Ep 136: Measuring Belonging to Strengthen Human Infrastructure with Eric Knauf

[00:00:09] [SPEAKER_01] Hey everyone, it's Bob. Welcome back to Elevate Your AIQ, your go-to source for insightful conversations on human-centric AI readiness, talent transformation, responsible innovation, and the future of work. Today, I'm excited to be joined by Eric Knauf. He's the founder of Belong HQ and author of the book, The 56% Solution of Belonging Infrastructure Transforms Performance.

[00:00:33] [SPEAKER_01] His interest in how humans function inside organizations goes back to his father's career in organizational psychology, long before Eric lived through a turnaround story most leaders would rather forget. We dig into what actually makes an organization's culture healthy or broken, why belonging is measurable and not just a feel-good HR buzzword. Now the gap between your best and worst managers predicts more about your AI transformation than any tech investment will.

[00:01:02] [SPEAKER_01] Eric makes a compelling case that fixing the human side of the business isn't a heavy lift, it's a handful of conditions any manager can create. Stick around for the whole episode and thank you as always for listening to the show. Hey everyone, it's Bob Pulver. Welcome back to another episode of Elevate Your AIQ. Today I'm excited to sit down with Mr. Eric Knauf. How are you doing today, Eric? Eric Knauf, fantastic, Bob. Thank you for inviting me.

[00:01:28] [SPEAKER_01] Absolutely. Yeah, I'm looking forward to this conversation. You're doing some really intriguing and impactful work and I want to dig in and let my audience hear all about it. So Eric, why don't we just start with you just giving the listeners a little bit about your background and how you got to where you are with the Belong HQ.

[00:01:45] [SPEAKER_00] So I could go through that set of questions in an interview style, you know, tell me about yourself. But I think there are a couple things that are worth calling out and part of it will make sense in a little bit. I grew up in an environment where the role of the human in a system was always important. By that I mean my dad's PhD was in group dynamics.

[00:02:15] [SPEAKER_00] I mean his PhD was at org psych. His dissertation was in group dynamics. And that goes back to 1974. So I was I was but a weak kid at that point. But his work as he applied it to making the Fed a more human place to work, working at the at Cleveland Clinic, becoming a chief HRO in health care system. His work informed my formative years.

[00:02:44] [SPEAKER_00] And when I came out of college, my thought was I'm going to be an org psychologist. That's what I thought I would do. Career took me in a very different direction. And for those of you who are watching or listening who ended up in recruiting, notice I said ended up in. Nobody says that's what I seek to do. But I ended up in recruiting. I was with a firm, ended up in the I was in the early days of the RPO space.

[00:03:13] [SPEAKER_00] As well as then a transition in through lean consulting. I found my way back into TA leadership in tech. And it was it was a heady time, high growth. I was with a Ariba before we were acquired. We doubled in size. Then we were acquired by this little software shop called SAP. And I sought to that gave me a rush. That gave me a thrill. How do you bring organization?

[00:03:41] [SPEAKER_00] How do you bring people into humans into an organization and help the company grow? What I discovered over time was, though, that it's one thing to fill a role. It's another thing for that human to actually add value. And so frequently organizations seek to ultimately fill a position as opposed to impacting the business.

[00:04:09] [SPEAKER_00] And with my experience in lean consulting, my default in going into new leadership roles is value stream mapping. I want to understand where value is created in the process. Where is there waste? How do you mitigate waste? And how do you add more value? And you start with the end in mind. So what is it, Ms. Hiring Manager, that you're seeking? And it's no, it's not to fill a role.

[00:04:35] [SPEAKER_00] It's for that human to be fully functional and delivering on the objectives of the business. That's what you want. It's not just a body. And I found as I went from organization to organization that the focus was more on the arrival of the individual. At the same time, my scope expanded.

[00:05:00] [SPEAKER_00] I ultimately ended up, my most recent in-house role was the head of talent culture, in essence, the head of people for a two-sided labor marketplace. We had just raised $700 million from Andreessen Horowitz, clearly a large sum, to create an environment where we would have a million people in the trades on this platform, which is heady for anybody.

[00:05:30] [SPEAKER_00] That said, within six months of my arrival, things shifted radically, so much so that we had a 55% riff. And it was my team that led us through that riff, that had the conversations one-on-ones with individuals saying, sorry, but there's not a seat here for you anymore. That was brutal. It was brutal for everyone. The company's EMPS at this point in time was negative 73.

[00:05:58] [SPEAKER_00] My team's EMPS was negative 92. And I confess, Bob, I confess I'm one of the negative 92, right? It was like, no, I'm not recommending this place as a destination for your career. But that doesn't solve the challenges of the organization. And that was our remit.

[00:06:23] [SPEAKER_00] So everybody traveled to Austin, had an on-site, off-site for two days. The first day was a bloodletting. It was let the poison out, as one person said. I was not in the room. As part of the leadership team, I shouldn't be in the room. I had somebody facilitate it. And when I was invited back in at the end of the day, it was Brian Chaney.

