00:00:00
Dan Loney: Well, the world of work
certainly has seen some unique
00:00:02
changes in the last few years.
Remote work obviously being one
00:00:06
of the bigger ones. But you also
have technology like AI becoming
00:00:10
a more important component in
our jobs as well. So where do we
00:00:14
stand right now as we're coming
towards the end of 2024, and what
00:00:18
would we consider as we head
into 2025? Pleasure to be joined
00:00:22
here in studio by Peter Cappelli,
Management Professor here at the
00:00:26
Wharton School, and also
Director of the Center for Human
00:00:28
Resources. Great to see you
again. How are you?
00:00:31
Peter Cappelli: Thank you.
I'm hanging in there.
00:00:33
How are you viewing, then,
work and the
00:00:35
workplace right now?
00:00:37
You know, I— I don't know who
first said this. So let's just,
00:00:41
if we can't think of it, it'll just
credit it to me— that the future
00:00:45
looks like the past, only more
so. And what that means is,
00:00:50
don't expect, you know, enormous
changes overnight in anything.
00:00:55
And that if you want to bet
where things are going to be in
00:00:58
a few years, you look at the
trends which are already
00:01:01
underway. And they're likely to
continue. So if you go out a few
00:01:07
years, it could look like a big
change. If you're in the middle
00:01:09
of it, it doesn't feel like
quite so much, you know? I think,
00:01:13
you know, the biggest change for
people has actually been the
00:01:17
tight job market. So, post-
pandemic. And more than
00:01:21
technology or— maybe remote work
is up there. But you know,
00:01:25
having gone through generations,
from 1973 through to 2017, the
00:01:33
unemployment rate in the US fell
below 4% only once in more than
00:01:37
40 years. And so we grew up in
that period. It was a lousy job
00:01:40
market. - Yeah.
- For 40 years.
00:01:43
And since 2018 it's been 4%—
below 4%
00:01:48
effectively every year.
- Yeah.
00:01:49
And that is a real sea change,
00:01:51
right? That there— you have more
choices. People can quit and go
00:01:55
someplace else. And that has,
you know, sort of shaken up a
00:01:58
lot of things. So I'd say that
on the ground for people has been
00:02:03
the biggest change. Remote work,
if you've got it, is an enormous
00:02:07
change. But it's always stunning
to tell people that only 26% of
00:02:13
US employers have any kind of
remote or hybrid work. - Yeah.
00:02:16
Because it feels like it's a lot
more. - It feels like it's a lot,
00:02:18
and the reason it does is
because that's what the press
00:02:21
talks about. - Right.
00:02:22
And something we discovered, one of
00:02:24
my former students and I,
Shoshana Schwartz, we just
00:02:29
totaled up the size of the
industry that supports human
00:02:33
resources now in the US.
- Right.
00:02:35
And that industry is
$1.9 trillion.
00:02:40
So it's the same size
as the official GNP of Italy. So
00:02:45
it's enormous, and they spend
10% of their budget on
00:02:48
marketing. And what they're
telling you is almost never,
00:02:51
"Don't worry about it. Nothing to
see here," right? - Right.
00:02:53
They're constantly telling you things
are wrong and different and
00:02:56
everything is going to change,
etc. And the reality is probably
00:03:00
not nearly so much.
00:03:01
But it even feels like remote
work is— is even changing, to a
00:03:05
degree. - It is. - As we're seeing,
incrementally, companies calling
00:03:10
back workers into the office,
whether that be five days a
00:03:14
week, three, four days a week,
whatever that combination is.
00:03:18
And it always felt to me, even
as we went through the pandemic—
00:03:21
and this is just my— you know,
my experience is— just feels like
00:03:25
we were going to get to a higher
level of back in office at some
00:03:30
point. It was just when, you
know, companies were going to
00:03:33
make that move.
- Yeah, it's
00:03:34
a great point, because it also
explains the problem that
00:03:38
companies had. I think it worked
way better than anybody
00:03:41
expected. But that did not mean
it was great, right? And a lot
00:03:46
of the problems are ones that
accumulate over time. The most
00:03:49
obvious of those is, once you
start hiring new people in they
00:03:54
don't know, in a remote
organization what the place is
00:03:57
like. They don't know what's
going on. They don't know the
00:03:59
culture. You know, you do that
for a year, it's not such a big
00:04:01
deal. You do it for four years
of people, which is what we've
00:04:04
done now— four years of new
hires who never knew the old
00:04:08
organization, the office and the
culture of the place. You get a
00:04:11
different kind of organization
after a few years. So the
00:04:15
problem and the problems
associated with remote work
00:04:19
accumulate and started to get
worse. And now you are seeing
00:04:22
companies also start thinking,
"You know, yeah, it did work
00:04:25
better than we thought, but it's
not perfect, and let's see
00:04:28
whether we can start getting
people back." The downside is
00:04:30
exactly what you pointed out, is
they said nothing for four years
00:04:34
or the last three. And so people
understandably thought, "Okay,
00:04:38
this is the way it's going to be."
