A major wave of HR software buying going on, but it’s just a repeat not a revolution

According to research by Bersin by Deloitte, the long-delayed purchase of human resource (HR) solutions by many companies is finally going to happen: 61% of HR leaders surveyed last year said they plan to replace aging systems in the following 18 months. As reprinted in CIO Journal by Deloitte

As reported in “Managing Talent through Technology: HCM Buying Trends in 2013”, 40 percent of the 308 senior HR executives surveyed have budgeted more than $500,000 to replace a core human resources management system (HRMS). The same percentage has allocated more than $750,000 to purchase and implement an integrated talent management suite.

In a majority of cases (53 percent), existing HR systems are seven or more years old. Among large enterprises, the number of HR organizations using 7-year-old systems or older rises to 63 percent. Many of these systems are homegrown or heavily customized, and users perceive them as outdated and expensive to maintain.

If we needed proof that companies are operating in the present with the tools designed for a distant past, this is it. These are systems that were designed over ten years ago, in general, prior to the rise of the cloud, and which lack basic functionality, like analytics (57% report this as a major issue with their existing systems), inability to integrate with other systems (54%) and business goals cannot be met using these technologies (54%).

The problem is that we are at the turning point of vastly different notions of the world of work, and most of the newest and most profound thinking is not baked into the systems available today. So, the massive transitional approach to HR — and other enterprise software — locks companies into these decade-long periods of stagnation.

One thing companies could do, is to adopt Reid Hoffman’s Netflix approach to tracking vacation time: don’t. Let people take as much as they want, so long as their work is getting done and co-workers are good with it. Likewise, Netflix policy for expensing travel, entertainment, gifts, and travel, which is five words: act in Netflix’s best interest. That eliminates a bunch of make work and HR staff. (I have a post coming later this week on Netflix’s principles and what we can learn from them.)

At any rate, I expect that while some of the obvious issues of the last generation of HR software will be remedied, I can’t help but think that this is just another turn of the screw, and not a revolution, alas.

Switching from flat jobs to flow-to-the-work gigs

Roger Martin, the dean of the University of Toronto’s Rotman School of Management, has a piece in the Harvard Business review that makes a case for transitioning away from the 20th century model of treating today’s creative workers (although he still says knowledge workers) like manual laborers: focusing them on a single role, incenting them to look busy at all times, and laying them off when there is a downturn. This binge-and-purge model leads to a great deal of waste and delay, and needs to be fixed by a new form factor for work, one that loosens the pigeon-holing of people to roles, and is based on a new compact between the creative and the company where work becomes a series of project gigs, not a permanent role doing the same “flat work” indefinitely.

Roger Martin, Rethinking the Decision Factory

The key to breaking the binge-and-purge cycle in knowledge work is to use the project rather than the job as the organizing principle. In this model, full-time employees are seen not as tethered to certain specified functions but as flowing to projects where their capabilities are needed. Companies can cut the numbers of knowledge workers they have on the payroll because they can move the ones they have around. The result is a lot less downtime and make-work.

Think of a freshly hired assistant brand manager for Olay at P&G. She may initially view her role as pretty standard: helping her boss guide the brand. However, she will quickly learn that the job is ever-changing. This month she may be working on the pricing and positioning of a brand extension. Two months later she may be totally absorbed in managing production glitches that are causing shipment delays on the biggest-selling item in the Olay lineup. Then all is quiet until the boss approaches her desk with yet another project. Within months she will figure out that her job is a series of projects that come and go, sometimes in convenient ways and sometimes not.

This characterization of knowledge work is gaining traction among management thinkers. In “The Rise of the Supertemp” (HBR May 2012), Jody Greenstone Miller and Matt Miller describe an emerging class of managers who are focused on short-term, high-value-added, knowledge-based projects. Similarly, the Silicon Valley legend Reid Hoffman, with Ben Casnocha and Chris Yeh, suggests in “Tours of Duty: The New Employer-Employee Compact” (HBR June 2013) that organizing knowledge workers’ employment into time-bound “tours of duty” can help companies retain these workers and keep them happy. And although actually organizing knowledge work around projects may seem a radical idea in mainstream business, it is very familiar to professional services firms, some of which have become as large as manufacturing corporations. In 25 years Accenture has grown from its inception as the “systems integration practice” of Arthur Andersen into an independent firm with revenue equivalent to 3M’s. The iconic consultancy McKinsey & Company has about as much revenue as a typical Fortune 500 company.

