Podcast
Podcast
- 04 Dec 2019
- Managing the Future of Work
Prudential’s long position on skills: fostering careers while embracing automation
Joe Fuller: The work that businesses perform is constantly evolving as technology advances and competitive pressures mount. Companies must adopt a fundamentally new approach to sustaining their skills base if they’re to succeed in this new era. Welcome to the Managing the Future of Work podcast. I’m your host, Harvard Business School professor and visiting fellow at the American Enterprise institute, Joe Fuller. Today I’ll be speaking with Rob Falzon, Vice Chairman of Prudential Financial, the world’s tenth largest financial institution. Realizing that jobs within the company were changing rapidly, Prudential began applying strategic management principles to its workforce. By forecasting the skills that will be needed in the future and developing programs to cultivate them, Prudential is creating a new set of best practices for managing the future of work. Rob, welcome to Harvard. Thanks for joining us.
Rob Falzon: Yeah, thank you, Joe. Happy to be here.
Fuller: Rob, I view Prudential as one of those iconic companies in America and everyone thinks they know what Prudential is and does, but the company has been through a lot of changes over time. Could you tell us a little bit about Prudential as we get started here?
Falzon: We're a 140 year-old company. But we're a 140 year old company that constantly has had to transform itself to stay current and to stay relevant in the market. And today, we think of ourselves as a pretty broad global financial services company. We have a large U.S. financial wellness business. We're one of the 10 largest global investment managers. And we have a very large international business, largely anchored in Japan, where we're one of the largest life insurance companies in that marketplace. And around that we have lots of interesting investments in emerging markets.
Fuller: Tell me about financial wellness.
Falzon: Financial wellness is around ensuring that individuals, as they go through life, have the wherewithal to both meet the needs they may have on an immediate basis, so it's ensuring that individuals have things like emergency savings available to them so that, you know, boilers blowing up or cars breaking down don't cause a tailspin in terms of household wellness. It's about ensuring that as they're progressing through their lives, that they're planning and saving for the types of things that all of us go through like buying homes or having children and paying for education. And it's ensuring that they have planning in place to think about retirement. We improve the quality of lives of individuals by reducing the risks that are associated with financial matters in a rapidly changing world.
Fuller: Well, of course, one thing that we're very interested in here at Harvard and in our Managing the Future of Work project, is employability and the ability to sustain earnings power so that you can sustain that wellness. And you, as a company, have also been doing research into how Americans view that issue.
Falzon: We've just finished the seventh in a series of these sort of surveys of the American worker. The American worker is our worker, but the American worker is also our customer. And as we think about the American worker and we think about sustainability, it starts with stability. So, we're very interested in ensuring that individuals have good jobs and good careers.
Fuller: Well, one thing that caught my eye in your most recent research, which was about how people viewed their ability to remain job ready, to have the right types of skills and who they were looking to to provide them the opportunity to develop those skills and the direction as to what skills to develop.
Falzon: Each of these surveys is a couple of thousand people. So, over time we've surveyed 14,000-plus individuals. And so, when you look at this particular survey, when they thought about who has responsibility for skills and skills development and staying relevant to the workforce, they identified themselves. Now, having said that, the individual has to be enabled. They said, "Well, number two and three right behind me, my employer and my manager." So, think about those as really both being their employer, right? So, the expectation is that there's a role that companies need to play in helping their employees to develop skills that they're going to need in order to stay relevant in a changing workplace landscape.
Fuller: Your research is actually very complementary to research that I had done, which showed that that workers in the United States particularly feel a very high sense of agency about this, that they have to own their futures, they have to invest in their skill development. But they are asking, "When am I going to be able to do this? And how can I afford it?" Because, of course, the workers who are most anxious about this are workers that are probably in middle-skills jobs and don't have a lot of financial cushion. Certainly the notion of getting out of the workforce, getting engaged in some type of education they'd have to pay for, probably too far a reach for a lot of them. And then also some anxiety about, I know I should be getting ready for the future, but I'm not quite sure what to study, what's a legitimate certificate or degree or what's going to be a vendor if you will, that I can rely on to give me what I'm actually going to need to know as opposed to something that just sounds good.
