The digital transformation and employment: creative destruction and the HRD’s role

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Employment and Digital

Posted by: adpindia on 13 July 2016 in Human Capital Management, Payroll

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Digital and employment: creative destruction and the HRD’s role. The digital transformation creates a major challenge for employment. The HRD must conduct a strategic planning of the resources and launch initiatives for associate adaptation. These needed adjustments are unheard of due to their size and speed. Furthermore, answering the needs of employees at work will allow the maintaining of their engagement in this major employment transition.

 

Digital in 2015, the same buzz as in 1831

While contemplating the Jacquard looms during a recent visit to the Arts & Métiers (Arts & crafts) Museum, I thought about the canuts and the Parisian taxi drivers. The canuts destroyed the looms in 1831, fearing for their jobs. The taxi drivers burned Uber cars in 2015 for the same reasons. History repeats itself. Extension of the revolution brought by computers and networks, the 4th Industrial Revolution – the one of robots, will continue to accelerate the digital transformation of the economy.

The HRDs are left with two questions: how will employment evolve in my company? What politics and initiatives to implement?

 

The most pessimistic predict the digital will cause the end of work

Have our taxi drivers seen the reel Uber? Probably not, because the reel Uber is the one without a driver, where the consumer interacts solely with algorithms and autonomous cars. We’re not that far from it.

According to research, about 40% to 50% of jobs are automated. The Roland Berger cabinet estimates that 3 million jobs will be affected by the digitalisation in France by 2025 (1). In a study launched by The World Economic Forum, they report that current trends could lead to a net employment impact of more than 5 million job lost in 12 countries of their study (2). Now, even complex jobs can be removed, in the educational or medicine fields for example. The pessimistic approach see the destruction of employment going faster and stronger than the creation of it. Worse still, the economic theory stating that growth creates employment is undermined. Productivity can now grow faster than additional production. This “decoupling” is unheard of. This digital economy, without employment, is called by W. Brian Arthur the “autonomous” economy (3).

 

The optimistic claim the value creation connected to digital opens up a new development cycle

For others, the picture is much more positive! What happened with charcoal and electricity will happen again with the digital. A new development cycle opens up. We could then build on a more positive employment dynamic, particularly in the most developed economies. According to a study published by Booz & Company in 2013, the digital had already created 6 million jobs in the world in 2011 (4).

The productivity that the digital generates brings the growth and offer to a low cost. We go from economy of scarcity to economy of abundance (5), which is a great value creation for the consumer and society. This abundance is offered to each with a tremendous personalisation capacity. As mentioned previously, this economic value creation isn’t necessarily a generator of employment.

But the digital also allows the generating of growth with its capacity to develop new services and impact new markets, due to a distribution cost largely reduced. This growth, is virtuous for employment. For example, online sales allows to sell more by targeting new categories. SMB’s, and even artisans, can now access the worldwide market and create employment.

In short, if growth comes from digital production efficiencies, there won’t be job creations. If on the other hand, the digital innovation allows the expansion to a new market, then the impact on employment will be positive.

According to McKinsey Global Institute (6), the automated jobs maintained are estimated to be of only 10% of the initial total. But when integrating the new skills needed like expertise or relational and new business opportunities, the study published in 2011 estimated that internet created 2.6 times more jobs than those eliminated due to technology efficiency.

 

Understand and accompany employment restructuration

MIT authors summed up well the issue (7) by inviting companies to “compete with machines rather than against the machines”. Men with machines will create more value than the machine will in replacing men. This partnership needs to be understood and reconsidered in order to find the best balance between growth and employment. Moreover, if Germany is seizing the subject of Industry 4.0 to make the best use of the levers, France on the other hand isn’t forthcoming. According to the Roland Berger Cabinet (1), the low automation rate of the French industry (1.2 robots per 1000 employees versus 2.7 in Germany) hasn’t permitted them to maintain employment, quite the contrary.