[00:06:49] [SPEAKER_00] For those of you who know Brian, he said, okay, you can come back in now. Raise yourself. You're not going to like what you see. Some of it's about you. And walked back into the room. And there's on the massive whiteboard, I see three letters, W-O-S. I don't know if you could edit this out, but it was a wall of shit. And it was a list of their grievances. And every single one of those grievances was legitimate.

[00:07:18] [SPEAKER_00] I agreed with almost all of them. And some of them were about me. All of them, though, were my responsibility as a leader for my team. And it was heavy. I mean, they were right. I cried. I mean, it was rough. The second day was the antithesis to that. It couldn't have been more different. We used a page.

[00:07:45] [SPEAKER_00] I mentioned earlier my dad's work around group dynamics. He also did a lot of work with David Cooprider, the godfather of appreciative inquiry. And we used a dose of appreciative inquiry in the second day. What do we look like as a team? What do we look like at our best? And what are the requisite conditions necessary for us to achieve that, to sustain that?

[00:08:11] [SPEAKER_00] Finally, the work product that came out of this was something that caught the attention of the CEO. And he was like, we need to do something like this for the whole company. So we did. Now, like I said, our EMPS was negative 73. Within six months, it was positive eight. And that positive, and it was that swing where that led people to say, whatever this is, you need to write about it. Well, about a month and a half later, I was given the opportunity to do just that.

[00:08:41] [SPEAKER_00] We had another riff. And, well, I was given the opportunity to write about it. So in a nutshell, that led me to writing, doing a lot of research, writing, and then founding a business on that research.

[00:08:58] [SPEAKER_01] So first of all, just so we get the transcript accurate. So your ENPS, that's your net promoter score, was in the tank. I've actually never heard of one so low. We were great at being, I mean, if you want to be bad, we were good at it. Right. Right. And then riff, just so people know, we're not talking about R-I-F-F, like riffing, it's reduction in force. And you just have to, the company has decided that just there's no other alternative but to

[00:09:27] [SPEAKER_01] actually reduce the headcount. And that's 50% as enormous as people can relate to. So, so this basically had you sort of, I guess, almost combine some of that sort of talent, now talent leadership experience with everything, you know, your sort of roots for what your dad was doing in terms of those group dynamics and organizational effectiveness.

[00:09:55] [SPEAKER_01] And, and how do you really move the needle on, you know, these high level business objectives? I think a lot of what you discovered through that is as true today as, as ever. Like, how are you motivating? How are you including providing, you know, psychological safety? I know we'll, we'll get into your methodology and your latest, latest book as we go through

[00:10:21] [SPEAKER_01] this conversation, but just, it sounds like a amazing sort of epiphany that kind of led you to, to where you are and all the, all the work that you're doing. And I just, when we think about human centricity, I mean, these are, these are the kinds of things that, that I think about and that I advocate for, you know, on the show and basically with anyone who will listen, but, but, you know, technology, these transformations can be powered by,

[00:10:52] [SPEAKER_01] technology, but it can't be successful without humans and having the right environment and, and chemistry and culture that allow these things to flourish. Are those fair statements?

[00:11:04] [SPEAKER_00] Absolutely. I, I'm not going to put words in your mouth. It sounds like what you're saying is it's, what is the system versus the people? Is that, is that a fair assumption? Yeah.

[00:11:16] [SPEAKER_01] I mean, I, it's a, I don't want to call organizations, you know, machines necessarily, but there is a, there is a, there are systems that need to be in place so that things all get orchestrated appropriately across, you know, people, data, processes, technology, all these things need to be sort of harmonized in certain ways. And that takes systems.

[00:11:44] [SPEAKER_01] And for those who are building with AI solutions now, or, or even those who are just doing basic automation around, you know, workflows, you know, they appreciate the, you know, the swim lanes and the, and the design, the workforce and workplace design elements that make these things successful and make, make the organization achieve, allow it to achieve the, the true

[00:12:10] [SPEAKER_01] objectives that they're after, as opposed to some of these lower level sort of tactical metrics.

[00:12:17] [SPEAKER_00] Well, and here's the thing. You said you don't want to call it a machine, nor do I. I mean, I, I love environments where there are humans. Deming found though, that, that 94 of variance occurs within the system. It's within the system. And so, and 6% from the individual. So systems can exist, right?

[00:12:42] [SPEAKER_00] Management, you would like, I would like to think mindfully says, this is, this is, these are leadership practices. This is how we make decisions. These are norms, decision access, all that good stuff, right? You know, that, they'd be mindful. That system can change though. And it changes in part because of the relationship that it has with the, with the human.

[00:13:08] [SPEAKER_00] And so for me, the epiphany actually occurred after the 90, after the swing from negative 73 or positive eight. It was actually, it was only when I started digging into the research that it was like, oh my gosh, there's something going on here. I, I mean, I, I knew it was good work. I mean, it was, I mean, I hadn't heard of it before. We created an organizational health index. And it just so happens that McKinsey had one, they taught at Harvard.

