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Is work working for your people and organization? In this podcast, Mercer thought leaders, industry experts, and business visionaries share big ideas and best practices to help you build great workplaces and a future where work works for everyone. Making Work "Work" is a podcast for Mercer Workforce Solutions.

Welcome to Making Work "Work." I'm Andrew Lafontaine, partner at Mercer Workforce Solutions. Today, we're going to talk about one of the top drivers of talent attraction and retention. And to no surprise, it is all about salaries and benefits. We will share key findings from the recently released Mercer Total Remuneration Survey and Australian Benefits Review, yes, I know, a very long title, but we'll dive into that in a little while, along with our perspective on what organizations should prioritize to motivate their people and attract talent they need in 2025 and beyond.

Now, we all that in the early post-pandemic years, the job market was absolutely booming. Pay rises were there for everybody, and many positions soared as workers switched jobs for better pay, that elusive work-life balance, and trying to find their purpose. However, our data shows now that the situation is changing, hiring is slowing, turnover has declined, and organizations are adjusting their budgets in a market that seems to be shifting in favor of employers, and we have recently seen that with some of the announcements by some very large organizations around returning to the office.

To explore this topic, let me welcome our guests and dive straight into it. Nithya Abram, general market leader at Digital & Insights, welcome to the show.

Hello, Andrew. Hello, everyone.

And I've also got Don Barrera, client engagement manager at Digital & Insights. Thanks for joining us today, Don.

Thanks, Andrew. It's a pleasure to be here.

OK, so let's get straight into it, guys. So what is the Mercer Total Remuneration Survey telling us about what's happening across Australia and were you at all surprised by any of the findings?

Absolutely, it's really interesting to see how the power dynamics are shifting towards employers. So according to the survey that was released in October, which gathered insights from over 1,200 Australian organizations, employers are planning to budget a bit less for raises next year. Now when we look at the overall budgets, that is the salary budgets for 2024, which includes your performance, merit-based budgets, adjustments for promotions and cost of living increases, they've remained stable at 4%, just like last year. And interestingly, the payroll budgets are forecasted to stay at 4% for 2025 as well.

But what caught me off guard was that last year, employers were forecasting a 3.5% merit budget for 2024, yet the actual merit budget figures this year exceeded that forecast, coming in at 3.8% Now, while it might seem like it's just 0.3% point increase, it's actually the highest we've seen in the last decade. Now, what do you think drove that? This unexpected increase in adjustments were largely due to the challenges businesses faced in attracting and retaining talent, and many organizations had to offer higher wages just to stay competitive.

And with the rising cost of living, how many of us have felt that squeeze, right? So many employers are stepping up to adjust salaries to help their employees manage those extra expenses. Doesn't that reflect a real commitment to employee well-being, especially in a tightening labor market? However, as we look ahead, there's a noticeable shift. Now, with employee turnover settling back to the pre-pandemic levels and the demand for new hires starting to cool off, budgets are also stabilizing. So for next year, employers are looking to allocate 3.6% of their compensation budgets for merit salary increases for current employees.

Nithya, you mentioned the cost of living there, and as we know, the cost of living is on the front-- I was going to say the front news papers, but nobody buys a paper anymore, we all scroll online-- but there's no doubt that that's impacting everybody. And I suppose that impacts people's situation in terms of staying and in their current job. And you talked a little bit about that, mentioning that employee turnover. Let's just focus on that issue for a moment.

So not too long ago, the headlines revolved around the Great Resignation and the talent shortages that were forcing salaries in many roles and industries to increase. Recently, there's been a decline in job vacancies, which basically means that there are fewer opportunities for employees to jump ship. And we've also seen that people staying put, maybe they're quiet quitting or not, but they are definitely staying put. So what's Mercer's data saying about the current state of the employment market?

Great question, Andrew. Right now, employees are really seeking job stability, especially with everything going on in the world. Now, it's no surprise they're less likely to seek new opportunities. We've seen a significant drop in the employee turnover. Now, it peaked at just over 21% in 2022, but fell to just over 18% last year. That's more in line with what we saw pre-pandemic. What a relief, right? Now, for the first half of 2024, though, we are looking at an average turnover rate of just under 11%. With the hiring market slowing down, I think we will continue to see this downward trend in turnover.

