Global Workers Are Ready for Retraining

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Welcome to the hbr ideacast from harvard business review. I'm alison beard. What does the workforce of the future look like? How can we adapt to an increasingly dynamic global economy? How many jobs can we automate? What new skills will people need? And what's the plan for getting from here to there? These are some of the questions that keep business leaders up at night. Many assume that the employees they currently have, especially those in lower income middle skills jobs, might not be able to make the transition. They'll need to be laid off, replaced by technology or younger people. But our guest today says that managers around the world are underestimating their workers willingness and ability to learn. If they instead adopted a more innovative approach to retraining, it could yield huge benefits. Joseph Fuller helped conduct a survey of thousands of workers and leaders across 11 countries in a joint venture between Harvard Business School's Project on Managing the Future of Work and and the Boston Consulting Group's Henderson Institute. He's a professor at HBS and a co author of the HBR article your Workforce is More Adaptable Than youn Think. And he's here today to discuss his findings and recommendations. Joseph, thanks so much for joining us.

My pleasure, Allison, thanks for having me.

So let's first talk about your survey. What kinds of workers and managers did.

You speak to in all of these countries?

Well, for the managers we looked at companies of all size, different industries, service, manufacturing, export oriented, strictly domestic across eight countries. For the workers we looked actually a broader set of countries, 11 countries. And we specifically looked at workers who on average had less than the median household income in that country and the population was limited to people who had two years of post secondary education or less. So that combination gave us a population of middle skills workers who are not enjoying the type of uplift we see for knowledge workers and people advanced degrees.

So these are companies that are primed for lots of change in their industry and then workers who might be at risk for being out of work soon.

The workers who are most commonly assumed to be at risk. If you look at the data in the developing world, the workers that have been displaced over the last 20 years tend to be high paying middle skilled workers who do routine work. I mean that conjures up images of assembly lines and that's right, that's a classic routine job. But it's any task that has just a Modest amount of variability around what you have to do. So a big category of workers that's been affected by technology in the last 20 years are middle skills, white collar workers who did routine work like processing health insurance claims or keeping personnel records. They only had four or five main tasks that constituted the bulk of their jobs. And so the vast majority of those transactions, in the case of, let's say, human resource systems, could be captured in software.

And what did you hear from these workers? What surprised you?

Well, if you read a lot of the popular press, very often the kind of underlying logic is deer in the headlights, scared to death of what's going to happen, very, very worried that they will be made redundant, and very often very evocative and heart wrenching stories of people who have suffered that and now having almost impossible time finding new work that is equivalent in salary and benefits to that which they lost. And I don't want to even remotely dismiss the likelihood of that. That does happen and it's very, very difficult in those populations. Having said that, the general characterization that is often either explicitly stated in that coverage or implicit in that coverage is powerlessness being acted upon by global forces. It's really a story of victimization. So we wanted to test that. What we found in fact, was quite surprising to us. The first is that this population, who we would anticipate would feel most exposed, is actually rather excited and bullish by the prospects that change in the workplace can have. Many of them thought that technology had the prospect of making their work more interesting, less dull, less dangerous in some instances. We often got comments like, I know how my smartphone has kind of improved my personal life. If this type of technology were in my workplace, maybe I'd have to do less things that I find very boring or unfulfilling or actually aren't that productive. Another example was with things like gig economy job platforms. Maybe I can qualify for a second type of job, or maybe I can find an alternative force of income. But the overall finding was not one of I'm scared to death of this and I've adopted some kind of fetal position. It was, these are pretty encouraging trends and might have a favorable impact on my life.

But that stood in stark contrast to what you heard from managers.

Yes, well, the first reaction of managers were my workers are scared of the future and they're anxious about what's going to happen. And then we talked to managers about what would be the barriers to workers adding to their skills and what were the types of attitude of workers. What we consistently got was an undercurrent in both interviews and our survey data that workers want someone to make this problem go away. The number one word I would describe to describe workers attitude about change is agency. They said consistently, I am responsible for getting ready for the future. I'm not expecting the government to do it for me. I'm not expecting my employer to take me by the scruff of the neck and lead me there. There was a real misfit between the way employers we think, for lack of a better term, stereotype the employees as once again deer in the headlights. Whereas in fact they're not that at all. They want to get ready for the future.

