- 15 Dec 2021
- Managing the Future of Work
SHRM’s Johnny C. Taylor Jr. on updating the HR playbook
Joe Fuller: HR organizations have been under increasing pressure. The 20th- century playbook needed a rewrite to account for automation, globalization, gig work, rising inequality, and demographic changes. Covid-19 and a range of social tensions have only increased the stakes. More essential than ever, how will HR respond at this pivotal moment?
Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. My guest today is Johnny Taylor, Jr., president and CEO of the Society for Human Resource Management, also known as SHRM. In his new book, Reset: A Leader’s Guide to Work in an Age of Upheaval, and elsewhere, he advocates more-flexible data-driven hiring and talent management. We’ll talk about the state of HR, Covid-19’s impact on workers and workplaces, and cultivating a more-diverse workforce. We’ll also talk about what a modern, legal, and regulatory framework for the workplace might look like. Johnny, welcome to the Managing the Future of Work podcast.
Johnny Taylor: So good to be here. Thank you.
Fuller: Johnny, I think a lot of people among our audience will be familiar with SHRM as an acronym or something they’ve heard even on television, but could you tell us a little bit about what SHRM is, and what it does, and how you find yourself there?
Taylor: The best way to describe it, especially for business leaders, is to think we are to HR professionals what the American Bar Association is for lawyers and what the American Medical Association is for physicians. So we represent over 300,000 members in 165 countries.
Fuller: Johnny, HR is often a function in companies that gets a lot of criticism. People have to kind of set rules and enforce rules, insist on compliance, and things like that. Similarly, often I’ve heard a lot of HR professionals complain that they don’t always have a seat at the table in terms of strategy and the direction of enterprise. But the last 18 months has sure changed all that. I mean, HR has been front and center, whether it’s making the transition to remote work for people, scaling up, hiring for essential workers, and everything in between. As you think about how Covid has affected the impact and the relevance of HR, what comes to mind? And what do you think the lessons learned are for companies and for HR professionals?
Taylor: Well, Joe, as a former CEO, you know for years, your senior leaders, your CEOs, your board members would go to employees and go to the street and make statements that included, “People are our most important asset.” But in practice, you focused on your other assets: your equipment, your capital, your everything-but-people. What happened over the last, frankly, decade, but especially so, as you point out, over the last 18 to 20 months, is that that phrase—our people being our most important asset—took on a life of its own. And, therefore, so did its focus on HR. It’s about human capital, who can get the best people, who can keep them, who can keep them engaged and committed to the organization. And so that’s why senior leaders from boardrooms and senior executive C-suite–level types appreciate that, if we don’t get our talent strategy right, our people right, our culture right, we’re going to lose the game. This is now a business imperative. HR folks are no longer asking for a seat at the table. And there’s an expectation that you will practice really high-level HR, or business leaders will replace you.
Fuller: Across countries, across industries, across size of enterprise, what are we seeing in the way companies have responded to Covid in terms of things like the shift to remote work for so many white-collar employees? Is it going to be integral to our future? How is the redefinition of who’s an essential worker? How is that going to reset things? What are the themes that you think are most important that emerge, Johnny?