These companies are made up almost exclusively of knowledge workers. When a project comes in, a team is assembled to carry it out. When the project is finished, the team is disassembled and its members are put on other projects. They don’t have permanent assignments; they have established skill levels that qualify them to work in certain capacities on certain projects.

I wrote as some length recently on the “Tours of Duty” thoughts of Hoffman et al (see Hire for “Tours of Duty” instead of pretending jobs are forever), saying

I believe that the new form factor for work is fast-and-loose, where companies strive for high flexibility and agility. The downside of that can be the direct impact on people who can’t flex as fast or as far as large, amorphous organizations can. So setting a hard date for making the determination about stay-or-go allows the parties to operate in a trust relationship, but also for each to retain their flexibility. This reminds me of the arguments for term marriage, for obvious reasons.

My sense is that Hoffman and his co-authors have codified one aspect of the new business ethos of work for the postnormal economy, replacing the illusion of open-ended employment with the certainties of a closed-ended tour of duty.

This same thinking is reflected in the “flow-to-the-work” model developed by Filippo Passerini at P&G’s Global Business Services, which was formed in 1998 to share IT and employee services, and in 2003

Roger Martin, Rethinking the Decision Factory

P&G in 2003 engaged in what was then the biggest outsourcing deal in corporate history: It sent approximately 3,300 jobs to IBM, HP, and Jones Lang LaSalle. Passerini transferred to those organizations the GBS employees who were performing the most-routine, least-project-oriented work. This allowed him to think more innovatively about the jobs that remained within GBS. The classic move would have been to structure them as flat jobs, assuming a consistent stream of similar work for each one.

Instead Passerini decided to embrace the project nature inherent in the work still at GBS. He made the part of his enterprise that remained within P&G what he called a “flow-to-the-work organization.” Of course, some of his employees were still working in flat, permanent jobs, but a large proportion were assigned to whatever projects had high urgency and high payoff. These knowledge workers didn’t expect to stay in one business unit in one region; they understood that they would be working in teams organized specifically to tackle pressing assignments in succession.

This rethinking of the nature of work — moving away from tight-and-slow, stuck-in-a-pigeonhole role, with supposed endless employment but actually being treated like a disposable liability — is a quiet revolution happening within companies like P&G. This transition from flat jobs to flow-to-the work gigs is going to happen everywhere possible, as fast as business culture can handle it.

Jobs & the future of work according to LinkedIn CEO Jeff Weiner

The future of work and jobs is going to be complex and messy. It is fraught with uncertainty and will mean redefining what we think is work. At least that’s what LinkedIn CEO Jeff Weiner says. And in my opinion, he isn’t that off the mark.

Hire for “Tours of Duty” instead of pretending jobs are forever

In June, Reid Hoffman (the co-founder and now chair of Linkedin), Ben Casnocha, and Chris Yeh published an article in Harvard Business Review that presents some new thinking around business operations, specifically with regard to establishing a new compact, as they put it, between employers and employees.

