What’s keeping employers up at night? Employee retention.  A more transient society plays into this but so does a struggle by employers to offer the pay and benefits necessary to keep employees with them long term. One study indicates that 69 percent of employees say searching for new jobs is a regular part of their routine. This month's Action Brief explores the changing landscape of employee loyalty and what businesses can do to decrease turnover of valued workers.

The unemployment rate, currently at just over 4 percent, is partially driving what is known right now as an “employees market.” The natural rate of unemployment is between 4.5 and 5 percent. Rates below that threshold make it increasingly difficult for businesses to retain enough workers to maintain ideal operational capacity. In addition, there is a mismatch between the skill sets employers need and those possessed by the unemployed population

Further complicating things for employers is the tendency of millennials and members of Generation Z to change jobs more frequently than their baby boomer counterparts. In 2016, a U.S. Bureau of Labor Statistics study showed that 18-35 year-olds in the workforce had an average tenure of 1.6 years on the job. The “gig” economy and the of lure entrepreneurial adventures are detracting even further from workforce stability. In addition, some urban areas experiencing high-business growth are also facing housing shortages and/or unaffordable housing prices for middle and lower class workers, making it difficult for potential employees to help fill jobs in those locales.

Even if businesses aren’t feeling the pinch in the recruiting and hiring stages, it's still important for them to evaluate their employee loyalty levels and retention plans. Why? Turnover can be expensive—some studies put the cost at 6-9 months of the employee’s salary—other studies estimate a higher cost. Turnover can also lower productivity levels, reduce employee morale, and jeopardize trade secrets.

Why aren’t workers more loyal? Studies show that workers who are changing jobs are doing so for a number of reasons including:

• Lack of career advancement pathways
• Underutilization of skill sets
• Need for greater flexibility and better work-life balance
• Unsatisfactory pay and benefits packages
• Lack of engagement in the company and work efforts (A recent Gallup poll shows that 87% of employees are disengaged at work.)

Besides competitive compensation and traditional benefits, what will help employees want to stay? Businesses are working to find the right answer to this question. They are finding that employees want more generous benefits, such as:

• Mentoring, training, professional development, and coaching
• Student loan repayment assistance (PwC offers each of its employees $1,200 for this purpose.)
• More lifestyle perks including childcare benefits, access to mental health services, and expanded leave options
  
  

Some employers are getting creative with benefits to help promote work/life balance. Salesforce provides employees with six days of paid volunteer time per year and $1,000 a year to donate to a charity of their choosing. Airbnb provides employees with an annual stipend of $2,000 to travel and stay in any Airbnb location worldwide. Netflix provides new parents with one paid year off and the option to return to work part-time. While these benefits would be challenging for some companies to provide, they can still appeal to potential and current employees with wellness programs, free snacks, flexible work hours, and relaxed working environments.

Employers are also discovering that workplace culture and employee engagement play a huge role in retention. Studies show that engaged employees are more productive, more customer-focused and can help companies be more profitable. How can employers promote engagement? Some of the top drivers in this area are:

• Demonstrating ethical leadership skills and commitment to the success of the organization 
• Being transparent to promote trusting relationships and rapport with employees
• Making sure employees feel valued and that they understand they are the most important resources in the organization
• Encouraging employees to problem solve and innovate
• Offering employees professional growth and career development opportunities
• Aligning organizational goals across all employees and rewarding them with profit sharing or gain sharing

Human resources professionals also recommend looking at the entire employment lifecycle when strategizing about how to retain top talent:

• During the recruitment and selection stages, ensure that employee and employer are well matched. This lays the groundwork for a long relationship. This is an important time to make sure that employee and employer expectations and ideas about the job and company and candidate values are well understood.
• The onboarding process helps set some of the early expectations for how employees will be treated and valued throughout their tenure. Having a strong training and orientation program, sends a message to new employees that they are important to the success of the organization.
• Millennials and employees in general are asking for, and receiving, more regular feedback in the form of formal performance evaluations. Among other things, this feedback can allow both the employer and employee a chance to evaluate prospects for advancement. They use this opportunity to seek feedback from employees about the organization as well. It’s better to get this input during the employee lifecycle rather than during the exit stage.
• Challenging and motivating employees throughout the employment lifecycle are key to making sure they stay engaged.
• Employee recognition is a key component for ensuring an organizational climate that is positive, productive, and innovative.
• When the exit stage is reached, employers need to take full advantage of what employees have to say about their work experiences in the organization and what types of things would have improved the experience.
  
