A Conversation with Jon Spector and Human Capital Experts From the Conference Board
In September, we were honored to have Jon Spector, Senior Advisor and Former Chief Executive Officer at The Conference Board, give a fantastic presentation to many of our top clients at The Verde Group CX Summit in New York City
Jon spoke about the Seven Key Forces that are driving change in the business environment, and I was particularly intrigued by three of the ‘people-related’ topics: the war for talent, the emergence of millennials, and digital transformation.
When Jon joined me on our follow-up call, he invited his team of Conference Board experts to participate in our discussion:
- Robin Erickson, PhD
Principal Researcher, Human Capital
- Mary Young, DBA
Principal Researcher, Human Capital
- Amanda Popiela
Researcher, Human Capital
Paula: Thanks for joining everyone! Jon, perhaps you could begin by telling us about The Conference Board?
Jon: Sure Paula. The mission of The Conference Board is to provide its members with insights into what’s coming next — emerging trends in the business environment. Specifically, the Conference Board has an extensive research practice that focuses on Human Capital, which encompasses the three ‘people-related’ topics you mentioned, Paula. So I invited three of our top researchers to share their unique insights.
Paula: Excellent! So why don’t we begin with the War for Talent? Jon, in New York you presented that we have a real talent shortage, and it’s not only a challenge to find the right people, but to keep them.
Winning the War For Talent
Robin: It’s true; there’s currently a big issue with finding employees. And with four percent unemployment, our voluntary turnover rate in the U.S. is very high. Research shows a very high negative correlation between the two. As unemployment goes down, voluntary turnover goes up.
Paula: So is that because employees are saying, “You know what? It’s an employee market. I know that I can easily find a job, so I really don’t have to hang onto this one?”
Robin: That’s correct. They’re willing to take a risk because they know that they’ll be able to find another job. Now, when unemployment is high, and the economy’s not doing very well, voluntary turnover is lower — people don’t want to take that risk.
Paula: So what are some of the interesting things that companies are doing to keep employees engaged and retain their talent?
Robin: For one, organizations have begun looking at the entire employee experience, from recruitment to new hire onboarding and beyond. They’re examining learning and development, total rewards, internal mobility — all the ways they can more effectively engage their talent.
According to Gallup, 50 percent of Americans are looking for new opportunities, and for the most part, it’s not for more money. They’re looking for new challenges and new skills. So companies need to promote skills development, career management, and internal mobility.
Paula: Something we’ve been seeing a lot of on the customer side, and now more on the employee side, is the use of non-traditional rewards — small things that ‘gamify’ the work. We see this, particularly with millennials.
Amanda: In our research, we’ve found that millennials tend to be competitive, and want to advance in their careers. We also see some of that gamification, especially in specific industries and fields. Sales is the obvious example, but we do see it used more and more to incentivize millennial teams.
Paula: Thanks, Amanda. And since you brought up millennials, let’s dive right in with a controversial topic. In your opinion, are millennials really that different — a distinct cohort?
The reason I ask is that I’ve learned that the millennials are really not a homogenous group. It’s easy for us to paint with a broad brush and say, ‘millennials — 22 to 38-year -olds,’ but there are huge differences between those who are 22-24 and those who are 36-38. What can you tell us about that?
Solving the Millennial Equation: Does Success Equal EQ2
Amanda: I’d say a lot of these differences are around life stages. A 22-year-old is in a different stage of life than a 36-year-old. As a result, some organizations are even grouping the 22 to 25-year-olds as a different segment than the older group. Some would even say that the mid-30s millennial group is more similar to Gen X.
That said, there are events that happened while most millennials were growing up that affect the way that they show up at work, as is true for every generation. For example, the 2008 Recession — millennials saw how it affected their parents. Some of them were even entering the workforce during the recession. And it impacts how they view company loyalty; how they perceive risk, and how they manage money. We see millennials saving more, early on. So millennials aren’t inherently different — they’re just impacted by unique factors and events.
Paula: How do employers deal with this cohort, recognizing that there’s so much heterogeneity in this group? Do they just treat an employee as an individual, or are there proven benefits to treating them as a cohort?
Amanda: Well, we’ve conducted research, and spoken with hundreds of millennial employees. And one of the main things that we found was that they do not want to be grouped. They don’t want to be part of any stereotype. So I’d recommend employers treat them individually, and would encourage managers to get to know their employees one-on-one, to see what rewards make sense for that particular individual. I don’t see much value in generalizing that all millennials want this or that.
Paula: That’s the feedback I get from millennials as well. However, I think it’s a fair question for employers to ask ‘what are my millennial leaders looking for from our organization?’
Amanda: I think that’s a good point. We found that in general millennials want the same things that Gen X or Boomers want — fair treatment, fair compensation, value alignment with the company, and growth and development opportunities.
The last one is significant. Since many millennials are earlier in their careers, growth and development are high on their list of priorities. We’ve heard in no uncertain terms that they’ll leave if those aren’t present.
Paula: So, if you had to give one piece of advice about millennials to organizational leaders who may be reading this blog, what would it be?
Amanda: Well, we already talked about not treating all millennials the same or lumping them together. But another thing we discovered is that millennials are very focused on emotional intelligence (EQ). For them, leadership impact is about relationship management, bringing people along, mentoring others and developing the next generation of leaders. This is something that millennials are interested in developing in themselves, and that they think will be important for the leaders of the future.
