LEADERSHIP | How to lead and organize today's changing workforce for the future of work. w/Heather E McGowan

0:00And now, Taking Care of Business, your hosts, Craig Moen and Shai Gillad. Welcome to Business Owners Radio, episode 231. Our guest today is Heather McGowan, author of the new book, The Empathy Advantage, Leading the Empowered Workforce with Chris Shipley. Heather is an in-demand internationally known speaker and future of work strategist. She has assisted corporate clients ranging from startups to Fortune 500 companies to rethink their business models, teams, and organizational structures to become resilient in changing markets. Her academic work has included roles at Rhode Island School of Design and Jefferson University, where she was the strategic architect of the first undergraduate college focused exclusively on innovation.

0:53Shai and I are so energized to have her on the show today. Good morning, Heather. Welcome to Business Owners Radio. Hi there. Thanks so much for having me. Yeah, we're very excited to talk to you today about your new book, The Empathy Advantage, Leading the Empowered Workforce. Tell us what inspired you to write this book. Well, I make my living as a keynote speaker, and I had written a book called The Adaptation Advantage, which came out in April 2020. I don't recommend launching a book in the middle of a global pandemic, but I did. And I found that book was an accidental guide to how you navigate the pandemic.

1:28It was a prediction of things I thought would take three to five years, and they all happen in three to five months, in some cases, three to five weeks. So as I carried on with my speaking, I then noticed that all the things I had predicted to take place further out in the future have a word taking place, and those required another set of changes. So I started on the second book, which is called The Empathy Advantage, Leading the Empowered Workforce. And it really came out of a changed relationship between individuals and organizations and a fundamental change in how we operate in business that requires four leadership shifts.

2:02So the book came out of seeing changes taking place in real time during the pandemic. That's amazing. I mean, first, I want to thank you for validating me not releasing a book that I was working on that overnight seemed to become irrelevant during the pandemic. But on the flip side, I also want to talk about how interesting it is that that work really informed and I'm thinking probably made this book even better. You must have learned a lot during that process. Yeah, I certainly did. I certainly did learn a lot. I mean, as a keynote speaker, I learned a lot because I get the opportunity to speak to all sorts of companies all over the world from military to finance to yesterday.

2:44Yesterday, I was at healthcare. I was real blank because I just got in at two o 'clock in the morning last night, but I was at a healthcare system yesterday. Week before that, it was education. Week before that, it was oil and gas. And sometimes it's three times a week in three different industries. So you see that many organizations at the height of crisis, panic, uncertainty, and ambiguity, and you certainly learn a lot. No doubt. And when I think of the five sort of large ideas of this book that you put together, These are terms a lot of us have heard, but I'm not sure all of us have defined, or we may have different definitions for them.

3:21So I'm thinking about things like the great resignation, the great refusal, the great reshuffle, the great retirement, and you talk about the great relocation. Help us break that down to set the stage for really what the driving forces behind the need for your work. Sure. So I had, you know, everybody was hearing about the Great Resignation in about 2021, early 2022. And I had tracked down Anthony Klotz, who's the individual who had coined that term, who had been looking at churn, the talent market for some time, and interviewed him for this latest book, The Empathy Advantage. And one of the things I started to realize in talking to folks and traveling around and my conversations with Anthony and other experts is that it really wasn't one thing.

4:05It was a series of things. And I like alliteration. So I found, you know, a bunch of great artists. So the first is the Great Resignation. And really, people thought of that as a phenomenon that happened between 21 and 2022, when in reality, churn has been building since 2009. You can draw a straight line up from 2009 with a little dip during the first year of the pandemic. And what that means is talent is mobile. And talent is mobile for really three reasons. One, we're realizing with this much speed of change of skills and knowledge, it doesn't make sense for a lot of folks to be in one organization for a very long time if it's not providing them constant opportunities to learn because those are opportunities for future earn.