As workers prioritize security in their roles, organizations are realizing that keeping employees is becoming more important than just hiring new ones. Interestingly, employers are feeling more confident about managing turnover, with nearly 2/3 saying that they feel in control now, which is up from 55% last year. Now that's the highest confidence we've seen in four years. It's nice to see that kind of optimism, but there's still a lot of uncertainty out there, especially with inflation, high interest rates and overall economy as we look ahead to 2025.

Now, with retention getting stronger, the urgency to bring in new talent has lessened, and organizations are now focusing more on managing costs and optimizing their existing workforce instead of aggressively hiring. And our survey also shows that hiring intentions have been declining year over year since 2022, hitting a low this year, with only one in four employers planning to add new staff in 2025. Plus a record 30% are still unsure about their hiring plans. It makes you wonder how this will all play out.

So overall, the labor market is rebalancing with vacancies now at 2.2%, the lowest we've ever seen in over three years. And while employees feel more in control of turnover, we have to remember that market dynamics can change quickly. It is crucial for organizations to develop and engage their key talent to thrive in this competitive landscape. And let's not forget, fair pay is also becoming a top priority for employees when it comes to staying in their current roles. It's fascinating how much the landscape has changed.

Yeah, look, I don't think there's any doubt that it's a very complex landscape at the moment, and that balance between-- the balance of power, let's call it, between employees and employees is shifting, because I think we've seen, as I said, quite a few large organizations emboldened to be a bit more directive around their return to work. And if we go back four or five years, there was definitely a concern that if organizations did that, people would resign. We've now got this movement called the Great Retention. We do love our phrases in corporate, that we the. Great Retention.

But the danger in this Great Retention is that we might be holding on to people who aren't engaged, who-- and then that's part of the, I think, the hybrid challenge is that, do we have a lot of people who are sitting at home who potentially aren't engaged, but staying because the labor market is shifting. Don, what's the data showing us around employees-- employers, I should say, in motivating and inspiring employees, how employees are thinking about this, and what are the key messages that those listening should know?

Yeah, well, a big surprise that we observed was we were putting these reports together this year was that even during a challenging cost of living crisis, the data showed that just under half of surveyed Australian employees would actually forego that 10% pay rise in exchange for well-being benefits, increased contributions to retirement programs. And then we also saw that 34% stated that they would do it for fully flexible or compressed working hours. So we know that benefits play an important role in retention and engagement and creating that thriving workforce, but we also know that employees are tired, they're stressed out, and they're at risk of burnout.

So the reasons for burnout may vary, but almost one in three employees tell that they're at that risk due to financial strain. And in the APR data, it suggests that employees are looking to their employers for support in times of crisis. This year, we saw many organizations start to recognize employees, maybe under this financial strain, as 29% of organizations now offer financial wellness programs. And although that doesn't actually seem like a significant prevalence, it's worth noting that, compared to last year, that's an 11% point increase.

So this trend shows that more companies recognize the importance of offering financial advice and support through education sessions to their employees. And some of these sessions might include financial management advice, planning for retirement, or just simply helping them understand and implement insurance to protect their income. Providing information for long-term financial planning and offering targeted financial education to specific demographics or groups within the workforce would help alleviate their financial concerns.

Yeah, it's an interesting thread there. Even though people are stating that their biggest concerns have to do with financial pressures and increasing cost of living, they're looking at their employers to help ease these concerns for their futures, and not just for right now.

That's right. Yeah, these employee benefits and HR practices can help energize employees who have chosen to stay within the workforce. And we're starting to see signs of that, employers are listening to those employees that do.

Let's just drill down on that one a little bit around the flexible work and what the ABR, so the Australian Benefit Review data, is actually telling us. Because you can't have a conversation today about flexible work and hybrid working, four-day work weeks, you mentioned that 34% of employees say they would forgo a pay rise for fully flexible or compressed working hours, so that's obviously still a very big factor since the pandemic, around how employees think about where they work, how they work, et cetera.

