Wednesday, March 22, 2017

Should CHROs be in charge of innovation?

I argued in a recent article that the Chief People Officer needed to own the organization’s automation strategy. The idea was to contribute to the company’s growth capacity while compensating for the inevitable cost cutting that the first wave of IPA will bring about. However, he should not walk alone: to succeed in this endeavour, he should also leverage Talent and L&D strategies to favour innovation.

Automation and IA technologies will likely focus on efficiency gains

In this recent article, I argued that taking full advantage of artificial intelligence and automation technologies required clearly anticipating which occupations could be improved by the automation of some of their less critical activities, and also designing the new jobs that technology would make possible. I also argued that this needed the CHRO to engage the front-line in both these two projects.

However, activity automation is very likely to happen quicker than new job design, even though it is new job design that holds the highest value creation potential (new job design is more likely to impact growth, whereas job automation is more likely to impact efficiency). There are a number of reasons for this:

  • Efficiency gains seem to be just around the corner. Recent successes in the deployment of next-generation cost-cutting programs (Intelligent Process Automation) make sizeable gains in profitability relatively easy by the application of tested and consultant-led transformation programs. What we had with continuous improvement and lean we are going to have with IPA;
  • The transition will be easier to manage from a talent management standpoint as the gig economy provides a safety net that HR leaders can leverage to smoothly manage the potential downsizing or evolution of their organizations;
  • Financial markets want short term results, and they want foreseeable short-term results that are foreseeably beaten. Growth by acquisition and efficiency programs are easier to manage from this standpoint than innovation-based organic growth;
  • And, finally, generating new organic growth opportunities through new job and activity development requires talents that are less easy to find (and manage) than the ones that deliver efficiency gains. According to PwC, “leaders will need a far wider range of skills than before – from a deep understanding of technology to the ability to manage a multigenerational workforce. This places huge demands not only on existing management, but on the development teams tasked with creating the next generation of leaders” (Source: PwC 17th Annual Global CEO Survey).

That automation and IA will focus on efficiency should not come as a surprise: Clayton Christensen famously identified three types of innovation (empowering, sustaining and efficiency innovations), of which only the first two had a strong impact on growth even though organizations focus on the third:  "In our traditional economic cycles, all three kinds of innovations occurred within a natural and repeatable sequence. Our current economy, however, has gone off of the rails in large part because we are focused almost entirely on efficiency innovations—on streamlining and wringing bottom line savings and additional profits out of our existing organizations.

...We are focused on the wrong metrics. Our universities are training entrepreneurs—and investors — to focus on fast and efficient return on capital investment. Efficiency innovations provide return on investment in 12-18 months. Empowering innovations take 5-10 years to yield a return. We have ample capital — oceans of capital — that is being reinvested into efficiency innovation. As long as this continues to happen, we will continue to experience the tremendous chasm between capital investment and the creation of meaningful numbers of new jobs and especially of highly specialized jobs.” (Clayton Christensen, Business Insider, 2012).

If, as argued above, the objective for the Chief People Officer is to ensure that the new jobs (and often client-facing jobs for new client services) that automation technologies make possible are conveniently designed and developed, he therefore needs to be championing innovation-based growth.

Chief People Officers should leverage L&D to develop innovation capabilities

In another recent article, I noted that according to Deloitte, “only 36% of HR departments are involved in the AI-driven work redesign, and that HR only leads this effort in 5% of the cases. It is as if L&D was overwhelmed by external, digital, trends and unable to cope with the operational challenges that these trends present it with.”

To react to this situation, I think that HR departments could follow three strategies to develop innovation capabilities in their organizations.

In the first place, and as a quick win, adopt (or embark on) a number of time-tested initiatives to push the innovation culture across their organizations, like for instance:
  • Develop internal L&D programs on the potential of new technology and ensure their leaders and future leaders are technology savvy, which means understanding how these new technologies impact operations and the kind of decisions that they, as leaders, will be facing;
  • Connect with internal growth incubator initiatives and ensure that the talent aspect of these initiatives is well covered (how the participation to incubator initiatives ties with the talent system - mobility, assessment, L&D, …);

Secondly, push for disrupting initiatives that force the organization to look beyond efficiency:
  • Champion sizeable average salary increase of employees concerned by automation (backed by strong development programs), to ensure talent sits on top of technology but also to ensure efficiency gains translate into an improved Employee Experience; 
  • Push for symbolic, visible initiatives around automation programs (for instance, allocate 50% of all gains on IPA to institutional innovation), so that employees can understand the relation between short term efficiency and long term innovation;
  • Lead unleadership campaigns to uncover hidden talent around automation programs.

And finally, try to own or co-own AI-driven work redesign, by focusing one of the OD teams on this effort. It would also be useful to dedicate one or two Trusted Learning Advisor on these work redesign initiatives, so that they are able to include these new positions as development opportunities in their Learning ecosystems and push the innovation culture throughout the organization.

In the end, long-term growth will come through job-producing innovation. While the efficiency that short-term automation programs offer is a welcome (but feeble) boost to the economy, it is the increased productivity of a growing workforce that sustains long-term economic growth. As they always have, CHRO are today on the front line of growth strategies.

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