The State of HCM Technology with Special Guest John Kostoulas

[00:00:08] [SPEAKER_01] Welcome everyone to a very special episode of the HR & Payroll 2.0 podcast. I'm Pete Tiliakis and it's just me this week again, back with another one of my fly on the wall series if you will, where you have the opportunity to listen in on one of my executive conversations from around the market. And this week I'm so excited to have my good friend, I call him my Greek cousin, Mr. John Bernatovicz.

[00:00:30] [SPEAKER_01] He is the current VP of market position and strategy at Dayforce, a former VP and HCM technology analyst at Gartner. Very famous for his work there and research. And yeah, I just really wanted to catch up with John. We've been trying to get together since Dayforce Discover and really wanted to just share his knowledge with our audience and talk a little bit about what's going on with HCM, what's going on with AI and HCM and all the things that everybody is sort of focused on right now in the marketplace in terms of where things are headed.

[00:01:00] [SPEAKER_01] And transformation and how to get on track if you're a little bit behind. So you can also catch episodes that Julie and I did recently, a news episode where she talked about the Dayforce SKO, the sales kickoff. And we did the fall coverage of the Dayforce Discover event where you can find out about all of the latest products and what's going on there. I did an article over at payrollinfluences.com where you can read more of that. So yeah, just a lot going on at Dayforce.

[00:01:25] [SPEAKER_01] And I love that John is now on the vendor side and not competing with us on the analyst side. But yeah, again, much respect to John. Really appreciate him coming on and sharing with us. So I hope you'll enjoy this episode. And without further delay, Mr. John Bernatovicz, you're a longtime industry analyst with Gartner. We were competitors, I guess, technically at one point. I always see you guys all as my peers. Have a lot of respect for you and your work.

[00:01:50] [SPEAKER_01] But man, what's it like making that move from analyst to now vendor side, right? Vendor executive.

[00:01:58] [SPEAKER_02] Well, of course, it is different and it isn't. So let me explain. So first of all, it is definitely different in the sense that, you know, there is a lot more execution happening on a day-to-day basis.

[00:02:14] [SPEAKER_02] A lot involved in how we execute on our marketing elements, on our product elements, on our sales, and how all this market insight that we collect by speaking to analysts or by doing research or by looking at different data eventually helps everybody make better decisions.

[00:02:38] [SPEAKER_02] And there comes the part that isn't different, meaning that I'm still the kind of the contrarian critical spirit when we're looking at data, when we have conversations, when I review materials. And also, you know, the other thing that isn't very different is when I read a lot, I keep reading a lot about what's going on.

[00:03:05] [SPEAKER_02] And then I try to make the same connection the analysts would make. Okay, there are two different points. Like how, what is the story that they say? Right. So I'm still different, but at the same time, the analyst doesn't, doesn't live out of me completely.

[00:03:27] [SPEAKER_01] Yeah, no, I love that, man. I admired the work that you did. Obviously, well-documented across the market as an industry analyst and vice president over at Gartner. And, you know, I made a little jump right when I went from, you know, Nelson Hall over to the, you know, being an independent analyst, I stopped off as the head of product strategy for Alight. And man, it was very different, right? But I learned so much. Just all of that go-to-market, you know, really rounded it out for me. So, yeah, I love seeing you on the vendor side, man.

[00:03:55] [SPEAKER_01] And I think it's, I know it's a really a huge ad for Dayforce. Thank you. But man, I want to ask you real quick. Like, one of the things we always ask everybody on this show is like, how in the world did you become, how did you get into HCM? Like, how did you become an analyst? How did you get to where you are right now?

[00:04:10] [SPEAKER_02] Yeah, that's a great question. And that, of course, will get us back to the ISH or close to that. So long story short, I'm an engineer by train. So I've started engineering in Greece. This is where I started having a sense of what HR is. I had a great professor of management who told me, look, this is coming, John.

[00:04:39] [SPEAKER_02] You better put yourself on that bandwagon. Then I went to study business in Canada. So I'm coming back in the year 2000 to Greece and I'm trying to find my first job. And this is the advice I often give to young folks that might be overthinking what I'm going to do. Like, and let me ask 200 people what I should be doing. Like, many of these decisions are spontaneous.

[00:05:05] [SPEAKER_02] So I'm back in Greece and still just another proof of how old that story is. Most of the job ads are on the newspaper. So I'm looking into one of those that says, look, there is a need for somebody who is an engineer with an MBA that speaks English and German. And that was the part that I knew I have to work as an ERP consultant. No idea what that is.

[00:05:35] [SPEAKER_02] And I say, well, I have some chances, so let's go. So I go to the first interview and then they asked me what exact aspect of ERP that I didn't know what it was you want to deal with. I said, well, I'm an engineer, so probably supply chain, but I have a genuine interest in HR. They said, yeah, the right place because not so many people are actually interested in HR. So almost no one. That would be excellent.