So these workers want to jump into the future with both feet. They want to build these new skills, but something's stopping them from doing it. So what is holding them back?

Right. This is something that is common across all the markets. And I think the overarching barriers can be described as falling in two categories. The first have to do with knowledge. They have a sense that they need to get prepared for the future, that there are going to be new requirements for them to keep their jobs or to qualify for advancement in their workplace. But they're not quite sure what it is. They're not sure what specific skill is really relevant for the future for them, where they should get it, what would be a credential that their employer would accept or embrace? As we think Joe needs to know more about digital controllers and how to program them. If he went to the local community college and took this course, we would welcome that as an endorsement of his skills in that emerging area. The second is economics. These are not highly paid people. These are the type of people we talk about as not being able to endure a couple of unexpected financial pinches like a bad a car wreck or a big auto repair bill or a healthcare emergency. They do not have a bank account, a tax deferred training account or something like that which they can draw down to do this. Nor do they have a lot of time. And those things are collinear. If to get this credential I'd have to reduce my working hours, I'm reducing my income, I may not be able to pay my rent, feed the kids, support my parents, whatever it is I'm doing. So because these are people that don't have a lot of slack in their systems, it's very, very difficult for them to match what they need to do, where they need to do it, how they need to finance it and where they're going to get the time. That's a very difficult equation for them to balance. Right?

So now we're getting to the crux of the matter. They need help. So where are we going to find this help? Is it government programs?

Is it organizations that is often very strongly influenced by where the worker is? So if you're talking about an aspiring worker in Central Europe, they would be entering the workforce through a very carefully curated, tried and true apprenticeship system where educators are aligned with employers to define what those skills are. But if you go to the United States, we do have things like workforce boards and community colleges, which can be great resources, but they're very, very poorly configured to support adult learners. Saying to somebody who's working in a manufacturing or service setting has a hour long commute to get to an eight hour job and then an hour long commute home. O you should stop by the community college every Tuesday, Wednesday and Thursday from 3:30 to 6:30 for the next six months to get your certificate in whatever it is you need to learn to keep your job or qualify for advancement and hope that your fourth grader, second grader and kindergartner are good at warming up the proven dinners because they're going to have to do that. Or we hope you've got neighbors or parents or a spouse that can do that. Bit unrealistic. So we believe that the first thing here is for employers to look at their own data. They all put almost universally the skills of my current workforce or the accessibility of people with relevant skills as their most pressing current concerns. If that's your most pressing current concern as an executive, your job is to manage that situation, not to observe it and be worried about it. What this data tells you is you've got a population that's willing and eager to try to fill those gaps and they work for you. Today, that's a pretty important thing to keep track of if you're an employer for a couple of reasons. First of all, at this level of skill, what causes a company to make what I'm going to call a failed hire? We posted a job, we hired somebody and they didn't work out. That's very expensive for a company. The smallest estimates in terms of what that cost as a company is about 20% of what you pay that person annually. And when you really start adding the indirect cost and some of the other things that are clearly related to unplanned turnover, you're easily getting into 30, 40% of one year cost. So it's a big cost.

And how does that compare to the cost of retraining the workers you already.

Have that's the math you need to do. But one thing we can say about when you're deciding to invest in that worker, you're making that judgment based on their personnel file, not their resume. I know that Alison has not missed a day of work for eight years. I know that she always qualifies for the maximum number of rollover days every year because she never misses a day of work. I know she's reliable. I don't know if she's got the aptitude to this job, but many of the variables that would have caused that failed hire. I have definitive insight about Allison that she's not going to suffer from those. So now I'm making a much cleaner investment decision. Okay, maybe I need to send her to that Community College from 3:30 to 6:30 for six months to qualify her for the type of job I'm finding it hard to fill. That might cost 3,000 or $4,000 of tuition. She may say that she needs to time phase her work and start earlier in order to do that. She may say I can't start until next quarter because my spouse can then accommodate the fact that I'm only going to be getting home at 7 o' clock at night, not when I normally get home at 5:30. But all of those considerations are now weighed against the chance, the odds, that she's going to be a success when she does that.