Falzon: And even more basic than that. Start with, “What skills do I actually need?” Close to 80 percent—or something like that—recognized that the evolution and deployment of technology is a good thing both for their companies because it means that it will help with growth of companies. And they also recognized it was a good thing for them because it helped them with efficiencies and helped them to be better at their jobs. So, they generally felt less threatened. And I think the statistic was like 95% of them felt that the majority of their job could not be replaced by technology. Now, having said that more than 30% of the individuals today felt that they weren't sure they had the skills even to do the job they were currently doing. And that 30% grows to 50% when they looked 10 years forward. Would they have the skills they needed to be able to do the jobs that would be required at that point in time? The employer has a responsibility to point people in the direction of the skills that they're going to need and then provide both the opportunity and the materials to do that.
Fuller: I'd be very interested in hearing about how, you, inside Prudential, with your own workforce, are taking those learnings that we just talked about and mirroring them in the working relationships you have with your colleagues, and how your policies and practices are changing in reflection of the type of technological change and other changing work requirements we're seeing.
Falzon: If you do right by your employees, you do right by your customers, you'll do right by your investors and shareholders. So, as we think about technology and we think about skills—and the word I would use to describe this is “symbiosis.” Talent, at the end of the day is the single sustainable competitive advantage that we have and that any company has, right? Because whether it's distribution, whether it's product, whether it's technology, whatever it might be, over time that can all be replicated. But talent is something that's very difficult to replicate. And talent always keeps you ahead on the curve. The question becomes: How do you, in today's environment, get the most out of talent? And so, technology is actually not a threat to talent. Technology is a way to then take your talent to the next level. And so, it's how you marry technology and talent together in a way that takes that investment that you're making in talent and gets more out of it. Things that we need to do for the sustainability of the company lend themselves, quite frankly, to automation, to even outsourcing ways that I can get that done in a much more cost-effective and efficient way and take that talent and turn them to things that are pivotal.
Fuller: Rob, you talked about these workers not only as being your customers, but also as being your colleagues and employees. How are you taking the recognition of how they are thinking about their future and the uncertainty some of them feel about it and the agency that they feel about it and embedding that in how you're managing your workforce and how you're developing your workforce?
Falzon: We actually want to double the size of our U.S. businesses with the existing investment that we're making in talent today. If you think about that, that requires that you significantly enhance the productivity and efficiency of your talent.
Fuller: Absolutely.
Falzon: For our customer, these people are buying online and what they recognize is in two clicks and two days, virtually anything they want in the world could be delivered to their front door. Now they're saying they're about to buy life insurance and they're like, "Well, why is it that I have to fill out reams and reams of forms and I have to wait months, and in that months period of time I probably need to visit with someone where I'm going to donate fluids in order for them to be able to underwrite my health in order to be able to get life insurance, when for two clicks and two days I can do anything else in the world?" We're not down to two clicks in two days, but we're down to about seven clicks in two days using artificial intelligence, starting with just database use and then complementing it with our artificial intelligence. What we've been able to do is create a program that underwrites an individual by scraping external databases in addition to the core information that they need to provide us in order to be able to predict what an underwriter would come out with. Now, as we back-tested this, 97 percent accurate! And incidentally, it’s not clear that the 3 percent—whether the machine is right or the human is right—even assuming the human is right and the machine is wrong, that 3 percent breakage is more than paid for by the cost savings that we generated as a result of expediting this, and incidentally, the market share that we can capture, because we’re now a much easier place to go and buy life insurance. So that’s what I mean about—now think about it. What skills did we need to do that?
Fuller: Exactly.
Falzon: I need less underwriters and I need more data scientists...
Fuller: ...or customer-experience people...
Falzon: ...and predictive analytics. It's a repurposing of individuals who have been doing underwriting, and many of those skills can be deployed in those areas, so they're different jobs but they're related skills. I need a very different labor composition, talent composition, in order to be able to execute against something like that. Looking forward, if I can define those skills, I can then help to map employees from where they are today to the sort of skills that they need to have in the future, in order to help us as an organization meet customer expectations. If we do that, we're going to gain market share. If we do that, we'll actually expand our addressable market. And the consequence of that is, then I have the opportunity to significantly expand the size of those businesses over a relatively short period of time.
