The HR department has changed a lot in the last decade and that's an understatement.
Josh Bersin of Deloitte breaks down traditional ideas of human resources using research, surveys and case studies to highlight innovation, potential, and change in the industry. He works with large companies to understand their strategies and update them on trends in the world of work.
In the aftermath of the 2008 recession, human resources has moved from administration and compliance to understanding the employee experience. His work helps the sector stay up-to-date and embrace experimentation and effective performance management.
Performance management is often a negative experience for team members undergoing feedback, but according to Bersin, good performance management is just management. Good management is about clarity, accountability, and connecting people, and similarly, good performance management should be based on those traits.
Unfortunately, HR had gotten in the way of that.
The new HR needs to understand how employees work, what perks they want and how work gets done so they attract the right people on a regular basis. The aim isn't to make people happy, Bersin says, but to give them good jobs that are meaningful and supportive, and that will in turn make them happy. This is particularly vital at a time when, as Bersin likes to say, "The war for talent is over, and the talent won." People know what they want in a job, and job seekers can easily find one through social media resources like LinkedIn.
The future of human resources is in being effective, straightforward, and focused on talent management and human capital at the company. Feedback needs to be quick, simple, and integrated with other tools. Employers need to become more effective about how they advise employees. Overall, organizations need to provide a positive work environment with a focus on transparency, listening, culture, and good benefits. Your company's human resources department needs to hire HR professionals who look at the technology landscape, understand the new world of HR technology, and can guide companies about the tools that are appropriate for them. Employee engagement "that push and pull of energy in a company" is now an ongoing, real-time process of listening to the employee, rather than only a yearly event. Senior management, says Bersin, needs to know that they should listen to and trust its people even during bad times.
The future of HR will hold even more rapid changes. HR processes are built around individuals, but companies need to figure out how to optimize not the person, but the team. How can we align goals around a team? Furthermore, organizations are now more socially integrated. How will business organizations become part of societal good?
In this episode of Resources for Humans, Josh Bersin describes the evolving work environment, discusses the future of work, and explains how HR leaders need to adapt their people practices to the demands of the modern workforce.
Welcome to another episode of Resources for Humans. I'm your host, Jack Altman, and today we have a really exciting guest with us. This is Josh Bersin, who I've been reading for a very long time. I think he's one of the most thoughtful, people in our industry, and I'm just so excited to be here with you today. So thank you. Thank you.
Thank you, Jack.
So Josh, you've been in the industry for a long time. Can you just give us a little bit of background of how you got into HR in the first place?
How I got into HR?
How you got into the whole area.
Well, I I'm actually not from the HR domain. I mean, I think a lot of people know that I was really an engineer, and I did sales and marketing and other things, and stumbled upon an e learning company in nineteen ninety eight that was trying to build online learning software, and that was before we even called it e learning.
And, we sold that company to a larger company. I worked for another company called Digital Think that was a fairly successful online learning company, and then the two thousand recession, for those of you that were probably children at the time, don't remember, everybody got laid off, including me, and I went out and decided I wanted to do research on corporate training. And that's how I got started in this. And then it expanded and grew and and turned into what we do now.
And tell us a little bit about what it is that you do now and kinda how that got off the ground.
Well, I felt that, and and I think it's still true, that the HR function in companies struggles to figure out what the right thing to do is because there's never any right or wrong in all of the different people practices of business. And so we've I felt that there was an opportunity for us to show people through research, through lots of unbiased studies and examples of what would work for a given company in a given situation. So we ended up building a, through lots of surveys and interviews and talking to vendors as an analyst, a methodology to produce written materials that HR people could read that would allow them to say, oh, here's where I am and here's what I need to do next to get better at whatever it is I'm working on, and those started as, in the learning domain.
The first really big report was called the High Impact Learning Organization, how to develop it, how to run a training department. And then it expanded into all these other parts of HR. So we do that, we do benchmarking, we write case studies, we do all this work with vendors to try to understand how the marketplace is changing, and now, I really work with large companies, CHROs to try to understand their strategy and try to keep them up to date. And in the years that I've been doing this, every year or two something new comes along, a whole theme changes, the technology world changes. So it's a never ending quest.
And I'm so excited I'm so excited to talk about all this, but, in the context of your role with Bersin and since you've joined Deloitte, I'm super curious to hear about has that changed at all since you've been part of Deloitte?
