Humanizing the Enterprise
The corporate imperative for performance
Situation: Talent matters more than ever, yet the talent is burnt out and frustrated.
Economics 101 states that Total Economic Output is a function of Labor, Capital, and Productivity. We live in an era of abundant capital and widespread implementation of technology that has increased productivity significantly. In this environment, talent (i.e., human capital) matters more than ever. Yet years of productivity increases - enabled by specialization and enforced by management - and 18 months of disruption from the pandemic have taken their toll. In a time of transition, many people have asked the question ‘is my job worth it?’ and answered in the negative.
Talent is the only long-term competitive advantage. Operational efficiency and technology processes have become tables stakes.
As more operational processes have been simplified, standardized, and automated, the economy has driven efficiency and increased productivity. However, as technological enablement has become a commodity, the human factor is increasingly the differentiator between success and failure. In the end, the quality of human capital will be the only competitive advantage. Corporations know that their employees are key to their strategic success - see the chart below. Nation-states also know that the quality of their talent is key to their economic success.
Yet attracting, managing, and developing a workforce for the modern workplace is proving more challenging than ever before. Why?
The ‘great resignation’ is real and not evenly distributed.
A record 4.4 million Americans quit their jobs in Septemberand for every unemployed American in September, there were 1.4 openings. When examining such large data sets, it can be difficult to understand the nuances of the phenomena, but other studies give a glimpse at the underlying factors involved.
The technology and healthcare sectors have seen increased productivity but also higher burnout.
While resignations decreased slightly in industries such as manufacturing and finance, 3.6% more healthcare employees quit their jobs than in the previous year; in tech, resignations increased by 4.5%. The authors thought that the pressures of Covid-19 likely increased workloads and burnout.
Other studies have shown that employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021.
The work environment hasn’t modernized.
Productivity might have surged, but at what long-term cost?
Employees report greater feelings of loneliness, burnout, and isolation. Mental health has become a big topic at work, and employees have been left to feel that personal worth is equated with productivity - they just can never keep up.
Hybrid and distributed work is here to stay and requires a tailored approach
Organic moments among employees for mentorship, bonding, and sharing informal feedback with each other don’t exist anymore - at least not in the same fashion as before. Even companies with great culture and processes prior to the pandemic are now rebuilding their processes to fit the remote environment.
Millennials are now solidly the largest part of the workforce, but GenZ is quickly entering behind them. GenZ is a digitally-native generation with unique workplace demands including flexibility, in-person interaction, desire for a strong relationship with their manager, and modern use of technology. From the Workforce Institute report on GenZs:
One in four (26%) would work harder and stay longer at a company with flexible schedules.
Nearly half (43%) prefer receiving real-time manager feedback rather than during a scheduled performance review.
One-third (33%) of Gen Zers expect their employer to provide modern workplace technology.
An understanding gap between senior management and employees
A large McKinsey study found that as employees started resigning, many companies are jumping to well-intentioned quick fixes such as a pay bump or a bonus but didn’t do much to fundamentally show employees that they were appreciated. Employees can sense a transactional relationship that reminds them that their real needs aren’t being met.
For example, when employers were asked why their people had quit, they cited compensation, work–life balance, and poor physical and emotional health. These issues did matter to employees—just not as much as employers thought they did. By contrast, the top three factors employees cited as reasons for quitting were that they didn’t feel valued by their organizations (54 percent) or their managers (52 percent) or because they didn’t feel a sense of belonging at work (51 percent).
There are two solutions: Either workplaces have to improve or the nature of work has to change.
Let’s start with the workplace.
Improving the workplace for businesses and corporations
How does an employer raise the likelihood that its employees are in flow? Well, it requires incredibly thoughtful workplace design. Technology products can help, but they can’t do everything. Building software and technology to solve human capital challenges requires deliberate design choices. UX/UI must be placed at the center. There also needs to be a recognition that the software can’t do everything. Company leadership and human capital leaders need to invest time and attention in company culture and people processes. They need to be deliberate about the products they choose to implement and the outcomes they expect to achieve.
And outcomes are everything. The biggest benefit of using SaaS products to implement changes in the workplace is that leading indicators can be measured and managed based on data. But that will only work if the right indicators are selected and if the leadership implementing the software has strong judgment to act on the signals they receive.
The modern enterprise realizes the imperative for change and is increasing their spending on HR tooling; as you can see in the diagram below, HR SaaS is the third-highest two-year growth rate.
Here are some specific domain examples of startups that are building solutions to humanize the enterprise:
Learning & Skills
Mentorship is an area that organizations know is critical to employee success and development but often proves elusive to implement. Why? Because the programs are administered top-down, they last too long, and they don’t access the right talent. Startups like Tribute Mentorship aim to solve that by spreading access to information and knowledge and engaging team members beyond titles and achievements.
Performance management is a historically tricky area. 80% of Millennials prefer on-the-spot recognition and feedback over formal reviews. Companies need to incorporate real-time feedback into their processes to retain them. Pavestep makes feedback and performance goal management easy and simple. Lattice started with performance management and now includes employee experience and career counseling.
Training services that work. Degreed and Guild Education are both upskilling platforms that connect companies with training providers. CodingDojo provides bootcamp to teach in-demand digital skills. NewCampus and Kurios provide management and digital upskilling to employees in SE Asia and LatAm respectively. Seshie and Electives both provide live, on-demand courses for training the workforce. Praxis Labs provides training in VR for Diversity, Equity, and Inclusion.
Optimized productivity tech stack
Employee experience and bonding
Startups like Name Coach enable users to have better conversations and build stronger relationships with everyone they meet by correctly pronouncing their names.
Burnout and resilience management
Skylyte uses the science behind building resilience in its product to help teams to operate at their best. Mello helps teams reduce burnout and stay motivated by tracking data and ensuring engagement. Quimby is a light-touch way to monitor team morale.
Smart decision-making in groups
HR Tech can be difficult.
Traditionally, when HR tech was considered at all in the world of venture capital, it was relegated to second-class status. I’ve made the case on why now is the time for companies to invest in products and services that catalyze their human capital. But that doesn’t mean it’s easy. Here are a few reasons why:
People/HR leaders traditionally don't have the budget, power, or influence within the organization that leaders in product, engineering, or sales functions do. Sometimes that’s because the department is seen as a cost center instead of a strategic function; it’s also because a core part of the job has long been focused on administration and compliance.
HR leaders tend to have a poor understanding of technology and products. They focus on the human aspects and aren’t playing around with the last productivity tools to make their jobs more efficient. This means they are difficult to sell to as they aren’t innately inclined to see the opportunity.
Quality of implementation matters. HR tech products aren’t an automated middleware layer. They require people to use them correctly to get the most value from the products. This puts a premium on the product design to make it intuitive and addictive, but there’s still no getting away from the necessity for many of these products to be implemented and championed from the center and reinforced constantly.
Conclusion: The $12 Billion opportunity.
Businesses, large and small, will need to adopt technology with smart human-centered design to develop, manage, and strengthen their workforce at all levels. A recent BCG paper estimates that in the next 18-24 months this will be a $12Bn opportunity. Without strong, human-oriented cultures, the great resignation will continue and businesses will struggle to remain competitive.
If centralized corporations stumble, there is already an emerging paradigm to disrupt work altogether with alternative models of human cooperation: Decentralized Autonomous Organizations. But, that is a topic for another time. Corporations and businesses be warned: humanize or face disruption.
Labor Department’s Job Openings and Labor Turnover Survey