WELCOME TO GENERATION Z - Deloitte

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WELCOME TOGENERATION Z-1-

INTRODUCTIONHeard the words “lit”, “bruh” and “major key” before?They’re just a few examples1 of what you’ll be hearingfrom the mouths of Gen Zers as they use “lit” to describesomething cool, call a close friend “bruh” and refer tosomething essential as ”major key.” This reworking of theEnglish language is the beginning of Gen Z’s influence.A new generation has arrived. Gen Z will soon surpass Millennials asthe most populous generation on earth, with more than one-third ofthe world’s population counting themselves Gen Zers. In the US, GenZ constitutes more than a quarter of the population and by 2020 willbe the most diverse generation in the nation’s history2.Its members are about to step onto the world stage, entering theworkforce and spending money on the products, services andsolutions that you produce, provide and create.The impact of their entry will be swift and profound, its effects ripplingthrough the workplace, retail consumption and technology, as wellas in politics and culture. Radically different than Millennials, thisgeneration has an entirely unique perspective on careers and howto define success in life and in the workforce.In late 2018, in partnership with Deloitte, NEW surveyed more than6,000 individuals across several demographics including generation,race, gender, income, education and location. Of the totalrespondents, 1,531 were considered Generation Z, 1,541 wereconsidered Millennials, 1,560 were considered Generation X and1,595 were considered Baby Boomers. Women represented 3,151 ofthe total respondents with 1,590 respondents classified as minoritywomen. For the purposes of this report, Black, Hispanic and Asianwomen data and insights are grouped as minority women.-2-

NIn this report, we look at the factors that have gone into shapingGen Z, demographic shifts taking place in the US that will affectGen Z’s entry into the workforce, Gen Z behaviors and attitudes andtheir view toward work, the future of work and what it means toorganizations and employers seeking to entice and integrate Gen Zinto the workplace.Entire industries and businesses willrise and fall in the wake of the GenZers. Yet few industries or organizationsseem to be ready for it.Are YOU?-3-

talkin’ bout thisGENERATIONBorn between 1995 and 2012, making up 24.3% of the U.S. population3and on track to be the most diverse generation in US history by20204, Gen Z is about to make its presence known in the workplacein a major way — and it’s important to understand the differencesthat set them apart.Gen Z cannot remember a time before the September 11 attacks and theWar on Terror. Its members were born after the collapse of communism andwitnessed the meteoric rise of China in the global economy. It came of agein a world where content and information is increasingly free and shared,where the body of human knowledge has expanded with mapping of thehuman genome and where one-click online purchasing is taken for granted.8 THINGS FROM THE ‘90S,ZERS DON’T QUITE GET 5GEN Z FIRSTS. The first generation that has never knowna world without the worldwide web.1. Listening to music on cassette players. The first generation that has never useda phone with a cord.2. Drawing a picture on an Etch a Sketch—the forerunner of creative drawing tablets. The first generation that has no idea whatfloppy disks are.3. Making a pay phone call.4. Transistor radios: Invented in 1947, it wasrevolutionary for its time. Today it’s a rare sight.5. Myspace, the first social networking site ofchoice.6. Paper maps: With step-by-step directionson Google Maps, paper maps are a thingof the past.7. Fax machines, the original email.8. Typing a letter on a typewriter.-4-

Gen Z is the most ethnically and racially diversegeneration in history: One in four is Hispanic, 14%are African-American and 6% are Asian, accordingto studies led by the Pew Research Center6. Andtheir views on gender and identity are unprecedentedand untraditional: Gen Z refuses to turn ethnicityand race into checkboxes on a survey form7.Gen Z is entering the workforce at a key inflectionpoint in the evolution of work8. Historically, a firstjob was viewed as a rite of passage: It meantstarting at the bottom of the ladder, learning howthe business world really worked and doing boringbut necessary work as a way to learn morevaluable professional skills. But all of this haschanged—technology and automation haveeliminated many of the more manual andrepetitive tasks.With jobs undergoing change AND with theworkforce shrinking, competition for talent will befierce. Companies need to think—and prepare—differently to win in the talent market. Employersshould consider redesigning these jobs in a waythat can both attract and engage Gen Z andensure that jobs continue to generate a pipelineof future talent.GEN Z STEREOTYPESGen Z has arrived repletewith a set of stereotypes andgeneralizations: Gen Zers aretech-dependent; they want toexperience new adventures,not just buy things; andthey’re less loyal to brands.As the first digitally nativegeneration, it’s touted theyprefer digital communicationto avoid face-to-faceinteraction, they’re harder toreach because of their short,“eight second” attention spanand they’re focused onauthenticity in a brand.Yet companies andorganizations would be wisenot to fall for the myths andstereotypes: Whether you’retalking about gender andethnicity or modes of learning,Gen Z refuses to fit intoneat little boxes.-5-