No. It's been great. Being part of Deloitte gave us scale. I mean, we were a self funded bootstrapped business, and we reached a stage of growth where we either needed to raise some money or, not grow at the rate we could, and Deloitte came along and said, Look, we would like you guys to be part of our human capital consulting business and give us an architecture for selling all the consulting that we do.
So for five years, we've been part of Deloitte. We've been growing. We've become more global. We're about twice as big as we were when we were acquired.
I now have the opportunity to get input from Deloitte partners all over the world. I'm involved in other projects in Deloitte like the Human Capital Trends research. So it's been really fantastic. I mean, I think, you know, every time somebody sells their company, there's a probably fifty fifty chance on what's gonna happen. For us, it's been really, really very, very positive.
So you've been looking at the HR industry for a long time from a really high level perspective. Before we jump into how the technology has changed, I'd love to hear how has the role of HR companies changed?
Well, it's changed a lot. I mean, if I go back to when we started, you know, when the two thousand eight recession hit, which you guys haven't seen what will happen, it was about doing less and how could the age we used to we actually had a conference where we had the theme was do less with less.
How do you do fewer things when your budgets are tight? How do you reduce the size of the workforce? That was a huge focus. But then in this last economic cycle, which has been nine years now, it's been moving HR from administration and compliance to understanding the employee experience, improving employee engagement, watching and monitoring the employment brand, and making the company a better place to work for a whole bunch of reasons.
One of which is to to retain people when you can't find them anymore because the market's so hot. And so there's been really a five year or so evolution of HR into focused on culture, listening, transparency, trying to, you know, better work environment, better benefits, free food, whatever it may be. That's really been a focus on becoming a more attractive employer. But I think we're meet reaching a new stage and the new stage, which I call is really HR as the chief productivity department.
Because it turns out that even if you do have a great brand and you hire a lot of great people, if they don't know how to get their work done and the organization can't flex to meet the changing business needs of a business disruption like digital, it doesn't matter if they're happy. In fact, they won't be happy. So, I think there's a sort of a new era of HR focusing on really understanding how work gets done, and what are the tools and practices that we need to be more productive at work. So it's getting more into really being a management coach or a management advisor, not just a curator of the employee experience.
So is this changing the types of people who do HR as as the role evolves? Are we seeing the composition of the people working in the industry change?
Absolutely. I think, I I mean and certainly in the big companies, we still need a lot of HR domain, a lot of expertise, a lot of people that have worked in HR, but more and more companies are saying, I want people with MBAs, I want people with statistics background, I want people from the business. I was just having a meeting right before I came over here with a head of HR of a large company asking me about how to staff his analytics team, and he said, should I look for people from HR or outside of HR? And I said, you know what?
You probably should look for people outside of HR. You should look for people that have done analytics in the customer or marketing domain and bring them in so they'll bring a more business oriented perspective. And so I think we're in an era right now of really HR upskilling itself to be more business relevant. As one of the CHROs I talked to put it, HR should spend their time where the company makes money, not where they think it might be nice to add value.
So HR professionals working on sales productivity, improving productivity in manufacturing organizations, reducing accidents, those are things that are, you know, business problems that HR people can help with. And then they can bring all the HR domain expertise about recruiting and learning and OD and training and org design to that problem. So that's until the next recession hits, in which case everything will change again, I think that's where we are today.
And so the expectations are obviously going up because, you know, it's no longer just say cost saving metrics. Are we also expecting people ops teams to drive revenue, drive employer retention? Where where where does that go?
I I think most CEOs would love their HR department to take some accountability for growth, profitability, innovation, revenue, customer service.
Employee engagement is a nice thing to measure. Retention is a nice thing to measure, of course, but those are not the most important things to the CEO. So anytime an HR department can get aligned with those kinds of initiatives, like if you're in a startup, you know what it's like. You wanna grow. So do we have the right people trained in the right job, so we're doing deals fast enough, so we're closing deals, so we're taking care of customers? Those that kind of mentality, the more HR people think about those things, the better off they're gonna be.
What are some of the most exciting or innovative sectors that you're seeing growing to sort of adapt to the new expectations and the new role of HR?
Well, there's quite a few things changing.
I mean, one of the one is the market that you guys are in is the performance management market, and if you, if you go back and look at performance management for the last thirty years, it used to be a once a year HR compliance program designed to weed out the low performers and try to come up with a defensible reason to give one person a certain raise and somebody else another raise, and so it was all about, you know, applying HR principles to the workforce to maintain equality and drive performance.