Taylor: Except for frontline workers, we all kind of, on a dime, decided we were going to have our employees work remotely. We learned that a lot of the roles that we assumed could not be done effectively could be done effectively remotely. At least early stage, we saw significant effectiveness—as well as efficiency and productivity—rates. Well, over time, that waned. Human beings began to deal with the downsides of remote work, which included all sorts of stress, isolation. We saw domestic violence, we saw alcohol abuse, we saw things that were negative that we would’ve been able to solve for—at least identify–when people were coming to the physical office space. We saw young people, in particular the Zs as well as the Millennials, say, “I graduated college, I came to New York City to build a life with and get to know friends, and to have a nightlife, and build relationships, my future spouse would be there,” and now you’re stuck in a 600-square-foot studio. So we as an HR profession, as well as with other business leaders, are trying to figure out what worked well. We know that the traditional nine to five, five days a week in the workplace has gone away, and that we won’t go back to that. So what we are all trying to do is figure out what does that mean? Is it four days in the office, one day remote? Is it three, two? Is it pick the days that you want on an individualized basis to come into the office? Or do we say we’re all going to be in the office two days a week, and everyone’s going to be in those two days? And what are the costs that we can pull out of the business? Real estate costs will go down, undoubtedly, if you need fewer square feet. But how do we ensure that people who are working remotely are as much a part of the culture, have the same career trajectory opportunities, as the people who are coming back to the office when you have a hybrid workforce? The other issue is you can work from anywhere, which means I can hire from anywhere also. So businesses and employees are really trying to understand how does work get done? What we’ve learned if we learned nothing else through the pandemic is that technology can be our friend, and it can enable us to be far more efficient and cost effective than we currently operate. It also means that I can find talent wherever I want to. So these are the sorts of issues. And what is the worker of the future? Is a full-time worker 40 hours—the whole notion of overtime after you work 40 hours—or is it now 50 hours? Because the work week has lengthened permanently. The final big issue that we’re all trying to sort is the legislative framework of work. If you think back, the Fair Labor Standards Act was enacted in 1938. It’s been a very, very, very long time since we’ve taken a hard look at this whole thing. And as a result, we’ve got to think about all of our current regulatory frameworks and the larger strategic framework to ask ourselves, do those rules apply how we define W-2 employee benefits? Do they need to be equal or equitable? How do you think about work in the traditional sense? Just what I call the “social contract” between employee and employer.
Fuller: Johnny, prior to the pandemic, the rules of the road were pretty clear between employers and employees as to how extensive the obligation and the reach, if you will, of the employer was into the life of the employee. You offered a salary or maybe salary and some incentive pay, or bonus, benefits packages. And those had to be competitive to get the talent you needed. But in Covid, all of a sudden, the lines got cloudy, because companies took the stance, completely appropriately and understandably, your health and well-being, our colleagues’ health and well-being, our associates’ health and well-being is an absolute non-negotiable top priority of our company. Now we’re living with this pandemic form of the virus. Where do you think that line’s going to get settled?
Taylor: Employees are looking to you in ways that they hadn’t in times past. Classic example of that is... and you recall this having sat in the CEO seat of a major enterprise. You could always say, “I’m not going to address this particular social issue. If it doesn’t have anything to do with my business, I don’t have an opinion about it.” And now your employees are saying, “Not so fast. Actually, you must have an opinion, and we want you to share that opinion. And to the extent we disagree with your personal opinion, we are going to question whether or not you’re the right person for the job.” So you can actually be delivering the numbers, you can be doing everything the board wants you to do, but because you’re not aligned with the employee population—and oh, by the way, oftentimes a minority, but a vocal minority of the employee population—there’s a question about your effectiveness as the CEO. We used to say to people, “Well, I’m not particularly interested in what’s happening in your personal life.” Well, now the expectation is, “Yes, you are, because my office that used to be within the four walls of your building is now within the four walls of my home.” It’s hard to imagine where this line will be drawn. When an employee says, “I have childcare problems,” well, think back, Joe. Twenty years ago, we would’ve said, “Those are your children. I pay you. You need to figure that out.” Well, now, not so. The expectation from your employees is that you’re going to help them figure it out. You’re going to help them pay for it, in addition to the salary, and the bonus, and the health and welfare benefits that need to be enhanced. More and more that line between your personal life and your work life, it’s past blurred. It just is non-existent.
Fuller: Well, it’s going to be a very interesting proposition to watch people sort through this. I’ve certainly seen a number of companies engage their workforces with a very open-ended set of: What’s on your mind? What would you like? Quite frankly, what’s come back is so expansive and so flexible that it has to be economically implausible. What advice is SHRM giving companies as to how to proceed without overcommitting or getting to a situation that they’re going to find that they wish they could undo?
