The New Organization: Different By Design
Global Human Capital Trends 2016The new organization: Different by design
Deloitte’s Human Capital professionals leverage research, analytics,and industry insights to help design and execute the HR, talent,leadership, organization, and change programs that enablebusiness performance through people performance. Visit the“Human Capital” area of www.deloitte.com to learn more.
The new organization: Different by designContentsIntroduction: The new organization 1Different by designOrganizational design 17 27The rise of teamsLeadership awakenedGenerations, teams, scienceShape culture 37Drive strategyEngagement 47Always onLearning 57Employees take chargeDesign thinking 67Crafting the employee experienceHR 77Growing momentum toward a new mandatePeople analytics 87Gaining speedDigital HR 97Revolution, not evolutionThe gig economy 105Distraction or disruption?
Introduction
The new organization: Different by designThe new organizationDifferent by designSweeping global forces are reshaping the workplace, the workforce,and work itself. To help organizations and their leaders understandthese changes, Deloitte presents the 2016 Global HumanCapital Trends report, based on more than 7,000 responsesto our survey in over 130 countries around the world.THE theme of this year’s report—“Thenew organization: Different by design”—reflects a major finding: After three years ofstruggling to drive employee engagementand retention, improve leadership, and builda meaningful culture, executives see a needto redesign the organization itself, with 92percent of survey participants rating this asa critical priority. The “new organization,” aswe call it, is built around highly empoweredteams, driven by a new modelof management, and led by abreed of younger, more globallydiverse leaders.To lead this shift towardthe new organization, CEOsand HR leaders are focused onunderstanding and creatinga shared culture, designing awork environment that engagespeople, and constructing a newmodel of leadership and careerdevelopment. In competitionfor skilled people, organizations are vying fortop talent in a highly transparent job marketand becoming laser-focused on their externalemployment brand. Executives are embracing digital technologies to reinvent the workplace, focusing on diversity and inclusion as abusiness strategy, and realizing that, without astrong learning culture, they will not succeed.Amidst these changes, the HRfunction is taking on a new role asthe steward and designer of these newpeople processes. The mission of the HR leaderis evolving from that of “chief talent executive” to “chief employee experience officer.” HRis being asked to simplify its processes, helpemployees manage the flood of informationat work, and build a culture of collaboration,empowerment, and innovation. This meansAfter three years of struggling to driveemployee engagement and retention,improve leadership, and build ameaningful culture, executives see a needto redesign the organization.that HR is redesigning almost everything itdoes—from recruiting to performance management to onboarding to rewards systems.To do this, our research suggests that HRmust upgrade its skills to include the areasof design thinking, people analytics, andbehavioral economics.1
Global Human Capital Trends 2016The forces of global changeWhat are the forces driving this demand toreorganize and redesign institutions aroundthe world? We see a series of drivers comingtogether to create disruptive change in thetalent landscape:First, demographic upheavals have made theworkforce both younger and older, as well asmore diverse. Millennials now make up morethan half the workforce, and they bring highexpectations for a rewarding, purposeful workexperience, constantlearning and development opportunities, anddynamic career progression. At the same time,Baby Boomers workinginto their 70s and 80s arebeing challenged to adaptto new roles as mentors, coaches, and oftensubordinates to juniorcolleagues. Also, theglobal nature of businesshas made the workforcemore diverse, demanding a focus on inclusionand shared beliefs to tie people together.Second, digital technology is now everywhere, disrupting business models and radically changing the workplace and the way workis done. Technologies such as mobile devices,3D printing, sensors, cognitive computing,and the Internet of Things are changing theway companies design, manufacture, anddeliver almost every product and service, whiledigital disruption and social networking havechanged the way organizations hire, manage,and support people. Innovative companies arefiguring out how to simplify and improve thework experience by applying the disciplinesof design thinking and behavioral economics,embracing a new approach that we call “digitalHR.”Third, the rate of change has accelerated.Fifty years of operating under Moore’s Law—the axiom that computing power doubles everytwo years—have not only propelled technology innovation forward but also significantlyincreased the pace of change in business asa whole, requiring