A monthly report to keep you thinking about the strategic impact of society, technology, economics, ecology and politics.

September 2007

This months issue: The Upcoming Talent Crunch 2007 - 2027

About THE STEEP REPORT: a monthly service to help businesses anticipate and profit from whats next
Welcome to The STEEP Report. Here at Competitive Futures, we work everyday with leaders of business and government to help them anticipate and profit from future trends. Our clients have been asking us to develop a different kind of strategic update service. Many of our clients have subscriptions to services that bombard them with interesting facts about the changing world hundreds of emails a week! They said to us, Give me ONE trend, ONE thing to tell my CEO about if I get him in the elevator. Give me ONE interesting trend per month and what to do about it. Once a month, the STEEP Report brings you the most important developments in Society, Technology, Economics, Ecology, and Politics. Our goal is to give you a five- to twenty-year perspective on the major changes of the day the long-view in a world that prizes next quarter thinking. Unlike many news services that simply push data on you, The STEEP Report brings you strategic implications and recommendations from both our own analysts and world-renowned subject matter experts. We bring you the future, what it means, and what you can do today to profit tomorrow. I look forward to helping you inspire vigorous strategic discussions and also to help you create a culture of future-focused leaders, wherever you are. Yours, Eric Garland

Eric Garland Principal Competitive Futures, Inc.

Think S.T.E.E.P. to anticipate future trends

Why do we talk about S.T.E.E.P.? What does it mean?
If you happened to read Eric Garlands Future Inc: How Businesses Can Anticipate and Profit from Whats NEXT, then you remember that one of the biggest reasons companies are surprised by the future is that they dont look at changes outside of their own industries. (Record companies were caught flatfooted by the expansion of the home computer and the MP3, and ended up suing teenagers, for example.) One remedy we recommend is to look beyond your industry in a systematic way dividing up trends into groups such as Society, Technology, Economics, Ecology and Politics. This forces you to consider broader changes that are not obvious, not directly from your industry or right in front of your nose. This is essential in a rapidly-changing global economy! Here at Competitive Futures we say the world is superconnected meaning that family trends, the Internet, biotechnology, agriculture, beer, air travel its ALL going to change your future. So you must stay on top of all kinds of trends. As such, not every issue of The STEEP Report will appear to pertain directly to you. But think deeper it will likely mean something to your customers, your suppliers, the government. Combine insights about this broader future with your tactical, day-today, cash-register-filling activities, and youre practicing future intelligence.

The STEEP Report is designed to help you develop a culture of future intelligence
The STEEP Report is just one tool to use in developing a culture of future intelligence. The Future Intelligence System, elaborated in Eric Garlands book Future Inc.: How Businesses Can Anticipate and Profit from Whats Next, shows that there is an organized, rigorous way to bring the future into the strategic thinking of your organization. There are six steps: Systems thinking thinking broadly Trend analysis collecting reliable data about the future Forecast assessment considering the opinion of experts Implications analysis - asking what it all means Scenario generation weighing several strategies Communications - sharing your insights with others The STEEP Report is a point of departure for several of these steps, specifically systems thinking, trend analysis, and implications. Our goal is to bring you the larger system, the relevant trends, and some thinking about what it all means. The rest is up to you we hope youll use this series of reports to get your organization talking about what these changes mean (implications) and how trends could combine in different ways (scenarios) and to bring more of your company into the discussion (communications). In the end, we hope this motivates profitable action ahead of the competition. Please let us know any feedback at steepreport@competitivefutures.com.

