having an immediate negative impact on motivation, productivity or turnover — and that creates a danger. When the work system is designed well, people enjoy what they do, get good feedback and are well rewarded for their performance. In that environment, if leaders cut back a little bit on labor costs — say by giving raises that don’t keep up with inflation — there won’t be an immediate negative impact. This looks like a win-win for the business: the short-term financial objectives are met while performance is maintained. All is good, right? Wrong. The strong temptation to cut compensation to boost margins can lead to addict-type behavior where leaders become hooked on a dangerous habit. Before long, compensation has fallen significantly from where it needs to be, leading to a big disconnect between pay and the job design (the bottom right-hand quadrant in Table 3).

There are two types of high-performance design leaders need to consider: at the job level and at the team level. The ideas are similar in both cases, but are distinct enough that

we need to discuss them separately.

High-Performance Job Design and Competitive Advantage

As the examples above showed, a lot of the differences in the application of high-performance job design are driven by differences in business strategy. At McDonald’s the strategy is to provide low-cost food using low-cost labor, so traditional job designs are appropriate for the jobs in its restaurants. Starbucks’ strategy, conversely, is to provide high-quality food and an experience customers will pay higher prices for. To achieve that strategy, Starbucks needs higher-cost baristas who are skilled and motivated to provide the high-quality experience. So the barista job uses a high-performance work design.

High-performance work design means giving the leeway to make decisions while breaking down hierarchical ways of organizing work. Choosing a traditional versus high-performance job design is a question not just of business strategy but also the sources of competitive advantage. The jobs that are more central for competitive advantage usually are prime candidates for high-performance design. The jobs that are not core contributors to competitive advantage also are not necessarily high-performance design candidates. For example, Starbucks does not need high-performance sanitation services in its stores, in contrast to the manufacturing clean rooms in the bottom row of Table 1.

High-Performance Job Design and Productivity

Yet even if a job is not a core contributor to competitive advantage, it still can be a candidate for high-performance design. There is a long list of literature on the potential benefits of high-performance, high-involvement job designs that follow the principles in Table 2. Even if a job is not a source of competitive advantage, it still can benefit from applying high-performance principles. F a l l 2016 • T a l e n t E c o n o m y

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The reason for taking a more high-performance approach is to give the person in the job the incentives, tools and freedom to make better decisions independently. The classic case is manufacturing-line workers and self-managing teams. Workers in that system are given greater decision-making authority to diagnose and solve produc-

sign, there is much greater emphasis on the output the employees produce, not where and how they produce it. Of course, giving people greater freedom to work outside of regular hours sitting in an office within sight of their supervisors does not require paying them more — and in fact is often viewed as a benefit. Yet many other aspects of

Traditional versus high-performance job design is a question not just of strategy but also the sources of competitive advantage. tion and quality problems immediately. The design often includes higher pay to compensate for the higher level of decision-making skills. It also usually includes greater supervisor spans of control. Fewer supervisors are needed because they don’t have to spend huge amounts of time closely monitoring their employees’ work. Instead, they can focus on skill building and coaching their employees to make better decisions. The lower number of supervisors helps to fund higher front-line pay. The same principles can be applied in other industries. For knowledge workers, the debate over whether they should be given greater freedom to work when and where they want often boils down to an argument based on high-performance principles. Under high-performance work de-

the work design are similar. The lower supervision needed, meanwhile, can be translated into fewer supervisors, freeing up resources that can be invested in greater front-line employee pay. This enables the hiring of people with greater ability to think independently and work on their own. It is important to note that many jobs are tightly controlled by technology, where it appears there is little leeway to use high-performance work design because there is little room for independent decision-making. For example, many call center jobs are heavily controlled by technology that monitors how long an employee is on the phone with each customer. This emphasis on efficiency leaves the employee little latitude other than to finish as many calls as possible, creating the appearance that there is little room to give them control over how to deal with each call. However, that is not reality. Employees have great control over the effort needed to make customers happy, an organizational objective more important than how many calls can be processed per hour. If a customer is being difficult they can decide to transfer them to another representative, or even to pretend that the call was cut off prematurely and hang up on the customer. The discretion employees wield in how they treat customers means the organization cannot rely on efficiency metrics alone. Giving employees greater control over the number of calls per hour, and trusting them to decide how best to balance efficiency and customer satisfaction is a type of high-performance work design. Moreover, employees who are given greater discretion should apply it better when offered greater compensation. After all, they have more to lose so they should be more diligent.

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High-Performance Team Design

High-performance team design has a lot in common with high-performance job design, with some critical differences. Interdependencies among team members is one difference. In addition, not all roles have to be designed for high performance individually in order for the team to be high-performance. In some other cases, in contrast, peripheral roles are designed for high performance even though you might not normally think there is a strong business case for doing so.

High-performance work design is complex. To make it work, leaders have to design and align different organizational parts and processes. This includes pushing decision-making down to the lowest level possible; sharing critical information so front-line employees can make au-

To start, consider self-managing work teams on an automotive assembly line, like the ones pioneered by the Japanese auto manufacturers that implemented Deming’s ideas to improve quality. The design elements that make those teams successful include: • Decision-making over many key issues that happens within the team, not at the supervisor or leadership levels. • Team members who are selected and trained for the competencies needed to manage the work processes and do trouble shooting on their own. • Team members who are cross-trained so they can step in for each other as needed. • Team members who are rewarded on the basis of the group’s performance, not just their own individual contributions, and are held mutually accountable for producing the target results. • Supervisors who coach and train the team members to be better independent decision-makers. Outside of the people directly involved in the self-managing work teams on the assembly line, many other roles in the factory don’t necessarily need to be designed for high performance, even though they support the work of the teams. For instance, the peripheral role of janitor in an auto assembly plant is not a candidate for high-performance job design: small deviations from standard performance in the janitors’ work usually won’t impact the assembly line’s product quality. The work environment may be dirtier at times, but not in a way that materially impacts the teams doing the auto assembly. In a manufacturing clean room, however, not only are the roles that operate the machinery producing the computer chips usually designed for high performance, but so, too, are the janitor roles. Unlike in auto assembly, clean room manufacturing employees do not necessarily need to be organized as self-managing teams because the assembly work is automated and requires fewer people in general. Yet because the jobs people do are so critical for monitoring the equipment and ensuring nothing goes wrong with the manufacturing processes, the skills demanded and compensation are upper quartile.

