Podcast
Upwork Research Institute's Kelly Monahan joins Get Reworked to discuss her research into how innovative companies approach hiring, AI use and distributed work as a cohesive business operating model — and why that helps them deliver change under tight budget restrictions.
"The three things we all need in a job is we need autonomy, we need to feel like we're learning and mastering, and we also need to feel connected to community. And those three things I think are in really rare regard today for the ways we think about innovation. I would rather ask, well, do you have autonomy? Do you feel connected to your colleagues? Do you feel like you're contributing to something bigger than yourself than necessarily perks? Again, in a perfect world, you'd have both firing on all cylinders, but I think we overlook at the intrinsic side," said Kelly.
Highlights of the conversation include:
- How workplace innovators maintain culture across a blended organization.
- Why Kelly doesn't see innovation and efficiency as being at odds.
- How self-determination theory applies to workplace motivation and satisfaction.
Tune-in Here
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Show Notes
- Kelly Monahan on LinkedIn
- Kelly's full Three Dots interview
- The Upwork Research Institute's report on work innovators
Show Transcript
Note: This conversation, recorded in December 2024, has been edited for clarity.
Siobhan Fagan: What sets innovative companies apart? That’s the question behind a 2024 report out of Upwork Research Institute. They found a few specific behaviors set these organizations apart.
I spoke with Kelly Monahan, managing director of Upwork Research Institute, about the research late last year. We touched on behavioral economics, antifragility and self-determination theory and explore how innovation can happen even when operating on a tight budget.
Welcome to the show, Kelly!
Kelly Monahan: Thank you so much for having me today.
Siobhan: So part of the reason why I reached out to you was you recently released a report with the Research Institute about work innovators. And one of the things that caught my eye is how these work innovators were managing to innovate while keeping their bottom line pretty stable. So can you just talk a little bit about what sets these work innovators apart?
What 3 Attributes Set Work Innovators Apart?
Kelly: We've been doing the work innovation research for two years now. And so, to step back, going back to year one, I think it's probably because I come from consulting and the way that I've been trained to do research is to really understand the characteristics and attributes of high-performing companies. That's really been the quest since I've been at the Upwork Research Institute is to understand what's separating high-performing companies from the rest. So in year one, we found these three statistically significant attributes were making a big difference to the bottom line.
The first one is those companies were ahead of the curve when it came to experimenting with generative AI. They were using it within their workflows. They were already beginning to find efficiencies there.
The second thing is they were continuing to expand their workforce through alternative talent models, giving themselves more flexibility through contractors, managed services, freelancers, really just alternative forms of talent.
And then the third thing they were doing is they weren't necessarily remote-first, but they were enabling some level of distributed work mostly because of a talent strategy so they could increase their talent pool outside of their local markets. And so that's what work innovators were doing differently in year one.
What we found in year two, which I think was really exciting that separates them apart today, is before where procurement was managing freelancers, IT was managing the generative AI roadmap and HR tends to manage distributed work. This year, we saw these companies move to a cohesive unified operating model, where that was not becoming these separate siloed roadmaps, that was simply becoming how that company was beginning to operate. The reason why they were finding so much efficiencies in the bottom line was by having that unified strategy and approach this year.
How Do You Define Innovation?
Siobhan: I want to dig into how they're actually doing it. But before we go any further, feel like innovation is one of those terms that kind of gets a little squishy. It's like engagement. What exactly do we mean? So how are you describing innovation in this context?
Kelly: I love that you're asking that because I think that's a smart question. So in our particular context, we are focusing on internal innovation. How is the company changing how they operate inside in order to provide better value externally? So this isn't product innovation, this isn't customer innovation, this is truly talent, HR, workforce innovation, and, you know, figuring out how they go to market differently.
How Work Innovators Approach Generative AI
Siobhan: When we look at their adoption of generative AI, I think one of the first conversations you and I had on LinkedIn is specifically related to how companies are using generative AI and how, in some cases, they are applying it to more efficiently do more of the same, as opposed to actually fundamentally rethinking how they work. So is that the case in these innovators? Are they actually rethinking how work happens in the workplace?
Kelly: Yes, absolutely. And they're doing that tangibly in a couple of different ways. Because I think to your point, there's two ways to think about generative AI today. It is a plug and play automated substitute effect where you can find that efficiency. I think that is so short-sighted. Some of our research that we released this summer showed that employees are actually feeling really burned out by that use case and that tooling.
I think when we think about generative AI, it can be as much of a coach and learning mechanism within the organization. When you really think through, it's generating new content. So in terms of creativity and brainstorming and helping people actually rethink the way they're doing work.