4:50So I say things like learning is a new pension. It's how you create your future value every day. Investment in yourself and your learning and your organizational capacity is the greatest investment you can make as an individual or an organization. And so people are seeing the speed of change. And if you're an organization that's not investing in those changes, it's time to hop to somewhere else where you can make a greater investment in yourself. So that's been building. We've got generational change and admittudial change in the workforce, particularly with the boomers exiting and Gen Z coming online.

5:20And then in the existential crisis of the pandemic, a lot of folks said, is this what I'm doing with my life? This isn't self-expression. This isn't connection to my values. This isn't connection to my purpose. I'm not working to my potential. I'm underemployed or I'm not appreciated where I am at work. So that caused a lot of hopping around. And I don't know that the hopping around will stay at this rate. Gardner thinks it's going to be about 20 % going forward. One other thing that's fueling it is labor shortages. So we're going to have labor shortages unabated for at least a decade, if not two.

5:50So that's a great resignation. That's the first piece of it. A lot of people don't understand those factors of it. But underpinning the great resignation are other movement factors. So there's the great retirement. I don't know why this is a surprise to anybody, but we've got 75 million baby boomers retiring between now and 2030. That's a huge impact on our workforce. And then you've got the great reskilling or the great reshuffling. And that's people moving from one industry to another, from one function to another. 53 % of people who changed jobs between 2021 and 2022 moved industries, functions, or jobs.

6:24That's good news, I think. That's people working to their potential. Another piece of it in there is the great refusal. And that's people saying, I'm not going to get punched in the face for$7.50 an hour anymore. And that really started during the height of the pandemic when people with close contact work, often low pay work, We're getting harassed by people about either wearing a mask or not wearing a mask or people's anxiety in general is coming out and some really bad behavior. And we've been underpaying folks on the front lines for way too long. If minimum wage kept place with pre-pandemic inflation or even our increases in productivity, it would be somewhere in the neighborhood of$23 or$24 an hour.

7:02And now we're fighting for$15. So that's a long overdue change. It's treating people like assets rather than liabilities, assets to invest in rather than cost to contain. And then the great relocation is driven in a large part by the availability of remote and hybrid work. But it's also people saying, I want to figure out not where I work, but where work fits in my life. And they're saying, hey, I always wanted to live in the Colorado Rockies. I've always wanted to live in Boise, Idaho. I don't want to live in Manhattan anymore, or I do want to live in Manhattan now. A lot of movement around where people are trying to decide where and how they want to live, and then they'll figure out what they do for work.

7:38And Upwork estimates there's like 19, 20 million Americans looking to do that now. So collectively, that gives you the great reset. It's an empowered workforce, and you have to meet them differently, have to engage them by a sense of purpose. They're very aware of investments in their learning and their future potential. They want to see you make those. And they're not going to put up a toxic work environments. They want places where they feel caring, love, and belonging. You know, it feels like you said that this is such a long time coming. And, you know, you really have done a wonderful job at illustrating how these different trends have all come together to give us where we are now.

8:16But it's so interesting in hindsight that I don't know if it was a lack of awareness. Is it the boiling frog analogy? How did we all not see this coming? You know, I've been looking at this for quite some time. So I knew something like this was coming. I'm frankly a little surprised it took this long. And I'm not surprised it's something like a pandemic that caused it to happen. So we used to think of what we did for work as trading our loyalty for security. I'll be loyal to the corporation. It will take care of me for my entire career. That has not been true for many decades. But it's still an expectation that a lot of workplaces and employers put out there as really a false promise.

8:54It's not true. It's changed. and then we sort of traded in some sectors in some levels and for some folks i will help you build your career as an individual if you give me your dedicated share of mind and then we got this sort of hustle culture that wasn't just around a big deliverable or wasn't just around a startup it was always on hustling all the time and when you look at our systems of work they were really designed for, you know, back in like the 50s or earlier for straight white men who had a wife at home to manage all the caregiving responsibilities. So it was never supposed to be sort of having it all for anybody because one person was supposed to work and dedicate their attention and their share of mind to that work.

