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Lance Jensen Richards, GPHR, SPHR Senior Director and Global Practice Leader Human Resources Consulting Kelly Services,

Lance Jensen Richards, GPHR, SPHR Senior Director and Global Practice Leader Human Resources Consulting Kelly Services, Inc. Talent 2.0: The War is Over. Now what?. 2008. What Are CEOs Saying?. “Global competition has heightened the need for flexibility and speed”

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Lance Jensen Richards, GPHR, SPHR Senior Director and Global Practice Leader Human Resources Consulting Kelly Services,

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  1. Lance Jensen Richards, GPHR, SPHRSenior Director and Global Practice LeaderHuman Resources ConsultingKelly Services, Inc. Talent 2.0: The War is Over. Now what? 2008

  2. What Are CEOs Saying? • “Global competition has heightened the need for flexibility and speed” • CEOs “worry that they don’t have the right kind of people for new market conditions” • “Globalization is rewriting the rules” • “Developed countries must reinvest and make their existing populations focus a lot more on skill development and education” • In 2001, Competing for Talent was the No. 1 management challenge in Europe, No. 2 in the Americas. • By 2004, “Talented Managers/Executives” was rated as a top priority by 86% of CEOs in Asia, 82% in Europe and 72% in the Americas. • By 2007, HR, Talent and Culture issues represented six of the Top Ten Challenges Do you know why your CEO is lying awake at night? Why not??? Source: The CEO Challenge; an annual survey of over 500 CEOs worldwide, executed by The Conference Board and various partners

  3. 2007: CEO’s Top 10 Global Challenges Percent ranking Challenge “Greatest Concerns” 1 Excellence in execution 38.3% 2 Sustained and steady top-line growth 36.8 3 Consistent execution of strategy by top management 31.8 4 Profit growth 28.4 5 Finding qualified managerial talent 27.2 6 Customer loyalty/retention 26.3 7Speed, flexibility, adaptability to change 25.4 8 Corporate reputation 23.7 9 Stimulating innovation, creativity, enabling entrepreneurship 18.7 10 Speed to market 18.2 Source: The CEO Challenge; an annual survey of over 500 CEOs worldwide, executed by The Conference Board and various partners

  4. Global Issues… Japan will be hit hard by labor shortages, and is expected to experience the squeeze first, of all developed nations. Russia: Simultaneous high unemployment and skills shortage • The 15 current European Union (EU) nations face shrinking labor pools.* • The number of people aged 20-59 years will decrease from 208.7 million in 2000 to 151.2 million in 2050. • During the same period, the number of people over the age of 60 will climb from 82.1 million to 125.1 million. Baltic Region: skills shortage and simultaneous high unemployment China is experiencing both rapid labor force growth and a skills shortage. Southeast Asia will see its workforce grow by 58% within the next 30 years.* East Africa (i.e.Eritrea): skilled workers shortage. India: The number of working-age people will increase by 335 million by 2030, a number almost as large as the total working-age population of the EU and the United States combined in 2000.* Central and South America: High fertility rates and high levels of unemployment, in addition to northern migration. Australia: Expects a shortage of 500,000 workers by 2020. Sub-Saharan Africa: Labor shortage predominantly in agriculture. Area of skills/labor shortage Area of population growth/unemployment Note: There is enormous variation in how far out labor projections go for each country/region. South Africa: Skilled labor shortage; unskilled labor surplus. New Zealand: Already has shortages of skilled workers in local building and manufacturing industries. (Local PR) Sources: EU information – “Demographic and Social Trends Issue Paper: Europe’s Changing Demography Constraints and Bottlenecks,” June 1999. *Fact Sheet: ”Living Happily Ever After: The Economic Implications of Aging Societies,” Watson Wyatt Worldwide & World Economic Forum. No date provided.

