Analytics For The CFO (Part 3): Rise Of The Machines

Rob Jenkins

In my previous blog, I discussed the role of finance quants in developing new insights and how finance owning enterprise master data provides a strong foundation for analytics. Today, I want to discuss how new technologies will fundamentally change finance process management and resource deployment.

In much the same way that industries like automobile manufacturing and agriculture have been disrupted by physical robots, artificial intelligence (AI) will have a dramatic impact on finance and accounting. The analytics engine and seamless workflow enabled by machine learning and robotic process automation will bring discontinuous change to transaction accounting. Shareholder-focused executives see opportunities for dramatic efficiencies, with some finance experts estimating that 40% of accounting jobs will be eliminated by 2020. A study by the Pew Research Center shows that most (72%) Americans are more likely to be worried than enthusiastic about automation. Thoughtfully redeploying task-oriented resources will be a source of competitive advantage.

The good news for analytical insight and productivity is the synergy in decision-making when AI is combined with humans. Medical professionals couple deep learning with doctors to magnify human capacity through the power of computer-aided diagnostics. Successful investment firms combine algorithms with fundamental analysis and human judgment in the search for alpha. Progressive CFOs are automating processes such as invoice matching, with one aerospace firm automating 95% of 3 million annual invoices.

Yet machines cannot demonstrate empathy, manage relationships, and tell stories. Nor do machines demonstrate cognitive biases that encumber our human decision-making. By pairing the rational analysis and speed of AI with the softer communication and social skills of financial professionals (at least for the foreseeable future), compelling analytics-based narratives will be part machine and part person.

Cloud changes everything

Millennials and “Gen-Z’ers” are taking over the boardroom. These digital natives have grown up with social media where engagement favors infographics that are more likely to be shared. The music is delivered via streaming connection to a cloud service. They look forward to application updates for new features and functions. They have expectations of real-time, live data that can be sliced and diced via browser and overlaid with spatial analysis for visual insight.

Enterprise software is rapidly migrating to the cloud. New apps are now born in the cloud, and the vast majority of new analytics projects will be cloud-based. Cloud eliminates the word “upgrade” from the lexicon. With the dramatic innovations in computing power, memory and database technology, data that score high on any or all of the 5 V’s (volume, variety, velocity, veracity, value) can be deployed and analyzed as never before.

Cloud is easy to try, buy, and use. Cloud is safe, scalable, and can be integrated with legacy on-premise systems. It is a global game-changer.

CFOs are embracing the power of advanced analytics to drive efficiency in finance operations, partner with the business in strategic analysis, and manage enterprise risk as corporate steward. By marrying art and science, equipping humans with machines, and modernizing technology platforms, CFOs will ensure that their models are as accurate as possible and most certainly useful.

Ready to start adopting technology? Read the research paper, Dynamic Planning: Live in the Moment to Succeed in the Future.

This article originally appeared on SAP Analytics.

Comments

Rob Jenkins

About Rob Jenkins

Rob Jenkins is a finance executive with over 20 years of experience in leading high-technology and professional services companies. He consults with CFOs on technology, analytics and performance management. Rob has served as Vice President, Corporate Finance and led finance transformation. His leadership experience also includes Corporate Development, M&A, Strategic Planning and Consulting. He has designed and implemented customer profitability, business planning, process improvement and performance measurement systems in multiple organizations. Rob began his career as an Auditor with a Big 4 CPA firm. He holds an M.S. in Accounting and is a CPA, CMA, and CFM.

Top 4 CFO Lessons From Vivint Smart Home’s Digital Transformation

Patrick Kelliher

Part of the Digital CFO Series

Business transformation is not a once-and-done project. At Vivint Smart Home, we’ve been working for years to help our company make the transition from a security services firm to a leading provider of smart home services for homeowners.

While traveling this road, we upgraded our financial and business systems to match our new sales channels and product offerings. (Read my last blog to learn how we did it.) By being adaptable – in our business models, our technology, and our approach to market demand – we were able to build a foundation for success.

However, the key takeaways from our efforts aren’t specific to Vivint or even our industry. Instead, they can help financial executives in any market digitally transform their company while more accurately anticipating business change and meeting customer demand. Here are the four primary lessons we learned.