tonomous decisions; hiring and training employees to make those decisions; providing compensation that supports and rewards higher productivity; and managing more through coaching and influence rather than micromanaging. The multiple parts in a high-performance work system create lots of opportunities for things to go wrong. Employees may lack the information needed for optimal decision-making; rewards may not sufficiently differentiate high from low performers; compensation may not attract the best performers; or managers may revert to micromanaging at the first sign of poor performance. Leaders need to diagnose the system to determine what are the areas of improvement that will support sustained high performance. A piecemeal approach to designing the work will not put the right levers in place at the right time. Alec Levenson is an economist and senior research scientist at the Center for Effective Organizations at the University of Southern California. This article is based in part on two of Levenson’s books: “Strategic Analytics: Advancing Strategy Execution and Organizational Effectiveness,” and “Employee Surveys That Work.” To comment, email editor@talenteconomy.io.

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Welcome to

ILLUSTRATIONS BY ANNA JO BECK

Talent Economy

BY LAUREN DIXON, BRAVETTA HASSELL,

SARAH FISTER GALE AND FRANK KALMAN

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Talent is the world’s most valuable resource. It’s time for leaders to elevate its strategic importance.

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hen Lynanne Kunkel first started as vice president of human resources for Whirlpool Corp. in 2010, the appliance manufacturer was in the middle of what can best be described as an economic tsunami. Like many corporations, the Benton Harbor, Michigan-based firm was still recovering from the worst recession since the 1930s. But Whirlpool was wading in especially choppy waters. “We were in the middle of a fairly major business turnaround at that time that I like to refer to as the perfect storm,” Kunkel said.

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First was the macroeconomic environment. With new home building at a standstill following the U.S. housing crash and ensuing global financial crisis, consumer demand for appliances was anemic. Compounding that pain was a shifting competitive landscape. The emergence of new global challengers in the appliance industry, Samsung and LG, coupled with the general economic malaise, weighed on Whirlpool’s performance. Whirlpool’s stock price sank to as low as $22 in February 2009, and while it recovered to about $75 in January 2010, the firm, which would celebrate its 100th anniversary the following year, was in need of a spark. “At that time, from a business standpoint, we were really looking at things like we have to move faster,” Kunkel said. Speed has become a hallmark of today’s economy. But between 2007 and 2010, companies weren’t worried about speed — they were worried about survival. Whirlpool, however, sensed something different on the horizon, and in its own effort to survive stumbled upon a realization that many companies have made only recently. While the recession decimated the global workforce, triggering mass layoffs that led to a nearly 11 percent U.S. unemployment rate, its wake revealed a different economy. The knowledge worker had long been at the heart of the economy, but as a tepid recovery moved along, a new talent economy emerged. Today’s pursuit for talent is as competitive as ever, led by a growing skills shortage, advancing technologies, generational shifts and evolving dynamics around the nature of work. Thanks to years of low interest rates, CEOs are not devoid of cash to invest in new products and services; they’re devoid of the people to lead these initiatives. This reality demands that executives take charge of how they attract, develop and retain their organization’s talent. Above all, it demands that they focus on the people, organization and innovation required to succeed in the new era. Whirlpool, like many others since, quickly realized in 2010 that its ability to move faster and stay ahead of its competitors involved shifting its internal talent economy. That’s why a major part of the company’s turnaround plan involved adopting new talent-related strategies as well as redesigning its corporate headquarters and global offices based on collaboration and transparency. Its stock now trades at about $190 a share. While Whirlpool’s story is emblematic of how to succeed in the talent economy, it is not alone. Savvy executives understand that talent leads in this new economy, and it is 36

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Talent Economy’s mission to be their guide and help them show others the way forward.

people Understanding how to manage and motivate people requires business leaders to adopt a number of progressive strategies.

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he heart of the talent economy is the people who represent it. Of the world’s roughly 7 billion people, about 3 billion are considered employed and 205 million are unemployed, according to the most recent estimates from the International Labour Organization, a research agency affiliated with the United Nations. In the United States, the world’s largest economy by gross domestic product, about 125 million of the country’s roughly 319 million people are considered full-time employees, according to 2016 data from the U.S. Bureau of Labor Statistics. Still, an abundance of people doesn’t necessarily translate to a proliferation of skills. In the U.S., labor force participation — the number of people employed or actively looking for work — is hovering around a 38-year low, despite a national unemployment rate of around 5 percent. Economists consider this “full employment,” yet the disconnect between the two figures speaks to the number of people whose skills are no longer useful, as well as changes spurred by technology and globalization. What’s more, according to a 2015 study by ManpowerGroup, an international research and advisory firm, 38 percent of global companies say they are having difficulty filling their open positions, the highest such figure since 2007. Unsurprisingly, the study points out the difficult-to-fill positions as executive, administrative, skilled trade, technicians and information technology. The stakes of this skills mismatch are high. The ManpowerGroup study notes that 43 percent of executives say their inability to fill jobs with these skills has reduced their ability to serve clients, while 41 percent say it has reduced


