"The HR function historically has been miscalculated and underestimated."
Described by former British Prime Minister Sir John Major as “the world’s leading business expert on emerging markets,” economist Daniel Thorniley is regularly invited to talk to CEOs and corporate boards and has worked with most of the world's major MNCs. He will be speaking at UNLEASH 2018, formerly known as HR Tech World, in London on March 20 and 21 2018.
Jamie Lawrence, Managing Editor, HRZone: You’re speaking at UNLEASH 2018 soon. Give us a flavour of what you’ll be talking about.
Daniel Thorniley, economist: The focus will be Brexit but it’s fair to say no one “knows what they are talking about” and that’s quite literal: we don’t know what Brexit will look like and in mid-March the outlook is more blurred than ever.
We can make an educated guess we won’t be in customs union, single market - that’s the probability - but we may have a Canada++ model, but tragically or laughably we still don’t know with just one year to go to Exit time.
The overall background is therefore uncertain, which is frustrating for the corporate world and of course HR. It’s frustrating because HR still has to do talent management but don’t know on what basis they will be doing it in the future. Will there be no single market, no financial deal for banks, tight migration, a lack of compromises and people needing new visas?
Jamie Lawrence, Managing Editor, HRZone: You have a reputation at conferences for speaking openly and honestly about things. Is there clarity lacking in the business world and things that people aren’t saying that they should be saying?
Daniel Thorniley, economist: Why I talk the way I do is I’m a hardline communist (read to the end of this sentence) because I believe workers should have good remuneration, but also I’m a hardline capitalist because if workers have good remuneration they can buy the products from the big capitalist corporations.
What I’m seeing recently is that 75-80% of my global clients aren’t happy with business and that’s because they can’t get the top line they want. It’s easier to get the bottom line they want, because they can outsource, cut staff, use new technology etc - but it’s the top line that’s the problem.
The current model of business - shareholder value, quarterly growth - I’m not sure how sustainable it is in the modern world. In emerging markets maybe there are a few more years, but in five to ten years I don’t see the sustainability still being there in the current structure and wages, unless we tax robots.
Maybe we should be exploring things like universal basic income, which is at least a new idea. But we also need to look at what jobs will look like in 10-20 years. How can we get enough remuneration to people to prevent populism and social revolution and to provide positive consumption to make people satisfied with their lives. We’re not quite at fulcrum point but I think this will come soon.
Jamie Lawrence, Managing Editor, HRZone: Has HR been underestimated in the past and what challenges does it face going into the near future?
Daniel Thorniley, economist: I think the HR function historically and maybe even today has been miscalculated, misperceived and underestimated. Many companies talk the talk about HR - ‘we’re a people company’ - but they underestimate HR and put them down as a technical function, with accounting, tax and legal as opposed to a strategic function.
With Brexit, HR needs to be become more of a strategic function of corporations because whatever the outcome of Brexit is, it’s going to mean more complications, stress and negativity for HR in the UK in the next 10 years. That’s a no-brainer. I think, globally, we’re only just recovering from the 2008 recession. A few numbers have gone up, but we haven’t properly recovered.
HR may face talent shortages due to Brexit. They may try to build local pools of talent to compensate but many roles are advertised internationally. America and Asia are doing well and internationally-minded people are attracted to places like Frankfurt and Amsterdam. Basically, HR in the UK has to ask ‘how do we compete?’
Things will become more bureaucratic, more expensive. For some companies the local talent pool just isn’t there.
Jamie Lawrence, Managing Editor, HRZone: But there’s an opportunity there isn’t there for HR?
Daniel Thorniley, economist: Because there are more challenges to companies in terms of talent, mobility, headquarters will turn to HR and say ‘we need good people, how do we incentivise them?’ and ‘what career structure can we offer?’ and other key questions in the face of a Brexited UK. There are therefore lots of good challenges for HR to try and answer these questions.
UK-headquartered companies will be thinking, how do we compete with our competitors in Germany or France? It’s a good question, but the trouble is that the UK economy can’t defy gravity for much longer. Consumption will slow, investment will slow and that will put more cost pressures on UK companies.
Hitting top line and bottom line will be harder so 80% of organisations will cut costs.
We need to turn to HR for solutions to these problems and give them more of a voice at the strategic level.
Jamie Lawrence is editor of global online HR publication and community HRZone.com. He is committed to driving forward the HR agenda and making sure that HR directors have the knowledge and insight necessary to make HR felt across the whole organisation. He regularly speaks to audiences of 250+ and has interviewed key HR industry names,...