So what is the data telling us about the whole flexible work? Has that been shifting? Is dynamics and that being shifted as well in this last 12 months? Don and Nithya?

Yeah, look, the data is showing us that flexibility is still king and it's still relevant. In fact, two of the top three observed benefits in the Australian market today have to do with flexibility. So when referring to flexible work or flexibility, it's important to distinguish between the flexibility of space and the flexibility of time. And at times, some employees are afforded the combination of both.

Now, when it comes to the flexibility of space, the APR data shows that the vast majority of organizations still offer the option for telecommuting or working from home. And what's interesting about this is that the pandemic didn't really catapult this into one of the most prevalent benefits today. In fact, in 2019, 81% were already offering the option to work from home, and it's just been growing steadily since to 89% this year. So I know that there's been a lot of media push about mandating employees back into the office full time, but it's also important to note that there's been some other large organizations pushing to keep offering hybrid and work from home opportunities to their employees, as long as those employees remain productive.

The APR data shows that only one in three organizations currently have a formal return to office policy or strategy in place. And for those that do have that, the return to office policy or strategy, the mandate employees to come into the office just three days a week.

Now, shifting back, when it comes to the flexibility of time, there's no surprise that flexitime remains the most commonly available to employees, and we may start to see this shift in the next couple of years. And I guess only time will tell whether or not we're going to see exactly the same way that we're seeing it today.

But what I found most fascinating about this year's data is that we're seeing some more unusual, flexible arrangements emerge as a way to differentiate their employee value proposition. So, of course, we heard about it a lot last year, there's the four day weeks, where you can work four days instead of five with no loss to your pay. And it's quite slow to pick up, but it has steadily increased year on year. And of course, there's also the compressed working year where employees can work an equivalent of 48 weeks in 40 weeks.

But the most interesting one that we saw this year, actually, was one organization reported experimenting with an unusual retention incentive. This company provides the employees the option to work four years at 80% salary and take the fifth year as leave, while still being paid that pro-rata amount. So I think maybe the key takeaway that we see when it comes to flexible work and flexibility is that it is a vehicle to use to achieve work life balance, which still continues to be a key focus for both employees and employers today.

Yeah, I was going to say, Don, I think that's a really important point. You highlighted the difference between maybe some of the headlines we see around the push to return to office. But that is a fascinating one about the 80% of salary over that four year period and taking the fifth year as leave, and we might have to ask Mercer whether that's an option for us.

Yeah, absolutely.

Let's shift gears a little bit and get back to a topic that's closest to my heart, and let's talk about pay. What have you seen around, Nithya, the incentives, and how could these be used for employee retention, given what's going on at the moment?

Absolutely. So when it comes to pay and incentives, we're really seeing a shift in how organizations approach employee retention. Now it's not just about salary anymore, it's about creating a comprehensive package that truly resonates with employees. Now, incentives can take many forms, bonuses, profit sharing, or even non-monetary rewards, like extra time off or professional development opportunities. And these strategies can be powerful tools for keeping employees engaged and motivated.

For instance, performance-based bonuses not only reward hard work, but also align employees' goals with the company's success. It's a win-win, right? So while organizations focused on attracting top talent for critical business areas in 2023 and were willing to pay a premium, we're now seeing new higher pay rates drop this year. And the data suggests that salary budgets for 2025 will shift towards retaining and developing existing employees. It's interesting how priorities are evolving.

We also saw increased momentum in the short term incentives in 2024. So these incentives are widely offered across all career streams. Typically, actual payouts are less than targets, but this year, we're seeing actual bonus payouts much closer to the targets across most career levels. For example, directors received about 90% of their target bonus, which is up from 79% in 2023, while managers received 86% of their target, compared to just 80% the previous year.

So this positive trend raises an interesting question. Are employers are increasingly using performance based bonuses to retain top talent? And let's not overlook the importance of fair pay. Employees are placing a higher priority on equitable compensation, and organizations that prioritize transparency and fairness in their pay structures are likely to see improved retention rates, and it's all about making employees feel valued and appreciated for their contributions.

