Category: Business Management Articles

Two views:

1. Economic growth is the path to prosperity, and thus companies and economies should make growth the core aim.
2. An obsession with economic growth is a cancer on society that’s eating up our planet and natural resources and making the planet unfit for humanity.

Which view is true? One or two? Both?

It’s a complicated issue, but one we all need to address in a world facing existential challenges like climate change, inequality, and resource pressures.

First, the good side of growth. It is undeniable that economic expansion has increased the well-being of humanity. The wonderful book Factfulness by the late Hans Rosling — who delivered a massively popular TED talk on statistics — shows how much progress we’ve made in reducing human misery. Rosling points out that in 1997, 42% of the people in India and China were living in extreme, soul-crushing poverty (that is, roughly less than $2 per day of income). In just 20 years, India reduced that share to 12% and China to an amazing 0.7%.

About 750 million people moved out of dire poverty — the greatest improvement in human well-being in history, all made possible by rapid economic growth. And now, with about a billion people still in the bottom rung and 2 billion to 3 billion more surviving just above that (with less than $8 per day), we need even more growth. More energy use, more materials of all kinds, more chemicals, more food, more, more, more.

But the giant elephant now filling the room is that our economy cannot use resources or belch carbon at the pace it has if we want to keep the planet livable. The way we got here is now killing us. So there’s a tension between the growth that nearly all economies and companies pursue — accepted almost axiomatically by economists and politicians — and the limits of the planet we depend on.

Fortune Begins Redefining Success

I saw this tension in an issue of Fortune magazine, which is what got me thinking about all this again. Fortune has long used its famous lists to celebrate companies for being the biggest, the fastest growing, the most innovative, the most admired, and the best places to work.

But the most recent ranking is a bit different. Working with BCG, the magazine developed the Future 50 in its third annual iteration, by screening 1,000 megacorporations for “factors that signal the potential for long-term growth.”

The message would seem to be that success means growth. But the methodology for picking the 50 did include some measure of a company’s commitment to sustainability. And Fortune ended the special issue with a long article on how Swiss Re, the giant reinsurer, is trying to survive the fast-rising costs of insuring a world in climate crisis.

So even the most famous purveyor of corporate lists celebrating size seems to be grappling with a core tension that it’s getting harder to define business “success” as just size or expansion, when growth done in the usual way means we keep barreling toward shared pain and devastation. We seem closer to really asking if “growth” is even the right goal for business. Or perhaps more nuanced, the real question is, What kind of growth should we be seeking and celebrating in economies and companies?

Celebrating Renewable, Circular, and Regenerative Practices

Again, there is no thriving world for 10 billion without increasing use of materials and food on the one hand, or without a relatively stable climate on the other. So we must “grow” in a new way. Broadly speaking, we know what a carbon-constrained economy looks like. Renewable energy powering the grid, buildings, and transportation … circular systems for essentially every material flow, so almost everything is made from renewable or recycled stuff and can be reused as many times as possible … regenerative practices, particularly in agriculture, that help repair the damage and capture carbon in vast quantities … and entire economic and human systems designed for justice and equality of opportunity as well — or the human pillar and support will crumble.

So, in theory, that squares the circle. Thoughtful, new practices allow for growth of the right kind of businesses — those producing goods and services in renewable, circular, and regenerative ways and, of course, those directly building a clean economy.

A few leaders are playing around with these tough issues and publicly questioning the wisdom of unbridled consumption. Eileen Fisher, CEO of the American clothing company that bears her name, said recently, “Maybe we don’t have to sell so many clothes.” Or consider the grandfather of questioning consumption, outdoor lifestyle brand Patagonia. The company has long been a leading light of sustainability, and for good reason, given its range of initiatives and actions to reduce its carbon footprint and material use.

In 2011, the company famously ran ads on Black Friday saying, “Don’t buy this jacket,” which encouraged customers to buy only what they need. The company supports this vision through the unusual approach of teaching customers how to repair its clothes. In my experience talking to the founder, Yvon Chouinard, and other Patagonia leaders, the anticonsumption view is for real.