[00:13:38] [SPEAKER_00] I mean, so it wasn't anything new. And the, the, the, what we looked at included everything from learning and development to, to trust and the like. I sought to address it from a slightly different perspective. Because frankly, we didn't do much with the organization around compensation. We didn't, we didn't make massive changes, right? So that certainly didn't account, didn't account for the change.

[00:14:06] [SPEAKER_00] I actually, the, the, our COO brought me in and we, we, I worked with a ELT to address trust among the ELT. And, and, and to do so discovered, you know, we don't have any operating norms. How long should it take to respond to somebody's text message? Right. Is, is there a norm for that? No, there's not. What if it's, what if it's really important? There's no norm for that. Right. So we had to address trust there.

[00:14:34] [SPEAKER_00] But what I found, so I found an article that was published in HBR, Harvard Business Review in 2019, they featured a story that was put together by BetterUp. And what BetterUp found was that companies that have belonging outperform in the market, beats their competition by 56%.

[00:15:01] [SPEAKER_00] They have half the attrition, 75% less sick leave and forex the throughput on innovation. And I thought, all right, so we had discussed the role of belonging in this transformation. We, we discussed it, but it wasn't where we focused all of our time. And I, I hate the word unlock. It's such a, such a, it's such a management speak, but it was a, it's something, it was an

[00:15:28] [SPEAKER_00] epiphany for me that what we actually did here was to create an environment where people felt that they had, that they belonged. The problem is I didn't know based on that article and based on other, on other stuff that I read, what is belonging? Now, everybody knows if they, if they have it or they don't. There's a, there's somebody, if, if folks aren't following what Pat Waters has to say,

[00:15:57] [SPEAKER_00] I suggest that you do so. She's been a serial chief HRO and has led massive change companies like Lincoln Service Now. And like, she's been talking about belonging for over a decade. And one of the things she shared with me was that Eric, everybody knows if they belong or not. You could be in Tokyo or you could be, you could be in the Serengeti, right? You know, if you belong or not, but what is that?

[00:16:25] [SPEAKER_00] The other piece is I can't sell this emotion to a CFO. The CFO will never say, yes, I, I buy into that. Whether they, I mean, they might believe that they belong or they don't belong, but in terms of how that connects to the bottom line, they couldn't do, I couldn't make that, that leap. So I sought to define really what is, what are the core components? What makes belonging?

[00:16:53] [SPEAKER_00] What is requisite for a belonging-based environment? And so A, B, are those components directly attributed to causation as opposed to correlation? What I found was that there were five that stood out. Psychological safety, inclusion, support, connection, and purpose.

[00:17:19] [SPEAKER_00] All five, all five of those directly tie to outcomes. Now, when I say that, it wasn't necessarily my research. I didn't do a study on inclusion or a study on connection. There are folks like Amy Edmondson from Harvard, who in her study in 2000, I'm sorry, 1999, really put a flag in the ground saying that psychological safety is absolutely essential

[00:17:49] [SPEAKER_00] to organizational success. It addresses how quickly individuals learn. It addresses the velocity and the frequency that they will report errors, which if you're in healthcare, that's kind of important, right? You know, do they actually speak up? And that has a causal outcome that affects metrics that a chief nursing officer will look at.

[00:18:18] [SPEAKER_00] And each one of the pillars has something similar. Another one that actually caught my attention around psychological safety was a study that found you could actually predict attrition six to eight months in advance if there's low belonging. So going back to the original study by BetterUp, you can cut attrition by 50%

[00:18:43] [SPEAKER_00] by simply fostering an environment that provides those five things, psychological safety, inclusion, support, connection, and purpose. So that for me was the aha. It for me was the system, the environment that you discussed that really impacts the way in which everybody works. And it's predictive of outcomes to come.

[00:19:14] [SPEAKER_01] So that's the message that you take to CFOs, right? That you can tie through causality. You can show that these five elements baked into this framework show can be correlated to actual quantifiable numbers, operational efficiency, revenue growth, those types of things that matter to

[00:19:42] [SPEAKER_01] the money man, money woman.

[00:19:46] [SPEAKER_00] Correct. And absolutely. So when you think about HR's remit, what are we responsible for? There are some that will say, no, I've been hired into environments where I've been responsible for company culture, right? I would argue, no, the company culture actually happens. I can't come in and say, this is now what our culture is. The organization tells you what the culture is, right?

[00:20:15] [SPEAKER_00] And it's frequently been said that it starts at the very top. I also have been responsible for employee engagement. I've had that remit. And again, I can't. So years ago, there have been roles for VP of recruiting and retention, right? So that would be retention. It says nothing about how people are experiencing that. I mean, you can lock somebody, lock the doors and not let people leave.

[00:20:45] [SPEAKER_00] I guess you're retaining them.

[00:20:46] [SPEAKER_01] I hope they don't do that.

