Managing Tomorrow’s People* - PwC
Managingtomorrow’s people*The future of work to 2020*connectedthinking
ContentsIntroduction2020: where three worlds co-exist0204Corporate is king:welcome to the Blue World06The journey to Blue06Life in the Blue World: the main themes07Work in the Blue World: the people challenges09The Blue HR business model10Small is beautiful:welcome to the Orange World18The journey to Orange18Life in the Orange World: the main themes19Work in the Orange World:the people challenges21The Orange HR business model22Are you ready for tomorrow’s world?25Appendix27Definitions: Scenarios, Millenials27Companies care:welcome to the Green World12Our methodology28The journey to Green12Global forces29Life in the Green World: the main themes13PwC Graduate Survey findings30Work in the Green World:the people challenges15Contacts32The Green HR business model16
ForewordAt the beginning of 2007, a team fromPricewaterhouseCoopers gathered to explore thefuture of people management. Our thinking wassparked by the rising profile of people issues onthe business agenda – the talent crisis, an ageingworkforce in the western world, the increase inglobal worker mobility and the organisational andcultural issues emerging from the dramatic pace ofbusiness change in the past decade. We wantedto explore how these issues might evolve and howorganisations need to adapt to stay successful.Many studies have attempted to capture a visionof the workplace of the future, but we set out tounderstand the people challenges that will impactorganisations and consequently the implicationsthis will have on the HR function as we know it.Few business thinkers have proposed that themarketing or finance functions might cease to existin their present forms, but some are starting to saythis about HR.With the help of the James Martin Institute forScience and Civilisation at the Said BusinessSchool in Oxford, we used ScenariosA1 to thinkA1 – Appendix 1, see appendix page 27about the future of peoplemanagement. Our team hasidentified three possible ‘worlds’– plausible futures to provide acontext in which to examine theway organisations might operatein the future. In addition we surveyed almost 3,000MillennialsA1 – new graduates from the US, Chinaand the UK who represent a generation just joiningthe workforce, to test their views and expectationson the future of work.We hope you will help us to encourage debatearound this critical topic. It is said that the future isnot a place we go to, but one which we create. Andwhile things happen that we cannot predict, we canstill be prepared.Michael RendellPartner and leader of Human Resource ServicesPricewaterhouseCoopers LLPManaging tomorrow’s people ForewordThe journey to 202001
Introduction022,739In July 2007, 2,739 graduatesfrom China, the US and the UKtold us about theirexpectations of work. They hadall been offered jobs with PwCbut had yet to start. Some ofthe key findings are highlightedthroughout this reportWhile some of the findingsseem to confirm currentreceived thinking about thefuture of work, a number ofthemes defy conventionalthinking.PwC is the biggest recruiterof graduates in the UK anda leading global recruiterof graduates. A3When we started our research we had somepreconceived ideas about tomorrow’s world. Manystudies have been undertaken to explore the futureof society, the environment, business and even theworkplace. Our challenge was to focus explicitlyon the business context and the impact on peopleand work.While we cannot claim to have identified all thepossibilities, several strong themes have emerged:1. Business models will changedramaticallyThe pace of change in the next decade will beeven more fundamental. Technology, globalisation,demographics and other factors will influenceorganisational structures and cultures. Ourscenarios outline three organisational models of thefuture:A3 – Appendix 3, see appendix for a full breakdown of the findings page 30 large corporates turning into mini-states andtaking on a prominent role in society specialisation creating the rise of collaborativenetworks the environmental agenda forcing fundamentalchanges to business strategy.2. People management will present oneof the greatest business challengesBusinesses currently grapple with the realities ofskills shortages, managing people through changeand creating an effective workforce. By 2020, theradical change in business models will meancompanies facing issues such as: the boundary between work and home lifedisappearing as companies assume greaterresponsibility for the social welfare of theiremployees
