The Evolution of Work: How Can Companies Prepare for What’s to Come?

Many studies are exploring the evolving new world of work. According to McKinsey, up to 70% of the global workforce has the potential to see half of its job functions automated. With productivity growth having declined over the past 20 years, generative AI and other technologies are predicted to unleash a new wave of growth in productivity over the next two decades. But the reality is that this wave of technological advancement is expected to reduce the number of people required for certain types of work.

The World Economic Forum (WEF) offers more insights. Its latest study envisions several major trends impacting the world of work:

Labor market disparity. Tight labor markets are prevalent in high-income countries, whereas low- and lower-middle-income countries continue to see higher unemployment than they did before the Covid-19 pandemic. Labor-market outcomes are also diverging, as women and workers with only basic education face lower employment levels. Meanwhile, real wages are declining as worker expectations regarding quality of work shift across the globe.

Technology and ESG impacts. Over 85% of the 800 companies surveyed identify increased adoption of new and emerging technologies and broadening digital access as the trends most likely to drive transformation initiatives. Broader application of ESG standards will also have a significant impact.

Job creation and destruction. Businesses predict that the strongest net job-creation effect will be driven by green investments, broader application of ESG standards and localization of supply chains. More than half of surveyed companies expect technological advancements to drive job growth, with expected job displacement expected in one-fifth of companies. In fact, all technologies are expected to be net job creators in the next five years, except for humanoid and non-humanoid robots. The three key drivers of expected net job destruction are slower economic growth, increased supply shortages and costs and the rising cost of living. Increasing geopolitical conflicts will also disrupt labor markets.

Job churn. Of the 673 million jobs reflected in the WEF report’s dataset, respondents expect structural job growth of 69 million jobs and a decline of 83 million jobs. This corresponds to a net decrease of 14 million jobs, or 2% of current employment. Artificial intelligence is expected to be adopted by nearly 75% of surveyed companies and lead to high churn — with 50% of organizations expecting it to create job growth and 25% expecting it to create job losses.

Pace of automating operations. Organizations today estimate that 34% of all business-related tasks are performed by machines, with the remaining 66% performed by humans. This represents a negligible 1% increase in the level of automation anticipated by respondents to the WEF’s 2020 jobs survey. The latest survey revises down expectations for future automation to 42% of business tasks by 2027 (versus 47% anticipated in 2020 by 2024).

With respect to the net gains anticipated from increased demand for new job roles more than offsetting the decreased demand for existing roles, these gains will not happen by accident. To that end, the WEF’s report cites additional insights regarding what companies need to consider as they help employees prepare for a new world of work:

• Analytical and creative thinking remain the most important skills for workers in 2023.
• Employers estimate that 44% of workers’ skills will be disrupted in the next five years. As a result, six in 10 workers will require training before 2027, but only half of them have access to adequate training opportunities today. 
• The skills that companies report to be increasing in importance the fastest are not always addressed in current corporate upskilling strategies. 
• Respondents cite skills gaps and an inability to attract talent as the key barriers preventing industry transformation. Almost half of companies identify improving talent progression and promotion processes as a key tactic to increase talent availability, ahead of higher wages (36%) and effective reskilling and upskilling (34%).
• Four in five respondents expect their investments in learning and on-the-job training and automating processes to be the most common workforce strategies in delivering on their organizations’ business goals in the next five years.
• A majority of companies will prioritize women (79%), workers under 25 (68%) and those with disabilities (51%) as part of their DEI programs. 
• Almost half (45%) of businesses see funding for skills training as an effective intervention available to governments seeking to connect talent to employment. 

The bottom line: The employment scene is changing — and quickly. Companies need to get their acts together and set their sails in the right direction. The new world of work cries out for flexibility, agility and accelerated skillset enhancement.

8 questions to consider

The pandemic transformed how, where, when and even why we work. It accelerated workplace redesign as offices closed, entire industries were upended and workers had to do their jobs remotely. It raised the bar for reinvigorating strategic conversations on vision, mission, purpose and values. Now that Covid-19 has shifted to an endemic state, the opportunity is to rethink the business by accelerating customer-facing product and workplace redesign and using data analytics to inform design decisions. Leaders must seek the right balance of human and machine work and in-person and remote work, recognizing that change management is a priority to facilitate workforce acceptance.

Executive management and the board of directors should view the organization’s talent strategy in coordination with the business strategy to ensure the two are integrated. To that end, following are eight questions for leaders and their boards to consider:

Is the stature of the chief human resources officer (CHRO) role sufficiently elevated and recognized within the organization to enable performance to expectations? It is difficult to envision a time when the CHRO role has been more important to an organization’s continued success than the present. Having the right person for the job and the appropriate human capital management capabilities in place are vital to creating and supporting a robust people and culture strategy that underpins the business strategy. To engender confidence, the CHRO must relate to the CEO and engage in strategic conversations regarding growth and performance objectives.

Have we assessed whether the available talent pool enables the company to meet short- and long-term business objectives? Leading HR functions conduct quarterly assessments of human assets and compare these evaluations to the skills needed to execute the strategy. They evaluate talent inventories against longer-term goals and develop strategies to address gaps.

Are we refining our talent acquisition and retention processes to address current and future market realities? With the intersection of work and home, some employees are less willing to go above and beyond as they separate their professional and personal lives. Employee engagement is an imperative. According to a global poll, only 21% of employees are engaged at work. In other words, there is a risk of employees “quiet quitting” as they become less than highly connected — mentally and emotionally — to their work, teams and organization. With tightening talent markets worldwide, employers must compete for hearts and minds. As work choices are deeply personal, retention is more important now than ever.

