Current Issue • August 2018

Human Capital in the Digital Era: Leadership under Scrutiny

Human Capital in the Digital Era: Leadership under Scrutiny

D. Shivakumar in conversation with S. Ramnarayan

D. Shivakumar visited the Indian School of Business to deliver the keynote address at the Thought Leaders’ Summit on Shaping the Future of Human Capital Strategies in March 2018. Currently, the Group Executive President, Corporate Strategy at Aditya Birla Group, D. Shivakumar has had a long and illustrious career at PepsiCo Holdings India, Nokia and other leading corporates. Professor S. Ramnarayan caught up with D. Shivakumar after his visit to discuss the future of human capital in India.

S. Ramnarayan: Why don’t I start by asking you this − what do you see as some of the main challenges for the human capital agenda in today’s organisations?

D. Shivakumar: I would say the first major trend is technology. Second, I think there are shorter lifecycles for products and services. The third is the presence of millennials at work. Fourth, I would say, the lack of adequate research on the future of work. How will it all play out?

These are all big challenges. What would be some of the factors that you would personally be concerned about? Factors on which we are doing very little work?

Technology gives us access to a huge amount of information. We collect a lot of information but our decision cycle does not match the information cycle. We get information on a daily, hourly, weekly, fortnightly, quarterly or an annual basis, but our decision-making cycles are anything but linked to the information cycle.

Data is a commodity. The insights from data are the real value. So there is a situation that I call a DRIP world – Data-Rich but Insight-Poor.

Second is that we have too much data. Data is a commodity. The insights from data are the real value. So there is a situation that I call a DRIP world − Data-Rich but Insight-Poor. When you have too much data and too much information, what you require is insight. For that insight to emerge, you need an exploratory culture. That is a qualitative, not a quantitative culture. That is the role of leadership.

When there is so much technology, each job has a digital ratio to it. I believe that jobs in future corporations will be segmented as job plus 0 to 20% digital ratio, job plus 20-40% digital ratio and so on. If you look at your organisation this way, then the capabilities you will build, how you move people and where you live will be very different.

A planner’s job has a high digital ratio because he or she works with these tools. A revenue manager’s job has a high digital ratio. An internal Human Resource (HR) person’s role might not have a high digital ratio.

Because an internal HR person is still working more face-to- face?
Yes. However, a talent acquisition person in HR will have a high digital ratio.

As digital ratios get higher, certain roles are getting completely transformed. Preparing not only the individual but also the institution becomes critical. If you are talking about converting data into insights, for example, one part of it is an individual challenge. The other part is the organisational challenge − the processes and systems that you create for this translation. What changes do you think are necessary?

The ability to have an open discussion about the implications of the information and data you gather. To open up the discussion rather than close it early. Having an open culture to look at information. That kind of culture has to be led by the leadership.

More exploration, more learning, picking up ideas from different participants?

Yes. Talk to at least two people outside your industry regularly. Monitor leading trends. Ask yourself: how they can impact us? For example, suppose you are not ISB but Harvard, how would you act? When you put yourself in the shoes of leading companies and institutions, you look at the same problem differently.

When you change the perspective, the meaning that you derive from the same data will be different.

Yes, and externally focused rather than internally focused. [It helps] the ability to learn, unlearn and re-learn very quickly.

What are the other things that the individual needs to learn? Where do you find the biggest gaps in companies today?

As the digital ratios move higher, you have to ask yourself whether the job is needed or can be automated. Now the person who moves up the digital ratio has to develop more sensitive skills.

For example, forecast accuracy. In my last company machine accuracy was 72 and the best sales manager’s accuracy was 67. Does that mean the sales manager’s job of forecasting is over? No. In the machine forecast, the sales manager has to have the sensitivity to pick up both positive and negative trends from the same data. She or he should be able to feed that in much faster.

Another example: lifts in buildings. Why do you need the lift man or woman? So that people don’t hurt themselves. But wherever digital technology has come in, you just put your hand in, the door opens and closes, so people can go. Technology has completely eliminated the need to have somebody there. Now you don’t need a lift man. Maybe you need somebody else. The person who is doing the lift man’s job needs to do something else.