1. Keep focused on what’s next

It often seems that companies cannot change as quickly as they should to meet dynamic business requirements. Despite our best efforts, we would have benefited from our new business systems and processes if they’d been in place a year or two earlier.

That’s why I advise financial executives to look at the road map for the business, assess current market conditions, and see how the winds are blowing. Then do what you can to get ahead of the change that’s inevitably coming.

Of course, that can be easier said than done – especially for CFOs, who are already trying to balance competing priorities, such as executing fundamental financial tasks and protecting existing technology investments. But never forget that part of your responsibility is to support the business so that it can move forward. Waiting too long to make critical changes can put you behind the curve.

2. Embrace flexibility

Developing a vision for the future is hard. You never know how new market drivers, changing customer demand, or technology innovations will affect your business. I always advise CFOs to embrace flexibility.

Our business changed so quickly. Only two short years ago, I couldn’t have imagined that we would be selling Vivint Smart Home products in 450 Best Buy stores nationwide. Retail wasn’t our thing then.

That’s where flexibility comes in. Executives must stop focusing exclusively on old business models and begin evaluating the new opportunities ahead. Of course, having the systems and processes that can accommodate multiple business models and channels is essential to achieving success in a dynamic business environment.

3. Treat technology as your ally

Use well-chosen technology solutions to drive efficiency and consistency through the business. This is an ongoing effort for Vivint, as I’m sure it is for most companies. Despite all of the work already accomplished, we’ve only scratched the surface of our potential improvement.

When managing multiple businesses, channels, and customers, consistent processes free up resources and capital – making it easier for the business to grow. An integrated technology platform serves as the foundation for streamlining and automating operations as well as improving data quality.

4. Balance consistency with innovation

CFOs are ultimately responsible for deciding what needs to change and when consistency is the highest priority. It’s a difficult balancing act at times.

I tell our executives that we should be able to deliver 80% of what our employees want with just 20% of the complexity that they’re used to. With thoughtful planning, we can develop processes and systems that make everyone happy.

One way to increase the likelihood of satisfying all of our stakeholders is to make sure that finance has meaningful, professional interactions with the different organizations of the business. With clear lines of communication and mutual respect, we’re more likely to have the essential discussions about processes and systems that will help us prepare for the next big business opportunity.

For more on Vivint’s digital transformation, see Finance Leaders Enter A New Era Of Influence And Partnership In The Cloud.

Comments

Patrick Kelliher

About Patrick Kelliher

Pat Kelliher is senior vice president and chief accounting officer of Vivint SmartHome, one of the largest smart home companies in North America, a position he has held since February 2014. He is responsible for all Vivint’s corporate accounting, and played an instrumental role in Vivint’s successful SAP S/4HANA implementation, which went live in February 2017. He also paid a key role in the $2 billion acquisition of Vivint by Blackstone in November 2012.

Before joining Vivint, Pat was the vice president of Finance and controller for Omniture Inc. and helped expand the company’s annual revenues from $43 million to $350 million in just five years. He developed Omniture’s accounting infrastructure and played an integral role in the company’s IPO, which was the most successful tech IPO in 2006.

He holds a Bachelor of Science in accounting and finance from Northern Illinois University and an MBA from the University of Chicago with a concentration in corporate finance and international business.

Black Swans, White Swans: They’re All Risks, At The End Of The Day!

Thomas Frenehard

One thing I realized since I moved to Australia is that black swans are pretty widespread here. Not the unforeseen—or silent—type of risks, that is. No, the bird itself. It just made me think about the European belief that held true until the 17th century that all swans were white because no contradictory observation had invalidated this hypothesis.

In recent exchanges I’ve had with executives, a lot of the focus has been on so-called “black swans.” And understandably so, since these are the threats that can take a company the way of the dinosaurs if they aren’t adequately mitigated.

But what about all the other “swans?” White, green, yellow? Are they getting the attention they deserve by the executives?

Going back to a previous blog from my colleague Bruce McCuaig, Finding the Risks Worth Having, I would argue that only the risks in the categories labeled as human behavior and control focus are really getting sufficient oversight. Risks in the loss management and risk focus categories are often either deemed appropriately managed and thus not deserving more attention, or the common belief is that some sort of monitoring would suffice.