their competitiveness and productivity — two factors with inherent bottom-line implications. In today’s global business environment, talent is as scarce as it has ever been. While workers in the industrial era were largely interchangeable, today’s most valuable jobs, and even some further down the chain of command, require a specific set of skills not easily found in the market. This shortage of skilled talent has created a spirited corporate recruiting environment, where an arms race of lavish perks and wage one-upmanship has defined new norms around workplace culture and the employer-employee social contract. “I truly believe there is an absolute war for good talent,” said Adam Ochstein, founder and CEO of StratEx Partners, a Chicago-based human resources software company. Competitive advantage remains elusive. Outside of perks and lofty wages, another strategy is “transparency, transparency and transparency,” Ochstein said. For some business executives, promoting total transparency at work, including around employee compensation, can be painful. But the core strategy is around communication and decision-making. On a weekly basis, for example, Ochstein encourages his employees to question him and other leaders on their decisions. “They don’t always walk away liking my response, but they know there’s a forum where they can come in and communicate.” A large part of this mindset shift is generational. “Generation X, Y and soon to be Z come from a perspective of inclusion and need to understand not only what their job is and their task, but how that job and task impacts their division or department [and] the overall organization,” Ochstein said.

Successfully attracting, retaining and developing the next-generation workforce will require executives to rethink their own development. The leadership skills that many executives acquired during their career likely won’t suffice to manage the needs of the future workforce. First and foremost should be an emphasis on collaboration. Open office environments, adopted by some firms, are a start, but to remain competitive in the war for talent, executives need to intentionally open the lines of communication and make their cultures more collaborative. Emotional intelligence, or EQ , is another skill executives should develop. As workforces grow more collaborative, formerly command-and-control executives will need to soften up, learn to listen and engage in a more coachbased leadership style. These skills will help executives manage a workforce that is increasingly dynamic. Full-time employees aren’t the only source of talent. The rise of the gig economy and continued value of freelancers has given executives new chess pieces to move when plotting their companies’ futures.

Successfully attracting, retaining and developing the next-generation workforce will require executives to rethink their own development.

So far, satisfying Generation Y, or millennials — generally those born between 1980 and 2000 — has been fleeting. Now the largest generation in the workforce, millennials are the least likely to stay for more than a few years. According to a 2016 study by professional services firm Deloitte, 44 percent of millennials say they want to leave their current firm within the next two years, mostly because they feel overlooked and see little path forward. The 30-year career tenure, common a generation ago, is quickly becoming a relic. Rather than avoid developing millennials because of the assumption they’ll leave, executives should train and invest in them, said Joan Kuhl, founder of Why Millennials Matter,

a New York -based research and consulting agency. Tapping millennials’ entrepreneurial spirit, passionate push for change and ability to think beyond traditional corporate norms should be atop executives’ talent strategies. “People should always be the priority,” Kuhl said. “People create ideas. People create culture.”

Roughly 53 million Americans are independent workers, according to Freelancers Union, a nonprofit advocacy organization. That number is expected to rise. The challenge for business executives will be maintaining a dual view that assesses which skills now and in the future are best met by freelancers and which will benefit more from retaining employees full time. Executives also need to manage the freelancer-employee dynamic so that there remains a cohesive organizational culture around productivity and innovation. Not being able to integrate these worker groups toward a shared misF a l l 2016 • T a l e n t E c o n o m y

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sion will put firms at a disadvantage, according to Jeffrey Wald, co-founder and president of Work Market Inc., a New York City-based software company that helps organizations engage on-demand workers. This means both should be included in formal employee development, another corporate component constantly being reinvented. Companies like General Motors Co. are encouraging informal development conversations between leaders and employees so that employees take more ownership in their development. Employees at the company are told that leaders are there to “champion” their learning, but it is on the employee to make the most of the resources provided to them. “I think everyone wants to be developed, and I think all companies want to develop their employees,” said Mimi Brent, head of global career development at GM. Recruiting, too, is poised for further disruption. Outside of traditional hiring, companies need to consider more creative, unconventional approaches to ushering talent into the organization. Some strategies may simply be new takes on old models. For instance, rather than hiring people for indefinite terms out of college or university, some companies have embraced the apprenticeship model, a practice that dates back to the Middle Ages. Aon PLC is one such firm. It uses two-year apprenticeships to fill roles in account management, client support, financial analysis and technology. After five successful years in the U.K., Aon is now rolling out a similar program in the United States, according to Margaret Heneghan, global head of leadership and talent development at the firm. “This is a legitimate talent strategy that we think that we need to pursue in order to secure the right talent for the right roles,” Heneghan said. Indeed, to win in today’s talent-driven economy, executives need to take the reins of their talent strategies and avoid delegating them to overly tactical human resources managers. Embracing unconventional strategies like apprenticeships; learning to manage and integrate the growing freelance workforce; adopting new leadership skills; and recognizing the need to create environments for employees to develop are all significant factors that will shape leaders’ thinking. As the cliché goes, people are an organization’s most valuable asset — but they’re also its biggest cost. The risk associated with mismanaging talent is perhaps the greatest a company faces. While to some the costs of properly investing in talent may seem unduly high, the benefits executives will receive for managing it properly are unlimited and often overlooked.

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organization How people are organized, as well as shifting norms around how office environments are assembled and used, will have profound influence on the future flow of talent.

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f people are the core of the talent economy, how executives organize and manage them to contribute is the next significant lever propelling companies forward.

