AI News, Artificial Intelligence
With all of this in mind, we’re placing a larger “bet” on this cause, this year, than we are placing even on other focus areas — not necessarily in terms of funding (we aren’t sure we’ll identify very large funding opportunities this year, and are more focused on laying the groundwork for future years), but in terms of senior staff time, which at this point is a scarcer resource for us.
(My views are fairly representative, but not perfectly representative, of those of other staff working on this cause.) It will then give a broad outline of our planned activities for the coming year, some of the key principles we hope to follow in this work, and some of the risks and reservations we have about prioritizing this cause as highly as we are.
The Future of Jobs and Jobs Training
Automation, robotics, algorithms and artificial intelligence (AI) in recent times have shown they can do equal or sometimes even better work than humans who are dermatologists, insurance claims adjusters, lawyers, seismic testers in oil fields, sports journalists and financial reporters, crew members on guided-missile destroyers, hiring managers, psychological testers, retail salespeople, and border patrol agents.
Moreover, there is growing anxiety that technology developments on the near horizon will crush the jobs of the millions who drive cars and trucks, analyze medical tests and data, perform middle management chores, dispense medicine, trade stocks and evaluate markets, fight on battlefields, perform government functions, and even replace those who program software – that is, the creators of algorithms.
A recent study by labor economists found that “one more robot per thousand workers reduces the employment to population ratio by about 0.18-0.34 percentage points and wages by 0.25-0.5 percent.” When Pew Research Center and Elon University’s Imagining the Internet Center asked experts in 2014 whether AI and robotics would create more jobs than they would destroy, the verdict was evenly split: 48% of the respondents envisioned a future where more jobs are lost than created, while 52% said more jobs would be created than lost.
At the same time, recent IT advances offer new and potentially more widely accessible ways to access education.” Jobholders themselves have internalized this insight: A 2016 Pew Research Center survey, “The State of American Jobs,” found that 87% of workers believe it will be essential for them to get training and develop new job skills throughout their work life in order to keep up with changes in the workplace.
Some 1,408 responded to the following question, sharing their expectations about what is likely to evolve by 2026: In the next 10 years, do you think we will see the emergence of new educational and training programs that can successfully train large numbers of workers in the skills they will need to perform the jobs of the future?
Respondents see a new education and training ecosystem emerging in which some job preparation functions are performed by formal educational institutions in fairly traditional classroom settings, some elements are offered online, some are created by for-profit firms, some are free, some exploit augmented and virtual reality elements and gaming sensibilities, and a lot of real-time learning takes place in formats that job seekers pursue on their own.
focus on nurturing unique human skills that artificial intelligence (AI) and machines seem unable to replicate: Many of these experts discussed in their responses the human talents they believe machines and automation may not be able to duplicate, noting that these should be the skills developed and nurtured by education and training programs to prepare people to work successfully alongside AI.
One such comment came from Simon Gottschalk, a professor in the department of sociology at the University of Nevada, Las Vegas: “The skills necessary at the higher echelons will include especially the ability to efficiently network, manage public relations, display intercultural sensitivity, marketing, and generally what author Dan Goleman would call ‘social’ and ‘emotional’ intelligence.
[This also includes] creativity, and just enough critical thinking to move outside the box.” Another example is the response of Fredric Litto, a professor emeritus of communications and longtime distance-learning expert from the University of São Paulo: “We are now in the transitional stage of employers gradually reducing their prejudice in the hiring of those who studied at a distance, and moving in favor of such ‘graduates’ who, in the workplace, demonstrate greater proactiveness, initiative, discipline, collaborativeness – because they studied online.” Other respondents mentioned traits including leadership, design thinking, “human meta communication,” deliberation, conflict resolution, and the capacity to motivate, mobilize and innovate.
So in short, we can train small numbers of individuals (tens of thousands) per year using today’s community colleges and university systems, but probably not more.” Several respondents argued that job training is not a primary concern at a time when accelerating change in market economies is creating massive economic divides that seem likely to leave many people behind.
Most experts seem to have faith that rapid technological development and a rising wariness of coming impacts of the AI/robotics revolution are going to spur the public, private and governmental actions needed for education and training systems to be adapted to deliver more flexible, open, adaptable, resilient, certifiable and useful lifelong learning.
As automation puts increasing numbers of low- and middle-skill workers out of work, these models will also provide for certifications and training needs to function in an increasingly automated service sector.” Michael Wollowski, an associate professor of computer science at the Rose-Hulman Institute of Technology, commented, “We will definitely see a vast increase in educational and training programs.
Our established systems of job training, primarily community colleges and state universities, will continue to play a crucial role, though catastrophically declining public support for these institutions will raise serious challenges.” David Karger, a professor of computer science at MIT, wrote, “Most of what we now call online learning is little more than glorified textbooks, but the future is very promising.
The more likely enhancement will be to take digital enhancements out into the world – again, breaking down the walls of the classroom and school – to inform and enhance experience.” An anonymous respondent echoed the sentiment of quite a few others who do not think it is possible to advance and enhance online education and training much in the next decade, writing, “These programs have a cost, and too few are willing to sacrifice for these programs.” More such arguments are included in later sections of this report.
There will be a greater need for such systems as the needs for new expertise in the workforce [increase] and the capacity of traditional education systems proves that it is not capable of meeting the need in a cost-effective manner.” The president of a technology LLC wrote, “Training, teaching are all going online, partly because of high costs of campus education.” Richard Adler, distinguished fellow at the Institute for the Future, predicted, “AI, voice-response, telepresence VR and gamification techniques will come together to create powerful new learning environments capable of personalizing and accelerating learning across a broad range of fields.” Ray Schroeder, associate vice chancellor for online learning at the University of Illinois, Springfield, commented, “It is projected that those entering the workforce today will pursue four or five different careers (not just jobs) over their lifetime.