Reid Hoffman, Ben Casnocha, and Chris Yeh, Tours of Duty: The New Employer-Employee Compact
For most of the 20th century, the compact between employers and employees in the developed world was all about stability. Jobs at big corporations were secure: As long as the company did OK financially and the employee did his or her job, that job wouldn’t go away. And in the white-collar world, careers progressed along an escalator of sorts, offering predictable advancement to employees who followed the rules. Corporations, for their part, enjoyed employee loyalty and low turnover.
Then came globalization and the Information Age. Stability gave way to rapid, unpredictable change. Adaptability and entrepreneurship became key to achieving and sustaining success. These changes demolished the traditional employer-employee compact and its accompanying career escalator in the U.S. private sector; they are in varying degrees of disarray elsewhere.
We are not the first to point this out or to propose solutions. But none of the new approaches offered so far have really taken hold. Instead of developing a better compact, many—probably most—companies have tried to become more adaptable by minimizing the existing one. Need to cut costs? Lay off employees. Need new skills? Hire different employees. Under this laissez-faire arrangement, employees are encouraged to think of themselves as “free agents,” looking to other companies for opportunities for growth and changing jobs whenever better ones beckon. The result is a winner-take-all economy that may strike top management as fair but generates widespread disillusionment among the rest of the workforce.
Even companies that have succeeded using minimalist compacts experience negative fallout, because the compacts encourage turnover and hamper employee productivity. More important, although the lack of job security indirectly creates incentives for employees to become more adaptable and entrepreneurial, the lack of mutual benefit encourages the most adaptable and entrepreneurial to take their talents elsewhere. The company reaps some cost savings but gains little in the way of innovation and adaptability.

The authors do a great job of diagnosing the downside inherent in companies seeking greater flexibility by stretching the old compact to its limits, where most the the stretching is done by the employees, since they are the weaker in an unequal power relationship with the organization.
But the authors offer an alternative. And like most optimizations it requires more effort at the start so that less cost (and pain) is borne at the end. In a nutshell, they propose that instead of perpetuating the old, late industrial conceptual model of employment — nominally employment forever, but in fact, a highly precarious unstable deal — a new compact should be put into place that takes as its starting point the new form factor of work.
First, they propose that jobs should be thought of as gigs (although they don’t use the term), as “tours of duty” with a proscribed duration, and with a clearly defined start-or-go trajectory. This is, they say, the shift from assumed — and seldom realized — mutual loyalty, and instead structured as an alliance. This is similar to the consulting company pattern of “up or out”. Again, from the article:

If you think all your people will give you lifetime loyalty, think again: Sooner or later, most employees will pivot into a new opportunity. Recognizing this fact, companies can strike incremental alliances. When Reid founded LinkedIn, he set the initial employee compact as a four-year tour of duty, with a discussion at two years. If an employee moved the needle on the business during the four years, the company would help advance his career. Ideally this would entail another tour of duty at the company, but it could also mean a position elsewhere.

And the company’s responsibility is to groom the worker for lifetime employability in lieu of lifetime employment. The tour of duty sets a time period of mutually agreed trust, with two agreed upon possible outcomes. Either the company will set up a second (or third, etc.) tour of duty at an appropriate time in the tour, or either party can indicate that this tour will be the last, and that case, the company will work to help the soon-to-be-departing worker a new gig.
It’s imperative to clearly define ‘moving the needle’, so that both can agree if and when it is accomplished. Here’s is where the work of optimizing takes place. The organization has decided that Bette is a great candidate to join a new product team, but instead of some generalized notion of quarterly and annual reviews, the goals can be much more entrepreneurial in spirit.
The authors state that this is an end run around centralized HR:

This approach can’t be executed by a central HR function; you’re making a compact, not drawing up a contract. We’re not suggesting that you negotiate a guaranteed arrangement that spells out all the specifics—a rigid approach is the opposite of an entrepreneurial mind-set. You’re building a trust relationship that’s based on the employee’s actual job, so the conversations must be handled by direct managers.

This bears on the second element of the author’s approach: the company is obliged to maintain an active network with other companies, alumni, and organizations so that departing alumni can take on new work elsewhere. And to accomplish that, the company must create and maintain an active alumni network, at whatever expense, so that career-long relationships between alumni and employers.
I believe that the new form factor for work is fast-and-loose, where companies strive for high flexibility and agility. The downside of that can be the direct impact on people who can’t flex as fast or as far as large, amorphous organizations can. So setting a hard date for making the determination about stay-or-go allows the parties to operate in a trust relationship, but also for each to retain their flexibility. This reminds me of the arguments for term marriage, for obvious reasons.
My sense is that Hoffman and his co-authors have codified one aspect of the new business ethos of work for the postnormal economy, replacing the illusion of open-ended employment with the certainties of a closed-ended tour of duty.