And yet Patagonia has quadrupled in sales since asking people to stop buying some of its products.

That sounds like a contradiction, but I don’t think so. We want the best companies to win, and win fast. We want them to set the pace and show how to think differently. In Patagonia’s case, it’s working. The company is no longer written off as a mission-driven, privately owned company with a model that doesn’t apply to big, public companies. Starting earlier this decade, as The Wall Street Journal has reported, “megacorporations like Walmart, Levi Strauss, and Nike are following [Patagonia’s] lead.”

That’s a good start, but what if the megachallenges we face require even more heretical questions? What if companies stopped making profit the core goal? The time is right, as big companies are starting to question the wisdom of shareholder primacy. So let’s lean in and challenge the status quo.

What if we sought to grow not profits but instead the quality of products, the customer experience, the engagement and fulfillment of employees, the connection of our people to their communities, and our overall well-being? If companies can give themselves some breathing room from obsession with quarterly performance and allow for real innovation in how they do everything, bigger changes are possible. And as the leaders embrace renewable energy and materials, circular models, and regenerative thinking and practices, the profits will come.

In short, the megachallenges we face now force us down a different path as we run into planetary limits. And the best companies adopting new strategies will still profit mightily.

Employers are confronting sizable skills gaps in all parts of their operations, at all levels, and they can’t seem to fill them by simply hiring new people. In today’s tight labor market, there are about 7 million open jobs for which companies are struggling to find qualified candidates because applicants routinely lack the digital and soft skills required to succeed. In the face of rapid technological changes like automation and artificial intelligence, helping employees keep pace is challenging. And companies are wrestling with how to retain top talent — a critical differentiator in a hypercompetitive environment. No wonder a staggering 77% of chief executives report that a scarcity of people with key skills is the biggest threat to their businesses, according to PwC’s 2017 CEO survey.

As a result, companies can no longer afford to wait for the traditional “system” to supply the workers they hope will help shape their future — the need is too acute and too urgent, particularly given that many higher-education institutions remain in denial. We must change how we educate both traditional college-age students and adult learners.

Last year, when 4,500 people gathered at the ASU GSV Summit in San Diego to discuss innovation both in education and in talent development writ large, it was clear that the companies in attendance were eager to find alternative paths. At this conference, political leaders and policymakers join CEOs and VCs to discuss the imperative of investing in human capital. Entrepreneurs in attendance work fervently to sell their wares or make deals, the likes of which have fueled a sharp increase in global mergers and acquisitions of education and talent development companies, up in total value from $4 billion in 2008 to $40 billion in 2018.1 Executives from leading companies like Apple, Google, Facebook, Workday, and Salesforce.com attend to share ideas and learn about new ways forward.

The annual event provides a regular check-in on the state of corporate learning. In part, it’s meant to coax companies to focus their efforts, because there’s still a fundamental mismatch between how much they say they want to strategically invest in their current and future employees and what they actually do.

On a keynote panel last year, Leighanne Levensaler, the executive vice president of corporate strategy at Workday, bemoaned a great lack of investment in human capital despite all the buzz around the topic. Michelle Weise, the senior vice president of workforce strategies at Strada Education Network and the chief innovation officer for the Strada Institute for the Future of Work, has written that although 93% of CEOs surveyed by PwC recognized “the need to change their strategy for attracting and retaining talent,” a stunning 61% revealed that they hadn’t yet taken any steps to do so.2 Employees seem to agree. According to a recent survey by Harvard Business Publishing Corporate Learning and Degreed, nearly half of employees are disappointed in their employer’s learning and development programs.3

But there are some notable exceptions to this prevailing trend. For instance, in July 2019, Amazon announced that it would “spend $700 million over six years on postsecondary job training for 100,000 of its soon-to-be 300,000 workers.” For now, Amazon says it intends to outsource that training to traditional colleges and universities. But once Amazon has begun to provide the bridge for that training, it’s not hard to imagine that it will be well positioned to create that training itself — without the “middle man” of colleges and universities — in the future.4 Although Amazon’s competitors will undoubtedly keep a close eye on its training moves, perhaps the education industry ought to keep an even closer eye, given that those moves may herald a total transformation in the landscape of learning, from college through retirement.