They will further fuel the scaling of learning to reach even more massive online classes.” Fredric Litto, an professor emeritus of communications and longtime distance-learning expert from the University of São Paulo, replied, “There is no field of work that cannot be learned, totally or in great part, in well-organized and administered online programs, either in traditional ‘course’ formats, or in self-directed, independent learning opportunities, supplemented, when appropriate, by face-to-face, hands-on, practice situations.” Tawny Schlieski, research director at Intel and president of the Oregon Story Board, explained, “New technologies of human/computer interaction like augmented and virtual reality offer the possibility of entirely new mechanisms of education.
As these tools evolve over the next decade, the academics we work with expect to see radical change in training and workforce development, which will roll into (although probably against a longer timeline) more traditional institutions of higher learning.” Many respondents said real-world, campus-based higher education will continue to thrive during the next decade.
Some say major universities’ core online course content, developed with all of the new-tech bells and whistles, will be marketed globally and adopted as baseline learning in smaller higher education locales, where online elements from major MOOCs can be optimally paired in hybrid learning with in-person mentoring activities.
… Human bodies in close proximity to other human bodies stimulate real compassion, empathy, vulnerability and social-emotional intelligence.Frank Elavsky Uta Russmann, communications/marketing/sales professor at the FHWien University of Applied Sciences in Vienna, Austria, said, “In the future, more and more jobs will require highly sophisticated people whose skills cannot be trained in ‘mass’ online programs.
Traditional four-year and graduate programs will better prepare people for jobs in the future, as such an education gives people a general understanding and knowledge about their field, and here people learn how to approach new things, ask questions and find answers, deal with new situations, etc.
Many people have gained these skills throughout history without any kind of formal schooling, but with the growing emphasis on virtual and digital mediums of production, education and commerce, people will have less and less exposure to other humans in person and other human perspectives.” Isto Huvila, professor at Uppsala University, replied, “The difference between educating to perform and educating to make the future is the difference between vocational [education] and higher (university) education.
But this does not mean that alternative means and paths of learning and accreditation would not be useful as … complementary to the traditional system that has limitations as well.” Dana Klisanin, psychologist/futurist at Evolutionary Guidance Media R&D, wrote, “Educational institutions that succeed will use the tools of social media and game design to grant students’ access to teachers from all over the world and increase their motivation to succeed.
… Online educational programs will influence the credentialing systems of traditional institutions, and online institutions will increasingly offer meet-ups and mingles such that a true hybrid educational approach emerges.” Will training for skills most important in the jobs of the future work well in large-scale settings by 2026?
Functions requiring emotional intelligence, empathy, compassion, and creative judgment and discernment will expand and be increasingly valued in our culture.” Tiffany Shlain, filmmaker and founder of the Webby Awards, wrote, “The skills needed to succeed in today’s world and the future are curiosity, creativity, taking initiative, multi-disciplinary thinking and empathy.
A mindset of persistence and the necessary passion to succeed are also critical.” Louisa Heinrich, founder at Superhuman Limited, commented, “Lateral and system-thinking skills are increasingly critical for success in an ever-changing global landscape, and these will need to be re-prioritised at all levels of education.” An anonymous technologist commented, “Programming and problem solving, learning how to work with artificial intelligence and robotics will become more important, and more and more workers will be replaced by software/hardware-based ‘workers.’ Automation will reduce the need for the current workforce, and the divide between the upper class and the lower class will continue to eat the middle class.” Some who are pessimistic about the future of human work due to advances in capable AI and robotics mocked the current push in the U.S. to train more people in technical skills.
A few people mentioned that young adults need to be taught how to have face-to-face interaction, including one who said they “seem to be sorely lacking in these skills and can only interact with a cellphone or laptop.” Because so many intricacies of the workplace – the human, soft and hard – are learned on the job, respondents said they expect apprenticeships and forms of mentoring will regain value and evolve along with the 21st‑century workplace.
Through evolving technologies (e.g., blockchain), this may provide opportunities for learners to document and frame their own learning pathways.” An instructional designer with 19 years of experience commented, “The pattern I’m seeing is toward individualized learning – almost on the level of tutoring or apprenticeship.
The key to the future will be flexibility and personal motivation to learn and tinker with new things.” As they anticipate the appearance of effective new learning environments and advances in digital accountability systems, many of these experts believe fresh certification programs will be created to attest to workers’ participation in training programs and the mastery of skills.
People with new types of credentialing systems are seen as more qualified than traditional four-year and graduate programs.” Many workplaces place a higher value on real-world work portfolios than they do on a degree or certification, yet their hiring systems – including AI bots programmed to scan resumés – still use the commonly accepted credentials as a basis for interviewing candidates.
software engineering and system administration professional commented, “The reliability of the traditional educational system is already being questioned – in some fields it’s considered common sense that certifications and degrees mean little, and that a portfolio, references, and hands-on interviews are much more important for assessing a candidate’s ability.
I believe that many – not all – areas of instruction should shift to competency-based education in which the outcomes needed are made clear and students are given multiple paths to achieve those outcomes, and they are certified not based on tests and grades but instead on portfolios of their work demonstrating their knowledge.” While the first three themes found among the responses to this canvassing were mostly hopeful about advances in education and training for 21st‑century jobs, a large share of responses from top experts reflect a significant degree of pessimism for various reasons.
Among the other reasons listed by people who do not expect these kinds of transformative advances in job creation and job skill upgrading: Some among the 70% of respondents who are mostly optimistic about the future of training for jobs also echoed one or more of the points above – mentioning these tension points while hoping for the best.
