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Thank you for joining us for this Mercer podcast. It has been a while since we connected. But how the world has changed, especially in the last one year. Today my intent is to have your comments, views as a practitioner, as a leader of HR for decades now, around the areas of business transformation, digitization, reskilling, how all of this is getting impacted by what we've seen through 2020 and through the COVID pandemic. So thank you for having accepted our invitation. And thank you for having agreed to share your thoughts on it.
Arvind, thank you for having me on the podcast. And I really look forward to this discussion.
So to start with, I would quote a recent study conducted by Mercer where CEOs have put business transformation as the number one item in their agenda, whether it is through repurposing changes to the operating model, acceleration of the digitization journey, improving productivity and efficiency, and a host of other implications. Now this has often led to a significant change in the way we have seen traditionally defined roles, whether it's role construction, its implications on how the role operates, from where it operates, at what time, and various other implications. So can you share with us what you think about the work that is being done on automation and digitization in your industry in your organization, and anything that you've seen around?
I think there are clearly three trends that I see that are shaping transformation in the Indian context. And I'm looking at primarily manufacturing. I'm also going to talk a bit and skirt around the services business, both B2B and B2C businesses. The first I clearly see an acceleration of digital within organizations to serve multiple stakeholders. The second factor being that digital is clearly impacting growth as can be seen from companies that are digitally mature and those that are still catching up. And this is a reflection on their financial performance as well.
And the third and most important being that digital and technology acceleration in organizations are both enabling efficiencies and productivity, which continues to be the mantra in the organization. And yet they have an influence of driving agility and resilience within the organization. So I think that there is an element of short term and long term both that organizations are looking at from a digital and tech acceleration perspective.
In the manufacturing context, if I may add, there is a huge amount of work that is being done in the area of smart manufacturing, basically in the area of big data, and cloud, internet of things, cybersecurity, artificial intelligence. And I can go on. When I speak to colleagues in automation companies as well as consulting companies, the single biggest client focus appears to be on digital and new technology adoption across the value chain that is impacting multiple stakeholders, both internal and external. In a particular metals and mining company for example, from what they shared with me is that the organization has already started the process of repurposing jobs at the shop floor by reviewing job design and seeding the digital and analytical elements in production operations, QC, and maintenance roles.
When I was speaking to another CHRO colleague of mine who works for a metals company, he was mentioning that on time in full, which is OTIF as they call it, has become fully integrated with the supply chain. And this has been through predictive analytics rather than human intervention.
There's also a case of a large tile manufacturer who has aggressively embarked on the transformation journey and is now looking at the people element of transformation very seriously and hopefully will come to the people element shortly. But to add to the manufacturing part, let me also give you an example of a service organization.
In a retail outlet chain-- and I'm talking of India itself-- customer-facing employees are being trained on multiple roles across customer servicing and capturing and are being provided handheld devices, which could assist customers not only in guiding them on latest fashions and inventory available but also in closing the sale in the conversation and not having the customer queue up to the cash counter and struggle with social distancing. So these are some of the things that I'm seeing. And these are some of the examples that are being exhibited across organizations in the digital add transformations.
Thank you for that. I think some of the examples, and especially the one around the retail outlet changes, bring alive the implications of digital and the transformation that organizations can offer the customer when they embrace digital in a very customer friendly way. But this clearly got them in a shift from where, let's say, especially the manufacturing and some of the traditional industries have been over the last decade or more. And maybe there are implications for HR in how they help the organization embark on this journey successfully. So any thoughts on the role that HR can play and the implications this has for the HR function?
Yes. So I think you're absolutely right, Arvind. I think the impact on the human resource function is going to be huge. And I believe that we will really need to rewrite the playbook for the function. You know, I think there are two or three things that are happening. One is democratization of knowledge in the organization. The second is the maturity and proliferation of EHR technology platforms and the changing working models post pandemic, whether you look at the hybrid model, work at home, work from home, and so on and so forth.
I think the focus of HR now will become more integrated and customized to the organization rather than a one-size-fits-all approach. In fact, since the businesses have become so fluid and dynamic, the interrelationship between HR subfunctions has never been as important as now. Let me give you an example.
While earlier the focus was on talent management per se, I think in the current context, organizations are looking at a more integrated talent management framework of job design, workforce planning, and talent management rather than just looking at it from a siloed approach. So these are some of the implications that I clearly see for HR.
And Gautam, in the same study that I referred to earlier, the number one investment that CHROs said they were planning to look at in the near future is learning and development. And you also mentioned about talent management and implications of that. So while we are on that, any thoughts in terms of what are some of the new skills that you think may be important in the future?