  

Classroom Implications

Students can start to understand the concept of loyalty and engagement based on jobs, volunteer work, school clubs, or sports teams. Ask them to think about the factors that influence their participation (or lack of participation) in their current daily worlds. Have them think about whether engagement is an employer responsibility only, or if the employee plays a role as well.

Encourage students to identify their values as well as factors about work that are important to them and to share what benefits, besides pay, are important to them. Discuss ways that these issues and values can be talked about during the interview with employers.

Have students research companies to find out how they are addressing loyalty and retention issues.

Have students read this article about the natural rate of unemployment and discuss how unemployment rates can affect employee loyalty.       

ACTION BRIEF UPDATE:

One of our Action Brief Advisors, Rusty Poeppelmeier, a Bond Manager with Liberty Mutual Surety in Cincinnati, Ohio responded to our January Action Brief with the following comments:

Each generation has differences that create challenges and opportunities. People leave jobs for a lot of reasons and students should learn more about those trends. The interesting part is that most studies vary in what are considered the top three reasons that employees leave jobs. This is partly because they change over time and each generation is different. But the reasons generally revolve around topics related to empowerment, engagement, and recognition. Students should read and understand the different answers and understand they can and will change over time.

Students should spend time learning the history of employee rights and what drove the need for change. The landmark acts such as the social security act of 1935, Fair labor standards act of 1938, Civil rights act of 1964, OSHA act of 1970, the ADA of 1991 and others are good to study for context. What events led to the formation of unions would be another. Students might be surprised to learn that there were times in recent history when employee safety was not the highest priority. What might seem trivial or automatically expected by one generation was not to another. Employees fought to get those benefits and some retired never seeing them. Students should study how each generation was shaped and why it led to these differences. All too often I hear people talk about how this group or that group had it easier or harder. The reality is each group grew up in different times with a different set of variables. The newer generations will deal with issues the previous generations never faced. Some have never seen a world war while others saw two. One generation never had a computer while another rarely used a piece of paper or signed by “blue” pen. Others were somewhere in the middle.

Students should learn about the history and differences so they can broaden their perspective and understanding. This is important because some day they will be the leaders and will have to address retention issues with the generations that follow. Students who have a broader mindset and openness to change will be more successful in retaining and empowering employees. They will look for ways to engage, empower, and recognize employees, which will lead to better retention over time. It will give them a competitive edge in acquiring and attracting talent in the labor force. 

The world of work continues to evolve rapidly, making the need for innovation a top priority. Every business wants to remain relevant in the face of Increasing competition, globalization, changing consumer expectations, and evolving technologies which are all drivers of innovation. Many companies are innovating on some level while others are struggling to innovate at all. This month's Action Brief explores innovation and how businesses are managing it within their current structures or changing to make their working environments more conducive to innovation at all levels.

Workplace Implications

Why aren’t all companies innovating? Some companies are risk averse, while others feel they have a corner on the market and don’t need to change. Still others see change coming and don’t do anything about it. Blockbuster openly admits they knew they needed to innovate and didn’t. And, then along came Netflix.

Determining what constitutes an innovation is a first step in beginning to foster a successful program. Some companies start by looking in the rearview mirror to identify ideas that produced margin and revenue gains in the past. They then use those learnings as a framework for developing a working definition. For something to be counted as innovative at Whirlpool, for example, the product or service must be unique, create a competitive advantage, potentially yield further innovations, and provide greater value for the customer than anything else on the market. What an innovation is varies by company.

Different forms of innovation can add to the challenges around definition. These are generally agreed upon as:

• Product—think Fitbit, kindle, iPhone—or improvements to current products
• Process—think supply chain or business operations improvements
• Business model innovation—perhaps the most challenging, risky and disruptive--alas AirBnB and Uber
  
  

How do companies make innovation a priority? Initiatives need to start from the top down and should involve everyone in the company including customers and partners. The company culture should reflect an agenda that includes innovation as a priority. Many companies that are serious about innovation are using a phase-gate (or stage-gate) project management technique to manage new initiatives. The method is metric based with standardized scores applied at “gates” between each phase to determine if the project is ready to move to the next level. Other ways companies are fostering innovation include:

• Developing and prioritizing structured innovation programs
• Listening to stakeholders inside and out of the organization
• Staying open to new ideas
• Sponsoring innovation “boot camps” for employees
• Collaborating—with employees, partners, and outside groups
• Creating collaboration spaces for brainstorming and growing new ideas
• Giving employees permission to innovate—and permission to fail
• Flattening management structures to decrease long approval processes and empower employees to thrive in a more independent environment

For some employees, the innovative culture is a mindset shift and adjustment can take time. Leaders can encourage employees to embrace new ways of thinking by communicating regularly about innovation programs, sharing examples, and helping employees become familiar with the ideation process.

