Podcast: Workplace Changes Don’t Happen How You Think

Digital Focus

Transcript

Mark:

Welcome to People Tech, the podcast of the HCM Technology Report. I’m Mark Feffer. Even before COVID-19, the world of work was becoming increasingly complex. There have been ongoing changes to technology, work environments, what employees expect and what employers are prepared to give.

 To talk about all that, I’m joined today by Jeff Wald. He founded WorkMarket and sold it to ADP and now he’s involved with four tech startups, Bento Engine, Independently, Heist and Scenaro. He’s seen the world of work from all examples and today he’s going to help us put its changes into perspective on this edition of People Tech. Hey Jeff, welcome to the show.

So a couple of years ago you published your book, The End of Jobs [inaudible]. And it struck me that your timing was great, published that in 2020 and a lot’s changed since then. So how’s the book standing up given COVID and everything that’s gone on in the last couple of years?

Jeff:

Well, I’ll tell you this, Mark, the book was never designed to be prescriptive, right, like here’s what’s going to happen. I mean, we do say that, we do go into it both myself and the collaborators that wrote segments and sections of the book with me, but it’s more designed as a framework to think about the future of work.

            And I think it’s held up incredibly well because that framework is always going to hold up. And that framework is simply if we want to make predictions about the future of work, we have to make sure those predictions are rooted in the history of work, in the data in the world of work and in how companies actually engage labor.

            Because way too often in our space people make predictions that just don’t have a foundation to them, right? Is it possible that all new jobs that are being created are on demand jobs? Sure, it’s possible. It’s just, that’s not how companies operate.

            They don’t suddenly go, stop all hires, make every person a freelancer from now on. That’s not how workforce management discussions begin. Is it possible that 50% of the labor force is going to be remote post-pandemic, which I’ve heard many, many people predict?

            No, it’s not possible because only 42% of the US workforce can work remotely. And when I’m on panels and point those things out, people go, “Oh, I didn’t know that to,” which I say, “But shouldn’t you know that? You’re making a prediction about the future of work, but you’re doing it outside of any constructive data.”

            So look, our predictions were always going to hold up because they’re rooted in history, in data and how companies actually engage workers. Look, did we predict a pandemic? Of course not. But do we say in the book that labor force changes, data in the labor market change very slowly and very methodically throughout time.

            And so anybody that makes a huge prediction of, oh my God, this is going to double or this is going to change, it almost never happens except during times of tremendous dislocation, a war or pandemic, or something like that. So that we did talk about, but God willing we’ll be through COVID soon enough and you will see that most things, remote work being the huge exception to that, will have reverted to mean.

Mark:

So given that as a background, when you look back over the last two years, did the changes to the workplace surprise you, or the way business responded surprise you?

Jeff:

Surprise me, no. Here’s what I was surprised about. I was surprised as to the unbelievably heroic work done by HR teams, done by the CISO’s office, the corporate security office, by a host of other team members, to move people to a remote work construct where possible.

            I really thought you’d be hearing all kinds of stories about security breaches and all kinds of nightmares above the mean of what we normally hear, because there’s always a trickle of that news. And the work done by your listeners and many others in leadership positions, well, that did surprise me, the speed to which people got things done.

            We’d always said that remote work was a better construct for the worker, or to be more clear, flexible work. Because remote work has a very specific definition and we can get into that in a second, but flexible work as most things, flexibility breeds benefits, whether you’re talking about our own bodies and flexibility or any flexibility in any system.

            The more flexible the system is, the better it is. And so that certainly applies to the world of work. If you’re being flexible with your workforces and not demanding that they’re there 9:00 to 5:00, five days a week, you’re going to have a happier, healthier, more engaged, more productive workforce.

            That’s been incredibly clear and yet not many companies embraced it because of a very antiquated mindset of, well, I believe productivity equals presence. I think magic happens when everyone is in the office, so I want everyone there. And policies, procedures and infrastructure that are necessary to enable remote work.