Due to this attitude, risks in these categories often fall through the cracks because there’s a perception that they’re no longer real threats to the organization.

What can be done to ensure that they aren’t forgotten?

This is where I believe lies one of the key advantages of the Three Lines of Defense approach. It’s risk-agnostic! It reconciles views from all three lines (operational, risk and compliance, and audit) regardless of the risks’ criticality, status, or category.

As a result, all “swans” are included in this approach, and their residual aggregated exposure can be reviewed. To me, this precision is important. Taken in isolation, some of these risks might not be life-threatening to a company. But together, they might amount to a significant exposure that could very well be above the organizational risk appetite and even above its ability to operate.

A coordinated response will therefore be needed, and a three lines of defense approach will help ensure that this is the case and that different departments work jointly to provide an effective response. Hence, we can break down typical departmental silos that we continue to encounter in many organizations.

A risk is a risk is a risk

Don’t get me wrong: it’s absolutely not the intent of my discussion to say that black swans shouldn’t get attention. But with resource constraints that all companies inevitably face, a sound balance is always necessary, in my view. I personally believe that three lines of defense, in addition to helping companies ensure sustainable compliance and correct reporting of the risk context, also supports such balance by enabling prioritization with regard to the company’s objectives and the real assessment level. As such, it sheds light on all swans irrespective of their color.

What about you? How does your company deal with white and black swans? I look forward to reading your thoughts and comments either on this blog or on Twitter @TFrenehard.

Learn more

For more information, read the other blogs we’ve written on Three Lines of Defense or check out the entire GRC Tuesday blog series.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

This article originally appeared on SAP Analytics.

Comments

Why Strategic Plans Need Multiple Futures

By Dan Wellers, Kai Goerlich, and Stephanie Overby , Kai Goerlich and Stephanie Overby

When members of Lowe’s Innovation Labs first began talking with the home improvement retailer’s senior executives about how disruptive technologies would affect the future, the presentations were well received but nothing stuck.

“We’d give a really great presentation and everyone would say, ‘Great job,’ but nothing would really happen,” says Amanda Manna, head of narratives and partnerships for the lab.

The team realized that it needed to ditch the PowerPoints and try something radical. The team’s leader, Kyle Nel, is a behavioral scientist by training. He knows people are wired to receive new information best through stories. Sharing far-future concepts through narrative, he surmised, could unlock hidden potential to drive meaningful change.

So Nel hired science fiction writers to pen the future in comic book format, with characters and a narrative arc revealed pane by pane.

The first storyline, written several years before Oculus Rift became a household name, told the tale of a couple envisioning their kitchen renovation using virtual reality headsets. The comic might have been fun and fanciful, but its intent was deadly serious. It was a vision of a future in which Lowe’s might solve one of its long-standing struggles: the approximately US$70 billion left on the table when people are unable to start a home improvement project because they can’t envision what it will look like.

When the lab presented leaders with the first comic, “it was like a light bulb went on,” says Manna. “Not only did they immediately understand the value of the concept, they were convinced that if we didn’t build it, someone else would.”

Today, Lowe’s customers in select stores can use the HoloRoom How To virtual reality tool to learn basic DIY skills in an interactive and immersive environment.

Other comics followed and were greeted with similar enthusiasm—and investment, where possible. One tells the story of robots that help customers navigate stores. That comic spawned the LoweBot, which roamed the aisles of several Lowe’s stores during a pilot program in California and is being evaluated to determine next steps.

And the comic about tools that can be 3D-printed in space? Last year, Lowe’s partnered with Made in Space, which specializes in making 3D printers that can operate in zero gravity, to install the first commercial 3D printer in the International Space Station, where it was used to make tools and parts for astronauts.

The comics are the result of sending writers out on an open-ended assignment, armed with trends, market research, and other input, to envision what home improvement planning might look like in the future or what the experience of shopping will be in 10 years. The writers come back with several potential story ideas in a given area and work collaboratively with lab team members to refine it over time.