To better understand the challenges facing this rising workforce andtheir impact on employers and the workplace, the Network ofExecutive Women (NEW) and Deloitte surveyed Gen Zers tounderstand the key events that helped shape their lives; to exploreindividual behaviors, attitudes and preferences; and to separate themyths and stereotypes from reality.Gen Z is not a completely different “species” than previous generationsthat entered the workforce. But its members do approach the workplacein a very different way than did earlier cohorts. To appeal to them willrequire organizations to truly personalize career experiences (the waywe think about personalizing offers we make to customers). Not only willthis personalization help to attract this generation and compel them tospend some part of their career in our companies, applying their diverseskills sets to drive customer solutions, but it can also benefit workersacross generations, helping to attract and retain talent more broadly.-6-

KEY DEMOGRAPHICSHIFTSDemography is said to be destiny. While there are currently more than44 million Baby Boomers who are still working, 10,000 Boomers retireeach day9. This shift in demographics is transforming the workforce.From 2017 to 2027, the US will face a shortage of 8.2 million workers—the most substantial shortfall on a percentage basis in 50 years,according to Thomas Lee, head of research at Fundstrat Global Advisors10.US unemployment: before and after the Great Recession11In addition to demographic changes, there are structural shifts afoot.US labor force participation has shrunk, from 65.9 percent in 2007 to62.8 percent this year, the lowest rate since the late 1970s12. Thesupply of workers has fallen steadily since the last recession.These demographic and structural trends are reshaping the labormarket. As more Boomers enter retirement, Gen Z will be replacingthem, bringing with them an entirely different worldview andperspective on their careers and how to succeed in the workplace.Understanding the forces that shaped their views, career aspirationsand working styles is essential for companies looking to attract them.-7-

What led us to explore this new generationThe entry of any new generationinto the workforce is usuallyaccompanied by comparisons toearlier generations, along withexpectations, anticipation andgeneralizations of how thegeneration may disrupt theworkforce. Much anticipation arosewhen the Millennials were enteringthe workforce, with the conversationin the marketplace and the mediafocusing on the impact thatsmartphones, technology, socialmedia and connectivity has had onthis generation.We wanted to look beyond thesurface and explore what willhappen as the following forces havean impact on companies, businessand the economy: G en Z makes up more than aquarter of the U.S. population andwill contribute 44 billion to thenational economy13. The workforce has dropped from67% in 2000 to 63% in 201814. Companies’ experience with theentry of Millennials into theworkplace may not have preparedthem to win with Gen Z.US Labor Force composition by generationSource: US Dept of Labor.-8-

GEN Z: thatshapedtheir worldview Key factorsTo truly understand this new generational cohort and what their entry intothe workplace will mean, employers first need to appreciate the environmentin which they came of age and forces that shaped their outlook: The Great Recession and the slow, decade-long recoverythat followed in its wake: watching parents lose jobs; seeing olderMillennial siblings having to move back home. The growing wealth gap between income groups: from 2007-2016,the high-income group saw its income increase 1,425% more thanthe low-income group and four times the middle-income cohort —and the gap is widening15. Rising non-discretionary expenses, such as housing, transportation,food and healthcare. A dramatic rise in higher education tuition and student debt will makethis generation the most educated and indebted generation to date16.These key factors have shaped Gen Z behaviors and their view ofwork, the future and those organizations and industries to whichthey’re attracted.-9-