  5. From now to 2030, people aged 65+ will grow from 15% of the developed world's population to nearly 25%. In Mexico, in 2007, there were nine children for every elderly person In 2050, that ratio will be 1:1 The Mexican percentage of population aged 65+ in 2005 was 6.29%; by 2030 it will double to 12.77% Insights into the Demographics 65+ as Indication of Retirement through 2025 * Ag2000 (Agenda 2000) refers to the following countries with accession agreements with the EU: Poland, Czech Republic, Hungary, Estonia, Slovania, and Cyprus. Source for Graph: Demographic and Social Trends Issue Paper: :Europe’ s Changing Demography Constraints and Bottlenecks” Géry Coomans (Institut de Sciences Mathématiques et Economiques Appliquées) EUROPEAN COMMISSION DIRECTORATE-GENERAL JRC, June 1999. Source for Text: CSIS Study, The Challenge of Global Aging, 2003 and the UN World Population Prospects report.

  6. Insights into Global Shortages:Projected growth rates vary tremendously among countries Working-Age Population, in Millions • Many countries will see a growth in working age population… but this does not translate directly into skilled workers. • The EU and Eastern Europe will see a contraction of their working population between 2010-2050. • The Middle East and Northern Africa will almost double. • China will peak in 2020, then contract through 2050. • India won’t stop growing... * Countries in blue = working populations shrinking the most in the next 25 years. ** Countries in red = working populations expanding the most in the next 25 years. Source for table: Fact Sheet: ”Living Happily Ever After: The Economic Implications of Aging Societies,” Watson Wyatt Worldwide & World Economic Forum. No date provided. Source for graph: CSIS Study, The Challenge of Global Aging, 2003.

  7. Fertility and age… • Fertility in most developed countries has fallen well below the “replacement rate” of 2.1 children per woman. • For 2008, some fertility rates were as follows: India 2.76, Mexico 2.37, US 2.10, Brasil 1.86, China 1.77, EU 1.50, Japan 1.22, Hong Kong 1.00. • Could Canada run out of Canadians?

  8. For Mexico… • Population growth remains strong • Replacement rate nicely above breakeven • Unemployment below traditional measures of full employment (only 3.6% in June 08) • Well ahead of Brasil at 7.9% and the US at 5.5% • But, velocity of consumer price growth rose 20% YoY, from +4.0% in 2007 to +4.8% in 2008; in June +5.3% • Approximately 9% rise in value of MXP vs USD in last 12 months (and the Economist says the Peso is still 12% undervalued!) • So, why can’t you fill jobs??? • Problem: Mexico’s Labor Participation is below 60% (OECD average is 66%) Sources: The Economist 26 July 2008; OECD Employment Outlook

  9. Global Skill Shortages:Nurses’ organizations from 69 countries report shortage • Rapidly aging populations mean an increased demand for health care professionals globally. • US: shortage of over 1,000,000 nurses by 2012. • Many cities in the US are recruiting healthcare workers from Mexico to address the growing Spanish-speaking population there • Canada: 50% of nurses employed in 2003 will retire within the next 15 years. • Japan seeks to bring in 1000 Indonesian nurses during 2008 and 2009. • Worst shortages are developing countries, made harder by heavy external migration of healthcare workers. Sources: International Council of Nurses, Socio-Economic News: January-March 2003, http://www.icn.ch/sewjan-march03.htm ; Survey conducted by Penn State.; Deloitte Research: It’s 2008, Do You Know Where Your Talent Is?; 2004.

  10. The Coming Labor Shortage:“Plenty of people, not enough skills…” • Driven largely by technological advancements, the economy is demanding continually higher levels of “cognitive” abilities. • “When new technology eliminates less sophisticated jobs, it creates higher-level positions elsewhere. The difference is that entry-level applicants now need at least a two-year degree in applied science to handle the job.” Even traditionally blue-collar jobs are requiring/will require higher skill sets. • “The cognitive abilities required to run a production line and the computer skills that go with that are significant to the point where somebody who's [only] got muscle power is not going to be qualified for those jobs.” Sources: Human Resource Executive, “Future Shock.” March 16, 2003; Business 2.0, September 2003 Issue; “The Skills Gap and the American Workforce,” by John Rossheim