Adobe’s Kickbox program—an open-sourced innovation model—is designed so that any Adobe employee can participate, not just those who exhibit innovative traits in their everyday work. In this way, employees begin to learn how to innovate if they are not already naturally “wired” for it.

Some employees with an innovative mindset may find themselves working for companies that are not encouraging of or fostering innovation. Employees can pitch new ideas as a way of helping companies begin to think innovatively. Some suggested tips for employees who want to promote new ideas or concepts are to:

• Ensure that their ideas are in line with their companies’ vision and objectives
• Be flexible and open to feedback which can sometimes feel harsh or misguided but is a necessary and helpful component of innovation
• Use imagery to help open the eyes of skeptics
• Make sure their enthusiasm is backed up by facts and be ready to discuss risk mitigation related to the new idea

How can companies find the right employees to help grow a culture of innovation? Ask prospective employees the following questions to help determine whether or not they would be a match for your company:

• How do they deal with change?
• How have they helped innovate or improve processes in previous positions? Have them describe their creative processes and barriers they’ve encountered, explaining how their contributions may or may not have helped change the company bottom line.
• How do they cope with failure? Have them to share an example from a professional standpoint.

Change, in general, is often driven by dissatisfaction or even conflict around ideas, products, and processes. Innovators can sometimes be labeled as not “playing well” with others. But keep in mind that it’s this very trait, a penchant for pushing the envelope, that sometimes drives the innovation and change needed to make or keep an organization successful.

To learn more about innovative processes within companies, we recommend “The Innovator’s Method” by Nathan Furr and Jeff Dyer. Read a preview here.

Classroom Implications

At MBA Research’s 2017 Conclave in Vancouver, Washington, several business speakers asserted that innovation can and should be taught in schools. While some students are natural innovators, those who are not can learn to think and act innovatively. Here are some ideas to get the ideas flowing with students:

• Vera Sell, an innovator and Software Solutions Manager for Tektronix in Beaverton Oregon, spoke to one of our groups at Conclave and led us in an ideation exercise. She asked the attendees to come up with as many uses for a pair of socks as they could within five-minutes. We broke up into small groups, and each group wrote its ideas on sticky notes. In the end, all the ideas were shared aloud with prizes for the group who had the most ideas and to the group with the most unique idea. Sounds crazy—but the groups quickly worked together to generate creative ideas—and had a lot of fun at the same time.
• Ms. Sell also introduced us to the Snake Oil game which has players doing sales pitches on oddly matched items—and requires them to think quickly about how the items could be useful in everyday life.
• Ask students whether they feel they are suited to be innovators and what attributes this entails.
• Talk with students about the differences between entrepreneurship and intrapreneurship. Ask which description better matches their interests and why.
• Have students choose an organization to research how that organization is or isn’t innovating.
  
  

The Golden Age of Artificial Intelligence: Are We There?

In our June Action Brief. we explored how technology is altering business operations. An aspect of that was Artificial Intelligence (AI). Now, let’s take a closer look at artificial intelligence to examine its potential for further revolutionizing business operations.

Business Implications

A wide availability of graphics processing units (GPUs), almost infinite storage, and the Big Data movement have all helped AI development flourish over the past three years. A recent survey indicates that 39% of workers are using some aspect of AI at work, 87% say their job will change by 2020 because of AI, and 76% indicate that “some” or “half” of their job could be completed by AI or other technology right now. It is predicted that AI bots will power 85% of customer service interactions by 2020. AI startups received more than $5 billion in venture-capital funding in 2016, according to one report. Revenues from cognitive systems and AI are projected to reach $47 billion by 2020. The advent of quantum computing will further fuel AI embeddedness in the workplace.