            It’s one thing to say, “No problem. We can have people work remotely or flexibly,” but it’s another to make sure they can access all of your systems from outside your four walls because if you let me work remotely, but you don’t give me access to the GitHub repository, then are you really enabling me to work remotely? No.

            If you say I can work remotely, but you don’t have a policy that every meeting has a telepresence or a Zoom or whatever default such that it doesn’t slip through the cracks when I try to be like, “Well, I wanted to attend the 3:00 meeting, but there was no dial in. There was no anything.” It just assumed everyone was in the office.

            If you don’t have those policies and procedures and infrastructure, you’re not enabling remote work. So those two impediments, which were structural impediments, both got swept away in March of 2020. And so because of that, you will have a structural change and a substantive change to the amount of people working remotely and flexibly.

Mark:

I’m sure you’ve heard these numbers before, but I’ve seen a number of studies that have said that executives tend to think everybody needs to be in the office, but then there’s other numbers that say workers are more productive when they’re working at home. How do they reconcile? I mean-

Jeff:

It’s tough. I will say this, first thing I’ll say, Mark, is as with, and this is one of the big takeaways when I give speeches on the future of work is we got to be very careful about painting with a broad brush, right? Are most workers productive in a remote context? The answer to that question is yes. Right.

            On average, yes. Does that mean that your workforce is more productive? Not necessarily. That those job functions are more productive? Not necessarily. Right. So we need to be thinking about it in a very granular way as decision makers within companies.

            Just because the overarching data tells us this doesn’t mean it applies to your company, your industry, your job functions. At the height of the pandemic a few companies that I advise, one a very large global bank, felt at best they had 84% productivity. At best.

            And they were desperate to get back to the office. And if I said their name, you’d be like, “Oh yeah, that’s one of the companies pounding the table to tell everyone to get back in the office.” And I had an accounting firm that felt half of their workforce, certain functions were more productive, certain functions about as productive.

            And so they were super psyched to let these people continue to work and they didn’t know what they were going to do with this other group. And I had another client that felt, don’t need offices anymore, we’re going to shut all these things down, everyone can be remote and they walk that back, right?

            They do have offices, the offices just take a different construct. So first thing, we can’t paint with that broad brush because it’s very, very difficult. Am I surprised that we still have managers that have an antiquated mindset? Not at all. I mean, how do you square that circle?

            I will tell you, having personally had this conversation and I will certainly be naming names out of it. Where ADP, when they acquired WorkMarket, told me, “You’ve got a bunch of remote workers. You need to get them to move to a location where there’s an office. They have to go to an office.”

            And I said, “Why?” They said, “Well, that’s our policy. They have to go into an office.” I was like, “I don’t understand your policy.” And it really wasn’t a debate. And so being an entrepreneur and not really that much of a rule follower, I just did what I normally do, I said, “No problem. I’m going to get on that.”

            And then six months later they were like, “Wait a minute, did you still have remote employees?” I was like, “Oh, did you want me to not have them? Did we say that? I forgot. That’s on me. That’s my bad.” And then they never brought it up again. And those people are still unbelievably productive members of the team.

            And the mindset at ADP has massively changed. I mean, I give ADP a huge amount of credit for everything that they’ve done with their teams. I had the pleasure of being a part of that in the beginning of the pandemic before I left.

            But what an amazing company and incredibly well led and very enlightened policies as they adjusted to a new reality, but were they rooted in a antiquated mindset before the pandemic? Sure. Almost everybody was.

            And it took the pandemic for people to actually see, wow, I get why some of these innovative young tech companies do it this way. I get this whole distributed team things. People needed to see it themselves. And I don’t blame anybody for that. But companies that still think that way, like some big banks and other things, I do fail to understand it now, I should say.

Mark:

Well, do you think this whole thing working from home or hybrid work, is it a technology thing or is it really a change in work thing?

Jeff:

So as with all things, it’s a little bit of both, a little from column A, a little from column B. The technology enabled it. When we look at the history, so surprising nobody, I’m going to always go back to what is the history of these different things. The history of remote work was in 2010, about 1% of the workforce worked remotely.

