The PwC “3-Worlds” Forecast: The Future of HR

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HR Future, HR Worlds, PWC HR

POSSIBLE HR WORLDS/Image: Michael Moffa

“Few business thinkers have proposed that the marketing or finance functions might cease to exist in their present forms, but some are starting to say this about HR.”—Michael Rendell, Partner and leader of Human Resource Services PricewaterhouseCoopers LLP

(Part 1 of a 3-part series on recent PwC HR and workplace forecasts. See Part 1Part 2Part 3)

In its recently published forecast and analysis titled “Managing Tomorrow’s People: The Future of Work to 2020”, PwC (PricewaterhouseCoopers, LLC) outlines three scenarios for the future of HR, companies and employees—what it calls the “Blue”, “Green” and “Orange” workplace and business “worlds”. Each has its own implications for the future role of companies, recruiters and HR staff, including the possibility of a dramatic downsizing of HR functions on the one hand and equally dramatic upsizing on the other, depending on which scenario unfolds in a particular business sector or geographical location.

Based on this tri-color analysis, PwC believes that “HR is at a crossroads and will go one of three ways:

• With a proactive mindset and focused on business strategy, HR will become the heart of the organisation taking on a new wider people remit incorporating and influencing many other aspects of the business. (Blue World)

• The function will become the driver of the corporate social responsibility agenda within the organization.(Green World)

• The function will be seen as transactional and almost entirely outsourced. In this scenario, HR will exist in a new form outside the organisation and in house HR will be predominantly focused on people sourcing. (Orange World)”

(Source: “Managing Tomorrow’s People: The Future of Work to 2020”, PwC. All further quotes are from this report. Color labels in the foregoing excerpt are my editorial inserts for clarity. Original British spelling has been retained in all quotes in this article.)

The three paradigms are distinguished and correlated through a PwC analysis based on two continua: “Individualistic-Collectivistic” and “Integrated-Fragmented”, mapped as two intersecting vertical and horizontal axes. Although there are four quadrants in the mapping, the PwC analysts reduced the scenarios to the three colors, which, on reflection and interpretation seem to correspond to three distinct business and cultural models, with clear historical precedents:

The Blue World

The “Blue World” is “individualistic-integrated”—vertically integrated as a supply-chain, and administratively top-down, closely supervised, performance measuring, it is an all-encompassing corporation that permeates both work and private life.  Through this permeation, the Blue company blurs the boundary between work and home, by undertaking the provision of services previously delegated to the community, the home or competing organizations.

This integration of work and private life is both vertical and horizontal, in that, in the former instance, recruitment and training begin in the mid-teens with career streaming that leads upward to corporate subsidization of education and training, culminating in hiring and vertically controlled and monitored performance, while, in the latter, horizontal integration dimension, the boundary between career and home is virtually obliterated by company employee services encompassing health, recreation, transportation, housing, etc.

To the extent that this sounds like “Big Blue” IBM, the color choice is apt. As I see it, the second most obvious historical precedent for this evolving Blue scenario had a longer and earlier history: feudalism—which seamlessly oversaw and integrated virtually every aspect of workers’ lives; defined the collective, shared mission of all; and fostered a key kind of “macro-individualism”: the independent functioning of the governing unit, viz., the feudal manor then, which serves as the “Blueprint” for the autonomous globalized corporation and laissez-faire corporate feudalism now.

It is also individualistic at the micro-level of individual employees and their families by allowing them to pursue their private lifestyle objectives, without constraint by any community or other non-corporate pressures and agendas. The analogy with feudalism is not a stretch, since the PwC report characterizes the Blue scenario as featuring “large corporates turning into mini-states and taking on a prominent role in society”.

Within this neo-feudal, macro-individualistic, micro-collectivistic framework, Blue HR management will, according to the PwC report, look like this (even though several of its presumably unique features appear to be practices and circumstances that any and all business scenarios would adopt or face, e.g., “Technology pervades every realm of business and leisure activity.”):

• Companies have become the key provider of services to employees. People management now encompasses many different aspects of employees lives’, often including housing, health and even education for their children.

• This strategy has led to an increase in staff retention rates as people policies seek to lock in talent, but the top talent is still hard to attract and retain, many senior executives use personal agents to seek out the best deals.

• Mass consolidation has had an impact on cultural issues. Leadership teams now have a high focus on the evolution of the corporate culture with rigorous recruitment processes to ensure new employees fit the corporate ideal. Existing staff are subject to compulsory corporate culture learning and development programmes.

• Huge people costs drive the need for robust metrics and analysis. Employee engagement, performance and productivity are all measured systematically. Leadership can access people data on a daily basis. This also provides an early warning signal of non-corporate behaviour or below standard performance.

• Technology pervades every realm of business and leisure activity. The line between inside work and outside work is often blurred by technology with employers providing the platform. This also provides employers with added insights to staff preferences.”

The Green World

The “Green”, “collectivistic-integrated” company, is ethically vertically integrated to provide quick responses to end-user/customer/client feedback regarding environmental, social and ethical concerns—what economists conventionally call “externalities”, which, in the “Green” scenario, become internalized into the mission, administration, marketing, recruitment and operations of the company. This Green model is “collectivistic” in the sense that, unlike the self-motivated macro-individualistic Blue corporation with its own, possibly maverick agenda, the Green company operates as part of the community (local, regional or global) in which it sees itself as embedded, making the social-environmental agenda a cornerstone of its own, with a holistic vision of its place in the scheme of things.