Does the calculus change though? If I'm 50 it might.

But we know a couple of other things there that in all these markets, with the exception of India and Indonesia, the actual working population is either stagnant or falling. So if you look at the most severe example of this, of course, is Japan, which has a negative population growth rate. That is the place is shrinking. What you'll see in Japan is a very active set of corporate and government policies try to keep people in the workforce longer and to put them in jobs that they're actually able to do that reflect the process of aging. So they're very innovative companies in Japan that manufacture ectoskeletal devices which help older people, let's say construction sites or in manufacturing settings or warehouse settings, supplement their physical strength to lift weight. And the reason for that is that Japan desperately needs people between the ages of the historical retirement age, which was around 60, to keep working into their 70s and beyond if they're so inclined. In places like the United States, where a number of people have inadequate retirement savings, extending that work life for an older worker is a benefit both to society and to that worker.

Is there any danger that workers are actually overestimating their ability to learn all of these new things. So they're willing, they're excited about it, but they actually can't.

Sure. And I think one of the things that any employer would need to understand is essentially their workforce demographics, not from just an age and gender point of view, but from a skills point of view. And they're going to see logical pathways from current jobs to the jobs of the future. What we know does not work if taking somebody that has worked, let's say, in construction or mining and trying to turn them into a cybersecurity programmer.

Coal miner decoder.

Coal miner decoder. It's a wonderful story. It's a wonderful image. It's not that it's inconceivable, but it's so unlikely and so unrelated to the actual lives and aptitudes of people as to be deceptive. But let's take that coal miner. Coal mining shares a lot of DNA with other jobs, construction. So if I'm a coal miner, there are a lot of things about the workplace I'm used to. I'm used to the fact that I'm around big, dangerous machines and you better pay attention to them or you're going to get hurt. I'm used to working in teams. So my work is influenced by and my work influences those of the people around me. I know that if there's something that seems to be a safety problem, I need to call it out right away. So there's been great research done on what those transitional maps, what those shared genomes to change my biomedical reference look like. If I've got a workforce that does certain tasks well, how I position them in jobs I know I'm going to need in the future that draws on that DNA is the question.

So business leaders can find these transitions within their own organizations?

Yes. And this gets to another popular myth that technology just blows away jobs. That doesn't happen very often. What technology actually does is replaces tasks within jobs, makes them more efficient, safer, higher precision. So many employers are worried about future skills. They're not worrying so much about how I go from the workforce I've got to some completely transformed workplace they're worrying about, will my machinists of today be able to interact with the more highly programmed, more highly automated production cells of the future.

You looked at such a wide swath of countries from Indonesia to the United Kingdom, Brazil and China, at a Sweden and France. Did you really see the very same dynamic in all of those countries? Or were there any outliers there were some outliers.

The two big outliers were France and Japan. In France, there was a distinctly greater emphasis placed on the workers to say the government's responsible for this, for retraining, for retraining, that that's who I'm looking for. And that reflects everything, I presume, from local political conditions there to how training has been conveyed in the past, to the belief with this constituency that employers are unlikely to do this and the government's essentially going to force them to do it. The second market was Japan, which was easily the most confused of the populations in terms of clarity of who is responsible. They're almost evenly distributed between my employer is responsible, I'm responsible, the government's responsible. In Japan. You have large pockets of a phenomena that we're beginning to see in European countries in the United States, which are effectively job deserts, where the historical employment base has gone away. It could be natural resource oriented, for example, in the United States. And it'll be interesting research for us or others to pursue going forward to look at some of these markets separately and drill down. In fact, one of our motives for doing this work, Allison, was to start raising some additional questions like the question of employers, of have you really done the math here on the cost of playing the spot market for labor versus the cost of taking the proven workers you've got in getting them where they need to be because that's where they want to go?

Yeah. And so everywhere else in the world you found the same dynamic workers ready, willing and able managers thinking it's a worse situation that it could be. Are there countries that are already doing a better job than most of moving that adult workforce into the new skills that they need?