Taylor: So what we tell all of the employers is, spend some time as a senior team, an executive team, being clear about what your culture is. Not what you aspire for it to be, not what your neighbor’s culture is, but what’s your culture? How do things get done? And what are the parameters? Once you articulate that, when you go out to survey your employees—and surveys are important tools to figure out the sentiments of your employees—even in your questions, you have to put parameters around it. So within this context, instead of saying, “Would you like to work remotely?” If you know that your culture is an organization you as a leader and your executive team have decided we value people ideating, innovating in person, then the question is, would you prefer working three or four days in the office? Or would you prefer Monday and Friday working remotely, Tuesday, Wednesday? There is huge value in being clear on the front end about what the parameters are and limitations are.
Fuller: When we think about this new and emerging world, what do you think the role of government is in this discussion about where these new boundaries are going to be drawn? Should they just be by-standing? We obviously have had a lot of back and forth in terms of discussions in Congress about paid family leave. Is that something that you think is going to become a competitive part of offerings to attract that key talent you’re referring to in your opening comments? Should the government be trying to set some new set of rules under which everyone operates?
Taylor: I believe the most important role that the government can play in this is to be a facilitator of various perspectives. So convening people—some from industry, some from social services, some from community. So let’s use, as an example, the whole idea around paid leave. The pandemic really made this clear to us, that when you have a Family and Medical Leave Act that’s unpaid, what you essentially do for a large portion of the population of the workforce is they don’t have leave at all. Because if I make 10 bucks an hour, I’m barely living on the edge, anyway. I have a choice of coming to work sick or staying at home unpaid, not being able to provide for my family. Then I come to work sick. And as a result, that’s how we pass disease around. So the government has a vested interest in the country not going back to a lockdown, a prolonged lockdown. Got it. So the government has to put all of us in the room, the various stakeholders, and community groups, and everyone in the room and say, “Okay, let’s deal with all of the competing interests. And then let’s figure out if we all agree that paid leave is something that we should provide to American workers.” The devil’s in the details. Who pays for it? Is it the government? Or do you have a combined contribution? What I will say to you, though, is the government may establish the ground, the floor, but private sector will naturally and ultimately deliver the ceiling, because it then becomes a competitive game. If the federal government says four weeks a year of paid medical leave, then company A is going to offer five so that they are more attractive. Company B will do six to compete. The market will take care of itself. Our members say that’s what they want. That last thing they want is the government say, “Here’s another government-mandated program.”
Fuller: Well, it certainly is a thorny territory, because so often very well-meaning pieces of legislation, unfortunately, don’t recognize all the systems effects. And as you said, if you start really changing what an economist will call the unit cost of labor…
Taylor: That’s right.
Fuller: ...too much, you cause accelerations of automation. In this environment, you might be spurring a new wave of globalization, despite what we’re seeing in terms of the fragility of attenuated supply chains and whatnot. Let’s turn to another very popular topic here in the holiday season of 2021, which is the off-discussed but I think not entirely understood Great Resignation. What do you make of that?
Taylor: Obviously, at the core of this was Covid. People began rethinking their relationship with work. The kind of carnage—the death, 750,000 people—very few of us have families or friends in our network who were untouched by Covid. People started to say, “Let me revisit all of this and how I think about work, how I think about life, my balance,” whatever “my balance” is. For a long time, 15 months or so, you had a lot of cash being poured into the market. You had people who had never made more than $400 a week now getting $1,000 a week. Remember, between the federal government and the state subsidy, and the state unemployment, you had a ton of money being poured into the market. So some people saved, they didn’t spend it all. Even after the government turned the spigot off, they could afford not to work. And then add to that, many of the people didn’t have to pay rent, because there was a rent moratorium. There was a foreclosure moratorium, federally. So you weren’t paying for housing costs. You weren’t paying for transportation costs. You weren’t even paying for entertainment costs because there’s nowhere to go. And you, meanwhile, have a ton of cash coming into your home. So you have a perfect storm. And I describe it as, people had time to think, and they have money to get back into this thing selectively. So we are seeing and have seen people quit jobs without a job. And that’s unheard of, in meaningful numbers. Not just kids. We’re talking about Baby Boomers just saying, “I’m out. I don’t want to do this right now.” We saw 401(k)s just burst, because you weren’t borrowing money from it because you had cash coming in. Within three or four months of it, it was the shortest-lived recession we’d ever seen. So there you have it. You put all of that together, people are literally leaving the workforce. What’s scary is, even when they’re coming back in, thanks, frankly, to the high inflation that we have, we are seeing real inflation has led to wage inflation. So employers are having to pay more, employees are demanding more. It’s just a really interesting situation for us as employers. The market’s going to be ugly for a while when it comes to talent. That’s why so many organizations, any organization that gets it right now, is focused on people and culture. You’ve got to get the right people. You’ve got to have them aligned with your culture, or you’re going to be fighting a battle for the next several years that is unlike anything you’ve ever seen.