What are work innovators are doing? They are two times more likely to be upskilling their workforce alongside the technology. And that's a huge differentiator right there. They're also much more likely to be giving permission to play and fail quickly and really iterate with this technology and come up with new ideas.
And the third thing they're doing, which again, it sometimes sounds like common sense, but it isn't happening enough within organizations, is they are listening to the front lines. And so there's this switch that's happening in the data that they're seeing their frontline associates as their R&D in this new world. And so they're really figuring out how are they using, how are their customers using AI? What are the insights? What are the friction points and really utilizing that frontline worker as part of the R &D to help make the AI experience better within the organization.
Are Innovation and Efficiency at Odds?
Siobhan: Listening to you, it makes sense that you're seeing more of this in those like mid-size organizations just because they have the resources where the people have time to experiment. They have the time to actually be trained that they can take out from their day to day, even though a lot of the generative AI training is, I imagine, in the course of work trying to experiment and things along those lines.
I'm wondering with this push for innovation though, both innovation and efficiency come up in the report a lot. And a lot of times they're at odds. They're sort of categorically opposed — innovation is about trying new things, oftentimes failing, not necessarily settling on one thing. And efficiency is often finding that one way that works and drilling down on the thing that works so that you can get faster and faster. So how do you jive the two?
Kelly: One of the concepts I came across during this that helped explain this paradox where organizations are living with both is antifragility. And what antifragility means is that when a stressor or a shock comes into your system or within your organization, you don't just try to retain what you have, which is efficiency, and also oftentimes we use the word resiliency for, but you actually become antifragile, which means that you're doing something different in response to the shocker. You're innovating, you're actually changing and adapting.
That is what I think is happening with our work innovators, and I think this is a really important conversation to have when it comes to how we think about innovation. And listen, I've been in tech for a while and I don't mean to speak negative to the tech industry because they've done a lot of good, but I think what I'm concerned about is they've got our minds a little twist on what innovation is.
What I mean by that is there's been enormous budgets. I mean, there's been so much free cash flow happening within this industry. There's been a lack of financial discipline in how they operate. And so whether it's been the salary packages to recruit people away, whether it's been these enormous campuses with all these perks. Back before the pandemic, there was the masseuses coming in. It was really extravagant. And the hope was that by offering this, people would innovate more and the company would generate value.
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That's not the reality for the majority of organizations today. And I think tech has had a reckoning because of the tight financial pressure that's occurred coming out of the pandemic. The customer behavior habits have changed as well as inflation made cash a lot more expensive. And so I think instead what innovation is, as you have a shock or stress in the system, you can't get extravagant. That is where people then tend to restrict or become efficient.
But the reality is what you desperately need to do is figure out what do I need to fix internally? What do I need to change? We know from living systems, those things that evolve and adapt are those that survive. And I think that's what we're seeing in these work innovators right now is they're getting really smart and finding efficiencies where there need to so they can free up that free cash flow or have that operating discipline in order to enable, how do we innovate how we work internally?
And it doesn't necessarily mean I have these huge budgets; I can do that by really rethinking workforce and existing systems today.
What Motivates People to Embrace Change
Siobhan: I think a lot of it comes down to also like when you go back to the masseuses or the big money packages, which I mean, you know, not going to turn those down. But at the same time, is that really motivating people to want to innovate? Like, that is that the thing that's intrinsically making people want to create new things? Or does that sort of add to a level of complacency to a certain extent because you don't want to rock the boat to lose those incentives?
Kelly: Yeah, of course, no one is.
So back in the day, I did a lot of work in behavioral economics. And it's this fascinating paradigm that — when people started trying to have seatbelt compliance, like you put on their seatbelt or stop smoking, there was this notion that we're extrinsically wired for money, which obviously there's some truth to. But what they found in all these studies time and time again is that the people who are compensated the most to put on their seatbelt or stop smoking had the worst compliance after that incentive was gone. It was a very short-term incentive.
The longer-term behavior change came from those that were connected within their community who felt they were doing this on behalf of others, to stop smoking on behalf of their family or some other cause. And so I worry, as we think about innovation today and just humans, humans are wired in two ways. One is that short-term, rational side that's all about self-interest. But the majority of us actually are wired, I think, much more for internal and intrinsic motivation.
The three things we all need in a job is we need autonomy, we need to feel like we're learning and mastering, and we also need to feel connected to community. And those three things I think are in really rare regard today for the ways we think about innovation. I would rather ask, well, do you have autonomy? Do you feel connected to your colleagues? Do you feel like you're contributing to something bigger than yourself than necessarily perks? Again, a perfect world. You'd have both firing in all cylinders, but I think we overlook at the intrinsic side.
Siobhan: Are you asking the work innovators about those three factors?
Kelly: Yes.
The theory comes from self-determination theory. Researchers were Ryan and Daisy out of the University of Rochester who came up with this. I'm surprised we don't talk about it more so in the workplace, but absolutely what we're finding is our work innovators have a workforce that's more motivated, they're scoring higher on the self-determination factors I just described than their counterparts. And so again, money matters — I want to make sure that's very clear. It's not an excuse to not have equity and pay.
But those three things are what work innovators are focusing on getting right right now. And those things are often not that expensive.
What Workplace Flexibility Looks Like for Frontline Workers
Siobhan: We've been talking sort of in an abstract way up until now, and I'd love to bring this down to reality. So if you could share an example of one of these work innovators, how they are actually delivering on all three of the different areas that you identified, could you walk us through that?
Kelly: I'll give one which is a large retailer in the clothing industry. So again, you might not think retail, work innovators, not necessarily the very first thing that comes to mind. But they were really getting interesting in the way that they were solving for these things. So they, during the pandemic, obviously had to grapple with distributed work.
And no surprise, their online store and presence increased. And so they were able to offer much more flexible staffing for associates in order to work from home or have that flexibility in order to resolve customer online needs and stuff. And so they were able to move some of that work online. And now when the store is fully reopened post pandemic, what we saw is that they were able to give more flexibility back to the workforce.
They were experimenting with different ways of scheduling and they realized at that point that flexibility at the front line was gonna become really important.
Second thing is that they were using is AI to help with customer support. And so again, figuring out what could be automated, not necessarily with the whole, when you go call phone where it's a frustrating experience and you know, you're trying to figure it out, but really using AI for customer support so that it was helping coach and guide the associate as they were having the customer call.
And so having that pop-up come up of, Hey, think about this for the customer, this might be a nice next thing to offer. I thought that was a really good use case of generative AI because it was elevating the role of the customer support person too, to alleviate some of the cognitive burden and be able to be more creative at times in their response.
And then finally, because of holiday hiring, they were able to really staff up and staff down as appropriate based on the holiday season, supply and demand. And so when they did return back to the retail stores, they relied much more contingent and freelancers during those times as opposed to then having to do layoffs.
I thought it was a really interesting case study of, again, a retailer who's been around for a very long time in the clothing industry of how that is an example of how you can actually become a work innovator. It doesn't have to always be these white collar professions. Flexibility I think can be enabled across all types of workforce.
How NASA Innovates
Siobhan: It's an interesting example because I think that people associate innovation also in these stereotypes with sort of the knowledge work or the so-called knowledge economy. it's devaluing the knowledge that's coming from the frontline workers and from the interactions that the people interacting with customers have and why it is so important. I'm glad that you raised that.
One of the other case studies that you included in the research was NASA, which I mean, NASA is always fun to talk about — I mean space, come on.
Kelly: Yes. I know. Who doesn't want to go to the moon?
Siobhan: But they also had some interesting approaches as far as the freelance contingent that you spoke of and how they treat them and sort of like bring them into their organization and you said that in the interview they told you that they actually give them the same onboarding experience and they have the same opportunities for engagement. was hoping you could just kind of talk a little bit more about that.
Kelly: Yeah, so Steve Radar over at NASA, he's really the mastermind behind how they think about alternative talent. And we've had the pleasure of being able to work with him a couple of different times. What's so fascinating to me is they really are doubling down on crowdsourcing and the collective mind being so much stronger than the individual minds. And I think what they've realized — and again, they've been doing this probably longer than most corporations have — how do you bring more diversity of thought?
At the end of the day, what precedes innovation is often diversity. Oftentimes it's hard to do if you're really at a localized talent model, hiring full-time employees, we tend to have desirability bias and recency bias and likeness, and there's very little diversity happening. And so they really have perfected the art of tapping into that, whether it's through crowdsourcing or freelancing and just treating that as one of their most valuable talent strategies.
What we heard in our research with NASA is that it is almost as good, if not superior, to the full-time employee model because of the newness that they can extract because of the creativity and diversity. And I think in most organizations, it's the other way around. They usually have them come in through procurement. It's a very transactional relationship. Don't join the team meeting, you don't know whether you can send them the emails or invite them to a happy hour. That is a very compliance-oriented mindset. NASA is the exact opposite. It's more of how inclusive can we be to, again, where some of our brightest ideas are coming from.
Leaders Change the Vibe on Blended Workplaces
Siobhan: I love that. I'm curious though, because so much of this is about the culture and building a culture that is going to welcome and all that. And I'm curious how you build that culture in the instances where it is this blended workforce. Did you see any kind of commonalities across these companies?
Kelly: Yeah, so it was really fascinating.
