The Future of the Office: The Hard Choices We All Face
In a shifting talent market, having an agile, people-focused culture can be key for attracting and retaining workers. As Peter Cappelli, Wharton Management Professor and author explained in our recent podcast discussion, many organizations failed to thoughtfully plan employee experiences amidst the sudden remote work pivot - and are dealing with the fallout now.
One of his priority areas is helping leaders understand what elements of in-person interaction are truly non-negotiable before mandating blanket return-to-office policies. As Peter advised, "Rethink what collaborative experiences teams need that video meetings can’t replicate."
He also spotlights the need to "Stop letting accounting rules drive bad talent decisions" when it comes to strategic investments in employees. Instead of cutting costs to optimize shareholder reports, calculate the substantial costs of turnover - and use that business case to advocate for building capabilities.
"Quantify the real costs of turnover. When leaders realized the magnitude...they'd think differently about 'savings' from relentless cost cutting."
Peter further presses leaders to unlock stalled potential for people analytics now. As he says, "Solve data integration roadblocks first, before complaints of lacking insight."
Reconfiguring workplace experiences to give people flexibility while connecting talent to organizational purpose is no small challenge. But getting this balance right can strengthen culture and competitiveness.
Episode Highlights
How managers need to rethink the role of offices in facilitating irreplaceable collaborative interactions
How HR leaders must quantify turnover costs to voice the business case for talent investments
How people data integration unlocks stalled potential for workforce insights
Recommended Resources
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Grab a copy of his book
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🎙️ Automatically generated Podcast Transcript
Peter 0:00
We just stumbled into this new normal. Now it's extremely hard to get people to come back because we waited so long telling people nothing about what the plans were. And we made lots of decisions along the way, which make it impossible to back up, you have a manager position that's open, you say, well, we have great talent in India. And they're also cheaper. Let's hire that person. So they did that. And now they say, we really want to get everybody back in the office. Yeah, but our managers in India so what are we going to do now? Well, you can't
Chris Rainey 0:37
pay. So welcome to the show. How are you?
Peter 0:38
I'm good. Thank you.
Chris Rainey 0:40
Nice to see you. Again. Congratulations on being coming a grandparent, how's it feel?
Peter 0:44
It's well, sleepy right now. Because it happened last night. And I wasn't even there. My wife was there the whole time. But I was tasked with watching the dogs, which I, I was told was super important to being good supervisors, my wife told me that my work was really important at home watching the dogs.
Chris Rainey 1:02
Yeah. Before we talked me tell us a little bit more about you yourself personally, and your journey to where we are now. And the What are you doing, went
Peter 1:10
to graduate school at Oxford went there with no particular direction, I was interested at the time and studying inflation, believe it or not, and incomes policies, which almost nobody remembers now. But these were government efforts to try to pull inflation down, almost by fiat, you know, resisting wage and price increases and things like that. And then I came back to the US just at the point when the traditional arrangements were falling apart, you know, we always think that the moment we are in is the one with the greatest change. But it's absolutely not true. It's been a period in the workplace, anyway, really, remarkably, more stability than you would think. But in the early 1980s, at least in the US, starting there, and then going around the world, you know, we were read deregulating entire industries and same thing happened in the UK, right? Roughly the same time and the unions were being pushed by employers suddenly very hard, they no longer sort of accepted the idea that unions should exist. And so we saw union power collapsing, and the baby boom was continuing to rush in at the same time companies were restructuring. So you know, I was looking at this the other day, and we had only one short period of about a year or so when the unemployment rate was below 4%. From the 1970s 1973 until 2018. So it was a buyers market for almost that two generations. And so it was a lousy time to be in human resources. Because if you were an executive, you said, What's the problem, you know, you can hire whoever you want, people don't quit. If you say jump, they say how high and so the current period is, you know, quite quite different. So I was kind of lived through the bad period. If you're an employer, it was great. But if you're in human resources, it was also lousy, because there wasn't any pressure from leadership to pay any attention to you, right? Because you could kind of solve all these problems by brute force, you know, unemployment was keeping people sort of in line, as Karl Marx once observed a very long time ago. And so it's quite a different period. Now. We had a brief little taste of this in 1999, through 2000, in the.com, era here, but now it really is quite different. It's much more interesting. All right. And some of it is that there are things on the data science side, which are offering different opportunities, but mainly it's a tighter labour market, which is making employers suddenly pay attention to this stuff. And if you're in human resources, you know, all the indications are this is the top concern for the CEOs, right, which is never in my lifetime been anywhere near the top. So it's an interesting thing, period to ride this up and down, right,
Chris Rainey 4:08
yeah, it's interesting, because then that's kind of shaping what's required from HR, right, those different periods, like you just said, the early days is a lot easier. There wasn't much attention paid to HR data, sort of keeping everyone in line and kind of keeping everything moving. Now, what's required of the business and HR leader is very different, and they're having to shift and move quickly.