Fuller: Well, Johnny, you touch on some of those themes in your book, which you’ve published recently, called Reset. But as we start engaging in this next normal we’re heading toward—particularly since Covid—the way I would put it, has dramatically accelerated some trends that were latent but detectable in the labor market before Covid. Like, the demographic challenge. Like putting a spotlight on diversity and inclusion issues. Like the many difficult trade-offs, particularly women in the workforce face as caregivers and as important parts of breadwinning in a household. Like the presence of what in our research I call “hidden workers,” but you talk about in your book—veterans and the disabled and others who are marginalized by the way we think about work. Tell us about why you call the book Reset and what you’d advise our listeners and executives to be thinking about as they try to reset to respond to all the turbulence they’re going to be facing.
Taylor: Actually, when I began last year, I was going to write a book called The Great Pause, because if you recall, we were assured by government that if we just shut our borders down and everyone sat still and sat at home for 21 or 30 days, we could then get back to normal. So I was chronicling our 30-day experience. Fast-forward, 12, 13, 14, 15 months later, we’re clear: It was a reset moment, not a pause. Think about this: If you had fired someone, terminated someone’s employment, virtually in the past, you would be deemed a horrible employer. They would be castigating you in the media. But now that’s what we do. We not only hire people, we onboard them. We fire them. We do all of this without a face-to-face interaction. That is a reset moment, right? It is nothing that we ever would’ve thought was good HR or good employment practices. The rules have changed. Talent acquisition—that’s really the big issue. We have a growing population, 330-plus million people. So that’s good. A lot of it may not be coming from birth rate. Some of it is immigration, whatever, and we’re living longer. What we’ve got to do, though, is do something about our labor participation rate. We’re hovering in the mid ’60s, high ’60s. Until the country solves for its workplace immigration issues, we’ve got to figure out how do we get more of these people who are sitting on the sidelines back into work. It’s a finite number of people, 165 million people or so who make up the American workforce. For every 1 million of them we can bring back off of the sidelines into the workforce, we can really solve for some of these ugly tensions that we’re experiencing right now. So I started talking about untapped pools of talent. And it dawned on me that when you think about, for example, the formally incarcerated— 750,000 or so people per year are going to be released from prisons in the United States. All of those people, unless we are prepared to see them go back, need jobs. It’s easy to think that it’s okay to continue resentencing them, which is effectively what it is when you put someone out, and you say, “Go out, don’t commit any more crime. But by the way, none of us are going to hire you to do a job.” So how is one supposed to eat and provide for themselves? So to me, there’s 750,000 people. We’re well toward that extra million people that we could bring in to do some of the jobs that we need done. These aren’t necessarily white-collar jobs, although some of them are as well, but it’s welders, and carpenters, and the manufacturing environments. We need these people. Truck drivers. You want to talk about a job where you’re sitting in a cab by yourself, there are just huge opportunities for us to solve for the nation’s labor woes by going into that untapped pool of talent. Historically, we’ve had the luxury of saying, “We don’t hire people. We’ve conducted a background check, and you haven’t had a perfect life.” Well, that’s just not smart anymore. Okay, second category, the differently abled. We don’t think about helping these poor people because I pity them, and we have our own paternal or maternal take on what they can do and what they can’t do. We’re saying, “Wait a minute, let’s look at they’re differently-abled. What can they do? And how can we use that to bring them off of the sidelines and into the work workforce?” Then finally, women. Just before the pandemic, February of 2020, women were the majority of the U.S. workforce for the first time ever. Then precipitously, we lost them because of the pandemic, because they had to come back and do caretaking, et cetera. We just lost a ton of women in the workplace. Well, here’s an opportunity to reset and bring women in. But it’s not just about putting up a sign to say, “I want more gender diversity in my workplace.” We have to change things like paid leave, because we’ve got to remove the barriers to women coming back into the workplace. That’s what the reset moment’s about, totally. Part of the thinking now is to have more flexibility in people coming to work. These are just examples of what we can do and what the book is about. And thus, it’s a leader’s guide to work in an age of upheaval, because the upheaval is continuing and will for the foreseeable future.
