The Future of the Global Workplace

1. The Future of the Global Workplace Dr Peter Saul www.petersaul.com.au Presentation to Diversity Council Australia’s Annual Conference on Diversity 22 November 2007 Melbourne

2. Overview • How can we most profitably think about the topic? • Work, workers and workplaces aren’t what they used to be or where they used to be. • … and things are still changing, so the future will be different again. • How might the HR function evolve in the light of all these changes? • What role will diversity play in successful organisations?

3. LOOKING AT THE BIG PICTURE:Probable shapers of the 10-20 year future • Polarised distribution of wealth • Globalisation • Diversity, complexity • New technologies: e.g. genomics, nanotechnology • Information and communications technology • Disintermediation • Legislation • Corporate governance structures • Population demographics • Natural environment; e.g. climate change • Risk, uncertainty, lack of meaning • Pandemics; e.g. bird flu • Wars, terrorism • Search for simplicity, new values, meaning • Growth in experience economy • Questioning of Western capitalism • Technology

4. 10 Consumer Trends for 2006+ • ANXIETY- expect a boom in escapism and fantasy • CONNECTEDNESS - faster, smaller, more intelligent world where events will be experienced by more people • SPEEDING-UP - blurring of work and home; memory loss, increased stress and mental illness • MOBILITY - people want to access anything , any time, anywhere • CONVERGENCE - blurring of whole industries, markets and brands • PRIVACY - potentially a more truthful and trusting society OR people adopt multiple personalities and fake IDs • NOSTALGIA - escape to the past; increased desire for face-to-face contact • LOCALISATION - more local trade alliances; the re-emergence of city states; the Balkanisation of Europe • AUTHENTICITY - growing interest in how things are made; search for real products and experiences • HAPPINESS - people increasingly value time, well-being and sustainability ahead of more money and materialism Source: www.nowandnext.com

5. Scanning the Environment for Patterns of Weak Signals India’s population will grow by 260 million by 2025; 5 times the increase in the US; and twice that in China Global survey of consumer and retailing companies: greatest threats over next 15 years are low-cost competition; decreasing customer loyalty Sydney households have average net worth 37% higher than rest of Australia ABS predicts, childless couples will outnumber those with children by 2010 65 per cent of young Australians will be overweight or obese by 2020 Technical Almost a billion new consumers will enter markets in emerging economies 20% of Aust. adult population has downshifted in past 10 years In 2005, one in six countries in the world faced food shortages because of severe droughts due to global warming Environmental Social % Aust. population over age 65 will increase from 13% in 2005 to 24% in 2025 No developed country has fertility rate above replacement level The 33 million university educated young professionals in developing countries is twice that in developed world 30% of net new jobs created between 2005 and 2020 will be in India; 14% in China Economic Political

6. DIFFERENT FUTURE SCENARIOS REQUIRE DIFFERENT AUSTRALIAN WORKFORCES “FIRST GLOBAL NATION” Australia capitalises on globalisation; promotes its internal diversity and ethnic tolerance; and boosts home-grown innovation and industry capability “SOUND THE RETREAT!” Globalisation stalls as political and social structures are not ready; trade barriers and nationalism re-emerge; we depend on bilateral national and commercial relationships “BRAVE OLD WORLD” Complacent, dependent on agriculture, tourism, “new” manufacturing and some biotech; clever people and companies move overseas “GREEN IS GOLD” We emerge from the growing imperative to protect the natural environment as a leading innovator of global environmental management Source: Australian Business Foundation “Alternative Futures: Scenarios for Business in Australia to the Year 2015” Sept 1999

7. Why care about the global workforce? “The working age population [in Australia] currently grows by 170,000 people a year. But trends already in place will see the working age population grow by just 125,000 for the entire decade of the 2020s…” “Population Ageing and the Economy” by Access Economics, Jan 2001, p.3

8. Overview of Supply and Demand Factors Shaping the Future Global Workforce Industry Structure Types of Organisation Govt.Policies Future Workforce Population Demographics Consumer Preferences Social Values