Thomas Claburn, editor-at-large at Information Week, wrote, “I’m skeptical that educational and training programs can keep pace with technology.” Traditional models train people to equate what they do with who they are (i.e., what do you want to be when you grow up) rather than to acquire critical thinking and flexible skills and attitudes that fit a rapidly changing world.Pamela Rutledge Andrew Walls, managing vice president at Gartner, wrote, “Barring a neuroscience advance that enables us to embed knowledge and skills directly into brain tissue and muscle formation, there will be no quantum leap in our ability to ‘up-skill’ people.
Remy Cross, assistant professor of sociology, Webster University, commented, “Lacking a significant breakthrough in machine learning that could lead to further breakthroughs in adaptive responses by a fully online system, it is too hard to adequately instruct large numbers of people in the kinds of soft skills that are anticipated as being in most demand.
… While there have been generational gains in the developments of online communities, a large-scale educational experience (either MOOC or on-demand broadcasts) will not be able to duplicate that.” Stowe Boyd, managing director of Another Voice and a well-known thinker on work futures, discussed the intangibles of preparing humans to partner with AI and bot systems: “While we may see the creation and rollout of new training programs,” he observed, “it’s unclear whether they will be able to retrain those displaced from traditional sorts of work to fit into the workforce of the near future.
And employers may play less of a role, especially as AI- and bot-augmented independent contracting may be the best path for many, rather than ‘a job.’ Homesteading in exurbia may be the answer for many, with ‘forty acres and a bot’ as a political campaign slogan of 2024.” Luis Miron, a distinguished university professor and director of the Institute for Quality and Equity in Education at Loyola University in New Orleans, wrote, “Bluntly speaking, I have little confidence in the educational sector, K-16, having the capacity and vision to offer high-quality online educational programs capable of transforming the training needs of the wider society.
… Successful education models will begin developing ‘mixed methods’ to leverage technology with traditional delivery and rewrite certification processes with practice-relevant standards.” Justin Reich, executive director at the MIT Teaching Systems Lab, observed, “There will continue to be for-profit actors in the sector, and while some may offer choice and opportunity for students, many others will be exploitative, with a great[er] focus on extracting federal grants and burdening students with debt than actually educating students and creating new opportunities.” John Paine, a business analyst, commented, “The competing desires 1) to make educational activity available to all and 2) to monetize the bejeezus out of anything related to the internet will limit the effectiveness of any online learning systems in a more widespread context.” danah boyd, founder of Data &
Whether the traditional programs or new programs will be better at teaching adaptive learning remains to be seen.” Cory Salveson, learning systems and analytics lead at RSM US, responded, “The nature of work today, and in future, is such that if people want to keep increasingly scarce well-paying jobs, they will need to educate themselves in an ongoing manner for their whole lives.” Some of these experts say those who aren’t motivated to continue to learn and grow will be left behind.
So, not only does the self-direction factor pose a problem for teaching at scale, the fact that a high degree of self-direction may be required for successful completion of coursework towards the new workforce means that existing structures of inequality will be replicated in the future if we rely on these large-scale programs.” Among the 30% of respondents who said they did not think things would turn out well in the future were those who said the trajectory of technology will overwhelm labor markets, killing more jobs than it creates.
They foresee a society where AI programs and machines do most of the work and raise questions about people’s sense of identity, the socio-economic divisions that already distress them, their ability to pay for basic needs, their ability to use the growing amount of “leisure time” constructively and the impact of all of this on economic systems.
The current automation is based on ‘general purpose’ technologies – machine learning, Turing complete computers, a universal network architecture that is equally optimized for all applications – and there’s good reason to believe that this will be more disruptive, and create fewer new jobs, than those that came before.” Glenn Ricart, Internet Hall of Fame member and founder and chief technology officer of US Ignite, said, “Up to the present time, automation largely has been replacing physical drudgery and repetitive motion – things that can and should improve the quality of people’s work lives.
How will we cope with a workforce that is simply irrelevant?” The question isn’t how to train people for nonexistent jobs, it’s how to share the wealth in a world where we don’t need most people to work.Nathaniel Borenstein Nathaniel Borenstein, chief scientist at Mimecast, replied, “I challenge the premise of this question [that humans will have to be trained for future jobs].
There is also the massive sociological economic impact of general automation and AI that must be addressed to redistribute wealth and focus life skills at lifelong learning.” Tom Sommerville, agile coach, wrote, “Our greatest economic challenges over the next decade will be climate change and the wholesale loss of most jobs to automation.
There will also be a parallel call for benefits, professional development, and compensation that smooths out the rough patches in this on-demand labor life, but such efforts will lag behind the exploitation of said labor because big business has more resources and big tech moves too fast for human-scale responses of accountability and responsibility.
As a society we need to take advantage of that, and nurture our natural hunger for knowledge and productive work while respecting and encouraging our diversity, a fundamental balancing feature of all nature, human and otherwise.” Jeff Jarvis, professor at the City University of New York Graduate School of Journalism, wrote, “At a roundtable on the future convened by Union Square Ventures a few years ago, I heard this economic goal presented: We need to see the marginal cost of teaching another student fall to zero to see true innovation come to education, allowing change to occur outside the tax-based (and thus safe) confines of public education.
But we will likely see a radical economic disruption in education – using new tools and means to learn and certify learning – and that is the way by which we will manage to train many more people in many new skills.” Cory Doctorow, activist-in-residence at MIT Media Lab and co-owner of Boing Boing (boingboing.net), responded, “There is, for the immediate and medium term, a huge shortage of IT talent, of course – especially security researchers and professionals.
An earlier and more enduring focus on stats and statistical literacy – which can readily be taught using current affairs, for example, analyzing the poll numbers from elections, the claims made by climate change scientists, or even the excellent oral arguments in the Supreme Court Texas abortion law case – would impart skills that transferred well into IT, programming and, especially, security.” Amy Webb, futurist and CEO at the Future Today Institute, commented, “Gill Pratt, a former program manager of the Defense Advanced Research Projects Agency (DARPA), recently warned of a Cambrian Explosion of robotics.