So in a nutshell, leveraging a mix of financial and non-financial incentives can significantly help organizations retain their top talent. And it's about creating a culture where your employees feel supported and motivated to grow with the company.

Yeah, and I think, Nithya, the challenge that organizations will continue to face is for different employees that trade off between pay, variable pay, performance-based pay versus flexibility is never going to be a one size fits all for employees, and that's where organizations are going to have to try and have as a flexible remuneration structure as possible to try and really meet as many needs as they can. But that's going to be an ongoing challenge for them.

I wouldn't mind asking the following question to both of you, yourself and Don, because I don't think we can have a conversation about any of this without touching on one of my favorite topics in AI and in productivity, because I think when we talk about retention and performance, AI has now become an area that most organizations, if not all organizations, are working through the impacts. Definitely, employees are expecting their organizations to ensure their skills remain relevant to protect their future employability. We've got half of-- 53% of Australian employees trusting their organizations will teach them the skills they'll need if their job changes as a result of AI or automation.

So it's a really big area of focus, but also a really big area of concern for many employees. What are we seeing in the data, Don?

Yeah, so the ABR actually found that 60% of organizations now have learning and development programs available for the whole organization. And so as AI technologies become increasingly sophisticated, there's that glaring concern of the potential that automation will take over certain job functions that has traditionally been carried out by people. One of the fascinating things about AI is that, as you mentioned, is the capability to sift through massive amounts of data and tackle complex tasks at lightning speed. And although this is great, it does make us pause and think about the role of human skills and expertise in the workplace. Are we at risk of undervaluing what people are bringing to the table?

But on the flip side, there are actually there are quite a few of us here at Mercer that share an optimistic sentiment about AI and how it can open up a world of opportunities for boosting efficiency and productivity.

Absolutely.

But it's not just a matter of jumping on that AI bandwagon. Organizations need to approach this transition with care, and it's essential for them to actively invest in reskilling and upskilling their workforce. After all, as technology evolves, so too should the skills of the people who use it. In this way, we can ensure that everyone is equipped to thrive in this increasingly automated world.

But let's talk about where the budgets for learning and development are actually being spent. According to the latest ABR report, 89% of organizations are directing their budgets towards leadership development. And the second was selected option was people management skills. But what's most interesting is that when we look at the biggest shifts over the last three years, the most significant increases in investment have been in areas like digital dexterity and collaboration skills. So this shouldn't be really surprising to us, because in an era where automation is on the rise and flexibility remains the most sought after benefit, it's essential to equip people with the skills they need to thrive.

After all, ensuring that employees are digitally savvy and able to collaborate is key to maintaining business continuity and employee productivity.

Yeah, those are excellent insights, Don. And in fact, Mercer's 2024 Global Talent Trends report revealed that half of the survey respondents are focusing on gaining a clear understanding of their employees skills and development needs. And this is a foundational step. It's crucial for identifying areas where additional training or upskilling is required. And what else are organizations doing here?

Well, I see many organizations are also implementing reskilling and upskilling programs, with nearly half actively preparing their employees to transition into new roles by providing the necessary training and support, which is fantastic, as it's vital for employees to have opportunities to grow and to adapt. And additionally, organizations are also nudging their employees to pursue training based on their job or skill aspirations. And this personalized approach helps individuals align their learning with their career goals, ensuring they acquire the right skills for future success.

And I also saw that 38% of the organizations plan to be more intentional in mapping, learning pathways, skills acquisition, and future job opportunities. So the strategic focus not only helps employees understand potential career paths, but also equips them with skills needed for those roles.

Thanks, Don. I think we've really had some fantastic insights into what's been going on here. What I'd love to do is maybe close with some really practical steps organizations can take. So, Don, I want to start with you. What are some of the practical strategies you recommend for organizations to attract and retain the talent they need in 2025 and beyond, based on all the data that we've got through the insights, we've been able to work with organizations, what would you be saying to organizations right now?

Yeah, look, it may seem simple, but simply ask and then listen. It's worth engaging with your people, whether that's through one-on-ones with line managers or through engagement surveys, to understand what their people need. But essentially, all you want to do is to understand what will motivate them and will keep them happy and productive, it all comes back down to that productivity.

