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Survey Report

Chapter three: Six trends in the digital world shaping the new work ecosystem

2019 Pathways to Digital Enablement Survey Findings

Compensation Strategy & Design|Future of Work|Talent|Total Rewards
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July 12, 2019

Chapter three of the 2019 Pathways to Digital Enablement Survey Findings.

Six trends in the digital world shaping the new work ecosystem

  1. Automation continues to grow, expanding both its reach and penetration.
  2. Organizations continue to strive to develop new digital capabilities.
  3. Automation and digitalization will impact job design and talent sourcing at more organizations over the next three years.
  4. As workplace automation expands and its impact on talent sourcing and job design increases, the talent mix will evolve to include more contingent workers.
  5. Feeling the impact of automation and digitalization, both employees and contingents are uncertain about their work future — but many are ready to take action.
  6. Organizations recognize the need to step up their game with breakthroughs in leadership and other key human capital areas.

Trend #1: Automation continues to grow, expanding both its reach and penetration.

The proportion of work completed using automation doubled over the past three years from 8% to 17% and is expected to nearly double to 30% three years from now. The increase over the past three years is attributable to more organizations beginning to use automation as well as a greater uptake by companies already using workplace automation. During the next three years, the increase in usage will be largely due to greater use of automation by current adopters (Figure 4).

Bar chart displays proportion of work completed using automation alongside the proportion of organizations that had work done by automation across three time periods – three years ago, currently and in three years. The average percentage of work done by automation doubled over the past three years from 8% to 17% and is expected to nearly double to 30% three years. The percentage of organizations that had some work done by automation increased by nearly 60% over the past three years from 51% to 81% and is expected to hit 92% in three years.
Figure 4: Nearly all organizations will be using automation in three years

While early adopters of automation expect that 36% of their work will be completed by automation in three years, latecomers expect to ramp up rapidly. Organizations that just started using automation within the past three years expect that 29% of their work will be completed by automation three years from now; those not using automation at all today expect that 24% of their work will be completed by automation in three years (Figure 5).

Line chart shows that organizations that started using automation 3 years ago expect that 36% of their work will be completed by automation in three years compared to just 16% three years ago and 24% currently. Organizations that just started using automation within the past three years expect that 29% of their work will be completed by automation three years from now compared to 16% currently and 0% three years ago. Those organizations not using automation at all today expect that 24% of their work will be completed by automation in three years.
Figure 5: Latecomers to automation are striving to catch up quickly

The fact that organizations that were not using automation at all three years ago are using it today to complete 16% of their work reflects the rapid adoption cycle.

Trend #2: Organizations continue to strive to develop new digital capabilities (e.g., AI and automation, data analytics, machine learning, mobile communications and social media).

Although organizations can develop digital capabilities in many ways, they usually begin with some combination of organic development or working with established organizations via partnerships or contracting relationships (Figure 6).

Once organizations move beyond these initial methods, they may look to acquisitions, internal venture capital or partnering with start-ups. Over half of organizations are taking a more aggressive approach and using multiple methods to develop new digital capabilities. Organizations gain many additional benefits from the more advanced methods, but they are more likely to use these methods when a CDO is in place.

Graphic shows proportion of organizations using initial and advanced methods to develop new digital capabilities. Among initial methods, 42% use partnerships with established organizations, 42% use organic development and 49% use contracting with third parties. Among advanced methods, 23% use acquisition, 17% use corporate venture capital or incubators and 17% use partnering with start-ups.
Figure 6: Developing new digital capabilities – no single method dominates

Trend #3: Automation and digitalization will impact job design and talent sourcing at more organizations over the next three years.

Automation and digitalization are powering new combinations of work, talent, skill requirements and work relationships.

Most organizations using automation in business processes today are using it to support humans or to take over some of the work. As more organizations become effective in these areas, we would expect to see a sharp uptick in the use of automation to create new types of work for humans, impacting the skill profiles required for positions.