            And we only have data on remote work. We don’t have a lot of data on flexible work. Because with remote work you are putting into your payroll forms what your office location is, because we as a payroll provider or ADP as a payroll provider has to know that because the tax nexus, right?

            If you are commuting into New York City, I need to know that because now you’re going to pay some New York City taxes. If you work out of your home in Connecticut and you never come to the office in New York, then your home office is Connecticut.

            And that may have different implications because then maybe your company has nexus in Connecticut because they have employees there. Leaving all that aside. Meaning we have data, if you very rarely less than 50% of the time technically go into that office.

            If you go in 60% of the time, three days a week, we have no data on you. Right. We don’t know whether or not you’re going in three days a week, four days a week, five days a week, six days a week. We just don’t know.

            We only know what you’re filling into your tax forms. So we have very good data that we hear being those of us that study labor statistics for a living or for their own amusement. So we know that in 2010, about 1% of the US workforce was working remotely and then it really, really grew.

            And it grew to about 3% of the US workforce pre-pandemic. And what enabled that growth was the technological infrastructure, right. Suddenly I could Zoom into those meetings. I didn’t need a whole telepresence room for $500,000 from Cisco.

            I could just use a WebEx or use Zoom or use one of the other platforms, those types of things and GitHub and JIRA and Asana and all these other tools that helped me see exactly what jobs I needed to be getting done. The disaggregation of work, which we talk about a lot, those things enabled remote work to be able to happen.

            Not the process of the disaggregation of work, but the tools that enabled it, right, that allowed me to now work from wherever. In the book I talk about the evolution of the 9:00 to 5:00, one office, one manager job to the fluid team-based work from anywhere, always on job.

            And a big part of that is this disaggregation of work and a big part of that are the tools that enabled it. And so we entered the pandemic with the idea that remote work will continue its slow and steady growth because of those two impediments we talked about earlier, that antiquated mindset and the policies and procedures and infrastructure needed to really supercharge it.

            And I didn’t anticipate those things happening, right? No big change happens in the labor markets outside of some massive exogenous event. And then COVID comes and those two things change and we see this huge change. Much like I always say, you won’t see any massive change in the on-demand labor forces unless there is comprehensive regulatory reform.

            If you saw that comprehensive regulatory reform, the number of freelancers and on-demand workers would skyrocket. Outside of it, you will continue to see the slow and steady growth we’ve seen over the last 10 years.

Mark:

Putting aside the whole issue of where people are working and the technology they they’re using, it feels like there’s been changes just to the way people get work done and the way they sort of construct their day. Do you think that’s true in… What do you think is going on out there?

Jeff:

Well, I’ll say this, it’s very difficult to know what’s going on out there. I like to look at historic perspectives and we have no historical precedent for a lot of things going on in the world today, but let’s just stick with COVID as the main driver from a work standpoint.

            The last historical perspective we have is from 1918 through 1920. And they’re in a whole lot of data that we have to look at about how the workforce, companies and work was evolving and changing there. And so I am super wary of making too many predictions, given that the data sets, right, in March of 2020, April, May, June the workforce massively contracted.

            Right. We lost 20, 25 million jobs. And then a huge number of them came back, but not in certain industries and not in certain places. There’s too much noise in the data is basically what I’m saying. And so when people say to me, “Where do we think it’s all going to shake out?”

            I’ll say, “I need three or four quarters of stability to understand where the data pattern stayed out and then I’ll tell you.” It’s one of my favorite quotes from one of the professors at business school who was a business historian. And he would always say, “Well, how’s this going to turn out?”

            And he’d look around the class and go, “I’m a business historian, ask me in five years and I’ll tell you.” We just don’t know how a lot of things are. We have some ideas, but there’s just too much noise in the data right now.

Mark:

Well, does the data or just your observations give you any hint about how employers are doing with all this? They did pretty good job of pivoting during COVID, but some of these changes seem like they’re going to stick around. Are employers ready?