organizations to be moreagile. Rapid business-model innovation fromcompanies such as Uber and Airbnb is forcing organizations to respond and repositionthemselves quickly to meet new challenges.In our highly connected, fast-changing world,“black swan” events (those of low probabilityand high impact) also seem to be more significant, reinforcing the needfor agility.Fourth, a new socialcontract is developingbetween companies andworkers, driving majorchanges in the employeremployee relationship.The days when a majorityof workers could expectto spend a career moving up the ladder at onecompany are over. Youngpeople anticipate workingfor many employers and demand an enrichingexperience at every stage. This leads to expectations for rapid career growth, a compellingand flexible workplace, and a sense of missionand purpose at work. Today, contingent, contract, and part-time workers make up almostone-third of the workforce,1 yet many companies lack the HR practices, culture, or leadership support to manage this new workforce.We see a series ofdrivers comingtogether to createdisruptive change inthe talent landscape.2Our global researchNow in its fourth year, Deloitte’s 2016Global Human Capital Trends report is oneof the largest longitudinal studies of talent,leadership, and HR challenges and readinessaround the world. The research described inthis report involved surveys and interviewswith more than 7,000 business and HR leadersfrom 130 countries. (See the appendix to thischapter for details on survey demographics.)
The new organization: Different by designFigure 1. The 2016 Global Human Capital Trends research identified 10 important trendsGraphic: Deloitte University Press DUPress.comThe survey asked business and HR respondentsto assess the importance of specific talent challenges facing their organization.The top 10 human capitaltrends for 2016In 2016, organizational design rocketed tothe top of the agenda among senior executivesand HR leaders worldwide, with 92 percentrating it a key priority. Perennial issues suchas leadership, learning, and HR skills continue to rank high in importance, as theyhave in each of the four years of this annualstudy. Yet this year, a key shift is under way,as corporate leaders turn a more focused eyetoward adapting their organization’s design tocompete successfully in today’s highly challenging business environment and competitivetalent market.Culture and engagement are also a majorconcern for the C-suite. This reflects, in part,the rise of social networking tools and appsthat leave companies more transparent thanever, whether they like it or not. Top executivesincreasingly recognize the need for a consciousstrategy to shape their corporate culture,rather than having it defined for them throughGlassdoor or Facebook.Figure 2 presents this year’s trends rankedin order of their importance as rated bysurvey respondents.3
Global Human Capital Trends 2016Figure 2. The 10 trends ranked in order of importanceOrganizational 15%85%Learning16%84%Design thinking21%79%Changing skills ofthe HR organization22%78%People analytics23%77%Digital HR26%74%Workforce management29%71%-30%Somewhat/not important-20%-10%0%10%20%30%40%50%Percentage of total responses60%70%80%90%Very important/importantGraphic: Deloitte University Press DUPress.comOrganizational design:The rise of teamsAs companies strive to become more agileand customer-focused, organizations are shifting their structures from traditional, functionalmodels toward interconnected, flexible teams.More than nine out of ten executives surveyed(92 percent) rate organizational design as a toppriority, and nearly half (45 percent) reporttheir companies are either in the middle of arestructuring (39 percent) or planning one (6percent).A new organizational model is on the rise: a“network of teams” in which companies buildand empower teams to work on specific business projects and challenges. These networksare aligned and coordinated with operationsand information centers similar to commandcenters in the military. Indeed, in some ways,businesses are becoming more like Hollywood4movie production teams and less like traditional corporations, with people comingtogether to tackle projects, then disbandingand moving on to new assignments once theproject is complete.This new structure has sweeping implications, forcing programs such as leadershipdevelopment, performance management,
