Article

Peak human?

How you’ll source talent, what you will pay for it and what they’ll do for your business is undergoing a revolution. Ravin Jesuthasan looks at the future of work.

October 26, 2016
| Australia

Are we approaching “peak human”? To understand what that means, let’s think about what happened to the horse. As recently as the early 20th century, horses were still central to the way we lived our lives and, indeed, how we worked. With only the train as competition, they were transport; essential for agricultural processes. But around 1910 they were replaced by machinery; “peak horse” had come and gone.

Today, we’re seeing a rapid change in our work processes, and the possibility of peak human needs to be considered. I’m not saying all human jobs are going to be replaced by technology, but there’s definitely an enhanced supplementary role for robotics and Artificial Intelligence (AI) – and that’s having an impact on the way companies will look at sourcing, employing and paying people.

For many organisations, the future relevance of their business will rely on quite different elements than those that underpin their work now. Regardless of whether your business is manufacturing, financial services or health care your future is likely to hinge on the ability to use digital media and emerging technologies in a way that is core to your business model, rather than a peripheral enabler.

This means that companies need to solve the problem of how to go about developing capability to harness these new technologies, which may require a fundamental change in skill sets of the people working in the business and a new approach to acquiring scarce talent.

Three metrics

We are working with organisations to show them how to look at the future of work, by addressing three core metrics:

  • Speed to capability – how do we get to capability as quickly as possible?
  • Cost – HR budgets and salary budgets are tight, how do we achieve capability for as little cost as possible?
  • Risk – how do we develop new capability by taking on as little risk as possible (think fixed cost) and manage the risk of the “rapidly declining half-life” of our people’s current skills? Will the skills we have spent millions of dollars acquiring and developing become obsolete at an increasing pace?

It’s important to start by looking at the jobs your organisation will need in the future and pulling them apart into their components. Having people work beyond a traditional employment model can often help you achieve outcomes on these three metrics that far exceed what could be achieved if you went out and hired talent in a traditional way.

Let’s look at an example from the future of banking, which is undoubtedly digital. If we use the example of an Android software engineer as a critical job in this future, there are three key elements: core programming, integration of technology with existing company and client systems and change management – the understanding of how the technology might be used by various stakeholders (leaders, employees, customers) and the resulting implementation to ensure adoption.

Traditionally we would go out and hire one person to do all three elements. But by pulling the job apart we can deliver a solution in relation to the three key metrics that is one fifth of the cost, less than a third of the time, and for almost no risk to the business model because it can be done with virtually no fixed cost.

In addition, if we hired employees to do this work, the risk would be significant because the technology change that is driving the business change will make the skills of this group and the technology developed redundant at an accelerating pace.

This shift represents a fundamental change to the theory under which companies have been operating up until now in hiring their teams. As you can see, we’re not talking about the 30 percent (on average) savings companies have been achieving through outsourcing by moving an entire process out of the company. This is a change of the type of magnitude that allows for significant disruption.

So what is changing the world of work? We’re seeing:

Democratisation of work – increasingly work is being fragmented and being pushed around the world to be done in the most efficient way

Technological empowerment – the exponential rise in the power of computing is transforming work in a significant way

A McKinsey report recently indicated that the combination of these two factors is leading, worldwide, to a deficit of 40 million people in skilled roles and a surplus of 90 million in unskilled jobs. We’re not talking blue versus white collar here; any job that is highly routinised is something that increasingly, AI and robotics will replace.

Some research suggests that up to 47 percent of jobs could be replaced by AI.  We don’t think whole jobs will necessarily be replaced at this level but the routine elements are likely to be impacted. Imagine a marketing manager who spends 30 percent of their time analysing data and making pricing and product decisions based on that. This work can be done by a machine so, in future, this person either does 30 percent more of other work, is paid 30 percent less or, most likely, there are 30 percent fewer marketing managers in the organisation

It’s not all “Brave New World”. While some jobs will be made obsolete, new jobs that don’t exist and we can’t yet conceive will be created.

The rise of robotics and cloud computing, mobile phones and sensors are fundamentally changing the nature of work – creating a human and tech interface that will drastically reduce, for example, the cost of basic assembly in factories (to as low as $1 per day). This is reducing the skill premium on many jobs.

Indeed, technology and disruption has given rise to a new style of working – the ‘robo gig’ economy. Research we did with Oxford Economics shows skills surpluses in places like India, coupled with a shortfall in much of the developed world. New talent platforms are allowing workers in India to access work opportunities anywhere in the world as the great labor arbitrage that started decades ago further accelerates.

And that allows companies to access skills in a different way. If we go back to our Android programmer example and consider the disaggregated job, we can get the core development done by a programmer on Topcoder, the integration by a partner at a tech consultancy, and the project management could be done by a PMO in the organisation or by a project manager on Upwork. And the cost of these is all scalable. Again, McKinsey has estimated that these talent platforms could significantly increase global productivity.

This is the fourth industrial revolution. Work can actually be done more efficiently outside the organisation than within it. We are seeing the disaggregation of jobs into activities and the ability of talent platforms to provide skills on demand, significantly reducing the frictional cost of employment. These twin forces are driving work outside the individual company structure.

Organisations are moving from a physical place where people come in and worked from 9-5 to a place that organises work and talent. It’s the move from a fixed set of functions to a malleable set. Deciding which ones get done inside the organisation is a big part of strategy.

This is not without potential problems at the individual and societal level. We see the shifting of risk to employees in things like retirement adequacy, possible under-investment in training and apprenticeships. But there are also potential positives, with employees less bound and more able to move and match skills to work and rewards.

What does this mean for Australia?

The forces of change that are driving organisations around the world to think differently about how they get work done are present in Australia now, and will only grow stronger in the future.

Willis Towers Watson and Oxford Economics research predicts that Australia will have a deficit of talent by 2021 with the most significant shortages in managerial and professional workforces. These deficits are occurring as we transition from a resources-led to a services-led economy, which will require our organisations to be more innovative to enable them to compete.

It’s likely that the skills needed for companies to compete with be scarce and expensive in Australia; those organisations that solve the challenge of how to organise work and use the new talent platforms will be able to move more quickly, with less risk and much lower cost.  

A logical starting place for organisations in Australia would be to conduct a work scan that looks at jobs which they are finding difficult to fill or more routinised ones (think certain accounting jobs) where there is a sense that the cost of work may internally may exceed external options. Once the position is identified and the full lifecycle cost determined (cost of acquisition, development, rewards, etc.), the job should be disaggregated into its core activities and each activity analysed against the range of potential alternative sources of work (talent on a platform, independent contractors, AI, etc.) again, using the three aforementioned metrics of speed to capability, cost and risk.

For employees in Australia, the same risks and benefits of the future of work that are present in the rest of the world will be at play here. Australian employees with their high levels of education, should be well positioned to take advantage of the opportunities presented by the new talent platforms and future of work.

This article was first published in HR Director magazine.

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