9. The Future Global Workforce: A Function of Supply and Demand SUPPLY FORCES • Population demographics • Government policies influencing fertility rates • Education and health policies and infrastructure • Immigration flows • Climate change DEMAND FORCES • Social/consumer values • Rate and nature of economic development • Income levels (purchasing power) • Technology • Nature of work organisation

10. Identifying The Relevant Global Workforce Those able to move (in time) Those attracted to your industry, organisation, location Those reached by recruitment process Those with desired skills and attributes Global population of working age

11. The BRICs are Changing Everything • The entry of Brazil, Russia, India and China into the global market economy has doubled the size of the global workforce and dramatically changed its demographic profile (many more younger workers). • The halving of the capital/labour ratio increased the power of capital as many more workers competed to work with the world’s capital. • The level of wealth inequality in these countries has increased dramatically. • As BRIC firms move up the value chain they will require more highly skilled workers and will become global competitors for the West’s best knowledge workers. Their improving social infrastructure will add to their competitiveness. Their huge foreign reserves will also enable them to acquire skills through corporate acquisitions.

12. China and India: Some Workforce Dynamics • The US currently graduates around 137,000 engineers each year. China graduates 351,000 and India 112,000 (from comparable curricula). • Thousands of talented Chinese and Indians now go overseas to study in Western universities leaving a shortage of skills at home and this (plus rapid economic growth) is driving up salaries. • China and India are starting to buy foreign companies to get access to the skills they need. • Survey shows that middle management salaries will rise by 16% in India and 9% in China this year. Increasing salaries (and better job opportunities) are starting to entice Chinese and Indians back to jobs in their home countries. Source: “Asian giants have quantity not quality”, Australian Financial Review, 20 August 2007, p. 23

13. Big picture demographics: Global population (millions) • 2004 • 2050 Source: Population Reference Bureau, 2004

14. Global population by age (%) • under age 15 • age 65 and over N.B. Data are for 2004 About 90% of the growth in world population to 2050 will occur in developing countries in Africa and Asia (including China and India)

15. Global population aged 65 and over (%) • 2007 • 2025 • 2050 Source: Population Reference Bureau, 2007

16. Population aged 65 and over Source: Population Reference Bureau, 2007

17. Australia’s ageing population (%) • 2000 • 2025 • 2050 United Nations “World Population Prospects” (2006) http://esa.un.org/unpp

18. Changing Expectations: Gen X, Y, 60+ How to Make Sense of the Changing Workplace? Employee Engagement Multiple, Overlapping Networks Employability vs. Job Security Skills Shortages Work/Life Balance Information Overload Changing IR Legislation Multiple, Self-Directed Careers New Technology, New Energy 24/7/365 Anytime, anywhere Collaborative Decision Making Knowledge Workers Valued Distributed Leadership New Retirement Options Diversity in the Workforce Leveraging Intellectual Property Youth Workers Two Speed Economy Distance Collaboration Global Competition + China, India Physical & Data Security Outsourcing Corporate Social Responsibility Sustainability

19. FROM Local markets, operations Manufacturing, clerical work Hierarchy Intermediaries; face-to-face Obedience to formal authority Stability, efficiency, control Full time job Shareholder value Work done by employees Fixed work location Management prerogative Loyal service White, young workforce Financial performance “Get a job” TO Global markets, operations Service, knowledge work Networks Direct access,virtual relationship Questioning of formal authority Change, creativity, flexibility, order Part-time and project work Stakeholder value Work done by many contributors Diverse work locations Social licence Marketable knowledge, skills Diverse, ageing workforce Multiple bottom lines “Get a life” Shifts That Are Re-shaping Organisations and Work