Peter 4:30
I'm in the middle of writing certainly about this right now. But one way to think about this is that human resources was struggling for a long time figuring out what it was supposed to be particularly to be strategic, you know, whatever that meant, but you know, now the nuts and bolts stuff are strategic. You know, just being able to fill jobs is really strategic. If you look at what has happened to many industries when they have not been able to fill jobs right, and they have to cut back business in a big way. And how disruptive it is when you're caught constantly trying to fill vacancies and new people are coming in and you've got hybrid work or remote work, and you're trying to get that to function. You know, I mean, these sorts of things we used to think of just take for granted, are now incredibly priorities. Right? So that's a big difference. Is
Chris Rainey 5:18
that was one of the reasons why you wrote your, your latest book is?
Peter 5:25
Oh, that one? Yeah, that was because I was getting asked by everybody, you know, what are we going to do here? And I discovered that there was actually a fair amount written and researched about remote work from a decade or two earlier. So you know, remote work started in a contemporary sense in Los Angeles in the 1970s, with smog, believe it or not, when they had to cut back on commuting time, because car pollution, this is when lead was stealing. Wow, was was so bad that people were not allowed to drive as much. And so they call it telecommuting. In fact, the US government still calls it telecommuting, because all you had were telephones, right. And people were trying to work from home with with telephone. So we actually knew a fair bit about how it worked. And if you were an employee, the punch line of many studies, maybe 10, or 12, is it was bad. You know, everything was worse for you. But one of things that was different about that is that those folks were at home when other people were in the office, right? So it didn't tell us everything about what it was like if everybody was going to be home. But now we're back to something that looks more like that 1970s period, right? When some people are in the office, other people are away, or you're in sort of and out sort of you know, so these things, you know, are now big, big challenges for organisations, right.
Chris Rainey 6:48
For more work perspective, obviously, especially since you've written a book, things have evolved, companies have had time to settle in figure out what model works best for them. What are some of the trends that you're seeing what you're hearing from organisations, the problem is
Peter 7:02
they didn't figure it out. And I understand why it was so difficult, because we kept thinking we were going to be back and then new waves of Coronavirus would come in, and we'd have to go back home again. And so they just did nothing. But I think it's an enormous failure actually, around human resource issues. Because what happened is, we just stumbled into this new normal of remote work. Now, it's extremely hard to get people to come back because we waited so long, telling people nothing about what the plans were. And we made lots of decisions along the way, which make it impossible to back up. You know, for example, a lot of companies started filling positions with people who were located elsewhere. So you know, you have a manager position that's open, you say, well, we have great talent in India. And they're also cheaper, let's hire that person. So they did that. And now they say, we really want to get everybody back in the office. Yeah, but our managers in India. So what are we going to do now? Well, you can't, you know, you can't bring them back together physically. So they weren't thinking about that. Or rather, they were thinking about what was cheaper to do. The thing that I find just the astonishing is the number of companies that move to Open Office plans in recent years, despite the pandemic, when you think about what would shut down an organisation faster now, if there's a pandemic, than having an open office plan. So you're worried about getting sick and being contagious. And you have to sit right next to a bunch of other people, you don't even have cubicles anymore. I mean, who thought that was a good idea, you know, we made these decisions without any longer even thinking about the path, it pushes you down. And the difficulty in backing up now from this, right?