Now, that's a great insight. And what about yourself, Nithya?

Yeah, I totally have to agree with that. And look, engaging with employees is crucial because the information we gather from them really helps us identify gaps and areas for improvement in our AVP. So one important step is to benchmark against industry standards. Organizations should compare their offerings with those of other companies in the industry to ensure they stay competitive and relevant. And this helps them understand where they stand and what adjustments they might need to make.

And so the next step is to tailor their offerings based on the insights they gain. So by customizing both financial and non-financial benefits, organizations can better meet the diverse needs of their workforce, ensuring that the AVP truly resonates with employees at all levels and makes them feel valued and understood. And so when employees see say that their specific needs and preferences are being considered, it fosters a stronger connection to the organization and enhances overall satisfaction and retention.

Thank you, both Nithya and Don, for sharing those insights today. Look, that this is an ever changing landscape of talent and retention and attraction for organizations, but also the way employees think about what their careers look like. It's clear that the job market continues to evolve. Organizations must be proactive in adapting their employee value propositions. It's probably more important now than it ever has been, not only to attract, but also to retain that top talent.

We know that focusing on fair compensation, flexible work arrangements, and support for employee well-being are all critical. Companies can create an environment where their workforce feels valued and engaged in 2025 and beyond, but they really need to think about all the different things that we've touched on today in a much more integrated strategy for their employees. Nithya, thank you very much for your time.

My pleasure, Andrew. Thanks for having me.

And Don, thank you very much as well.

Thanks, Andrew. It's been an absolute pleasure.

I'm Andrew Lafontaine. Thanks for listening to Making Work "Work" from Mercer Workforce Solutions, and we'll see you next time.

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I hope you enjoyed today's podcast, and thank you for listening. Please subscribe to keep up to date with our latest episodes. And if you have any questions, get in touch with us via our website at mercer.com.au.

The views and opinions expressed by the podcast speakers are solely their own and do not represent the opinion of Mercer. This content is general information only, and it should not be relied upon or used as a substitute for professional advice. This content has been produced by Mercer Consulting Australia Proprietary Limited. Mercer is a registered trademark of Mercer Australia Proprietary Limited.

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Is work working for your people and organization? In this podcast, Mercer thought leaders, industry experts, and business visionaries share big ideas and best practices to help you build great workplaces and a future where work works for everyone. Making Work Work is a podcast for Mercer Workforce Solutions.

Welcome to Making Work Work. I'm Andrew Lafontaine, Workforce Solutions leader at Mercer. And today, I'd like to share a recent conversation I had with Shane O'Neill, host of the HR Community Podcast. In this conversation, I had the opportunity to discuss my career journey, from a teaching degree graduate to where I am today, helping organizations navigate the complex world of HR in the midst of an AI revolution. I hope you enjoy this conversation, and I would love to hear your reflections. Feel free to send me your thoughts via our website or reach out on LinkedIn.

Welcome to the HR Community podcast. My name is Shane O'Neill, founder of Civitas Talent, the HR and HSE recruitment community. Each episode, we will host HR leaders and discuss their journey and discover best practice HR solutions across the HR industry. Whether you're a CEO, HR executive, or operating across the wider HR space, this podcast is for you. Please like and subscribe, and don't forget to comment and share your views. Enjoy the episode.

Good morning, everyone. Welcome to another episode of The HR Community podcast. This morning, I'm here with Andrew Lafontaine. Andrew is the partner over at Mercer Pacific and partner for consulting services and Workforce Solutions. Good morning, Andrew.

Morning, Shane. How are you?

I'm very good. I'm very good. Thanks for jumping on this morning. I know we had a little bit of a chat before we jumped on about a couple of things, and I'm sure everyone's ears perked up when they heard Workforce Solutions, given what's happening out in the world of the workforce at the moment. But I guess before we get into that, Andrew, tell us a little bit about yourself. Tell us a little bit about who you are, and your role over at Mercer.