We are in fact facing a big reorganisation, with a combination of destruction and creation of jobs. This leads to major adjustments which need anticipation, at a much faster pace than during the Industrial Revolution where the deployment basically happened between agricultural sectors towards industrial and services sectors over the course of two generations. Considering the present rigidity of the labour market and the speed of this restructuration, strong tensions are still to come in these transfer operations.

Needs will typically be found in jobs with a highly added value where strong creativity, capacity for judgment and decision making and the ability to offer advice will be requested. These jobs will be well paid. On the other side, needs will be found in contact and proximity employment. Those simple jobs that require “presence” can’t be delocalised because of their nature and their automation would not present a good return on investment, when possible. The increase of needs at both ends of the labour market is what David Autor (8) calls “polarisation”, which also reflects an increase of wage inequalities.

Beyond the knowledge of net job creations, available monthly in ADP France’s National Employee Report (9), it is crucial to understand the flow of destruction and creation per country, industry, job and to determine the implications for your company.

 

The HRD carries the heavy responsibility of adapting the human resources to the digital challenges

If the political sphere must work to create the necessary conditions for these massive adjustments of employment, many challenges still have to be faced inside the borders of the company. The World Economic Forum acknowledges a growing awareness, but considers the transition to action still too shy. According to their recent study (2), 53% only of HRDs are confident in the adequacy of their HR planning to prepare the organisation to transitions. Yet the digital transformation is indeed occurring in each sector, whether they’re from the industry or the service sector. Not taking it into account is takin the risk of a high social cost of an unsuited workforce. Taking it into account proactively is giving yourself a competitive edge and opening up to new markets.

For the HRD, the first challenge is to upstream work to manage the talent pool for the needs of tomorrow. This pool must mainly rely on the existing human capital in the company. The HRD must abandon the idea of a “ready to use” human capital available on the market and set up an “inclusive” strategic planning to allow as many people as possible to stay on board. This means an unprecedented effort of competence upgrading and a dynamic internal mobility setting up need to be made, which makes this strategic planning need even more crucial.

Automation and restructuration of employment phases also have an important impact on morale and employee engagement levels, as shown by a recent study published by BSR Cabinet (10). Maintaining engagement in those stages is also capital and must be an innovation field for the HRD. In its recent Evolution of Work (11) study, ADP Research Institute suggests numerous potential solutions to meet the expectations of employees classified into five categories: freedom, access to knowledge, stability, self-management and meaning. The study shows for example that more than 80% of employees feel positive emotions about being able to use technology to learn anything, anytime, anywhere. 78% also feel positive emotions about being able to define their own work schedule. So many domains where employees would feel ready to exceed the current playing field, to the greater benefit of their development and their commitment to the company. Finally, the HRD must allow the development of the social vision of the company with the help of executive management by better sharing productivity gains with employees, but also with the communities in which they evolve and depend of.   

Sources:

  1. Roland Berger, October 2014: Les classes moyennes face à la transformation digitale. Comment anticiper ? Comment accompagner ?
  2. World Economic Forum, January 2016 : Le futur des emplois – Emploi, Compétences et Planification des effectifs pour la 4è révolution industrielle
  3. La seconde économie, Brian Arthur, October 2011
  4. World Economic Forum and Booz & Company, 2013 : Digitalisation pour la croissance et la création d’emploi : perspectives régionales et sectorielles
  5. MIT, June 2013 : Comment la technologie va détruire des emplois
  6. McKinsey Global Institute – Internet compte : L’impact net sur la croissance, l’emploi et la prospérité
  7. MIT, January 2012 : La course contre la machine : comment la révolution numérique va accélérer l’innovation, piloter la productivité et transformer de manière irréversible l’économie et l’emploi
  8. La polarisation des opportunités d’emploi sur le marché américain – Implications sur l’emploi et les rémunérations – David Autor, MIT, April 2010(9)  ADP’s National Employee Report in France, published monthly on http://www.rapport-emploi-adp.fr/
  9. BSR – Business Social Responsibility, June 2015: Les bons emplois à l’ère de l’automatisation. Défis et opportunités pour le secteur privé(11)    ADP, 2016: The Evolution of Work. The changing nature of the global workplace
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