Globalisation & ‘People’
In our last post on ‘The Future of Work’ we wrote that “That period in your day we call ‘work’ is about to change drastically, and both workers and the organisations that they work for will have to change too.” In this post we want to look at the three key areas which are broadly geo-political and ‘people’ related that are driving future business change. Those domains are Globalisation, Future Workforce and ‘Generation Z’.
Increasing global co-operation, the expected growth in global multi-nationals and ‘Generation Z’ coming of age when the workforce is shrinking will all combine to drive another set of major business transformations.
The global nature of doing business and co-operation is now an established fact. The economies of nation states are more interconnected than ever before and in one sense this will see end to traditional borders as we know them. More of us in the future will be working for multi-national corporations and global economic power will continue to shift to the emerging regions.
The Governments’ of the most developed countries spend as much time focussed externally, looking outwards, as they do focussed on domestic matters. Insight and influence in the Middle and Far East is as important as managing change back at home. Whilst the select few belong to very exclusive ‘clubs’ such as the G7 and the UN Security Council etc, many other countries co-operate via a plethora of ‘global’ bodies. As citizens of nation states we can’t act in an insular way. Increasingly nation states are co-operating, and collaborating to solve the most difficult problems. Many countries are keen to belong to the ‘global clubs’ such as:
- UN Conference on Climate Change included representatives from every country in the world, working through and signing up to what in principle is a single agreement.
- World Economic Forum 2016 boasted 2500 participants from 100 countries, that’s over 50% of the Worlds countries. With its stated mission of “committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas”, it draws world leaders and business leaders.
- The International Space Station is arguably the most expensive thing ever constructed (c.$150Billion) and is a collaboration between the USA, Russia, Japan, Europe and Canada.
So at nation state level, there is accelerating co-operation and collaboration, which is set to continue. If anything, globalisation in the private sector is set to be more rapid. Back in 2010, McKinsey predicted that the number of companies which you could describe as global, i.e. large corporations trading across continents, would almost double from 8,000 to 15,000 in the 15 years between 2010 – 2025. They also predicted that 45% of the new global corporations being based in the emerging ‘BRIC’ regions. So there are going to be more, huge corporations, which theoretically will drive down costs as they compete globally. This might be seen as an issue for smaller and medium size organisations as they get squeezed in the market but conversely this predicted growth provides huge opportunities for supply chain and service companies.
Increasing globalisation will bring with it an increase in employment opportunities. As we’ve already seen there’s a growing list of global companies setting up in emerging regions, creating opportunities for employment where none existed previously. Migration barriers will necessarily need to be removed such that people are able to migrate easily further creating opportunities for better jobs.
Globalisation is also driving up educational standards right across the globe, and necessary so as emerging markets need a steady supply of indigenous, well-educated employees. The G7 group of countries all possess excellent higher education establishments and they typically make it easy for foreign students to live and study in their countries. A good example of this would be the UK. In the academic year 12/13 the UK administered higher education to almost half a million non-UK citizens with around 22% of these from the emerging regions of China and India. In the same year over a million overseas students were studying in overseas campuses for UK qualifications, in partnership with local HE establishments. As top rate educational institutions spread across the globe, it has become easier to move from home countries for better education opportunities. This has led to integration of cultures and people from different educational backgrounds. The countries that have benefitted mostly from this phenomena are those with typically labour intensive economies and the developing nations.
Growing international trade has increased competition, driven prices down and driven quality up. For example the first commercial mobile phone would have cost you £3K back in 1985, and the quality was, well, questionable. There’s no doubt that the quality of almost every mainstream mobile phone on the market now is a huge improvement, and continues to improve, and the price isn’t prohibitive. Generally speaking consumers today can make compromises when it comes to price but not quality.
The removal of trade barriers internationally has also been a factor in the fall in prices of commodities with fierce competition noted in some markets. With an increase in potential global suppliers, consumers have a choice making it a necessity for producers to price them competitively. Increased trade, migration and internationally based higher education people are becoming more tolerant and open towards one another. Additionally, globalization has also enhanced communication.
In some quarters there are concerns that globalisation doesn’t serves the ‘haves’ but not the ‘have nots’, but there is strong evidence to the contrary. Globally over the last 35 years there has been a sharp fall in the percentage of those living in extreme poverty, defined as those living on less than $1.90 a day, from 44% in 1980 to 10% in 2015.
As multi-national corporations utilise the local workforce, and force up living standards they are often seen, often by those already with higher living standards, predatory and exploitative. So international social justice via improved working conditions is a challenge. Another challenge to the growth to burgeoning multi-nationals and globalisation global is how these corporations make use of local national resources and care for the environment.
A further adverse side effect of globalization is that travel wise, the globe is smaller which has led to the incursion of diseases especially deadly ones by travellers in some cases, to the most remote regions in the world.