Consider what is happening across the business spectrum:

• Human resource professionals are using AI to gather and analyze online information about potential hires. AI also helps interviewers devise interview questions based on specific jobs or profiles.
• Retailers are providing personalized shopping experiences for customers based on analysis of past customer purchases, location, weather, and other insights gained through AI. Suggestions are pushed towards the customer while they are shopping rather than at check-out.
• Marketers are utilizing capabilities of some AI platforms to be able to predict the best times to engage particular buyers based on past behaviors and actions. AI is able to find patterns among individual and groups of customers and retailers can make use of this information in real time.
• Some AI is beginning to measure human emotion which can help companies strengthen customer loyalty to their brand.
• Brick and mortar stores are using facial recognition technology to help deter shoplifters. Some stores scan customer’s faces before doors will unlock for entry at night. Some systems send a text message to staff when a known shoplifter enters the premises.
• Analytics are being used to better predict business activity and smooth out results. The hope is to help make financial outcomes more consistent over time.
• Managers and others and are using AI to complete lower-level management tasks, maximize workflows, and automate various business processes which frees up their time to focus on more productive tasks, which can boost the top and bottom lines for businesses.
• Metadata and analytics are being used to predict logistical issues before they happen including kinks in supply chains and traffic accidents.
• Human swarming (or blended intelligence) platforms allow groups of users to login from any location and think together to solve problems and make predictions, decisions, and generate ideas.
  
  

Coincidentally, human swarming is one of the methods recognized for potentially stemming AI singularity (dominance). The concern is that some AI machines learn and advance on their own, and could possibly set in motion actions with negative and unforeseen consequences to humankind. There has even been talk of a “big red button” to be used as a kill switch if AI runs amok. The swarming method is thought to be one way of keeping humans in the loop with AI so it can be used to help with human decision-making, not replace it. Read this article to find out more: Teaching A.I. Systems to Behave Themselves.

Unsavory uses of AI, however, are a current reality. Natural-speech technology is advancing. Some companies are using chatbots to fool consumers into accepting goods and services unknowingly over the phone. This is commonly known as the “can you hear me?” scam. When consumers answer “yes” to a chatbot asking that question, they are noted as having subscribed to whatever service the company is selling. The chatbots are so lifelike that they can even laugh, say “uh-huh” appropriately, and adjust their vocal pitch contextually.

AI can also be used to help cyber-hackers root out vulnerabilities in technology with greater ease. More data collected via AI means the potential for more serious data breaches. We are seeing governments wage digital wars for which there is no kill switch. Fraud, extortion, and other cyber-crimes will become more sophisticated in the future. New resources and possibly a new industry will be required to counteract these risks.

Technology costs still provide many barriers to AI use in business. But as it becomes more accessible, how can businesses balance the rewards, while still being mindful of the concerns around it?

• Carefully Evaluate AI applications that can immediately affect revenue and cost
• Look for ways to implement AI to help produce more goods with the same number of people.
• Evaluate how AI can be used to improve computer-to-computer functions before using to replace human functions.
• Understanding the risks that accompany the use of AI is paramount. Make sure cyber-security measures are evaluated and strengthened as AI is adopted by your business.
  
  

Classroom Implications

Students will be familiar with AI that uses facial recognition through their use of social media. Ask them to identify other areas where AI is at play in their lives.

Get students thinking about what AI really means by posing some of the questions found in this article: https://medium.com/eliza-effect/science-fiction-movie-trailers-and-youtube-videos-i-use-to-help-kids-understand-artificial-38a6c08d4652

Educators may find this article helpful in thinking about AI as part of your students’ futures: https://www.edsurge.com/news/2017-03-16-what-does-it-mean-to-prepare-students-for-a-future-with-artificial-intelligence. The article notes that 65% of students will hold jobs that don’t yet exist. Ask students how they think their career choices might be affected by AI.

Students can also begin thinking about AI implementation strategies by studying how businesses have already implemented it. Ask them to speak with a mentor or business person in their community to hear about their experiences with AI.

AI is now performing the teaching-assistant role at some colleges. Ask students what they think about this. What are the advantages and disadvantages? Students will probably be interested in how educators feel about this development as well.

Technology is reshaping organizations across the spectrum. June’s Action Brief explores high-tech business operations and how companies are striving to make sure their workforce is prepared to manage the convergence of people, operations, and technology.

The use of technology in business operations can increase productivity and reduce deviations in standard processes.  In the last decade software costs have dropped, capabilities have increased, and the speed of delivery has improved. But, businesses are also finding that implementing new technology can be expensive, time-consuming, can bring about new security risks, and may leave their employees ill-prepared to function in the new environment.