Integration of talent and business strategy requires new talent assessments, talent metrics, reskilling approaches and reporting. It involves deployment of innovative labor models and sourcing strategies. The widespread pursuit of digital capabilities in all industries has resulted in a scarcity of technological talent that will likely linger for years. Focusing on cognitive and critical thinking skills rather than specific fields of study may become more important (i.e., companies’ historical recruiting sources may not be their sole talent sources in the future).

To expand the available sources of labor, HR leaders and their organizations are:

• Implementing upskilling strategies to increase proficiency in all forms of automation, data analytics and advanced technologies such as AI and quantum computing.
• Giving closer attention to retention to mitigate the risk of upskilled employees being poached by better-paying competitors.
• Using exit data to identify the drivers for invigorating employee loyalty (e.g., recognition programs, competitive compensation and benefits and effective career development and learning environments).
• Instituting a flexible labor model consisting of a blended talent pool of full-time employees, contract and temporary workers, expert external consultants and managed services and outsourcing providers.
• Investing more thought and effort in framing how contingent workers are integrated into the organization’s culture.

The value of these tactics was evident inside companies that responded faster and better to Covid-driven closures and other disruptions. They also are germane to fighting the so-called war for talent, as a recent study of 2,500 white-collar professionals indicates that 68% of professionals have already been looking for new jobs as a “just in case” tactic, with almost half (48%) of those professionals blaming low job satisfaction as the reason for their current mindset and 28% reporting lack of job security.

Are we innovating and improving the employee experience? Hybrid and work-from-anywhere models have blurred work and personal lives. Organizations differentiating their employee experience are addressing the well-being of their people more comprehensively. They offer flexible work arrangements and other benefits as well as company-supported and -led employee networking groups that promote physical, mental, social and financial well-being. However, questions linger. For example:

• How are leaders communicating in a hybrid environment?
• How is performance recognized and rewarded without disadvantaging those who opt to work remotely?
• How are the organization’s facilities, training programs and other resources enabling employees to obtain the most value out of in-person interactions in terms of fulfilling their responsibilities and developing new capabilities and skills?

How are we enhancing our culture as the workplace transitions? As stewards of culture, CHROs monitor the organization to ensure managers remain fully aligned with the tone set at the top. In today’s environment in which there is ongoing debate around corporate purpose, this alignment remains a priority but is more difficult to sustain in a hybrid environment. Corporate leaders have a significant responsibility to ensure the culture functions as a magnet for talent and is aligned with company core values and strategy. Directors should make it a priority to get to know the executive bench of aspiring leaders to gauge their quality and gain insights regarding the culture and robustness of succession plans.

How are we modifying our human capital management processes to address emerging workplace realities? Initiatives to address generational distinctions and DEI priorities should be linked to talent acquisition and retention processes. A granular understanding of specific goals, attributes and aspirations of the various generational classifications is key to tailoring HR programs. DEI initiatives should be tracked to ensure continued progress. Performance evaluations and reward systems should address the evolving hybrid work environment. Different metrics may be required to address these workplace initiatives (e.g., ROI on recruitment sources, quality of recruits, promotion speed ratio, 90-day turnover rate, skills at risks, upskilling opportunities, health of organizational culture, well-being indicators and progress on relevant metrics underlying the company’s external sustainability and ESG narrative).

Is the evolving workplace impacting our leadership development and succession planning? The emergence of collaborative and virtual technologies has increased the focus on nontraditional leadership competencies. Leading with empathy builds trust and loyalty among employees because it acknowledges value in the diverse contributions and points of view of others. Such leadership offers a foundation for training current and future leaders in managing a hybrid workforce and is invaluable in inculcating employee resilience, responsiveness and speed to market in an environment of disruptive change. As for succession planning, high-performing HR executives are devising and testing knowledge transfer processes and leadership development plans prior to losing senior leaders. This approach promotes the versatility needed to reduce the high costs and stress from reassigning roles and responsibilities in a reactive manner following unexpected departures.

Are we managing the talent implications of high-risk corporate stances as well as we should? A survey focused on the role of trust in human capital management disclosed that when considering a job, 60% of employees expect the CEO to speak out publicly about controversial social and political issues that they care about. Employees are making job decisions based on whether their personal values and the organization’s values are aligned. Leadership presence in the social arena continues to evolve as the market absorbs high-profile examples of companies choosing sides on issues through leadership messaging and marketing campaigns that affect employees, customers, other stakeholders and the bottom line. CHROs play an important role in facilitating side-choosing decisions and subsequent actions by monitoring workforce sentiment on sensitive issues and the associated risks.

Final thoughts

Aligning talent strategy and business strategy and managing the evolving new world of work are enormously complex undertakings. The above discussion suggests that much work is needed to think through the issues and flesh out solutions in the context of a company’s strategy and specific circumstances. It also is a formidable challenge if there is resistance to change in the organization (which is a top five risk globally — looking out both 12 months and 10 years — according to Protiviti’s most recent top risks survey).

But rapid technological advancements and other external market disruptions and volatility suggest that the talent and skills needed to sustain the business are likely to change as labor markets evolve. That is why the above questions merit consideration in both the C-suite and boardroom. As companies adjust their talent strategy to the new and evolving realities, they also need to evaluate their long-standing HR policies around the way they compensate and reward their people, facilitate worker mobility, and deploy flexible work arrangements.