9:41And the other person was supposed to care for all the other life issues. And now almost every single family has a two family income and trying to have it all, It's falling disproportionately on women, but it's also not giving men enough time for caregiving and time at home. So we've been way out of balance in our loyalties, you know, in our promise. The social contract has been broken for a while. And so I'm not surprised something like this came about. I saw it coming, but I am very optimistic that we're going to get to a better place if we're brave enough to seize this moment. It's the value proposition of work has just really, really changed for people.

10:20And so much of it used to be driven by where you gained employment. And then that's where you moved to and lived, right? And I mean, even that alone is utterly changed for many parts of the economy. But it also, what about this inequity that's created? You know, you talk about how COVID was really this boiling point or an inflection point, at least, where things changed. But it also made us hyper aware of this great inequity, which I think led to the great resignation, quiet quitting. How do we address those kinds of inequities as you look to the future? Well, I think that we've got to look at our workforce as individuals who are driving their own careers.

11:05Not everybody is going to be dedicated to workforce first. For some folks, this is a job, it's a paycheck, it's X number of hours a week, it is not my identity, it's not my life. And we have to acknowledge that. I mean, for a long time, we were like, we don't want that worker. Well, the reality is you don't have the opportunity to reject almost any worker these days, not every single one of them. But with these labor shortages, we have to think about, okay, who are my people who are here to drive a career, to build the business, who are here because they are really dedicated to what we do every day because it's part of their self-expression, part of their desire for identity for themselves in the world or a piece of it.

11:49And then there are other folks who are there too, and they're going to do a great job too. It's just you have to understand how to motivate them. So I think we have to acknowledge that we have presumed that everybody's going to be always on hustle culture or we're going to throw them out If they're not, we don't have the luxury of throwing out people. And quiet quitting is a really crappy term for people just putting some guardrails in their life and saying, you know what, I am not going to die for this job. I am not buying into that always on hustle culture because, you know, the reality is we did that and we acted like it was going well.

12:20It wasn't going well. Gallup has been tracking engagement for more than 20 years and we have barely moved the needle. We have the highest rates of mental illness and burnout ever right now. So why would we continue to push on something that wasn't working at all? It's tremendous insight. I really appreciate this, Heather. I'm diving into it, taking the other side just a little bit for looking at how things look. I've chatted with a number of business people that are concerned they're not going to survive the transition. Prior to it, it was the business defining their purpose and their direction and their vision, and then plugging in the resources, including people.

12:59And away we go. And it's all about the business and the client and this change of who's accountable for what. And now the business is asked to be more accountable for the relationship, the mindset, culture, and approach, behavior, all of these things that you've pointed out in your book. Are there businesses in your mind that just aren't going to make that leap or that transition? And what are the models of business structures that you're seeing to be successful for the future? Yeah, I really do believe no matter how big the business is, if you treat your people like they're disposable, you will not ultimately survive.

13:37You may survive, but you're certainly not going to thrive. And so we're seeing a lot of layoffs take place. Some of it makes sense to me. Many of them don't. I'm a fan of Jeffrey Pfeiffer's work from Stanford who points out, you know, the street asks for a 10 % reduction headcount. And then the stock goes up and they lay off people and they don't even know why they're doing it. ultimately cost them more because they lay off people. They've still got to get that work done. So they pay a higher price for that work. And then eventually they're going to hire those people back at a higher rate and you've killed the morale of your organization.

14:08So layoffs should be the absolute last thing that you do. Treat people like the precious assets that they are. And it's not just about having people in your organization working for you. It's having those people engaged and mentally well and not burnt out and thriving. And you can't do that if they're under constant threat. Because if you look at a lot of the work we're going to be doing going forward, especially when you look at the different types of technologies that are coming online now that people are just starting to experiment with GDP so they can sort of see what's possible, the work we're going to ask humans to do is going to be uncertain, ambiguous, collaborative, unknown.

14:46All of that work requires psychological safety and trust. You cannot establish psychological safety and trust if you're randomly throwing out people, you're not communicating well, you're not treating your people well. So the businesses that are not going to do well are going to treat their people like they're disposable. The businesses that are going to do well are going to focus on a niche market that they can defend and treat people like the best assets that they have, which they are. It's interesting. So many different industries have assets like we're talking about as far as people and equipment and machinery and they'll align resources and budgets to maintain the hardware of their business, but they don't align funding to grow and maintain their human assets, if you will, or their team members.