We are starting to see major shifts in the distribution of age and diversity of the global workforce. Essentially in the coming 10 to 15 years as the ‘baby boomer’ generation retires and fewer skilled workers are available to replace them, companies in industrialised markets will face a severe labour shortages and a huge brain drain.
A number of the so-called BRIC countries will be badly affected, as demand outstrips supply. By 2030 Brazil will have a labour shortage of 33%, a third of their current workforce will basically go missing, and for an emerging economy that’s a huge challenge. Equally challenged will be South Korea losing 26%, Russia losing 24%, Germany 23%, Canada 11% and Mexico 8%. Many other countries will have single figure workforce population deficits such as Italy at 4%, Spain and China at 3%, UK and France at 1%. The USA and India are seemingly relatively unaffected.
This global workforce crisis presents a unique set of problems for organisations and front and centre of those is the apparent power shift from employers to the employed.
The Global Workforce Crisis (BCG, July 2014)
Organisations that ignore this issue will not survive, employees will have much more choice and competition for them will ensue. Whether or not organisations remain in business will depend on how they (or wider society) redefines retirement, transforms how they deal with and manage employees and on wider HR practices. In this new circumstance the whole lifecycle of recruit, retain and retire must be addressed. Knowledge management will be a challenge, how do organisations ensure that there is no loss of organisational memory as the old and bold head home to retire? How do we re-engage with those disillusioned mid-career workers, and how do we attract and retain the youthful talent. In the coming years there will be huge competition for skilled workers. Organisations necessarily have to devise different employee engagement models, but the crisis will give rise to more imaginative use of Artificial Intelligence and we’ll have to use ‘machines’ and algorithms more, not only in physically doing certain tasks, but also in directing work in the pursuance of higher productivity. In the coming 10 years many more of us will be working for, or at least directed by ‘Robot Bosses’.
Advances in both the medical and technological environments are leading some to consider what humans will be in the future. Transhumanism is a growing movement which considers that advances in areas such as nanotechnology, biotechnology, information technology and cognitive science (NBIC) will lead to us becoming ‘more than humans’, or H+. With advanced robotics and hybrid brain/computers just around the corner the challenge for future organisations is adapting to make use of these advancements, and how to adapt the workplace to cater for future humans.
In 2015 ‘Generation Z’ represented 25% of the population. These ‘Digital Natives’ are starting to enter the workforce in the next few years and they will have very different life expectations and they are very comfortable with technology.
- Builders 1925-45
- Baby Boomers 1946-64
- Generation X 1965-79
- Generation Y 1980-94
- Generation Z 1995-……
Whilst the world is a safer place that it has ever been before, this is a generation that has been brought up indoors, protected by fearful parents. Their playground has been accessed through a screen and much of their social interaction is done online. During the period from mid-90’s to late 2000s we have seen what many have called ‘the crisis era’. The rise and subsequent fall of the ‘dot-com’ bubble in the late 90s saw $BNs wiped off stock values. Hot on its heels we saw major terrorist event’s the ramifications of which we still see today with the radical Islam still seeking to find its place in the world, with values which are the polar opposites of those of western democracies. Coming off the back of major upheavals in the Middle East the world then entered a global recession, the scale of which has not been seen before. So if you born in 1995, you’ve grown up in an age of global turmoil and it highly likely that as an early teenager you’ve seen either your or a friends parents try to cope through a protracted global downturn. Character building, but also possibly leading to the dampening of entrepreneurial spirit.
Generational and workforce analysts characterise Generation Z in a number ways, which together impact on how organisations will need to plan…..
- Education – ‘Generation Z’ see higher education as an unsafe investment. They see the ‘baby boomers’ selfishly holding on to their relatively highly paid jobs, in order to maximise their pensions, because they are living longer. Employers are concerned about the growing skills gap caused by outdated educational systems which fail to fill workplace needs. Competitive business environments drive organisations to change, but the traditional education models and approaches are much slower to adapt. For example as University cost rise – so does free access to the web, where access to knowledge is ubiquitous. You don’t need a degree to thrive in any most careers, and some in the high end technology environment positively encourages students to drop out of college to start entrepreneurial careers.
- Entrepreneurial spirit – as a ‘baby boomer’ your formative years would have been informed by parents who lived through the war and who probably felt lucky that they had survived. The consequential ‘rise from the ashes’ spirit of building anew, probably pervaded your upbringing. As a person born into ‘Generation Z’ it remains to be seen what the effect of the ‘era of crisis’ has had. Whilst the majority of ‘Generation Z’ express a desire to be an entrepreneur real or perceived risk might well drive them down the intrepreneur route, opting to work in large organisations.
- Government – it is thought that ‘Generation Z’ will be less resistant to Government subsidies than their predecessors. In the US studies show that these youngsters are financially pragmatic, are more pre-disposed to government intervention and less independent from the state.