Key Workplace Trends & Impact to Human Resources

March 18, 2008

Sources

From McKinsey Quarterly, online journal January 2006, “Ten Trends to Watch Davis and Elizabeth Stephanson

From “SHRM Workplace Forecast, 2006-2007” & “SHRM Special Expertise Panels 2007 Trends Update”, http://www.shrm.org/trends/2008WorkplaceTrendsList.pdf

Business Week Survey to 2,000 managers, published August 20, 2007

“Are They Ready to Work? Employers’ Perspectives on Basic Knowledge and Applied Skills of New Entrants to 21st Century US Workforce,” key findings of survey to 400 employers by Conference Board, Corporate Voices for Working Families, Partnership for 21st Century Skills, and Society for Human Resources Management, October 2006.

McKinsey Quarterly – 10 Trends to Watch - Macroeconomic

1. Centers of economic activity will shift globally and regionally

– Currently Asia (minus Japan) accounts for 13% world GDP and Western Europe has 30%+. Within 20 years Asia will catch up.

2. Public sector costs will balloon, requires increase in productivity

– Aging population causes huge outlay for pension & health care.

– Not just developed economies but countries with emerging markets demanding more retirement & health care security.

Macroeconomic trends

3. Consumer spending changes worldwide– Billion new consumers worldwide in next decade

with increase in discretionary spending – $4 trillion to $9 trillion plus.

– Hispanic population in 2015 spend equivalent of 60% of all Chinese consumers.

– Technology will give all consumers info and access to products.

Ten Trends to WatchSocietal and Environmental

4. Technological connectivity transforms way people live.

– 12% newlyweds last year met online, 2 billion use cell phones, billion Google searches a day (more than half not in English), 9 trillion emails a year.

5. Integration of global labor market– 33 million college educated in developing countries– Companies shifting jobs where the talent is and not

just low paying jobs.

Societal and Environmental Trends

6. Behavior of big business coming under increasingly sharp scrutiny.

– Current US ideology not understood or accepted around globe – intellectual property rights, free trade, shareholder value.

– Regulatory backlashes

Societal and Environmental Trends

7. Demand for natural resources and strain on environment.

– Oil demand to grow by 50% in 20 years. Supply can not keep up with demand. Similar demands on copper, steel, aluminum.

– Water shortage

Ten Trends to Watch Business and Industry

8. New global industry structures – Nontraditional business models flourishing

9. Management not an art but a science– Technology and highly sophisticated software

running companies.– Most CEO’s are boomers & impending

leadership crisis is coming. As many as 50% senior managers leaving in next 5 years.

Business and Industry Trends

10. Access to information changing economics of knowledge.

– Google and other online tools allow instantaneous access.

– Open source knowledge, new models of production, distribution and ownership.

– World-wide patent applications rose 20% annually in last 10 years.

SHRM Workplace Forecast – 2006Top Three Themes Overall

1. Rise in healthcare costs

2. Implications of increased global competition

3. Demographic changes, aging of workforce, impending mass retirement of baby boomers at about same time

Demographic Outlook

In 2003, Hispanics became the largest minority group in US

Most population increase seen in ethnic and racial minorities - births and immigrants

Singles outnumber married couples with children

Later age for child bearing

Racial and Ethnic Composition of the Population 1980-2020

Demographic Impact

Aging population – Sandwich generation caring for children and parents– Fewer workers to support Medicare & Social Security

Diversity of workers impacts workforce policies– Flextime, telecommuting & sabbaticals– Training line managers to respond to differences - cultural,

languages, generational, technology – Bringing retirees back into workforce

Economic Outlook

Rise in healthcare costs is most important economic trend

Rise in costs of retiree health benefits & governmental programs

Labor shortage – projected in 2012 will have 21 million jobs and only 17 million new entrants into workplace

Cost of security & war on terrorism causes continued economic uncertainty

Social Outlook

Changing definition of family 24/7 workplace Broadening diversity – religious, ethnic and

cultural Poor educational performance US students Women attaining higher rates of education and

professional degrees versus men Global health issues – HIV, SARS & bird flu,

plus US has highest obesity rate

Percent Households by Type

05

1015202530354045

1970 1980 1990 2000

Married Couples +Children

Married Couples noChildren

Other FamilyArrangements

Men Living Alone

Women LivingAlone

Other NonfamilyHouseholds

Source: U.S. Census Bureau, Current Population Survey, March 2002 Supplement

Science & Technology Outlook

Technology increases communications with employees and potential for monitoring employees

Increased theft of intellectual property and identity theft

Skills quickly become outdated and gap in skills learning – rich vs. poor and young vs. old

E-learning any time & any place– Wearable computer devices

Political Outlook

Focus on Global and domestic security driving political agenda

Health care privacy and portability legislation Increased political partisanship and state reactions

related to the political party in power Increasing grassroots pressures on labor practices Political impact of federal deficit and cost of war in

Iraq Weakening of Affirmative Action - policies tested in

courts

International Outlook

Exporting of US manufacturing & other white collar jobs

Ethnic strife causing segregation of cultures and increased anti-Americanism

English spoken by ¼ of world’s population Spanish is second language of US Development of global labor standards

Employment Outlook

Rising health care costs, continued double digit increase per annum over next 5 years

Employee demand for flexible work schedules & telecommuting

Growth in women and minority owned business Benefits & compensation structured for diverse

population and varied needs Increase in hiring college grads and highly skilled

workers

US Census Bureau, 2004 Supplement

Average all states – educational background– 25.5% have some college– 18.1% have bachelor’s degree– 9.6% have advanced degree

State of Tennessee – educational background– 23.0% have some college– 17% have bachelor’s degree– 7.3% have advanced degree