- Right. - And now they're really
00:04:41
angry if you bring them back.
- Well, and
00:04:43
I was gonna say, the expectation
now, it feels like, by younger
00:04:47
generations is that there is a
component of remote work that
00:04:51
they should expect as part of
their job moving forward.
00:04:53
Yeah. And you know, some of that
came out of their experience in
00:04:57
school. - Yeah. - High school. - Yeah.
- That's actually a problem that
00:05:00
we have seen here with students,
and my colleagues elsewhere see
00:05:04
the same thing. And with— the
experience in high school was
00:05:09
not just teaching remote so you
didn't have to come to class,
00:05:13
but also a sense that,
frankly, we lifted this— we
00:05:18
lowered the standards, right?
Because we didn't want to fail
00:05:21
anybody in that time of crisis
for the country. And so their
00:05:26
perceptions of what is required,
you know, just got awfully
00:05:30
sloppy. - Right. - And so that's
something we're dealing with
00:05:33
now, and it's not always fun.
00:05:34
How do you think companies
00:05:35
have adapted to that
dynamic of
00:05:39
the workforce and having so many
people available, and the
00:05:43
ability to— for somebody to just
pick up and leave, which really
00:05:46
wasn't the case if you go back,
you know, 30, 40, years? It's a
00:05:50
dynamic that obviously— or I
should say it's an adjustment
00:05:53
that companies really have to
make.
00:05:54
Yeah. No, it is a great point. And I
think the problem is they have
00:05:59
not adapted to it. They've just
been bearing the costs and not
00:06:02
paying much attention to it. And
the reason for that is something
00:06:05
we've talked about with you
before, and this is this strange
00:06:08
issue of accounting, financial
accounting. So there's no
00:06:12
ability, if you're an investor,
say, to look at a company and
00:06:15
see is turnover costing them
money or not? Because there's no
00:06:19
evidence on it. Companies don't—
won't tell you their turnover
00:06:22
numbers. And if you're a CEO of
a company, you're not managing
00:06:25
to your turnover numbers, because
nobody sees them. But you are
00:06:28
managing to your compensation
numbers. So if you're
00:06:32
underpaying people for a while
and it's causing you to lose
00:06:34
people, yeah, you're not doing
as much about it as you should
00:06:38
if you were trying to worry
about the overall effectiveness
00:06:41
of the company. If you're just
playing to the numbers, you
00:06:44
know, you're willing to tolerate
higher levels of turnover that
00:06:47
don't make business sense, but
they might make accounting
00:06:49
sense, right? So I'd say,
unfortunately, they're not doing
00:06:53
as much about that as they
should. You know, we're seeing,
00:06:57
for example, employee life-
related issues, health issues,
00:07:02
perceived well being, all that
stuff, mental health problems,
00:07:04
really getting worse and worse
and worse. I confess, I'm not
00:07:07
sure exactly why, but the
numbers are going up over time.
00:07:11
So it's not just, you know, some
weird one shot thing. And you
00:07:15
know, companies aren't doing
much of anything about it. They—
00:07:18
they're giving you more chair
yoga programs, but they're not
00:07:21
dealing with the things that are
causing the stress in the first
00:07:24
place, like constant
restructuring and downsizing.
00:07:26
So is the focus on
culture in the office, you know,
00:07:32
having that kind of framework,
is it a little bit overrated
00:07:35
then, in terms of what it's
going on— what is going on, and
00:07:39
how it's going on?
00:07:40
You know, I think the story on
almost everything these days is,
00:07:44
what do people at the very top
of the company think? Because
00:07:47
it's so top down. You know, the
need for everybody underneath to
00:07:52
make sure that the very top
folks are on board with
00:07:54
everything you're doing right
now. And I think they all
00:07:59
believe and understand that
culture kind of matters. They
00:08:02
don't have much of an idea of
what their culture actually is,
00:08:05
and it's often not nearly as
great as they think it is. And I
00:08:09
think they are aware that remote
work in particular is just
00:08:12
eroding your culture. You know,
people don't see each other. You
00:08:15
learn culture by observation, by
seeing what's rewarded and
00:08:19
particularly what's punished.