[00:20:48] [SPEAKER_00] I hope not. For me, the way I frame it is that culture is an output, is an outcome of those five pillars. That employee engagement is an outcome of those five pillars. I would go so far as to say that, I mean, yes, I have inclusion as one of the core pillars. DEI is an outcome of those five pillars.

[00:21:17] [SPEAKER_00] So whether or not we choose to go down and drive down a DEI path, belonging itself is something that I have framed as infrastructure, belonging infrastructure. Or in some circles, human, what does the human infrastructure look like within the organization? What is the health of the human infrastructure within the organization? And again, that's foundational to culture.

[00:21:46] [SPEAKER_00] That's foundational to engagement. So if you're building your culture on a weak foundation, it's going to be, in essence, a weak culture. You are going to see pretty negative numbers when it comes to employee engagement. So first things first, I just want to clarify that I treat it as foundational. In fact, I shared it with a buddy of mine when I finished my book.

[00:22:14] [SPEAKER_00] I shared it with a buddy of mine who is a retired CFO of a large steel company. And our paths crossed yesteryear back at Goodyear. And his comment was, Eric, this is the closest thing that I've seen HR get to CapEx. So I knew I was onto something when he said that. It's like, all right, if he is saying this, and he is a really tough customer, you know,

[00:22:43] [SPEAKER_00] you better be able to monetize, you better be able to articulate how what you are doing hits the bottom line. And so, yes, it is predictive. The Gallup, there's a study with Harder Schmidt and Hayes in 2002, found that top quartile engagement,

[00:23:03] [SPEAKER_00] so when individuals are engaged, that profitability runs 18 to 23 percent higher than the norm. So that matters. That's something that they care about. Productivity is up 18 to 20 percent. That they care about. So it actually materializes in some other ways.

[00:23:28] [SPEAKER_00] So let's, if we go through each one of the pillars, I already mentioned how psychological safety is the valve that allows for effective, the effective articulation of a concern, of a problem. The, I was in the office of a CFO, and I talk about this in the book, of a CFO, I'm sorry, a CEO of a Fortune 150 company.

[00:23:52] [SPEAKER_00] And he shared with me, Eric, I know that nobody tells me the truth. I knew why they didn't tell him the truth. At a macro level, the concern is he's not hearing about supply chain problems. He's not hearing about delays on a release. He's not hearing about slumping numbers before they, before the earnings call. Right? That, those are all, those are real problems.

[00:24:20] [SPEAKER_00] He's not hearing about union grievances that are, that are metastasizing to be something. He's not aware of those things. But it can actually get far more granular. So you mentioned, we talked about AI earlier. Around AI transformation, the, one of the most important components of an AI rollout,

[00:24:45] [SPEAKER_00] or any transformational rollout, is the degree, the speed at which knowledge travels from one part of the organization to another. Connection is, is what addresses that. Without connection, you don't have velocity of knowledge from this department to that department. If people don't have psychological safety, they are not going to provide the discretionary effort above and beyond in order to make it happen.

[00:25:15] [SPEAKER_00] So many of the, so they are interrelated, but they all have direct ties to outcomes. And, and actually in the book, I actually get into how even the metadata of, that they, that they touch their digital dust, whether it be in finance or sales, you know, in the CRM or in the, in goal planning systems and solutions, work day or whatever, that data directly ties to corporate outcomes as well.

[00:25:43] [SPEAKER_01] Eric, how do you, how do you clients operationalize some of this? Like when, let's say you pitch this to a CFO, they get it, you show them the numbers, they, they see the, the, not just the correlation, they see the causation, they see that these are fundamental to making sure we are literally, and I'm going to,

[00:26:10] [SPEAKER_01] there's about this, say something that made it sound like the organization was a machine again, but, you know, fire, I use car analogies all the time. If they see that in order for the organization to fire on all cylinders, right, then how do they do this? Because I'm just thinking back to, you know, your experience at the, you know, the company going through the turnaround talent marketplace.

[00:26:35] [SPEAKER_01] You've got to get the, the management, you know, that all the people managers to agree that they've got accountability in this and that they need to perhaps change the way that they lead their, their teams. So I'm just wondering about like the, the mechanics of, of some of that in terms of how it gets operationalized.

[00:26:58] [SPEAKER_01] And then I'm glad you brought up AI transformation because I think one of the key points that I bring up a lot is, I guess I put the human centric sort of prefix on AI transformation, because if you think you can be successful in this enormous unprecedented transformation within your organization

[00:27:22] [SPEAKER_01] and across your ecosystem without leaning into all the things that you're advocating and writing, who've had and building, like all bets are off as far as the company's, you know, of long-term competitiveness, right? So I guess I just to flip it back to an actual question for you, like, how does this get operationalized

[00:27:47] [SPEAKER_01] so people wake up and see what it's going to really take to be successful along the way?

[00:27:53] [SPEAKER_00] First things first, you have to know what you're looking at. First things first, you have to know where you are on the map, right? If you're objective, and I would argue that many organizations are going down the AI path for all the wrong reasons. So I would argue that they're already starting off on the wrong foot.