Sure. So currently, I'm working at Mercer, leading their Workforce Solutions team, which is another way of saying our HR consulting business for the Pacific, so for Australia, New Zealand, and have been doing that for about three years.

Mercer is probably well-known to most people for our award consulting, and our salary surveys, and a few of other key things. But we've really been doing a lot of work recently with clients around the whole skill space and the transformation. So that's been great.

Awesome. And now, we'll get a bit more into that in a little bit. But before we do, really interesting background and journey. Obviously, you've worked in a number of various different organizations, especially some of the larger well-known household brands. Tell us a bit about where it all began, Andrew.

Yeah, look, my journey is probably a little bit different to everybody else when it comes to HR. I never had any particular career aspiration to move into when I was young. I actually started off and got into uni doing music of all things, but then decided I was going to teach. So I did a teaching degree.

But then landed my first proper full-time job in a learning function with AXA back then, National Mutual, really helping in providing education services to the financial planning businesses that they had, professional development, et cetera. So the teaching job never came about, and then it just really went from there.

I then moved into doing a little bit more leadership work at Telstra. And then the much broader HR career started when I moved into NAB, where I had an OD role. So that included things like culture and workforce planning, and a whole bunch of other stuff.

And then just over the years, decided that I really enjoyed consulting as well. So I've probably-- I do four or five, six years in HR role. And then I think, I want to go back to consulting, and then I'll go do consulting. So I've been on the consulting side for the last 10 years now.

So it's the consulting bit I love because you get to work with so many different clients. You get to see and understand what's the latest thinking, what's the latest initiatives, how are organizations tackling it? So you feel like you're always learning when consulting, which is great.

That's really cool. And I guess, as well, you've got that unique combination of having worked on the-- let's call it the in-house side and the external consulting side. Do you think that has given you a bit more of a holistic picture of how things operate and how you can, I guess--

Look, there's no doubt about that, Shane. I mean, when I first started on the consulting side with this venture, I was amazed at how many consultants probably didn't realize the amount of-- I would argue, the amount of pressure and the operational component to the roles that when you're sitting in HR, that you have to live and breathe every day because the business is really relying on you. So you do get very little time to sit back and think more strategically about the business, which is one of the challenges of working in-house in HR.

So for me, when I'm working with clients, I'm really always mindful that, yes, they might be trying to balance off either trying to drive some larger project work, or larger transformation, or technology implementation, or an EVP, whatever it is. But their day-to-day operational component doesn't go away. They've still got to deliver services to the business. They've still got to deliver all of those-- on all of those metrics to the business. So I'd like to think, when I'm working with clients, I do have a better appreciation and understanding of exactly how this all needs to come together.

And B, I guess for it to lean into the L&OD space that you've been involved in specifically and open it up from there, how evolved have you seen that L&OD function over the past decades, particularly the fact that you've been in consulting, and you've been in-house, and you've been in NAB and the bigger brands?

Look, I think I've seen the change, and it's not going to be a surprise to anyone. But I think HR was initially predominantly-- especially when I started, and it was predominantly about administering a process. So it would be a learning process, or a payroll process, or a performance process.

There's been a real shift around the fact that, yes, those processes still need to be administered and roll out in organizations. But where the shift has come is, in the first instance, has come with the technology. So the technologies have absolutely transformed those processes, automated them, made them more efficient, which has allowed HR to really think more broadly about how do they-- and where do they add value?

If you can take 80% of the time from a process that you once did, well, where can you spend the rest of the time getting value to the business? So it's meant HR people have had to become real digital natives, really understand the tech, the AI. And now, AI-- that words mean-- that acronyms being thrown around everywhere, but it is coming. And while the use cases are only a few, a handful at the moment, it's really going to come and it's going to change everything. So I think that that's where the biggest change has been around the tech.

But I think the other big change has come that the businesses expectation from HR around really supporting and driving business outcomes is much more heightened. If you think about businesses expectations of their personnel department, as it was called back then, it was literally, let's just get the people on board, pay them. And that was pretty much it.