Sept 2007 STEEP Report: At a glance

The Big Picture
Overview 60 Seconds with the CEO Systems Map Timeline

The Trends
Trend #1: Aging populations leads to mass retirement Trend #2: International competition for talent Trend #3: Increase in knowledge-based industries Trend #4: Generation X & Y taking power, with different values

What to do Today
Strategic implications Recommendation

The Big Picture

60 Seconds with the CEO Overview System Map The Timeline

THIS MONTHS ISSUE Why We chose THE FUTURE OF THE TALENT CRISIS
(Because, oddly, the HR Department could be the key to future profitability)
Human resources is almost NEVER on the vanguard of future trends. Biotechnology and genomics? Sure. Nanotechnology? Frequently. The next generation wireless internet? Absolutely. But the HR Department? Human resources is going to be one of THE key drivers of the 21st century. Heres why. Think of the following activities. Designing missile guidance systems. Accounting for oil and gas. Fixing elevators. Delivering great customer service. Performing colonoscopies. Formulating arms proliferation policy in Central Asia. What do they have in common? NONE OF THEM ARE EASY. NONE OF THEM ARE SIMPLE. The critical skills of a developed economy cannot be learned at some weekend training seminar in the ballroom of a Holiday Inn. The experts take time and effort to develop. Due to global aging, nearly HALF of all subject-matter experts are retiring, leaving a GLOBAL TALENT CRISIS for companies to navigate. Moreover, its a global issue, touching all industrialized and industrializing! countries. This doesnt mean theres going to be NO talent. It means there will be increased competition for the best brains and your future profitability may rest in the hands of your HR department. Theres more to consider. Come with us as we explore the factors that will change the nature of recruiting and retaining talent.

HUG A 30 YEAR OLD. Loss of human capital due to global aging and mass retirement will challenge long-term profitability. To assure your success over the next fifteen years, your organization must take a proactive approach to human capital and knowledge management. When the Boomers retire, your company is going to be strapped for talent. This you know. Remember that nearly EVERY company throughout the industrialized world is going to be lacking skilled workers, and thus competing for the same brains. There are two major fixes: Recruitment, and knowledge management. The smart money is preparing human capital systems that attract and keep top people and keep valuable knowledge in your company any way you can. When this crisis hits over the next 15 years, successful companies may be defined by those who build their human resources today.

Trend #1: Aging populations around the world

Form consulting relationships with retirees an alumni network Alumni relations

WILDCARD: Technology: Will robots & IT help any of this?

Trend #2: Global demand for talent increasing

Boomers demand the new retirement: Half retirement, Late retirement, NO retirement

Retirement

TALENT CRUNCH 2007 2025 A systems view

Birthrate insufficient to provide enough workers Demographics

Unprecedented global aging sends millions of experts into retirement

Generation X needs leadership training Workforce Development Gen Y needs work skills in addition to their tech savvy Retention Talent poaching may be more important than price wars in the competition of tomorrow
Trend #3: Industries more knowledgebased than ever

Education Skyrocketing cost of college and grad school makes young workers more indebted than ever
Immigrants starting to go BACK after working in USA

Recruitment

Outsourcing increases to find scarce talent

Need for a variety of compensation: Money, time, education, lifestyle

New immigration: H1B Visas hard to get

Branding & marketing as important for HR as it is customers!

Trend #4: Gen X & Y ascending to management

TIMELINE: A short history of the future

2011: More Latinos returning home to take advantage of booming economy in Mexico, Costa Rico, not to mention good coffee, fresh fruit, good music.

2009: Lack of engineers and scientists intensifies

2015: Missing 200,000 doctors, 800,000 nurses in the USA alone!

2020: China needs 1.1 billion workers to operate its economy

2007: Business and government begins to take the upcoming talent crunch seriously Now, what comes next?

2007

2009

2013

2017

2020

2027

In Future Intelligence, we like to see the next 15 years of developments and compare them with what we expect in our own industry. What does your timeline look like?

2010: Millions of Boomers discover $50,000 not enough to retire, seek consulting positions

2012 :People hiring ANY 26 year old off the street to be director of marketing gotta have someone, right?

YOU, 2020: Did you use the trends you see here to anticipate and profit from whats next, or did these developments take you by surprise?

