Your Work Friends

New Week, New Headlines: The Future of Work: Managers Fading and Bonus-Based Pay Rising & Human Capital Is Investment - Not Expense

• Francesca Ranieri • Season 1 • Episode 42

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Discover two major work trends that are reshaping the workplace: the shift away from managers and the growing importance of bonus-based pay. Learn why human capital is an investment, not an expense.

Two Game-Changing Work Trends:
👉 Explore two major work trends transforming corporate America: the decline of traditional managers and the rise of bonus-based pay. Find out what this means for your career.

We referenced:
Amazon's Plan to Cut 14,000 Managers
The Big Shift from Salaries to Bonus Based Pay

Human Capital: Why Investing in People is the Key to Growth:
👉 The data is officially in - Human Capital is actually an investment (I know, all of us in talent are like, no duh. But, we love the data!!). The SEC's human capital reporting rules and why diverse teams are crushing it financially (35% better). Plus, Microsoft's secret sauce for employee retention.

We referenced: 

future of work, no managers, bonus pay, human capital, employee investment

Disclaimer: This podcast is for informational purposes only and should not be considered professional advice. We are not responsible for any losses, damages, or liabilities that may arise from the use of this podcast. The views expressed in this podcast may not be those of the host or the management.

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Speaker 1:

You wouldn't expect to get returns from your technology investments if you're cutting corners on the maintenance right. And so the same goes for your human capital. If you aren't investing in your workforce through development, well-being programs, diversity initiatives, you're not going to get the best results from your employees, and so you're not going to get the best business results what's going on, mel?

Speaker 2:

not much going on with you not much, not much, I'm clear into fall. I can't believe it's october, isn't this funny? It's like the time of year where you start thinking about the next year, even though we still have what three months left.

Speaker 1:

We're still at the tail end of fair season here. My best friend and I are gearing up to head to a local garlic festival that we love.

Speaker 2:

What kind of garlic? You know how many varietals of garlic there are A million, yeah.

Speaker 1:

Yeah, and not sold in the grocery store. So this place has everything. Their vendors were amazing. Last year they had garlic ice cream, which I was very skeptical about, but it was pleasant. They also had the best freaking pickles garlic pickles, pickles all day I love pickles, yeah, and then they had a ton of stuff though, like sauces and-.

Speaker 2:

Really, yeah, yeah, that's it. That's the way to do it.

Speaker 1:

It's a really good vendor. I'll have to pick some stuff up for you. Yeah, yeah please, I would be Please.

Speaker 2:

Speaking of pickles, I think people need to bring back the pickle tray at restaurants.

Speaker 1:

What's the pickle tray? I never experienced a pickle tray.

Speaker 2:

What Like when you go to a restaurant and they have a pickle tray. This used to be a big thing back like in the 50s and 60s, and crap like that. Yeah, you had a pickle tray. It was Midwestern Like a pickle tray.

Speaker 1:

I don't know what a pickle tray is. I know at Thanksgiving my Nana we used to always do a tray of pickles as like an appetizer thing to pick at, Like dill, gherkin. Yeah, just the little ones for people amongst a number of things is like tiny apps, but I've never been in a restaurant that does a pickle tray.

Speaker 2:

Yes, so you can get a pickle tray and it'll have, yes, like varietals of dills, maybe some pickled carrots or something like that, maybe some olives, but, yes, pickle trays. I don't understand why more people don't do this. I freaking love pickles.

Speaker 1:

I would love it. It sounds like a good girl dinner. It is.

Speaker 2:

It is Actually so when you come, we'll just do a whole pickle thing.

Speaker 1:

We'll just do a pickle tray, yeah.

Speaker 2:

I'm down. We're back with new week, new headlines. Mel, what are you talking about today?

Speaker 1:

Listen, I had the hardest time picking something because there's so much to talk about right now, but a recent article came out in Forbes, called From Expense to Investment Human Capital a Driver of Business Value Interesting, interesting. I didn't realize that was a question to be said, so I thought we'd talk about it. What are you talking about?

Speaker 2:

Okay, I want to talk about two trends I think everybody needs to be aware of. One is something called de-layering or flattening, ie organizations getting rid of manager levels, and the second is incentive pay, so a big shift from salaries to bonus-based pay. I want to talk about those two trends because they're growing in popularity and have some pretty massive impacts on the workplace. Oh, let's do it.