[00:06:05] [SPEAKER_02] And then, so that got me in. And after 25 years, what keeps me here is exactly people are the most important lever for success in teams, in workplaces, in societies as a whole. And that in the beginning was quite underestimated, meaning in different meetings, you know, when you do implementation,

[00:06:30] [SPEAKER_02] the HR module was the last five minutes of the whole meeting, if we had any time. So the first few years, I just stayed to see this becoming 10 minutes at the end. But over time, the space grew. I met some wonderful people, you know, like many, many of our common friends in the industry. So that keeps me around here for 25 years.

[00:06:55] [SPEAKER_01] Yeah. Yeah. Just after all that time, John, what gets you excited now, man?

[00:06:58] [SPEAKER_02] Yeah. Well, one thing that I believe has evolved a lot over the years is exactly what is the role of technology when it comes to success of human capital management. So, of course, we have both lived the times that technology became more pervasive. In the beginning, it was more administrative. It was more in the hands of the HR teams.

[00:07:26] [SPEAKER_02] Then we started seeing all these self-service parts. Yeah. And then everybody, like employees, managers, non-employees are using technology. And now we are moving into AI and Agendic and all this. So that space keeps evolving and growing. The other thing that I've seen over the years, and that makes me even more excited,

[00:07:50] [SPEAKER_02] is like the combination of what technology does with what people's skills do and how these two come together and produce outcomes. So I've seen many organizations, and I've been a practitioner in places like Coca-Cola and Vodafone to see this happening and see how well-implemented technology together with people enablement can really move the needle.

[00:08:19] [SPEAKER_02] And this pretty much means that people are developed and engaged. And then these same people will give all this engagement back in multiples as business owners of everyday things, even if they are the front line.

[00:08:36] [SPEAKER_01] Absolutely. I think I'm a practitioner too, right? Disney, IBM and others later. I get really excited about the orchestration element of this. Like the idea that, yeah, it's cool to have an agent for this, an agent for that. The idea that they can eventually maybe really work together. I know it's becoming a little bit of a marketing kind of buzzword now, orchestration. But I really, that's the thing my practitioner brain really craves is that opportunity to start stringing things together and making things happen in a very harmonious way for HR and payroll.

[00:09:06] [SPEAKER_01] I complain about leave administration, John, about how in a lot of big enterprises, at least back in my day, if I'll say it, it's like a scavenger hunt because not everything was in the HR system. It was benefits. It was facilities and other things. And I always just would watch these often mothers going out on FMLA, just going through this scavenger hunt of frustration, you know? And I thought, and you think now it's like, why can't all of that work together? You know what I mean? Make it helpful. Make it an experience for her or him, you know? So a lot of promise there, man.

[00:09:35] [SPEAKER_02] I would say one of the things that I saw being understood over the years is that shift from let's go and do tasks. So in the HR department, for example, there was a lot of tasks.

[00:09:49] [SPEAKER_02] So onboarding is a list of a number of things from getting basic data right to get some proper training and then getting the person to get their laptop or computer or other supplies or their uniform all the way to getting paid and then to do the surveys and so on. So all this in the earlier days were tasks in the list.

[00:10:13] [SPEAKER_02] But for the person becoming onboarded, they are eventually a journey that has some sentiment at the end. So they love it or they hate it to be here in the first 80 days. They don't always remember which task of all those in the list got them frustrated. They definitely remember that they are frustrated and they might regret it.

[00:10:38] [SPEAKER_02] Or on the other side, a properly orchestrated journey get them really excited to join the organization. So I think that more and more gets understood. And because obviously organizations, and we will get to that, have many, many systems. Yeah, agreed.

[00:10:58] [SPEAKER_02] This is critical, like to move from, think of an orchestra, from noise to music with the exact same number of musicians.

[00:11:10] [SPEAKER_01] Very well said, man. I love that. I love that. So, John, the other day you had a really good post with the glass of water leaking. I'm going to share the link to that. But I think you talked in that about the sort of unified versus single platform. Talk about the difference there because I think there is a lot of like confusion. And I want to talk about this later because integrations is part of this that we see in my research with the payroll profession confidence index. But yeah, I want to talk about that article a little bit, man. Just your point of view on that.

[00:11:37] [SPEAKER_02] Yes. Yes. And thanks for bringing up this question because it is a real question. So that the reason why we wanted to clarify this is exactly that there is a lot of noise out there. So let's start one step back. Many organizations we are seeing, they feel the need to simplify their landscape.

[00:12:01] [SPEAKER_02] I mean, in my own experience, when I was a practitioner and I had to count my systems just in HR in a large multinational, they were in the hundreds. And there are some reports, I think Okta and a few others are doing this from time to time that say, what is the average number of systems in an organization? And they also count to hundreds.

[00:12:25] [SPEAKER_02] Today, with the needs we have for agility, for velocity and so on, I think it's humanly impossible to be able to move fast if just for HR, we have hundreds or more systems. So that is one thing. And we see more organizations who say, I need to simplify. So they say, I had the so-called best of breed and now I want to simplify.

