Scandinavian Management Model as Competitive Advantage in Attracting Qualified Foreign Labour

1. Scandinavian Management Model as Competitive Advantage in Attracting Qualified Foreign Labour Dr Maria Vrabcova Hardager, Norway 3 June 2010

2. Agenda • Overview of Norway’s economic environment • Population growth and net migration • Theory of migration • Overview of Scandinavian Management Model • How does the Model compare with other countries? • What can we learn from other countries? • Conclusion

3. 1.8% 2.5% 2.1% 1.8% 0.7% -1.5% Norway has performed better than most industrialised countries during the financial crisis and global recession … GDP Growth - % Change on Previous Year Source: Eurostat

4. …and unemployment rate remains well below that of Europe and the rest of Scandinavia Source: Eurostat, Norway Statistics

5. Norway’s surpluses from oil & gas revenues will ensure that any protracted slow down will leave enough room for the government to increase stimulus measures… Net Surplus (+) / Deficit (-) as a % of GDP 2010 forecast Source: IMF

6. …which helps to ensure unemployment rate remains low compared to Scandinavia and other European economies Forecast unemployment rate in 2010 - 2011 Source: IMF

7. Labour shortage in Norway myth, fact or not on the radar?

8. Overall Norway’s population is still growing compared to the rest of Scandinavia… Greenland, Iceland and Faroe Island excluded due to small size of population relative to the main Nordic countries

9. … however growth is increasingly dependent on net migration in Norway… Source: Norway Statistics

10. …this growth has accelerated in recent years due to EU enlargement in 2004… Source: Norway Statistics

11. 1 2 3 4 …and Norway has benefitted from a large influx of Polish immigrants Source: Norway Statistics

12. Norway has the highest fertility rate in Scandinavia, however it remains below World average Fertility Rate – Births / Woman Source: UN, http://en.wikipedia.org/wiki/List_of_countries_and_territories_by_fertility_rate

13. In summary, population management is complex and requires well considered strategically long term policies • Norway benefited from EU enlargement in 2004 (less skilled workers) • Current high levels of unemployment in Northern Europe and neighbouring countries should make it easier to attract labour in the short term • Longer term Norway may need to diversify its immigrant base to consider nationals outside of Europe Key Points:

14. Norway is a great country - skilled migrants should find attractive: Norway- Highest Standard of Living, UN Human Development Program, 2005 Oslo, Top 20 Worldwide Quality of Living Survey, 2009 #1 Mother’s Index 2010, (well-being of mothers), Save The Children # 20 Globalization Index 2010, KOF Swiss Economic Institute

15. The reasons for migration are complex, broadly fall into the following categories: economic, security and family reasons Reasons for Migration Push factors / Sending County Pull factors / Receiving Country Economic reasons Security/ Family Economic reasons Security/ Family • More “relaxed” and less bureaucratic • Political and/or religious freedom offered • Family links encourage • Discrimination • Poor medical care • Natural disasters • Lack of political or religious freedom

16. Economic reasons Pull Factors Push Factors • Favourable labour market conditions • Higher Wages • Favourable exchange rates (£ v €) • Job mobility and professional career development • Higher standards of living • Active presence of recruitment agents • Education • Industry • Scandinavian Management Style • Poor socio economic living conditions • Unemployment • Money • Variety • Acquiring new skills • Interesting lifestyle / culture • Career development Everett S. Lee “A Theory of Migration” University of Pennsylvania

17. Customers Shareholders Employees Society Employees Shareholders Customers Society So what are the main forms of Management Styles? US style dominates and sets the global management agenda, however Scandinavia is growing in popularity US Management Style • Shareholder Capitalism – “Happy Customers Make Happy Owners” Scandinavian Management Style • Stakeholder Capitalism – “Happy Employees Create Products which Meet Customers Demand” Global Competiveness Report 2004, World Economic Forum, Monday Morning Dec 2009

18. Culture determines how these functions of Management are implemented Planning Organising Commanding Staffing Culture Controlling Budgeting Coordinating Henri Fayol, Principles of Management

19. Culture determines the approach to how each area of management is implemented US Scandinavia Planning • Mutual need between employers and employees • Employers and employees divided • Significant control from centre • Control is “expected” • Empowered • Delegated authority • Decision making process collective and inclusive Controlling • Management lead by example • Authoritarian • Employees have influence and independence • Autonomous project groups • Low trust of authorities Commanding • Employers and Trade Unions work together to agree wage settlements – from a position of mutual respect and dialogue • Pay decisions are set by management • Wide variation in pay scales Staffing Organising • Hierarchical • Flat Source: Copenhagen Business School

20. Cultural underpinnings of the Scandinavian Management Model, influencing factors: • Rooted in socialism • Collectivism rather than Individualism • Thriftiness • Egalitarian • Trust

21. In Norway even the bad guys are influenced by collectivism ”We tip toe very quietly When we’re out to steel things We only take what we must And things that we really need….”