  11. College Education: A flat line? • Globally, college education rates appear to have leveled off: • In 2006, the percentage of the prime-age labor force that will go to college (college participation rate) in Mexico was at 13%, the US at 35%. • Mexico’s labor force needs to improve education: while 58% complete primary schooling, only 19% complete secondary… only 16% complete tertiary (Peru? 36%) • The US is expected to flat-line over the next 20 years. • India is at 7%, and working to get to 10% • Worrisome: Enrolment in crucial fields such as engineering and science have been declining worldwide. Source: Springer International Handbook of Higher Education; 2006, The Tectonic Shift in Global Higher Education; The Carnegie Foundation for the Advancement of Teaching, Jul/Aug,2006

  12. Science and Engineering Students • In Mexico, as of 1997, Science and Engineering students represented about 32% of all undergraduate degrees • In the US… 32.6% • In China, that number is 72.3% • From 1998-2008, though, US colleges will graduate only about 198,000 engineering and science students • In India, 350,000 students graduate in engineering each year. • But, in 2006, there were 451,000 Mexican students in engineering… just over 370,000 in the U.S. * Source: It’s 2008: Do You Know Where Your Talent Is?; Deloitte Research, 2004.; Dan Pink; A Whole New Mind; Encyclopedia of the Nations; BusinessWeek, May 22, 2006

  13. But, they’re not ready for work… • McKinsey research asked HR professionals in several countries what percentage of recent graduates would you consider employable… • Engineers Czech, Poland, Hungary 50% India 25% China 10% • Finance/Accounting India and China 15% Brazil 13% • HR Generalists Russia 10% China 3% Source: McKinsey Quarterly, Jan 2008

  14. …and what are they thinking? • Employers are “dangerously disconnected” from recent college graduates • Employers focused on academic achievement • Recent graduates focused on work/life issues; less than 20% expect to remain for five years • Major disconnect in perception: • 91% of graduates said they were “well prepared for the workplace” • 54% of employers said “NO, they’re not!” • Changing employee needs will exacerbate these labor shortages: • By 2007, fully 86% of workers cited work fulfillment and work/life balance as their number one career priority • Only 35% of workers said that being successful at work and moving up the ladder were their top priorities Source: Personnel Today; 13 June 2006; Firms ‘dangerously’ out of touch with graduates

  15. Engagement in Mexico • In recent Towers Perrin research, Mexican employees showed: • 54% of all workers Engaged • (vs. 3% in Japan or 13% in Netherlands) • Top Attraction Drivers: Competitive base pay and career advancement opportunities • Top Retention Drivers: Encouraging new ideas and actions and relationship with supervisor • Top Engagement Drivers? • Decision making authority to do job well, challenging work assignments, and fair and effective performance appraisals • However, Mexico also has a 27% Job Insecurity rating… the highest in Central and South America Sources: Towers Perrin Global Workforce Study, 2008; Inter-American Development Bank paper, January 2008

  16. The means of production, in the form of computers, are now in the hands of the workers… literally. USD178 laptops are shipping to emerging markets… What will the “means of production” mean in 2030? How will unforeseen technologies change work? Infosys, the Indian IT giant finished 2007 with USD4.17bn in revenues (2008? USD5bn+) They are “investing a whopping USD450mm in training” … over 10% of gross revenues… and representing about 42% of eventual net profit… How much are you spending? Karl Marx’ Revenge and Infosys…

  17. McDonald’s McPassport The McPassport, a McDonald’s Europe initiative, is an official certification of the training and skills that employees have acquired while employed by McDonald’s It is designed to support employee movement throughout the EU’s 25 member states Over 225,000 McDonald’s employees are eligible for the McPassport, called “unprecedented” by the FT

  18. i2 Technologies • i2 Technologies in Dallas is offering to relocate their employees, regardless of nationality, to India. • Why? • 66% decrease in hard costs • Development of Global Managers • Export of i2 corporate culture, leading to an i2 global culture. Labor mobility no longer solely means moving work overseas- it can mean moving workers overseas! Source: Travis Jacobsen, i2Technologies Director, Investor Relations