INDIVIDUALBEHAVIORS& TRENDSOF GEN ZSo who is Gen Z, what are their behaviors and what sort of impactwill they have on the workplace, business and the economy?To explore those issues, we surveyed 1,531 Gen Zers, looking to resolveassumptions and premises about this generation that often pass asconventional wisdom in the media. For example, Gen Z is typicallyportrayed as prioritizing financial security over “personal fulfillment.”Was that the case? What were their aspirations in terms ofcareers? Were they risk-averse or more entrepreneurial?Starting from nine hypotheses, we sought to understandtheir career aspirations and developmentand which industries and sectors theywere drawn to. We wanted to understandtheir working styles: Are they morecomfortable as team players versusworking individually? We looked at how theircore values determine the kinds of companies theywanted to work (and would avoid working) for.Given its experience growing up in the aftermath of theGreat Recession, one might think Gen Z has emergedas a pragmatic, risk averse, non-entrepreneurialgroup motivated by job security, uninterested intraditional higher education and ready to workwithout argument at the whim of employers, right?Think again.- 10 -

SURVEYHYPOTHESES1.5.Core ValuesCareer Development6.Education/LearningWorking Styles7.Core Value8.Behavior & Character9.DiversityCareer AspirationsGen Z will prioritizefinancial security over “personalfulfillment”.Gen Z prefers to work inindustries that they interact within their personal lives opposedto industries they aren’t frequentconsumers of.2.Gen Z is reevaluating thecost/benefit analysis of traditionaleducation given the dramatic risein education expenses and theimpact of student loan debts.Gen Z desires diverse andentrepreneurial opportunities withthe safety of stable employmentand will remain loyal to acompany if they can offer this.3.Gen Z proactively seeksout learning opportunities toenhance skills and prefers tolearn independently via onlineplatforms, such as online tutorials.Gen Z prefers individualtasks over team-based activitieshowever they will value physicalconnection. They preferindependence but not isolation.4.Education/ LearningGen Z’s attachment tosocial media will pose implicationsto how they interact and want tobe perceived.Gen Z no longer formsopinions of a company solelybased on the quality of theirproducts/services but nowon their ethics, practices andsocial impact.Gen Z defines diversityalong different lines thangenerations before them.Hypothesis confirmed- 11 -

Instead, a more nuanced picture emerged as we explored their careeraspirations, career development, working styles, core values,behavior and character, education and stance on diversity.Much has been made in the media and in earlier surveys of Gen Z’semphasis on money and salary. However, we found that of therespondents, when it comes to salary and compensation, the reality ismuch more nuanced. Yes, money and salary matters the most to GenZ. But because of the environment in which this generation came ofage, other things matter too, such as work-life balance, flexible hours,perks and benefits. More importantly, Gen Z feels itself in a positionto get those perks from employers, in addition to salary. And whilesalary is the most important factor in deciding on a job, Gen Z valuessalary less than every other generation: if given the choice ofaccepting a better-paying but boring job versus work that was moreinteresting but didn’t pay as well, Gen Z was fairly evenly split overthe choice.The core values of the generation are reflected in their prioritizingsocial activism more than previous generations and in the importancethey place on working at organizations whose values align with theirown, with 77% of respondents saying that it’s important. Gen Z nolonger forms opinions of a company solely based on the quality oftheir products/services but also now on their ethics, practices andsocial impact. To win the hearts of Gen Z, companies and employerswill need to highlight their efforts to be good global citizens. Whilefocusing on the quality of the goods/services you provide is stillimportant, a company’s ethics are more important than ever.Moreover, actions speak more loudly than words: Companies mustdemonstrate their commitment to a broader set of societal challenges,such as sustainability, climate change and hunger. Not only mustcompanies have strong ethics, they have to demonstrate they takeaction consistent with their ethics and values, and this action must befront and center of their brand for prospective Gen Z buyers andemployees to see.- 12 -

RECRUITING MORE GEN Z WOMENTO THE TECH INDUSTRYAt the moment, women only make up 28% of STEM jobs inAmerica and, according to a study by the National Associationof Manufacturing and Deloitte, more than 3.5 million STEMjobs will be needed by 2025 17. Despite the many initiativesaimed at girls and young women, women appear not to bedrawn to the STEM fields. To meet the goal of greater genderdiversity, companies will to have to change and figure outways to attract more women to technology, particularly asevery industry faces a workforce crunch.- 13 -