Finding the right revenue model for office sharing

When it comes to the share economy and sharing physical space, Airbnb and its billion dollar valuation has stolen much of the show in the first act of a larger story about how consumers are choosing access over ownership. But the question remains whether a startup could build a successful business model not around sharing one’s home but around sharing office space.
A changing workforce
The technological trends driving the need for more flexible office space are well known and related to mobile and social technology. The number of employees working remotely at least once a week is steadily growing, and over half of companies surveyed offer “virtual work options.” The recession has also left a number of people with contract work, rather than full time employment. And a final, perhaps overlooked trend, is that as women have steadily entered the workforce, there’s a greater probability that a couple will move to the geographic work location of the primary breadwinner, be it the man or woman, leaving the other partner to work remotely.
The evolution and growth of coworking spaces has been analyzed here at GigaOM Pro. Coworking spaces are analogous to traditional car sharing.  Zipcar, for example, actually controls and manages the underlying asset being shared. And similar to the Zipcar story in which peer-to-peer car sharing startups like RelayRides and Getaround entered the market with the idea to build platforms to share the assets already out there in the world (everyone’s private car), startups are building platforms to see if companies are willing to share their excess office space. The idea goes: Why manage and put additional capacity into the market when there is available capacity that is going unused?
And the startups are jumping in, including Loosecubes, Liquidspace, Kodesk and Europe focused DeskWanted. Typically having raised anywhere from five to ten million dollars each, it’s still early in the race to figure out exactly what membership and revenue model will capture the market for remote workers that have tired from working at home or who are nomads in need of a desk for the day.
The elusive revenue model
Different startups are pursuing different revenue models. At first a strict percentage of transaction model, similar to what Airbnb uses, would seem a logical way to go, particularly if you’re the first mover and can create a critical mass around your service.
But Loosecubes, which has received some media attention, partially because AOL-founder Steve Case’s VC firm Revolution backed the startup earlier this year, is trying a different tack. After experimenting with a transaction based models, Loosecubes is transitioning toward a community membership model.
To access Loosecubes, members have to sign up via LinkedIn or Facebook. The reason for this is that Loosecubes wants to use those networks to allow its members to access office space, capped at 3 days per month, from those people in their network with the option to purchase a premium membership that buys access to office space from those folks outside of their network. Loosecubes will end up putting extra supply into the network by paying offices with 10 or more available desks to share those desks. Network effects will be critical for whichever company can stand out in this space and so far Loosecubes has 15,000 members and 1,000 office providers.
The ultimate idea here is to generate value for members, both hosts and renters, by allowing them to network and build connections with those in their industry, and one way Loosecubes does this is by allowing those offering space to select the types of professionals it wants in its space, whether it’s a writer or a programmer.
Selling to companies
Loosecubes founder Campbell McKellar described this philosophy to me as “bringing together local, professional and social in niche interactions.” And while there’s likely value to be had from bringing together similar professionals in a novel work environment a few days a month, the longer term vision for a company like Loosecubes is about being a B2B company that could ultimately sell to corporate accounts that want to offer their employees the possibility of working remotely a few days a month or to give those employees options as they travel. Asking a business to pay for a subscription should be more viable than asking individuals to make a new transaction every time they want to book space. Unlike Airbnb where a vacation is a one off transaction event, office sharing should become part of a regular work lifestyle.
No doubt the folks at LinkedIn and perhaps Facebook are watching this phenomenon closely since the conversion of virtual professional connections into physical connections is of immense value. LinkedIn co-founder Reid Hoffman has invested in Loosecubes’ main competitor LiquidSpace, noting to The Wall Street Journal that “people are interested enough to try transactions on both sides, but it’s early.” The question now is whether people will prefer individual transactions or whether the phenomenon is pervasive enough that professionals and businesses will want to pay a premium to become part of a community of office sharers.

Question of the week

Which model will prevail in the office sharing market?

France’s Viadeo has ‘headstart’ on LinkedIn in China

With $32m in the bank, French professional networking site Viadeo is expanding internationally — and the head of its Chinese operation says that the company is expecting to go head to head with Reid Hoffman and LinkedIn.