Fuller: Are you, as a company, actually developing an inventory of your skills and a forecast, a taxonomy of the types of skills you're going to need in the future, and looking at the supply you've got vs. the demand you're going to have?
Falzon: Yes, the first thing we have to work through is, you have to take every business that we have—and we have multiple businesses—and we have to take every function that we have that’s supporting those businesses, and they need to go through a visioning exercise. If you’re to meet customer expectations, what does your organization need to look like three years from now, five years from now? Given that state, how do you get there—from where you are today to that point? So the investment we’ve made is decomposing jobs down into skills. I think this is the stuff that everyone needs to begin thinking about and investing in. It’s not the traditional way of thinking about how you track employees and how employees track their own careers—about, “I have a resume of experiences, and those experiences, now, I take those, and I’m able to look at what are the next or adjacent experiences.” It’s, no, “I have a resume of skills, and when I take that package of skills, what are the types of things that I can think about doing in the future that are adjacent from a skills standpoint?”—as opposed to a direct experience or job experience standpoint? Then looking at the jobs that we need and saying, okay, again, let’s not define those as jobs. Let’s define those as skills that we need. If I need people who are going to do marketing in a digital age, what do I need in order to do that? Well, I need programmers. What are the skills that I need for programming? I need empathy in those programmers. What are the skills that I need to translate models into something that a customer will actually relate to, the digital experience, and one that becomes a compelling digital experience? So you break it down into a set of skills, and then you have to marry those two.
Fuller: Rob, I can imagine there's some of our listeners who are saying, "This sounds fascinating, but man, that sounds like a lot of work." In a typical business unit, who's involved in this process?
Falzon: Well, in the first part of it, the leadership, and their expanded leadership team, would take on the task of defining that future stage, that vision state.
Fuller: The strategy, and the future state, yeah.
Falzon: For an organization, as many organizations, and in particular, companies as well established as ours, you tend to migrate toward a skill set that's around execution, and we tend to be less strong in innovation. We've done very innovative things, but not innovation in the way that the world works today, a Silicon Valley type innovation. Yet, that's the sort of mindset that you need to begin to introduce, if you're going to think about future state and meeting customer expectations in the rapidly changing environment that we're in. So, you need to have tools for creating that level of creativity in the planning process, so people can see around the corner and not just a linear progression of what's the next step function, as opposed to know what's a rewrite of how we think about it. So that's challenge one. Then, challenge two is, how do you take that employee base and translate jobs into skills? You've got to have an enormous database to do this. You have to invest the work into taking every job description you have in the company, and breaking that job description down into what are the underlying skills that are represented by those jobs, as we look at individuals. The answer to that is technology, right? So it's, we're introducing technology and in this particular case, actually artificial intelligence, so it's self-learning and develops over time. That will initially, off a database, translate jobs into sets of skills. Individuals can download their resumes from LinkedIn down into a Prudential application. It takes that resume and it translates it into a set of skills. They have the opportunity to then look at those skills and say, "Is that a complete representation of who and what I am?" You can edit that. As you're doing that, incidentally, the program is learning.
Fuller: Sure.
Falzon: Then, we can map that against the open positions we have, which we've also broken down into skills as opposed to positions, and marry the two, so that when someone runs through this program, what they're saying is, "Okay, these are my set of skills, apply them to all the thousand jobs that are open in our organization today. How many of those jobs did I qualify for?" What happens is, there's a whole list of jobs that they never would have thought of that they're actually qualified for. Or, with some incremental training, they could be qualified for, based on the skill set that have and what the gap might be between that skill set and what's required for that job.
Fuller: What have been the two or three things you've learned about how to run this process effectively and how to engage people in it, that you'd be able to share with us?