Start with the corporate office. Designed as ultra-efficient cubicle farms based on secrecy and individual productivity in the 1960s, today’s office environment has taken on a form inscrutable to the corporate titans of yesteryear. Cubicles are being broken down; there’s an integration of new technologies; and, perhaps most important, customs around the role physical space plays in work are being rethought. Much of this is driven again by the influence of millennials, a younger, more agile demographic that entered the corporate world with drastically different notions about how work is done and how groups of people should be organized. Many firms now feature entirely open office plans, where the CEO is just as likely to sit among interns as the rest of the C-suite. These environments help enliven a sense of shared community and collaboration; they also break down formerly bureaucratic structures that slowed decision-making. In 2012, global engineering technology firm Siemens AG began rolling out its “New Way of Working” campaign in offices across Europe and North America. The new office design replaced cubicle farms with open spaces featuring glass-walled meeting rooms, more comfortable common


areas, “phone booths” for private calls, and shared offices that anyone can use. “It is a philosophy that says breaking down walls and creating shared spaces will enable collaboration and transparency,” said Bob Kermanshahi, head of strategy for Siemens Real Estate Americas. “That philosophy is then reflected in the way we design our offices.” Employees at the firm appear to agree. The company’s most recent engagement surveys show 95 percent are happier in the new space. “Executives need to recognize that they are not the demographic that represents their workforce,” said Dominique Jones, chief people officer for Halogen Software in Ontario, Canada. “It means letting go of how we think about managers and career development, and finding the courage to listen to what the organization wants.” This evolving mindset around work, along with the rise of communication and collaboration technology, has upended more than just how physical office space is used. Some firms, like internet retailer Zappos.com, are taking the open office design a step further by eliminating traditional hierarchical reporting structures, leading to flatter organizations, a freer flow of ideas and, according to firms that have adopted the practice, better products and services. Such a mentality includes measuring productivity by output, not time at a desk, and trusting people to do their jobs, not micromanaging their every move, said Karolyn Hart, chief operating officer of InspireHUB Inc., a custom app development and consulting firm for nonprofits in Windsor, Ontario. In short, executives should direct their managers to trust their talent. Hart came to this realization when she was head of marketing for WindsorEssex Economic Development Corp. prior to joining InspireHUB. There, her team was tasked with selling the region as an economic hub. When she took the job in 2012, Hart found employees were expected to be at their desks from 9 a.m. to 5 p.m. Hart argued they would be more creative if they went into the community to find inspiration for their campaigns. “If you are designing a product, you spend time with that product,” she said. “This was no different.” Eventually her team started working where they wanted, and, according to Hart, loyalty and productivity increased. “If you treat people like adults they will work their tail off for you.” The expectation around how and when a central office is used has evolved as well. About half of the U.S. workforce has a job that is compatible with working from home, according to data compiled by Global Workplace Analytics, with about 25 percent of workers telecommuting frequently. That compares to the roughly 90 percent of the workforce that says they would like to work remotely at least part time.

Employees’ desire to work remotely should push executives to establish more flexible policies around the practice. If they don’t, they might soon find themselves operating in an obsolete environment — with no plan to adapt. According to a 2016 “Future Workforce Study” by technology firms Dell Inc. and Intel Corp., half of all global employees said better communication technology and remote teams will make face-to-face conversation obsolete in the near future, while 52 percent of employees said they already work outside of a traditional office at least one day a week. “You can create a culture of communication and accountability without being in the same room,” InspireHUB’s Hart said. “You just have to be intentional about it.” Such environments aren’t reserved for tech companies or venture-backed startups flush with cash. Whirlpool, founded in 1911, in 2006 adopted its own work-fromanywhere policy, partly under the realization that sitting at a desk during traditional working hours doesn’t equal productivity, and partly due to its acquisition of Maytag Corp. (the company simply couldn’t fit everyone in its headquarters at the time). Thanks to such flexibility, use of technology-based collaboration tools and a redesigned corporate headquarters, Whirlpool has been able to reduce its scheduled meetings by 30 percent, according to Mike Heim, the company’s chief information officer. Other significant organizational strategies in today’s economy require that executives consider eliminating long-held human resources practices around paid time off and worklife balance. Just as the evolving nature of the physical office has changed how talent performs, executives need to rethink their expectations around workers’ ability to get away from work. Consider the amount of time employees are allotted for vacations. While many firms still operate on a formal accrual system or paid time off allocation, some progressive companies — like Netflix Inc. and Virgin Group — now offer unlimited vacation time for their employees. So long as they don’t leave their teams hanging and communicate with their managers, employees there can take time off whenever they want as often as they need. Moreover, because U.S. workers are historically bad at taking time off, roughly 3 percent of firms even provide employees with a “vacation stipend,” according to 2016 survey data from the Society for Human Resource Management. This will again require a change in executives’ mindsets and some initial discomfort. But for firms keen on remaining competitive in the talent economy, their leaders need to acknowledge the value of time away from work and its positive influence on performance, said Maura Thomas, founder of Regain Your Time, a consultancy based in Austin, Texas. F a l l 2016 • T a l e n t E c o n o m y

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A reimagined vacation policy alone won’t suffice. Executives, many of whom are challenged with burnout themselves, need to build their cultures around work-life balance, from revised policies around maternity and paternity leave; to building team and reporting structures compatible with anywhere, anytime work; to flexibility with regard to when employees respond to company-related communication. Above all, business leaders need to be hands-on in their organization’s approach to structuring and managing these policies, and they need to lead by example. Whether talent is working at home or in the office, whether it is a veteran manager or a summer intern, these new workplace realities reflect a larger shift toward managing with trust and respect, as well as with a more modern sense of what constitutes employee productivity and success. “The companies that are doing it right are thoughtful about implementing policies that support employees’ need to be productive,” Thomas said.