Speaker 2:

Two trends that I'm seeing that I think will really impact people in their jobs currently and, potentially, if they're looking for jobs too, because I've been seeing it for a while. The first trend I want to talk about is flattening or de-layering of organizations, and then the other one I want to talk about is the idea of shifting from salaries to bonus-based pay, meaning more of your compensation will be bonus instead of salary, so you'll still get a salary, but more of that percentage of the pie will be bonus. So those are the two trends I want to talk about. Let's do it All right.

Speaker 2:

Article came out this week. Amazon is reportedly planning to cut 14,000 managerial positions by early 2025. A couple of weeks ago, annie Jassy dropped this note to all employees. Hit the news because the big story coming out of that was Amazon's returning to office five days a week. Everybody had a shit fit. Remember this? Okay, but there was another paragraph in that email that was talking about cost efficiency and streamlining operations, and in that, 14,000 managerial positions would be cut. Did you see this? I did see that, yeah, yeah, we're seeing it in quite a few places. When you eliminate managerial layers, it's often referred to as de-layering or flattening of an organizational structure. This is something that has been going on. Ge did this under CEO Jack Welch. It's not a bad thing to do, especially when you want to make sure that you're improving communication, you're increasing agility, you're really making sure that employees feel empowered, ie the doer to the approver is as streamlined as the processes you can get. Not a bad thing to do.

Speaker 1:

Not a bad thing to do? I don't think so at all, yeah.

Speaker 2:

And you see this quite a bit and you're seeing it more and more in things like high-tech organizations or fast-moving industries, because Amazon's doing it. But just in 2023, meta did it, microsoft did it, ibm did it, so it's happening in these big mega organizations.

Speaker 2:

Okay, I want to talk about what might be the impacts of this in terms of a pro and in terms of a Listen. Delaying or flattening an organization can really be really great, and you might want to do that If you are in an organization where it takes forever to get shit done. Have you ever been on a team right where you're like, oh my God, I have to have the meeting before the steering committee?

Speaker 1:

Yes, and you've now talked to 30 people and a decision still isn't made. And yeah, it's like moving a cruise ship. Yeah.

Speaker 2:

That's so freaking frustrating.

Speaker 1:

You're a hamster wheel. Yes A hamster running in place Yep.

Speaker 2:

Thousand percent. So when you're in these organizations and you typically see this in really big organizations, where you're having like decision making bottlenecks, employees are like I can't get anything done.

Speaker 1:

A lot of bureaucracy, where you have really big industry changes happening where you need to move more quickly. Flattening is a good thing to do yeah, flattening and or looking at your decision-making processes and how that works and how that needs to change.

Speaker 2:

Yes, if flattening is not the only move, you can make that point Right. That's not the only lever. All right, yeah, here's my concern and what I would love everyone to look out for. There's one thing to flatten your organization, there's a lot of pros you can get on that speed, employees feeling more empowered, agility, great stuff In practice. In practice, I want everyone to think about. We know that, for example, the most direct reports you should have seven, for a manager to have have seven in order for them to have really good career counseling, coaching, conversations, feedback, clear goals seven, seven to one. So my question is when you flatten an organization and all of a sudden, 18 people roll up into a VP, 56 people roll up into a VP what happens?

Speaker 1:

That all falls away to at least one, one person who they can go to to help them make a decision, who they can brainstorm with, who's going to give them guidance on things. You have one VP with 50 plus people, even 18 plus people. There's not enough time in the day for them to possibly do their job and do it really well and support that amount of people.

Speaker 2:

No, there's not At all.

Speaker 1:

It just isn't. So now you're hurting both, because neither of them are getting what they need to succeed.

Speaker 2:

To your very good point. When you see organizations de-layering or flattening, they are giving up aspects of having a very strong mentorship culture. That's what you're giving up. Okay, if you want to have a very strong mentorship culture, this is not necessarily for you. But if you run a very complex operation, if you're in a regulatory environment, this is not for you. If you're in high growth, this is not for you. Obviously there's some pros. There's some pretty major cons, just something to be aware of because it's growing in speed.

Speaker 1:

Yeah, it's growing in speed and I think it's good to ask questions if that's happening. So what does that mean? Who do you go to? How are decisions going to be made? Those are all conversations that need to be had. I'm all for efficiency, but there's a huge cost to some of this.