The process of working with writers and business partners to develop the comics helps the future strategy team at Lowe’s, working under chief development officer Richard D. Maltsbarger, to inhabit that future. They can imagine how it might play out, what obstacles might surface, and what steps the company would need to take to bring that future to life.

Once the final vision hits the page, the lab team can clearly envision how to work backward to enable the innovation. Importantly, the narrative is shared not only within the company but also out in the world. It serves as a kind of “bat signal” to potential technology partners with capabilities that might be required to make it happen, says Manna. “It’s all part of our strategy for staking a claim in the future.”

Planning must become completely oriented toward—and sourced from—the future.

Companies like Lowe’s are realizing that standard ways of planning for the future won’t get them where they need to go. The problem with traditional strategic planning is that the approach, which dates back to the 1950s and has remained largely unchanged since then, is based on the company’s existing mission, resources, core competencies, and competitors.

Yet the future rarely looks like the past. What’s more, digital technology is now driving change at exponential rates. Companies must be able to analyze and assess the potential impacts of the many variables at play, determine the possible futures they want to pursue, and develop the agility to pivot as conditions change along the way.

This is why planning must become completely oriented toward—and sourced from—the future, rather than from the past or the present. “Every winning strategy is based on a compelling insight, but most strategic planning originates in today’s marketplace, which means the resulting plans are constrained to incremental innovation,” says Bob Johansen, distinguished fellow at the Institute for the Future. “Most corporate strategists and CEOs are just inching their way to the future.” (Read more from Bob Johansen in the Thinkers story, “Fear Factor.”)

Inching forward won’t cut it anymore. Half of the S&P 500 organizations will be replaced over the next decade, according to research company Innosight. The reason? They can’t see the portfolio of possible futures, they can’t act on them, or both. Indeed, when SAP conducts future planning workshops with clients, we find that they usually struggle to look beyond current models and assumptions and lack clear ideas about how to work toward radically different futures.

Companies that want to increase their chances of long-term survival are incorporating three steps: envisioning, planning for, and executing on possible futures. And doing so all while the actual future is unfolding in expected and unexpected ways.

Those that pull it off are rewarded. A 2017 benchmarking report from the Strategic Foresight Research Network (SFRN) revealed that vigilant companies (those with the most mature processes for identifying, interpreting, and responding to factors that induce change) achieved 200% greater market capitalization growth and 33% higher profitability than the average, while the least mature companies experienced negative market-cap growth and had 44% lower profitability.

Looking Outside the Margins

“Most organizations lack sufficient capacity to detect, interpret, and act on the critically important but weak and ambiguous signals of fresh threats or new opportunities that emerge on the periphery of their usual business environment,” write George S. Day and Paul J. H. Schoemaker in their book Peripheral Vision.

But that’s exactly where effective future planning begins: examining what is happening outside the margins of day-to-day business as usual in order to peer into the future.

Business leaders who take this approach understand that despite the uncertainties of the future there are drivers of change that can be identified and studied and actions that can be taken to better prepare for—and influence—how events unfold.

That starts with developing foresight, typically a decade out. Ten years, most future planners agree, is the sweet spot. “It is far enough out that it gives you a bit more latitude to come up with a broader way to the future, allowing for disruption and innovation,” says Brian David Johnson, former chief futurist for Intel and current futurist in residence at Arizona State University’s Center for Science and the Imagination. “But you can still see the light from it.”

The process involves gathering information about the factors and forces—technological, business, sociological, and industry or ecosystem trends—that are effecting change to envision a range of potential impacts.

Seeing New Worlds

Intel, for example, looks beyond its own industry boundaries to envision possible future developments in adjacent businesses in the larger ecosystem it operates in. In 2008, the Intel Labs team, led by anthropologist Genevieve Bell, determined that the introduction of flexible glass displays would open up a whole new category of foldable consumer electronic devices.

To take advantage of that advance, Intel would need to be able to make silicon small enough to fit into some imagined device of the future. By the time glass manufacturer Corning unveiled its ultra-slim, flexible glass surface for mobile devices, laptops, televisions, and other displays of the future in 2012, Intel had already created design prototypes and kicked its development into higher gear. “Because we had done the future casting, we were already imagining how people might use flexible glass to create consumer devices,” says Johnson.