3. The role of HR will undergofundamental changeHR has been perceived by many as a passive,service oriented function, but given the context oftomorrow’s workplace and business environment,we believe HR is at a crossroads and will go one ofthree ways: with a proactive mindset and focused onbusiness strategy, HR will become the heart ofthe organisation taking on a new wider peopleremit incorporating and influencing many otheraspects of the business stringent people measurement techniques tocontrol and monitor productivity andperformance the rise in importance of social capital andrelationships as the drivers of business success. the function will become the driver of thecorporate social responsibility agenda within theorganisation the function will be seen as transactional andalmost entirely outsourced. In this scenario, HRwill exist in a new form outside the organisationand in house HR will be predominantly focusedon people sourcing.“HR needs toensure it is fit forpurpose in orderto be proactiveand maintain ordevelop itsinfluence in thefuture.”Keith Murdoch,Remuneration andBenefits Manager,British American TobaccoManaging tomorrow’s people Introduction03
2020: Where three worlds co-exist04We believe itis possible that allthree worlds willco-exist in someform, perhapsdistinct bygeographic region,or industry sectorfor example.We identified a number of global forces that willhave significant influenceA2, and of those we feltthat individualism versus collectivism and corporateintegration versus fragmentation would be the mostsignificant. From this axis we identified three worldsand business models for the future.(See figure 1 opposite.)We tried to capture the events and trends whichdraw a picture of life in tomorrow’s world and thepeople management challenges that might prevail.The forecasting timelines and world descriptionsare not intended to be taken literally as completevisions of alternative futures. They are designed topresent ideas and illustrate the more importantpoints around the people management challenges.We believe it is likely that all three worlds willco-exist in some form, perhaps distinct bygeographic region, or industry sector for example.As you read this document think about how yourown organisation might be positioned within thesescenarios and what implications this has upon yourcurrent people management strategy.A2 – Appendix 2, see appendix page 28
Managing tomorrow’s people Introduction2020: three worldsFigure 105
Corporate is king: the Blue worldWhere big company capitalismreigns supremeIn a nutshell:The globalisers take centre stage, consumer preference dominates,a corporate career separates the haves from the have nots.20112012201320142020The Indianeconomy expandsdramatically asit goes througha new wave ofcross-borderacquisition spreesand becomes aglobal leader inseveral industrysectorsWorld’s biggestsearch engine andlargest technologycompany mergeThe brain-drain ofEastern Europeanworkers starts toreverse as workersreturn hometo set up andlead corporates,building onexpertise gainedin several sectorsA decade of M&Aconsolidationacross industrysectors peaksGlobal warmingchanges theclimate of Europe;as the snow on theAlps melts, skiershead to the US
90%of Chinese respondents expectthey will use a language at workother than their mother tongueSize mattersThe sheer size of corporations in 2020 meansthat a significant number now operate with annualturnovers that far exceed the GDP of manyindividual countries, particularly in the developingworld. With echoes of the business modelspromoted by companies like General Motors in themiddle of the last century, many companies nowprovide the equivalent of the welfare state for theiremployees to ensure they lock the best talent intotheir organisations. Internally managed servicecentres are sophisticated and highly efficient –using processes perfected by the outsourcers ofthe ‘nineties. People metrics become an essentialpart of everyday life to keep track of individualperformance and productivity.Corporates divide the haves andhave notsThe power of corporations means that a muchgreater divide has opened up between thoseworking for global corporations and thoseworking in smaller enterprises. Employees ofmega-corporations have everything they need laidon. Those working for smaller businesses remain atthe whim of housing markets and basic statutoryentitlements, needing to self-supplementeducational support, health and insurancecoverage, what remains of the public healthsystem, and so on.Welcome to the technology ageTechnology is all pervasive, entire cities in theUS, Japan and the UK operate with ubiquitoushigh-speed wireless networks that allow allcommercial transactions, entertainment andcommunications to be handled by every individualon credit card-sized devices. Pinpointing exactlywhat you want and being shown where it isavailable from wherever you happen to be is nowtaken for granted, allowing businesses continuouslyto refine and individualise their relationships withconsumers, employees and shareholders.“Our search fortalent is now aglobal search.The competitionfor talent will onlyincrease further.”Hanspeter HorschAssociate Director,Human ResourcesSamsung SemiconductorEurope GmbHManaging tomorrow’s people Blue World07