And now, it's so much more about that genuine attraction and retention. So how do we get the best people on board? And how do we keep the best people? And that's got to do with the whole HR life cycle. Because we know-- and great leaders, great CEOs, great C-suite know that it is the great people who are going to drive those business outcomes. And they clearly look to HR to say, are we doing everything we possibly can to attract and retain people? So that correlation between great people and business outcomes is really well and truly understood now by the business.

Agreed. And I think as well, and you may or may not agree, the workforce-- the dynamic of the workforce has changed so much as well, and the demands there. I mean even if I was to-- I mean, everyone does the contrast between post-COVID and now, but that's literally only a couple of years really. And the changes and diversity in the economy versus the workforce is just-- it creates a lot of demand for organizations to figure out guess where they focus their attention. Do you find some of-- are you having some of those conversations at the moment with businesses?

There's absolutely no doubt about that, Shane. I think the one-size-fits-all approach to managing employees just does not work anymore. And so organizations in every industry really need to think through, what are the strategies that are going to keep people here? What are the strategies that are going to attract people to come here? And what are the strategies that are going to get the most out of people?

Because I think that's-- and maybe the pandemic has highlighted that, but people are wanting a much greater balance between work and life. And so organizations thinking through all of that. And when I say organizations, HR.

That's right.

Organizations-- the business is looking to HR to solve some really, really complex generational issues. I've got a 22-year-old son who's just started work after finishing his uni degree, and his expectations of work, he thinks-- his company has a requirement of six days a month. I still can't get my head around that. And that's his first job ever.

Now, I've said to my wife the other day, but you what? Maybe that's just the way things are now. I've got to stop overlaying my view of ways of working as the right way and really start-- and so what we've got is these generational changes that have happened, where some people still wanting to be five days a week, other people acknowledging that you can get the best out of people two days a week. Massive changes, massive challenges. And they're all falling to HR.

That's it, exactly. And even to your point earlier, just building off even that example we just saw, and other organizations that I know and recruit for, they just can't possibly be one-size-fits-all. Because if it works for a business that do six days in the office per month, another organization are doing five days on-site, and it works for them.

And that's where I come back to the technology as well. The technology has absolutely enabled this. Businesses were forced to adopt it during the pandemic. So there is no going back. There's no going back. I personally don't believe. There's no going back to-- corporate life is now going back to five days a week.

I mean, we still also need to acknowledge and manage that there are many, many industries who are fighting each week. And I often say to people, sometimes we need to realize that we're pretty privileged in corporate, that we have the flexibility that we do. My wife works in a hospital. She can't work from home. People in retail can't work from home. People on construction sites can't work from home. So I think the conversation also needs to be moderated a little bit, too. The talk about the haves and the have-nots in terms of choice. So I think there's that overlay as well for it.

I think so. And I mean, even from a HR perspective, and I hope a lot of HR practitioners that are listed will agree, is you have to adapt to the environment that you're supporting. So if you're a HR manager in a food manufacturing, process manufacturing site, you're probably would be best off to be present and on-site to deal with the issues, build that reputation and trust, and be seen.

So if any of the workers do have an issue, they know the can come to you because they see you, and they know you, and they trust you, and you've got a reputation. Whereas if you're working from home full-time and they don't know who's in HR or how to step over to them on the side, it creates a funny dynamic.

Yeah, it does. And I think that's part of, I think, the working life, is really understanding some of those nuances. I look at the consulting world now, coming back from the pandemic, clients always wanted us on-site, working on-site. We don't have any clients who want consulting on-site.

Interesting.

Because they're not on-site. So it doesn't make any sense for us to be sitting in their offices anymore while they're not there. So it's, as I said-- and every industry has their own nuances around that, the adapting to those, and understanding those, and getting the best out of your employees based on the specific nuances. Work life is where everybody is trying to work through at the moment because as we discussed, the one-size-fits-all is not going to work anymore.

Exactly. And before we jumped on today as well, we talked a little bit about our own industries. And you're coming at it from that consultative perspective in Workforce Solutions and I'm on the HR recruitment side. And I had been stalking a lot of your work and research and reports online over the last couple of months. But in one of the articles I read, which I found was really, really interesting, and you touched on it a little bit there, as we were speaking, is AI will be your best hire this year. So I found that quite interesting. Tell us a little bit about what you mean by that.