Speaker 2:

Yeah, and my number one thing if your organization's thinking about flattening seven to one ratio, If you're more than seven to one, your mentorship, your coaching is out the door.

Speaker 1:

Just know, yeah, just know, that's going to hurt. Also, when you think of succession planning, what does growth look like? What does your career trajectory look like? How is that shifting? If there's now only a VP role available, is it someone's either got to leave or die for someone to get into? Like, what's the track for growth?

Speaker 2:

Yeah, or pay, or pay Right.

Speaker 1:

How does your pay look? What does that look like? Are there caps Things to consider?

Speaker 2:

That's yes, absolutely so there's a lot of questions.

Speaker 2:

I have Lots of questions. Yeah, listen, flattening or delayering that's trend number one. You and I were joking around. Catch us in two years when they realize that they probably overcorrected and need to layer that back in, but this is something that's happening, so just be on the lookout for it in your organization. Trend number two Wall Street Journal came out with this article the big shift from salaries to bonus-based pay. When surveyed, 28% of organizations are thinking about making a bigger percentage of someone's pay be what they call variable, ie bonus. So, for example, if you traditionally have 90% of your pay be salaried ie fixed pay, and 10% bonus, now organizations are saying, oh, you know what, we want to have 70% of that be salaried and 30% of it be bonused. Yeah, we're seeing a lot more pay percentages be incentive or bonus pay. Thoughts and feelings. Thoughts and feelings.

Speaker 1:

I don't think there's anything necessarily wrong with incentivized pay feelings. I don't think there's anything necessarily wrong with incentivized pay If there is massive amounts of transparency to show someone how they get that pay, what plays into it, how are you tracking it? How are you measuring it? Do they have access to that measurement, not just at year end but throughout the year? How is that discussed with them? How do they know they're on track? And it's not a mystery where you feel like you're going into a casino and throwing a quarter in a slot machine and maybe I'm getting something, maybe I'm getting nothing, Because I think most people's experience when it comes to burial pay and pay transparency pay transparency in the workplace is opaque. It is When's the last time it was made really clear to you and you got a certain bonus for your variable pay?

Speaker 2:

How has that?

Speaker 1:

ever been discussed with you. You know what I've gotten in the past. Let us know if you want a conversation to discuss this. If organizations are making this move, they're going to have to get really good about transparency for how this is measured, very specific goals for how that's more productive right.

Speaker 2:

Also pay for performance takes a lot of the onus of pay off of the employer and puts it more on the employee. It's also why you've traditionally seen pay for performance mostly in sales organizations, because sales organizations they're quantitative right.

Speaker 1:

How many calls did you do? Oh yeah, that's very easy to measure.

Speaker 2:

It's very easy to measure. You're pulling it down the sales funnel and why I think it's so important. What you're saying around that transparency and that clarity is we're talking now about pay for performance in HR and marketing and engineering every single aspect of the organization where you don't have those clear quant, and so the ability of a leader and an employee to be 100% clear on what does success look like for me to get this bonus huge. The other concern I have with this is that it is about what the employee does. So even if you're 100% clear on that success, even if you 100% met that goal, most of bonus-based pay is based not only on your performance, but on your organization's performance and on your company's performance as well. So you might kill it, but if your company didn't, you don't get a bonus.

Speaker 1:

Right, or if there are variables that are ultimately out of your control. So, for example, you mentioned HR being in this right. How is that going to be measured? By employee engagement? Guess what? Hr isn't responsible for all of employee engagement. They help with part of that, but a lot of that has to do with things out of their control, like how are leaders showing up to help keep people engaged? How are other parts of the organization set up to help people be engaged? So it's got to be super transparent how this is being measured. Yeah, and some guarantees, right. There has to be some guarantee, because otherwise people are just going to feel like their livelihood is a gamble.

Speaker 2:

Yeah, it's a gamble. You and I both know, because we work with teams on this all the time. We work with orgs. One of the biggest complaints people have is they literally don't know what success looks like in their role Constantly. The fundamentals of coming back to having really clear goals is a major problem. Having very crisp feedback, regular feedback, is a major problem. And so now we're saying your pay is congruent on you meeting some sort of goal that we're not even clear about, Oy vey. So here's my recommendation for employees If your organization is moving towards that, or if you're interviewing with an organization where there's a bonus structure, be very clear it's your very good point, mel what that looks like, what you need to do, how goals are set, how people have met that in the past. Be really clear about it. Don't just be like oh cool, it's fine, it's fine. Be clear about it.