Now, you know, performance management is really focused on what can we do to get people to do their jobs in a more productive way to be more better trained, better skilled, better engaged in the right job, not the wrong job, not just evaluate their performance, that's a part of it, but that's a very small part of it really. And so that's completely changed. And then learning domain, I mean, I spent ten years writing research reports on learning management systems, and e learning, and traditional training blended learning, wrote a whole book on that. And now companies are saying, yeah, that's all well and good, but I want to make sure I have people developing the skills for the future because every year there's a new set of skills that we need that keeps us from competing with our competitors.
And so do we know what those skills are? Do we know where those people are that have those skills? And are we doing things to give them the, information they need immediately on the job to do their jobs better? That's that's a change.
So so I can go through sort of all of the areas of HR. They've all adapted to this new world.
Do you think it's fair to say with performance management that the goal of it has moved from evaluation to development or do you think it's more complex than that?
Well, the simplistic way to think of it is that, but it is much, much more complex, and I'll give you our data on that one. When I first did our our first research on performance management was two thousand six, I remember this. And, you know, we had been talking to success factors and a lot of the, you know, contemporary companies. And there were a lot of them. By the way, there were like fifty, just like there are today.
This is ten years ago.
Ten years ago.
And we did a survey and we asked several hundred companies if you could characterize your performance management into one of two categories, competitive assessment or coaching and development. Which one are you? Pick one. You only get to pick one.
Seventy five to set to eighty percent of them said, it's competitive assessment. The reason we do it is to figure out who's on top, who's on the bottom, to weed out the low performers, reward the high performers.
That was Jack Welch stuff.
Right. That that was the whole thingy. Last year, we did it. It's completely inverted.
Seventy five percent said it's coaching and development. Only twenty to twenty five percent said it's competitive evaluation.
And the reason for that is we're in a world where skills gaps, team engagement, alignment with the mission, hiring people with the right culture and the right passion is it is a definition of success. Telling somebody they're a low performer isn't gonna help you that much. You somebody has to tell them that, but it's really what do you say after that. What what are the coaching and tips and guidance you give them to make sure they can improve their performance, and then having a growth mindset, which basically says, even if you are a low performer, I do believe you could improve, and we're gonna spend some time figuring out how to do that in the current role or another role. That's where companies are today. So that whole domain and the software people buy and the kinds of features they want has shifted from this old, model to this new model. And I would say, you know, companies like yours are just, you know, really reinventing the whole marketplace.
And to what degree do you think this plays into sort of the increasing war for talent? So like, I know a lot of other startups are as afraid of as we are of, you know, Facebook's new office in San Francisco Right.
And it's getting more competitive than ever.
And in some sense, I wonder, is performance management one more tool to make your company a place people want to work? Is it is it operating at that end of the funnel too?
Absolutely. It it it it has to be. If it isn't, then it probably isn't doing its job.
And I think, as we were talking about a little bit earlier, the phrase performance management is an old fashioned concept.
The idea that a manager is going to manage the performance of an individual is actually not the way it works. We all manage our own performance.
If I know what to do, and I'm in the right company, in the right job, and getting the right rewards, I will improve my own performance.
And it is my boss's job to make sure I'm getting the help and support and advice and guidance and tools to do that.
So I don't even know whether we want to call it performance management that much longer. I'm not sure if that phrase will go away, and this idea of the war for talent, you know, the phrase that I like to use kind of a funny phrase is the war for talent is over and the talent won. People know what they want to do and they can find a job on the Internet then you're not they don't belong to you anymore. They can go to LinkedIn or Glassdoor or wherever other website, find what roles, jobs are available. They can even look for jobs within their city, within their zip code, within their within three blocks of their office, they can apply online, people can look at their social profiles. So this idea that you have some control over what your employees do is really not true. So if performance management isn't helping the company, attract those people on a regular basis, not just once a year, then there's probably something wrong with the process.
I love what you said about the sort of war for talent and that the talent has won because we talk about this sort of power shift towards employees quite a bit. One other area that's related here is employee engagement, and before we get into the HR tech, which I'm very excited to talk about, engagement is this other hot topic. It's this buzzword that we hear a lot about, and I'm really curious just to get your thoughts on what's the state of employee engagement and how should companies think about it.
Well, the phrase employee engagement is an old term.