Look, I think the-- and I was actually talking to Michael who leads the digital HR practice form here at Mercer. And the question I posed to Michael is that, when it comes to HR, is HR really thinking about how AI can influence change, adapt the work that they're doing? Versus are they looking to their IT function to provide them with the HR-- the AI solutions?

And I think the critical bit there is that nobody knows their business better than the HR people. And it comes back to that comment I made earlier around HR needing to be much more digital natives. I think HR really has to be understanding and on the hook to actually thinking about the AI solutions that they want to implement in their business and not necessarily looking externally because nobody understands their business as well as they do.

But for them to be able to do that, they need to really understand the AI. Now, I'm not talking about understanding the backend of the AI and all the coding and the technical components. But actually, what can AI in various-- I mean, we all-- the two use cases that everybody understands right now is Copilot and GPT.

That's right.

Everybody understands that. So probably everybody in corporate understands those two. But there's so, so much more in terms of process automation and a whole bunch of other stuff. So if you can get that right, then yes, AI might be some of the best hires you will make through the course of the year.

Because what you're really doing then is bringing together the technology, understanding what people do, and understanding the depth of the process that needs to be rolled out, and bringing all those three things together in a way that, again, augments what the human does, not necessarily replace what the human does. And again, frees people up to do high-value work.

And I think way, way, way back when we talked about the Ulrich model of HR functions, shared services, business partner, COE, et cetera, that whole premise was to free up people to work on higher-value activity and to push their transactional work to a shared service center. In some respects, that iteration is happening again, but this time with technology.

So where can we continue to focus on the transactional way in the most efficient and effective way while we free up business partners, center of expertise, people to actually focus on the high-value stuff to drive the organization? So that operating model piece is almost having its second evolution now through. AI.

It's really interesting. And I know you're a huge advocate for the digital solution side as well, which combines really well with the journey, I think, that organizations are going through at the moment. On the digital front-- I mean, I know in my world, recruit for fairly large enterprises right through to the small-- to medium-size players, often I speak to companies where they start to, I guess, entertain the idea looking at systems and new HRAs. And I'll just pick Workday as an example.

And often, they go through that journey where they go down the Workday route, they implement it, and then they put their hands in there and go, OK, where do we go from here? Do you find that like a common-- and I'm sure people are here with their notepads and pens, but is that a common challenge or issue that you face with some of your clients?

Yeah. Absolutely. I think there's a couple of things that are happening on the technology front. So I think the first thing is that the technology is finally catching up to where HR functions have always wanted them to be. And if you look at the AI skills-based technology platforms, like the [INAUDIBLE], and the Gloats, and the Reejigs, et cetera, for the first time now, in the last three to five years, organizations can all of a sudden get a full understanding of the skills in the organization in a live and a dynamic way that's generated by AI.

So the HR is catching up. But what that means is that HR functions are really having to think through how do we actually best implement this? How do we actually best roll this out to the organization to actually meet our needs, not the generic needs that were sold to them?

And I think it comes back, again, to me just really saying, HR functions absolutely need to become those digital natives. They really do need to understand very deeply the technology. And the reality is that HR functions haven't had to do that, similar to finance functions, similar to a whole bunch of different [INAUDIBLE].

I mean, if you think about it, probably the one function that has best adopted technology is marketing. if you just think about-- marketing used to be, we'll put ads in a newspaper and we'll send out flyers, and we'll do all of those things. Then technology came around.

And now, you think about the CMO and how they're using marketing to attract clients, to service clients. I mean, that's where I think if HR can get to that when it comes to technology and employees, that's when we'll get the step change in HR, the use of technology. Because the things that we get on our social media, the way we're marketed to is really quite amazing when you think--

It is amazing.

But marketing departments had to make that transition from very traditional ways of marketing through to-- we've got all of this technology on. But when you think about that, when it comes to HR, have we made that transition as well? Probably not. Would we be able to use the technology in a customized way to engage with employees? Probably not as well as marketing have been able to do it would be my assumption.