I hate to just say it's as simple as this, but it really came down to leadership mindset. So in our study, we asked this question. I asked, it was about 1,400 executives, what is the first word that you think of when you see the word freelancer? And so it was qualitative research and I divided the responses after we figured out who our work innovators were from the survey, versus the others.
I thought this would be interesting: is there any differences here of how they've actually analyzed? So our work innovators, these executives said the first word that came to mind, the most likely to rise to the top were skilled, creative, innovative, resourceful.
When it came to the others, executives, the very first words that rose to top was cheap, contract, gig and then they repeated their word back, freelancer. It was these very non-human characteristics and almost a lesser than mindset. And so to me, if your executives are thinking about freelancers and contractors through that lens, this is just a cheap play, this is just an efficiency play versus this is a skilled, innovative, creative person I'm bringing in to do something differently.
I've never seen such a qualitative data set where the answers were light years away from each other.
Where to Start
Siobhan: That's quite a startling difference. If an organization listening to us now aspired to be a work innovator, is there one place where they could start? Is there one area that they should sort lean into first that you would recommend?
Kelly: Yeah, I would say first thing, I think there's so much low-hanging fruit we're not doing enough within our organizations and one is employee listening. I know there's been all this debate of doing it once a year at the annual employee engagement and now kind of moving away from that. I think companies have struggled of what this Pulse or quarterly employee engagement survey thing looks like.
But I think the reality is we are not listening enough to the people at the front lines, to the workforce. There's a lot of guessing happening. We see this with return to office — rarely is that being driven by employee data and listening. It's very much driven by this mindset of, as executives or leadership, it's a bit of an echo chamber of what's happening.
I think that in order to become a work innovator, you have to know what your people want. In order to scale distributed work, you have to understand, what model works best for you? This is not a one size fits all approach and context matters greatly for the organization and their leadership. So the first thing you can do is begin to listen to your people and really begin to understand where are their barriers, where are their cultural friction. And that's what we saw our work innovators were doing so much more differently than those that weren't work innovators. They were dedicating a lot of their time and attention to employees in order to get this right.
Siobhan: That's interesting because we've all been watching during the pandemic, everything was employee experience and we're doing everything that we can to make you happy and we're send all these perks and then we've seen it being rolled back. It's like Homer Simpson, Homer Simpson shrinking back into the bush, you know, like here goes employee experience.
So it's interesting that you have these data points that are saying these companies are valuing EX and it's not to give them these perks that I think some people associate with it. It's more understanding how your organization works, how your organization will function better. You've seen that.
What Employee Experience Means Today
Kelly: Yeah, 100%. And it's funny because to your point, like what do employees actually want today? You know, leaders seem puzzled today because you see a lot of this entitlement conversation of, you know, people just can't be happy anymore. But the reality of what we're pulling back on is we talk about that self-determination intrinsic motivation. We're pulling back on autonomy.
You know, I think depending on how AI is being used, is it being used as again, an efficiency and compliance tool? Or is it being used to bring out more of the humanity in the workplace? Those are two decision points that I think, depending on where your leader is coming from, people are experiencing AI very differently today. We need flexibility. That's a core part of what we need. And that's getting rolled back during these times. And so yeah, I think at the end of the day, what I hear a lot of times what people want, they want more of an emphasis on well-being. People are still burned out.
They're tired leaders. This is not just individual contributors. I see this in the leadership data as well. They want more of a focus on well-being. They want more of a focus on learning. People are really scared, I think, right now of understanding what does the future look like? How is their job going to be transformed? And they don't feel like there's enough time and emphasis being placed on skilling. And the third thing I hear come up a lot in the data, and again, this is going to be difficult in remote environments, is people are looking for community and that connection
I think they're missing that today.
Siobhan: Kelly, I've enjoyed all of this. I want to give you the floor, though, if there's anything that we didn't cover in the conversation that you really wanted to touch on. Is there something you think people should know from this report and from your research?
Kelly: You know, I think the one thing I would just reinforce is something that we've talked about throughout is that I really hope when people read this report, they rethink innovation, and that we begin to put as much emphasis on the way that we're working in the internal innovation. I don't think HR has had a seat at the table for a while on this. As we think about innovation, you invite your chief strategy officer, you maybe invite your CIO from an IT perspective, HR needs to be there to start figuring out how do we innovate, how we work.
And that to me is going to be really be big differentiator as the world gets more complex and chaotic.
Siobhan: If you have a suggestion or a topic for a future conversation, I'm all ears. Please drop me a line at [email protected]. Additionally, if you liked what you heard, please share Get Reworked with anyone you think might benefit from these types of conversations — word of mouth marketing is the best marketing anyone could ask for. You can find more coverage of related topics on reworked.co. Thank you again for exploring the revolution of work with me, and I'll see you next time.