[00:12:51] [SPEAKER_02] So then the question is, what exact options you get? So do you really get a platform that is really one data model, one experience, one area to get insights that can make you reap the benefits of simplification?

[00:13:12] [SPEAKER_02] Versus having the so-called unified option, which is, again, multiple databases, multiple applications, many data flows that might or might not work, still carry the risk of not working. And then eventually taking as much time as it took before to get into insights.

[00:13:35] [SPEAKER_02] And then asking the question, because this question is critical to be able to bring back the value your stakeholders expect from simplification. So it was more like, obviously, Dayforce is built as a single platform, is designed and built as a single platform.

[00:13:52] [SPEAKER_02] But the point was more, if you know that you have this problem, too many systems, too much fragmentation, and you want to simplify how you can ask the right questions in order to get the right kind of starting point to bring the value back. Or otherwise, it's going to essentially to backfire at the point.

[00:14:20] [SPEAKER_01] Yeah, absolutely. Absolutely. What's kind of the healthy amount of specialized need systems that you should be integrating? I mean, I don't know that there's a magic number, but just think along that lines, like how do leaders measure this and when to consolidate and whether or not there's ROI and all that?

[00:14:35] [SPEAKER_02] I think one of the biggest gaps that I've seen as a practitioner, as an analyst now, also in my vendor seat, is exactly how much outcomes orientation there is before going to buy systems.

[00:14:52] [SPEAKER_02] So I believe we still have this prevailing task-based or process-based type of thinking that eventually gets people to solve one problem at a time and then go and buy whoever can solve that problem at a time. And then if you add everything up, then it becomes all this fragmented landscape. So clarity of outcomes to me is important.

[00:15:20] [SPEAKER_02] I know it might be obvious, it might be cliche, but this is still something that many organizations have been cropped. So working backwards from outcomes to what process should be doing, what users should be doing, what systems should be doing, is one step to understand like how many vendors you really need here. And then the other part we discussed already is experiences and experiences are related to the company.

[00:15:49] [SPEAKER_02] So two companies, even if they are the same industry, they might not have the same people. I remember once in my analyst days, I used to assume that every retail organization, they had young folks who can use mobile like in a second and all good.

[00:16:06] [SPEAKER_02] And I was once with a client who actually told me, wait a minute, John, in our organization, we have many people of like older generations and it is not easy to bring them to mobile as any other organization. So that was a great lesson to not take two organizations in the same industry as the same.

[00:16:31] [SPEAKER_01] Yeah, absolutely.

[00:16:32] [SPEAKER_02] And then when these two are resolved, then vendors come in and they can play to that outcome. So it's more like how the janitor in NASA gets somebody on the moon to the moon as opposed to just being the janitor. So instead of just providing a list of features, which is the same for everybody, then they contribute to an outcome.

[00:17:00] [SPEAKER_02] And then they're also playing nice with other vendors because there is no one size fits all application that they have everything. Like even in places where we say we come in to help consolidate, it's not that we will take over everything and there is no other application. Yeah.

[00:17:17] [SPEAKER_02] And even outside of HR, then we also work together with other applications because their users will work together in order to do their business tasks, their finance operations, you name it. So all these eventually taken into account will say, okay, that's the amount of consolidation simplification you can afford.

[00:17:42] [SPEAKER_02] Or this is the number of sprawl that is healthy, the number of sprawl that is sprawl or it's healthy.

[00:17:49] [SPEAKER_01] Yeah. Yeah. It makes sense at this time. And you see that a lot with payroll, right? I mean, global payroll, for example, is very difficult to transform all at one time for many reasons, especially in organizations where there's a lot of M&A, right? You're stuck with contracts for a period of time or there's an exit period of time that you have to move things or not move things.

[00:18:07] [SPEAKER_01] And so, yeah, I mean, I think there's, I think the beauty of that integration and having that command center in your HCM to be able to confidently build off of data and all of that is really, really important for integrating those pieces and parts that are necessary at the time they are or when they are. So, John, AI, let's talk AI for a minute, man. There's no way we can get away with not talking that. I'm excited for it again as a practitioner. We kind of touched on that. But, like, there's a lot of, like, you know, with everything in the market, there's not everything's equal.

[00:18:37] [SPEAKER_01] There's good and bad. I think there's a lot of things getting bolted on. But, like, what do you think separates, like, AI that's generally improving decision making and outcomes versus that that's just kind of, you know, maybe, again, just bolted on and sort of amplifying bad habits?

[00:18:51] [SPEAKER_02] I would say, first of all, it's great that we gradually move to this conversation because I remember even this time last year, we were having these debates with, also with analysts across evaluations and others.

[00:19:10] [SPEAKER_02] And it wasn't clear, like, how we cut through that noise of, like, and who has gotten more agents and who has gotten more features and how, like, what is the volume of things as opposed to the value of things? Quality over quantity. So, bring AI value in mainstream thinking is definitely one big plus this year versus last.

