I was recently talking with two project teams who were each keen to look at the ways in which they needed to rebuild their HR functions to address the latest challenges in the world of work. They were both in the banking industry — but the similarities ended there.
Team 1 recognized that the HR playbooks of the past were no longer relevant. The rules had changed. As a result, they were ready to question everything about their HR function, including; how it was structured (e.g. centers of excellence, business partnering and service delivery), what they spent time doing and the skills they needed to bring to the ‘enterprise table’. Most importantly, they knew they wanted to experiment and build something unique to their bank and to create more interdependence among the HR sub-functions. As it stood, insights weren’t being used to bind the function together to have an optimal impact on the workforce.
In short, Team 1 was looking for what investment guru, Charlie Munger termed the Lollapalooza Effect. This occurs when multiple factors or capabilities act together in ways that feed into each other, bringing about an extraordinary or extreme outcome (positive or negative) and creating a result far bigger than the sum of the factors involved.
In this case, Team 1 wanted its HR function to be greater than the sum of its parts. They were going to use greater analytical insight to drive their efforts in experience centricity and help inform what the workforce ‘shape’ of the future needs to be.
On the other hand, Team 2 knew that they needed to do something new, but they wanted to learn from others through examples and leading practices. And although they didn’t say it, I suspected they wanted to copy what others had done, as they saw this as less risky. What’s more, they really wanted to broadly recreate their current siloed structure. They were comfortable with what they knew, so they wanted to stay close to the traditional playbooks.
Pathfinders look forward, not back
In my view, there’s no positive Lollapalooza Effect to be had by going back to what existed before 2020. According to KPMG’s Global Digital Transformation Survey*, 71% of digital transformation strategy leaders stated that the building of a new kind of workforce model — one with human workers augmented by automation and artificial intelligence (AI) — has accelerated by months or even years.
This is encouraging HR functions to experiment and innovate — led by the “HR Pathfinders” like Team 1. Pathfinders are HR teams who are focusing on integrated and mutually reinforcing capabilities, such as employee experience, data & analytics, workforce shaping, digital HR and learning. They’re deliberate about creating the positive outcomes of a Lollapalooza Effect.
From interviews in our new report The future of HR: Lessons from the Pathfinders, several HR leaders highlighted the importance of thinking differently about the workplace, putting an emphasis on experimentation, agility and in-the-moment learning. More so than before, it’s critical to build interconnectivity within (and outside of) the HR function—with analytical insight as the ‘glue’ that binds together the various components of the HR function of the future.
Interconnectivity and the ‘boundaryless’ function
Collaboration and connectivity allows organizations to be nimble and responsive to change. And while it is important for organizations to architect more ‘boundaryless’ functions, most organization still operate within silos.
For decades, HR functions have been hard-wired to undertake specific services — performance management, centers of excellence, shared services, global mobility and more. But what creativity might we be able to unleash by doing things a bit differently?
We could be limiting our scope by the frame of reference we’re bringing. There needs to be alignment across the organization and within functions — a Connected Enterprise approach — to meet stakeholder expectations, improve business performance and grow.
Charting the path ahead
The 2019 and 2020 Future of HR surveys uncovered five pillars that set the foundation for success in Pathfinding HR organizations. This year, our conversations with HR leaders suggest they will continue to rely on them in the year ahead:
- Play a vital role in establishing the right culture across the enterprise. HR Pathfinders take responsibility for the internal social structure of the organization and empower employees to succeed in a culture of continuous learning. Employees are encouraged to seek out mentors, learning opportunities and stretch assignments, and their value is acknowledged by management and leadership. This provides the framework for a strong business structure.
- Own the entire employee experience. HR Pathfinders recognize that creating an employee-centric culture is vital to attracting and retaining top talent, and creating an inclusive, diverse, and equitable (IDE) environment. This pillar has become vital to the future of work and organizations’ ability to attract the next generation.
- Use data and analytics to target and recruit the future workforce. HR Pathfinders recognize that the organization has a goldmine of data, and they use it to track every aspect of workforce performance and employee experience in order to adapt to evolving needs.
- Understand how to shape the workforce with new skills, functions, composition and processes to become more resilient for the future. Prior to the pandemic, HR Pathfinders were in the process of transforming their workforces to become more digital, adaptive and resilient. COVID-19 caused them to fast-track these efforts. They also used the shift to remote work to access new talent pools and to rethink when, where and how work gets done.
- Invest in all forms of digital technology to deliver HR and learning services. This means building on the core human capital management system with other technologies that enable streamlined employee service management, predictive analytics, in-the-moment learning and real-time sentiment analysis. More than half (58 percent) of organizations in KPMG’s Digital Transformation Survey made digital transformation part of their long-term business strategy. And most respondents in KPMG’s 2020 CEO Outlook COVID-19 Special Edition found the pandemic accelerated these efforts, putting many years ahead of where they expected to be.
While each pillar brings business value, HR Pathfinders approach them holistically. By treating each pillar as one aspect of a systemic whole, they create high-performing, sustainable talent organizations that are agile and forward looking. This interconnected approach helped Pathfinders find new opportunities to improve and adapt more easily to the double disruption of automation and the impact of COVID-19.
As organizations manage the impact of the pandemic, Pathfinders intend to maintain that pace of progress and ride the wave of the Lollapalooza Effect — a wave of their own making.
* Source: A commissioned study conducted by Forrester Consulting on behalf of KPMG, April 2021.
Throughout this blog, “we”, “KPMG”, “us” and “our” refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity.