Strategies for Enhancing Human Resources

2021.6.1

Masashi Santou
Center for Policy and the Economy

Key Points

  • Digital revolution-inspired expansion of the skills-to-jobs mismatch exacerbated by covid pandemic
  • Need to identify job requirements entailing competencies only humans can acquire
  • Government, companies, and individuals must each move to establish utilization of the FLAP cycle

1. The needed improvements in human capital and overhaul of the employment model

Ever since the Fourth Industrial Revolution, a.k.a. 4IR or Industry 4.0, headed the agenda at the 2016 World Economic Forum in Davos, Switzerland, the digital revolution’s impacts on employment have been a focus of much debate the world over.

The covid pandemic has spurred on technological innovation and industrial-structure transformation; these in turn have expedited shifts in labor demand and job requirements for workers. These changes are taking the issue of how to enhance human capital beyond the realm of business and industry to make it an urgent challenge for society as a whole.

The traditional Japanese employment model has delivered economic growth and social stability by entrusting human-resources training and development to employers while holding workers within their enterprises. However, the model will have to adapt if it is to allow society to put technological advancements to work and bring about destructive innovation in this age of dramatic change.

Though maintaining stable employment remains a crucial policy issue amid the current covid pandemic, we still need to move with a view to adapting for the post-covid era. Government, the business community, and workers (as private individuals) must take steps to lay the groundwork necessary for encouraging a shift of human resources to occupations that need them.

2. The digital revolution’s impacts on human-resource supply and demand

2.1 Impact on employment

According to scenario-based forecasts we made in 2018, the spread of advanced technologies like artificial intelligence (AI), the Internet of things (IoT), and robotics will create some 4 M new employment opportunities across industry while machines will replace some 7.3 M workers by 2030. Even though that's a net loss of about 3.3 M jobs, demographic change will bring supply and demand for labor into balance over the same period at the macro level.

At the micro level, however, there will be big disparities. Our forecasts predict a 1.3 M worker surplus for administrative jobs next to a 1.7 M shortage of workers to fill specialist openings (see Figure 1).
[Figure 1] Supply and demand in Japan’s labor market, by occupational category (base year: 2015)
[Figure 1] Supply and demand in Japan’s labor market, by occupational category (base year: 2015)
Source: Mitsubishi Research Institute, Inc.
Thus there are already clear signs that, without a 1 M-scale shift of human resources between occupational categories, the Japanese economy will not be able to achieve growth while benefitting from the advantages of digital technologies.

2.2 Pandemic exacerbates expansion of skills-to-jobs mismatch

The pandemic has accelerated the uptake of digital technologies, especially due to greater demands for avoiding direct contact, working remotely, and reducing headcounts in closed spaces like offices. For our forecasts, we initially assumed that it would take about a decade to implement digital technologies throughout society; covid expedited that for certain technologies, such as those enabling remote working.

To reflect these realities in our forecasts, we revisited our scenarios, this time assuming a doubling of the speed of uptake for technologies seeing wider use spurred on by the pandemic, to see how they would impact labor supply-demand balance. Our findings indicate that the emergence of worker surpluses, mainly of administrative generalists, would pick up pace starting in the early to mid-2020s—moving forward by about five years the timing of the overall supply-demand balance to shift into surplus territory.

3. Human resources visualization and incremental career evolution

3.1 The competencies needed for jobs only humans can fill

Our research tackled the question of how we should proceed in order to enhance human capital in ways that will help resolve the skills-to-jobs mismatch, i.e. the mismatch between competencies workers have and those employers require.

We looked for answers in the job requirement profiles for in-demand jobs in the occupational profile data maintained by the U.S.’s O*NET occupational information database. We found that competencies only humans can acquire—ones like creativity and outgoingness, decision-making skills, analytical thinking, and innovativeness—were in higher demand for specialist and management jobs. These human-exclusive aptitudes make workers who have them less vulnerable to replacement by machines, and demand for workers in those jobs is set to continue rising until at least 2030.

In contrast, general administrative jobs and jobs in manufacturing, transport, and construction involve a high proportion of routine tasks and do not require competencies only humans can master, thus making them strong candidates for automation.

Of course, since any job entails a variety of tasks, machines will not take over all the work of whole occupations; the reality is that they will take over a certain portion of highly routine tasks. To resolve skills-to-jobs mismatch, jobs will need to be broken down into constituent tasks and the competencies needed for each made visible and identified. Then, the key will be increasing the proportion of tasks that leverage human-only competencies.

3.2 Continued learning in small-steps holds the keys

At MRI, we have created a new model for career development in which workers acquire human-exclusive competencies through continued learning in small-steps—the Incremental Career Evolution Model for short. This model is premised on clearly defining and creating visualizations of job tasks and required skills.