[00:28:17] [SPEAKER_00] In fact, I was just on a call last week, and it was stated that 88% of AI initiatives are not going as planned. Going back decades, research has shown that 70% of massive change initiatives fail. So right now, it's not the 70%. It's worse than that.

[00:28:44] [SPEAKER_00] Worse, we're actually spending incrementally more money on bad outcomes. So going back to your question, where are we going? What is the objective, right? But just as importantly, you need to know where you are today. Where are you starting your journey? And unfortunately, the discussion around what is the role of people in the transformation

[00:29:10] [SPEAKER_00] is something that is only now starting to be talked about. Deloitte found that 93 cents on the dollar are going to AI, to the technology itself. Only 7 cents on the dollar are going to the people. So where I start is, what is the condition? What is the health of that human infrastructure? Let's start to understand where are we today?

[00:29:39] [SPEAKER_00] And can that human infrastructure withstand transformation to begin with, right? And when I say, where are we today? That's not only what does the board see, the board that's allocating these dollars. It's not only what does the CEO see, she's responsible for the allocation of those dollars.

[00:30:04] [SPEAKER_00] Not just the chief HRO, who theoretically is responsible for the impact of the humans in this system. It needs to be down to the, for me, the unit of measure is the frontline manager. Anybody that has the ability to impact the outcome of others is somebody that is where you should be looking.

[00:30:29] [SPEAKER_00] And actually, one of the things that really stood out for me, going back to that transformation, is that so frequently we assign, you know, I might, so I, at Belong HQ, we have the ability to do the measurement. And, and yes, provide the organization a score, but we then drop it, we go all the way down to the frontline manager.

[00:30:52] [SPEAKER_00] There might be a score of, on a scale from one to five, leadership might see a score of four, 3.8, you know, something that would be pretty healthy. Where things start to get interesting, by that I mean where they unravel, is when you get, when you break it down and tear apart the averages and, and look at the frontline managers. Where are the low scores?

[00:31:18] [SPEAKER_00] So it's understanding where is there a material weakness in, in psychological safety. So there was just a research, a report that came out this year. And so this is, it's current that Cyclot, and this is from Reich found this. So they looked at 2,250 consulting employees. The number one predictor of whether or not they use AI, psychological safety.

[00:31:48] [SPEAKER_00] Which I found, I mean, that's, I mean, it's reaffirming for, for my work, but do leaders actually know that? Do leaders that are buying the technology, are they aware of that? Are they creating the conditions for employees to feel like they could say, yo, I've got a problem here. This isn't working. This is hallucinating. This is whatever. There's a challenge with this technology.

[00:32:17] [SPEAKER_00] So, again, to answer your question, first things first is start with understanding the condition of those five pillars within your organization. And it's not enough to say where is it on average. You really need to understand where the weak links are because that is, after all, what defines the strength of the chain.

[00:32:38] [SPEAKER_01] That concept right there where you've got to sort of look in each, don't take these aggregate views, don't average it out. I see the same thing happening with AI readiness, right? Like people just take this enterprise level view. They take a high level survey. How are we doing? They look at usage.

[00:33:04] [SPEAKER_01] They look at, you know, they grab metrics of things that are easy to measure and then they roll it up and then it almost becomes, you know, meaningless. Right. And that's why when I talk about this, even the concept of AIQ, it's, look, you can have, as you look across, you know, mindsets and skills and tools and things like that, you know, you might have an individual one, but you may also have a team AIQ and then departmental AIQ.

[00:33:33] [SPEAKER_01] I mean, you've got to know where everyone is starting from so that you can give them the proper sort of guidance and nudges and things like that to basically level up all the people that might be either falling behind for whatever reason or maybe, you know, AI adoption hasn't picked up in a particular domain yet because it could be something risky in terms of, you know,

[00:34:00] [SPEAKER_01] personally identifiable information or regulated industries and those types of things. But as you're talking, I just, I feel like I have as much emphasis as I put on like the human centric elements of AI readiness. Everything you're talking about makes me think that I have even underweighted some of the human centricity elements in this because, again, if people aren't ready for this transformation,

[00:34:28] [SPEAKER_01] if they're not ready to think about how they can redesign their own work, potentially disrupting to some degree their role as they know it. If they're not willing to do some of those things, then you're not going to get a fully engaged, a fully connected, you know, I guess, you know, human contributing to the greater good of the organization.

[00:34:54] [SPEAKER_01] So I just see a lot of parallels and I see a lot of, you know, overlap with what I'm seeing in terms of how people are really preparing for this, you know, impending transformation.

[00:35:07] [SPEAKER_00] In talking with the folks at Deloitte, one of the things that they observed was that this actually helps predict the, this conveys the readiness for transformation. Is the organization prepared to go down this path? I would actually argue, though, that yes, AI transformation could be existential for many of us.