The new organization: Different by designlearning, and career progression to adapt.Challenges still remain: Only 14 percent ofexecutives believe their companies are ready toeffectively redesign their organizations; just 21percent feel expert at building cross-functionalteams, and only 12 percent understand the waytheir people work together in networks.Leadership awakened:Generations, teams, scienceFully 89 percent of executives in this year’ssurvey rated the need to strengthen, reengineer, and improve organizational leadership asan important priority. The traditional pyramidshaped leadership development model issimply not producing leaders fast enough tokeep up with the demands of business and thepace of change.More than half of surveyed executives (56percent) report their companies are not readyto meet leadership needs. Only 7 percent statethat their companies have accelerated leadership programs for Millennials, although 44percent report making progress—a jump from33 percent last year. While investment in leadership development has grown by 10 percentsince 2015, progress has been uneven. In fact,more than one in five companies (21 percent)have no leadership programs at all.2Our findings suggest that organizationsneed to raise the bar in terms of rigor, evidence, and more structured and scientificapproaches to identifying, assessing, and developing leaders, and that this process needs tostart earlier in leaders’ careers. This is likely toalso involve teaching senior leaders to take onnew roles to make way for younger leaders.Shape culture: Drive strategyLast year, “culture and engagement”ranked as the most important issue overall.This year, we asked executives about cultureFigure 3. The relationship between culture and engagementTrusted leadershipHands-on managementRisk andgovernanceMeaningful workClear goalsMission and purposeCourageInnovationRecognitionCulture:The way thingswork around hereReward systemsInclusionThe work environmentEngagement:The way people feelabout the way thingswork around hereCompensationDevelopment and careerGraphic: Deloitte University Press DUPress.com5
Global Human Capital Trends 2016and engagement separately—and both placednear the top of the importance list, with 86percent citing culture as an important or veryimportant issue.Why the separate rankings? Both arecritical human capital issues today, and eachrequires a CEO-level commitment and strongsupport from HR if they are to be understood,measured, and improved. However, they aredifferent concepts and need a different focusand set of solutions. Culture describes “theway things work around here,” while engagement describes “how people feel about the waythings work around here.”That said, culture and engagement are alsolinked. When a company’s culture is alignedwith its values, it attracts those who feel comfortable in that culture, which in turn helpscompanies to motivate people, leading to a(85 percent) ranked engagement as a top priority (that is, important or very important).Building a compelling and meaningful workenvironment is a complex process.3 At thesame time, the world of employee engagementand feedback is exploding. Annual engagementsurveys are being replaced by “employee listening” tools such as pulse surveys, anonymoussocial tools, and regular feedback check-ins bymanagers. All these new approaches and toolshave given rise to the “employee listening”officer, an important new role for HR.In terms of readiness, companies are making progress. The percentage of executives whobelieve their organizations are “very ready” todeal with engagement issues increased from10 percent in 2015 to 12 percent in 2016, whilethose who feel they are “fully ready” rose from31 percent to 34 percent. These are hopeful signs, but even with this increase,only 46 percent of companies reportthat they are prepared to tackle theengagement challenge.Culture describes “the way thingswork around here,” while engagementdescribes “how people feel about theway things work around here.”high level of engagement (see figure 3).In this year’s survey, the percentage ofexecutives who believe their companies aredriving the “right culture” rose from 10 percentto 12 percent—a small sign of progress. Yetfewer than one in three executives (28 percent)report that they understand their organization’s culture.Engagement: Always onEmployee engagement is a headline issuethroughout business and HR. An overwhelming majority of executives in this year’s survey6Learning: Employeestake chargeThis year, 84 percent of executivesrated learning as important or veryimportant. This focus on learningseems appropriate, as learning opportunities are among the largest driversof employee engagement and strongworkplace culture—they are part of the entireemployee value proposition, not merely a wayto build skills.Compared to last year, companies appear tobe making strides in adopting new technologies and embracing new learning models. Thepercentage of companies that feel comfortableincorporating massive open online courses(MOOCs) into their learning platforms rose to43 percent from 30 percent last year, while thepercentage who said the same about advancedvideo tripled from 5 percent to 15 percent.These gains signal increasing recognitionamong executives and HR leaders that learning