If there are unanticipated external events – environmental disasters, new pandemics and the like – that could devastate a country’s economy and significantly impact its workforce, which might catalyze the development of online learning opportunities.” Mike Roberts, Internet Hall of Fame member and first president and CEO of the Internet Corporation for Assigned Names and Numbers (ICANN), responded, “MOOCs and related efforts are in their infancy, so ‘yes,’ there will [be] considerable expansion as more is learned about what works and what doesn’t work.
And most importantly, we do not mix education with religion – never.’” Anil Dash, entrepreneur, technologist, and advocate @AnilDash, predicted, “These credentials will start to become widespread, but acceptance and quality of the training programs will map to the existing systemic biases that inform current educational and career programs.” Henning Schulzrinne, Internet Hall of Fame member and professor at Columbia University, wrote, “Training programs have had the problem that short-duration generic programs are often not very effective except as a way to incrementally add very specific skills (‘learn how to operate the new industry-specific tool X in a week’) to the existing repertoire.
The MOOC-style programs have shown themselves to be most effective for this ‘delta’ learning for practicing professionals, not turning a high school graduate into somebody who can compete with a college graduate.” Jamais Cascio, distinguished fellow at the Institute for the Future, responded, “We will certainly see attempts to devise training and education to match workers to new jobs, but for the most part they’re likely to fall victim to two related problems.
As learning systems improve, we will soon (if we’re not already) be at a point where adaptive algorithms can learn new jobs faster than humans.” Kate Crawford, a well-known internet researcher studying how people engage with networked technologies, wrote, “We clearly need new educational and training programs to address the deepening precarity of the labor market.
K-12 teachers are constantly pulled from class time with students for professional development or during class are required to take attendance, [complete] grade assessments, fill out grade checks, practice fire drills – all degrading quality teaching time.
Large school systems can’t scale major improvements in current systems without leveraging the tools that society and industry are using to transform their practice.” Barry Chudakov, founder and principal at Sertain Research and StreamFuzion Corp., replied: “One serious drawback to fast-tracking needed educational and training programs: the people who are creating the jobs of the future have so little time to reflect and gain perspective on the people they will need – and how adding these people to their corporate culture changes that culture.
These entrepreneurs are so busy building technology infrastructures, filing patents, testing beta incarnations of ideas and processes – not to mention navigating the thicket of regulations and restrictions that surround many emerging technologies and industries – that they simply don’t have time to look around and see the implications of the changes their companies are creating.
Because all human processes and activities can now be quantified, and there is considerable exploration and technology development in the application of quantification to everything from our sleep patterns and shopping habits to our emotions and online behaviors, many new and important business models are emerging from quantification and the learning algorithms that drive it.
Lastly, we don’t need large-scale training of workers – we need real education (not job-focused) and opportunities for people to pursue diverse pathways for career development and lifelong learning.” Patrick Tucker, technology editor at Defense One and author of “The Naked Future,” observed: “Online education offers the opportunity to gather data on student performance continuously, or telemetrically.
… What telemetric education offers is the opportunity to continuously and constantly evaluate a student to gain a much more comprehensive understanding of ability, retention of information, even how other behaviors and factors such as time of day, other calendar items, nutrition, amount of time on Pokemon Go, influence learning.
That opportunity doesn’t come easily in a crowded classroom – especially not for women or minority students, many of whom feel that if they ask the wrong question or display ignorance, they’ll confirm some unflattering, broadly held perception about their social group.” David Golumbia, associate professor of digital studies at Virginia Commonwealth University, commented, “As an educator, I am completely unconvinced by the current rhetoric that says our educational system is unable to meet the needs of current or future workforces.
Reputation and Its Risks
Moreover, in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations.
Such a process will help managers do a better job of assessing existing and potential threats to their companies’ reputations and deciding whether to accept a given risk or to take actions to avoid or mitigate it.
Regulators, industry groups, consultants, and individual companies have developed elaborate guidelines over the years for assessing and managing risks in a wide range of areas, from commodity prices to control systems to supply chains to political instability to natural disasters.
Consider the 135-page framework for enterprise risk management (ERM) proposed in 2004 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), a group of professional associations of U.S accountants and financial executives that issues guidelines for internal controls.
In defining operational risk as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events,” the Basel II framework, issued in 2004 and updated in 2005, specifically excludes strategic and reputational risks.
(The company’s due-diligence process includes the evaluation of problems that could affect reputation, including pending lawsuits, weak product-testing procedures, product-liability concerns, and poor control systems for detecting management fraud.) The risk management VP says that reputational risk is not included in the long list of risks for which he is responsible.
A company’s overall reputation is a function of its reputation among its various stakeholders (investors, customers, suppliers, employees, regulators, politicians, nongovernmental organizations, the communities in which the firm operates) in specific categories (product quality, corporate governance, employee relations, customer service, intellectual capital, financial performance, handling of environmental and social issues).
Employee allegations and company reports suggest that the root cause of the Prudhoe Bay problem may have been inadequate maintenance and inspection practices and management’s failure to heed warnings of potential corrosion problems.
The temptation is to respond to them with resignation and conclude: “No matter what we do, people won’t like us, so why bother?” The reason executives should bother—through redoubled efforts to improve reporting and communications—is that their fiduciary obligation to close such reputation-reality gaps is as great as their obligation to improve real performance.
Until the 1990s, hostile takeovers in Japan were almost unheard of—but that was partly due to the cross-holding of shares among the elite groups of companies known as keiretsu, a practice that undermined the power of other shareholders.
It committed GE to doubling its R&D investment in developing cleaner technologies, doubling the revenue from products and services that have significant and measurable environmental benefits, and reducing GE’s own greenhouse emissions.
They were initially on board when GSK led a group of pharmaceutical companies in suing the South African government after it passed legislation in 1997 allowing the country to import less expensive, generic versions of AIDS drugs covered by GSK patents.