Everybody kind of knows what it means to, you know, your ability or interest in in applying discretionary effort at work, but I think it's much more complex than that. It's really the whole tapestry of experiences and environments that you, witness and are part of at work and how well they bring the best of you out. And so I'm trying to think of the right phrase for it, but it's really in a a story of energy. Do I get energy out of this job? Do I bring energy to the job? Do I have energy in the job?
And that makes me stay with the company, work harder, do more, collaborate more, and so forth. So it's a complex area.
Historically, engagement was a once a year survey.
I think that goes back to the industrial age when we thought about employees like cogs in a machine, and we had, you know, Frederick Taylor and the old scientific work methods, and we said, look, if we if we survey them once a year and see which ones are happy, maybe we can figure out what to do with the other ones to make them productive too.
Now it's really continuous process of listening all the time and and we have a whole set of new tools including the kinds of things you guys do. But you know the funny thing about it when you look at the data and I've been looking at the Glassdoor data for eight or nine years, it hasn't gone up. The average engagement on a five point scale is about the same as it was before the two thousand eight recession and during the two thousand eight recession.
So it is a problem that plagues many, many companies, and what I've concluded from all the research I've done and the data I've looked at is that ultimately it comes down to leadership and leadership's, investment and understanding that the people side of their company is perhaps the most important thing they do.
And, you know, the way I kind of try to describe it to companies is every company is in the people business, whether they know it or not. You might be pumping oil out of the ground, or making widgets, or selling software, or developing software, but if the people aren't engaged and trained and aligned, that particular thing that you're selling won't be productive, customers won't be happy. And so the companies that are at the right side of the bell curve on engagement tend to have senior leaders that are very very focused on their people. They understand, they listen, they're transparent, they're trusted, they, invest in people on a continuous basis, including during bad times.
I'll tell you when it during the two thousand eight recession, a lot of the companies we talked to, great great companies, cut their HR and training departments, slashed them. Two years later, they were very sorry they did that because when the economy came back, they really didn't have anything and a lot of their people left because they they saw the cuts. So those are the things that drive engagement, and I think performance management can be a positive or a negative. I think in most companies, it's been a negative on engagement.
I I've been through I was trying to figure out the other day. I think I've had close to forty or forty five performance appraisals in my career, and I can only remember one or two that have been positive experiences for me. In most cases, I went home that day and had to take a deep breath and say, okay, I'm gonna put this out of my mind and try to go back to work tomorrow. And that shouldn't happen.
Absolutely.
Yeah. And I know you've you've shared fascinating data about just how much employees historically have have hated performance management. And I think that's so much of what we're trying to Yeah. To do now.
One last question on on the data piece. Do you think that measuring engagement or happiness, do you think that that's enough? Because you mentioned that engagement hasn't gone up over all these years, but obviously we've been measuring more.
Do you think companies would be better off spending their time doing things rather than just taking Yeah.
I think engagement You know, it's a good point. I mean, engagement is a surrogate measure that doesn't mean anything by itself.
What really matters is productivity, retention, employment brand, revenue growth, customer satisfaction.
If all of those things are good, I guarantee your employees are happy. I can guarantee it. And I think one of the problems with engagement as a big, big measure is companies get a little bit too wrapped around the axle that we're trying to make people happy. We're not really trying to make people happy.
We're trying to give them really good jobs that are meaningful to them that help the organization succeed. And if we do all that in a supportive environment, they will be happy because it is work. Absolutely. It isn't home.
So, so but I don't think the market's gonna go away. I think it's gonna be around for a long time and there's many many definitions of of what engage, how you how you measure it. We have one and there's just dozens and dozens.
And you do find, I've looked at the Glassdoor database in a lot of detail. You do find a class of companies, five to ten percent of companies, that are the most engaged year after year after year, upcycle, downcycle in every industry. And that's not just tech, I mean, retail, manufacturing, distribution, energy. There are a small set of companies that have very, very highly engaged workforces. They also are very financially successful companies. So they are thinking about engagement, but they're also thinking about the other things. So thinking about it as in terms of the whole system.
Do you think do you think that success is what drives that engagement? In other words, do you think that being a successful company is the most important thing you can do to type engagement?
Well, actually, I looked at the data in Glassdoor, and there is a very high correlation between company growth and career growth, for example, but not between company growth and culture.