[00:19:37] [SPEAKER_02] Now, I would say, at the end of the day, AI is a technology. And it has use cases. And these use cases need to have a so what. So, I don't think it's very different from the classic, like, transformation playbook where you have, like, people, you have processes, you have technology. And then they need to work as a triangle.

[00:20:06] [SPEAKER_02] If they don't work as a triangle, then you don't get any value. If one is static and the other are moving, but you only take one thing into account.

[00:20:14] [SPEAKER_03] Yeah.

[00:20:14] [SPEAKER_02] I was yesterday at an event, mostly with IT folks. And I sense that's exactly the problem out there. It's like, if I take AI as the single value trigger, then how do I tell my senior stakeholders what exactly is the AI value? And this is because you don't take into account the other two parts.

[00:20:43] [SPEAKER_02] Like, where are my people? What are their skills? What is their engagement? Also, what happens with my processes? Because AI is going to do things working together with people in a different way than before. So, if you just try to automate a process which was done one way, but just, like, without changing it, then obviously you will not get the most of value. So, I think these are important elements to bring value.

[00:21:13] [SPEAKER_02] The other piece which is important is trust. Trust comes from data. Huge for payroll and HR, man. Huge. Explainability, security, privacy, and so on. See what happens in recruiting now. The pendulum has wonk from let all flowers bloom about AI support and recruiting.

[00:21:35] [SPEAKER_02] You see how many vendors had grown out of this premise in the last five, six years to because of all the lawsuits that happen at the moment. And gaps in terms of ethics and governance and so on. Like, should we use AI at all? This is something that I hear very often is being the sentiment. Like, should we use AI at all? Yeah, yeah. And we did on that, we did some research last year.

[00:22:04] [SPEAKER_02] And we saw that 60% of respondents said that, yes, I can see it. AI presents ethical challenge at work. But when we asked their organizations who is on the hook for that, then three quarters said no one.

[00:22:22] [SPEAKER_01] Yeah, wow. You mean, so no one is on the hook for the AI strategy?

[00:22:26] [SPEAKER_02] No one is on the hook for AI ethics and trust. So, obviously, you can understand that trust becomes a big barrier to adoption, which is the third level of tool eventually.

[00:22:38] [SPEAKER_01] Yeah, yeah. You know, I'm finding that more often. I've talked about this. I actually talked about it about Dayforce Discover. I actually, and I'm hearing this probably, you know, I don't know, anecdotally, maybe one in five customer types that I speak to across the marketplace, whether it's payroll, whether it's HR, benefits, any of the towers of HR, is that many of these organizations are doing what many other organizations are. And they're experimenting with AI, but they're not doing it at a governance level. They're not doing it at an enterprise level.

[00:23:07] [SPEAKER_01] It's very much a bottoms up, you know, experimentation with Pi Copilot or experimentation with ChatGPT. And I asked one of your customers exactly there. I said, hey, do you have AI in your organization at the, you know, at the upper levels being sort of pushed downward as a program? And he said, no, not really. There's some incremental use happening throughout the organization. And I said, do you have AI in HR? And he said, yeah. And I said, why do you have it in HR and not in anywhere else? He said, because of Dayforce.

[00:23:35] [SPEAKER_01] I said, so you're using AI in your models, right? In your modules. And he explained which, where, and which. And so I think what I'm saying in that is, is that, like, look, I think we all know that the business is not going to come to payroll or HR with a wad of cash and say, hey, go do AI. You know what I mean? The way that HR and payroll and the back office is largely going to get AI in their hands is by way of their commercial investment.

[00:24:00] [SPEAKER_01] And that's where that, I think that trust is really essential because that audience isn't very trustful of things as it is. They have to guard, right, and de-risk. And yet, they also have to trust and partner with their commercial investments. And I think that puts a lot of responsibility on the day forces of the world and the others out there proliferating these things to really empower these people to be successful with them.

[00:24:21] [SPEAKER_01] So I think in a lot of ways, HR might be the tip of the spear, not just for their responsibility of readying the organization with literacy and capability, but just the fact that they might be one of the few that are actually applying it at scale across their processes.

[00:24:35] [SPEAKER_02] And to your point, I would say exactly. We are at the moment now that we had two years of experimentation. So many organizations said, look, we don't exactly know how all this works, so let's make sure people understand the basics. And then they will go and do things. And let's see what they come back with.

[00:25:01] [SPEAKER_02] And now I think the pendulum swung a bit to say, okay, now people came back. But like venture capital, for example, firm, like there are 10 investments, nine are going to fail. One is going to make the money for all 10 of them. So which one is it? Now we have to choose, we have to prioritize, and we need to help scale. So obviously scalability is what comes into the picture now.

[00:25:31] [SPEAKER_02] And this is then raises all these questions about, and what is the data underneath? Now, if I scale it, what happens with security? What happens with privacy? And so on and so forth. So when it comes to scalability as a determinant of value, then this is exactly like the way we believe on the value of AI and working backwards to functionality,

[00:25:58] [SPEAKER_02] as opposed to just working on functionality, and then finding out that we are just like dealing with bits and bobs without the clear problem behind them. Yeah, yeah. Yeah.