15:35So this is a big shift and the cost can be significant, but the return on that investment has to really be understood by the business owners to really value it and promote it and nurture it. You've got a lot of guidance in your book and what would you say are some of the best returns on corporate investments or business investments in their people? Yeah. So the ground that's been covered well in terms of looking at the ROI on people is the cost of not doing it. So the cost of losing people, the cost of searching for new people, bringing them on board, training them, loss of productivity, loss of business continuity, loss of morale.

16:18So that ground, at least we have that covered with some pretty hard data. it's much more expensive to acquire someone after you've lost someone than it is to keep a person but we don't think about that i mean we'll pay more for a new person than we will for our existing people and i think some of the transparency around pay is going to help change that i mean at least in new york city they're making it by law it's gonna be a tough road to cover and i think um i've spent about a decade in academia academia had bans that were transparent so you didn't know what somebody made, you knew what band they were in.

16:52And so you knew if you were properly paid, if you were feeling well within that band, I think we'll see that kind of thing. But some of the return on investment stuff, honestly, some of it we do not know yet. And that's going to be something we didn't know when we invested in technology, what the returns were going to be. But for some reason, we're reluctant to invest in humans when we don't know what the returns are going to be. And I think it's becoming more and more clear. I mean, And one of the examples we use in our book is a recalculation of the S &P 500, looking at the enterprise value of all the companies on the S &P 500 from 1975 to 2020.

17:25And in 1975, 83 % of the value of all the companies on the S &P 500 came from tangible capital, property, plant, and equipment, because we made stuff into other stuff. And during that period of time, we were absolutely treating humans as a cost to contain. We had to keep our labor costs down because they were a small percentage of actual value creation. That's when Milton Friedman wrote his seminal essay that said that the only purpose of a business was to return profits to shareholders. And it started the shareholder value era. Well, fast forward to 2020, and 90 % of the value, 90 % of the value of all the companies on the S &P 500 is intangible.

18:04That's not property, plant, and equipment. That is ideas. That is patents. That is human activity. So I said in 2021, we were on the birth of the human value era, which we're finally going to figure out that humans are the greatest source of value. We need to start treating them that way. The Securities and Exchange Commission in 2021 said that indeed humans are the greatest source of value and we need to account for them differently. And we haven't yet shifted humans from being a liability to an asset. There's still a liability on the balance chain. So there's still a cost to contain. And as long as we keep that accounting practice in place, we're going to struggle with this.

18:41But we need to think differently about humans, whether it's accounting, it's our mental models, how we treat them, how we think about them in organizations. But 90 % in 2020, that number is only going up. All the value in your organization is your people. We've been saying it forever. We didn't really mean it. We have numbers behind it. We know it intuitively, and we need to start acting like it. And I think that's our profound opportunity right now. So a challenge, Heather, for bricks and mortar businesses that rely on a workforce that needs to be located geographically where that business is.

19:14They need to come into a place of work. This is terrifying and wonderful at the same time like most massive changes are, right? The idea of empowering more of humanity. What do you say to those business owners? What can they functionally do? How should they be thinking about this? beyond just, you know, you're going to have to pay people more if you'd like them to stick around. Yeah. I mean, the studies on pay are interesting because if you pay somebody, you know, a dollar more,$10 more, 10 ,000 more, that works as a motivator for about two or three months. And then it subsides. It doesn't sustain itself as a motivator.

19:48As long as you're paying people fairly and you're removing the friction and fear that they live their lives because they're scraping to get by, compensation, as long as it's fair, is not a motivator. It's not a sustainable motivator. So my mother owns a clothing store. She opened it when she was 65 years old. She's about to be 80. She opened a clothing store in the global financial crisis that was going on when she was basically opening her clothing store. Everybody said, you're not going to make it. She's done so well. She wins award after award. And it's a small store that is tough business, but she does it by focusing on her customer.