Fuller: Certainly, you’ve touched on a couple of themes there—the lack of any kind of coherent immigration policy as it relates to our economics and our skill base. The actual number of people we have in the United States with criminal convictions isn’t a known number, but it’s probably north of 30 million people. Prior to Covid, if you’re an African American woman with a felony conviction, your unemployment rate was almost 60 percent. So what do you do about that population? The differently abled? How do you eve the transition into the civilian workforce for veterans? And so our shared interest in how companies need to start thinking about the way they approach what we call these “hidden worker” populations—not because they’re hiding from work, but because the way companies approach the labor market—they’ve screened off these populations from consideration.
Taylor: Let me tell you, one other... If I may jump in there, the most obvious one is older workers. We blatantly and obviously discriminate in the workforce right now. We do things like put up postings that say, “We want someone with two to three years’ experience.” That’s de facto, right? I don’t want older people. Or we say, “Bright, young, educated.” Or we have all of our recruitment affairs on college campuses, where you’re going to index younger. So I was talking to a big company—let’s just call it Tech Company—CEO, who said, “We’re putting coding camps in all of the community centers so that we can get the kids to start coding earlier.” And I said, “Have you thought about going and coding? If you can teach a kid to code, then you can teach a 45-year-old or a 50-year-old. Give them their encore career. What about doing these things to bring older workers? You won’t have the retention problems that you have. You have a maturity factor there that will work to benefit you, et cetera.” So we have to just think very differently. We have got to go to these untapped pools of talent to help solve for our labor challenges of the future.
Fuller: Absolutely. We already can see in Korea, Japan, Russia, the consequences of simultaneously not having a sensible immigration policy and having these demographics starting to turn very quickly against workforce growth. A lot of people don’t realize that about half of GDP growth in most economies is purely a function of workforce growth. Johnny, another thing that people talk a lot about is how automation is going to play in all this, how much work’s going to get displaced. What’s the net impact? Are we heading for a world where AI and robotics are going to do everything, and people are going to have to find something else to do? How are you approaching that problem? How are you talking to SHRM members about the consequences of automation?
Taylor: What we have been trying to encourage employers to communicate to their employees is this is net-net positives, particularly if you take this on and accept that the jobs of today will likely not even be around five or 10 years from now. So whatever you do, you’re going to have to be a life-long learner, that things will change. So you’re seeing companies pay for tuition reimbursement at rates that they’ve never done before, and not just for a degree attainment, but for stackable credentials, so that different certifications, so that you’re constantly updating. We have got to do a much better job not making the boogeyman AI, machine learning, automation, because that’s been the narrative so far. And that’s a big opportunity for companies to face it straight on and tell employees, “Things are changing. But you can be on the other side of this with a better-paying job, a more-secure job, because of this new automation. By the way, you’ll do more interesting work as opposed to some of the rote repetitive work that can’t be interesting long term.”
Fuller: How should companies be viewing their obligation as it relates to re-skilling? Because we use phrases like, “You need to be a lifelong learner.” Well, I need to be in a learning environment, and I need someone to tell me what courses to take. Certainly, in some of our research, we see that employers often are not very clear about what are the credentials that would allow someone to qualify, let’s say, for a promotion or a raise? And how can they access them? What type of support [will] the employers bear to offer to create that worker of the future that they need? Since so many companies are conditioned that when they have a new need, they go into the spot market for talent.