[00:26:12] [SPEAKER_01] John, I know you've talked about that as well, about sort of platform attributes mattering more than individual features, right? If you were giving advice to an enterprise or a board about that, you know, what are kind of the architectural sort of characteristics in HCM that you think are going to matter the most over the next five years that you'd have people focused on?

[00:26:33] [SPEAKER_02] Yeah. Again, we live in uncertain times. What I think it's Peter Hinson who says, it's the never normal. So these are very different times. It's a perfect analogy. From the times we started like doing transformation projects and say, never mind. They will take two, five, 10 years. And at some point they will arrive somewhere.

[00:26:55] [SPEAKER_02] Now, all this will change five times in 10 years until, and we will arrive in multiple places. So that is the business reality. So now the starting point is not so much architectural. I would say it's, again, clarity over outcomes and cascading this clarity across functions. Meaning that, yes, these outcomes can change. Of course, we live in those times. But these clarity should live on.

[00:27:25] [SPEAKER_02] If it doesn't happen, then functions will have their own default objectives. And this creates classes. Particularly if they have to work together. So it's like, you know, all this dissonance reminds me of, you know, you have, for example, you have a snapshot of me taken 10 years ago. And you're trying to recognize me when we are at a blind date in the corridor. It will not be. Yeah.

[00:27:52] [SPEAKER_02] Because what you are doing now is based on something that was decided quite a lot in the past. So how they can make this happen? Perhaps one way is to have a big picture team. Like organizations have functions, they have functional silos. But a big picture team combining business and technology architecture that has empowerment,

[00:28:18] [SPEAKER_02] not just being there, like staring at what functions do, can somehow deal with this dissonance. Right. Yeah. The other thing is simplify. Simplify, simplify, simplify. I don't believe that in those times organizations can be agile, managing the parts of like of some thousands of systems or of some hundreds of systems they have.

[00:28:48] [SPEAKER_02] So thousands can happen outside of HR, like total systems landscape. So that is, that is super important. Like, is this asking why? Like, do we need all these different systems? And particularly when these systems renew. So I remember Josh Burson having this, mentioning this kitchen drawer example, which resonated very much. I remember that. It reminded me of my own kitchen drawer here.

[00:29:18] [SPEAKER_02] So clean up that kitchen drawer. Yes, yes. And then the third advice I would give is, yes, experiment where possible and make this intentional and give it a budget, but eventually scale the vital few. So what we said before, like that you have to, you have to decide. So finally, when you scale, adoption is critical, meaning we cannot just wait for two years for

[00:29:47] [SPEAKER_02] things to get used after 20 rounds of change management and 30 rounds of training. So one advice I always gave as an analyst was when you decide on vendors and adoption, bring some real users as part of the process. Somebody who is not the executive and they are just doing the employee role occasionally, but those who are going to use this system only without or as a manager and so on and so forth.

[00:30:15] [SPEAKER_02] So, so it's like this will evaluate adoption outright.

[00:30:23] [SPEAKER_01] Yeah, absolutely. John, one of the things that I worry about, man, is just this, like, and I want to give you an example, but I want to, I want to ask you a question first. So we kind of went from systems of record, right? Then it was like, we went through this phase, almost this decade or almost of systems of experience. Do you think HCM can be system, a system of redesign, right? Because we've got to redesign work around AI or maybe use AI to, you know, maneuver our work around its capabilities. But like, what are your thoughts on that?

[00:30:53] [SPEAKER_01] What do you think are the platforms that can differentiate against that?

[00:30:56] [SPEAKER_02] I would say, first of all, I don't think that there is many vendors who are like playing a key role today, particularly the suites that aspire to be just the system of record. And this is right. This is right. Meaning if they, if they just do that, then they are part of this ask why five times type of thinking I mentioned before.

[00:31:25] [SPEAKER_02] I would say more and more, we are getting exactly to that notion. Like, of course, there is the aspect of using technology to develop people, to operate as related to people, but more and more to make a decision. This is not just about development or it is even in places like payroll, workforce management benefits.

[00:31:54] [SPEAKER_02] There are aspects of decisions that need to be made around design and redesign and optimization and so on and so forth. So, so one thing that we had seen in our research, for example, that workforce management can help very much is understanding the gaps that are there with regards to just getting people to replace other people in shifts or making sure that they have backups.

[00:32:22] [SPEAKER_02] When they are not around, you will be amazed by the proportion of organizations that didn't have anybody. And then people felt that mental strain and then they would, they would vote with their feet or they would feel really like stressed with that. Yeah. So I would say we are moving more into systems of action and then best platforms will do, I think, three things.