Because future planning relies so heavily on the quality of the input it receives, bringing in experts can elevate the practice. They can come from inside an organization, but the most influential insight may come from the outside and span a wide range of disciplines, says Steve Brown, a futurist, consultant, and CEO of BaldFuturist.com who worked for Intel Labs from 2007 to 2016.

Companies may look to sociologists or behaviorists who have insight into the needs and wants of people and how that influences their actions. Some organizations bring in an applied futurist, skilled at scanning many different forces and factors likely to coalesce in important ways (see Do You Need a Futurist?).

Do You Need a Futurist?

Most organizations need an outsider to help envision their future. Futurists are good at looking beyond the big picture to the biggest picture.

Business leaders who want to be better prepared for an uncertain and disruptive future will build future planning as a strategic capability into their organizations and create an organizational culture that embraces the approach. But working with credible futurists, at least in the beginning, can jump-start the process.

“The present can be so noisy and business leaders are so close to it that it’s helpful to provide a fresh outside-in point of view,” says veteran futurist Bob Johansen.

To put it simply, futurists like Johansen are good at connecting dots—lots of them. They look beyond the boundaries of a single company or even an industry, incorporating into their work social science, technical research, cultural movements, economic data, trends, and the input of other experts.

They can also factor in the cultural history of the specific company with whom they’re working, says Brian David Johnson, futurist in residence at Arizona State University’s Center for Science and the Imagination. “These large corporations have processes and procedures in place—typically for good reasons,” Johnson explains. “But all of those reasons have everything to do with the past and nothing to do with the future. Looking at that is important so you can understand the inertia that you need to overcome.”

One thing the best futurists will say they can’t do: predict the future. That’s not the point. “The future punishes certainty,” Johansen says, “but it rewards clarity.” The methods futurists employ are designed to trigger discussions and considerations of possibilities corporate leaders might not otherwise consider.

You don’t even necessarily have to buy into all the foresight that results, says Johansen. Many leaders don’t. “Every forecast is debatable,” Johansen says. “Foresight is a way to provoke insight, even if you don’t believe it. The value is in letting yourself be provoked.”

External expert input serves several purposes. It brings everyone up to a common level of knowledge. It can stimulate and shift the thinking of participants by introducing them to new information or ideas. And it can challenge the status quo by illustrating how people and organizations in different sectors are harnessing emerging trends.

The goal is not to come up with one definitive future but multiple possibilities—positive and negative—along with a list of the likely obstacles or accelerants that could surface on the road ahead. The result: increased clarity—rather than certainty—in the face of the unknown that enables business decision makers to execute and refine business plans and strategy over time.

Plotting the Steps Along the Way

Coming up with potential trends is an important first step in futuring, but even more critical is figuring out what steps need to be taken along the way: eight years from now, four years from now, two years from now, and now. Considerations include technologies to develop, infrastructure to deploy, talent to hire, partnerships to forge, and acquisitions to make. Without this vital step, says Brown, everybody goes back to their day jobs and the new thinking generated by future planning is wasted. To work, the future steps must be tangible, concrete, and actionable.

Organizations must build a roadmap for the desired future state that anticipates both developments and detours, complete with signals that will let them know if they’re headed in the right direction. Brown works with corporate leaders to set indicator flags to look out for on the way to the anticipated future. “If we see these flagged events occurring in the ecosystem, they help to confirm the strength of our hypothesis that a particular imagined future is likely to occur,” he explains.

For example, one of Brown’s clients envisioned two potential futures: one in which gestural interfaces took hold and another in which voice control dominated. The team set a flag to look out for early examples of the interfaces that emerged in areas such as home appliances and automobiles. “Once you saw not just Amazon Echo but also Google Home and other copycat speakers, it would increase your confidence that you were moving more towards a voice-first era rather than a gesture-first era,” Brown says. “It doesn’t mean that gesture won’t happen, but it’s less likely to be the predominant modality for communication.”