The controversy has raised patients’ and doctors’ expectations that drug companies should disclose more detailed results and analyses of clinical trials, as well as experience in the market after drugs have received regulatory approval.
A classic example is the marketing department of a software company that launches a large advertising campaign for a new product before developers have identified and ironed out all the bugs: The company is forced to choose between selling a flawed product and introducing it later than promised.
At the same time that it was negotiating a major reduction in wages with its unions, its board approved retention bonuses for senior managers and a big payment to a trust fund designed to protect executive pensions in the event of bankruptcy.
When 269 executives were asked in 2005 by the Economist Intelligence Unit who at their companies had “major responsibility” for managing reputational risk, 84% responded, “The CEO.” This means that nobody is really overseeing the coordination process.
Effectively managing reputational risk involves five steps: assessing your company’s reputation among stakeholders, evaluating your company’s real character, closing reputation-reality gaps, monitoring changing beliefs and expectations, and putting a senior executive below the CEO in charge.
While useful in offering a real-time sample of media coverage, these services are not always accurate in assessing whether a story about a company is positive, negative, or neutral, because of the limits of the computer algorithms that they employ.
This new tool not only analyzes every line in a story but also places the coverage of a company within the context of all the stories in the leading media (those that set the tone for the coverage of topics, companies, and people in individual countries).
Since the reputation of a company is a function of others’ reputations in its industry and the relative reputation of the industry overall, having the complete context is essential for assessing volume and prominence of coverage, topics of interest, and whether the view is positive or negative.
First, the company has to land and remain on the public’s radar screen, which involves staying above what we call the “awareness threshold”: a minimum number of stories mentioning or featuring the company in the leading media.
When coverage is above the awareness threshold and is positive overall, the company’s reputation benefits from individual positive stories and is less susceptible to being damaged when negative stories appear.
If coverage is above the awareness threshold but the majority of stories are negative, a company will not benefit from individual positive stories, and bad news will reinforce its negative reputation.
Even if a small company has a very strong reputation among a small group of core investors or customers, it runs a high risk of suffering considerable damage to its reputation if its media coverage is below the awareness threshold when a crisis hits.
Third, managers can influence the mix of positive, negative, and neutral stories by striving to optimize the company’s “share of voice”: the percentage of leading-media stories mentioning the firm that quote someone from the organization or cite data it has provided.
The reasons include transcription errors (a big problem when a large amount of data in paper documents has to be manually entered into electronic spreadsheets), for instance, and the inability to determine whether the way competitors report information in an area is consistent.
Toward that end, he announced in September 2006 that the SEC will invest $54 million in an interactive data system based on XBRL, which “will represent a quantum leap over existing disclosure technologies.” (For more detail, see the HBR List item “Here Comes XBRL,” HBR February 2007.) Another valuable new tool for managing reputational risk is visualization software, which uses colors, shapes, and diagrams to communicate the key points in financial and operating data.
Because it takes so much time to make sense of spreadsheets, executives tend to focus on the largest business units even though the greatest risks to reputation may reside in smaller ones—such as a struggling foreign subsidiary that has begun to employ questionable means to meet budget targets.
(See the exhibit “One Drug Company’s Dashboard for Spotting Potential Risks” for an example of a simple but effective use of visualization software to highlight whether business units and products are on track to meet year-end goals.) When a company’s character exceeds its reputation, the gap can be closed with a more effective investor relations and corporate communications program that employs the principles of strategic media intelligence discussed above.
If, however, the gap is large, the time required to close it is long, and the damage if stakeholders recognize the reality is likely to be great, then management should seriously consider lowering expectations—although this obviously needs to be done in careful, measured ways.
So does the general counsel, whose job of defending the company means his relationship with stakeholders is often adversarial and whose typical response to media inquiries is “no comment.” The chosen executive should periodically report to top management and the board on what the key reputational risks are and how they are being managed.
In addition, top management and the board should periodically review the risk-management process and make suggestions for improving it.• • • Managing reputational risk isn’t an extraordinarily expensive undertaking that will require years to implement.
The additional costs of installing and using the new tools described above to identify risks and design responses are in the low to high six figures, depending on the size and complexity of the company.
Becoming irresistible: A new model for employee engagement Deloitte Review Issue 16
Today more and more companies are deploying analytics solutions to predict retention, correlating factors such as compensation, travel schedule, manager, and demographics to understand why certain people are less engaged than others.10 But the answers are hard to find: High-technology companies, for example, throw benefits at employees to see which ones stick—unlimited vacation, free food, health clubs, parties, stock options, and fun offices are common.
There are three issues to address: After two years of research and discussions with hundreds of clients, we uncovered five major elements (and 20 underlying strategies) that work together to make organizations “irresistible.” These 20 factors fit together into a whole system of engagement in an organization (figure 1), one that is held together through culture.
Research by Aon Hewitt, for example, shows that it ranks among the top five drivers (but is not number one).11 In this article, we do not discuss compensation because much research shows that pay is a “hygiene factor,” not an “engagement factor.” In other words, in most cases if compensation is not high enough, people will leave—but increasing compensation does not directly increase engagement (with certain exceptions).
One organization we studied told us that among the highest-potential employees, the organization could directly correlate pay increases with retention—but among the remaining 90 percent of the workforce, compensation simply had to be competitive and fair within job families.
Despite these pressures to improve productivity, research shows that when we enrich jobs, giving people more autonomy, decision-making power, time, and support, the company makes more money.12 Psychologist Daniel Pink writes that people are driven by “autonomy, mastery, and purpose.”13 Individuals crave work that lets them leave a unique fingerprint on a finished product.