The Trends

Four major trends are making human resources a strategic issues for the next fifteen years
MASS GLOBAL RETIREMENT
INTERNATIONAL COMPETITION FOR TALENT

INCREASINGLY KNOWLEDGE-based industries

Generation x & y take power and have different values

Trend #1: Global aging leads to mass retirement

Worldwide, the Boom Generation (born 1945 1961) is preparing to leave the workforce. Its effect will be unprecedented in the history of industry

50% of top execs at Fortune 500 ready to retire within five years Federal government losing people en masse: 60% of total federal workforce, 90% of senior executive staff in next ten years
Italy: Rapidly aging population, birthrate of only 1.2 Japan: Turning Daycare Centers right into Senior Care Centers

Healthcare workforce: Short 200,000 doctors, 800,000 nurses by 2020 U.S. Defense contractor: We expect 2/3 of our engineering staff to leave within 5 8 years. U.S. Fed Chief Ben Bernanke: Avoiding dealing with the Boomer retirement may harm the U.S. economy.

Most industrialized countries are unprepared for the shock!

But wait, were Boomers and we feel great. Isnt 60 just the new 40?

COMPETITIVE FUTURES NEWSFLASH: 60 IS NOT THE NEW 40.

Lets take a second away from strategy to deal with a particular psychological blindspot in America. At Competitive Futures, we have heard people try to dismiss the impact of the aging and talent crunch trend, implying that Boomers will be different in their old age. After all, for Boomers it was Life Begins at 40 then Fabulous at 50, and now even 60 is the new 40. IT AINT. And thats not because of Boomers, who may in fact be more social, healthy, and active than previous generations of sixty- and seventysomethings. Its not about Boomers being different. Its that 30 is about the same as it ever was. Twenty- and thirty-somethings remain hungry to prove themselves, to buy houses, and to pay off recentlyacquired student loan debt. So Boomers may stay in the workforce, but they wont be a replacement for hungry, motivated, (indebted) talent.

So Boomers may not leave the workforce entirely, but will likely create

THE NEW RETIREMENT

It used to be a pretty straight line from the office chair to the rocking chair. But there are financial and industrial realities that may change what the next retirement looks like.

ITEM: 55% of Boomers aged 45 54 have less than $50,000 saved toward retirement. 66% have less than $100,000. 90% have less than $250,000

Not shockingly, 2/3 of Boomers want a phasedretirement some work, some play The IRS has put forth a proposal to allow workers to collect salary, social security

Trend #2: Competition for talent is global

People often think only the United States and Europe are going to be looking for talent Match the talent crisis with the country:

The IT industry in the country could be running out of employable talent, especially where new recruitments are concerned.

India

The rapid growth of our nations industries is leaving our companies hurting for skilled labor.

Malaysia

93% of companies report having trouble finding skilled workers.

Costa Rica

Trend #2: Competition for talent is global

A dangerous assumption people make is, Well, if were short of talent, well just import more from (Mexico, Turkey, Philippines - wherever.) Not so fast. The critical, oft-forgotten aspect about global aging and talent crisis is that its GLOBAL! Just as many countries are establishing advanced industries, they are becoming crippled for talent.

Indias thriving economy is leading directly to a homegrown talent crunch. Due to the linguistic and cultural barriers inherent in global work, only 25% of tech grads and 10-15% of general grads in India are ready for work with Western companies Australia and New Zealand are especially looking for talent 61% of companies report difficulty finding appropriate candidates As Latin America increases in prosperity, its brain drain of the 1970s, 80s, and 90s, due largely to civil strife, is causing a lack of homegrown talent

Trend #2: Competition for talent is global

Heres a quick hint about a counter-trend to immigration U.S. and European : Immigrants making money, getting educated in the U.S., then returning HOME.

IT Talent recruiter Ranjit Pradesh:

ESPECIALLY IMPORTANT The future of immigration is changing just as fast as the global labor market is changing. This is a key point: Believe it or not, the whole world is not necessarily scrambling to work in the United States.

Washington DC salsa singer Verny Varela:

Many Americans still believe that everybody on earth would like to live in America. In fact, many Indians I recruit find American life to be a pain high stress, expensive, and you have to do your own laundry! Life at home is quite a bit easier.

Cali, Colombia is probably poorer now than when I left eight years ago, but the life style is still better than the United States. Fresh fruit, good coffee, and you always have time for your family.

More on this in a future issue of The STEEP Report

Many Latinos are saving up money to go home they dont want to stay here permanently.