Jeff:

I think employers are ready. I think some employers are going to do better than others. I look to are friends at ADP who are doing a phenomenal job at this and I think of other people that I’m close with that are doing a terrible job with this. There’s so many factors in this, Mark, around this kind of war for talent.

            And when the labor markets are as tight as the labor markets are now, and we can talk about why that is by the way, and that’s an immigration and retiree issue mostly because the labor force is smaller today than it was before COVID. We’re still about 2 million workers short in the United States.

            And so when you have this situation where you have 11 million job openings, and everybody knows these statistics. As a company to have policies that are not worker friendly, you simply are going to attract not that many workers. It’s not really some huge thing, right? That’s not some big leap of logic.

            If you’re not the kind of place people want to work and people have a choice, then they’re not going to work there. Now when the labor markets are not tight, you can make the same, well, if they want a job, then they have to do what we say. Great. That can work very well depending on the state of the labor markets.

            The state of the labor markets right now are very tight and I don’t see them easing anytime soon. So are companies going to be fine if companies are adjusted? For the most part, yes, but as with all things, there are winners and there are losers. And the losers are companies that stick to very rigid policies and aren’t listening to what their workers want, to an extent, right?

            You can’t let the inmates run the asylum here. Managers still have to do what is best for the company. You can’t just say, oh, whatever you guys want, whatever you want. Of course not. But some companies are doing great and will continue to be employers of choice and some companies are not.

            But if we have to make predictions and many times we do have to make predictions, I would simply say that we are starting to see the data shake out such that about 8% of the US workforce will be working in a remote context. Again, remote context means less than 50% of the time you’re in that office.

            So it could just be two days a week, then you’re a remote worker if you go in two days a week. And we think about another 24, 25% of workers will be flexible meaning, again, three days a week or more in that office.

            And so that really only leaves because again, remember 42% is the max in the US workforce that can work remotely because people that are in manufacturing and a logistics and extraction industries and the many services can’t work remotely, construction, whatever. That means that you have very few.

            So it’s called a total of 33%. You’ve got about 9% of your workforce that is staying in this 9:00 to 5:00 kind of one office five days a week job. That’s a big shift, man. That is a big, big shift. And if you are one of the employers that insists upon that, then just recognize that you only have access to 9% of the workforce now.

            Before you get access to 42% and obviously people can move from extraction industries into office work, whatever, but what I’m saying here, why would you want to do that? Why would you want to limit the pool of eligibles? So we will see how all this plays out, but that is where the data indicates we will shake out.

Mark:

And for my last question, I want to shift gears a little bit. Technology obviously plays a big part in HR and workforce issues nowadays. And the vendors that I know are always being pretty aggressive in trying to develop new products and new approaches.

            Do you think there’s any risk or do you see any signs, I guess is a better way to put it, do you see any signs of the technology producers getting so far ahead of the market that you have something like Amazon tried for a while where they had a system that automatically hired, managed and fired people without any human touch? Do you think we’re going to get into that kind of position more?

Jeff:

Do I think we will? The answer is they’ll certainly be examples. We can talk through a number of examples where people think just because the technology exists X, Y, Z is going to happen. And I talk about this a lot, Mark, in regards to people saying, “Oh, the ATM exists. All bank tellers are going to be out of work,” to which I say that almost never happens, almost never.

            And I spend a lot of time in the book talking about this. And a lot of times in my speech is talking about this, the changes that technology can roter are also often incredibly misunderstood and take a lot longer to develop. So look, has the technology existed to display almost every waiter and waitress in the world?

            Yeah. That’s actually existed for some time. I don’t need a human to hand me a piece of paper with the items that are available for me to eat. I don’t need to communicate that with them verbally and have them write down on another piece of paper what it is I want and bring it in. I can do that on my phone, right.

            I don’t need that to happen, but it hasn’t happened. We have not seen in mass the displacement of that job category because people just don’t want it. People don’t want that experience in a restaurant. If I want to do that, I just order food at home. I want to go into the restaurant.