In an automated world, anything which is repetitive and can be done better by a machine will be done by a machine. For example, in a future world, you won’t have sports umpires because machines and technology can tell you whether the ball is in or out. You don’t need an umpire to do anything because the players will automatically do it. Many jobs will be like that.

But the jobs that will stay will always be social, and creative. The psychologist’s job will not go away. The HR manager’s job will not go away. The job of the Chief Executive Officer (CEO) will not go away. In problem-solving terms, the job of exploratory thinkers will not go away.

Talk to at least two people outside your industry regularly. Monitor leading trends. Ask yourself: how they can impact us? When you put yourself in the shoes of leading companies and institutions, you look at the same problem differently.

But other kinds of data would be coming in from systems that are driven by artificial intelligence. Therefore, the nature and quality of these roles will become significantly different.
Surely.

In your experience, do you find individuals struggling with some of these roles? What kinds of issues do you see in organisations that are coping with these various trends, whether automation or digitisation?

The big challenge that everybody copes with is their ability to manage data and reports. How many reports can I read? How much data can I comprehend? How do I go prepared for meetings? That is a function of the number of reports a company generates. The same set of managers want different slices of information but don’t have the time to read that information. So as a leadership team, you have to be clear that these are a few reports that everyone reads and monitors ahead of meetings.

Information drowning or data drowning is something that people need to watch out for. If everybody has the same information, what is the role of gut feel? What is the role of experience? How do you ensure that the person with the right information is empowered to take the decision? That is not something we are good at.

We are still making decisions as if we are operating in a physical world. We are not making decision as if we are living in a digital world. When there is so much information, what a good company would do is develop playbooks. If this is the information, this is the decision you can take. So we should enable faster decision-making to be quicker in the market, as opposed to bringing the data and having a laborious three-level or four-level meeting. If everybody has the same information, it will take one meeting to solve issues. You don’t need multiple levels of people to scrutinise the data.

As a matter of fact, a number of intermediate levels may not be required because the value added may be questionable. If the skills exist at the level at which the data is available, the decision can be made.
Absolutely.

You also talked about the fact that we are becoming an informal society but that the workplaces are becoming more formal. Can you elaborate on that?
The reason organisations have become more formal is that for almost everything, we have a rule or guidance. A workplace is an amalgamation of different cultures and different bodies. You want all of them to adhere to not the lowest common denominator but the highest common denominator. For example, consider interactions between men and women, interactions between engineers and non-engineers, interactions between different ethnic groups. What words and language can you use? How casual can you be? The whole concept of touch: if somebody has their arm around somebody else in today’s world, you will worry about that. The way people dress is something that will concern you. So we are sanitising the workplace with all these rules.

But young people, the millennials, do not understand this because outside they see a very informal society. When they land in the workplace and see a very formal system, it surprises them. It is over a period of time that they realise why the formality is there.

One is clarifying the rules. I think a very important part is being authentic as leaders and putting the company first above everything. What are values? Values are what a company would die to uphold. So values are reflected in the behaviour of leaders. That is what will work. What is the point in having a formal set of rules if the leaders don’t behave or don’t follow the rules themselves?

The psychologist’s job will not go away. The HR manager’s job will not go away. The job of the CEO will not go away. In problem-solving terms, the job of exploratory thinkers will not go away.

What do you see as primary challenges here? Organisations attract people from various parts of the society, from various other organisations. Once people are within the organisation, how do you ensure some of these dimensions?

The primary challenge for everybody, starting with the leadership, is to conform to the rules. An outlier can become an example.

In every company, we say teamwork is important. But if a leader, sitting in a functional meeting says, don’t bother about the other functions, it is over. So leaders have to conform to whatever they have agreed on. Clarify those rules to everybody in the organisation.

For example, one simple rule that every organisation has but does not follow: respect for the individual. Respect for the individual means you will not use foul language. You will not raise your voice. You will not scream at anybody. I have seen a number of CEOs and leaders do exactly those things.

Customer first is another value. How many times do people say that the phone call is from a customer but that they will take it later? If it is customer first, it means ahead of everything else. There are so many deviations.

I feel the basic problem is leadership itself. In a digital world, leadership which is not authentic will die. People will be scared of you but they will not respect you. So in a digital world, you need to shoot for respect and not popularity or fear. You have to be a respected leader and not a fierce leader or a popular leader.