Falzon: First I think, as an organization, to do this right, you have to have a commitment to talent. If you treat employees like commodities, you will get commodity-like output from that investment that you're making into your talent, right? So the first thing is, think about talent as an asset, and invest in talent that way, that asset not being a commodity-like asset. The second thing is, I mentioned before about thinking about this in three to five year increments, as opposed to 10 year increments. If you try to get too far out on this, I actually think it becomes overwhelming and you're trying to boil the ocean, right? What do you see to be the opportunity three years from now? Talk to your customers. Where are we meeting their expectations and where are we failing to meet their expectations? Particularly, again, their expectations in the context of things they're doing outside of our industry. That's a much more manageable exercise for them to go through. As they're going through this, the other things that I'd suggest that companies focus on earlier rather than later would be, one, mobility. We have something we call accelerators. Think about them as learning academies. That's training that we provide, in four different pillars of accelerators. At the end of that process, there's something we call an apprenticeship, right? So, it's a classic apprenticeship concept, which is, our belief is 70% of learning occurs on the job. We can do all the training we'd like, but the application of that training is where the real learning occurs. So, you need to give people the opportunity to say, "All right, I've now developed the skills, or believe I've developed the skills, in order to take this position. Give me me a chance." The biggest impediment to that, the hiring manager, they don't want to take that chance, for a variety of reasons. The downside of, "I've got an employee. They didn't work out. Now I've got to manage them out of the organization. That's going to take a year of my time." And you know, it's an unpleasant task to go through-
Fuller: "I've got performance metrics for this period. I need to meet them. If this person doesn't work out, I might be in jeopardy."
Falzon: Whole thing, right?
Fuller: A lot of the organizational perils we're all familiar with.
Falzon: Exactly. Now, if you introduce the concept of an apprenticeship, it's sort of like a borrow-to-buy. So, take them for six months, take them for nine months, whatever that period would be. If it doesn't work out, we'll take them back, and we'll figure out where we can redeploy them elsewhere. Or, if they're ultimately not a fit for the organization, we'll have to deal with that. But try it, give them the opportunity to apply their learnings on the job, for a long enough period of time that they can actually, demonstrate. So, it's got to be for the position, the right duration of time. And, take the downside risk out of that for the hiring manager, such that they're willing to experiment with it. So, this concept that I call mobility is something that we've leveraged over time. We've always had mobility in our organization. We find that, that's a key asset, as we develop talent and look to retain talent. Now, we're taking it to a whole different level, in the idea that giving people the opportunity to move from where they are into new positions that are adjacencies from a skill standpoint, not adjacencies from a job standpoint. And then, facilitate that by encouraging the hiring manager to do this through this apprenticeship program. That's a key piece of it. Have you had this in play for long enough to get a sense of what the return rate is?
Fuller: Have you had this in place for long enough to get a sense of what the return rate is?
Falzon: Not yet. I have to be honest, we're in the early stages of this, so we're just ... we've just stood it up. We rolled it out to the first 500 employees, and we're rolling it out. We'll have it, this year, rolled out to several thousand employees, and then we'll have it to the whole U.S. force sometime during the course of next year. I have to tell you, the energy in the organization is off the charts. People understand that, while we want to invest in technology and want to invest in becoming more efficient and competitive, they recognize that we see the path toward doing that is through talent, and that we're willing to make the investment in them in order to help them to be part of our success story.
Fuller: Certainly, our research indicates that workers who feel and observe their organization making a commitment to their advancement, their opportunities to realize their ambitions, whether it's having a more meaningful and purposeful job, or a higher earning job, or even the prospect, if not the guarantee, of advancement, exercise higher level of customer care, much lower levels of voluntary turnover. It's correlated with a lot of indirect cost drivers, that suggest that the return on investment in this type of program is ... may not jump off the page in terms of the direct economics, but when you put the direct economics and the indirect economics together, can be pretty compelling.
Falzon: Yeah. I'm not sure that even on a direct basis, it wouldn't jump off the page. I think actually there's a ... you can measure it on both bases. One of the interesting things that also came out of this most recent survey that we did related to this concept is that there's another myth that today's generation of workers and employees are serial job hoppers. Yet, what we saw in the survey is that over half, or around half employees, actually would prefer to stay with the same employer over some fairly long period of time.
Fuller: Right.
Falzon: Think about that. Yet, their behavior is, they're not staying.
Fuller: Right.