Some high growth companies are not great places to work. I've worked in a couple. They're very financially rewarding and you learn a lot, but you may not like it because usually high growth companies are very competitive and there's lots of new people coming in all the time getting in your, you know, possibly going up above you and getting in your way. So so they're all related, but I think, there's no question that if you wanna grow over time, you have to have highly engaged people. I'm not saying that every high growth company is a great place to work. There are periods of time when high growth companies are great places to work for certain types of people.
So the other part of it I would say for those people watching the video that are that are candidates or employees, you need to find a company that's the kind of company you want to work in. Every organization's got a different culture or different business strategy, different management team, and you might be really really highly engaged in company a and just hate it in company b. And so one of your jobs as a job seeker is to is to do some due diligence to to figure out what kind of place you're you're interviewing to go visit and be a part of.
Great. So let's transition to something that I think you know maybe more about than almost anybody, which is the landscape of HR technology.
So maybe to start with one question, what do you see as the trends between all in one solutions and best in breed point solutions?
Well, it's funny. This is a really funny cycle that's happened over the last twenty years. We had a market, fifteen, twenty years ago of a whole bunch of learning products, a whole bunch of recruiting products, a whole bunch of performance management products, a bunch of employee, self-service tools, a bunch of comp and benefit tools, a bunch so there were there were all these silos.
And we came up with this concept of integrated talent management, and all those companies got bought and integrated and merged together, and then the big ERPs got into it and bought a bunch of those companies. And so we had this idea of the suite, the integrated talent suite, and the concept was pre hire to retire.
And, companies snatched that up and they tried to get rid of their individual suites, and the reason they did that is they believed, which the vendors told them which had a lot of truth to it, that if they had one suite, they would get better data about their employees because all the data would be integrated.
That is now completely gone the other direction.
That was a reasonable effort, and it did reduce the number of vendors and the number of, risky tools you had to buy at the time.
And now but now we have the cloud. Most companies will buy a cloud based human capital management system, which usually includes core HR and payroll, and then they will look for best of breed recruiting, best of breed training, best of breed performance management. And the research shows that the average number of systems of record in the last year almost doubled.
So we're back to a market of people looking for better tools wherever they can find them. And the reason for that is not because of the technology, it's because the way we work changed. And so the work practices and the management practices that were embedded in the talent management software from mid two thousands are not useful anymore. They don't really help us.
We work in teams. We work in networks. We have much more peer to peer communications, we wanna learn on demand, we wanna do micro learning, we wanna do continuous performance management, we wanna do check ins. That stuff was never even conceived of in those integrated talent management tools.
So so actually, the market's becoming more innovative, more fragmented, and more creative. And the other thing I would say that I think is really kind of exciting is that for HR departments, HR departments are becoming better at experimentation, testing, trying tools with a few parts of their doing pilots, and then later deciding whether to roll something out as opposed to just doing this big bang, doing a giant RFP and buying a bunch of stuff and then spending three years trying to get people to use it.
Those are very risky projects. So the whole marketplace has become very very dynamic. There's likely to be another consolidation phase, you know, in the next, you know, on some number of years ahead, but, we're in a we're in an era of very very a lot of creativity, a lot of innovation, and a lot of experimentation in the HR function.
And do HR teams just need to sort of adapt to this new way because, you know, if there's now thousands of vendors to choose from potentially, how do teams make good decisions about what softwares to try, to pilot, to roll out when there's more choice than ever?
Well, it's harder, but it's like when you like I have to buy I'm buying a new hot water heater for my house right now, And I went online and I looked at all the hot water heaters and I had to do my homework because one of them is like five times more efficient than the other one and I wouldn't have known that without doing my homework. So I think HR teams need to have a person or a group that is looking at the technology landscape. They can use companies like us to help them and get become aware of what's going on to see what tools are appropriate for them.
Not every vendor meets the the needs of every company. So if you're a giant global corporation with a very conservative management style, there are gonna be certain vendors that are gonna appeal to you. If you're a tiny little company growing really fast, there are certain vendors gonna be appropriate to you. So you have to do a little more homework.
The other thing is of course references. As you guys know, most of these smaller vendors are scrambling around trying to get as many customers as they possibly can as fast as possible. So, the best thing to do for a buyer is ask the vendor to give you some references that are in similar industries, similar size, similar culture to you are and when you find somebody like you that's bought a tool and it worked for them, chances are it's gonna work for you.
