Top 10 Global Issues and Hotspots for HR Leaders in 2020
“A Walk on the Wild Side” picks out ten issues and trouble spots that will demand the attention of HR leaders across the world. Some of us will take a proactive stance on some of them, some will be bitten in the rear by others—but everyone ought to consider these issues for their 2020 priority list.
As we move into a new decade, every business will have its own issues and priorities to deal with. For many, it will be trying to deal with “more of the same”—but better, faster—and with less.
Somewhere between the long-term vision for HR (i.e., going digital, employee experience, workplace of the future) and simply navigating from quarter to quarter to the year-end are a series of issues that might not make your list.
My top ten issues and hotspots are those least likely to be front of mind today and most likely to come to bite you tomorrow. If you are a regular reader of “A Walk on the Wild Side,” at least some of these will not be surprises.
#1 Leaders Behaving Badly: The Pace Increases
As the world’s media is captivated by the “escape” of former Nissan and Renault President Carlos Ghosn from Japan to Lebanon, the trend of CEOs being removed from their posts for inappropriate personal behaviour or for creating a toxic work environment through their actions not only continued in 2019—but accelerated. According to Challenger Christmas, 2019 data for CEO separations exceeds the prior record set in the financial crisis of 2008. Put simply, employees and activist investors are becoming more aggressive in demanding the heads of high-profile CEOs. The so called “2019 walk of shame” list includes Steph Korey of Away, Mark Parker of Nike, Kevin Tsujihara of Warner Media, and Tim Sloan of Wells Fargo.
It’s not just about the U.S., nor is it simply about the personal behaviours of leaders. As a result of a series of employee suicides at the French Telecom company Orange, on 20 December a Paris court sentenced the former CEO, Didier Lombard, to a year in prison, with eight months suspended. The court further imposed fines on the company and on Lombard personally for “institutional harassment” as opposed to their direct personal actions. Two other former executives, including the human resources director Olivier Barberot, were found guilty of the same charge and were handed the same jail terms and fines as Lombard. Four more executives were charged with "complicity in psychological harassment" and given four month suspended jail sentences. Orange will not be appealing the rulings.
#2 Brexit: From Both Sides Now
With a decisive election result in the UK going very much in favour of Prime Minister Boris Johnson, things should be much clearer and move on at pace to the practical (rather than ceremonial) separation of the UK from the EU. I can’t let the opportunity for a quick aside pass by as I wonder what U.S. Democratic presidential hopefuls Sens. Warren and Sanders make of the decimation of the British Labour Party led ever leftwards by Jeremy Corbyn—not just in marginal constituencies, but in solid “working class” Labour strongholds.
All that said, Johnson’s predicted swing to the right on issues of employment may be tempered a little by having won his landslide victory in the industrial North and Midlands. Dismantling laws based on European employment directives might not be his first priority. Likewise, if Johnson is to press ahead for a quick trade deal with Europe, it is clear that workers’ rights, the environment, data protection and some banking regulations will come as part of the deal. Indeed, there is plenty for international companies with UK operations to think about.
But what of the Union itself? Without the continued and systematic “hand-bagging” of European employment initiatives started by Margaret Thatcher more than 40 years ago, is the way open for new laws on low pay, the platform economy, and European Works Councils? Legislation on the first (and certainly second) of these might even attract the support of governments in Central and Eastern Europe.
The answers for international business may still not be clear, but after the stalemate that has existed since the referendum in 2016 has gone, at least the questions we need to deal with are now in front of us. Time for business to change gears.
#3 Artificial Intelligence and Restructuring: Welcome to the Continuous Apprenticeship?
With the increasing adoption of AI by companies, the nature of restructuring has changed from eliminating surplus capacity caused by productivity increases or offshoring to dealing with fast-changing skill needs. The notion of firing people with worn out skills and hiring people with new ones doesn’t work from a legal point of view (with selection issues in Europe and age discrimination in the U.S.); from a moral point of view (writing people off as useful contributors at earlier and earlier ages); or from a financial point of view for companies paying large separation payments and states absorbing the social impact of the no-longer-employable.