Jon: Let me add to Amanda’s point. We need to acknowledge that there is a difference in the leadership characteristics that are most important to millennials versus those prevalent with current CEOs. Many current CEOs put a slightly higher priority on what I’ll call the harder skills of leadership, like critical thinking, or business management skills, as opposed to EQ type skills.
And, as one of those older generation CEOs, I think leaders of organizations need to focus on both. I think it’s a fair criticism to my generation of CEOs — that we’re not as focused on EQ as we should be.
So my one piece of advice to current leaders is to understand that the next generation of leaders has a keen interest in EQ type skills and they’ll be needed along with more traditional business-related skills to effectively lead an organization.
Amanda: Absolutely. The business skills, like critical thinking and shareholder management, will always be important.
Paula: So let’s move on to one of my favorite subjects. Mary, how do you define digital transformation (DX)? Because all of my clients think they’re doing it, but I’m not so sure.
Digital Transformation: What Got You Here Won’t get you There
Mary: One of the things we discovered when we began to research digital transformation about four years ago was that most people had a very murky, fuzzy idea of what it was, yet everybody knew that it was going to be really important to their company and their industry.
The biggest misconception is that digital transformation is about adding technology to do what you already do, only more efficiently or quickly. Digital technologies like AI, robotics, or social media are just one element. What digital transformation involves is how companies capitalize on the kinds of connections that were never possible before — between people, between physical assets like equipment, between different kinds of data, and so on.
Together, all of that produces masses of data and new insights. You’ve got technology, connectedness, and you’ve got data, and you also need a digital strategy. Digital transformation is a combination of all four elements.
So one misperception about DX is that it’s just technology. Another is that it’s for startups only. And a third is that tech companies exemplify DX, when in fact, many large tech companies like Cisco or HP started as traditional organizations and must also go through a digital transformation.
Paula: And what about those big, traditional companies, Mary? What would you say is the biggest failing that you see in some of these organizations as they undergo digital transformation, in whatever way they define that?
Mary: Our research found an extraordinarily consistent message across companies with whom we spoke — large companies that were well into digital transformation. I’ve been doing organizational research for more than 30 years, and I can’t think of one other topic I’ve investigated where there was as much consistency in the feedback. The biggest challenge is something that may have been an asset to the leadership of these organizations in the past but is a liability with digitization, and that’s risk avoidance and the fear of making mistakes. Many company leaders are where they are because they haven’t made mistakes, but digitization requires breaking barriers and trying new things — and not everything is going to work.
Another obstacle for traditional companies is the conventional view they hold of outside collaboration. They tend to hold on to their assets and knowledge very tightly. Digital transformation requires the opposite approach. It’s developing the ability to quickly assess and partner with the right individuals and other organizations to access the capabilities in their broader ecosystem, rather than building those capabilities internally.
No big, traditional company is going to be able to survive on its own. That’s why you see so many established companies partnering with or acquiring startups, bringing people in to do hackathons, investing with incubators, and participating in promising new technologies that may or may not be useful to them. These fluid partnerships with others allow them to identify and seize opportunities quickly.
Paula: Thanks Mary, what a great perspective! So for traditional companies just starting out on their digital transformations, how do they begin their journeys? Aside from partnering with startups and collaborating with more digital savvy organizations, how do you start to change the culture to be more aligned with a successful transformation initiative?
Mary: The first thing I’m going to say is a platitude, but the change really starts at the top. Many senior leaders are where they are because they understand the company’s business — they have a lot of knowledge and expertise and make very few mistakes. This will have to change since no one knows all the answers with digital transformation because it’s so new and moving so quickly. In some ways, the senior leadership team is less likely than some others to know of those things.
Leaders will need to get coaching in new ways to lead because digital transformation requires much less centralized decision-making and a kind of democratization of information. They have to become much more transparent. They have to let go of some of their authority and power. These are the kinds of things that senior leaders will need to do, because they have to be able to communicate a vision of what this means to the company and its future.
One final point. Our research indicates that not all senior leaders can make this journey, just as not all employees can. So when you launch this kind of effort, you provide a lot of resources for people to learn, and then ultimately implement some mechanism for determining who are the people willing and able to change with a company, and who are the people who frankly can’t, or don’t want to.
Jon: Mary, let me just add that there are some digital-first companies (Amazon comes to mind, but they’re not the only one), where the shareholders are helping to drive the change — they’re not just allowing, but encouraging companies like Airbnb and Uber to spend capital. They’re not focused at all on short-term earnings, but the overall transformation — and they’ve achieved huge valuations as a result.
Paula: For most companies, though, won’t there always be a tradeoff between innovation and the need for a stable, predictable earnings trajectory? That’s a difficult dilemma many CEOs face.
Mary: That’s true. And one of the things we’ve seen with this digital transformation is that there hardly ever any quick payoffs. But I don’t think you can succeed in digital transformation unless your board understands the imperative for change, and supports the significant pivots that change requires. It may mean investing in the development or education of your board, and possibly even looking at board composition.
And while we see many big companies are tapping into heads of successful startups and venture capitalists to serve as advisors, other leaders aren’t paying enough attention to digital transformation — and that’s another pitfall. I think not being curious and vigilant about what’s changing around you is really a recipe for longer-term failure.
Paula: It will be fascinating to watch how some of these more traditional market leaders progress through their digital transformation journeys. Jon, Mary, Robin, and Amanda, thank you so much for your time and your perspectives today. I look forward to speaking with you all again soon!