In the next three years, more organizations expect to use more contingent talent and redesign jobs to both raise and lower skill requirements as they combine humans and automation, and deploy work to other locations (Figure 7). These approaches will help employers leverage automation and digitalization to substitute repetitive, rules-based tasks, augment more human tasks (e.g., those involving judgment, creativity and interaction), and create new types of work.

Table shows top 4 rankings for areas of the workforce and work activities that are changing today or will change in the next three years due to automation and digitalization.  The number 1 area cited as most commonly changing today is improving collaboration and information sharing followed by requiring us to pay more for employees with certain skills sets, increasing work flexibility (e.g. scheduled hours to get work done) and enabling work to be deployed to other locations. Among the areas that will change over the next three years, the number 1 cited is requiring/enabling us to use more non-employee talent followed by changing the way we design jobs so they can only be done by employees with more skills, requiring us to have less employees and changing the way we design jobs so they can be done by employees with lower skills.
Figure 7: Areas of the workforce and work activities that are changing today or will change in the next three years due to automation and digitalization

Trend #4: As workplace automation expands and its impact on talent sourcing and job design increases, the talent mix will evolve to include more contingent workers.

The past three years have seen a rise in the use of contingent workers. Three years ago, seven in 10 organizations were already using non-employee talent, a rise that can be attributed to organizations using more types of non-employee talent and more of each type.

Employers expect full-time employees to represent a smaller share of their overall workforce in the next three years, with a corresponding increase in the proportion of contingent talent during this period (Figure 8).

Graph illustrates in the past three years there has been a rise in the use of contingent workers. Three years ago the use of free range agents was 3.6%, currently is 4.1% and in three years this is expected to increase to 5.3%. Use of free agents on a talent platform (e.g. Upwork, Topcoder) three years ago was 0.1%, today is .3% and is expected to increase to .5% in three years. Workers on loan from other organizations (e.g. talent exchanges, alliance partners) was 0.9% three years ago, .1% today and is  expected to increase to 1.4% in three years.
Figure 8: Use of free agents and other non-employee groups grows over time

Note: Percentages reflect the portions of the workforce represented by type of worker.

The increasing sophistication of the skills that contingent workers possess and the work expected from them combined with the growing premium placed on speed is encouraging more organizations to consider the use of contingent talent, which can frequently be more quickly sourced, onboarded and deployed productively to specific projects than traditional employees.

In three years, more organizations will rely on free agents, talent on a platform and workers on loan from other organizations (Figure 9). Even organizations not currently using any of these talent options expect to catch up quickly in their use of them. For example, the group of companies not depending on talent platforms today expect that in three years over 4% of their workforce will consist of free agents on a platform.

Graphs show in three years more organizations will rely on free agent workers, free agents on a talent  platform, and workers on loan from other organizations. In three years it is expected organizations who started using free agents more than three years ago will increase to 9.2%; organizations who started using free agents in the past three years will increase to 8.4%, and organizations who plan to start using free agents will increase to 7.4%.
For free agents on a talent platform it is expected in three years, organizations who started using these types of workers more than three years ago will increase to 4.4%; organizations who started using free agents on a talent platform in the past three years will increase to 4.9%, and organizations who plan to start using free agents on a talent platform will also increase to 4.4%. For workers on loan from other organisations it is expected in three years, organizations who started using these types of workers more than three years ago will increase to 6.5%; organizations who started using these types of workers in the past three years will increase to 6.9%, and organizations who plan to start using workers on loan from other organisations will increase to 4.4%.
Figure 9: The use of free agents and other non-employee groups grows over time

Trend #5: Feeling the impact of automation and digitalization, both employees and contingents are uncertain about their work future — but many are ready to take action.

From a talent perspective, the changes occurring in organizations and labor markets, and within society more generally, heighten worker perception of job risk. Two out of five workers think their jobs are likely to be taken over by automation or offshoring in the next decade (Figure 10).

Pie chart shows proportion of worker's perceived level of risk that job is likely to be taken over by automation or offshoring in the next decade. Forty percent cited low perception of job risk, 19% cite moderate perception of job risk and 41% cite high perception of job risk.
Figure 10: Workers' perceived level of risk that job is likely to be taken over by automation or offshoring in the next decade

The perception of job risk is highest among contingent talent, followed by managers (Figure 11).