Innovations in technology are changing operations in some of the following ways:

• Artificial intelligence (AI) is advancing rapidly and becoming a mainstay in consumer and business applications. GEICO, Staples, and Macy’s are using IBM’s Watson in customer service operations. Einstein assisted 70,000 H&R Block tax professionals in filing over 11 million tax returns this past spring. Einstein, Salesforce’s version of AI is being used to provide “out of the box” sales insights that once required coding and customization to obtain.

• Robots are replacing some workers. They are increasingly used in manufacturing and warehouse operations and are becoming increasingly sophisticated and being programmed to absorb data, recognize objects, and respond to environmental changes with more accuracy.

• Robots at Amazon fulfill “one-click” orders in less than 15 minutes which is about one-fourth of the time it takes a human to complete the same task. Kiva robots have reduced Amazon’s operating expenses by about 20 percent. Lowe’s is now rolling out customer-helping robots (called Lowebots) in 11 stores in the San Francisco Bay Area.

• Transportation management systems (TMS) are maximizing efficiencies in supply chains. They are becoming more affordable for small and mid-sized companies with the advent of cloud computing. Being able to track shipments on a 24/7/365, real-time basis is close to becoming a common reality. Most companies utilizing TMSs are realizing five-to-ten percent freight cost reductions. Last October, Anheuser-Busch and a company owned by Uber teamed up to deliver 2,000 cases of beer via a self-driving truck.

• Inventory processes are being revolutionized by the advent of real-time tracking systems that are updated every time a product makes a move. The technology is especially helpful for retailers with hybrid or multichannel models.

• Risk management areas are relying heavily on bots to predict potential problems with quality and compliance.

• Supervisory Control and Data Acquisition (SCADA) systems use the Industrial Internet of Things (IIoT) to monitor and control entire operations, improving efficiencies and decreasing operational downtimes.

• Bitcoins, blockchains, virtual/digital assistants, bots to track customer algorithms, and improved anti-fraud software are all creating major shifts in the retail world. A Kroger store in Ohio is using technology they developed (QueVision) to reduce waits in check-out lines. They have combined the use of QueVision with infra-red sensors at store entrances to reduce average wait times from four minutes to about 30 seconds. 

How can businesses prepare for changing roles and requirements as new technology is adapted?

• Manage the changes from both short and long-term perspectives.

• Make changes in automation gradually—without sacrificing core capability. Understand and plan for the overarching impact of the changes to manage them effectively. At the same time, keep in mind that change is happening rapidly across the board, and innovation through technology can sometimes define winners and losers almost overnight. Being nimble and ready to adapt to new technologies are keys to success.

• Remember the soft side of automation. New leaders and managers will need to be experienced “business/technology hybrids.” These individuals will need to be able to shift seamlessly between managing people and managing experiences and technology. If they are not, gains to be made through automation could be lost. Partnerships between people and machines are growing more rapidly than machine-only operations.

• Evaluate what skills need to be retained and or enhanced to prepare your workforce for the changes in automation. Many low-skilled and entry level retail workers are losing their jobs due to the increased use of technology. Unlike the manufacturing industry, retail has not been successful with helping workers make the shift to higher tech jobs. Walmart is one exception—they have an academy that helps employees advance their technological skills. They train about 250,000 employees per year and have the goal of joining forces with other large retailers to develop training standards that can be applied industrywide.

Classroom Implications

Successful business leaders need to be experts at managing both machines and people interchangeably. The following ideas can help students consider how business and technology are intertwined:

• Ask them to view this video about Kroger’s line-reducing technology, and ask them how technology is shifting the world around them—in ways that may not even be noticeable to them:  https://www.youtube.com/watch?v=QuZuPKbTWqY

• Ask them to consider the advantages and disadvantages of the closer relationship between business and technology. Some people are pushing to “keep jobs human.” Ask students to talk about the “right” balance between humans and machines.

• Suggest that students complete a case study of a major retailer (i.e., Walmart, Kroger, Amazon, Target, etc.). Have them evaluate how those retailers have changed their approach to the marketplace based on technology. This article highlights some of the challenges in retail.

• For those of you addressing project management in your curriculum, make sure students understand the difference between waterfall and Agile development/management models.

• Schools are changing the way they teach business to include more of a technology focus. Information technology education is also shifting to include business foundations. Ask students to think about their education pathway. Are they preparing for a future that allows for the close relationship between business and technology?