Falzon: They want to stay, but they're not saying. Why? Because of just what you hit on, Joe, which is for them to stay, you have to be creating the opportunity for them to continue to advance their careers where they are. So, the whole concept of investing in them, allowing them to seek new jobs, which, you know, that's what they really want to do. They're looking to grow, both professionally and personally. If you provide them the opportunity to do that in your organization, then you can keep employees for a longer period of time, and maybe for very long. People like me, I don't even want to confess how long I've been at Prudential, but if you do that, think about the enhancement of productivity that comes from that. You're not spending your time constantly trying to replace the attrition in your workforce. Actually, what you're doing is, you're harvesting the investments that you're making in individuals. That talent is, as it seasons over time, becomes increasingly productive and efficient for you, particularly if it's talent engaged in continuous learning. So this is not, quote, the dead wood. These are actually individuals who are highly engaged and want to move their careers forward. If you've got that kind of a talent base and you're hanging onto them, the productivity for the company just goes off the charts. So, you can solve for the employee's objectives and solve for the employer's objectives with this concept of investing in individuals and giving them this mobility opportunity. Because, then they can try different things. Then, the real power is facilitating that mobility with this training, with the idea that they can think about skills that would take them into places that they might not have considered, because of the very linear way in which most companies and managers think about career development for individuals.
Fuller: We have seen a trend in the more developed world that, over time, companies may not be the fairest representation, may have gotten a little lazy. Because, it's become easier and easier to source potential talent from the outside through technology. Therefore, that's led company to arc toward playing the spot market for labor, rather than worry about anticipating what they're going to need, and migrating the talent they've got in that direction, as you're describing.
Falzon: Yeah.
Fuller: Once you start getting hooked on, though, what I do when I need a new skill as I go hire it, then you've told that employee, "You may be leaving with some regret, but the smart move is to leave and go to that next employer, because there's no
Falzon: Yeah, that-
Fuller: Investment that this company is making in your future.
Falzon: Yeah. I think there's a couple of observations on that, Joe. One is it sets a culture for the organization that doesn't signal that talent is the key to success. Again, if you want to treat talent like commodities, which is you buy them as long as you need them and then dispose of them when you don't need them and you buy the next commodity when you need it, expect to get a return from a commodity type investment like that. Two, in this market, that's a challenging paradigm. I call this the two- dimensional talent gap. First there's a quantum. It's a tight labor market.
Fuller: Yes.
Falzon: We've got a three and a handle unemployment rate. In our sector, "the insurance sector", even though we're a broader financial services company, it's one and a handle unemployment rate. The number of bodies that are actually out there are not as significant as you would think, it's not as deep of a well for drawing talent into the organization. You compound that with the second dimension of it, which is, it's not just bodies to fill the jobs, it's the bodies with the right skillsets.
Fuller: Right.
Falzon: If you don't think your existing employees have those skillsets, what makes you think that there are people out on the street that have that skillset? The reality is, you do have to solve this with some combination of external hiring and internal reinvestment. If you do the internal reinvestment, I think there are cost savings from that standpoint. Think about the severance and exiting costs associated with an individual, then compounded with the hiring costs and buying out of people from positions that they're currently in to get into the organization. That's not an insignificant amount of just pure dollars, you have to do the math on that. As the CFO of the company I've seen this math. That's compelling in and of itself. And then think about lost productivity that's associated with that as well because of the time lapse associated with that. I think there's a very compelling proposition around reinvesting in talent and that's why we're doing that. And then you compound that with now the message you're sending to your employees is, we actually care about you as individuals and we actually recognize that as individuals you're the key to our success in the future. You get a whole different level of engagement and that engagement are all the things that you were talking about before in terms of what that does for customer satisfaction, what that does for productivity, what that does ultimately then for the shareholder in terms of what flows in profitability.
Fuller: If you were advising one of our listeners about how to get started doing this, what are the first two or three things they ought to do?