because they haven’t captured what every company ultimately covets: innovation. In today’s economy, innovation can best be described as the creation of new methods, products or ideas, and it has significant implications in the world of managing talent. Identifying, attracting and organizing talent is necessary, but it is just the start. Companies and leaders that are at the forefront of the talent economy are fully embracing innovative practices around people analytics and workforce planning, as well as data science and machine learning. Operating in these spaces will again require that executives challenge old conventions, both around business and the role talent plays in it. “The most interesting part is not to invent the lightbulb, but how to make that lightbulb shine better with less energy and for a longer period of time,” said Dan Croitor, a people analytics and human resources software strategist at Solutions PC in Brussels, Belgium. Workforce planning and people analytics are basic tools required in the talent economy. Many firms have made strides in improving how they use their employee data to make management decisions, from measuring core talent metrics such as headcount to employee sentiment, retention and turnover. But most of these measures reflect things that have already happened. With the explosion of data and computing power has come an enhanced ability to predict workforce needs and costs, in addition to being able to identify skills and talent shortages for building organizational talent models for leadership succession. These developments require that executives continue to build a strategic partnership with their human resources function to ensure that insights from such tools are included in the broader business strategy.

innovation Firms that capture the power of their talent through innovation will be the ones leading the way now and in the future.

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ot every company will succeed in the talent economy. Even if leaders are successful in finding the right skills and attracting the right people, even if they adapt their organizational structures and cultures to create the most efficient workforces, many are poised to fall flat

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“HR can be and should be at the table leading and thinking about what’s needed — thinking about things like culture and engagement, and performance management,” said Jason Geller, national managing principal for human capital consulting at Deloitte. “You can either be stuck with outdated approaches to that or more modern approaches that have adapted to how organizations work.” Yet, even as people analytics transform how executives conceptualize and plan around talent, it’s important for companies to remain focused on asking the right questions of the data and not falling victim to the trappings of big data. “Without the right question, your probability of success is quite smaller,” Croitor said. And oftentimes asking the right questions of data comes down to finding the right talent to ask the question. While many firms


have successfully employed data analysts in other core operational functions, executives should make sure those leading the people analytics push are equipped with similar capabilities, or have those in other departments work cross-functionally.

Today’s pursuit for talent is as competitive as ever, led by a growing skills shortage, advancing technologies, generational shifts and evolving dynamics.

Workforce planning and people analytics isn’t the only area in which innovation should influence executives’ talent strategies. New technologies are transforming once-routine tasks such as candidate interviews and job postings. Video interviews, in particular, have the potential to transform how talent flows in the market. Goldman Sachs Group Inc. is one firm that has made public plans to shift its on-campus interviews to video, with the hope of expanding its once-exclusive candidate pool of Ivy League students to include talent from other parts of the country. Others have followed.

Social media is also continuing to refine how companies manage their reputations, both from a recruiting standpoint and in terms of promoting their larger value propositions. “[ Job seekers] want to work at a place that actually values them as a person, wants them to be engaged,” said Laura Hamill, chief people officer for Limeade, a corporate wellness technology company based in Bellevue, Washington. This technology is also changing how employees communicate and work internally. Through social networking applications like Slack and Yammer, employees can connect with one another and rapidly share information useful to their work. Furthermore, pulse apps enable employees to communicate with managers in real time about challenges rather than wait until annual performance evaluation time. In 2012, Whirlpool ditched traditional office tools in favor of a complete Google Apps suite, and productivity immediately increased, Heim said. Finally, products like Limeade and others are deployed to wrap around other facets of a person’s life, like their health and wellness. Just as technology and innovation has created a new nor

mal in how work gets done, further advancements are likely to cause even more uncertainty for executives. The biggest innovation likely to both disrupt and contribute to the talent economy in the next decade is the rise of artificial intelligence, or AI. “The machines, the robots, are going to replace a lot more roles much faster than I think many people are aware,” said Ross Sparkman, head of strategic workforce planning at Facebook Inc.

With AI’s rise will come many workforce costs. The most severe predictions estimate that robots could replace as many as half of the world’s jobs in the next 30 years. While some roles will certainly be eliminated — especially those with repetitive, computational tasks — others are poised to benefit, Sparkman said. Continued advancement in AI technology will potentially free up workers’ time so they can function more strategically, for instance. Still, many of the aftereffects of AI remain a mystery and won’t be fully understood for some time. In either case, AI and other technologies’ advancement will require that both companies and individuals deeply consider how their skills and capabilities will be affected. “Companies that don’t have a plan in place for this are going to find themselves at a disadvantage,” Sparkman said. Given all that has changed and is likely to change further, the outlook for the talent economy is bright. Even though the challenges around maintaining a sustainable business in the face of continued uncertainty are indeed real, the world’s people — its talent — remain unwavering in their ability to overcome whatever obstacles stand in their way. In an era of widely available capital — and even in times without — talent is among the only true competitive differentiators executives have at their disposal. Talent, in fact, is the world’s most valuable resource, one no enterprise can move forward without. And for organizations to continue creating new value for their customers, business leaders need to fully embrace this credo and take charge of it as the key to building a better future. F a l l 2016 • T a l e n t E c o n o m y

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BY LAUREN DIXON ILLUSTRATIONS BY BENOIT TARDIF

Like other professional services firms, Ryan LLC had a long history of demanding in-office hours — until a top employee’s resignation spawned a cultural shift to total flexibility.