I keep asking three questions of HR leaders:
- After years of pure workforce reductions, have we lost the muscle memory of how to “re-” and “up-” skill our people?
- Have we become so obsessed with workforce restructuring as a numbers reduction game that we can no longer judge the economics of separation vs re-skilling?
- Because we can no longer promise a job or career for life, it is OK for companies not to care at all about their employees' lifetime careers?
Around the world, we have seen many companies reinvent apprenticeships for the modern era to get people out of schools with the skills they need to make a start on today’s workforce skill needs (take a look at IBM's PTech initiative). That’s a great start, and it works well in getting people into the workforce—and where a particular skill has a long shelf-life. What it doesn’t answer is how to deal with the speed of skills change over a working lifetime.
Should we not adopt the idea that we are all now lifetime apprentices if we want to stay relevant?
#4 China Grove
The trade war blows hot and cold, with sanctions on and off on a regular basis. Whatever the short-term moves, it is clear that the U.S. wants to re-set the trade balance with China, and it is clear that China is unlikely to step back and say, “it was good while it lasted.” Don’t forget that China is an historic trading nation and its share of world trade today is less than it was in 1831.
If we look at the longer trend, we can see a number of issues we will need to deal with:
- Work is moving away from China—some back to the U.S. and Europe (and in a jobless way)—but more so to economies in Southeast Asia, Bangladesh, and Latin America. India Prime Minister Mahindra Modi is hoping that a slice of the China action will come his way. International companies are restructuring in China after years of growth—and this not such an easy matter.
- International companies are increasingly manufacturing in “China for China”—after all, the population is three times that of the U.S. With the growth of “trading and political nationalism” across the globe, will this mean that organizational power will shift from global leaders to regional and local leaders?
- Just as companies adopt the “China for China” approach, Chinese companies are adopting the same tactic in their own global expansion—those who have not watched “The American Factory” on Netflix should take note.
What of Hong Kong?
As I watch the continuing Hong Kong saga unfold, I feel increasingly depressed for the Hong Kong community. For HR folk we have spent time in 2019 at introducing flexible working practices to avoid troubled areas and have tried to draw lines between freedom of speech and protest and maintaining cordial relations with China. Right now, I suspect that many companies at looking at where Hong Kong fits into their future as a regional hub and whether the real choice now is between the Chinese mainland and Singapore.
#5 Performance Management: Getting Even Tougher
Dealing with poor performance is an essential for every business. Tolerating people who do not make a reasonable contribution damages the working environment for everyone. But dealing with poor performance is difficult wherever you are in the world, and in some countries like Italy and Japan it is a nightmare. Indications are that this already hard job is getting more difficult.
In India, using poor performance to manage workforce balance is getting tougher. As the labour market cools, fewer people are prepared to leave the company for a small severance knowing that they can walk into another role immediately—and poor performers have become the “stickiest.” Life was never easy in France, but the jail sentences handed out to senior executives in Orange for creating the kind of “toxic environment” that drove people to either improve performance or leave have put companies on notice. The government of Japan has continued to challenge those companies using heavy handed tactics to “encourage” poor performers to leave the company and new laws in Korea point in a similar direction to those in France.
It’s important for companies to get this issue right—maybe it’s time for a program rethink.
#6 The Gig Economy
Issues around defining the employment status of casual workers, sub-contractors, and franchisees have been around for many, many years. A variety of national laws set out at a macro level what kind of work can and cannot be sub-contracted. At a micro level, such laws set tests to determine if there is an employment relationship between a worker and a company, and, if so, who is it with. Many of the current rules are associated with the degree of control that a company can exercise on sub-contractors or freelancers. They vary by country, but normally involve three to five specific criteria. What is beginning to change is the emphasis placed by courts on the workers’ dependence on a particular company—but let’s come to that.