You don't even have gossip
00:08:22
anymore to figure out, you know,
who got fired for what? Company
00:08:25
doesn't want to talk about it.
But everybody knows, right? You
00:08:28
learn that stuff. That's all
gone. I think they understand
00:08:32
this at a kind of gut level.
They also don't think they have
00:08:36
to do much about it,
unfortunately, to make it
00:08:40
better, and they're really,
really reluctant to spend money
00:08:44
on anything. So if you could
suggest that there are things
00:08:48
you could do that don't cost
anything, they're probably
00:08:50
inclined to do that. But a lot
of these innovations, like,
00:08:53
let's take our culture more
seriously, would also require
00:08:56
their time. - Right. - You know, we
need our managers to be seen, to
00:09:00
be visible. They need to see you
walking around. Well, that means
00:09:03
I got to take time away from
deal making, and, you know,
00:09:06
conversations with investors. Do
I want to do that? No.
00:09:09
I saw you talk earlier this year
about the component of entry
00:09:14
level jobs, and the fact that
there are instances where even
00:09:18
the entry level job requires a
couple of years of experience.
00:09:22
Why has that happened, and what
kind of an impact is it having?
00:09:26
Yeah, well, that, particularly
after the Great Recession, we
00:09:30
started to see employers just
ramp up the requirements. And
00:09:34
the reason was, they could. You
know, they had lots of people
00:09:38
just saying, "How high would you
like me to jump?" So they just
00:09:40
started adding requirements and
adding requirements. And you
00:09:43
know, on our campuses, you
discovered that students
00:09:45
couldn't get internships unless
they had already had an
00:09:48
internship, because nobody
wanted to be the first person to
00:09:52
give them— break them in as to
what it means to actually show
00:09:56
up on time and that stuff, right?
So I think, you know, we still
00:10:00
have a problem on the hiring
side, in that employers are
00:10:04
unrealistic about what they're
looking for, given what they're
00:10:07
willing to pay. And some of that
is just sloppiness. You know, we
00:10:12
hire by committee. "Just tell me
what would you like to see in
00:10:14
this job," and then "What would
you like to see?" And we just add
00:10:17
them up, and you end up with
this Christmas tree that nobody
00:10:19
is qualified for, right? So that
still goes on. I think what's
00:10:24
different now is they pay a
price for it. You know. So time
00:10:27
to fill positions is going up,
and companies just leave
00:10:30
positions vacant. And CFOs often
think that saves money. You
00:10:34
know, it hurts performance, it
hurts economic costs. But
00:10:39
finance, again, in terms of
accounting, it might look like
00:10:42
you're saving money. So, you
know, it's this dilemma between
00:10:45
are you trying to run an
effective organization, or are you
00:10:47
trying to run one that looks
good on paper?
00:10:50
How do you view the
00:10:52
use of AI in the
workplace, how it will be used
00:10:59
and relied upon? And— and also,
there was the narrative for a
00:11:03
while about AI replacing jobs.
But it feels like it's now more
00:11:08
of, AI is going to be a
complement to human jobs.
00:11:11
Yeah. You know, it's again, this
story about vendors. If you ask
00:11:15
the people who are creating
something what it can do, you
00:11:19
get this incredible story. And
it might be true that it
00:11:23
literally could do those things,
but it turns out that not
00:11:27
everybody wants them, and to do
them sometimes costs an
00:11:33
unbelievable amount of money,
right? So, for example,
00:11:37
generative AI could write all
your form letters for you now.
00:11:41
Yeah, it could do that. But
nobody writes those now. They're
00:11:43
all form letters. They've gone
through legal. No manager's sitting
00:11:47
down and handwriting notes to
customers, right? So a lot of
00:11:50
stuff they could do doesn't need
to be done. I think when we're
00:11:54
looking at actually trying to
automate work, as they say,
00:11:58
which means take over these
tasks from workers, it's really
00:12:03
hard to make that go. It takes a
ton of IT time and money and
00:12:09
generative AI, which can do
great things, is no longer
00:12:13
cheap. It's quite expensive to
get the most, you know, the
00:12:17
fanciest stuff. And the problem
is, the things they're trying to
00:12:21
automate are low value. And we
think, "Oh, okay, we'll do those
00:12:25
first, because they're low
value." But the problem is, if
00:12:28
you— if you need expensive AI to
automate something that's cheap,
00:12:33
there's no way it's going to pay
off, right? It's one thing to
00:12:36
get fancy, generative AI to do
gene sequencing for you,
00:12:40
something of real value. - Yeah.