A few examples:
In a nursing facility, a care-giver checks up on care recipients using a tablet to view monitored data that sensors have automatically collected. Freed from having to take vitals and the like manually, the caregiver can now concentrate on providing the services—including attention to mental health needs—that the recipient needs most.
Visualizing conventional office workflows and deploying Robotic Process Automation to automatable tasks allows managers to allocate human resources to more-sophisticated, automation-resistant tasks.
Or a person with years of experience doing general back-office work could acquire information security management know-how, allowing them to thrive as a member of their employer’s in-house Computer Security Incident Response Team.

It should thus be possible to accumulate a deep bench of human capital in small, persistent steps, regardless of occupation or employment format, by continually having workers refine their automation-resistant human-exclusive competencies while gradually automating their routine tasks.

4. Human resource strategies for eliminating skills-to-jobs mismatch

We propose establishing the FLAP Cycle as the essential means of resolving skill-to-job mismatch by making incremental career evolution viable (see Figure 2). The FLAP Cycle is an MRI invention, and the letters stand for a sequence that each human resource cycles through: Find their aptitudes and occupational requirements, Learn the new competencies they need, Act to move forward in their desired direction, and then Perform on their new career stage.
[Figure 2] Policies and actions for establishing the FLAP Cycle
[Figure 2] Policies and actions for establishing the FLAP Cycle
Source: Mitsubishi Research Institute, Inc.
Under Japan’s traditional “membership” model premised on life-long employment, the FLAP Cycle cannot function smoothly at several levels. In particular, there is currently no basic infrastructure in place outside the framework of corporate-enterprise for helping workers move between jobs or update their competencies. The challenges that need to be addressed to help the FLAP Cycle take root are numerous. We outline below several initiatives we believe to be particularly crucial for government, companies, and individuals to undertake to help it along.

4.1 Government

Companies have fulfilled a huge role in providing active members of the workforce with employment opportunities and benefits. However, now that humanity has moved into an era when many live to be 100 or longer and technological innovation continues to accelerate, opportunities are on the rise for human resources living outside the corporate framework to step onto and utilize the FLAP Cycle. That means it’s now time for government to step forward and take over some of the safety-net responsibilities companies have shouldered till now, especially in providing public support for the “L” (continued learning) of the FLAP cycle.

Of course, this does not mean government should assume the lead role in the employment system. This brings us to two key points.
The first is that government should provide a basic framework for systematically organizing the occupational information that businesses till now have pooled but kept to themselves.

The other is building out a safety net designed to nudge workers who have fallen by the employment wayside forward so they will be able to thrive in an appropriate job as soon as they can. To this end, the government role should be to provide necessity-sufficient peripheral assistance thus ensuring the optimal efficiency of the country’s workforce.

4.2 Companies

In a time of rapid change and uncertainty, a company’s human resources strategy can serve as a compass for its employees navigating their careers forward. Thus companies need to formulate their human-resources strategy in tandem with their business strategies, folding into them specific actions like training and hiring. We’d like to call attention to three crucial points.

First, companies must clearly define the competencies required for their businesses. Recently a number of companies, mainly large ones, have embarked on job-based hiring practices, as opposed to the traditional membership-based approach, and examples of initiatives to clarify job descriptions are emerging. We hope these moves will provide an impetus for enhancing human capital, encouraging clear definition of job requirements, and ongoing reskilling—all steps conducive to incremental career evolution described above.

Second, companies must communicate their business strategy-based human resources strategy to people in- and outside the enterprise. Communicating about corporate philosophy- and purpose-linked human resources strategy will be indispensable to acquiring new human resources from outside a company, not to mention improving engagement among current human resources.

Third, companies must get actively involved in overhauling models of employment. Technological innovation accelerated by the pandemic is having impacts that will overwhelm any quick fixes to the current Japanese employment model. Meanwhile, there is no one-size-fits-all solution for how to overhaul the current model characterized by long-term stable employment and inhouse human-resource training, or how far to go in overhauling it. In addition to the aforementioned actions, such as undertaking visualization of human-resource issues, companies, especially their leaders, must explore the new forms employment should take on and make the necessary decisions.

4.3 Individuals

Japanese employees, and especially those in general administrative jobs that are the greatest beneficiaries/subjects of Japanese-style employment model, have enjoyed job stability in exchange for entrusting leadership over their career development to businesses and taking any and every task asked of them.

Going forward, and supposing society moves in the direction suggested in this paper, individuals will be afforded greater freedom and burdened with greater responsibility for determining their career paths themselves. Specifically, they will be required to communicate their competencies and the tasks they are capable of to the outside world. Individual workers need to begin taking the initiative themselves, interpreting for themselves what companies require of human resources, and taking maximum advantage of government support programs to form their own carrier paths.

The coming decade of accelerated technological innovation amid further aging and shrinking of Japan’s population will be a time that tests our mettle as individuals. But it is also a great opportunity to take up the challenge of pioneering new possibilities.