  19. What’s going on here??? • Germany is identifying 3-year-olds for science education • China is recruiting businesses from Mexico- which were recruited by Mexico from the US • “Medical Tourism” is driving a new economy in Thailand… healthcare skills become critical • Norway is recruiting Polish carpenters to address their homelessness issues • Japan is recruiting Indonesian nurses and Filipino farm workers • Russia is recruiting Australian engineers… and Australia is recruiting US engineers

  20. Truly a global problem Work (and attitudes towards work) is changing College education rates have leveled off Forecasted shortage of talent (not simply people) is coming true, but few solutions are on the horizon There will be people, but you may not want them… and if you do want them, you may not want them forever. HR needs to change… Broad Headlines…

  21. HR’s disconnect with line managers…

  22. Technology and HR • Acceleration of technology - be prepared for technologies that will leave your existing way of doing things in the dust- resistance is futile • Have you held a Kindle lately? • What’s your efax number? • What’s on your iPod: DesperateHousewives or your CEO’s monthly video podcast? • Technology has crushed distance • Do you Skype with your co-workers or your kids?

  23. What must you do? • Change the way you manage expectations… • Recognize that managing expectations may be the best employment practice of all… • HR has a responsibility to set and manage expectations for line managers • To do this, HR must clearly understand the labor market today, and where it is going tomorrow • HR must help managers manage… but we cannot always just say “Yes” • Understand local labour issues, the shift in the supply/demand balance, current marketplace; availability of managers; specific skills or competencies which are scarce or abundant • Understand legal constraints on your ability to hire, manage, pay, separate employees and local practices.

  24. What must you do? • Change the way you staff… • Develop robust recruitment practices that span the globe • Be ready to acknowledge that not everyone you hire is designed to remain with you forever • Your solid knowledge of local labor markets and recruitment practices is key • Have you researched the availability of qualified managers and their attitudes toward work? • Change the way you reward… • Are you incentivising short-term people against long-term results? Why? Why not? • Do your pay practices encourage best and brightest people? Do they enable or discourage Just-in-Time employees? Do you have ‘7-day Weekends’? • Does your comp strategy embrace local market practices, or ignore them?

  25. What must you do? • Identify and use robust benefits practices • There are two types of benefits; Statutory and Market Practice • You will have to exceed Market Practice if your requirements are at odds with current employment market • What are you doing? What are your competitors doing? • Change the way you handle M&A activities within HR… • To be successful, your HR team must be fully engaged; HR has an implicit mandate to understand, set, and manage, expectations at all levels • HR must read and understand the business plan, the economic models underlying it, and how people issues might affect execution • HR must know the business as well as HR knows HR!

  26. What must you do? • Change how you manage employee and leadership development… • Ownership has shifted… companies want employees grown and developed, but don’t have systems to handle the wildly different needs of many different people in many places • Employees who do take ownership of their development, and aggressively look for growth and learning, will drop companies who do not do so • Money is scarce… pay and promotions will chase those who differentiate themselves • Develop a locally-relevant retaining work environment- and this has to be defined in local terms. • What’s “retaining” in Mexico’s City may actually be a turn-off in Stockholm or Singapore… • How do you know whether you’re pushing the right buttons? • Integrate career development efforts with business goals

  27. What must you do? • You must change the way you manage retention… • Redefine retention: What must you do to retain these people? Do you know? Do you want to retain them? • What your employees think and say about your company has an impact on them and others. Do you know what they are thinking? Why not? • Do you understand why people are leaving? Can you articulate when turnover is regretted or unregretted? • Who is accountable for retention? HR or line managers? Is it included in performance management? Source: White Paper at Talentkeepers.com; SHRM Employee Engagement

  28. So, what now for Mexico? • Good news: • Solid population growth • High literacy • Excellent university system • Timely federal government intervention for Science and Engineering • Bad news: • Labor participation rate is low • Underemployment is a concern • Education needs some help… • Migration of ‘best and brightest’ • Loss of healthcare workers

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