To put this development into perspective, it’s worth stepping back to consider how learning has already evolved in recent years before situating Amazon’s announcement within the broader opportunities and challenges facing employers.

What’s next for adult learning? Education is in the midst of digital transformation.

That this is true is no longer hotly debated. Online learning emerged over two decades ago as a technology category that enables a range of potentially disruptive business models. No longer do students need to convene at a central location to enjoy a real-time, interactive experience with a teacher and peers. They can instead participate from anywhere in the world, in a more affordable and convenient fashion.

This trend is growing rapidly in postsecondary education. Today, roughly a third of students in the United States take at least one online course as part of their accredited higher-ed experience, and over 15% study exclusively online.5 Many of these students are adults who are employed while they learn. Countless more workers take supplemental courses on platforms like Coursera, Udemy, and edX.

Indeed, online learning has led to the creation of numerous organizations and offerings that support companies’ talent development efforts. For example, Pluralsight, LinkedIn Learning (built on the acquisition of Lynda.com), [email protected], and Udacity help employers re-skill the workforce in myriad areas, often in specialized or cutting-edge fields. Startups like Guild Education and InStride allow companies to work with colleges and universities to offer learning as a benefit. Degreed has emerged to measure and help assess the learning and skills inside an organization. Coding and engineering boot camps like General Assembly and Galvanize, and other so-called last-mile education providers (many of which offer blended or fully online programs), are increasingly working directly with enterprises. And universities like Arizona State, Bellevue, Southern New Hampshire, and Ashford, as well as schools like Ultimate Medical Academy, are partnering directly with companies such as Starbucks and Walmart to offer education to employees.

The pace of innovation in corporate learning is frenetic — and highly uneven. As providers compete to serve enterprises, there is not one monolithic answer for what corporate learning will look like in the future. Just as companies have always patched together a variety of learning solutions to support their needs, they will most likely continue to do so.

But what this abundance of new approaches and players has led to is the same thing that disruptive innovation has wrought in countless other fields: far more affordable and convenient options. In the case of learning and talent development, such offerings have the potential to allow companies to make more significant investments in their greatest asset: their employees. Which companies will leverage this opportunity to improve both their bottom lines and the welfare of their people? The answer to that is not yet clear, although it will be interesting to see whether a critical mass of organizations will follow Amazon’s lead.

An interdependent solution to training. In many ways, Amazon’s announcement shouldn’t have been a surprise. The need for better-trained talent is clear in companies across the globe, and Amazon is taking a somewhat predictable path.

Amazon’s efforts resemble what we’ve seen happening in other technology arenas for decades, bearing out Clayton Christensen’s Theory of Interdependence and Modularity. The theory tells us that in the early years of a new paradigm, in order to succeed, product and service providers must integrate across all the unpredictable and performance-defining elements of the value chain. Think of how, in the early days of mainframe computers, IBM integrated hardware manufacturing with the design of interdependent operating systems, core memory systems, application software, and so on. IBM recognized that to thrive, it had to do much more than make machines that would play nicely with modular components created by others. It had to own the whole value chain.

We are now entering a similar moment in workforce education. The status quo that existed in the industrial economy and the early years of the knowledge economy — in which the links between companies and the educational institutions that fed them were predictable and good enough — is no longer adequate.

In the case of Amazon, the step in the value chain that’s not good enough is the education that colleges and universities provide. Because the subject matter Amazon’s employees need to know is changing rapidly and building the curricula through traditional higher-ed faculty and processes would be too cumbersome, Amazon has concluded that it will in essence take a much more active role in the education and training of 100,000 of its employees. What may be equally interesting to monitor is where Amazon goes with this development. The company was its own first customer for Amazon Web Services before opening up that offering to others. It’s not hard to imagine Amazon doing something similar for corporate learning. Will Amazon shape the future of the global workforce through its own education programs? The company’s timing, it would seem, couldn’t be better.