And I'm not saying the vendors lie, but the vendors will exaggerate all the time, so you have to do your homework.
But I think this is the this is the cost of innovation. If you don't do this, you're gonna end up with a bunch of HR technology that people don't use, don't like, and it'll cost the company a lot of money and won't be a lot of value.
What's the, like, scope of where we're seeing this? So, of course, this is happening in maybe San Francisco and other coastal cities. Are we seeing this in the rest of America? Are we seeing it in other countries?
We're seeing it everywhere. I I would say, it tends to have I mean, the innovative tools are usually purchased by companies that are a little bit more traditional and less traditional in their thinking, so they're willing to try new ideas.
There are I run into companies all the time that are just growing.
They're doing fine. They don't want to change anything. They don't want to upset the apple cart. They're just happy to use whatever they have.
That's the end of it. If you go to certain parts of the world like in China and certain emerging economies, that's all that they just want to hire people, pay them, get them on the job, and just give them the basics. But as soon as you find companies that are reinventing themselves, creating new bit digital products and services, moving into new market, moving into new geography, you know, they're going through sort of transformational changes of their own. They are finding that their talent practices are oftentimes holding them back, and they need new talent practices to better train and engage people, and they're a lot more likely to buy these more creative tools.
And there's also a lot of companies that have very sophisticated HR departments, and they're scratching their head thinking, you know, this software isn't doing what I want and I can't bend it to do what I wanna do and I don't wanna build it because the IT department is too busy, so I've gotta find it. And so we're actually in a part of the market that that is new to me where the HR departments are doing things ahead of the technology vendors. We now have HR departments experimenting with rating list reviews, continuous check-in, that all came from HR not from software companies. The software companies followed innovations done by leading HR departments.
So so I think forgot, you know, for you guys for for the vendor market, you're gonna find some very creative ideas in your clients and if you listen to them and think about how you can build software around them, you will you will help find the next market for your product.
One interesting thing related to this that we talk about a lot is to what degree companies are matching the processes of their vendors versus creating their own process and then finding a vendor to match that. What are the ways you've kind of seen that with say performance management, which is kind of close to our hearts?
Well, I mean, most big companies don't have time to visit fifty other companies and see how they're doing something. I mean, maybe they'll read our research and, you know, go to some conferences and stuff, but they're they're inventing it on their own. And they have some, you know, if they're if they're an innovative creative group, they'll do pilots and they'll do, you know, prototypes and they'll try things in their own company and they'll figure out what's gonna work best. Some companies do that, some companies don't. But generally speaking, they're living in the bubble of themselves.
A vendor comes in with fifty clients, a hundred clients and set and and the and the HR department says to the vendor, you know, what does your software do?
And the vendor says, well, you know, for a company like yours, we have found that these are some of the things that really can add a lot of value. Do you do these things? And the HR person might say, no, we don't. You know, that's an interesting idea. Why do you recommend that? And the vendor will say, because I've got twenty other clients doing that and let me put you in touch with them. So you have an opportunity as a vendor to do a lot of education and best practice development in the next client.
If you listen to the current clients and figure out what they did to make your software successful. So I think it's very hard to run a successful HR technology company without having a little bit of a professional services mentality and a professional services team that really understands what the client did to use the software well, so you can explain that to the next customer. I think the vendors that do that will outperform the ones that just sell tools.
It's almost as though a lot of these people practices might innovate at companies like Adobe or Deloitte. Right. The vendors can codify that and then actually help share that to the rest of the world potentially.
Absolutely. I mean, the one of the reasons I spend so much time with vendors and you know, like you guys is I learned so much from you that you're learning from all the customers you have that are doing new things in your software. And I think really successful software companies are by nature innovators all the time. So you're you build a feature, you get somebody to buy it, they ask for some other things, you scratch your head and say, wow, is that something other customers are gonna want or not?
Yes, it is. No, it isn't. That process that you're going through in product management is is helping the whole industry get smarter. And so, I think that the vendor market is a an enormous source of training and development and best practices for corporations.
That's why it's a little bit hard to pick the right product because you've got to pick a company that that, you know, you feel is giving you the kind of advice that's gonna be relevant to to you as a big company.
So And you've written you've written a lot about this particular innovation around killing the performance review and this happened, you know, a lot, you know, several years ago.
Mhmm. And you've talked about some particular companies that have done that. What do you think happened there? Why did it why did it get killed, and what what where where are we going from here?