Chris Rainey 8:52
So you kind of it's harder, right? Because you kind of need both really, because, you know, it's, here's the reason people aren't coming to the office to sit in a cube, right? They're coming to collaborate. And in order to collaborate, they have to have an open, the
Peter 9:03
evidence on that is overwhelming that actually open office plans reduce collaboration. And the reason is because you've been in, we've all been in them, you don't want to be talking to somebody when their neighbours are two feet away from them, because you're going to disturb them. So when you walk into those offices, what you see is everybody has headphones on we know a fair bit about that. And open offices actually reduced collaboration because of it. And you have to create these spaces for people to go to to talk to each other, you know, and so the spontaneity actually kind of disappears in open offices because you're afraid and understandably, to talk to each other because everybody else is just a foot or two away from you and you're going to SR about what you see instead. What's
Chris Rainey 9:46
the answer that because like, I was literally at a couple of offices this week, and they typically have the open floor and then they have you know, five or six meeting rooms that you can book out to have, you know, more private conversations that work do you think
Peter 9:58
well if what you want is Fontaine He has conversations. It doesn't work employees hate them. You know, they hate Open Office plans, and they have reduced collaboration. The only thing they're good about is they're cheaper. And that's why we did them. Right. It wasn't that anybody thought, Oh, gee, this is a smart thing to build collaboration. People might have said that, but they say lots lots of things that are not really true. It sounds good. In order to accept things which are unpalatable, you know, like our unlimited vacation policies in the US, maybe we'll talk about those a bit, too, you
Chris Rainey 10:33
know, yeah. One of the biggest challenges, obviously, is deciding what type of model to adopt, and what's going to work best for you. Yeah, good news organisations. Yeah. What advice do you give companies about that? Right.
Peter 10:43
So I think the problem is that we have built our lives around remote after many years of being remote. And lots of people have actually changed where they live because of this, right, which I thought was incredibly risky for people to do, you know, you move to Montana, or you move to Portugal, to work remotely. And then your employer says, Oh, by the way, you have to be in three days a week. I mean, nobody thought about that, I guess it is a problem, because we have adjusted our lives around being remote. But it's also clear, I think that there are things about physical interaction, that being on zoom just doesn't cut it. And you can see this particularly with new hires, right, who seems to be lost in organisations, because there's nobody to talk to, right. And if you want to talk to somebody, you have to schedule a meeting, you know, the same thing is these Open Office plans. So you have a room you could go to, but you have to kind of schedule that to go talk to somebody. So the idea of popping around the corner and just asking somebody a question, getting a 10 second answer disappears, you got to schedule that, or try to ping them and then need a time. So you can do it. Right. So I think we know we have to have some back in the office experience face to face experience. And the question is how to do that. So far, it's been failing kind of dramatically. And the reason is, because, you know, we tell people, they have to be in three days a week, but they get to pick three days, they go in on days, and when they're there, almost nobody else is there. And then they say, Why should I go in at all? And you know, they're right, if you're not going to run into other people, you know, my boss, as we said, is now in India. And so I want to talk to my boss, but going to the office just defeats the purpose. Right? So we've created a lot of problems on this, but I think the answer is, we do have to have some in office time, we have to have people there together. And part of the problem is also if companies engaged in Hotelling, during the pandemic, or hot desking, your version of this, right? So we shrink the entire office space down. So now you can't get many people back in the office at the same time. So can we think creatively about how to get people together in the office at the same time when we need to see each other? And when we might be able to meet people from other teams. So the big problem seems to be collaboration, not so much within the five people that I see every day. A lot of that, yeah, it's outside of that, right? And so can we think creatively about that we can, but this is all going to require more management. So the I think the big takeaway on this is that offices substituted for a lot of management, a lot of things got done informally. And if you get rid of offices, then you have to use management to make this happen. And that's going to require getting people together in a way, which is systematic, that's also going to require taking a little autonomy away from individuals, where you just get to pick the day you're going to be in the office, it's just not going to work. Yeah,
Chris Rainey 13:49
and you're never going to please everyone when it comes to that, like my entire team meets every Monday in person, we all come together. When we first chose that day, there was not everyone that was happy. Oh, sure. Oh, but that's the day I do this. So you Oh, absolutely. There's always someone who, and it will continue to be the case. And I think that most companies are kind of just letting it letting the leaders locally managed their own way of working. I
Peter 14:19
think too, right. And that raises some bigger long term problems. And that is there's such inconsistency as to what you can do, from one office to the other. And sometimes people have to work together. Because across teams, right? My manager allows this, but this other manager doesn't allow that. Yes, sir. Yeah. And then how do you get the whole organisation to work? I think we have pushed too much responsibility on to line managers, immediate supervisors. And at least what I've seen in organisations is they're inclined to say, well, if corporate or the headquarters or my boss is not going to tell us what to do, then I'll let my own employees choose as well. You have this problem of this lack of synergies and things, right. And I think the other big change we've seen as a result of that talking to employees is, when you ask them what their responsibilities are, it is narrowed down to just the things that I am measured on. So the idea of helping other people falls to the cracks, the idea of helping new employees figure out what to do that becomes secondary, right? People are thinking of themselves much more as individual contributors now than they did before. You're
Chris Rainey 15:28
so right. Because if you look at now, the productivity scheduling, etc, software, it's like, here's, here's Chris's tasks, absolutely. I am measured only on these tasks. So why am I gonna go and help a new hire or collaborative a team or, and also you can't see them in, in the office, those things would happen naturally, right? In terms of mentoring, I'm going to chat with another department, right? All of that stuff, which which creates innovation, to be honest, as well. All of those opportunities for innovation and problem solving your right now is all narrowed down to I log into a system, hearing my talk, so I've got a complete today and check them that they're done. So my leaders know I did work today. And that's it. Yeah.