22. Labour productivity has been falling overall however it has fallen faster in Scandinavia Labour productivity annual growth rate Source: OECD

23. Could it have been impacted by Scandinavia having one of the lowest average working hours within OECD? Average working hours per worker per day Source: OECD

24. How some countries attract immigrants? • Depends on high inflow of talents to fill vacancies and / or • High level of government participation in enterprise / wealth creation

25. Selected countries US UK UAE / Dubai Singapore Australia Japan

26. US Overview Throughout much of America’s history, immigration has been a major source of population growth and cultural change The American Dream is a belief that hard work and determination, any immigrant can achieve a better life US accepts more legal immigrants than all other countries in the world combined 20.6% of world’s total migrants and 12.8% of national population are migrants Positively encourage – Bill Clinton said: "America has constantly drawn strength and spirit from wave after wave of immigrants...They have proved to be the most restless, the most adventurous, the most innovative, the most industrious of people” Since 911 public attitudes towards immigration have changed Global economic recession has augmented the negative aspects of immigration

27. US has a lot to offer Pull Factors Push Factors • Career Development • Education • Free (Political Rights – 1, Civil Liberties – 1) • The American Dream • Management Style • Straight talking and 'getting to the point' • Respect is earned through conspicuous achievement rather than through age or background • Self-deprecation is often misunderstood by Americans as a sign of weakness • Time is money • Structure proposals to emphasize quick wins rather than long-term objectives

28. US is facing one of the most severe unemployment rate since 1982 Source: http://www.miseryindex.us/urbymonth.asp?StartYear=2000-01&EndYear=2010-04&submit1=Create+Report

29. A large proportion of US population growth is achieved through migration Source: http://www.census.gov/popest/states/NST-comp-chg.html

30. UK Overview Up until the global recession, UK has accepted the largest number of migrants from the EU enlargement in 2004 Immigration is seen as beneficial to economy by some political parties not shared by majority of Britain Attracting too many low skilled means the tax they pay are unable to cover the social services they receive Moved to points based system, similar to Australia with emphasis on professions where there are skill shortages 2.9% of world’s total migrants and 10.0% of national population are migrants OECD Tax burden 36%

31. UK Pull Factors Push Factors • Free (Political Rights – 1, Civil Liberties – 1) • Management Style • A manager is expected to have the interpersonal skillsmanagers to be 'generalists' rather than 'specialists‘ • High job mobility • Flat management, Managers developing a close, friendly relationship with staff,but they make thedecisions • Respect is earned through experience rather thanqualification system • Career Development • Education

32. UK’s projected population growth is spread out fairly evenly between natural changes and net migration

33. …however this

34. UK has taken in a large proportion of immigrants from accession countries Source: ONS, DWP, National Insurance number allocations to adult overseas nationals

35. UAE/Dubai Overview • Driven by need to populate with both highly skilled and unskilled labour due to transformation of state from oil producer to international hub for commerce and regional tourism • Build and they will come / playground for the rich • 1.7% of world’s total migrants and 71.4% of national population are migrants • Sovereign State – all state enterprises and large corporations owned by the ruler of Dubai • Negatives have not deterred skilled migrants • Not allowed to take up citizenship / permanent residency ( work permits only) • No unemployment benefits • Closed culture • Hot

36. UAE/Dubai including the rest of Middle East’s management practices are very different to Western styles and is not a model for attracting skilled migrants, however tax free status ensures there is no shortage of people wanting to work there Pull Factors Push Factors • Not Free (Political Rights – 5, Civil Liberties – 5) • Dubai (including middle east) Undeveloped management practices built around state ruler • Autocratic • Hierarchical • Nepotism • Very relationship-oriented, respectful, patient, • Managers reach decisions only after discussing • the matter with the major stakeholders • Employees do not question the decisions that managers have made • Relaxed immigration policy for skilled/unskilled migrants • Only work permits offered • Permanent Residency not recognised • Tax Free • Playground for the wealthy • English is used in business and government • Presence of recruitment agents • No tax • International hub – 3 hours to India, 6 hours to Europe • Western Corporates sending employees there • Short term attractiveness