The new organization: Different by designmust adapt to a world where employeesdemand continuous learning opportunitiesthrough innovative platforms tailored to theirindividual schedules. A new type of employeelearning is emerging that is more “consumerlike” and that brings together design thinking,content curation, and an integrated modeloffering an end-to-end designed learning experience. However, companies still face tremendous challenges in realizing this vision. Evenas spending on learning rose 10 percent lastyear (to over 140 billion),4 only 37 percent ofcompanies believe their programsare effective, and only 30percent believe corporatelearning is the center oflearning today.5Design thinking:Crafting theemployeeexperienceDesign thinking is emerging as amajor new trend inHR. Global HumanCapital Trendshighlighted the firstinklings of this issuetwo years ago when we identified the “overwhelmed employee” as a significant talent concern, with employees struggling to deal witha flood of emails and information, grapplingwith demanding work assignments and beingon 24/7. Last year’s Global Human CapitalTrends report identified HR’s attempts to “simplify” the work environment as a response tothe overwhelmed employee situation.Now, innovative HR organizations are taking their efforts a step further by incorporatingdesign thinking into their approach to managing, supporting, and training people. Instead ofbuilding “programs” and “processes,” leading HR organizations are studying people tohelp develop interventions, apps, and toolsthat help make employees less stressed andmore productive.In this year’s survey, 79 percent of executives rank design thinking as a high prioritywhen it comes to meeting talent challenges.While only 12 percent of respondents overallbelieve that design thinking is prevalent intheir current talent programs, 50 percent ofthose executives who rate their talent programsas excellent state that they apply design thinking well, and self-identified high-performingcompanies are three to four times more likelythan their competitors to be applying designthinking to their people practices. Clearly,design thinking is emerging as a best practicefor leading companies and innovativeHR organizations.HR: Growingmomentumtoward a newmandateMany HR organizations appear to be “getting it” when it comesto upgrading the skills,capabilities, and experience of their teams. Compared tolast year, the percentage of executives who rank HR skills as a top priority fellslightly. More than two-thirds of executivesin this year’s survey (68 percent) report theircompanies have solid development programsfor HR professionals, and 60 percent believethey are holding HR accountable for talent andbusiness results—both a higher proportionthan a year ago.Best of all, HR organizations’ scorecardshows a marked and steady improvement. Fourout of ten executives report their companiesare ready to address the skills gaps in HR—anincrease of 30 percent over 2015. And thepercentage of executives who rate their HRorganizations as “good or excellent” in delivering business-relevant talent solutions increasedas well.For the first time in the four years of theGlobal Human Capital Trends report, there are7
Global Human Capital Trends 2016real signs of change and progress: HR teamsare learning to experiment with new ideas;they are making significant steps to upgradeskills; and a new generation of younger, morebusiness-savvy and technology-empoweredpeople is entering the profession.People analytics: Gaining speedAs technology makes data-driven HRdecision making a possibility, 77 percent ofexecutives now rate people analytics as a keypriority, up slightly from last year. In response,companies are building people analytics teams,rapidly replacing legacy systems, and combining separate analytics groups within HR intoone strategic function. In 2016, 51 percent ofcompanies are now correlating business impactto HR programs, up from 38 percent in 2015.Forty-four percent are now using workforcedata to predict business performance, up from29 percent last year.One of the biggest new trends in peopleanalytics is also starting to accelerate: leveraging external data—such as data from socialnetworking platforms, employment branddata, data on hiring patterns, and externalturnover and demographic data—to predictworkforce trends and target top talent. Today,29 percent of companies believe they areperforming well in this area, and 8 percent ratethemselves excellent.A variety of new tools and data sourceshave entered this domain. Employee feedbackand engagement systems, real-time narrativeanalysis, and off-the-shelf predictive modelsfrom almost every talent managementvendor are now available.Companies are enteringa “golden age” of peopleanalytics—and progresscould accelerate.8Companies are enteringa “golden age” of peopleanalytics—and progresscould accelerate.Digital HR: Revolution,not evolutionThe all-digital world is changing how welive and work, creating two major challenges.First, how will HR help business leaders andemployees shift to a “digital mind-set”—a digital way of managing, orga
than half the workforce, and they bring high expectations for a rewarding, purposeful work experience, constant learning and develop-ment opportunities, and dynamic career progres-sion. At the same time, Baby Boomers working into their 70s and 80s are being challenged to adapt to new roles as men-tors, coaches, and often subordinates to junior
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