Peter 16:08
Yeah. And the other part of it, of course, is that it's not just that, it focuses your attention on those things, you get punished for doing other things, because you have to get so many of my own tasks done. And doing more makes you look better. But if I stopped to help other people, I'm effectively being punished for that, because it takes the time away from things that I am being measured against, right? So. And then you start thinking about, okay, when are we going to get our next generation of leaders? Are we going to get pick just the people who are the best individual contributors? If you do that, we know that those people tend to be lousy leaders, right? Because, you know, if you're a leader, you're supposed to be trying to help other people succeed, not just yourself, it's got all these knock on effects, which if you think about him for a minute or two, you can see why they're going to be such issues. But if you don't think about them, and you don't want to spend some time planning, then you're going to get all these problems, right? Yeah.
Chris Rainey 17:07
What when when's the right time to make build meaningful relationships?
Peter 17:13
Because and why should you if all you got to do is be an independent contractor? Right. So
Chris Rainey 17:17
yeah, it's so interesting. I told me I didn't want to touch upon is when we first spoke, you were speaking about a new a recent article, I read it as well as how financial accounting screws up HR, right. You know, one of those people I've heard speak about this. So I don't want you want it to you to share your thoughts and insights of olders. I think it's super interesting. Yeah.
Peter 17:34
And just a backup to an earlier question which you asked, which I didn't answer is, how did I come to write this book, I started out writing a book, basically, just to explain how we actually manage people as opposed to the textbooks, because all the textbooks basically, frankly, they mainly look like they're from the 1950s. They're describing these systems built by personnel, psychologists, and around big corporations and big corporate models. And you know, we for the most part, we don't do those things anymore. If you think about hiring, for example, you know, hiring is a pretty informal thing. It's a mass exercise, applicant tracking systems drive a lot of it, you know, the idea of doing CES, sophisticated interviews, and tests and stuff has largely gone away. So I started out trying to describe that. And when I went through practice, by practice, by practice, what you would see in managing people is that you could see the old bones, the bones of the old system, but they were completely stripped down. And so what was the common theme? Well, the common theme was that they were cheap, which didn't mean that they were efficient. And so I started to think about, well, why does this keep happening? And then you could start to see that there was a focus on some costs, but not on others, right? So we don't want to spend any money on hiring cost per hire. But that leads to huge turnover problems. And those are clearly costly, and people who don't fit and that's enormously expensive. I mean, there's nothing more costly than hiring the wrong person. So why aren't we spending more time trying to hire the right person? Well, because not all costs are treated the same way. Right. And I think part of the problem for leaders as well, most of us now in this generation, took if you went to college, you had classes in economics and economics is telling you a story, which is literally not true. And the story is about business and firms, and that is firms are trying to be as efficient as possible, because that's how to be profitable and how to be profitable is what they're trying to do. And if you aren't profitable, somebody will drive you out of business. Right? Well, the thing is that efficiency is not what contemporary firms are about. They are about shareholder value. And shareholder value is about future profitability. But profitability is defined by financial accounting. And it's not simply let's look at all your costs. Spend all your revenue and subtract, and that's profitability, because costs matter differently depending where they are. If you spend $1 on software, for example, it turns out it's much more valuable than $1 spent on employees once we're in
Chris Rainey 20:16
there for a second, that's quite a big statement.