How to Keep Experiments from Being Stifled

Once organizations have a vision for the future, making it a reality requires testing ideas in the marketplace and then scaling them across the enterprise. “There’s a huge change piece involved,”
says Frank Diana, futurist and global consultant with Tata Consultancy Services, “and that’s the place where most
businesses will fall down.”

Many large firms have forgotten what it’s like to experiment in several new markets on a small scale to determine what will stick and what won’t, says René Rohrbeck, professor of strategy at the Aarhus School of Business and Social Sciences. Companies must be able to fail quickly, bring the lessons learned back in, adapt, and try again.

Lowe’s increases its chances of success by creating master narratives across a number of different areas at once, such as robotics, mixed-reality tools, on-demand manufacturing, sustainability, and startup acceleration. The lab maps components of each by expected timelines: short, medium, and long term. “From there, we’ll try to build as many of them as quickly as we can,” says Manna. “And we’re always looking for that next suite of things that we should be working on.” Along the way certain innovations, like the HoloRoom How-To, become developed enough to integrate into the larger business as part of the core strategy.

One way Lowe’s accelerates the process of deciding what is ready to scale is by being open about its nascent plans with the world. “In the past, Lowe’s would never talk about projects that weren’t at scale,” says Manna. Now the company is sharing its future plans with the media and, as a result, attracting partners that can jump-start their realization.

Seeing a Lowe’s comic about employee exoskeletons, for example, led Virginia Tech engineering professor Alan Asbeck to the retailer. He helped develop a prototype for a three-month pilot with stock employees at a Christiansburg, Virginia, store.

The high-tech suit makes it easier to move heavy objects. Employees trying out the suits are also fitted with an EEG headset that the lab incorporates into all its pilots to gauge unstated, subconscious reactions. That direct feedback on the user experience helps the company refine its innovations over time.

Make the Future Part of the Culture

Regardless of whether all the elements of its master narratives come to pass, Lowe’s has already accomplished something important: It has embedded future thinking into the culture of the company.

Companies like Lowe’s constantly scan the environment for meaningful economic, technology, and cultural changes that could impact its future assessments and plans. “They can regularly draw on future planning to answer challenges,” says Rohrbeck. “This intensive, ongoing, agile strategizing is only possible because they’ve done their homework up front and they keep it updated.”

It’s impossible to predict what’s going to happen in the future, but companies can help to shape it, says Manna of Lowe’s. “It’s really about painting a picture of a preferred future state that we can try to achieve while being flexible and capable of change as we learn things along the way.” D!


About the Authors

Dan Wellers is Global Lead, Digital Futures, at SAP.

Kai Goerlich is Chief Futurist at SAP’s Innovation Center Network.

Stephanie Overby is a Boston-based business and technology journalist.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Comments

Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

About Stephanie Overby

Tags:

Future Of Work 2018: 10 Predictions You Can’t Ignore

Steven Hunt

The start of winter is often referred to as the “holiday season.” But it might also be called the “prediction season.” When it comes to human capital management (HCM), most predictions tend to be variations of the same things.

A colleague and I even created a scale to rate HCM predictions based on whether they are new or just “old wine in new bottles.”  The reason HCM predictions do not change much over time is because the “H” in HCM is about people. People do not evolve as fast as technology. Consequently, the basic challenges of HCM are constant: getting the right people in the right roles and providing them with the right work environments while complying with employment laws.

The following are my “top ten” predictions about how these will change in 2018.

Workforce agility will become the most critical concept in HCM. It is often said that the only constant is change. It is now more accurate to say the only constant is an ever-accelerating rate of change. The only way companies can survive in the modern economy is to excel at adapting to changing markets, technologies, and business landscapes. This requires tapping into people’s innate capacity for learning, growth, and innovation.

Staffing will reach new levels of complexity. For over 100 years, most people interpreted “staffing” to mean hiring employees to work onsite in full-time or part-time roles.  This concept is changing due to shifting skill shortages, global labor pools, and a massive rise in virtual work and contract employment.  Staffing no longer means hiring employees.  It means finding the right mix of skills and matching them to business demands by tapping into an increasingly global, virtual, and contingent labor force. Companies will be forced to redefine workforce planning, recruiting, staffing, and management to work in this much more complex labor market.