Trend #3: Industries are becoming more knowledge-based than ever.

In short, replacing people is going to get even harder, because world-class companies are increasingly driven by innovation and intellectual capital than by physical capital and brute strength.

According to the U.S. Dept. of Education: 60% of all new jobs in the 21st century will require skills that are possessed by only 20% of the current workforce. Research and development is more essential than capital investment for future success-the top-ten R&D spenders increased R&D by 42% since 2000, while only increasing capital investments 2% in the same period. Businesses are investing in brains. China and India are taking the next step into value-added products the more complex their economy becomes, the more they require brains as well. Consider the billions of dollars they are investing in nanotechnology. They arent just looking for simple machinists or guys who can paint. Asian industries are becoming every bit as knowledge-intensive as Western ones.

Trend #4: Generation X & Y ascending to power but with a different set of values
Since were talking about attracting the next wave of talent, it bears mentioning that the people for which you are competing are going to be a bit different than past generations. Lets have a quick look.

Old stereotypes that have been beaten to death in the media

Generation X Cliches Generation Y Cliches

Slackers Apathetic Cynical Rebellious against traditional authority

Selfish Whiners Creative Never even heard of how traditional authority is supposed to work

Trend #4: Generation X & Y ascending to power but with a different set of values
Think deeper about these upcoming generations and how they will LEAD, not just how they work! The point is, they are soon to be LEADERS! The job market has never been good or stable for either generation. Even the Dot Com boom was chaotic, if well-paid. Degree inflation has required Gen X and Y to get lots of expensive masters degrees they are chomping at the bit for real jobs Both generations are in record levels of debt housing and education costs have skyrocketed well ahead of wages Gen Y is the YouTube community, and virtual networks are more comfortable than typical militarystyled hierarchies
Cliches aside heres the real issue: Gen X and Y will be entering positions of responsibility very quickly once people begin to retire and they lack managerial experience as well as practical business experience.

What To Do Today

WHY THIS FUTURE IS DIFFERENT

Trend #1: Aging populations around the world Trend #3: Industries more knowledgebased than ever

There has never been global demand of this magnitude for highlyskilled talent. Act TODAY.

Trend #2: Global demand for talent increasing

Trend #4: Gen X & Y ascending to management

Competition for skills is not new, but the upcoming global demand is unprecedented. Plus, one hundred years of constant economic development throughout the world means some formerly poor nations (India, China, Malaysia, Korea) are competing for the exact same types of brains. Weve never had to deal with anything like this.

Strategic implications why you should care

Strengthening human resources is one of the keys to the future of competition

Likely, in your career, human resources has been the office that deals with health insurance paperwork and runs the career fair at the college. They are about to be the lynchpin in ALL of your strategic plans.

Need for immigration will exacerbate ethnic tensions especially in Europe and Asia

We can talk glibly about talent crossing boundaries, but not every nation is culturally ready to accept new people. Japan and Europe need MILLIONS of workers, but they will have to come from other countries. This is going to mean ethnic tensions unprecedented in their history. The United States and Canada may benefit as places that have practical experience bringing in new cultures.

Information is headed for the golf course and must be caught on the way out the door!

Chances are, you will never hire and train enough people to make up for the talent getting ready to walk out the door, especially in very technical fields. To make up, you must improve your knowledge management systems, capturing tacit-but-vital knowledge from your talent before they retire.

Strategic implications why you should care

India, China, Latin America, and other economies will be constrained by this talent crunch

For years, we have heard about how fearsome India and China are as competitors. As the talent crunch hits, they will be just as susceptible as everyone to the lack of talent. Manufacturing may not just be about price when engineers start aging in Asia.

Consulting / outplacement firms will catch up the slack but at a cost

Consulting firms and other contractors are often used to make up for talent that their customers cannot find. As the talent crunch hits, many organizations will turn to them as a short-term fix. Naturally, the more that talent is found this way, the more labor costs will increase.

Smaller nations will fight to keep their homegrown talent

Dont expect other countries to take this lying down- according to Manpower, the Malaysian government is planning to offer significant come home bonuses. As standards of living increase throughout the developed world, it will be more difficult to attract top talent from abroad they may be living quite well where they are!