Yeah. So Arvind, I think this is a very good question. And this is something that is keeping all of us awake at night. But I think there are a couple of steps that are coming into play as part of the learning and development agenda, which itself is undergoing a major change in its own way. I believe that companies are now looking at elements of job design and job analysis to understand more objectively how digital is changing the work landscape.
Now there's clearly the hard side of skills, which includes analytics, machine language, data sciences, business intelligence, and information security, blockchain, to name a few. On the people side of skills, there is clearly a need to focus on areas around social intelligence, empathy, critical thinking, and I think also this element of influencing across levels and hierarchies because I believe hierarchies and levels are collapsing.
It's interesting to note that given the outcome focus of most organizations, there will be a high focus on hard skills but I think progressive organizations or progressive companies will focus on both aspects of skills and not try to place the hard over the soft, or the hard skills over the people skills, especially in the senior and middle management levels.
For example, I believe one of the key leadership skills that will be needed is the ability of the senior leadership to invest in engaging and aligning the teams to the overall purpose of the organization. And this itself is a very complex change management issue. And that will have to be driven largely by the CEO and the C-suite employees.
One of the researchers that I've read is clearly indicating that how we communicate the purpose of automation and digitization is clearly creating a sense of ownership amongst employees or creating dissonance or alienation. Let me give you an example. Some companies now have utilized digital and automation opportunities to delayer and downsize their organizations. And many companies are doing this. But some companies have actually gone and publicly launched various programs looking to downsize anywhere between 25% to 50% of the workforce. This may be great to manage investor community or external stakeholders.
But from an internal stakeholder perspective, which is the employee, I'm not sure how well will there be acceptance of automation and digitization initiative as employees will think that acceptance of change could actually mean employees losing their jobs. In JSW, for example, we've been working to accelerate the job rotation program and the skills upgradation program simultaneously to provide employees, especially at middle and junior management level, an opportunity to move to other parts of the businesses or within the same businesses. And given the fact that we are growing at a rapid pace, we are in a sweet spot in that context.
It's interesting to hear what you said JSW is doing and also some of the implications that you spoke of, especially implications not just for people and roles but also implications for how leadership, and C-suite, and CEOs lead this change because this is not an incremental change but, like you mentioned earlier, a transformational change, a big leap forward. Based on your experience, how large do you think is the gap from where we are to the desired state? And any thoughts on how you are planning to bridge the gap and any inputs for what organizations should do when they plan to bridge this gap?
So I believe that in the new norm, companies are paying attention to workforce planning and are getting more granular on detailing on the demand and supply elements of workforce planning. Clearly, there is a divide here. Companies that have not been able to build a culture of learning and development and have not invested in building a leadership pipeline across all levels will have to buy or rent talent, which will come at its own costs and its own efficiencies. I think more and more companies will link up with technical and leadership institutes, not just in India but globally to build a talent pipeline that will be strategic and competitive as well.
Our research is actually showing that, in India, the gap between the design-- actually, the gap at the design stage is huge. And my belief is that emerging economies will face a bigger challenge in manufacturing sector around employee displacement, jobless growth, rising unemployment amongst workforce joining the labor market, and, I think most important, the widening gap between the formal and informal labor pools.
So at JSW, we are actually looking at a three-pronged strategy to address this issue. One is to revisit the entire workforce planning. The second is to make sure that we are hiring a quality talent at the junior management level with the appropriate skill set, some of the skill sets which we spoke about in the earlier discussion, and providing employees opportunity for multiskilling, and, most importantly, strengthening the job rotation opportunities because it's only through job rotation that people will learn and delearn or unlearn.
I think our focus now is on building the right talent pool rather than indiscriminate hiring at the junior level, which is what we envision the future to be in terms of making sure we have the right quality and we have the right profile of people in the talent pool, rather than just hiring a large number of engineers that was earlier being done. While it's easier said than being done, I think integrating the gig economy, working with lateral hires, and getting them productive at a faster pace than before will have its own issues and challenges. This will lead to, I believe, newer leadership skills that managers will have to look at, which is which I call cognitive diversity. But of course that is another chapter by itself.
Good. I think the importance of soft skills-- and you referred to them earlier and even when you talked of cognitive diversity. I think while at the one end technical aspects such as digital, and automation, and machine learning are accelerating, we are also seeing the increased need for balanced soft skills aspect. And I think you referred to that a couple of times earlier as well. And that's clearly an area for organizations to invest in.