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n 2002, Kristi Bryant joined professional tax services firm Ryan LLC as an entry-level consultant. By 2007, she had successfully climbed the corporate ladder by becoming a team leader at the firm. With the added responsibil

ities came the typical trappings of a corporate manager, mainly the rigorous, 60-hour-plus workweeks, many of which stretched well into the weekends. This sort of culture is standard practice in the tax industry. It had been at Dallas-based Ryan since its 1991 founding by CEO and chairman Brint Ryan. Prior to 2008, all of Ryan’s roughly 600 employees were required to be in the office at least 55 hours a week and log each hour of their work, billable to clients or not. But by 2007, with her wedding approaching the following year, Bryant had had enough. “I felt like if this was what it was going to be like,” she said, referring to Ryan’s

strict in-office hours policy, “I probably was not going to be able to keep up mentally and emotionally to be there for my family.” Bryant submitted her resignation. What she likely didn’t expect was the reaction from Ryan, the firm’s CEO. Instead of accepting Bryant’s resignation, Ryan asked that she stay and be part of an effort to change the company’s culture around flexibility. Bryant was one of the firm’s top employees, and Ryan wasn’t about to let her go because of an outdated industry practice. In fact, this wasn’t the first time Ryan was at risk of losing top talent over the firm’s hourly work environment. At that time, in 2007, the firm’s annual

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turnover rate was 22 percent, likely attributable to the lack of employee work-life balance. “Frankly, I was fed up about hearing about it,” Ryan said. “I was fed up with the complaints. I was fed up with the surveys and the information we were getting back.” He called for a team to figure out a companywide flexibility policy — and to do it quickly. The resulting policy, “myRyan,” completely changed the firm’s culture. Today, Ryan employees only track client billable and project hours, along with internal project hours, according to Delta Emerson, Ryan’s president of global shared services. But employees’ work time, save for certain groups, is entirely flexible. Some workers, for instance, might spend about 70 percent of their time in the office and 30 percent working remotely, while others might split their time 60-40.

Some companies’ f lexible work policies require employees to be in the office but in staggered hours, while others include various levels of autonomous f lexibility as long as employees communicate with their manager and co-workers. The idea that knowledge workers could work remotely out of the office started with business travelers. In client-fac-

Around 80 percent of companies offer flexible arrangements. But only 37 percent of those have a written policy on flexibility.

Voluntary turnover, meanwhile, is now in the single digits, and the business has grown significantly thanks to a number of acquisitions that coincided with the flex policy implementation. Most important, client satisfaction has increased. “The most important thing we learned throughout this whole exercise is that myRyan, in our view, enables people to achieve not just success at work, but success in life,” Ryan said. Nevertheless, the transition to flexible work didn’t go entirely smooth. Managers experienced some initial discomfort with the practice, and extensive training was required to familiarize leaders with how to determine each team’s flexibility framework.

Flexibility has grown into a must-have in the talent economy. Thanks to advances in collaboration and communication technology, as well as shifting attitudes around what constitutes employee productivity, more firms have adopted policies loosening rules around workers’ in-office time. Around 80 percent of companies offer flexible work arrangements to employees, according to an October 2015 survey by WorldatWork, a nonprofit human resources association, and FlexJobs, a careers website. However, of those companies, only 37 percent have a written policy on employee flexibility. Moreover, many forms of “f lex-work” aren’t entirely f lexible, according to Laura Sherbin, chief financial officer and director of research at Center for Talent Innovation, a nonprofit think tank in New York City. 44

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ing industries especially, these workers could maintain their output while being on the road tending to clients. Sherbin said the concept went mainstream thanks to Lehman Brothers Holdings Inc., the now-defunct investment bank at the heart of the 2008 financial crisis. Shortly after the September 11 attacks in New York City, Lehman started a policy so it could still operate in the event that all its employees had to work remotely. “They were able to really flip the conversation and make it something that every manager needed to do,” Sherbin said. Flexible work arrangements rose in popularity pre-2008, then some companies pulled back on the offering after the financial crisis. The firms that maintained the benefit, however, “realized that in the absence of huge monetary rewards that they used to be able to pay their employees, flex work was actually a great nonmonetary reward,” Sherbin said.

When Emerson started working as a senior director for the training function at Ryan in 2004, she noticed an unbalanced system of long workdays. Even if an employee worked 16 hours one day, Emerson said, they still had to work at least the required daily eight hours the following day to avoid pulling from their allotted paid time off banks. Policies like this led to high turnover, with an estimated 60 percent of employees mentioning in their exit interviews that a lack of work-life balance factored into their decision.


The culture of long in-office hours permeated other aspects of the firm. Internal talent reviews, for instance, used employee hours logged as a point to award raises and promotions. “We’ve realized that that was really a false and meaningless metric,” Emerson said, because regardless of how many hours someone works, client satisfaction and revenue are more important. Although myRyan didn’t come into effect until 2008, the precursor to it came in 2006 with the firm’s 24-employee Workforce Effectiveness Committee, chaired by Emerson and set up to rethink employee flexibility. The team gathered research and discussed ideas to reduce turnover, Emerson said, as well as how a potential flexibility policy could contribute to the firm’s performance. Ryan’s Houston office at the time had the highest voluntary turnover rate of the entire company — about 30 percent for its 80 employees. As a result, Emerson and her team decided to pilot a flexible work program there in the fall of 2007. Bryant’s resignation submission expedited a companywide rollout of the program the following year. Ryan tasked Emerson and her team with figuring out the new system.

The shift started in January 2008, with the official rollout of myRyan the following August. During these months, ongoing communication efforts kept employees informed of upcoming changes. The firm’s 70 managers also received training ahead of time so they could best lead its more than 600 employees in the transition. Still, not all managers were keen on the idea. Some thought nobody would show up to work. Other leaders just wanted to get the job done and serve clients.

sition and group, Emerson and her team decided on what benchmarks and goals to track for everyone and which to customize. Items such as client satisfaction scores, revenue generation and goal achievement track within the dashboard to provide managers with the concrete results employees produce. This software, created by an internal IT, finance and human resources team, took about a year to complete after myRyan went live. Finally, when an employee isn’t performing, there is an option to pull their flexibility benefit, although it happens rarely. “We’re assuming going in that everybody has earned it, and it’s yours to lose,” Emerson said. The dashboard system allows for total transparency, so employees are aware if their production numbers are slipping to the point where the benefit might be revoked. Even with these principles in vvshift to flexibility needed outside help amid some early struggles, namely manager discomfort and confusion