[00:32:49] [SPEAKER_02] Well, the first one is to bring compounding value. So as you are putting the different parts of the Lego together, is one plus one equals three or is it two or is it one and a half? Like, is it getting better from your fragmented best of breed or is it right? The second thing is like, do they become enablers of these kinds of people in technology,

[00:33:15] [SPEAKER_02] tango, human and AI, not just by providing capability to do your work, but also by amplifying human skills. And then the third one is like, what is the true people scope really? So is it just administration? Is it administration and talent? I would say there are a few more things. We mentioned analytics, we mentioned planning. Now I would add to that total talent.

[00:33:40] [SPEAKER_02] Like many people today are employees and at the same time they do gigs or they might shift between contingent and full time a lot faster than previous generations. So which means that solutions around resourcing and how people are planned and eventually end up to work are not just one or the other. They are both.

[00:34:06] [SPEAKER_02] And this is what we're trying to do, bringing the two worlds together with flex work and

[00:34:11] [SPEAKER_01] with workforce planning. Yeah, I think that workforce agility sort of acumen is going to become incredibly important, right? Right people, right place, right skills, doing the right thing at the right times. Um, and that's going to take technology to help you help you do that. And I, uh, I love that there's an opportunity for that now. Right. And we're just advancing it, you know, more and more. So John frontline workers, right? It feels like that's in the media or not the media, but in the, in the marketing of everything now. And for a lot of times, like for a lot of this, I feel like the friction is still really

[00:34:41] [SPEAKER_01] for the managers in a lot of cases, right? You got a lot of people who get promoted to manager that often they're not necessarily the most skilled leader, but they have the most experience doing the thing, you know, that they're being promoted for. Um, and there's a lot of opportunity I think with, with frontline workers too, but, and I know you guys do a lot of that over at day force, but when you look across sort of like HCM, right, what are kind of the biggest blind spots still for, for designing for that sort of end to end, um, experience, right?

[00:35:11] [SPEAKER_01] Where talent pay scheduling, everything kind of comes together for the frontline and defrictions their world, because I still feel like there's a lot of gaps, um, to that experience for both the frontline worker and the frontline manager. What are your thoughts on that?

[00:35:23] [SPEAKER_02] Yeah. So one thing that I believe is a blind spot is that although pay and time are obviously very important elements of the frontline experience, they are not the only thing. So there is talent, there is risk killing, there is engagement, there is recruiting. Back to your point about like how this is being done when you've got somebody who became a manager at the store last night and tomorrow they have to hire five people to arrive the

[00:35:53] [SPEAKER_02] next day because there isn't time to, to hire should be one day, not two weeks. Yeah. So that is, that is one thing. Um, I would say one, one thing, for example, that showed up in our research is exactly that when we asked people like how many of you would you want to stay and grow in this organization that you are now, it was more than 50%.

[00:36:22] [SPEAKER_02] So generally people want to stay and grow, but there are organizational inertia, friction that prevents them from doing that. Um, the other thing that we have seen is exactly understanding the main design factors of frontline experience as opposed to, uh, like experience that is more for office based people. So how different the places, right. People are moving around. They're not, they are on their feet.

[00:36:51] [SPEAKER_02] They, they, they are in this in, they don't work from home. Right. Well, first of all, they have to go to maybe not in front of a computer to the place of work. The second is the work itself that very often is manual. It is task based and so on and so forth. And the third is the role of technology and that, you know, the, the systems of work are very different. They are very related to the, to the industry they are.

[00:37:21] [SPEAKER_02] So healthcare professionals versus manufacturing. So all these are not like understood most of the time as distinct design factors, which means that there is no one size fits all at the end of the day. You cannot really treat them all and say, look, they, they are frontline people. No, you have different personas. You have very different, uh, like even subdivisions, even inside retail, for example.

[00:37:50] [SPEAKER_02] Yeah. Yeah. And then the third thing is the element of cross-functional collaboration. So how HR teams up with operations in particular to bring those things to life. When I studied employee experience at Gartner, that was one of the key topics where you would get people nodding when you say like, yeah, but there are many functional silos.

[00:38:15] [SPEAKER_02] But when you ask, and how many of you have a cross-functional task force to deal with that, it would be very few.

[00:38:22] [SPEAKER_01] Yeah. Interesting. Very interesting. Well, look, I think we've got a lot of work to do for that, for that crowd. Um, you know, there's, like you said, there's a lot of nuanced UK use cases and often, you know, the, the, the complexity in many of the HR organizations is sector specific frontline related kind of things that you have to do to compete in that, in that space. So that's another thing I love about AI is being able to help people kind of, um, solve for those things uniquely for their business. But John, I want to share, I want to share a story with you.

[00:38:51] [SPEAKER_01] I was listening to a podcast recently. Okay. And, and you're obviously, I'm sure you're familiar with, uh, the term vibe coding. We've seen a lot of this, right. Where people are fundamentally expressing an idea to AI and, and supposedly it can help them build that idea. And sometimes that's software, right? We have tools like, uh, cloud code that's out there coding and doing these things. But I was listening to this, um, entrepreneur. I won't say the podcast was a big podcast entrepreneur. And they were talking about how they got very frustrated with their ATS.