Peter 20:20
Absolutely true, right? So here's what here's why, if you invest in something, assets are valuable, right? Assets, offset liabilities and financial accounting, and that makes your company instantly more valuable employees cannot be assets. And the reason is, the standards in financial accounting, say that you have to own something for it to be an asset, and you can't invest in employees, because you can only invest in assets. So if you don't own something, you can't invest in it. So if you think about spending dollars in a company, if I spend $1, on software, that's an asset. If I spend $1 on employees, that is a cost. And if I update my software, that's an investment. If I send my employees to training, that is a cost. And it's a different kind of cost. It's a current operating expense. It's there along with coffee and financial accounting, you know how much we spend on coffee in our office, there's no place an investor can see how much you're spending on training, it just looks like you're wasting a lot of money on administrative expenses to an investor, you know, then you start to think about the other ways that plays itself out. So the story in the US now this, you know, idea about unlimited vacation time that you may have heard about sounds like a great thing for employees, right? It's a terrible thing for employees, because right now, your vacation time is something the company owes you. So in financial accounting, it is a liability that sits on your financial books. So when companies move to unlimited vacations, the reason they're doing that is because now we get rid of that liability. And you don't have an explicit asset there that you are drawing on as an employee, you just have a vague promise from an employer that says just take what you need, but no one in their right mind thinks that if you decide you're going to need a month off, you're going to get it from the employers, you just have this sort of promise from the employer, which isn't worth much of anything. But the company is now suddenly more valuable, because they dumped this liability, right? And the other thing is financial accounting is that they measure firm performance based on per employee. So it's your profitability per employee, it's your revenue per employee. It's not your revenue or your profit per dollar spent on workers. So if I push employees out and use contractors, instead, that denominator falls, right. That is the number of employees drops, and suddenly, yeah, I look more profitable. I look like my revenue is greater all that sort of stuff, right? The underlying problem here is that dollar is not $1. Under Financial Accounting, Financial Accounting sets the rules that determine who is winning and who is losing. So it's not too surprising that employers and companies are playing by financial accounting rules, not by The Economist rules about efficiency, right. And that explains why they really don't like employment costs. And there's another reason why they particularly don't like employment costs, which is not really financial accounting, but it is kind of economics related. And that means investors assume that financial that sorry, employment costs are fixed costs, and fixed costs mean that a business turns down, you're stuck with them. And that looks really, really bad. Now in the US, particularly, the idea that employees are fixed costs is nuts, particularly since the 1980s, when we started laying off white collar workers. So you know, you can cut employee costs much faster than you can cut your contracts with a vendor to provide your contractors. And yet we treat employment costs as fixed costs and investors hate them. So if I take my employees and push them out, and I bring in leased employees from, you know, one of the big staffing companies, they're not my employees, right? Literally in financial accounting, there's somebody else's, then all things look better for my company, right? So there's all kinds of ways in which financial accounting is driving us away from economic efficiency. There's another one one more on this, which companies have adopted because of these financial concerns. And that is something called headcount budgets, which big corporations all have and add headcount budget means that if you're a manager, a project manager, you've actually got two constraints now. One is the cost But he tells you, you can only spend a million pounds on this thing. Okay, fine. And by the way, you also can't hire more than this many employees. And you might say, look, if I don't have this many employees, I have to go get contractors. And they'll say, oh, that's fine, go get contractors. But you know, the contractors, it turns out to be more expensive than employees, let's say, Yeah, so you're still stuck with it, right? Now, because investors don't like employees. So we want to put a cap on the number of employees you can have, even if it's more efficient, to have employees than to try to get vendors, you know, with vendors, you have to pay not only the cost of their employees, but all their overhead and all their profitability as well. Right. So that's the story, right? Financial Accounting drives all these distortions in economic efficiency, that seems
Chris Rainey 25:51
crazy, because from what you're saying, almost was like, both HR and finance are just running in two separate directions.
Peter 25:58
So you know, what's the answer to this? Well, the the CEO, is the person who is supposed to be reconciling these things, right? And the CEO is thinking or should be thinking, you know, okay, like on the hiring, okay, we understand that investors hate employees. On the other hand, we also understand that employees are going to be more important to us. So let's think about training, for example, we understand investors hate that, because they, it just looks like administrative expenses to them. But we know that it really pays off for us, rather than trying to just go outside and hire people all the time. So the CEO is thinking, Okay, how do I balance these, the CFO is saying, don't train. And the line managers are saying, we need people with skills, and you're thinking as a CEO, you should be okay, we're gonna pay a price with investors right now for doing this. But the longer term benefit of this in terms of effectiveness is going to be so much greater, that we're going to bite the bullet and do it, right. So the CEO has to juggle those two, the problem for human resources. And this is where we can blame human resources, they have to make the case to the CEO, that this training expenditure is going to lead to effectiveness, which is so valuable, that it's worth doing. And I don't see HR making that case, they're playing along with the CFOs. And therefore, are they don't want to confront the CEO or present a different argument. And therefore the CFO is when would you
Chris Rainey 27:31
recommend like the HR leaders going to their financial counterpart to have that conversation? Sure.