The PwC report summarizes the Green scenario this way: “Companies develop a powerful social conscience and green sense of responsibility. Consumers demand ethics and environmental credentials as a top priority. Society and business see their agenda align.”

What makes this Green scenario collectivistic is the communal motivations and constraints it enjoins. Contemporary examples include companies that produce green products and provide green services in a green way, those that provide non-green products and services, but in a green way; and those that otherwise support green goals, e.g., through charity.

Like the Blue scenario, the Green paradigm and its emphasis on social responsibility and the integration of work and moral values has historical antecedents and parallels, most notably the utopian communes of the 19th century, such as Robert Owens’ 19th-century experiment in socialism in New Lanark, Scotland; the communes of Mao’s China; the Israeli kibbutzim and the hippie communes of the 60s.

In contrast to the Blue scenario, which emphasizes only the private integration of  work and private home life, the Green model also stresses the integration of work and community ethics,  of work and the ecological and social environment, and of work and public, community life. Ethically vertically integrated, this model utilizes horizontal integration of community, ecological and corporate parameters.

In the PwC analysis, the implications for the future of HR are far-reaching: ”The need to travel to meet clients and colleagues is replaced with technological solutions which reduce the need for face-time. Air travel in particular is only permitted in exceptional circumstances and is expensive. Working across teams in different locations therefore presents enormous challenges to global businesses, and the HR function dedicates significant energy to generating virtual social networks across the operation and the client base.”

The Orange World

The “Orange”, “fragmented” work model, in which, instead of the Blue scenario’s mapping of one employer into many workers, one worker—like a free-lancer—serves many masters, often on a strictly short-term or fixed-term project basis, with limited company benefits, through a network of contacts made and maintained through networking tools like what PwC presciently calls “Workbook” , a fully-professionalized analogue of Facebook (not to be confused with the real, a photography portfolio website).

In the PwC characterization of the Orange model, it is a framework in which “global businesses fragment, localism prevails, technology empowers a low impact, high-tech business model. Networks prosper while large companies fall.”

Because the Orange framework rejects the exclusive tie to one employer or patron, it bears a strong resemblance to the post-feudal guild and merchant framework that emerged from the ravages of the Black Death of the Dark Ages and Middle Ages, when the scarcity of labor induced by decimation of the skilled laboring population by plague allowed survivors to command much greater remuneration, organize themselves into guilds and achieve substantial independence from their feudal overlords.

However, like that earlier end of the exclusive tie to a single feudal manor’s master, the futuristic Orange scenario entails a loss of the protections and privileges of the cocooning, all-embracing Blue framework’s monopoly on the worker’s services, with a transfer of some functions, e.g., professional training and upgrading, to external guilds and other professional associations and institutions.

As for the implications for HR management, couched in terms of a guild concept analogous to that of the Middle Ages, the report forecasts this for the Orange world: “Our third world is in many ways the most radical. In this world, economies are comprised primarily of a vibrant middle market, full of small companies, contractors and portfolio workers. People management is about ensuring these small companies have the people resources they need to function competitively. This allows an important role to be carved out for HR, one where the people supply chain is a critical component of the business and is strategically led by the HR function. But the flip side is that this could also see in-house HR becoming a sourcing or procurement function, with the high-end people development aspects of HR being managed externally by guilds.” (Note the reference to guilds, not unlike those of the plague-wracked feudal Middle Ages.)

The clear suggestion here is that not only will primary production and services be increasingly outsourced to small, independent contractors, but also that many of the traditional functions of the HR department will face a similar fate.

The Four Worlds Model

Based on the two continua identified as key, viz., “individualist-collectivist” and “integrated-fragmented”, the PwC researchers originally considered having four scenarios describing four recruitment, employment and business “worlds”—“yellow”, “red”, “blue” and “green”, but reduced them to three, orange being a blend of the red and yellow, for the following reasons: “We began with four worlds: yellow, red, blue and green, with the yellow and red worlds straddling the top half of the quadrant. In these fragmented worlds we discovered through our analysis that the differences across individualism and collectivism were hard to define in the fragmented world. Both of these worlds relied upon networks to survive, were, small, nimble and adaptable. The motivations were the only variant factor where the red world was more self-serving than the collective altruism of the yellow world. We decided therefore to combine these themes to create a single orange world which represented the fragmented business model.”

Because the PwC tri-color classification of future HR and business scenarios is based on the intersection of these two continua, it is well worth investigating the completeness, consistency, independence and comprehensiveness of the crucial underlying “collectivistic-individualistic”/”integrated-fragmented” dichotomy pairs—especially since the initial logical response to them is that both pairs seem to be reducible to an opposition between “whole” and “part”, or between “being a part of” and “being apart from”.

In turn, that suggests there may in fact be only one dichotomy, namely, “whole-part”, not two, and that therefore “individualistic-collectivistic” and “integrated-fragmented” are not two independent axes as the PwC study suggests and requires.

If that is the case, the question arises as to whether or not the PwC tri-color model may require a different rationale, whether it is in fact complete and accurate, and to what extent the three “worlds” are 1. best viewed as complementary aspects of one corporate and HR structure; 2. as mutually exclusive, but co-existing frameworks; 3. competing frameworks, with an eventual single winner (“HR is at a crossroads and will go one of three ways”) —three possibilities that the PwC report explicitly allows for.

It is to this task, and analysis of its implications for HR management, that Part II of this article will turn.

(See the complete PwC report and its useful comparative summary of the Blue, Green and Orange “worlds”.)

By Michael Moffa