Taking half a step back, there is a difference between the “platform economy” and the “gig economy.” The “platform economy” involves the automation of “transactions’ through a platform—think Ebay (the shopping bit), Etsy, Facebook, PayPal, AirBnB, etc. The “gig economy” is a subset of this type of operating model where the transactions involve the contracting of peoples’ services—think Uber, Lyft, Turo, Fiverr, Deliveroo and (other) parts of Amazon—and this area is growing fast. It is estimated that more than a third (36%) of U.S. workers today are engaged partly or fully in the gig economy. It varies widely—in Japan, the number is estimated at 1%—but it is growing everywhere.
The issues of “reliance” and “control” are where the gig economy presents dilemmas. The platforms open up new opportunities for working flexibly (i.e. reduced reliance) but have also increased the ability of businesses to control and monitor how the individuals they engage do their work. Of course, those involved in workers’ rights are keen to assure protections for gig workers, but in many countries it goes much further, into the world of taxation and social security. The Treasury departments don’t like the gig economy. They prefer people to be employees where deductions are made at source for obvious reasons.
What is happening to the categorization of gig economy workers around the world is a lottery. Laws are hopelessly out of date. The courts used the traditional self-employment tests to judge cases inconsistently – whether they have “more” or “less” sympathy for the gig worker in question. In the U.S., California would be more sympathetic to employee status than would Texas. Courts generally are more sympathetic to drivers than they are to IT specialists. Put simply, gig economy workers doing the same job may be classified differently in different countries and workers in essentially similar circumstances treated differently depending on the nature of their work. It’s neither about skill nor salary—Uber drivers are more likely to be classed as employees than plumbers and “handymen.”
So, if you are involved, and we all increasingly are, I’m sorry to say you need to watch case law developments in every jurisdiction you care about closely—and be prepared for judgment swings.
But shouldn’t the law just “catch up?” From the ILO internationally to the EU regionally and to governments nationally, legal changes are under review. The hot debate is whether there is a hybrid status of “worker” that sits between employee and true independent contractor and is entitled to some protections and benefits but less than those accorded to an “employee.” Most of us would applaud this—but don’t hold your breath for clarity.
#7 Gender Pay Gaps and Low Pay
These two issues are high on the agendas of law makers (especially on reporting requirements), activist investors, labour and human rights activists, the mainstream and social media, non-executive directors—and maybe last of all employees. For all these reasons, pay differentials—gender or “top vs middle or bottom”—need to be high on your agenda. The answer to the first is clear, the second is a question of “fairness” and how you justify it.
On the gender side, people are right to ask the question whether we are serious about the subject. ILO Convention 100 on Equal Remuneration was passed in 1951. Yet today the U.S. is one of just 14 world countries (and the only advanced democracy) that has not ratified it. National laws were passed in the U.S. in 1963, the UK in 1970 and in Japan only in 1985.
If these pictures don’t persuade you that this is both a global and a diversity issue—and that we have a long way to go—then you should stop reading here and go onto the next issue.
In the UK, all organisations with more than 250 employees had to publish their gender pay gap by 4th April 2019. Of the 9,961 companies that filed on time, 7,755 paid male employees more than female staff based on median hourly pay. Almost a third of businesses had gaps which were worse than the national average for full- and part-time workers, and more than a quarter of companies paid women over 20% less than men—I’m guessing the worst offenders chose not to publish! Over half a century after the U..S passed the Equal Pay Act, a woman working full time earns 80.7 cents for every dollar a man working full time earns.
No one expects this to change overnight, but the moves toward mandatory or voluntary reporting and the external interest in the subject will show clearly those companies moving forward, standing still or backward. When you get your issues more or less right in the U.S. or Europe, expect the media to turn to your data in Japan—maybe you should look for yourself today!