[00:35:30] [SPEAKER_00] It is, though, simply change management on steroids, right? It is change. And we frequently change how we going from learning how to go from training wheels to taking off the training wheels. There's a change, right? And guess what that results in? A fall or two, usually. And it's the preparedness. Are you willing to do that? Are you willing to take off those training wheels?

[00:36:00] [SPEAKER_00] This AI transformation is a change management leader's dream or nightmare. It's one or the other. But as I said earlier, when evaluating the map, where are we going? And hopefully that's clear. As opposed to where are we today? The, this is to understand the strength of the human infrastructure is essential before you begin that journey.

[00:36:30] [SPEAKER_00] So it's important to start. There's a layer that, that we're frequently we're missing in change management. And that's the understanding of where are we today? There's with AI transformation. What's really unique about it is there's a deliver, hopefully a deliberative process where leaders decide what work is innately appropriate for technology.

[00:36:57] [SPEAKER_00] Is it technology driven? Is it augmented? Is it assisted? Where the human then is, is the primary driver if it's assisted. There will come a time when virtually all work is at the very least going to be AI assisted. Do we understand where that individual is? Do we understand where the manager is in leading that team through that change?

[00:37:25] [SPEAKER_00] The cool thing is, even if you have a low score, the score might suggest, hey, you need to hold off for now, or you need to do a pilot in this area where it's healthier, where, where, where those pillars are stronger. But even in the weakest of areas, improvement in those, in those weak areas don't cost a lot of money. What it costs is perhaps ego.

[00:37:53] [SPEAKER_00] What it costs is commitment and the actual, the currency of commitment that, yes, in fact, I'm going to follow through on this. That's the cost. Because when it comes to inclusion, are you actually getting the best ideas from your team? Maybe you have to solicit them. Maybe you have to ask them. Maybe they won't tell you because they don't feel psychologically safe to tell you.

[00:38:22] [SPEAKER_00] So we need to address that. Do they have the connections in the organization? When we seek to onboard people, the pre-boarding process is one of the most important periods to garner trust and build and strengthen the human infrastructure as people are joining the company. It's crazy to see how fast that dies.

[00:38:47] [SPEAKER_00] When somebody comes in the door, are we introducing them to other individuals, not only within a team, but outside in other teams to foster that connection? Because it's when they have that connection that they are then going to reach, they have other individuals they can reach out to, which is then going to improve inclusion. It's then going to, so it is a flywheel that works.

[00:39:13] [SPEAKER_00] If we know where that manager is, whether it be positive or negative, we know what they could do to improve the conditions for their team. We know what they can do to improve then the outcomes of their team. And the material lift is not huge. In some cases, it's being less of a schmuck. I mean, that's, but it's more than that.

[00:39:39] [SPEAKER_00] It's how does that manager enable their team to feel that they have those five conditions? Because it is those five that are going to directly drive not only their KPIs, what they're going to be measured on, and the OKRs, and therefore the success of the business.

[00:39:59] [SPEAKER_00] It is by improving those conditions that you're going to start to see people more prepared to actually use new technology, to talk about it, to test it, to explore its capabilities, and to learn what they can do with it. One of the biggest indicators on learning is psychological safety. Why?

[00:40:27] [SPEAKER_00] Because when you feel that you have room to fail and learn, you're going to learn. If you don't feel like you can fail, you're never going to experiment. You're never going to stretch. You're never going to test new ideas. And that's something that Amy Edmondson has written an awful lot about. And if you haven't checked her workout, I encourage you to do so. But, again, this is all on the shoulders of a manager.

[00:40:58] [SPEAKER_00] But it's not a heavy lift for them.

[00:41:00] [SPEAKER_01] I mean, even the managers need the psychological safety, like you said, to sort of report, right? Sure.

[00:41:05] [SPEAKER_00] Well, if I say that CEO that I told you about that said, I know that people aren't telling me, this is a CEO of a company. So who are his direct reports? CFO, right? Chief Revenue Officer. I mean, so these are the top C-suite in the company. And they didn't feel that they had the psychological safety.

[00:41:26] [SPEAKER_01] Yeah, no, I've heard, I've listened to very senior people at IBM. Like, I'm talking someone who reported to the board and the CEO, I suppose. But very high-level person who basically admitted to a room full of C-suite executives that he's had to declare amnesty before, just so he could get to the truth. Right? Right?

[00:41:53] [SPEAKER_01] Like, no, I just need to know where we are. Right? And I forget if it was, I don't think it was Watson. He was referring to Watson. I think it was something big before that. I forget if it was like, you know, Deep Blue or the chess playing computer or something else. But there was something major that we had committed to publicly. And he just knew he wasn't getting the truth. Right? And so, so that was the only way to get it. Right?

[00:42:21] [SPEAKER_01] Short of setting up, you know, I would have suggested a prediction market or something so people could anonymously say, you know, give their own odds of whether something was going to happen or not on time. But nonetheless, there was no psychological safety because everyone, the expectations were that, you know, sort of failure is not an option, that failure was not a learning opportunity. Right? Which I think is one of the big ones now.