The experience of work will greatly improve.  Technology has made a lot of things about our lives much easier and more enjoyable. Finding our way around a city, buying products, staying in touch with our friends, watching movies, and hundreds of other life experiences have been transformed by social and mobile technologies leveraging artificially intelligent interfaces and machine learning algorithms. We will see exponential growth in the use of artificial intelligence, chatbots, intelligent services, machine learning, mobile solutions, and social platforms to make work more enjoyable, simple, and engaging.

Performance management will become a solution, not a problem. People have hated performance management for decades.  This is changing thanks to companies rethinking performance management to focus on ongoing coaching and team based decision making.  We will soon reach a tipping point where the dreaded annual review will be nothing more than a painful memory, having been replaced by mobile technology enabled continuous performance management solutions that employees and managers both appreciate and like.

Re-conceptualizing compensation. Companies spend billions of dollars each year on merit increases, bonuses, and other form of compensation.  Yet few of them can confidently answer this question: “What is the return on investment you get from the money spent on compensation in terms of increased employee engagement, productivity, and retention?” Companies can tell down to the last penny how much is spent on compensation, but they cannot tell if that money is being spent wisely. The future of compensation will involve more continuous processes where employees receive different types of rewards throughout the year from different sources.  And analytics will be used to link investments in compensation to returns in workforce productivity.

Intolerance of inequity. For too long, companies have viewed inequity as a problem, but not a problem worth solving. With the workforce becoming increasingly diverse, particularly the rise of women who now represent 50 percent or more of the employees in many fields, society is reaching a long-awaited tipping point where inequitable treatment based on non-job relevant factors such as gender, ethnicity, and age is being openly acknowledged and addressed. Smart companies will proactively redesign their talent management practices to ensure bias is identified and addressed before it happens.

The rise of well-being tech. People are not meant to live in an “always on” 24-7 world.  The pace of work is literally burning people out.  Companies need employees to be highly engaged, creative, and service oriented.  But this is impossible to do if employees are tired, stressed, and distracted.  In the coming year, companies will continue to make more well-being tools available to their employees. With the explosion of well-being technology at the consumer level, such as smartwatches and fitness technology, many employers will be looking to bring these tools into the workplace.  However, successful organizations will be those who make such technologies accessible, enjoyable, and cultural for their employees.

Org charts will begin to phase out. There is a lot of talk about updating businesses for the digital age, and yet companies continue to manage work forces using a tool that has changed little since the Roman Empire: the hierarchical organization chart (“org chart”). Relying on org charts to guide workforce management decisions is both foolish and dangerous in a digitalized world. And while 2018 will not be “the year the org chart died,” some progressive organizations will begin to phase out traditional org charts for more modern, digital approaches.

Companies will ditch all-or-nothing retirement. 2018 will bring about a major shift in workplace dynamics with regards to older generations. Today, individuals are living longer, and thus working longer – past 60, 70, and even 80.  Forward-thinking organizations realize the need to keep this skilled talent in their organization, particularly as many industries face increasing skills shortages. However, this transition will also force companies to rethink jobs; for example, many positions that used to be full time will become part time.  In the coming year, organizations will begin to move away from the traditional, all-or-nothing view of retirement.

Growth in HR cybersecurity threats. Ransom ware made its main stage debut in 2017 with the WannaCry and NotPetya attacks.  In 2018, ransom ware threats will continue to proliferate.  HR systems have not historically been a major target of cyber criminals.  Unfortunately, this will change.  There will be a growing number of attacks against human resources departments, with cyber-criminals posing as potential applicants in the hopes of infecting the larger organization.

We should feel confident these trends will continue to evolve over the coming years. If there is one thing psychologists have proven over the years about predictions, it is that the best predictor of future behavior is past behavior.

For more on technology and HR, see Why (And How) Technology Is Bringing HR And The CFO Together.

This article originally appeared on Forbes SAPVoice.

Comments

Steven Hunt

About Steven Hunt

Steven Hunt is the Senior Vice President of Customer Value at SAP. He is responsible for guiding the strategy and deployment of knowledge, tools and process improvements that increase the value customers receive from SuccessFactors & SAP Cloud software as a service solutions.