Falzon: First, it has to start with an external lens. I suggest ... the most obvious external lens on this that’s most powerful should be, start with the customer. Start with the customer expectations of your organization, and become aware of what that gap looks like. Once you’ve defined that gap, then use that to inform organizational redesign that you’re going to need. I think the most important thing is start external—in, as opposed to in-out. Most companies, the in-out is not going to work very effectively. You need that external pressure in order to create the visioning, which gives you the starting point for the exercise. The other thing I suggest, if you’re just trying to get started, the two things I mentioned before is, if you do nothing else, just increase mobility within your organization. Back when I was CFO of the company, we took a look at every individual who had been in position for four years or more, in a single position, and we said, “Why? Is there an opportunity to move that person to a different position?” Because now what you’re doing is you’re beginning to build different skills by just moving them around in the organization. That may be not specifically targeted to the skills that you’re going to need in the future, but you’re nonetheless developing better athletes, and that’s going to put you into a better position. So, take a look at mobility in the organization. And if you’re not getting that kind of mobility, institute a program of forced mobility within the organization, moving people through it. The other thing I would suggest is, if you’ve got training that you’re investing in today, take a look at that investment. And can you make it more targeted than the generic type of training that comes out of many HR organizations? Listen, quantitative skills, soft skills, they’re all necessary, but they should be targeted toward the skills of the future, as opposed to some legacy type of training that’s been put in place that’s not being particularly impactful to those sort of things that you’re going to need in the future.
Fuller: What’s the role of outside institutions: educators, third parties, even suppliers? Because, historically, the skillsets in the US has been very much the educator creates someone that they hand a piece of paper to at the end of some educational experience, and that person is presumed to be minimally work ready if not job ready, and then someone drives up and picks them up and takes them to a workplace. Teacher and guidance counselor waves goodbye, or professor waves goodbye. Says, “All the best, and don’t forget to come to the reunion, and hopefully make donations when you do.”
Falzon: Donation, exactly, the alumni fund, yeah.
Fuller: Are you partnering with outside institutions? And what’s your observation generally about what an enterprise can reasonably expect from those institutions?
Falzon: I think there’s the opportunity to think about collaboration for solutions, as opposed to anyone doing this alone. Now, different types of institutions—there’s roles for government, there’s roles for academia, there are roles for business and industry. And there’s obviously the role for the individual. When we talked about how, in the first instance, it’s the responsibility of the individual, I think about this in this phrase of stackable institutions, Joe, that you and I have talked about before, and that’s the concept that no one’s going to find the solution to this all by themselves. Even the things that we’ve built within our organization to do this redeploying, it’s really building upon blocks that others have put into place, and it’s a matter of us now pulling all these blocks together in a unique way that has allowed us to translate jobs into skills and skills into career opportunities for individuals and facilitated by the learning modules that occur between all of that.
Fuller: Configuring the different elements of the system in a way that meets your needs and the workers’ needs.
Falzon: Yeah. I think it can start early on. We’re very engaged at the high school level of getting people involved in math, and so we’ll sponsor that. And then we’ll help facilitate them visiting with universities. In our particular ... we’re headquartered in Newark, and so Rutgers has a big campus in Newark. We’ve sponsored an honors school in Rutgers, and that allows for kids in the inner city that we’re trying to get from studies in math and similar disciplines into those schools. They can do it on a full-ride basis, so that they’re not disadvantaged to be able to access that education. Then we and other companies are providing internships for those students as they’re going through school and then ultimately providing jobs. You complement that with the role of government, which I think needs to think a little bit more expansively in terms of how they support that ecosystem as well. Traditionally, it’s been around supporting the four-year college experience. And that’s a great thing, but the reality is, it’s not the sole solution in this economy today. The retraining that individuals need to do may require some personal investment to do that, and that personal investment isn’t necessarily a four-year degree. It may be some special criteria or credential that they need. It may be a year at some specialized school. These are the sort of things that people have to have access to. And government needs to think about how they help facilitate that as well. If all that can come together, we can build on each other. And if we can build on each other, we can create a successful transition for employees. I always like to refer back to the experience of the Luddites. While every industrial revolution has had a good outcome, it’s had a good outcome in the long term. It hasn’t necessarily had a good outcome in the short term. There’s been transition and those who have suffered through the transitions.
Fuller: Absolutely.
Falzon: This industrial revolution, we have the ability to make this not only good in the long term to improve productivity, and the GDP per capita will go up as a result of this, clearly. But we need people in the near term to actually have a good experience going through it as well, not just the next generation benefit from it.
Fuller: Well, Rob, thanks a million for visiting us here at Harvard Business School and sharing all the things Prudential is doing to build the workforce it’s going to need in the future.
Falzon: Thank you, Joe. Enjoyed it.
Fuller: Thank you for listening to this episode of the Managing the Future of Work podcast. To find out more about our project on the future of work, visit our website at hbs.edu/managing-the-future-of-work.