A focus on ROI. For corporations to invest in learning solutions in a sustainable way, there will most likely need to be a clear and compelling return on investment. As Allison Salisbury, a partner and head of innovation at education venture studio Entangled Group, has observed, companies can take at least five different angles when investing in human capital: providing on-ramp programs, upskilling, re-skilling, outskilling, and education as a benefit.6 Some of these approaches may be more sustainable than others, but each one has a distinct ROI. For instance, on-ramp programs bolster the quality and diversity of candidates for hard-to-fill roles by offering short-term training that creates a direct pipeline for employers. Outskilling programs, which are growing, help employees who don’t have a future at a company build a skill set to change careers. Companies offering such services become more desirable places to work and enhance their reputations in the labor market.

In today’s economy, where there are more job openings than there are unemployed Americans, the imperative to invest in many, if not all, of these categories is evident for employers. Companies are competing for a scarce resource: people qualified to execute mission-critical tasks. Hence the Amazons and AT&Ts of the world are announcing major half-billion-dollar-plus bets on training.7

But are these just fair-weather investments? When the economy inevitably turns south, which of these categories will companies abandon? If the past is any guide, the most vulnerable categories will be those where the returns are the least direct — areas such as outskilling, perhaps, where the immediate benefits to the company are more reputational than financial. Even upskilling will probably be at risk — despite its obvious economic upside, given the widely acknowledged skills gaps that businesses urgently need to fill — unless employers can show a clear ROI that is better than other potential investments in automation and the like, as Mike Echols, formerly the director of Bellevue University’s Human Capital Lab, has written.8

The measurement challenge. The biggest challenge for companies that want to invest sustainably and heavily in human capital may lie in figuring out what kinds of people they need. For all their apparent sophistication in data analytics, few employers have a clear sense of the underlying skills, competencies, and habits of their most successful employees — never mind their future workforces. As a result, they don’t know what to look for when they post jobs, interview candidates, and hire new employees.

A key sign of the imprecision of the hiring process is that nearly 50% of newly hired employees fail within 18 months.9 And that failure has significant costs — $15,000 on average, according to a CareerBuilder Survey.10

Why do employers struggle to understand what is important to succeed in certain positions? Partly, it’s because experts are notoriously bad at knowing what they know. According to the book How Learning Works,11 as individuals gain expertise in a particular role or field, they go through stages, from novices who don’t know what they don’t know to novices who do know what they don’t know to experts who know what they know to experts who don’t know what they know. The reason is that automating knowledge — essentially moving it into an individual’s subconscious as background information — is critical to freeing up space for the complex and creative tasks that an expert performs. As a result, though, asking top performers in a company to write a job description, for example, or to say precisely what skills are at the heart of correctly doing a job, is not as simple as it sounds, because the experts literally don’t recall. They are good at their jobs because much of their knowledge has been automated, so they aren’t able to easily articulate what skills are essential. What’s the solution to this problem?

For years, one of the most trusted ways to identify key competencies was cognitive task analysis, a process of observing and documenting the underlying activities involved in performing a job. But cognitive task analysis is relatively costly and time-consuming, so most employers don’t do it.

Herein lies an opportunity — and so a wave of providers is sweeping in to offer new ways to measure the skills of employees. Degreed, for example, has built a platform that records all the learning employees do, in an effort to understand their various learning pathways. It also offers a range of skill assessments to certify experts in various domains. LinkedIn Learning offers similar assessments, along with learning software to help people upskill, and tracks people’s self-reported skills and their connections to various jobs.

If players like these are successful in capturing the real skills at the heart of work and measuring their attainment, that could translate into more precise measurement of the return on investment in human capital. And that could, in turn, lead employers to take far better advantage of the emerging slate of disruptive tools dedicated to helping people learn in a sustainable and strategic way rather than an episodic and ad hoc way.