Zeynep Ton, a Massachusetts Institute of Technology professor, in her book The Good Jobs Strategy shows that retailers like Whole Foods, Costco, UPS, and Mercadona deliver higher profitability per employee by giving their employees above-average wages and greater control over their jobs.14 The idea of “lowering the cost of labor” to save money backfires because people simply become less productive as their workload goes up.
Fewer than 40 percent of all hiring teams use any form of formal prehire assessment: Most managers look for relevant experience, college credentials, or GPA.15 While these seem to be sound criteria for success, when organizations study the characteristics of high performers, they find that other “fit factors” actually drive success and happiness on the job.16 A movie theater company found, for example, that theater employees who drive the highest levels of customer satisfaction and concession sales are not those with good grades or strong academic experience but rather people who “like to have fun” and “love to serve others.” An insurance company found that the best salespeople were not those from top schools but rather those who had experience in the auto industry and no typos on their resumes.
Zappos, a company that prides itself on culture as strategy, uses its 10 core values to assess people for cultural fit in the early stages of the application process.18 By getting to know candidates well (through online and phone meetings) before people even apply for jobs, Zappos can assess fit and help people decide if they should even apply for a job.
This type of assessment has helped Zappos maintain a high level of engagement, low turnover, and its place among one of the best customer-service providers in online retail.19 Research also shows that meaningful work takes place in small teams.
Jeff Bezos, the CEO of Amazon.com, is reported to have said that “if there are more than two pizzas in the room for lunch, then the team is too big.” Small teams feel empowered, they make decisions faster, and the people get to know each other and can lend a hand when one of the teammates needs help.20 Finally, engaged people need time to think, create, and rest.
Google, for example, uses an agile goal-setting process called OKR (objectives and key results), which was originally developed at Intel.25 The process is simple and effective: Each individual (from CEO down) sets ambitious and measurable objectives (like “launch Gmail version X by year end”) and are asked to define “key results” that monitor their progress.
Only 8 percent of surveyed companies think the process is worth the time they put into it, and the focus on rating and ranking takes the focus away from the coaching and development that people often desperately need.31 In many companies, the process does not involve enough continuous feedback, places too much weight on the actual rating, and often does not encourage hyperperformers to perform at an even higher level.
The concept of “forced ranking,” popularized in the 1960s, is now falling away because it strips the autonomy and judgment of leaders, often discourages very high performers, and rewards those in the middle.32 Finally, it is important for companies to remember that management’s job is not to manage work but rather to develop, coach, and help people.
Studies show that 68 percent of women would rather have more free time than make more money, and while 40 percent of professional men work more than 50 hours per week, 80 percent would like to work fewer hours.33 Given the nature of work today, if leaders want people to engage with their organizations, they have to give them a flexible and supportive work environment.
We studied this topic and found that “high-recognition companies” have 31 percent lower voluntary turnover than companies with poor recognition cultures.36 These companies build a culture of recognition through social reward systems (tools that give people points or kudos to reward to others), weekly or monthly thank-you activities, and a general culture of appreciating everyone from top to bottom.
When JetBlue implemented a peer-to-peer recognition system focused on company values, employee satisfaction surged by 88 percent.37 And there are physiological effects as well: Researchers have proven that when you thank someone, it releases oxytocin, a hormone that makes people more relaxed, collaborative, and happy.38 Finally, highly engaged workplaces are also inclusive and diverse: People feel comfortable being themselves.
Not only do diverse workplaces attract people from a wider sample, research also shows that teams that operate in an inclusive culture outperform their peers by a staggering 80 percent.42 In a recent study of high-turnover companies conducted by Quantum Workplace, the second-highest-rated issue in employee engagement was the organization’s willingness to “listen to an employee’s perspectives.”43 While this is a fairly broad statement, it speaks to the issue of inclusion at an organizational level.
Inclusion usually comes from the top: Leaders must overcome their unconscious biases and make every effort to listen, create open forums for discussion, and promote people with varied backgrounds (gender, nationality, race, age) who embrace listening and inclusive values.
Employees under the age of 25 rate professional development as their number one driver of engagement, and this is the number two priority for workers up to age 35.44 As employees get older, their focus on development shifts away from mobility and upward progression in favor of aligning a job with long-term career goals.
Organizations with a strong learning culture are 92 percent more likely to develop novel products and processes, 52 percent more productive, 56 percent more likely to be the first to market with their products and services, and 17 percent more profitable than their peers.45 Their engagement and retention rates are also 30–50 percent higher.
A major home improvement retailer studied store-by-store performance and found that teams that cross-train their sales leaders regularly are generating 10–15 percent higher revenue and as much as 20 percent higher engagement scores.
When organizations define their success through the eyes of their customers, stakeholders, or society, people come alive.46 Our research shows that “mission-driven” companies have 30 percent higher levels of innovation and 40 percent higher levels of retention, and they tend to be first or second in their market segment.
Our research on “high-impact learning organizations,” conducted in 2005, 2008, and 2011 (before, during, and after the last recession), showed each year that companies that “overinvest” in L&D (spending per employee) rated highest in employee retention, innovation, and customer service and outperformed their peers threefold in long-term profitability.51 This trend shows that investment in people matters during good times and bad.
Without increased amounts of empowerment and local control, complexity can lead to high levels of error and stress.52 Southwest Airlines, one of the top 20 rated employers in 2014, has honed simplicity and empowerment in its business model.53 The company focuses heavily on employee empowerment in its management training, letting the local team (the airplane crew) make all the decisions they need to run safely, on time, and on budget.54 The company also works hard to keep its entire business simple: Southwest uses a single airplane model (Boeing 737) and common boarding and reservations processes for every flight.
Managing Risks: A New Framework
A U.S. investigation commission attributed the disaster to management failures that crippled “the ability of individuals involved to identify the risks they faced and to properly evaluate, communicate, and address them.” Hayward’s story reflects a common problem.