Well, it's pretty clear to me what happened because I lived through it.
In two thousand six, when we did that study I told you about where eighty percent of people said they were doing competitive evaluation, I called many of the references of some of the big performance management software companies, and they were telling me things like, we're having a huge success. And I said, what what do you define as success? By the end of January, we had all our cascading goals in the system. I said, well, that's I don't know what that means by success.
It sounds like you've been successful using the software, but I don't know if it's helped your company, and then I called a lot of those companies back in August, September, October, and I said, well how's your performance management process working? And I heard things like, well you know all that stuff we did in January is now getting in the way because we reorganized or we came up with a new initiative or we had a big product quality problem, we need to change everybody's goals and they had these goals and these compensation plans locked in concrete, we couldn't undo them. So now we're trying and we started to realize that the software that looked so powerful, this idea of the top down hierarchical cascading goals, forced ranking, end of year review was getting in the way of business transformation.
And what's happened for the as you know, for the last eight years, digital disruption has hit everybody.
Every company of all sizes is saying, you know what? The way we're doing this isn't working. We need to do it differently. We need to reorganize. We need to do some experimentation.
And so the goals we set in January may not be the right ones. The teams may have changed, and they're finding they found that the performance management process was not helping them, it was hurting them. And so a couple of innovative companies, Adobe was one of the ones that made the most noise about it, but there were others said, you know what? We're losing engineers, we're losing people because this process is so demoralizing.
Let's just get rid of it. Trash it. Throw it throw it away and start over. And they experimented with no reviews, they experimented with check ins, they experimented with management development, which, you know, we always need.
They experimented with, you know, qualitative reviews instead of quantitative reviews. We looked we started to read research on the bias implicit in ratings. Fifty one percent of a variation in ratings is actually the result of the manager, not the employee. We, you know, got all that research out there. We looked at the fear and dislocation that people feel when they are evaluated by their manager and the fact that that reduces their engagement in front we all this stuff started to come out and companies started to experiment.
And what happened over this, you know, it's been seven or eight years, is we realized that doing away with ratings was not the was not even the problem.
The problem was what we now call continuous performance management. The problem was coming up with some process or set of practices. I don't even call it a process anymore. It's a set of practices that allow managers and employees and teams to continuously evolve and change and learn and grow and share their goals and get evaluated and get paid and do those things on a more real time basis. Just like everything else in the world has become real time, this has become real time. And so the best practices today, which are much more proven, are things like check ins, smaller numbers of goals, OKRs, if you if you believe in that practice, transparency, social recognition, things that were kind of interesting ideas have now started to take hold, and, I think there'll be a whole bunch of books written on this. In fact, there probably are already.
Lots of examples, lots of webinars, lots of, you know, example kit companies, and then you guys now have come along to try to build us the software because what happened is a lot of the early pioneers didn't have any software, they just built it. So Adobe built their own stuff, Deloitte built their own, we built their own stuff, couldn't find it in the market. And so now, vendors like you guys are coming along and saying, you know what, we can automate all that and we can make it even better by all this great UI and AI and all these other things we can add to it. So that's kind of what happened.
That's that's funny because it's so closely, ties to what we've seen where people believe that this cascading goal, you know, throughout the company process is going to drive success, and the, you know, we've we've enabled that in some cases and we've learned over time that that's not the thing that drives it. And so one of the one of the interesting things is learning what do companies think is gonna be successful performance management before they do it. What actually is? And then what's a role, you know, of a vendor to help the company get to the thing that they actually want, or not?
Well, I think there's I think we all need education on what the new world of management is, not performance management. And I and I always used to say this is that good performance management is good management, and HR kinda got in the way of that. And good management is about clarity of goals, reinforcement of values, agility where needed, and no agility where not needed, being clear, holding people accountable, connecting people together. I mean, if you just look at what good management looks like, that's what performance management should be based on.
And so much of it comes around, I think feedback, and I think the fact that historically feedback happened once a year or twice a year. I mean, that's so much of what we stand for is giving feedback in the moment and getting people to do that more. Right. And I think that's great.
Well, and and that's an interesting area of innovation too. I mean, the early ideas of feedback where you fill out a form and you zap it to the employee and the employee reads it and goes, geez, I didn't realize I was doing that or, you know, that you're just basically taking the same process and making it a little bit easier. Now we've got, you know, sort of feedback that's quick and simple and integrated into other tools and more developmental and new tips on how to give better feedback. In fact, a lot of companies don't use the word feedback. They use concepts like insight or advice or things to make it more positive.