Peter 27:36
Yeah, you know, smart ones do. And the place you have to begin and this is an enormous failure of human resources, is the first thing you have to do is demonstrate, what does it cost us if somebody quits? Now, right now, the figures, at least that you're hearing in the US, which almost nobody bothers to calculate this themselves are a figure that's been kicked around a lot, that just represented the administrative costs of bringing a new person on, not the performance costs, not the productivity costs, not all the disruptions, but just the administrative costs. And it's a few $1,000, right, like $4,000, something like that. But if you look at the productivity costs, and the costs of keeping a position vacant, you know, it's often multiples of salary for a year, if you're the CFO, and you thought the cost of turnover was $4,000, you're gonna say forget it. We don't care about that. If you think it's $60,000, it's going to get your attention. Unless that figure is front and centre, you're never going to get started in trying to do anything on human resources, right? And that's the place to start. No, I spent, I haven't spent a tonne of time around CEOs. But the few times I've been engaged with groups of them, they don't know that number. If they know the number, they know the number HR has told them, which is this administrative costs thing, which is the wrong number. Right. And it's wrong by orders of magnitude. Right. So that's the place we have to get started.
Chris Rainey 29:07
It has always been the case,
Peter 29:08
it has always been the case. But here's why we haven't paid much attention to
Chris Rainey 29:13
Yeah, because that's what's gonna get to Yeah, if it's always been the case, why don't we? So like,
Peter 29:17
if you talk to accountants about this, they'd say, yeah, so we know that. But accountants are not people who are making business decisions. So it never occurs to them that why this might matter. But this wasn't a big deal until investors became the driving force in business. And that begins in the 1980s and starts to really accelerate through the 1990s. And now why we haven't paid attention to it since then. That's a very good question. I think you know, what you would hear grumbling on the human resource side is just that CFOs don't understand. It's probably true that they don't know but it's not their job to make the argument about the effectiveness of training, let's say, that's not their job, right, somebody has to make that case, their job is to particularly these days is to think about what are the investors going to say, and we have so incentivize the CEOs to pay attention to what the investors say that they're not paying as much attention to what the effectiveness issues are in their organisation. So, you know, this is really follows to HR to do it. And as HR done that, no, I think they've been rolled over by the power of the investor community, you know, frankly, they didn't want to raise their hand and say, excuse me, this is crazy. And if the CEO is thinking some other way, you know, you would just saluting and saying, Yes, boss. So we have this expression in the US about corporate heroes, maybe you had that in the UK as well, for HR, you know, these were people who basically just collaborated cooperating cutting their own budgets, that's how you got to head right, you know, somebody has to make the case, and you have to do it subtly. And you have to do it diplomatically. But you do have to get these numbers in front of them. And, you know, a lot of HR people were number averse, and particularly financial numbers averse. But that shouldn't be the case anymore. You know, financial accounting knowledge is pretty widely distributed. And it's not rocket science, what we've been talking about, I definitely
Chris Rainey 31:24
think we've made a lot of strides in these areas, though, like, especially with technology now, where people analytics is making a lot easier for CHR OHS to have that they are present that they tell the story. If you really can't be a CFO, at the moment, if you don't understand the financial side, and how the business makes money, as well, and you're not data driven, you won't last very long. I think that's true. And I think like the pandemic also accelerated that as well, where businesses kind of turned to the HR team during that crisis, and was like, hey, what do we do? And many did step up to the plate. But I do feel like the vast majority are probably still where you're describing. And also, to be honest, there is a little bit of bias in the sense that I'm speaking to the best of the best on the podcast, the largest companies in the world. So you know, that doesn't account for the rest of the companies. Yeah.