We examine the individual and organizational challenges inherent in generating open, constructive discussions about managing the risks related to strategic choices and argue that companies need to anchor these discussions in their strategy formulation and implementation processes.
Since considerable literature already exists on the rules-based compliance approach, we refer interested readers to the sidebar “Identifying and Managing Preventable Risks” in lieu of a full discussion of best practices here.
A strategy with high expected returns generally requires the company to take on significant risks, and managing those risks is a key driver in capturing the potential gains.
Instead, you need a risk-management system designed to reduce the probability that the assumed risks actually materialize and to improve the company’s ability to manage or contain the risk events should they occur.
While a compliance-based approach is effective for managing preventable risks, it is wholly inadequate for strategy risks or external risks, which require a fundamentally different approach based on open and explicit risk discussions.
In particular, teams facing uncertain conditions often engage in groupthink: Once a course of action has gathered support within a group, those not yet on board tend to suppress their objections—however valid—and fall in line.
Rather than mitigating risk, firms actually incubate risk through the normalization of deviance,as they learn to tolerate apparently minor failures and defects and treat early warning signals as false alarms rather than alerts to imminent danger.
JPL, for example, has established a risk review board made up of independent technical experts whose role is to challenge project engineers’ design, risk-assessment, and risk-mitigation decisions.
The risk review board meetings are intense, creating what Gentry Lee calls “a culture of intellectual confrontation.” As board member Chris Lewicki says, “We tear each other apart, throwing stones and giving very critical commentary about everything that’s going on.” In the process, project engineers see their work from another perspective.
The board members, acting as devil’s advocates, counterbalance the engineers’ natural overconfidence, helping to avoid escalation of commitment to projects with unacceptable levels of risk.
A simple extension from a prior mission would require a 10% to 20% financial reserve, for instance, whereas an entirely new component that had yet to work on Earth—much less on an unexplored planet—could require a 50% to 75% contingency.
In these situations risks stem largely from seemingly unrelated operational choices across a complex organization that accumulate gradually and can remain hidden for a long time.
Since no single staff group has the knowledge to perform operational-level risk management across diverse functions, firms may deploy a relatively small central risk-management group that collects information from operating managers.
Chief risk officer John Fraser, with the explicit backing of the CEO, runs dozens of workshops each year at which employees from all levels and functions identify and rank the principal risks they see to the company’s strategic objectives.
The group ultimately develops a consensus view that gets recorded on a visual risk map, recommends action plans, and designates an “owner” for each major risk.
The risk group draws upon technical experts to challenge line engineers’ investment plans and risk assessments and to provide independent expert oversight to the resource allocation process.
For such companies, risk management requires embedded experts within the organization to continuously monitor and influence the business’s risk profile, working side by side with the line managers whose activities are generating new ideas, innovation, and risks—and, if all goes well, profits.
The face-to-face contact with line managers enables the market-savvy risk managers to continually ask “what if” questions, challenging the assumptions of portfolio managers and forcing them to look at different scenarios.
Risk managers assess how proposed trades affect the risk of the entire investment portfolio, not only under normal circumstances but also under times of extreme stress, when the correlations of returns across different asset classes escalate.
“Nine times out of 10 a manager will say, ‘No, that’s not what I want to do.’ Then we can sit down and redesign the trades.” The chief danger from embedding risk managers within the line organization is that they “go native,” aligning themselves with the inner circle of the business unit’s leadership team—becoming deal makers rather than deal questioners.
Other companies compartmentalize the management of “brand risk,” “reputation risk,” “supply chain risk,” “human resources risk,” “IT risk,” and “financial risk.” Such organizational silos disperse both information and responsibility for effective risk management.
Ranganath, the chief risk officer, “we gradually zeroed in on risks to business objectives specified in our corporate scorecard.” In building its Balanced Scorecard, Infosys had identified “growing client relationships” as a key objective and selected metrics for measuring progress, such as the number of global clients with annual billings in excess of $50 million and the annual percentage increases in revenues from large clients.
Infosys uses a dual structure: a central risk team that identifies general strategy risks and establishes central policy, and specialized functional teams that design and monitor policies and controls in consultation with local business teams.
The decentralized teams have the authority and expertise to help the business lines respond to threats and changes in their risk profiles, escalating only the exceptions to the central risk team for review.
For example, if a client relationship manager wants to give a longer credit period to a company whose credit risk parameters are high, the functional risk manager can send the case to the central team for review.
Hydro One, a large company, has a relatively small risk group to generate risk awareness and communication throughout the firm and to advise the executive team on risk-based resource allocations.
By contrast, relatively small companies or units, such as JPL or JP Morgan Private Bank, need multiple project-level review boards or teams of embedded risk managers to apply domain expertise to assess the risk of business decisions.
And Infosys, a large company with broad operational and strategic scope, requires a strong centralized risk-management function as well as dispersed risk managers who support local business decisions and facilitate the exchange of information with the centralized risk group.
For example, during the economic slowdown after the global financial crisis, Infosys identified a new risk related to its objective of developing a global workforce: an upsurge in protectionism, which could lead to tight restrictions on work visas and permits for foreign nationals in several OECD countries where Infosys had large client engagements.
Although protectionist legislation is technically an external risk since it’s beyond the company’s control, Infosys treated it as a strategy risk and created a Risk Event Card for it, which included a new risk indicator: the number and percentage of its employees with dual citizenships or existing work permits outside India.
Financial services firms use stress tests to assess, for example, how an event such as the tripling of oil prices, a large swing in exchange or interest rates, or the default of a major institution or sovereign country would affect trading positions and investments.
If managers see that their strategy is contingent on a generally optimistic view, they can modify it to accommodate pessimistic scenarios or develop plans for how they would change their strategy should early indicators show an increasing likelihood of events turning against it.
In a war-game, the company assigns three or four teams the task of devising plausible near-term strategies or actions that existing or potential competitors might adopt during the next one or two years—a shorter time horizon than that of scenario analysis.