Speaker 1:

Yeah, tough questions and review your contracts.

Speaker 2:

A thousand percent and honestly negotiate the shit out of your salary on your fixed pay, because that's the only thing that's guaranteed.

Speaker 1:

The headline here again was from expense to investment. Human capital, driver of business value. The author is Dr Charis Solange Charis, let me ask you a question, francesca when you think of human capital, do you consider it an expense or an investment?

Speaker 2:

It depends on what hat I'm wearing, but ultimately I would say it would be an investment. But if you're talking about human capital, as in like payroll, some people might think it would be expense, but I think of it as an investment.

Speaker 1:

But I think of it as an investment.

Speaker 1:

Yeah, it's an interesting conversation to have, right, because when we met with Mike Ohada and his book, it's like how do you bring back humanity in the workplace? So, thinking historically, I think human capital it's been seen as a cost center, which isn't very humane, necessarily if you don't think of your people as a base for your business value, which they are. So what you need to know, human capital, which is employees and talent for folks who are like what is that? It's now widely seen as a strategic investment rather than just an expense to manage, and the shift has been largely driven by regulatory changes, like the SEC's 2020 decision requiring companies to disclose more human capital data in their financial reports, and these changes are forcing companies to be more transparent about their workforce management. For example, under the new rules, companies must report on workforce composition, including the number of full-time, part-time and seasonal workers, as well as provide more detailed data on diversity, and this is crucial because, according to McKinsey's, diverse organizations are 35% more likely to outperform their peers financially, for example.

Speaker 2:

I think it's so funny. It's like all this argument around DEI and all the pushback on DEI and this is a business issue. It's a slam dunk win for businesses. Yet we're making it this dumb shit.

Speaker 1:

Political stuff Like yes, more diverse teams are more profitable, period, point blank, correct Not hard Because people come from different backgrounds, experiences, have diverse point of views, which help with innovation. So many things. Yeah, don't have blind spots, it's unreal.

Speaker 2:

It's the dumbest thing.

Speaker 1:

According to the article, businesses that use human capital analytics to inform their decision making see an average ROI of $19.75 for every dollar invested in their workforce, compared to those that don't invest in such systems, and this means that organizations are seeing tangible returns on investing in their people, whether it's through leadership development, well-being programs or training and development. So something to consider if you're listening to this how does your organization approach workforce investment? Are there any examples where you've seen clear returns on that investment, like increased productivity, improved culture? So spending more time measuring those impacts? Why does this matter? The shift matters because historically and you and I have seen this on our own experiences companies have seen labor as a cost, something to control and minimize.

Speaker 1:

However, more and more data is showing that human capital is an asset that directly contributes to financial performance. We talk about this a lot on this podcast, that your people are the base of every organization. For instance, gallup shows that companies with highly engaged employees and we talk about this often they outperform those, and I love this analogy. But they talked about how you wouldn't expect to get returns from your technology investments if you're cutting corners on the maintenance right, and so the same goes for your human capital. If you aren't investing in your workforce through development, well-being programs, diversity initiatives, you're not going to get the best results from your employees and so you're not going to get the best business results. Why do you think organizations are so slow to recognize the actual value of their human capital as a strategic asset and not a cost?

Speaker 2:

I think one of the long game right. A lot of times organizations are looking for results every quarter as opposed to every year or year over year. And when you think about the return you're going to get on human capital investment, think about someone onboarding right. Someone's not going to be 100% ready to go and able to really hit the ground running on day one, like historically we look at like 90-day marker, three-month marker, six-month marker, one-year marker. The higher up you go, that extends. I don't think most executives are really like feeling very confident in their role until about a year in. Quite honestly, two years is even better. So it's a long game. It's one. The other thing is most organizations don't do the plumbing right or the infrastructure right to set their people up, the plumbing right or the infrastructure right to set their people up, and so all of the problems fall down to oh, this person must not be operating well, as opposed to thinking about are we setting up an environment that would put someone up for success?