Like gender-based pay, this issue is increasingly subject to internal questions and external scrutiny. Over recent years, and notably since the financial crisis of 2008, the issue of (excessive) executive pay and whether the money had been “earned” has been a hot agenda item in the media and at shareholders meetings. The argument has now morphed into an examination of the difference between executive pay and that of other workers in the same company, and whether it is “fair” or not. From 2020 UK companies will have to report on their own pay gaps. In fact, the UK does not have the highest pay gap in the world—again, this is a global issue.
Unlike gender pay, there is no one solution. Pay gaps between the “top” and the “middle or bottom” are not the same—there is no single right answer to what is “fair.” After all, “fair” may be whatever the marketplace says it is. Companies do, however, need to think about and be prepared to respond on their practices.
Another issue to collect your international data on—awareness leads to preparedness.
#8 Workforce “Apptivism”
I have written so much about this (see prior blogs) it’s hard to think of a way to set this in the context of a 2020 priority without being repetitive.
Simply put, the issue of socially-driven employee protests on employment and business practices hit the executive agenda in 2018 with the #metoo spotlight thrown on celebrity and leadership behavior. Following the #googlewalkout protest and reported employee-driven social media outbursts on business issues in a number of companies in 2019, a survey of global chief executives conducted by Herbert Smith Freehills put concerns about activist employees third on their list of reputation risks—after cyber threats and global recession. If the issue is troubling CEOs, then it is clearly on the agenda of HR leaders.
For this piece, let me take a slightly different tack to illustrate why I think this is a permanent change in the environment we work in, that will go beyond borders and industries, and that we had better get used to.
Many believe that social activism is a product of the tech industry on the west coast of the U.S.—and may or may not spread. Maybe it is a “one off fad” that can be hit with a large stick and will disappear, or remain of academic rather than significant practical interest (like International Framework Agreements)?
Actually, the issue really became a major problem for companies in China from around 2010 onwards, when employees in mainstream manufacturing companies had grievances but did not trust their union (the ACFTU) or the Chinese legal processes to resolve them. They instead organized mass walkouts using social networks—and with a lot of success. The learning point here is not that workers were privileged enough to care about things beyond pay and were tech savvy (i.e., the west coast tech argument). They were regular employees with serious concerns and demands, did not trust the established system, and found a new way to get results.
Two lessons come out of this. First, employees do not need trade unions to organize a collective dispute and win. Second, just because employees don’t form a union doesn’t mean that they don’t have issues with their employer.
I know that we have taken a tongue-in-cheek approach to the new language of employee relations—the pop up protest, apptivism, clicktivism, e-mocracy and #walkout—but this is an issue we will have to learn not just to tolerate, but to embrace from 2020 onward.
#9 Working hours
This was on my playlist last year (Wages and hours in many flavours – none of them good), and it remains so.
The regulations around working time were put in place when work looked and felt very different to the way is does today. The holy trinity of the full-time contract—the five-day Monday-through-Friday week and the eight-hour day (with a break for lunch) has gone, but the rules of the road haven’t changed. The experience of those countries (like the EU) that sought to modernize working time rules resulted in a mess.
That didn’t matter so much when no one complained—but a series of new trends are emerging. First, governments like those in Korea and Japan are beginning to wage war on the historic excessive hours working culture; discontent with long, unrecorded and unpaid working hours is starting to emerge in India and other tech service countries; wages and hours will be an issue in Mexico under the new government and in the inevitable and upcoming trade union recognition battles; and in many places the way work is done is rendering old and clear distinctions between “exempt” and “non-exempt” workers meaningless. I’ve been doing a global “sore thumb” audit for a major tech company—you might think of doing the same.
To compound the issue further, last year the European Court of Justice found that employers had to measure the actual working time of virtually every employee in the European Union. Although every country in Europe must now implement laws to comply with this judgment—most seem to be frozen in the headlights (it applies to government employees also!) or simply turning the other way. There is enough going on in Europe right now for this to be legitimately on the back burner—and now at least the UK has something (if not much) to smile about. As I said last year, and intimated in the gig economy section above, the next time a labour law maker or labour court judge enters a modern workplace (or probably any workplace) may well be the first.
