The Impact of Industry 5.0 on Manufacturing and People Operations

We are currently on the cusp of the next phase of industrialisation. While many organisations are still working with version 4.0, official bodies like the EU are already basing policies on Industry 5.0, signifying a growing influence.

The difference between version 5.0 and its predecessors is striking, especially for HR professionals and their counterparts in operations. Industry 5.0 centres around the collaboration between these two specialities.

To fully grasp the implications of Industry 5.0, it’s essential to first understand what versions 1.0 to 4.0 represented. Then, we will explore the key aspects of this latest version. However, the crux of this article is to interpret the impact of Industry 5.0 for HR. Spoiler alert: The emphasis is on people, specifically people operations.

A Brief History of Industry 5.0

The Industrial Revolution, which began in the 19th century, has undergone multiple phases, from 1.0 to 4.0. These phases have been characterised by mechanisation, mass production, automation, and information & communication. In other words, we transitioned from steam power to electricity, introduced assembly lines, automated tasks with computers, witnessed the evolution of robots from large scale production to delicate tasks such as fruit picking, and data became the new gold in recent decades.

This summary highlights nearly two centuries of industrial development. However, what sets Industry 5.0 apart is the focus on people. The focus up until now has been on the optimisation of technology. But Industry 5.0 does not mean that we will optimise people. Instead, it implies a heightened emphasis on well-being and interactions with technology.

The Role of Humans

Prior to Industry 4.0, the primary aim was to make people redundant. However, with Industry 5.0, and as the world faces significant challenges, there has been a noticable shift towards prioritising people. The specifics of this shift varies depending on who you ask. First, let's explore the core principles and perspectives to provide context.

The Foundation of Industry 5.0: Three Pillars

Industry 5.0 is based on three fundamental pillars.

People-oriented (focusing not only on customers or shareholders but also strongly on staff well-being).
Sustainable (considering all waste and potential by-products, ultimately aiming for a circular economy).
Resilient (able to withstand disasters, technical attacks, war, etc. and using technology for the greater good).

The Interplay Between People, the Planet and Industry

The interpretation and impact of Industry 5.0 can vary greatly depending on who you ask, with various approaches to achieving the three pillars selectively emphasised. The most significant differences are seen in the prioritisation of components and variations in tone and wording.

For example, the European Union’s website on Industry 5.0 focuses about 90% on worker welfare, with sustainability only mentioned in a concluding sentence.

Forbes, on the other hand, describes Industry 5.0 as "a shift from a focus on economic value to a focus on societal value, and a shift in focus from welfare to wellbeing”. Their description focuses on people as individuals, emphasising that society must also benefit.

Several technology companies envision a world shaped by Industry 5.0, where intelligent machines and people work together more efficiently than ever before. Sustainability and resilience may receive less attention, but are a natural outcome of this development.

Optimism

Optimism pervades all descriptions of the future under Industry 5.0. As we confront the consequences of climate change, work is returning to a focus around people, and sustainability is becoming the norm. Some even go so far as to say that companies knowingly polluting will find it increasingly challenging to attract and retain talent.

Think of It as a System

The three pillars of Industry 5.0 are interlinked. Circularity strengthens resilience, and a resilient economy ensures the well-being of people.

It’s therefore crucial to think of Industry 5.0 as a system that considers individuals within the context of society. The well-being of an individual in a struggling society will be limited, and societies with lower than average individual well-being will face difficulties making progress or maintaining the status quo.

The Gap Between HR and Operations

Research by UKG, an international HCM software developer that places people at the centre of its solutions, shows that the visions of HR and Operations align well on performance management, but diverge in other aspects unique to Industry 5.0. HR places importance in training, continued education and development, in addition to managing HR operations and administration, while Operations focus on structuring and managing teams, and on creating and planning work schedules. Opportunities can arise by placing people at the centre and involving them in processes and planning.

Opportunities and Concerns

Industry 5.0 describes a number of developments that are important for HR professionals and Operations, necessitating collaboration between the two. Several new trends are emerging which are already impacting recruitment and retention, with a growing focus on embedding well-being in processes and policies. Here are the most crucial trends:

Human-Centric Production

As we optimise technology, future production processes will prioritise people and their well-being, recognising that happier, healthier and more satisfied people perform better and are more productive.

This is also largely connected to the degree of influence and ownership that employees feel. Multiple studies show that control increases engagement, responsibility and production. Giving your employees influence over scheduling without disrupting operations is a key aspect.

Well-Being and the Labour Market

With a historically tight labour market, the transition to Industry 5.0 is accelerated. Preparing for this shift not only readies organisations for the future but also enhances their attractiveness as employers. The new generation has different values and priorities, expresses them openly, relies less on traditional competitive factors, and has the ability to make demands.

Preparing for this shift not only readies organisations for the future but also enhances their attractiveness as employers, aligning with the values and priorities of the new generation that seeks organisations with a clear "purpose."

For example, consider sustainability. Both current and future employees prefer organisations with a clear purpose, meaning that they make a positive impact on the world. Sustainability, in all its forms, is essential in this context. Not embracing sustainability, or worse, working against it, is a red flag for talent, and could make it much harder for companies to attract and retain employees.

Retention

Investing in people is a hallmark of Industry 5.0, enhancing the strategy for retaining employees. It also increases your chances of positive reviews, and attracting potential talent, making recruitment a lot less strenuous.

Human-Machine Interaction

Many innovations required humans to adapt to machines, for example, by learning specific instructions and programming languages. Industry 5.0 aims to bridge the gap between humans and machines.

Recent developments in Generative AI is making it easier for software to interpret human language, potentially freeing up employees to focus on core processes.

Technology Integration

In earlier phases of industry, from 1.0 to 4.0, technology often had a negative reputation. But now when we want to do more with less people, modern HR software (which is becoming smarter and more versatile) is playing a pivotal role in Industry 5.0.

It not only helps us understand our processes and productivity but also provides insights into employee well-being. It’s also becoming easier to integrate with ERP systems, creating an consolidated platform where all information is not only informative but also meaningful for both employees and employers.

Good HR solutions offer another advantage: employees can easily find the answers to most of their questions, allowing HR to focus on unique questions and invest in the well-being of their colleagues.

In Conclusion

Industry 5.0 represents the future, with an undeniable emphasis on putting people at the centre of the production process. Prioritising employee experience is going to be the key to achieving greater productivity and better results. HR’s role is becoming increasingly important, but not as a standalone discipline. The interplay between HR and Operations will determine the difference between progress, stagnation, or even decline.