There's actually I went to a company the other day, a vendor who did the actually did a study of the word feedback and feedback has a very negative connotation for people. So so I think we're getting much much smarter at figuring out how to do that in a nicer way.
Absolutely.
The last question, that I wanna ask you about is the future. So the next five to ten years, what are the things that you're expecting to change in the market?
Well, I'd say there's two or three really, really big things that I think are exciting and I'm the reason I'm into this, I'm writing this book, I've been thinking about this a lot. One is, figuring out how to optimize a company where the unit of measure is not the person, but the team.
We've really built almost all the HR practices around an individual, an individual's potential versus performance, an individual's goals, an individual's salary, an individual's career. And that's great, you know, for us as individuals, but the company succeeds through teams and projects and networks.
A bunch of individuals succeeding on their own doesn't make a company.
It it just won't work. So how do we measure and align goals and rewards and careers around teams? What is the right makeup of a team? How many people of what care caliber of skills are needed in a particular team?
How do we reward people as a result of the team success, not just their individual success? What's the relationship between the two? That's one gigantic change, and companies are trying to figure out right now how to reorganize themselves into more agile teams, and that's that's an enormous thing. The second is data and analytics and insights.
We just published a report about a month ago that said that close to seventy percent of companies, including small companies, are actively invested in building a people analytics database, an integrated database of all of their people, which goes beyond payroll and HR data, but includes engagement data, sentiment data, even location data.
And so three to five years from now, we're gonna have much, much more intelligent systems powered by AI that will tell us things about the workforce and will tell employees things that they can be doing better. So for example, you walk into a meeting, you find out that half the people in the meeting are not ready for the meeting because they're too busy on other projects. So you you get some data that says maybe the original agenda of the meeting isn't the right agenda, we should change the agenda based on what's been going on. I mean, that would be a wonderful insight to have. We don't have that today.
We have fraud and miss, misbehavior and things going on in the organization that are actually easy to spot when you look at the right data, but that data is not easy to find. People that are under skilled in an area and they wanna move into a higher level job, what skills should they get? What are the skills that the company needs that are in most demand? That data is not easy to find.
That that sounds like it should be, but it's actually not. I could go on and on and on, including data about location, productivity, health, communication styles. So all this data is kind of floating around there in different assessment forms, and and companies are now realizing that, you know, we have AI, we have data lakes, we have technology to bring all this data. We're gonna bring it together.
So I I think three to five years from now, we're gonna be looking at HR departments. And by the way, this this big HR database won't probably won't belong to HR. It'll be in operations. It won't be owned because HR doesn't really need it the way the rest of the company needs it.
So we'll have much much smarter people data. The third area I would say, I think is really, to me, very important, especially right now, is companies as good citizens.
Organizations today are not whole they don't wholly own their employees. A lot of employees are contingent. A lot of employees are gig workers. A lot of employees are, you know, working to their seventies and eighties, and they're working part time. We have young people running the workforce earlier than ever. So this idea of what the organization is is more of a social, integrated entity and has to be more cognizant of its sustainability, its citizenship, its responsibility, its transparency.
And so all of the bad behaviors that companies do that they used to be able to hide, they can't anymore. And so I think we're gonna be talking a lot about business organizations as a part of societal good, hopefully. Now, maybe this is hope wishful thinking on my part. I'm sure lot of people have thought about this before, they have. But I think that's a significant trend right now, and the reason I mentioned that is we have a study in Deloitte called the Deloitte Millennial study.
It's a massive study of people in, you know, sort of the age thirty five and younger. And it shows a very, very sharp increase in distrust of political institutions and social institutions and a huge amount of ex high expectations of workers that their companies will be good citizens, that their companies will fill the gaps, that their companies will take care of the environment, that their companies will take care of society, that their companies will be diverse and inclusive and fair and transparent. And so those expectations are being thrown upon CEOs, many of whom maybe didn't want to run a company that way, but now they're realizing that that's their job. So that so I think that's the third one that I I think is gonna be sort of a big change over the next three to five years.
Well, those would all be great. When can we when can we look forward to the book coming out?
Fall of next year if things go well. So probably September, October of two thousand eighteen.
Great. Well, Josh, this was this was fascinating. Thank you so much for doing this with us. Thank you.