The policy would nonetheless have a set of fundamental principles. What became clear early on was that the firm’s flexibility policy would look different for each team. Receptionists, for example, must have the phones covered from 7 a.m. to 8 p.m. However, these shifts aren’t set in stone. Every two weeks, the firm’s receptionists at the Dallas office determine how to divvy up each of their required 30 hours a week, providing accommodation for those who like long days or who enjoy coming to the office later in the day. Otherwise, salaried employees can work anywhere, anytime, as long as they meet results. To hold workers accountable to goals, the firm created a “Ryan Success Measures” dashboard. After giving thought to each po

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around team-specific policies. With a few years of myRyan under its belt, the firm signed up in 2011 and 2012 for the “National Workplace Flexibility Study,” a coordinated research effort by Life Meets Work, Career Life Alliance and the Boston College Center for Work & Family. The trio studied and provided tools to three organizations, including Ryan. Jennifer Sabatini Fraone, associate director of Boston College Center for Work & Family, conducted surveys and focus groups with the organizations; Kyra Cavanaugh, president of Life Meets Work, led training; and Kathy Kacher, president of Career Life Alliance, conducted follow up coaching with managers. At first, managers expressed positive feelings about myRyan, but they still needed better communication tools and resources for making the program customized for each team. “In general, flexibility is not something that can be prescribed or strictly dictated from the top of an organization,” Fraone said. “Each work group is so unique in their functions, in their goals, in how they measure productivity that each group needs to be able to figure out how flexibility works for them.” Cavanaugh conducted three workshops with Ryan managers in February 2012 to address these concerns. The workshop, called “Working as a Flex Team,” included topics around communication and team-building tactics, performance management strategies, optimizing technology and measuring success.

An important part of the coaching on team-based customization came in the form of a Flex Team Blueprint. The document guides teams with a list of questions and suggestions for how to build its individual flexible work framework, including those around success factors and team-specific challenges. Most important, the blueprint helps determine meeting frequency, expectations around employee accessibility and communication strategies and priorities. A team’s final agreement on these grounds ends up as a formal agreement. This Flex Team Blueprint helps teams agree on the above listed aspects of flexible work, so each person is on the same page. Later, when a new hire comes on, groups use it to onboard their new employees. Teams can also revisit their agreement and change as needed. The researchers planned a 90-day pilot between the training and post-study surveys to assess managers’ change in attitudes around flex work. In the post-study survey in August 2012, Fraone used questions from the pre-intervention survey to measure the change. Before the study, 73 percent of managers felt that if they had a question about managing flexible work, they would know where to turn for help. After the study, 93 percent knew where to look. Another prior concern was that managers would play favorites; that item in the survey decreased by 40 percentage points after the study. A final concern from managers was that myRyan would lead to a decrease in productivity and customer service. However, 22 percent of managers from the study saw improvements on both fronts, Fraone said. Also, 98 percent of managers participating in the study said they saw flexibility having a positive impact. Today, Ryan has training for both teams and managers called “myRyan Team Blueprint Agreement.” “If we had not done that [study], I’m not sure we would have figured out how to handle the Team Blueprint,” Emerson said. “It was our missing piece.”

When the myRyan project began, the firm had 677 employees. Following multiple mergers and acquisitions, the company is now global and employs around 2,200 employees and receives numerous awards each year for its workplace culture. “It’s not even comparable to what it was before,” Bryant said, referring to Ryan’s culture. She said she now works around 45 hours per week, which helps her be present at work and with her husband and two children. “There’s just a general consideration for each other’s time, but yet also the ultimate goal is to get the work done in an efficient manner.” 46

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IT’S THE PATH OF INGENUITY AND INNOVATION. You want to see productivity increase, sales grow, and profits climb. But you can also count on rising complexity and competition. At Korn Ferry, we know that the only path to up is through your people. And that is why it’s our mission to help you drive superior performance by tapping into your people’s full potential. See how your organization measures up with our Superior Performance Diagnostic Survey at kornferry.com/up