[00:39:20] [SPEAKER_01] I would imagine they're probably a smaller mid-market company just by, by what I know of them. So not a massive enterprise. And they said, you know, we had tried a few and we just didn't like our ATS provider. So I challenged our team to build one and I thought, Oh, here we go. Here we go. We're going to vibe code HR now. So, you know, I thought, okay, you know, on the one hand, this is kind of interesting, but then on the other hand, this is super dangerous, right? There's a reason why it's taken all of the big firms to build some of these solutions

[00:39:48] [SPEAKER_01] to the powerful things that they are today. Um, data matters, integrations matter, foundational elements of how you've structured all that matter. Um, and the idea that, you know, they thought, Hey, look, in a week, we came up with a product that we believe we could make viable in a month. Right. What scares me about that most is especially in the down market, right? Especially if you have young, hungry tech, high growth type companies that are going to think, Hey, because there's already an oversimplification of HR, I believe just systemically,

[00:40:18] [SPEAKER_01] especially payroll on the surface. You could look at it and go, Oh yeah, gross to net calculation. Isn't that big of a deal. And it's not, but what happens is, is all of that frontline data gathering. And backend processing and auditing and controlling and funding and last mile and all that in payroll would be very difficult to replicate without a lot of expertise and experience. Right. So even though you could, you could manage the core element of the tech of, of processing,

[00:40:42] [SPEAKER_01] just as an example, you would create a lot of risk at the front and back end, um, of the payroll process if you didn't accommodate for all that. And I don't know that someone is going to vibe code their way to that. Right. And especially at scale across all of HR and we've seen failures at the enterprise level or the mid market level with like Klarna saying they were going to pull out work day and go and build their own thing. And then they kind of reverse that. But I just want to know your thoughts, John, just, you know, maybe have a little fun here

[00:41:08] [SPEAKER_01] with this idea that we could start to see SMBs or even enterprises believing that they could somehow vibe code their way to an HCM, uh, in, in, in a month, you know? Yeah.

[00:41:19] [SPEAKER_02] Well, first of all, that is probably another question to show how old I am. Uh, so obviously we have seen this before in the on-premises era. So, so obviously we had like many organizations that even when they had bought some of the well-known enterprise applications, they were mostly using them as a development environment.

[00:41:47] [SPEAKER_02] And then they would go customize, spend years and years on that until they, they, they got it to, to look more as a custom made system. They, they, they were few that started even from scratch, from the very strife. A lot of custom PeopleSoft out there. Yeah, yeah, yeah, yeah. Custom, even custom tools that, and they build applications. So that, that has happened before.

[00:42:11] [SPEAKER_02] This is what I often say to, uh, to colleagues who are like, uh, younger that's, you know what? It is coming back. So you haven't seen this in the cloud software as a service era, but it's coming back. So we, we started covering this topic even since last year when we started seeing some noise, obviously now it's a much bigger topic, but I would say like my thoughts are the same as the on-premise era. Yeah.

[00:42:40] [SPEAKER_02] We focus on speed of development. And obviously now you can develop much faster. Now how more accurately that is, the jury will be out. It's still, I believe a very short period of time where we can evaluate, but the problem is not that. The problem is more who is maintaining those tools, who is keeping them current.

[00:43:03] [SPEAKER_02] If it is the HR or the IT department or whoever is vibe coding, can they do that? Do they have the capacity? Do they have the capability? Can all this scale? There is also the opportunity cost. So if you do this, then how you forgo other strategic value added activities you need in order to become application developer.

[00:43:30] [SPEAKER_02] So sometimes the answer might be that it makes sense, but I believe in most cases it wouldn't make sense.

[00:43:39] [SPEAKER_01] Yeah. Yeah. I think it's kind of dangerous to be honest with you. I really do. I mean, I think if you're a very small company, you might get away with some, some applications you could build, but I think trying to maybe build a full scale HCM and payroll and all of that would be incredibly risky if you didn't have the expertise behind it to actually service all of that and execute on all of that compliance and all of that, man, it's just so much. So please don't vibe code your way out of, out of these things, folks. But John, look, man, I always love talking to you, but just to kind of round this out,

[00:44:07] [SPEAKER_01] like as an analyst for the last 10 years, I've watched all these things come about, you have to, and I sit and I scratch my head and I think, how is HR going to keep up with any of this? Right. Like we've still got firms that are on on-prem solutions, right? Yeah. Firms that are very behind on, on, you know, global payroll transformation or just HR modernization at all. Now, um, many companies who are, are, I talked to a head of learning, learning and development, John, I was walking down the hallway, one of the big conferences back in, in, in fall.