You said the primary problem with companies today is disengagement far more than attrition. Why are there such high levels of disengagement?

People have high levels of disengagement because they are not able to relate to the purpose of the organisation. Neither are they able to relate to the leadership. As a result, they get into dysfunctional conversations among their own peers. Either there is fear in the system or it is a transactional system. Fundamentally, if people are not valued as people but as employee codes or numbers or as titles, then that is a problem. Digging beneath the surface and getting to know people as human beings is critical.

The underlying problem is the leadership crisis. We talked about the leadership qualities of positivity, energy, curiosity and passion. How do you facilitate the development of these qualities?

This is not a one-off thing. You have to do an audit of behaviour. Give feedback, take feedback seriously and reflect on feedback. Have people who are sounding boards. Create buddies in the system for all the leaders. Establish reverse-mentoring. Leadership will come under more scrutiny in the coming years than ever before. The reputation of a leader is not what it is inside the company but what it is outside the company. So leaders have to get used to that.

Leaders must develop a degree of comfort with being constantly assessed by people.

I would say that in a future world, there will be nothing called a perfect leader. Every leader will have enormous strengths and some opportunities to improve. Good leaders will focus on their strengths because that is where their real multiplier will come, as long as their weaknesses do not become a derailer.

Over-playing strengths will be a problem for some leaders. For example, if you are extremely articulate and you keep talking in meetings, people will say you are dominating your meetings. If you are very reflective and you take too much time to come to a decision, then people will say you are dithering and too slow. So you have to have the right combination for when you play your strengths and when you avoid your weaknesses.

If you were to look at some of the specific areas where educational institutions could make a positive offering, say some specific educational programmes, what would those be?

Education can do a lot. First, the teaching methods have to be far more practical, real-life and visual compared to the old textbooks and cases. Second, in each of the decisions that you make, your education should lead you to go beyond the impact on business to ask about the impact on society.

The third thing: how do you develop a hunger for learning? To learn a subject not for the sake of academics and marks but for a lifelong foundation. So how do you build lifelong foundational learning?

Practical hands-on projects force you to face the consequences of your recommendations in a way that classroom learning may not.

Any specific content areas for educational programme offerings in the area of human capital? We talked about a number of factors − technology, digitisation, the multigenerational workforce.

Your courses must have a very strong technology foundation − technology in marketing, technology in supply chain, technology in HR. So the platform has to change to a technology course.

Next, you have to add softer aspects like working in ecosystems, collaboration or dependent growth. Then you have to address what I call swift changes or challenges. Not strategic ability but strategic agility for the future. What is agility? Which industries display agility? Which sport displays agility? For example, T20 today is a 240-ball strategy game. You can’t be a single skill player in T20. You have to be a fielder, batsman, bowler, wicket-keeper, captain. The more roles you can perform well, the higher your value.

If everybody has the same information, what is the role of gut feel? What is the role of experience? How do you ensure that the person with the right information is empowered to take the decision?

If you were to look at the challenges of executive development − learning and unlearning development − what methods work well in individuals who excel in these areas? What are they doing? What are the ways in which they are unlearning or learning? What is it that you would like to see more of in our organisations?

An essential aspect of learning and unlearning and re-learning is humility. If you think you know everything, then you have a problem. Second, you have to realise that there is a shelf-life to both your experience and to your information. If today a Marketing Director or a CEO is quoting examples from the 1990s in team meetings, she or he is way off target.

Most of these technologies are also in a way competence-destroying. Older competencies may no longer have a place. Unless you are investing in yourself, even if you are very, very bright, you become outdated.

If you go back 20 years, development was company-led. In the last ten years, it was boss-led. I believe development of the future will be individual-led. You have to take ownership of your career and your own development.

What are the research areas human capital academics should focus on? Which are the areas that we don’t have sufficient insights on?

Human capital is about learning and unlearning. Human capital is about being digitally ready. Human capital is about insights. These are the kinds of things that we should measure. If you grow human capital, then you realise the potential of the individual.

There may be other measures like the number of internal promotions. What are the top five or ten measures that should form the human capital index? That would be a good area of research.

Human capital is not about lifelong learning alone. It is also about lifelong teaching. How many good teachers are there among the bosses? That is one metric the human capital index should measure.

Thank you so much.

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