The process helps to overcome the bias of leaders to ignore evidence that runs counter to their current beliefs, including the possibility of actions that competitors might take to disrupt their strategy.
Since moral hazard does not arise for nonpreventable events, companies can use insurance or hedging to mitigate some risks, as an airline does when it protects itself against sharp increases in fuel prices by using financial derivatives.
Employment and disconnection among teens and young adults: The role of place, race, and education
Young people in their late teens and early 20s stand at a pivotal point as they transition into adulthood.
Although they typically have higher unemployment rates than older workers, the Great Recession and slow recovery have focused attention on the challenges young people face when progressing from adolescence and school into full-time employment enabling self-sufficiency.
The following analysis and related interactive examine employment trends among teens aged 16–19 and young adults aged 20–24, and compares these groups with adults aged 25–54—those typically considered to be in their prime working years.
School is likely to be teens’ primary activity until high school graduation, but early work experiences (part-time and in the summer) can provide valuable opportunities for teens to learn new skills, gain experience, expand their networks, and develop positive relationships with adults.
These young people are missing key educational and employment experiences and are at increased risk for a host of negative outcomes: long spells of unemployment, poverty, criminal behavior, substance abuse, and incarceration. Data on disconnected youth also comes from American Community Survey microdata, but to compensate for small sample sizes, the analysis uses a three-year estimate encompassing the years 2012–2014.
Findings include: Employment rates are typically lowest among teens and steadily increase with age as people seek to find full-time work, usually after completing their education (whether or not they earned a credential).
While most teens do not need to work to support themselves or their families, the decline raises concern in some quarters that teens are missing out on opportunities to learn new skills and gain experience and contacts that will improve their job prospects later in life. Both young adults aged 20–24 and prime-age workers aged 25–54 registered employment rate declines of three percentage points, landing in 2014 at 65 percent and 77 percent, respectively.
The gap by race/ethnicity narrows when adults are in their prime working years of 25–54, although the black-white gap remains a still-sizable seven to nine percentage points over the 2008–2014 time period.
In 2014, the employment rate among young adults with a bachelor’s degree was 87 percent, a full 35 percentage points higher than the rate among those less than a high school diploma (52 percent) and 21 percentage points higher than among those with a high school diploma and no further education (66 percent).
The gaps are a bit smaller among prime-age workers, which may reflect that the experience of older workers compensates for lower levels of education, and/or that young people entering the labor market today with lower levels of education have a harder time finding a job than similarly educated young people did in the past.
Among prime age workers in 2014, the employment rate of those with a bachelor’s degree was 87 percent, compared to 60 percent among those with less than a high school diploma and 72 percent among those with a high school diploma and no further education.
These places all have relatively highly educated populations, and the disproportionately high employment rate among adults aged 25–54 relative to younger workers probably reflects that these metros import workers from other places.
Among the 10 largest metro areas (those with populations large enough to support detailed demographic analysis of relatively small subgroups), whites typically have employment rates above the regional average across age groups, while blacks generally have lower than average employment rates across the age groups.
Among the 10 largest metro areas black employment rates across all ages are the lowest in Chicago, where the teen rate is 12 percent, the young adult rate is 47 percent, and the prime-age worker rate is 66 percent.
The racial gap narrows with age, as the spread between the highest and lowest rates falls to about seven percentage points among prime-age workers, down from 12 percentage points among young adults and 20 percentage points among teens.
Young adults with only a high school diploma had an unemployment rate of 17 percent in 2014, about two-and-one-half times higher than the rates of those with an associate degree (6.9 percent) and a bachelor’s degree (6.4 percent).
Among prime-age workers, the unemployment rate of those with a high school diploma was 8.4 percent in 2014, almost three times higher than the rate for those with a bachelor’s degree (3.0 percent) and almost twice as high as the rate for those with an associate degree (4.9 percent).
We define disconnected youth as young people who are not working or in school, with less than an associate degree, living below 200 percent of the poverty line, and not living in group quarters such as dorms or correctional facilities. Most of these young people (74 percent) are between the ages of 20–24, with another 26 percent aged 16–19.
Given their age and the longer time period in which they could be enrolled in school, young adults have higher educational attainment than teens: Twenty percent have earned a high school diploma and taken some college courses, 50 percent have a high school diploma, and 30 percent have less than a high school diploma.
(In one metropolitan area—Madison, WI—the sample size is too small to report on with confidence.) The twenty metros with the highest rates of teen disconnection (all at or above 6 percent ) are generally among the least populous of the top 100 largest metropolitan areas and concentrate in the South, the Southwest, and California, with the exception of Springfield, MA.
To succeed in today’s economy and earn middle-class wages, a young person needs to graduate from high school or earn an alternate credential, enroll in and complete some post-secondary education or job training, and then enter the labor market with skills that match employer demand.
The American Community Survey was launched in the mid-2000s, and although this analysis could have included data from the 2000 Decennial Census and ACS data from 2006 and 2007, the Census Bureau made changes in the wording of labor market questions starting in 2008, making direct comparisons with earlier years less accurate.
In this analysis, people are considered disconnected if they meet the following criteria: they are between the ages of 16–24, not working (including both those who are unemployed and not in the labor force), not enrolled in school, living below 200 percent of the federal poverty line, with an educational attainment of less than an associate degree, not in the Armed Forces, and not living in group quarters.
Group quarters refers to non-household based living arrangements, and includes “institutional group quarters,” such as such as correctional facilities or supervised medical facilities, and “non-institutional group quarters,” such as college dormitories, military bases, or group homes.
While there is income data for residents in some types of non-institutional group quarters, these individuals are students who may have low incomes from their own earnings but are often supported by their families, so the reported data on earnings does not always paint an accurate picture of their economic status.
- On Friday, January 18, 2019
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