As we move on, one factor that comes to my mind is the paradigm shift in the readiness of organizations and its employees. I mean how ready are organizations, especially in manufacturing, which may not be in the best way but does not necessarily capture the readiness of the manufacturing sector and the transformation it's already been through over the last decade or so but are still referred to as legacy organizations?
So their ability to embrace the new normal and what steps do you think are important to incentivize employees because, like you rightly pointed out, the implications for employees and the workforce is quite significant. So to your mind, what are the important incentives for employees towards accepting the changing nature of work and applying themselves towards reskilling, et cetera?
I mean there are mixed views across legacy manufacturing organizations. And as I speak to many of my CHRO colleagues, I think it all boils down to the leadership mindset of accepting the changing nature of work. But I believe that the role of the board of directors in facilitating companies' preparation for this shift becomes extremely important.
You know, there is a saying that everyone has the will to win but very few have the will to prepare and a plan to win. The role of the board, whether in promoting companies or otherwise, becomes critical. Their ability to influence change at the highest level, their appreciation of the leadership gaps, and the technology digital readiness and maturity of the organizations are most wanting. And this is possible because most boards have a very strong and an active NRC.
I think very clearly organizations will shift from tenure and performance-based to being more performance and skill-based. The more mature organizations will provide relevant platforms for learning and development and also encourage employees to dabble in unstructured learning as well. Earlier the entire focus was structured. But I think there's going to be this whole element of unstructured learning as well coming in.
I think the other area will be in driving agile teams around multiple projects for organizational transformation. I agree that incentivizing employees in both monetary or non-monetary ways will become the tipping point for driving behavior enforcement. The problem is that the structure of incentives across management levels makes short-term results today more attractive as compared to long term gains.
Now this is a dilemma because you take an example of performance-based awards and gates associated with them. Even in long term incentive plans, there are annual gates for achieving a threshold number beyond which the performance reward gets tends to get vested. So there is a gate on an annual basis. And it's the one plus one, which adds up to the entire period of the long term plan.
I believe that the short term mindset is trading depth from weight. And this is leading to our inability to think deeply about long term implications of complex or interrelated problems.
Let me share an example with you. Today issues like environment, social, and governance, or ESG, which is a long term issue on balancing people, planet, and profitability, is becoming extremely critical. And we are now seeing companies in Europe linking long term incentive plans for senior management to ESG goals. At least there's a weightage around the ESG goal. However we are yet to see that being widely accepted in the Indian context.
From an individual employee context, I think very clearly organizations will shift from tenure and performance-based incentives to adopting a performance, skill, and output-focused approach. And this will take massive time and effort. In my opinion, in legacy manufacturing organizations, over 60% of the workforce will need to be either reskilled, or upskilled, or redeployed, and not to mention the contract workforce, which forms the large component of any manufacturing organization in India.
There will be a tendency of many manufacturing organizations to downsize contract labor significantly but this will have an adverse effect on the communities at large where the plants operate. On the incentive piece, I just want to add one last point. And that is companies will have to focus on non-monetary and monetary aspects of incentives. And the lines between incentivizing highly skilled contract workforce and permanent frontline employees will blur.
This means that the incentivizing process in production operations you see across the entire value chain will have to get deeper with the system as never before. This will work very well for contract labor operating on manpower-based contracts but I see this becoming a challenge in job-based contracts. While one does not want to build a doom and gloom scenario, I think the need for workforce planning, skilling, incentivizing, change, and job rotations will be the prime driver for legacy manufacturing organizations going forward in dealing with digital and technology transformation.
Thank you so much for sharing your thoughts. I think through these last 15, 20 minutes of conversations, you've been able to bring together so many aspects. Oftentimes we are tempted to think that transformation is about just technology and how organizations embrace technology, but really, like you brought out, it has implications on jobs, on roles, on workforce planning. It has implications not just for employees but all the way to the CEO and the board. It requires organizations to balance between short term and long term, between financial goals and larger ESG goals, and then workforce planning between regular workforce, gig, temporary workers, and how organizations have a responsibility towards all of them and not just the regular full time employee.
So given all the implications, I suspect this is going to be the first of many conversations that we have with yourself and the retail leaders as we see this transformation unfolding. So thank you very much for taking the time, sharing your experience, expertise, and knowledge. It has been extremely useful.
Yeah. Thank you for having me, Arvind. Somebody once said that digital transformation is not a vaccine but it's more long term initiative that builds the resilience and future of the organization. But I think there's a big difference in what we are looking at. And this is just only the beginning. But thank you very much.
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