Gen Z is an independent, entrepreneurial generation yet it differsfrom Millennials, whose career development paths seemed to bedirected toward startups and early-stage companies. Gen Z’spreferred career development is to have diverse and entrepreneurialopportunities with the safety of stable employment, and they mayoffer more loyalty to companies that can offer this.Gen Z digital natives are drawn toward working in the tech industry:51% of those surveyed rate technology as a top industry in which towork. At the same time, they also are drawn to work that supports thegreater good, such as education (41%) and healthcare (37%). But thereare gender differences: Gen Z females seek roles in technology at amuch lower rate (34%) than their male counterparts (73%). Thiscontinuing gap between the sexes will likely have implications,particularly for tech companies seeking to create greater diversityand inclusivity at their organizations.- 14 -

Diversity is the watchword for Gen Z: Diversity matters to themthrough many dimensions, not just isolated to race and gender, butalso related to identity and orientation. Gen Z prioritizes diversity —across race, gender, and orientation — more than any othergeneration and companies should as well. Gen Z is also the mostlikely generation to have individuals that identify as non-binary/thirdgender. As a result, companies need to represent the full spectrum ofhumans in marketing: Many Gen Z minorities feel their race isn’t wellrepresented in marketing. Companies that can better represent thespectrum of differences in their external branding/marketing aremuch more likely to diversify their talent pipelines.Finally, we found that contrary to popular belief, Gen Z is notreevaluating the value of a college education. In fact, Gen Zconsiders a traditional four-year college education more importantthan ever before. Gen Z is quickly becoming the most educated anddebt-laden generation in history. So organizations that focus oninvestment in learning and skill/capability development become moreattractive to this education-oriented cohort.- 15 -

THEFUTUREOF WORKAs we draw insights from the preferences and behaviors of our newestgeneration entering the workforce, we need to also take a look at how“work” itself is changing and evolving. We define the future of work asa result of the many forces that are effecting change in three deeplyconnected areas of an organization: work (the what), the workforce(the who), and the workplace (the where)18.The new realities produced by these forces of change present us withcomplex questions to consider — including the ethics around humanmachine collaboration, how to plan for 50-60 year careers and howwe unleash organizations through a continuum of talent sources.As Pulitzer Prize-winning author Thomas Friedman has pointed out:“What’s going on is that work is being disconnected from jobs, andjobs and work are being disconnected from companies, which areincreasingly becoming platforms.”Deloitte’s Point of View on the Future of Work2. WORKFORCEWho can do the work?With new talent platforms and contracts, who can do the work?How do we leverage the continuum of talent from full-time, tomanaged services, to freelancers, gig workers, and crowds?3.Talent category1. WORK3. WORKPLACEWhere is the work done?What work can be automated?With increasing robotics, cognitive,and AI technologies, what work can bedone by—and with—smart machine?Current work optionsWith new combination of collaborative,teaming, and digital reality technologies,how are workplaces and work practicesreshaping where and when work is done.1.2.Automation levelPhysical distanceFuture work options- 16 -

Work skills in the past were often separated and distinct and siloed.The future of work, by contrast, draws on skill sets from divergingfields. For example, marketing will increasingly require a combinationof creative thinking with analytics and analysis, necessitating thatmarketing managers be designers and analysts rolled into one. Incomputer science, the opposite has taken place: Once consideredhighly technical work, software developers require communicationsskills, problem-solving skills, creative and research skills, and skills inteamwork and collaboration.The future of work will call for a return of the Renaissance figure:A person with many talents, interest and areas of knowledge. Itwill require a fusion of four key work skills:Digital tools and technology skills: Along with a familiarity andcomfort with digital tools, work will be defined by the ability to learnnew systems, and to configure and customize these tools.Comfort with analytics and data: Data analytics — includinginterpretation, visualization and communication — is one of the mostimportant. Every one of these high-paying jobs (customer servicemanager, health care advisor, sales professional) requires facility withanalytics and data.Business and management skills: Work increasingly requiresbusiness and leadership skills, irrespective of the position: engineersas well as accountants must have the necessary businessmanagement skills.Design and

Millennial siblings having to move back home. The growing wealth gap between income groups: from 2007-2016, the high-income group saw its income increase 1,425% more than the low-income group and four times the middle-income cohort — and the gap is widening15. Rising non-discretionary expenses, such as housing, transportation,

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