Peter 32:15
I think there's two caveats to that. I think, as we just described, like remote work, it is true that human resources, got them through that issue. There was not a conversation about what happens next. So it was all reactive. Okay, we're in a crisis now, how can you help us get out of this, and maybe HR didn't raise their hand and say, We better think about what you want to do after this. Because most places there was appeared to be no thinking about that. And we ended up in this problem of making decisions that make it difficult to backup, I think on on data science and people analytics, we are remarkably still hamstrung just by simple data problems. And this begins with things like choosing disparate vendors who can't whose data can't talk to each other. It's remarkable how many companies are still stuck in that box, they're overwhelmed with data, but they can't use it. And that's because they can't get the basic database management stuff solved, which is the first problem. And some of that falls back to the fact that they don't have any staff. Because during the corporate hero era, you know, the HR staff got cut back so much. And when you outsource everything, right, your vendors don't have an obvious incentive to help you with other vendors. Figure out how to get your data together. So you can do the analysis. So you have to turn to somebody else, because you don't have the staff internally to figure out are our hiring practices paying off. Okay, well, what do you have to do to do that? Well, you have to get your applicant tracking data, which tells you the AP, you know, attributes of candidates, and then you have to get your performance management data, which sits with a different vendor, to see, you know, who are the good employees, and then you got to cost that stuff out. And, you know, it overwhelms you and your organisation because it was never set up to do that in the first place. So I think the promise of people analytics is still largely hanging out there. For most organisations, it takes up a big chunk of time and energy and money to even answer something quite as simple as do our HR practices pay off,
Chris Rainey 34:29
you'd be amazed what you can do with an Excel spreadsheet.
Peter 34:34
Well, you know, we had a conversation just before the pandemic, we used to get groups of data scientists together who work in HR, but we were asking about data lakes and all this sort of stuff that, you know, data scientists play with and how are you dealing with your matching your data? And overwhelmingly the most common software was Excel spreadsheets.
Chris Rainey 34:55
Yeah, I'm not gonna pretend that some of the people analytics, software's are cheap because they're not but you can do a lot already with just excel. But to your point, one of the biggest challenges to getting their data cleanse and in in good shape first. Step one. They live in a million million different systems, you know? Yeah, that's kind of the big challenge before anything else. You're talking about technology and everything else. How do you find out you got AI? How do you see this playing out? If we don't make these changes in
Peter 35:26
the US anyway, the big story and I think this is true in the UK, too, because some of the same players are involved there has been pressured to make financial accounting include these human capital kinds of
Chris Rainey 35:38
issues in the US. You bought that now, right? You have to do that. I'll tell
Peter 35:43
you what the law looks like right now. So the investor community has been behind a big push to try to get the Security and Exchange Commission which oversees ultimately financial accounting, but they delegate it to the accounting community to set the rules. The push is to get employers to report training, data, turnover data, employment cost data, total labour cost data, basically just a few things. What the Security Exchange Commission agreed to do a couple of years ago was to tell employers and public companies that if you're doing anything in human capital, which is material, you should report it in your financial accounts, but they don't tell you what is material and they don't tell you what you have to report. So what they've reported so far is worthless. Basically, they just, it's just, it's not even numbers, it's just statements. And it's mainly just positive statements about diversity and inclusion or commitment to the environment, that sort of stuff. So they haven't reported anything, which is useful. And if you think about it, in financial accounting, it's not of much use, unless what you report is standardised, and we know how to define it. And it's the same for everybody. If you let every company pick what they want to report, how they want to report it and change it every year, I didn't realise that. Okay, you, you get nothing. You get nothing. So it's worthless. So far. This
Chris Rainey 37:09
was like a tick box exercise. For sure, wow. Well, it's important you go where can people connect with you and learn more about your work, grab a copy of the book, etc? Well, I
Peter 37:19
think grab a copy of the book, anyplace Amazon seems to be the easiest place to do it. And oddly enough, it's often cheaper to get books from Amazon than it is to get them from me. That's how they do it. That's how they do it. Yeah. And that's capelli with two peas and two L's and believe me, there's not a lot of appellees in the in the academic world. So it's easy to easy to find me at the Wharton School and happy to connect I
Chris Rainey 37:43
also you're on LinkedIn as well. Right. So I think we could connect there. As always everyone listening all those links are below in the comment section, wherever you're out. Sorry, in the description below, whether you're listening or watching, but yeah, I appreciate you coming on show. It's absolutely fascinating. I'm excited to get the book into everyone's hands, as well, the future of the office, a lot of practical things in there that people can take away, whether you're an employee or an employer, right, in terms of the book, a lot to take away and I wish you all the best until next week in conversations again,
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Steve Degnan, Advisor, Board Member, and former CHRO of Nestlé Purina.