0875%of respondentsthink that workplaceflexibility will notexist; they believethey will be workingformal office hoursCorporates drive lifestyle choicesSophisticated measurement and segmentationstrategies mean companies can target goods andservices across their customer base and toemployees. For example ‘green politics’ is seen asa lifestyle choice rather than a meaningful politicalmovement. Corporations provide environmentalproducts and services to those who express apreference.Managing people in the Blue World Companies have become the key provider ofservices to employees. People managementnow encompasses many different aspects ofemployees lives’, often including housing, healthand even education for their children. This strategy has led to an increase in staffretention rates as people policies seek to lock intalent, but the top talent is still hard to attractand retain, many senior executives use personalagents to seek out the best deals. Mass consolidation has had an impact oncultural issues. Leadership teams now have ahigh focus on the evolution of the corporateculture with rigorous recruitment processes toensure new employees fit the corporate ideal.Existing staff are subject to compulsorycorporate culture learning and developmentprogrammes. Huge people costs drive the need for robustmetrics and analysis. Employee engagement,performance and productivity are all measuredsystematically. Leadership can access peopledata on a daily basis. This also provides an earlywarning signal of non-corporate behaviour orbelow standard performance. Technology pervades every realm of businessand leisure activity. The line between insidework and outside work is often blurred bytechnology with employers providing theplatform. This also provides employers withadded insights to staff preferences.
OrganisationalchallengesEmployee profile The Chief People Officer (CPO) is a powerfuland influential figure, sometimes known asthe ‘Head of People and Performance’ whosits on the leadership board. Quality assurance across the globe drivesthe need to create consistency across theorganisational supply chain. People are graded and profiled at the age of16 and categorised for work suitability bothin terms of capability and individualpreference. Metrics and data are used to drive businessperformance through complex staffsegmentation strategies which identifythousands of skills sets – creating precisionaround sourcing the right candidates for theright tasks as well as on the job performancemeasurement and assessment. The science of human capital has developedto such a degree that the connectionbetween people and performance isexplicitly demonstrated by the CPO. As organisations increase in size, their riskmanagement systems are similarly extended. The people risk agenda is one which is takenseriously by the board – as a result, the CPOand HR business partners become moreinfluential. Those responsible for people managementincreasingly need financial, analytical,marketing and risk management skills tomeasure the impact of the human capital intheir organisation and to attract and retainthe best talent. The challenges of size and scale mean thatthese organisations are at greater risk fromexternal threats such as technologyterrorism or meltdown and they find itdifficult to effect change quickly. As companies try to reinforce corporatevalues, these can often be at odds withcultural values and can present challenges. Organisations must develop models andsystems designed and run by HRprofessionals which enable individuals andtheir agents to negotiate the value of theirhuman capital based on employees’personal investment strategies. The top talent is highly prized and foughtover. In most cases people are linked to anorganisation by the age of 18. University education is managed by thecompany according to the organisationalcareer path chosen by the individual. At the top level, employees take far greatercontrol of their careers; often seniorexecutives have their own personal agentswho represent them to find the best rolesand deals. Lower level employees are also takingactive charge of their careers; they areaware of the value that their human capitalrepresents and are demanding about thecircumstances in which they will invest. Those outside the corporate sphere findemployment choices are limited to smallercompanies that are unable to provide thesame level of development and financialbenefits.09Managing tomorrow’s people Blue WorldWho leads peoplestrategy?