[00:42:50] [SPEAKER_01] And people are justifiably, you know, nervous and anxious about what's going on right now. What do I do? What do I say? Who can I say it to? How do I use AI? Is this an appropriate use? Is some AI detector going to recognize that three words in this, you know, paragraph were copied and pasted from an AI? Does that mean, does that make me a cheat?

[00:43:15] [SPEAKER_01] Does that mean the core ideas and foundational storytelling are not human or not mind? That's not fair. Right? So people are, it's like an obstacle course. Right? People are just dodging things left and right.

[00:43:31] [SPEAKER_01] But I think your point, Eric, well, one of your points is like, you've got to lay this groundwork yesterday so that you know that everyone is moving forward in a constructive, collaborative, you know, direction that's going to move the needle.

[00:43:49] [SPEAKER_01] I mean, I'm just, I'm getting a little tired of all these really smart people showing the impact, whether it's our friends in town intelligence and people analytics, you know, workforce analytics, bringing the data and showing you.

[00:44:06] [SPEAKER_01] Or folks like yourself who are basically converting what many think of as qualitative, you know, fluffier things and they're, you're converting it into numbers that people can relate to. And yet we're still, we still have majority of companies that can't figure out how to get out of their own way and make a transformation, a successful transformation.

[00:44:30] [SPEAKER_01] So it's just, I'm, I'm venting a little bit, but it's just, I mean, I, you and I have talked before about some of these things and it's just, I don't know, it's just some observations that like, I don't know what it's going to take to break through to most organizations about how they need to change what they do.

[00:44:48] [SPEAKER_00] The second chapter, so in my book, The 56% Solution, the second chapter is written for the CFO. It's written with the CFO in mind. And the thought, the thought being is chapter one, this is what I'm going to tell you about. Chapter two is, and this is why it matters. So my framing was purely from a finance, was from a financial perspective. I do get into this.

[00:45:17] [SPEAKER_00] So the third chapter, I do address that the human side of why it's important. So evolutionary biology, the neuroscience, the psychology behind why these five things matter, why belonging actually matters to fulfill what I talked about in the second chapter, to, to actually achieve those outcomes. So what is it going to take? There are going to be, just like in the book, Crossing the Chasm.

[00:45:47] [SPEAKER_00] Not every organization is going to sign up day one. You are going to indeed have laggards. And that's okay. We have, I'm not, I'm not going to get all Darwinian, but organizations that have the ability to adapt are the ones who are most likely to succeed.

[00:46:05] [SPEAKER_00] The, with the 56%, saying to be able to articulate organizations that have these five things outperform their competition by 56%, believe me or not, that is reality. And you could choose, you could choose to embrace that or not. I'm not seeking to improve every single company on the planet.

[00:46:35] [SPEAKER_00] My hope is, though, to improve the human infrastructure for a sufficient number of organizations to actually impact the ways in which humans work. That's, that ultimately is my goal. Because when they actually are working in an environment that provides those five conditions, the company is going to do a whole lot better.

[00:47:04] [SPEAKER_00] Significantly better. 56% better. And that same can be applied to AI transformation. If an organization chooses to invest a million dollars, a billion dollars, whatever the amount is, on this transformational process, on technology and on change, wouldn't the board of directors be interested in the likelihood of success?

[00:47:31] [SPEAKER_00] Wouldn't the, wouldn't the CEO be interested in on really where are we going to begin this journey? That's what I believe we can do.

[00:47:41] [SPEAKER_01] I agree. And I, I think it coincides with a lot of recent, you know, research. There was just a McKinsey report on the state of, state of AI for, for 2026. I think it came out in the last couple of weeks. And they talked about how to, you know, appropriately, you know, fuel some of this, this growth through AI and that your AI investments. And some of your AI investments need to go to people, you know, that Deloitte status, scary, right?

[00:48:10] [SPEAKER_01] That 93% of your AI investment go to the technology itself. That's, that's just, that's hard to believe. And, well, it's, it's not given where we are, but it's, I guess I'm, I'll stay optimistic that that starts to shift very quickly.

[00:48:32] [SPEAKER_01] And I, and I think people are starting to recognize that, like getting rid of, you know, these, these tactical moves to, to get rid of the very people who could sustain your long-term, you know, growth to not upskill them, to not re take some of that savings you may get from, you know, efficiency gains and reinvest that in, in people, not just technology.

[00:48:55] [SPEAKER_01] I think there's a lot that sort of indicates these human-centric sort of investments and leaning into the human side of these transformations is what's going to yield the greatest, you know, dividends.

[00:49:11] [SPEAKER_00] Well, yeah, I mean, I, I would also suggest that if an organization truly is, has a strong human infrastructure, the way they go about headcount planning is radically different. Right? Because now they're getting the output, an ups and outsized output from a, from a smaller team.

[00:49:34] [SPEAKER_00] They are, and, and they're actually providing the discretionary effort to go above and beyond. Right? So how you go about defining the number of the needed heads to do certain amount of work, that changes. The way in which information travels, changes. Innovation, like I said, the, the, the, the throughput on innovation goes up.