20:22What do they want? Her customers are all female. When she comes in, what's she looking for? What kind of interaction does she want to have? What kind of clothing is it? What can I carry that nobody else carries that? They can't get on Amazon. They can't get online. They have to have an experience. So you have to become customer obsessed and that your people are there to provide an experience you can't have anywhere else. And that's true of every brick and mortar place. That's true of the bookstore that's struggling. That's true of the coffee shop that's not a chain. That's true of any place where humans are interacting with humans.

20:52You have a huge competitive advantage if you can be customer obsessed and focused on creating an experience they can't get anywhere else. Heather, I love that customer experience element. And we see it every day in our personal lives and in our business lives. Who do we do business with? Who do we spend time with? It's more than the money. And I agree with you totally. The statistics really support that the number one reason people leave is not money. It's important. It has to be competitive, but it's their management. And so So businesses, where do they start? How do they change the culture? How do they work towards something that's far better than their competition as an environment to work?

21:36They can't shift who they've hired in the past overnight. They can shift who they're hiring for the future. But in the meantime, they can really identify things that are going to make a difference in their culture. What's the most glaring cultural issue that you see? Well, the reason Chris Shipley and I named the book The Empathy Advantage, Leading the Empowered Workforce, is this is very much about leadership. And if you look at the leadership profile that we had promulgated for way too long, it was an unquestioned expert who can make decisions in certainty, drive productivity pretty myopically, with domination, fear, even humiliation.

22:19That's the profile. It was a person who self-selected that they wanted to be the boss, sometimes with a little insecurity and imposter syndrome. Far too often that was the case. They like to have people a little bit afraid of them, and they pitted their people against each other. I mean, that's kind of the profile. There's a good side of that. There's a bad side of that. We're all very familiar with the bad side of that. But almost every one of those attributes now is a liability. So let me break it down. We talk about the four leadership shifts we need to make. So first, from the standpoint of a mindset.

22:53The mindset was I manage people and processes. People work for me. I'm the boss. Well, now most people, it used to be true of just the CE level or maybe the executive level. But now at middle management, in some cases, even the front line, people are managing teams of people who have skills and knowledge they do not. Cybersecurity, data analytics, machine learning. If you don't manage a team of people who have skills and knowledge, you don't today, you will tomorrow. Get ready. It's coming. So you can't have an attitude that the people work for me when they know things you do not. You've got to shift your thinking and say, my mindset is I'm in the business of enabling success.

23:32People don't work for me. I work for them because their success is my success. So that's the first shift. And it's a big one, and it's intentionally provocative. The second shift is a shift in culture. So when you were that in-question expert and most of the people working for you had skills and knowledge, not only you had, but it was duplicated across the team, or at least there was some redundancy, you could pit people against each other. And things like forced rankings and some of those other ways that we tried to rank performance. Well, now, if folks on your team have unique knowledge and you need them to collaborate to be successful, you can't pit your people against each other.

24:09You can't have peers as competitors. you now need peers as collaborators and you need to set that culture you need to set that expectation and you need to lead with that expectation the third shift is a shift in approach we got people to perform through punishments threats and rewards we used extrinsic pressure now that worked when what they needed to do was largely execute but now what you people need to really do is learn explore do things they've never done before so you can't lead with that extrinsic pressure, you got to move to intrinsic motivation. And as I was explaining this to a large farmer company, one of the executives came up to me and said, oh my God, I have to get to know my people.

24:50When I was just driving productivity, I didn't really have to know them. I just applied extrinsic pressure, which was uniform across whoever they were. Now, if I'm focusing on intrinsic motivation, I have to get to know them as individuals so I know how to motivate them. Now, Dan Pink proved 12, 14 years ago in his book Drive that intrinsic motivation is far superior than extrinsic pressure. But we didn't learn that. Now we need to learn that. We definitely need to learn that because you're not going to be able to get your people to what I call self-propelled unless you help them get in touch with their own internal drive.