A people management model for the Blue World10In the Blue World where corporate is king, the people and performance model below is the closest to whatmany leading companies are aspiring to today – linking HR interventions to improvements in businessperformance and using more sophisticated human capital metrics to evaluate corporate activity. Under thisscenario the management of people and performance becomes a hard business discipline, at least equal instanding to finance in the corporate hierarchy.Human resources: the current modelFigure 2People and performance: the 2020 model
11Future viewExtract froma newspaper in 2016WORLD FINANCIAL NEWS3rd April 2016NEWS IN BRIEFItalian pharmaceuticalgiant Como saw itsshares climb higheryesterday inexpectation of positivenews in its quarterlyresults due next week.The company, nowworth an estimated 20bn has profitedfrom the success of itsnew line of statins inEurope and America,but also in China, thefastest growingpharmaceutical marketglobally.The quarterly reportwill be looked atclosely by companiesinside the industry andbeyond. Many creditComo’s unusuallyrapid rise anddominance of parts ofthe sector to the wayCEO Mario Fabrizzimanages theorganisation’s humancapital, which thecompany also reportson in detail. Last yearearnings per employeerose by 7% while costsper employee fell 5%,generating a muchimproved return onhuman capital.Mr Fabrizzi said, “Youhave to measure thethings you attach valueto. Measuring theperformance of ourpeople has allowedus to quickly makeimprovements to anyunderperforming partof the business, tomake effective plansfor succession and toreturn real value to ourshareholders.”Managing tomorrow’s people Blue WorldPeople metrics are integral toanalysts’ pricing strategies
Companies care: the Green WorldWhere consumers and employeesforce changeIn a nutshell:Companies develop a powerful social conscience and green sense ofresponsibility. Consumers demand ethics and environmental credentialsas a top priority. Society and business see their agenda align.20102012201320182020The UK launchesthe LondonCarbon TradingExchangeThe US signs theKyoto II agreementand becomes aleading advocatefor actions toreduce the rate ofglobal warmingIndia becomes akey player in thecorporate socialresponsibilityagenda with afocus onpreserving theIndian culture andheritageHybrid or fullyelectric carsoutnumberpetrol-poweredcarsA group ofscientists confirmthat the rate ofglobal warmingis slowing
94%of respondents believe they willwork across geographic bordersmore than their parents did.components of the supply chain through verticalintegration. Rigid contractual obligations are inplace covering every eventuality.How green are you?The environmental lobby is so pervasive thatcompanies must be quick to react to consumerconcerns about any aspect of their business whichcould be deemed unethical. Clear communicationand clarity about products and services is essential.The audit process and quarterly company reportsare characterised by a focus on measuringgreenness detailing carbon emissions ratings, andcarbon exchange activity, as well as the moretraditional company valuations. This is an indicationof the importance shareholders and investors placeon these issues which are reflected in the shareprice.Supply chain controlBig corporate finesCompanies have strong control over their suppliernetworks to ensure that corporate ethical valuesare upheld across the supply chain, and be able totroubleshoot when things go wrong. This has led tomany organisations taking greater ownership of keyIn the business world ethical behaviour is the mostimportant attribute to attain and preserve. Brandscan rise and fall on the basis of perceived greencredentials, with government imposed corporatefines for bad behaviour in this highly regulatedworld. Corporate responsibility is not an altruisticnice to have, but a business imperative.Consumers drive corporate behaviour“We aredeveloping anemployer brandreflecting ouridentity as anemployer andpromoting ourlong termcommitmentwith ouremployees.”Hughes Fourault,Global Head ofCompensation, Benefitsand International Mobility,Société GénéralManaging tomorrow’s people Green World13
1490%of US respondentswill actively seek outemployers whosecorporateresponsibilitybehaviour reflectstheir own.Managing people in the Green World New graduates look for employers with strongenvironmental and social credentials; inresponse HR departments play a key role indeveloping the corporate social responsibilityprogramme. Employees are expected to uphold corporatevalues and targets around the green agenda.Most are given carbon credit tokens which areused like ration books to be cashed in forprinting documents in hard copy, companytravel and other anti-societal activities. The HR function is renamed ‘People andSociety’, the leader being a senior member ofthe company’s executive team. The need to travel to meet clients andcolleagues is replaced with technologicalsolutions which reduce the need for face-time.Air travel in particular is only permitted inexceptional circumstances and is expensive.Working across teams in different locationstherefore presents enormous challenges toglobal businesses, and the HR functiondedicates significant energy to generating virtualsocial networks across the operation and theclient base. Most companies provide staff with corporatetransportation options between work and hometo minimise the need for car use. This has led tomany companies choosing to relocate parts oftheir operation to where people are base
preconceived ideas about tomorrow’s world. Many studies have been undertaken to explore the future of society, the environment, business and even the workplace. Our challenge was to focus explicitly on the business context and the impact on people . large corporates turning into mini-states and
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