Recommended options: What can you do today?

You study all kinds of risk when you make future plans. Quick how much is your human capital worth? Where are you lacking? If you dont know the answer find out now! By the way, the HR Department may not have a reliable way to give you numbers its still a new field! We always hear Oh, theres no loyalty anymore. Hey, for years theres been no loyalty on anything not in a world where companies are bought, refinanced, downsized, and shipped overseas. But today is a perfect day to start thinking about everything in terms of long-term relationships with people. Your future profitability will depend on keeping people and their knowledge over the long term.

Audit your human capital balance sheet

Long-term relationships are the key to profit

Start an alumni network

Part of a long-term approach to relationships is keeping in touch with people after they leave whether they are 30 or 70. Facebook is already offering social networking for companies. Think of ways to keep people involved after they leave your company. Youll need access to those brains!

Knowledge capture, expert systems

At the very least, you should attempt to capture the lessons learned of your most experienced employees. Some corporations are using corporate historians to chronicle these lessons in an organized way. But you may want to go further. Back in the 1970s and 80s, people started experimenting with expert systems softwarebased processes that would mimic the decision-making ability of the pilots, surgeons, and other specialists. It didnt work that well at the time. Tomorrow, there will be new impetus to make up for the lack of expertise it could work this time around.

Recommended options: What can you do today?

Make friends with Universities

The American Association of Colleges and Employers says one best practice is to forge long-term relationships with the universities and colleges that will be training your next workforce. This may be more than just sponsoring basketball games and coming to the jobs fair. Do you have a network of career professionals at your local universities? What about the people who make the curricula for the professions you need most? Time to forge closer ties.

Have multiple retirement options for employees

We talk about the future of retirement. Have you asked what your employees want? One study showed that 93% of executives surveyed believe aging workers want to remain in the workforce for financial reasons but a whopping 80% of them have not asked their aging workers about their intentions and their needs! So ask today and start to design custom retirement options. For decades, employers have had their pick of Boomer aged talent after all, the generation is just so big, there is lots to choose from! This has had an unintended consequence many companies look around and realize they havent planned sufficiently for a succession plan. MENTORING is the answer. Hug a 30 year old today they are about to get scarce. Pick leaders in your organization while they are young and offer them long-term career ladder. Trust us Generation X isnt used to that kind of treatment! Branding its not just for customers anymore. Since you are about to be trying as hard to get talent as you are customers, your branding must serve two roles. You must show your products are great, but just as importantly, you must show what a great choice you are an employer. After all, young talent is going to get so scarce, they will have their pick of companies. Start branding now.

Mentor, mentor, mentor

Brand yourself as a great place to work over a lifetime

Find Out More

The Talent Crunch is a complex topic and means different things to different organizations. We hope youll use this briefing as just the beginning of this subject. For more, check out the references included below.

Find out more: Books

Doing Nothing is NOT an Option!: Facing the Imminent Labor Crisis, Robert Critchley

Lost Knowledge: Confronting the Threat of an Aging Workforce by David Delong

The 2010 Meltdown: Solving the Impending Jobs Crisis By Edward Gordon

Bridging the Generation Gap: How to Get Radio Babies, Boomers, Gen Xers, And Gen Yers to Work Together And Achieve More by Linda Gravett and Robin Throckmorton

And many other titles.