[00:44:37] [SPEAKER_01] And she was telling me about all these, um, great things they wanted to do with talent management and AI and, and learning and development and recruiting all these things. Right. Right. And, uh, I was asking her some questions and, and I finally said, what is your core HR platform? And she just sort of paused. And I was like, here we go. Right. And she smiled and I already knew the answer when she smiled. You know, it was, it was an on-prem solution, very popular one. And I said, when are you changing that? And she said, I don't know. And I said, I just sort of sat there and looked at her and I was like, I think we both knew

[00:45:06] [SPEAKER_01] she, they weren't going to be doing any of those other things that they talked about. Right. At least not to any, not anytime soon. Um, and so I just don't know if that reality has sunk in for a lot of folks. And so I guess my point here is, is what would you say to an organization's leadership team right now that is maybe paralyzed, hasn't really done the most on their HR modernization. And as we've seen from, um, I don't know if you've seen Kyle Lagunas's, um, research from Clearco shout out to Kyle. Uh, they've kind of highlighted what we've all sort of been, been feeling is that AI literacy

[00:45:36] [SPEAKER_01] is a big gap, especially in HR right now. We need people to get much more governance, much more literacy. And, and then begin to sort of do something at scale. But what would you say to executives right now that are maybe a little paralyzed, a little behind, and maybe not exactly sure where to start in all of this? Cause that's something I get asked a lot. Where do we start? What do we do? And how do we, how do we start taking that first step? What's the, what is the first step? Right. First step for us.

[00:46:00] [SPEAKER_02] So yeah, just any thoughts there. That's an excellent question. And this is also something that we also hear from our customers, prospects, partners, like help us because exactly we don't know where to start. So to the point of AI literacy, before I go like to the, to, to, to, to the dudes and don'ts. One thing that we saw through our own research last year was that the majority of people would

[00:46:28] [SPEAKER_02] want to get up skilled on AI. The problem was with their employers. Only 17% of, of the respondents said that we offer a program to get people whose role is impacted by AI to get them up skilled. So the proportion of people who wanted to get up skilled, it was something around 60%. So you can understand the gap here.

[00:46:54] [SPEAKER_02] So it's not that people don't want is that what is missing is like how all this upskilling can escape. Now on the do's and don'ts, I would say that many of the good old lessons of transformation playbooks are still valid. So yeah, first of all, focus on outcomes. Sometimes I wrote about, about those when I was frustrated that, you know, we speak about outcomes for so many years.

[00:47:24] [SPEAKER_02] And still, this is a very popular topic, how you can get your organization to be outcome focused. So focus on outcomes. This is super important. Like understand the why's or ask this why five times. Secondly, simplify. It is impossible that you can get through all this complexity and all this ambiguity with the level of fragmentation that many of you, you've got.

[00:47:52] [SPEAKER_02] Involve your end users, your frontliners, those who are going to say, I like this AI application system, suite, whatever, or I hate it. And finally, experiment. Of course, come back and decide what to scale. But yes, experiment. What are the don'ts? I would say don't go with whoever makes the loudest noise. There is a lot of noise. I see you. I hear you.

[00:48:22] [SPEAKER_02] There is a lot of noise out there. We feel that. Really? It's clear. So whoever makes the loudest noise is not always like the one rightfully worth following. Secondly, don't kick the canon complexity. Don't leave it for the next year. Don't leave it for the next person. Like this is an imperative.

[00:48:48] [SPEAKER_02] And then finally, don't buy feature lists. One of the typical examples I use is if we have a debate about cars now, it between a Ferrari and a Land Rover Defender, I believe if I ask you which one is the best car, I believe you wouldn't go for the Land Rover Defender. I had one somebody who had three in their garage, so that is the only outlier.

[00:49:17] [SPEAKER_02] But most of the people would say that the Ferrari. That's without context. In the context of a driver being trapped in the Sahara Desert, I think that becomes a totally different conversation. So know your context, work on the outcomes, and don't go to abstract feature lists and what a system can do. Without those clearly in mind.

[00:49:45] [SPEAKER_02] That is my kind of short list of do's and don'ts.

[00:49:49] [SPEAKER_01] Yeah, I love it, man. I love it. You are a wealth of HCM knowledge, man. And I appreciate you so much for coming and sharing and letting me record this, man. It really is a blessing. Can I ask you, I'm going to share your articles. I want to share also your LinkedIn. Anywhere else you'd like us to reach out to you or get in touch with you where folks can connect?

[00:50:08] [SPEAKER_02] Yes, please. Please do. Thank you, first of all, for spreading the word. And yeah, looking forward to help people. I know, as I said, I know there's a lot of like noise. I know there are many people with questions. And this is something that we have very front incentive in the way we're not here just to preach, like, look at us and what we're doing.

[00:50:35] [SPEAKER_02] It is very important to help understand the whys because this creates a relationship that

[00:50:42] [SPEAKER_01] lasts. Absolutely, man. I appreciate you, John. And listen, let's do this more often, man. We need to catch up. It took us too long to get together. And I know I'll see you at Discover. I'm sure maybe I'll see you hopefully sooner. So all the best, man. I appreciate you. Thank you.