Although the time and location for getting work done looks different for each group, about 75 percent of Emerson’s 200-person team are at the office most days and 25 percent at home. Other teams, such as service delivery, might have a 60-40 split, she said. This variety of flexibility has led to boosts in employee morale and other tangible benefits. Despite implementing this program at the start of the financial crisis, Ryan said the following year was “the most profitable year in our history.” “What it proved to me was that not only could we do this, but we could do it and still achieve a very strong result financially and a very strong result organically,” Ryan said. STATEMENT OF OWNERSHIP, MANAGEMENT & CIRCULATION (Required by 39 U.S.C.3685) Publication title: Talent Management Publication number: 2427-9000 Filing date: October 1, 2016 Issue frequency: Bi-Monthly Number of issues published annually: 6 Annual subscription price: $195 Complete mailing address of known office of publication: Mediatec Publishing, 111 E Wacker Dr. Ste 1200, Chicago, IL 60601 Contact: Cindy Cardinal at 847-438-4577 8. Complete mailing address of headquarters or general business office of publisher: Mediatec Publishing, 111 E Wacker Dr. Ste 1200, Chicago, IL 60601 9. Full names and complete mailing addresses of publisher, editor, and managing editor: Cliff Capone, Publisher, 111 E. Wacker Dr., Suite 1200, Chicago, IL 60601; Mike Prokopeak, Editor, 111 E. Wacker Dr., Suite 1200, Chicago, IL 60601; Kellye Whitney, Managing Editor, 111 E. Wacker Dr., Suite 1200, Chicago, IL 60601. 10. Owner: John R. Taggart, 1401 Park Avenue, Ste 502, Emeryville, CA 94608 11. Known bondholders, mortgagees and other security holders owning or holding 1% or more of total amount of bonds, mortgages, or other securities: none 12. Tax status has not changed. 13. Publication title: Talent Management 14. Issue date for circulation data below: August 2016 15. Extent & nature of circulation Avg. no. copies No. copies each issue of single issue during preceding published nearest 12 months to filing date a. Total no. of copies (net press run) 26,522 24,460 b. Paid/requested distribution: b1. Outside county paid/requested mail subscriptions stated on form PS 3541 (Including advertisers’ proof and exchange copies) 20,312 19,342 b2. In-county paid/requested mail subscriptions stated on form PS 3541 (Including advertisers’ proof and exchange copies) 0 0 b3. Sales through dealers and carriers, street vendors, counter sales and other non-USPS paid/requested distribution 699 643 b4. Other mail classes through the USPS 0 0 c. Total paid and/or requested circulation 21,011 19,985 d. Nonrequested distribution: d1. Outside county nonrequested copies stated on form PS 3541 4,027 4,160 d2. In-county nonrequested copies stated on form PS 3541 0 0 d3. Nonrequested copies distributed through the USPS 0 0 d4. Nonrequested copies distributed outside the mail 0 0 e. Total nonrequested distribution (sum of 15d 1, 2, 3, 4) 4,027 4,160 f. Total distribution (sum of 15c & 15e) 25,038 24,145 g. Copies not distributed 1,484 315 h. Total (sum of 15f & 15g) 26,522 24,460 i. Percent paid and/or requested circulation (15c ÷ 15f × 100) 83.9% 82.8% 16. Electronic Copy Circulation. 2,415 a. Requested and paid electronic copies 2,504 b. Total requested and paid printed copies (line 15c)+requested/paid electronic copies (Line 16a) 23,515 22,400 c. Total requested copy distribution (line 15f)+requested paid electronic copies line 16a) 27,542 26,560 d. Percent paid and/or requested circulation (both print & electronic copies) (16b divided by 16c X 100) 85.4% 84.3% ✔ I certify that 50% of all my distributed copies (electronic and print) are legitimate requests or paid copies. 17. This Statement of Ownership shall be printed in the November/December 2016 issue of this publication. 18. I certify that on October 1, 2016, all information furnished on this form is true and complete. Mike Prokopeak, Editor. 1. 2. 3. 4. 5. 6. 7.

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“MyRyan enables people to achieve not just success at work, but success in life.” — BRINT RYAN, CHAIRMAN AND CEO, RYAN LLC

As a recruiting tool, myRyan has proved especially successful. Emerson said that during onboarding conferences, Ryan asks his new hires if their decision to join the firm had anything to do with myRyan. “Every hand, invariably, in every chat that we get from those who respond to the poll on the WebEx, goes up,” Emerson said. “It’s at least 90-95 percent. It’s a huge factor in what draws people to Ryan.”

important, turnover has also improved. In 2007, the firm’s annual turnover rate was 23 percent; by 2010, it had shrunk to 8 percent.

Client satisfaction has also increased. During the first year of myRyan, client service scores increased six percentage points to 96 percent, according to a 2013 case study on Ryan’s implementation by professional services firm Deloitte. In 2012, the score jumped to 98 percent. Perhaps most

Looking back, Emerson acknowledged the risks involved in switching to myRyan. While the arrangement has ultimately benefited the firm, it didn’t come without its share of headaches. When initiated there were about a dozen employees who never showed up to work and were let go. These initial pains, however, helped Ryan rid its culture of the wrong people and further aligned it with a strategy to keep and continue to attract the right people.

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Still, there’s work to be done, as the firm aims to expand on the success of myRyan into other initiatives. One such effort is “Great Rated Teams,” an initiative planned for the end of 2016 that will survey people at the team level to determine if the myRyan culture seeped into each of the company’s roughly 450 teams. The current measures of success will morph from the Ryan Success Measures dashboard into a separate Great Rated Teams dashboard. The existing dashboard puts heaviest weight on goal or revenue achievement. However, the new dashboard will feature team engagement factors and employee feelings about management. Additionally, the company plans to revisit its real estate needs, as those who work from home won’t need permanent desk space at the firm’s office. Emerson said Ryan is considering establishing more collaborative, unassigned work areas for employees likely to work remotely most of the time.

“You have to take a leap of faith that the most talented people — those that you want to keep — are the ones who are going to be responsible for achieving the result,” Emerson said. Lauren Dixon is an associate editor for Talent Economy. To comment, email editor@talenteconomy.io.


QUOTES OF NOTE FROM THIS ISSUE “Millennials especially have an expectation that they can get access to better information. They just want to understand why they’re paid what they’re paid, which at the core of it really isn’t unreasonable.” — Lydia Frank, senior director of editorial and marketing at online compensation data and software firm PayScale Inc.

“When I did workforce planning at GE, I took a much longer-term view of the types of plans and how we would execute on them — so I’m looking three to five years out with a little more confidence than I would at Facebook. At Facebook, one of the first things that I was told is six months is a long time to plan. We’re just so dynamic.” —Ross Sparkman, head of strategic workforce planning, Facebook Inc.

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“In many ways, successful leaders have always been using prescriptive analytics. The only change now is the availability of better data and new techniques to understand it.” — John Lipinski, data scientist in human capital analytics at health insurer Humana Inc.

“The most interesting part is not to invent the lightbulb, but how to make that lightbulb shine better with less energy and for a longer period of time.” — Dan Croitor, a people analytics and human resources software strategist at Solutions PC in Brussels, Belgium.

PORTRAITS BY ANNA JO BECK

BOTTOM LINE


Talent Economy — Fall 2016  
Talent Economy — Fall 2016  

Talent is the world’s most valuable resource. It’s time for leaders to elevate its strategic importance.