- It's another to get really
00:12:43
expensive AI to read forms, you
know? And so I think we
00:12:47
discovered the same thing we
discovered a while ago with
00:12:50
robotics, and that is, it's not
taken over anybody's jobs,
00:12:53
really. It might take over a
task or two from people. - Right.
00:12:57
Not the whole job.
That's a good thing.
00:12:59
I mean, none of this is bad.
00:13:01
It's just that the hype was so
out of proportion to the
00:13:05
reality. And the reason is, the
hype comes from the people who
00:13:09
are building the tools, not the
people who are trying to use
00:13:11
them. And well, what I'm
discovering is, you know, you
00:13:15
look at these surveys of people
who say they're using these
00:13:19
tools, and you get these really
high numbers. The reason is,
00:13:22
they're often under pressure to
use them. So I've heard from
00:13:25
some HR people who say their CEO
is given a mandate. Say, "Gotta
00:13:29
automate 30% of this." So what do
they do? They claim that
00:13:32
anything they're using is AI. So
applicant tracking software,
00:13:38
which is simply word recognition
stuff, been around for 25 years
00:13:42
or so. We're using AI, right?
And if you go to your computer
00:13:46
and you ask ChatGPT to look up
something for—"We're using AI."
00:13:49
Right? But are you actually
replacing people with it? The
00:13:53
evidence on that is, it's really,
really rare, right? So I don't
00:13:58
think it's going to change very
much. To automate a particular
00:14:02
job takes a ton of work.
Somebody's got to be willing to
00:14:06
front all that money, and you're
in competition with all these
00:14:09
other investment deals for it.
So I think the problem here is,
00:14:13
again, expectations. We believed
this stuff is free, you know.
00:14:17
ChatGPT is free, so just use
that. But that won't help you
00:14:21
automate these tasks. And the
costs of— this company's been
00:14:24
giving away this software.
They're not in business to give
00:14:28
this stuff away.
- Right, exactly.
00:14:29
And it's getting
more and more
00:14:30
expensive as more people
use it, right?
00:14:32
Is there something that you are
watchful for as we flip the
00:14:36
calendar to 2025, in and around
work? Workplace, workforce?
00:14:42
Well, I think there are
political issues. You know,
00:14:45
there's— it's now a full
employment project to try to
00:14:48
understand why President Trump
won. And it all centers around
00:14:53
working class people, and
complaints about not getting
00:14:59
what they felt they should get
from the workplace and from jobs
00:15:02
and things. And— but we are
installing in Washington a
00:15:08
pretty employer-friendly
workplace which is clawing back—
00:15:14
pretty clearly going to claw
back the Biden administration's
00:15:17
efforts to help unions, and some
of those on things like
00:15:21
mandatory overtime, to make it
more applicable, more broadly, to
00:15:25
more jobs, and all those kinds
of things. So I think the
00:15:29
interesting political situation
is going to be to see, was the
00:15:33
original story right? That, you
know, working class people
00:15:37
switched allegiance because they
didn't think the Democrats were
00:15:41
delivering for them, but then
we're moving toward a model
00:15:45
which at least traditionally,
was going to be worse for them.
00:15:49
And what's the response to that
going to be? Or is it turning
00:15:52
out that that's actually not why
they voted the way they did,
00:15:55
right? So I think that's the big
question, at least in the pundit
00:15:58
class we're working for. I think
in the— on the ground, I think
00:16:02
we're hearing an awful lot of
talk about remote work among
00:16:05
managers now, because they are
rethinking this. Part of it,
00:16:08
recently, because Amazon, quite
publicly, called everybody back
00:16:12
in the office, and not just
called them back, but is making
00:16:16
them come back, which is a
different thing than just saying
00:16:19
"You got to come back." - Yeah.
- And they told him, you know, they're
00:16:21
going to start firing people
really, if you don't—
00:16:23
effectively, if you don't come
back. So that has suddenly got
00:16:26
the attention of lots of other
companies that were feeling like
00:16:30
they should do it. Is the time
right? Is the labor market soft
00:16:33
enough, we're not worried about
what the HR people told us, that
00:16:37
everybody's going to quit? - Right.
- So I'd say, in practice,
00:16:39
on the ground, that's the big
issue.
00:16:42
Peter, great to see you again.
Thanks very much.
00:16:44
Thank you.
00:16:44
Peter Cappelli, Management
Professor
00:16:46
here at the Wharton School.