Taylor: Well, the spot market is near dry, and employers have acknowledged that. And so it’s a much easier sell than it was when unemployment was 8, 9 percent, or hell, even 5 or 6 percent. We’re trying to say, “There’s no spot market for you to turn to.” While, yes, there’s a gig economy, the problem is those aren’t your employees. So all you have to do is, that gig person can call you up one day and say, “The gig assignment across the street is paying $20 an hour more, so I’m out.” And now you still have a problem. This is an investment strategy. Your labor planning folks, if you have any level of sophistication, can map where there are gaps. You can go to the outside, to the extent outside talent is available, or you can do some internal inventorying and say, “This person could be ready for this role if we work with them.” So you’re seeing an explosion of learning and development capacity within organizations, where companies are investing in not only, to your point, paying for tuition, reimbursement, and giving all that stuff. But they’re also saying, “I’m going to hire full-time professionals to help you with your pathway. It is good for you, Mr. or Ms. Employee, and it’s really good for us as the employer, because we already know you. So we’re seeing companies get far more proactive about this.
Fuller: One thing we’ve written about in our Managing the Future of Work project is this growth of contingent works, often called “gig work” by people. Now, I often shy away from saying “gig” because people hear “gig,” and they think Uber and DoorDash. They don’t think of a Catalent or an A team or a Toptal, where data scientists and machine learning experts—people with deep credentials with extensive resumes—are now moving from being employed in a traditional sense—a full-time job with a single employer—to where this world-class talent makes itself available on a contingent basis, allowing them to make the types of choices we were talking about earlier—about when they work, where they work on, what type of project they work, with what type of company. What do you anticipate is going to be the role of contingent work in augmenting skills? Is it going to continue to be something that people reach for as a last resort? Or do you view it as something that’s going to become much more integral to people’s playbooks?
Taylor: Far more integral. So we are now looking and realizing that all of these people don’t have to sit on our payroll and be traditional employees for us. We can supplement our workforce, complement, whatever term you want to use, and get the work done, which is really the point. I’ve been making this point. I wrote a piece on this in Chief Executive magazine, where I said, “Increasingly, back in the day, we referred to labor planning. Now, the really sophisticated HR functions are talking about work planning, because that work may be done by employees, or it may not. Now, I will tell you the downside to that. Twofold. One, the legislative framework, we have a problem there, because we treat them differently. The Fair Labor Standards Act never contemplated—that’s why with labor planning, it hasn’t contemplated this new world. That’s number one. The second biggest issue is—and I do worry about this—if you have not paid into a social security system, if you’ve not funded your 401(k), if you’ve not done some of these things, and then you wake up at 50, and you need to go into the workplace—the workplace in which you’ve never worked, traditionally speaking—you might have a real, real tough problem. So we’ve got to talk on both sides. We’ve got to talk to government to get the infrastructure right and the laws, legislative framework. We’ve got to talk to employers, but we also have to talk to these workers. I am worried that this belief that, “Work will come. I can go online, and someone will ping me and give me work, and I’ll get the money directly. You won’t take taxes out of my paycheck. You don’t have to do this, don’t do that,” they’ve not lived through that.
Fuller: Well, it is true that, really across the developed world, the entire logic of work—whether it’s embedded in benefits or tax policy, even how the government funds itself with payroll deductions—is predicated on people showing up, getting paid twice a month, and you can find them easily. If they’re in Northern Michigan or somewhere in some lovely spot like Tuscany coding away, not having their social security tax deducted, not having standard sets of benefits, you can have all sorts of the types of systems effects that governments have awfully hard time anticipating. Johnny Taylor, president and CEO of the Society of Human Resource Management, also known as SHRM. It’s been such a pleasure to talk to you.
Taylor: It’s been a pleasure to talk with you. Thank you.
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