These pie graphs show the perception of job risk is highest among contingent talent, followed by managers. For non-employee talent, 19% cited low perception of job risk, 16% cited moderate perception of job risk, and 64% cited a high perception of job risk. For managers, 42% cited low perception of job risk, 18% cited moderate perception of job risk, and 40% cited a high perception of job risk. For Non-managers, 51% cited low perception of job risk, 21% cited moderate perception of job risk, and 28% cited a high perception of job risk.
Figure 11: Perceived level of risk that job is likely to be taken over by automation or offshoring in the next decade by type of worker

As a result, employees who perceive their job to be at risk are more likely to take the following actions (Figure 12):

This graph illustrates that employees who perceive their job to be at risk are more likely to take the following actions: 41% of employees who have a high perception of job risk will plan to leave their job within the next 2 years, with 26% of employees with a low perception of job risk planning to leave. 59% of employees who have a high perception of job risk worry about their current financial state, and those who perceive their job to be at a low risk are 1.5x as likely to worry about their current financial state. 65% of employees with a high perception of job risk will choose to invest in their own learning/training, and 45% of employees who perceive their job as low risk will invest in their learning/training.
Figure 12: Actions that employees who perceive their job to be at risk are more likely to take

In a workplace disrupted by such technology as AI and robotics, where the half-life of skills continues to shrink, organizations and workers alike must adopt a growth mindset and an agile approach to reskilling and upskilling to remain competitive. Organizations must rely more on a skill-based architecture instead of a job-based one to respond in an agile way to changing demands.

After all, the leadership profile is changing. Leaders must manage the levers that power the new digital ecosystem and are accountable for the success of their organizations’ digital ambitions.

Among those who perceive the greatest risk to their jobs from these trends are a substantial number of highly engaged individuals who are extremely motivated to develop new skills to meet evolving requirements. These workers are likely to be in high demand. The organizations that do a better job attracting or retaining them, and integrating them into their projects, will gain a competitive advantage.

Trend #6: Organizations recognize the need to step up their game with breakthroughs in leadership and other key human capital areas.

A large majority of employers (66%) cite leadership development as the top area requiring breakthroughs to adequately address the challenges of automation and digitalization (Figure 13).

66% of employers cite leadership development as the top area requiring breakthroughs to adequately address the challenges of automation and digitalization. Other areas employers believe will require “breakthrough” approaches include Performance management (64%), Organization structure (59%), Career management (56%), Talent acquisition (54%), HR’s role (52%), Pay programs (51%), cybersecurity (45%), Benefits programs (41%) and The employment brand (30%)
Figure 13: Areas employers believe will require "breakthrough" approaches and innovation to ensure the challenges of automation and digitalization are adequately addressed

After all, the leadership profile is changing. Leaders must manage the levers that power the new digital ecosystem and are accountable for the success of their organizations’ digital ambitions; therefore, it’s critical that they understand and master the core competencies of digital transformation leaders.

These leaders possess the capabilities and skills to orchestrate a diverse ecosystem of work options that include AI, robotics, alliances and a wide range of talent across different platforms and locations, among others. Leaders need to curate and execute on the optimal talent experience and ensure it aligns the mission and purpose of each individual (employee, gig worker, AI vendor) with that of the enterprise. By providing a shared sense of purpose and meaning, they inspire trust and motivate workers to respond in an agile manner in the face of change. Inclusion and diversity are priorities for these leaders who create innovative, collaborative workplaces where employees feel comfortable sharing ideas and receiving feedback.

Moreover, leaders in digital transformation have a forward-looking vision enabling them to build innovative digital strategies that advance their organization’s business objectives. They seek out new ideas and broad thinking from different sources by building internal and external networks. And when they uncover compelling ideas, they encourage calculated, data-driven risk taking to disrupt the status quo and deliver transformational results. It is important to recognize that leaders need to be ambidextrous and can operate in both in this agile, experimental way but recognize when there is zero tolerance for mistakes.

Next chapter: How to get and stay ahead of the competition

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