Well, there was some variability on the employer's attitude too. So for example, Indian employers were more optimistic about their workforces attitude about getting new skills than, let's say OECD member countries. But I would say that what you see pretty consistently is everybody's got some pieces of the puzzle figured out and nobody's got it all figured out. If you want to look at a market that has a very dynamic online distance learning capability with an exploding inventory of quality resources, the United States is dominating that. Everything from EDX to Coursera Khan Academy to support learning. If you want to look at a country that has done a very, very good job in the last 20 years or so, beginning to encourage employers to really revisit this work based learning for aspiring workers or on the job training to keep their current workers, it'd be the UK where they Introduced several governments ago, a payroll tax of half a percent of payroll. And they basically said to the employer, you pay this tax and we'll rebate it to you up to 100% if you spend that money on your either apprenticeship programs or work based learning for your workers, or you can just send it to us and we'll spend it on something. Well, guess what? 100% of the employers say, well, if you're going to take it away from me, I want it back. But UK through that period has gone from being distinctly behind in multiple categories of skills for this type of worker to being much more competitive with the German. So the Swiss, the Danes, the Austrians, countries that with 50 year histories of very robust institutionalized apprenticeship programs and work based learning programs. You can see progress also where you've got companies, often as happens, larger companies are early movers in creating new approaches. But you can see the German and Swiss multinationals really beginning to try to infuse structured work based learning in their international operations. So if you go down to some of the states like South Carolina and Tennessee, that have been sites of significant foreign direct investment in things like manufacturing companies like BMW, Siemens, they're beginning to bring their personnel practices from Germany and apply them to American workers. Apprenticeship systems, cooperation with local educational resources, high levels of technical training for specific jobs, engaging Even younger people, 12, 13 year olds about first of all, you should stay in school. And secondly, here are the types of things you should stay interested in if you really aspire to work at our BMW plant, the largest BMW plant in the world is in South Carolina. They're saying to kids, math isn't torture, it's actually fun. And this is some of the ways you can do it. And I'm sure there are still South Carolinians who are convinced that math is torture. But more of them are beginning to be able to put two and two together, no math pun intended. That gee, if I stay in high school and I work hard at math, I can get a job at the BMW plant. And that's one of the best jobs near where I live you can get.

Is there anything else companies should be doing?

Well, I think in a lot of industries they need to be cooperating more. It's true that there are strong industry associations in certain markets that begin to define skills, but in a lot of markets, certainly everywhere from Brazil, India, United States would be good examples. The employers still view the game as one of competition that I'm trying to get the good workers and I kind of hope you get bad ones and that's great if you can win that game, but it's also effectively it's a version of the tragedy of the commons. If we're all going to try to cherry pick the education system, if we're all going to try to keep obscure my view of what I'm going to need to be successful in the future, the likelihood there's a buoyant supply of people who are qualified for that work and interested in it, you have low so now I'm reduced to playing the spot market for labor and I better be the most well regarded employer that pays the most in the right location to win that battle. But if I'm in the wrong city, I'm not the top dog in the industry. I'm not the job that everyone wants coming out of whatever school could be trade school could be MIT if I'm smaller. Industries are way better hanging together where otherwise they're going to hang separately, defining what the skills are, working, working with educational resources to have them articulate those skills in curriculum, in courses of study, working with my labor unions about how I'm going to soft land the workers I've got in a lot of markets can't get rid of except an exorbitant cost to have them future ready. That type of alignment should not just be happening at the company level, it should be happening at the industry level. And it should be facilitated by government policy as opposed to impeded by policies that cause those employers to work worry that if they started talking about the future, later on some legal justice minister or some state attorney general in the United States will decide that they can get kudos for suing the industry, for colluding on what skills were needed in the future.

Well Joe, you've given us a lot to think about. Thank you so much for coming in and talking to me today.

My pleasure, Allison.

That's Joseph Fuller, a professor at Harvard Business School. He's also the co author of the HBR article your Workforce is More Adaptable than youn Think. You Can Find it in the May June issue of Harvard Business Review or on hbr.org. This episode was produced by Mary Dew. We get technical help from Rob Eckhart. Adam Buckles is our audio Product Manager. Thanks for listening to the HBR IdeaCast. I'm Alison Beard.