            I want to hear from the wait, in which I want their opinion, blah, blah, blah, blah, blah. So just because a vendor builds some new tech doesn’t mean that people need it and the tech sector often gets ahead of itself.

            But I will say this, the place where the tech sector seems to me to have gotten the most ahead of itself is not on feature sets. It’s not on the use of AI. It’s not on a host of other technological things. It’s from a corporate finance standpoint.

            The different HR tech startups, as companies in a lot of sectors saw, there was just a huge bidding up because of where the venture capital markets were, where the capital markets were. And I will tell you a story about a startup that I am an angel investor in, that I’m an advisor to.

            And I helped them negotiate a deal with a large HCM where the HCM was going to help distribute their products and the head of corp dev of that HCM called me up and he said, “Hey, should we just buy them? You introduced us, we love them. We signed a big deal with them. We’re going to distribute their products. Should we just buy them?”

            I was like, “Should you buy them? Absolutely. Do you know what their last valuation was?” He said, “Well, no.” And I was like, “Well, we all have an NDA in place, so I will tell you. That company got valued at $650 million. $650 million. Their revenue at the time was $8 million.”

            And this head of corp dev, we were sitting there and I could hear him spit his coffee out when I said the 650 number. He’s like, “What?” I was like, “Yeah, I know.” He goes, “I can’t spend 650.” I said, “Oh no, you can’t buy them for 650. That’s what the last valuation was. You got to put a premium on that, man. You got to buy them for like 800.”

            And he’s like, “No, obviously I would never do that.” He goes, “I’d buy them for 100 right now.” And the thing is, Mark, is that for 100, each of the founders would’ve made 20, 30 million bucks. Each of the investors, all would’ve 10X to our money and it would’ve been a great outcome.

            And now that company’s in a box because there are very limited exit opportunities for them. None of the HCM platforms are going to buy them because they’re way too expensive. Or they’re going to have to have some massive down round where the early investors and the founders and everyone is going to get crushed.

            And so that’s the trouble I see in the HR tech ecosystem is this construct of what every corp dev team thinks through is should I buy or should I build? And ADP certainly had that thought process on WorkMarket. And there were a number of people on the ADP side that very much believed in the build side.

            And they were very vocal with me after they bought, they’re like, “I think we should have just built it.” I’m like, “Okay, why are you telling me this? You already bought it. Why are you being a jerk?” But anyway, they have this contract of buy versus build.

            And what has happened in the HCM world is that the buy has gotten more and more and more expensive as these HCM players and startups are raising money at ridiculous valuations, which by the way are persisted even though a lot of valuations have come down.

            You see like HiBob and a few others have continued to raise money at a very, very high valuations, which I don’t understand. But what people don’t seem to understand is that the HCM players, their capacity to build or their cost to build has gone down and down and down.

            Let me tell you something, 10 years ago, I think ADP really had to buy a lot of technology. Now using ADP as a proxy for the other ACM players, they’ve got an amazing technology team and they can build great stuff. Do they build it as fast as a startup? No, really. No, no.

            But can they build cool stuff now very effectively? Absolutely. 10 years ago, probably not. But today ADP is just a full on tech firm. And so the cost of buy has gone up, the cost of build has gone down. I think that’s going to leave a lot of HR tech platform stranded. And I think that’s the problem that the HR tech ecosystem’s going to have.

Mark:

Well, Jeff, thanks for taking the time and visiting today.

Jeff:

Any time and every time, always a pleasure.

Mark:

My guest today has been, Jeff Wald, an entrepreneur, executive and author. And this has been People Tech, the podcast of the HCM Technology Report. We’re a publication of RecruitingDaily. We’re also a part of Evergreen Podcasts.

            To see all of their programs, visit www.evergreenpodcasts.com. And to keep up with HR technology, visit the HCM Technology Report every day. We’re the most trusted source of news in the HR tech industry. Find us at www.hcmtechnologyreport.com. I’m Mark Feffer.

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