Find out more: Articles

Winning the Talent Wars by Lars Daggard http://www.businessweek.com/careers/content/feb2007/ca20070207_039145.htm?chan=search How Boomerang Recruiting Brings Valued Execs Back (from 2000) http://www.businessweek.com/careers/content/jul2000/ca20000726_862.htm?chan=search The Future of the Global Workforce January 2006 registration required http://www.forbes.com/leadership/2005/12/30/manpower-careers-employment-cx_0102mckinsey.html Few U.S. Employers Retain, Recruit Older Workers Despite Feeling the Crunch from Talent Shortages http://www.thematuremarket.com/SeniorStrategic/manpower_seniors-8955-5.html The Battle for Brainpower The Economist October 2006 http://www.economist.com/surveys/displayStory.cfm?story_id=7961894 Generation Y: What is With You People and 8:30 AM? Harvard Business Review Online; July 2007; http://discussionleader.hbsp.com/erickson/2007/07/what_is_it_with_you_people_and_1.html Generarion Y at the workplace http://www.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm Dealing with Generation Gap at the Workplace, http://www.cnn.com/HEALTH/library/WL/00045.html Generation X and the Work-Life Balance http://www.careerjournal.com/hrcenter/articles/20051205-chao.html Generation X Retention Tips http://www.fastcompany.com/articles/2007/06/retaining-youngerworkers.html?partner=rss-alert

Addendum: Talent Crunch - By the Numbers

Figure
50% of top execs at Fortune 500 ready to retire within five years

Source
Fortune, Sept 25, 2006 http://www.fortune.com/whatever Office of Personnel Management: May 5, 2007 www.fcw.com/article102606-05-07-07 USA Today, March 2, 2005 http://www.usatoday.com/news/health/2005-03-02-doctorshortage_x.htm The Economist. How to manage an aging workforce. 18 February 2006 Manpower White Paper: 2007 http://www.ageplatform.org/EN/IMG/pdf_OlderWorkforce_Global_US_Letter.p df The McKinsey Quarterly: 2007 http://www.mckinseyquarterly.com/article_abstract_visitor.aspx? ar=1998&pagenum=1 Corporate Voices for Working Families: 2006 http://www.cvworkingfamilies.org/downloads/TalentDebate.pdf? CFID=22487671&CFTOKEN=60403015

Federal government losing people en masse: 60% of total federal workforce, 90% of senior executive staff in next ten years Healthcare workforce: Short 200,000 doctors, 800,000 nurses by 2020

Japan expects its workforce to shrink by 16% (some 10 million people) over the next 25 years. Between 2025 and 2030, 12 million people a year will be exiting the global workforce

78% of respondents say that increasingly global talent and labor markets are important/very important but only 48% of companies are taking action on that trend. 93% of surveyed employers believe older workers want to work longer for financial reasons; 80% of those surveyed have not bothered to ask their older workers about their intentions

Addendum: Talent Crunch - By the Numbers

Figure
According to research from the International Workforce Survey of May 2007, 68% of companies worldwide do not have an employer brand strategy. Only 25% of technical graduates and 10-15% of general graduates are suitable for employment in offshore IT/BPO industries in India. 69% of surveyed HR practitioners said that attracting new talent posed the greatest threat to competitiveness. 90% of companies surveyed in a March 2007 study by ERC reported having difficulty finding the talent they needed; 20% considered the problem severe. 55% of boomers aged 45-54 have less than $50,000 saved for retirement; 2/3 have less than $100,000 saved. Nearly two-thirds of workers over 50 hope to scale down their hours or work in a flexible environment before retiring completely. According to AARP, 69% of workers plan to work in some capacity in their retirement years or not retire at all.

Source
Robert Half Financial Services Group http://www.accountemps.net/Site/showpage.jsp?s=RHB_UKE&p =PRESS_DETAIL&prid=449 The Hindu, February 2, 2006. www.thehindu.com/2006/02/02/stories/2006020206230400.ht m Deloitte LLC, May 19, 2005 http://www.deloitte.com/dtt/press_release/0,1014,sid%253D283 4%2526cid%253D94680,00.html Worldwide ERC http://www.erc.org/news_events/Press_Releases/03-0507_newhire.shtml US News & World Report, June 5, 2005 http://www.usnews.com/usnews/biztech/articles/050613/13sque eze.htm Watson Wyatt Worldwide http://www.watsonwyatt.com/research/resrender.asp?id=w731&page=1 AARP http://www.aarp.org/money/careers/employerresourcecenter/tre nds/business_case_for_workers_age_50_key_findings.html

Coming next month in:

The slow collapse of the American healthcare system

Contact
For more information or to discuss what this means for you, contact: steepreport@competitivefutures.com (202) 508-1496