20. The changing locus of employment in Australia Source: ABS 8155.0, Section 2.1, Data for 2004-05

21. Emerging Organisational Paradigms on “the Edge” • STAKEHOLDER BASED CORPORATE GOVERNANCE PROCESSES • TERRORIST ORGANISATIONS SUCH AS AL-QAEDA • MULTI-AGENCY NETWORKS EMERGING TO FIGHT GLOBAL HEALTH THREATS SUCH AS SARS • SELF-ORGANISING COMMUNITIES CREATING OPEN SOURCE SOFTWARE SUCH AS LINUX; AND DATABASES SUCH AS WIKIPEDIA • GOVERNMENT POLICY MAKING AND DELIVERY IN A WORLD OF INCREASING DEMANDS AND SHRINKING RESOURCES • IN THE EMERGING “KNOWLEDGE ECONOMY” N.B. The network is the central organisational form in all of these emerging arenas of activity

22. MIT Scenarios Forecast Emergence of Networks in 21st Century MIT Initiative on Inventing the Organizations of the 21st Century (January 1997) facilitated by Peter Schwartz of the Global Business Network:- http://ccs.mit.edu/21c/21CWP001.html The scenarios were developed during 1994-1997 by MIT academic and research staff in discussions with hundreds of executives at various MIT Symposia, executive education programs, etc.

23. FUTURE OF ORGANISATIONS: Scenario 1 VIRTUAL COUNTRIES • Keiretsu-like alliances with operating companies in every country • Minimal national allegiance - primary loyalty is to the corporation • Traditional hierarchy or decentralised divisional structure • Company is the focus for individual identity • Company meets employees’ needs from cradle to grave • Employees own the firm and have right to elect the Board and management • Open book accounting informs management elections • Specialist “organisational designers” travel through firm brokering partnerships and fostering cross boundary communication • Role of governments, industry unions is significantly reduced Examples: Asea Brown Boveri; GE; Johnson & Johnson

24. Virtual Country HR • HR almost replaces social welfare, education systems and provides financial management and estate planning services, etc • Corporate (strategic) HR • sets standards and monitors the corporate culture • helps Marketing build the corporate brand • Divisional (operational) HR • total care of employees so they are free to focus on performance • Actively involved in local communities to reinforce the company culture and image • Selection emphasises fit with corporate values • Performance management focuses on results achieved the “XYZ way” and on being a company ambassador in all areas of life • Reward is via promotion, enhanced status, rights, benefits - and pay • Development is via corporate colleges and universities in partnership with the world’s best educational institutions • Innovation is through internal R&D and improvement programs with heavy emphasis on protecting corporate intellectual property

25. FUTURE OF ORGANISATIONS: Scenario 2 SMALL COMPANIES, LARGE NETWORKS • Autonomous teams of 1-10 people • Temporary - task or project based • Linked by high bandwidth, electronic network • Venture capital infrastructure identifies promising teams and provides financing • Independent organisations emerge for social networking, recreation, learning, reputation building and income smoothing • evolved from professional associations, unions, clubs, university alumnis, neighbourhoods, families, churches • they are home for our identity as projects come and go Examples: Film industry; Prato Mills (Italy); Nike; Nokia PC Display Division

26. Your Organisation is the Network Suppliers,Contractors Employees Govt Agencies Unions, Associations Shareholders, Investors Business Partners Community

27. Small Company, Large Network HR • Very specific in scope as far as the project organisation is concerned (e.g. talent scouting/selection, pay, health & safety) • Outsourced • agents, brokers, specialist providers • contract staff organisations handle the HR for their talent as part of their brand and competitive strategy • Individuals rely on professional associations, “guilds”, managers/agents • Mutual employment obligations spelled out in project contracts • Project Manager’s reputation depends on his/her people skills and hence there is a reluctance to delegate to HR specialists • Selection is via networks, personal references, reputation • Performance management is via peer pressure and industry/ professional standards • Rewards are contractual or entrepreneurial (equity based) • Development is via doing leading edge projects • Innovation is via brokers, deal makers, agents, sponsors

28. Traditional Organisation Formal authority Rigid structure - power concentrated at “top” Clear boundaries Leadership responsible for control Focus on contracted performance outputs Money, status hold people in the system Growth by expansion, acquisition Scale gives economic power Success measured in financial terms Threatened by complexity, change Network Organisation Expert, relationship, symbolic power Fluid structure - distributed power Fuzzy boundaries Leadership promotes order, linkages, emergent properties Focus on commitment, psychological contract Members held by values, synergy, higher order goals Growth by cell replication and linkages to new cells Power derives from symbols, stories, relationships Success is resilience, impact, quality of relations Nourished by complexity, change How are Networks Different?