37. Singapore Overview • Driven by need to populate with highly skilled labour due to lack of resources • Latterly driven by economic expansion of neighbours – financial centre of Asia • Master plan looking to increase population from 4m+ currently to 6m+ in 2020 • 1.0% of world’s total migrants and 42.6% of national population are migrants • Socialist democracy / Engineered Society • Negatives have not deterred skilled migrants • High density • Cost of living • Hot and humid climate

38. Singapore has established itself as the business centre of Asia with shipping, tourism and financial services coupled with a flat tax regime of 15% and multicultural which attracts a lot of skilled talent Pull Factors Push Factors • Partly Free (Political Rights – 5, Civil Liberties – 4) • US model, heavily influenced by traditional Asian values • Mix of solidly traditional Asian values and western business techniques • Multiculturalism accepted • Age is respected and managers tend to be older. • Managers delegate decisions to their teams • Outside family ties, promotion will be based on performance • Relaxed immigration policy for skilled migrants • Permanent Residency offered after two years to those who meet the country’s list of key skills • Extensive resource available to help potential skilled workers • Job vacancies advertised and run by government • English is used in business and government • Presence of recruitment agents • Career Development • Flat Tax system – 15% • Income levels are significantly higher (x3-x5 timeshigher) than those around Asia • International hub – 3 hours to India, 6 hours to Dubai,3 hours to HK/China • Head Office or Regional Head Office for many westerncompanies

39. Singapore has very low unemployment rate and it has increasingly relied on the non-residents (immigrants) to take up jobs Singapore Residents and Non-Residents Singapore Unemployment Rate ‘000s Singapore Residents include citizens and permanent residents Source: Singapore Statistics Office

40. Australia Overview • Historically driven by need to populate smallest continent • Latterly driven by economic expansion – mining / housing boom • Master plan looking to increase population from 20m+ currently to 35m+ in 2030 • 2.2% of world’s total migrants and 19.9% of national population are migrants • Negatives have not deterred skilled migrants • Recent backlash against immigrants • Cost of living (Property is x9 average earnings) • OECD Tax Burden 31% • Remote – 24 hours to get to Europe • Limited career advancement (compared to Singapore / Europe)

41. Australia follows the US management style which is heavily influenced by British culture. Unsurprisingly UK is Australia’s largest source of immigrants Pull Factors Push Factors • Free (Political Rights – 1, Civil Liberties – 2) compared tomany Asian countries • US model, heavily influenced by British culture • Meritocratic – although some elements of “old boy network” remains • Highly functional, “less” responsibilities • Work life balance emphasised • Sports unites – Aussie Football, Cricket, • Multiculturalism accepted • Highly developed immigration policy (Points Based System) • Skilled Migration Programme – Permanent Residency offered to those who meet the country’s list of key skills • Extensive resource available to help potential skilled workers • Language tuitions • Presence of migration agents and recruitment agents in theUK and Australia • Deep historical links with UK – economic and family • Significant arrangements with UK (2 year working holiday VISA) • Education – Australia’s 2nd largest export – attracts asignificant number of students from Asia • Looking for a more “relaxed” lifestyle

42. In Australia, population increase has depended on the Net Migration, particularly in the last 10 years

43. Despite higher unemployment rate in comparison to Norway, Australia remains very attractive to immigrants

44. Japan Overview Immigration is very much discouraged - citizenship and permanent residency are extremely difficult to obtain 1.1% of world’s total migrants and 1.6% of national population are migrants Addresses the shortage of workers through industrial automation

45. Japan policies discourages immigration which is addressed by significantly investing in robotic technologies to automate significant parts of their manufacturing processes Source: World Robotics Report 2008

46. Japan is an advanced economy, however it discourages migration even when demographics show a rapidly ageing population Pull Factors Push Factors • Partly Free (Political Rights – 3, Civil Liberties – 4) • Internationalisation • High earnings • “Japan and American management are 95% the same, yetdiffer in all important aspects” -Takeo Fujisawa, Founder Honda Motor Company • Hierarchical, high emphasis on job and seniority • Large supervisory • Unassuming, un ambitious managers • Polite and diplomatic • For international companies-- opportunities for careerdevelopment (Sony, Nissan) • Japan is not keen on immigration • Asia’s financial centre • Western Corporates with regional hubs

47. Industrial automation From this To this

48. More radical solutions? From this To this?

49. Even more controversial? To this? From this

50. So what insights can we learn from these countries and what can we do? Critical Success Factors • Management that accepts multiculturalism • Create awareness • Proactive recruitment • Appreciate limitations – regional • Tax is a driver • Automation