The term VUCA was introduced by the US Army War College to describe the more
Volatile, Uncertain, Complex and Ambiguous world in the post-cold war era. The
term was subsequently adopted by the business world to describe the rapidly
changing business environment, underscored by globalisation of markets,
rebalancing of the global economy, advances in technology, changing demographic
trends, new customer needs and disruption of existing business models.
The chaotic “new normal” in business is real and here to stay. And the new
realities of the world will have deep implications for the HR function.
Klaus Schwab, Founder and Executive Chairman of the World Economic Forum,
recently concluded in a report, “In the future, human capital will be the most
important kind of capital.” The WEF report highlighted that a nation’s human
capital endowment – productive skills and capacities – can be a more important
determinant of long-term economic success than virtually any other resource.
Demographics are leading to a major shift in the demand and supply of talent
around the world. According to Global Talent 2021, a study conducted by Towers
Watson and Oxford Economics, HR professionals must prepare to address the
projected labour shortages in countries such as USA, Japan, South Korea, France,
Germany etc., while dealing with talent surpluses in countries like India,
Indonesia, Brazil, South Africa etc. “Talent Mobility”, thus, becomes the first
variable when thinking about the future of HR.
The second variable is “Economic Volatility”, which is also a part of life
now. Every day we are bombarded with analyst reports and forecasts about the
state of the economies around the world - gradual recovery of the USA, continued
instability in most of Europe, slowing down of China, the hopes of ‘Abenomics’
in Japan, the growth revival in India and so on. The constantly changing
business environment requires a continuous evolution of strategy and again, HR
needs to be able to respond to these.
Scenario Planning for HR
Nate Silver, the American statistician who is revered for his work on
accurately forecasting results of 2008 & 2012 US elections, wrote in his
best-selling book The Signal and the Noise, “We need to stop, and admit it: we
have a prediction problem. We love to predict things—and we aren’t very good at
it.” He further added that we must become more comfortable with probability and
This is where the concept of scenario planning comes in. Instead of
formulating HR strategy based on a single prediction, it might be better to plan
for multiple future scenarios. Using the two variables of Talent Mobility and
Economic Volatility, we can construct different scenarios for the future.
Let’s look at each of the scenarios and what might be some of the key
implications for HR.
Day of the Elite: Local talent rules in this scenario which
is characterised by economic stability and low talent mobility. The demand for
talent would grow and employers would need to compete heavily for the best
talent. And with ample employment opportunities for critical-skills talent,
retention would become a serious challenge. This scenario would require
companies to invest heavily in branding themselves as a destination employer and
offer a differentiated employee experience, together with a compelling total
Extreme Segmentation: If the economy is in turmoil and
talent mobility is low, HR would need to flex its approach to managing the
workforce – retaining critical-skills talent while tapping into cost-efficient,
on-demand talent sources like contractors, outsourcing, crowd-sourcing etc. To
retain the best talent, companies would segment their workforces and invest in
roles that are pivotal to the strategic success of the business. Given the
reliance on external parties like contractors, off-shore workers etc., there
would also be a need to enable better ways of working through task parsing,
asynchronous collaboration, tele-commuting etc.
Talent Super Market: If the economy is stable and talent
mobility is high, the power starts shifting to the employers. In this scenario,
the high demand for talent is matched by ready availability of talent. At the
same time, talent investments will be lower as more talent from lower-cost
economies come onboard. The onus of differentiation now falls on the employee
and employees need to stand out in the crowded labour markets. However, such an
“ideal” state is somewhat hard to envisage given current debates on immigration.
Talent Hedging: The last scenario is one of high economic
volatility and high talent mobility. The outlook for talent becomes uncertain,
even though talent can move more fluidly. Employers would become more cautious
and access talent from lower cost economies to manage costs. The nature of
employer-employee relationship would change to short-term contractor-type
arrangements, rather than permanent employment. The scenario can see an
over-supply of talent, especially in routine jobs and HR departments would
invest resources in identifying the right talent from a global pool.
The Way Forward
The scenarios described above are entirely plausible. In no way, the
implications for HR outlined here are comprehensive and there would be several
other issues to deal with. Moreover, HR leaders might need to tactfully navigate
each one of them at different points of time.
To enable business success under different scenarios, Agility is the key word
for HR. Based on research and experiences with hundreds of companies, Towers
Watson has developed a model for Agile HR, which has different underpinnings. An
Agile HR function’s organisation structure, roles, competencies, technology and
governance will need to change substantially.
In the Agile HR model, HR will have fewer permanent resources, but instead will
have on-demand internal or external resources which will group around specific
business problems. Such groups may consist of stakeholders with vested interest
in an initiative - business leaders or external experts. These groups would be
formed when a pressing issue presents itself and will be disbanded once the
group’s mandate is achieved.
The roles would change too with HR Centers of Expertise designing programmes
based on business demand (pull) versus based on corporate roll-out (push). The
HR Business Partners will assume added importance and have a more strategic
business-enabling focus, rather than operations alone. New roles like Contract
Experts may need to be created to manage the on-demand talent pools and
The competencies of the HR professionals would also look different. Instead
of HR specialists who understand the business context, there would be a need for
business experts who can deliver people solutions. Beyond having expertise in HR
programme design and delivery, future HR professionals would also need solid
analytics and change management capabilities.
And HR Technology will need to evolve to provide consumer-grade experience to
the enterprise. The transactional systems would be replaced by knowledge-based
enterprise 2.0 systems based on software-as-a-service platforms. Technology will
play a key role in enhancing responsiveness, enabling analytics and simplifying
people-related tasks for managers and employees.
Peter Drucker shared his wisdom, “The greatest danger in times of turbulence
is not the turbulence; it is to act with yesterday’s logic.” Hence, it is
crucial that HR leaders plan for the different future scenarios, respond swiftly
to drive business success and enable enterprise agility through an agile HR
Abhishek Mittal is a Senior Consultant at Towers Watson, Singapore. To
connect with Abhishek, email