[00:50:01] [SPEAKER_00] So you can rethink about how you build out your development organization. It also, though, changes, it is as material as M&A. So with M&A, you, when a, when a, when a PE firm buys an organization, they look at the first 100 days to real, to be, to evaluate the organization and identify where is there a potential uplift in value and where's their drag?

[00:50:31] [SPEAKER_00] Where's their drag in the organization? This actually shows you where the drag is. This shows you with those low numbers, you'll see where that invisible drag is before it actually hits the financials. So if you were going, if you were the acquiring organization, it actually gives you a blueprint of where to go. It gives you a blueprint of what's working. I mean, you're going to see that in, in the financials.

[00:50:59] [SPEAKER_00] You're going to see that in output from your HCM, from, from your, from ERPs. You'll see that. But this provides the layer beneath that. This is what feeds those numbers. So an organization that actually is driving down this path and reinforcing the, the strength of the human infrastructure will change how they do headcount planning.

[00:51:26] [SPEAKER_00] They will change how they engage in M&A activity above and beyond just simply how do they operate on a daily basis?

[00:51:36] [SPEAKER_01] Yeah. I mean, I think you're, well, you're, you're sort of teeing up some topics that could lead to a whole nother hour of conversation, Eric, but, but, you know, you teed up innovation. Like how are you fueling this innovation, you know, pipeline, which should be one of the goals of shifting from automation to, to augmentation, right? Like how do you give people more capacity? How do you augment their thinking? How do you provide decision support? Those kinds of things.

[00:52:03] [SPEAKER_01] And then the other thing you mentioned was about like how knowledge travels around, around an organization, right? And how that feeds into connection or, or can be derived from the sort of connectedness of the organization, which feeds into some of the things that, I mean, I worked at IBM on, you know, 15 years ago around like, you know, doing network analysis, organizational network analysis, social network analysis.

[00:52:29] [SPEAKER_01] And so I think all of those sort of feed into how things are actually happening, how decisions are actually made, how knowledge is actually shared and discovered across an organization. So I think those are all, you know, you know, you know, multiple elements of, of your framework. And yeah, I mean, there's just, you know, there's so much value in, you know, putting all these pieces together.

[00:52:57] [SPEAKER_01] You just have to have, you know, the framework and the metrics to, you know, execute against that and then make sure everyone's aligned and, and buys into that. Because otherwise, you know, why, why did you join? Why are you here?

[00:53:13] [SPEAKER_00] The cool thing is, is to improve those metrics doesn't require a lot. It requires being a better person.

[00:53:22] [SPEAKER_01] I want to be respectful of your time. Like any, any final thoughts for, for the CHROs and talent leaders or CFOs out there as we wrap up? I will definitely put links to some of your books and, and your website in the, in the show notes, but just any closing thoughts?

[00:53:39] [SPEAKER_00] Yeah, I think first things first, seek to understand where it is that you stand today. If you're going to go down a path of change, understand change from what, not just to what. And in doing so, break apart the company averages. The devil's in the details, right? The, the, the risk for transformation resides way beneath the averages.

[00:54:09] [SPEAKER_00] It's, so I would encourage that a chief HRO identify the gaps between the leaders and, and the, the, one of the outliers positively and negatively and, and address what can be done with the negative outliers. There's tremendous opportunity there. And the work that needs to go into that simply is the work of a human.

[00:54:37] [SPEAKER_00] But it's enabling that frontline manager to, let's go back. Okay.

[00:54:45] Okay.

[00:54:46] [SPEAKER_00] So where, great question. Where to begin? First things first, as we talked about earlier, know where you are on the map. It's one thing to know where you're going to. It's another thing to know where you're starting from. And it's where you're starting from. What are you changing from? That gap of visibility into how, again, cut that again. Great question.

[00:55:11] [SPEAKER_00] I think it's, it's imperative that the chief HRO in looking at the map of where are we going to, it's just as important to understand what are we going from. And it's essential that the chief HRO look at not just the averages across the board in the organization, but break that average apart and seek out the, the outliers.

[00:55:40] [SPEAKER_00] Whether it be positively, those teams that are delivering not only on results, but the state of the human condition, the human infrastructure, and those teams that are failing, that are, whose output is likely not adding up to where it should be. But that's the result of a weak human infrastructure.

[00:56:07] [SPEAKER_00] To improve that weak human infrastructure doesn't require a heroic lift. It requires being more human. It requires five things. Psychological safety, inclusion, support, connection, and purpose. And that manager is in a unique position to improve all five for that team. I would suggest that that's where you begin.

[00:56:33] [SPEAKER_00] Again, if I was chief HRO, I would seek to understand where am I today.

[00:56:39] [SPEAKER_01] Well said. Excellent. We're going to leave it there. Eric, thank you so much for joining me for another insightful conversation. Always great to talk to you. And thank you everyone for joining. We appreciate it. We'll see you next time.

[00:56:53] Thank you. Thank you.