29. Networks in the Knowledge Economy

30. The Leadership Challenge The vast majority of the leadership and management literature presumes large, hierarchical organisational structures. Consequently, we know very little about how to lead and manage networks - and yet these are likely to proliferate in the future as large hierarchies consolidate, die out or are transformed.

31. FUTURE WORKER 2015: A “maverick” scenario • Extreme individualisation of work • Multiple expectations of work (e.g. Gen X, Gen Y, Baby Boomers, Migrants) • Global village with virtual teams • Inventiveness spreads into developing countries • More than 60 percent of jobs will be unique to a company • More collaboration, less alone time Source: Gartner Research paper “Future Worker 2015: Extreme Individualization” 27 March 2006

32. Future Worker 2015 Key Conclusions • Future successful companies will have a symbiotic relationship with the future individualized workers, as opposed to an authoritarian relationship. • Companies that operate as if they own and control people will become obsolete. • No company will build or sustain a competitive advantage unless it capitalizes on the combined power of individualized workers and social dynamics. Source: Gartner Research paper “Future Worker 2015: Extreme Individualization”27 March 2006

33. Predictions of the Impact of Changes by 2015 High Probability     Low Probability  • Companies will have to completely revise their hiring and benefits practices.     • The average tenure at one job for skilled workers will be 18 months.    • Skilled workers will drive 80 percent of the technology acquisition decisions for their workplace.    • In highly developed countries, employees will see their managers face-to-face three times on average.   • A new breed of universities will perfect the concept of agile curriculum development.   • Seventy-five percent of corporate IT workers will be focused on supporting and enhancing cross-business processes.   • A new international legal definition of a business entity will include virtual employees, capital and a structure of accountability to replace a board of directors.   Source: Gartner (March 2006)

34. The Changing Worker Future??? Past

35. The drivers of increasing workforce diversity • Several generations at work as workforce age span increases • Increasing cultural and ethnic diversity as immigration fills skill gaps; and knowledge workers chase global opportunities • Attitudes of Gen Y and the retiring baby boomers – they both want work that fits their chosen lifestyles; and because of skill shortages they have market power • Companies must foster innovation to compete – and innovation is nurtured by diversity of ideas, knowledge, professional networks, perceptual and learning styles, problem solving styles, etc • But research highlights the critical moderating role of leadership, organisational culture and HR policies

36. The moderating role of leadership and culture Diversity X Leadership X Org. Culture = Performance • The leader must: • Allocate diverse team members appropriately • Educate the team about the important roles to be played by different skills, attitudes, knowledge, etc • Develop processes for positively managing tensions • And organisational culture and HR policies must: • Recruit, train and reward diversity • Develop leaders who manage diversity constructively

37. In Summary: A Possible Network Future • Most organisations produce or compete on the basis of knowledge and services (not things). • Most “organisations” are networks of teams and/or SMEs and encompass the entire community of stakeholders. • People skills, innovation and knowledge management skills are taught at schools and universities (these are taken for granted in the workplace). • People management systems become necessary (and invisible) organisational infrastructure; e.g. learning, change/transition management and diversity management become “real work”. • Leaders nurture networks and foster emergent order throughout the system (this is created by bottom-up action). Leader as ecologist vs. engineer or combat commander. • Work teams, informal self-help networks and formal professional associations take over much of the old HR role (e.g. in finding jobs; sharing knowledge; recognising success).