Maybe we should launch an employer initiative to bring these people closer to where the real work is done?
#10 Latin America boils over
What can I say? If I were to pick a global hotspot in the world of traditional labour relations, it would be Latin America. Wherever you turn there are old, new, and returning challenges.
Let’s start with Mexico. New laws on trade union recognition and collective bargaining took effect on 2nd May 2019. The regulations and infrastructure to support a change that impacts on the 95% of Mexican companies, by outlawing the so-called “protection agreements” that employees were unaware of, is being implemented over the period to May 2023. The problem is that the law is in place, but the rules for implementation are not. Some regulations were put in place later in 2019 and a new set is scheduled for October 2020. In the meantime, employers and unions are looking at each other with neither side knowing quite what to do. This space needs to be watched closely for those companies who would wish to be non-union south of the border or to legitimize the “secret” agreements they have in place.
If anyone thinks the situation is not volatile—think back to 1Q 2019, when 90,000 workers in 90 companies in the border city of Matamoros went on strike (against the advice of their unions and organized on a social media platform!) and achieved a settlement of a 20% pay increase and a bonus of 32K pesos per head (the 20/32 deal). As we speak, the minimum wage has again been increased by another 20%, and more laws are planned to restrict outsourcing.
In Argentina, Cristina Kirchner made a comeback in the recent election (along with Peronist politics) by presenting herself as Vice-President and positioning Alberto Fernandez as President. After the perceived poor economic performance of the Macri administration, Christina is as powerful behind the throne today as she ever was in it. Fernandez has sought to address the currency crisis by levying 30% tax on all purchases done in foreign currency—your employees’ Netflix and Spotify charges just increased by one third—and the effectiveness of holding dollars as a hedge against inflation has been blunted. Argentinians are feeling the pinch.
To preserve jobs and keep the peace with workers, the President has doubled separation payments for displaced workers—a “temporary” measure that is likely not to end anytime soon. He has also increased wages by decree for private sector workers—and will do so again in 2020. Cast a fresh eye over your salary plans for 2020.
In Brazil, the main aim of the Temer reforms (the President between Diima Roussef and Bolsonaro) failed in the objective of creating jobs. Unemployment remains high at 12%. That said, his reforms have all but crippled the Brazilian trade unions. By outlawing mandatory trade union contributions, their income has plummeted by 95% and the number of labour court claims has reduced by 34% (although there remain literally millions of claims before the courts). A number of sectoral collective agreements stand unrevised and the unions are finding day to management of member services impossible. It is suggested that the saviour of the Brazilian unions are the international companies who are continuing to make trade union deductions—check out what you are doing and why.
Looking forward, Bolsonaro has presented a choice to the Brazilian population: wide ranging rights and no jobs, or less rights and more jobs. At the end of last year, he commissioned a group of studies to propose changes to the Brazilian labour laws. Watch this space for trade union developments, legal change, and popular unrest.
Venezuela remains embroiled in a crisis that has only deepened over the last ten years. Around five million citizens (or 15% of the population) have left the country. Venezuela is now only second to Syria in terms of the number of displaced people living outside their country of origin. Inflation continues to double every two weeks; food and basic goods are scarcely available; and city-wide blackouts are "business as usual" for those remaining in the country. President Maduro continues to hold power through the support of much of the military and from countries like Cuba, Russia and Iran. The 2019 Juan Guaidó move as "President in charge of Venezuela" in opposition to Maduro seems to have lost much of its initial drive and flares up periodically.
You may not have many employees left in Venezuela, but my plea is that you look seriously about what you can do to provide them the hard currency they need to live and the day-to-day provisions they need for basic survival.
Well there we go—a whistle stop tour of issues and places to think about, and plan for, in 2020.