Measuring Up 2006 – Report Card on Higher Education by National Center Public Policy and Higher Education

In Tennessee 33% aged 18-24 were enrolled in college in 2006

– Compared to top ranking states at 41%– Ranking TN below Korea, Greece, Finland, Belgium,

Ireland, Poland, Australia, France, Hungary, Spain and New Zealand

2006 Tennessee Report Card– Preparation = C- (up)– Participation = C- (up)– *Affordability = F (neutral)– Completion = B (up)– Benefits = C+ (up)

The Value of a College Degree?US Census Bureau, 2004 Supplement

Average all States – avg. personal income– $25,053 with high school diploma– $48,417 with college degree– $70,851 with advanced degree

State of Tennessee - avg. personal income – $21,815 with high school diploma– $43,644 with college degree– $67,986 with advanced degree

For 2008, adjusted for annual 4% increase = $51,056 with college degree

% Change in Number of Jobs by Education Source Projected 2000-2010

0

5

10

15

20

25

30

35

Percent Change

Associate

Doctoral

Master's

Bachelor

1st Prof Degree

Work Exp. + BS

Vocational

Source: Bureau of Labor Statistics

2007 SHRM Workplace Update

SHRM expertise panels look at 13 areas for key trends and changes from previous year

Looks at trends in following areas:1. Corporate Social Responsibility

2. Employee Health, Safety and Security

3. Employee Relations

4. Ethics

5. Global

6. HR Consulting/Outsourcing

2007 SHRM Workplace Updates

7. Labor Relations

8. Human Capital Measurement/HR Metrics

9. Organizational Development

10. Staffing Management

11. Total Rewards/Compensation and Benefits

12. Technology and HR Management

13. Workplace Diversity

Corporate Social Responsibility

Businesses recognize necessity for corporate social responsibility as part of required strategy

Increase in transparency in operations Awareness of gaps between “haves and

have nots” Business impact of Generation Y priorities

Employee Health, Safety and Security

Influence of health insurance costs and new programs – “smokers penalties,” health risk assessments and wellness programs, particularly for diabetes and obesity

Concerns for health information protection and risks of identity theft

Ongoing concerns for communicable diseases and possible pandemic situations

More background and drug tests

Employee Relations

Retention of talent is strategic objective – specific skill sets in short supply

Multi-generational employees see increased employee relations issues

Change in communications (social networks, blogs, etc.) and the new etiquette and ethics required for the workplace

“Islamophobia”

Global

How to manage global talent and have the right talent, particularly in fast growing countries (India, China)

Immigration reform and employee shortages (construction & engineering)

Balancing business needs with US centric versus global centric views

Multiculturalism

HR Consulting/Outsourcing

Changing role of HR due to outsourcing, consulting and global needs.

Small organizations are outsourcing all of HR to Professional Employer Organizations

Greater use of metrics to justify HR costs Specialized niche HR consultants

Labor Relations

Union consolidation and attempt to organize more members in non-traditional areas

Impact of the cost of health care benefits to labor relations

Impact of immigration policy on union organizing efforts

Human Capital Measurement / HR Metrics

Increasing demand to use human capital measures and HR metrics leading to standard sets of measures

Measures that are culturally sensitive and understanding of the various differences in acceptable practices

Increased use of technology for measurements

Organizational Development

Increase awareness of OD and impact on business

Supporting targeted groups (generational, cultural) with specialized development

Organizational performance tied to talent management – ID, develop and retain those with critical KSA

More entry level workers lacking workplace etiquette, emotional intelligence, interpersonal skills

Staffing Management

Looming skills and talent shortage Shifting demographics and use of global talent Increasing use of technology in recruiting Increasing use of assessments for pre-

employment Continued use of metrics but increase in

alignment with business goals

Total Rewards / Compensation and Benefits

Proper oversight and compliance to regulations and increased transparency for executive compensation

Impact of aging workforce on total compensation packages

Risk and cost shifting increase both government to business and employer to employee

Total rewards increasingly using career development and work/life balance issues, and importance of effective communications of all total rewards

Performance management and alignment with total rewards and business strategy

Technology and HR Management

Online social networking Growth of ASP’s and outsourcing technology Real-time web applications – ex. Remote

interviewing, “pulse” surveys Need for closer working relationships

between IT and HR for HR technology Legal issues for use of HR technology, ex.

privacy issues and data storage

Diversity Management

Linking diversity to overall business strategy to ensure commitment

Demographic shifts in workplace and impact to recruitment and retention efforts of HR– Immigration and multi-cultural issues– Aging workforce and multiple generations working– Those with disabilities

Need to address varying religious and spiritual needs of diverse workforce

Are They Really Ready to Work?Study by SHRM, Conference Board, Partnership 21st Century, Corp. Voices Working Families

63% predict a foreign language is important basic skill

Critical thinking 77.8% and creativity/innovation 73.6% are top two responses for increasing in importance

Top three applied skills important to the workplace are professionalism, teamwork and oral communications.

Employers list top deficiencies for college grads – written communications, leadership ability and professionalism.

Actions HR Professionals are Taking in Response to Trends

Training managers to respond to generational differences

Changes in health care policies and plans in response to demographic changes

Changes in policies as response to federal and state regulations

Strategic HR planning and succession planning related to recruiting and retaining diverse employees

Increasing use of technology to perform transactional HR functions, and use of technology for more employee self service applications

Actions HR Professionals are Taking in Response to Trends

Increasing HR’s role in corporate ethics and crisis management

Increasing investment in training for employees and HR staff

Building human capitol factors/metrics into key business transactions & planning to increase productivity to offset higher cost of business

More policies for work/life balance Increase in policies for safety and security

Q & A