Speaker 1:

Right, yeah, yeah it's a good shift that's happening, I think. So I want to talk about what it means for organizations, leaders, employees, I think, for organizations, companies that shift their. They've increased retention because of it. They've also improved innovation because of it. They focus on providing training and career development opportunities for employees, which fosters long-term loyalty and boosts creativity. And you and I both come from pretty heavy L&D backgrounds ourselves. We know that training is super valuable for that.

Speaker 1:

For leaders, they play really a critical role in this shift, this mindset shift and way of thinking about people, and they are the ones that need to ensure that human capital investments are the ones that are aligned with overall business goals.

Speaker 1:

There was a Korn Ferry study that found that organizations with effective leadership development programs, for example, saw a 25% higher profit margin than those that don't. So leaders who prioritize employees' growth, invest in leadership development and create cultures of engagement are going to see those better financial results. And then for employees, today's workforce just expects more from their employers. Right, we talk about this all the time. Employers aren't going to be everything to everyone, but there has to be a two-way street, and Deloitte always comes out with that human capital trends report, and they noted that 80% of employees say, for example, being is critical to their success and the organization's success. So employees are looking for development opportunities, diverse work environments, well-being programs that support their professional and personal lives, and companies that prioritize those elements to retain their talent. What are some other things that you think leaders can be doing or should be doing to transition or help with the transition from viewing employees as an expense to seeing them as an investment?

Speaker 2:

I think this comes down to a philosophical thing. Quite honestly, if you're a leader, do you think your people work for you? Do you work for your people? Are you trying to figure it out together? That's one. What do you think your responsibility is in, helping people reach their potential or not? I really think it comes down to that. What is your philosophy on people? And if you really believe that, for instance, my philosophy on leadership is that my job is to make sure that these people are reaching their full potential, that's my job. That means the investment is going to reach their full potential. It's not that these people work for me, it's what's my responsibility in that.

Speaker 1:

And it's just a philosophy thing yeah.

Speaker 1:

Interesting stuff Globally. There are also some global trends and regulatory changes. I'd love to recognize. So in terms of regulations, globally, there are tighter regulations around human capital disclosure. For example, europe's European sustainability reporting standards require that companies disclose how their workforce strategy contributes to long-term success for their employees. Similarly, japan's corporate governance code calls for more transparency in workforce management, and these international trends are starting to push US businesses to prepare for stricter regulations under this new SEC ruling, such as reporting on workforce composition, turnover rates and the total cost of the workforce.

Speaker 1:

So it is signaling that workforce management is becoming just as critical as financial management, and a failure to provide transparency could harm a company's reputation with investors, employees, customers, future talent, etc. So becoming extremely relevant today. So want to wrap it up by just saying with for leaders, if you're listening to this today, you're right in the middle, right, but you have the greatest impact. So it's time to rethink how your company approaches human capital. Here are some things that you can do Consider implementing data-driven strategies like workforce analytics, to see how those investments are truly impacting the bottom line, whether it's through leadership, development, being performance programs, diversity initiatives, treat your employees like the asset they are. That's critical to business success.

Speaker 1:

You might ask yourself how is my org preparing for the future workforce? How am I doing that? How am I offering transparency? And then I had a fun Google alert for a small organization that I wanted to call out because they had a really good motto First, take pointers from any external orgs doing this really well. In my Google Alerts this week four L&D trends that I was following something came up that was super interesting. It was an insurance agency and they were nominated in the Insurance Journal's 2024 Best Agency to Work For. They took home the gold for the best agency. In the Insurance Journal's 2024 Best Agency to Work For. They took home the gold for the best agency in the West. Their motto we treat our employees like we treat our clients. Hey friends, this episode of your Work Friends was hosted by Francesca Ranieri and myself, mel Platt.

Speaker 2:

This episode was produced and edited by Mel Plett and myself, Francesca Ranieri.

Speaker 1:

Our theme music is by Pink Zebra and you can follow us over on all of our social media platforms Instagram, TikTok, YouTube and, if you're so inclined, join us over on LinkedIn in our large and growing community. And, if you're so inclined, join us over on LinkedIn in our large and growing community and you can email us at friendatyourworkfriendscom or visit us on yourworkfriendscom Also. Folks, please like, subscribe and leave a review if you enjoyed this episode. And if you really enjoyed it, please share with a work friend or two. Bye.