©2000, Michael A. Mische MOR 559 – Strategic Renewal

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©2000, Michael A. Mische MOR 559 – Strategic Renewal

  1. 1. Diversity & Multiculturalism Strategies for Changing Workplace & Pluralism Lecture 5
  2. 2. Lecture 5: <ul><li>DESCRIPTION & OVERVIEW </li></ul><ul><li>This lecture focuses on the third factor driving change and strategic renewal – multiculturalism and diversity. As a fundamental societal characteristic and component, multiculturalism has a major impact on the composition and dynamics of today’s workforce. Additionally, in combination with globalization, diversity and cultural differences present an issue that has some key implications for organizations competing in a number of foreign markets, where they interact have to understand and interact with both local customers as well as employees. </li></ul><ul><li>The main goals of this lecture is to address several key issues: </li></ul><ul><ul><li>How do changing work patterns and worker mobility drive strategic renewal? </li></ul></ul><ul><ul><li>What are the factors driving change in the workforce structure and employment patterns? </li></ul></ul><ul><ul><li>How can multicultural workforces and organizations create competitive advantage? </li></ul></ul><ul><ul><li>What are the effects of multiculturalism and diverse workforces on leadership styles and management practices? </li></ul></ul><ul><ul><li>How do multiculturalism and changing workforces neutralized the traditional sources and bases of competing? </li></ul></ul><ul><li>KEY LEARNING CONCEPTS </li></ul><ul><li>Multiculturalism is an ever-presents societal phenomenon that is shaping today’s workplace. It has a direct and profound implications on organizational environments and global markets. As an important driver of strategic renewal and enabler of high performance, it is imperative to understand the key business and strategic issues surrounding the topics of diversity and multiculturalism. In this regard, the learning objective of this lecture are to: </li></ul><ul><ul><li>Understand the key distinction between diversity and multiculturalism. </li></ul></ul><ul><ul><li>Understand in how multiculturalism relates to and affects strategic renewal, strategy development and high performance. </li></ul></ul><ul><ul><li>Identify the key forces driving changes in the workplace and working patterns in modern societies. </li></ul></ul><ul><ul><li>Understand the interdependencies between multiculturalism and globalization as well as the relationship between IT and changing workforce structures and patterns. </li></ul></ul><ul><ul><li>Understand the managerial issues and leadership challenges associated with diversity and multicultural environments. </li></ul></ul><ul><ul><li>Identify the ways in which diversity obsoletes traditional sources of competitive advantage and provides for new means of competing. </li></ul></ul><ul><li>This lecture will also discuss some key indicators and trends to stimulate your thinking as a strategist and a leader, and raise awareness of some pressing issues such as the “glass ceiling”, matters of disproportionate compensation, promotion decisions, etc. </li></ul>
  3. 3. Lecture 5: <ul><li>CLASS SCHEDULE & AGENDA </li></ul><ul><li>6:00 – 6:15 Course Related Q&A </li></ul><ul><ul><li>Student Concerns </li></ul></ul><ul><ul><li>General Discussions </li></ul></ul><ul><li>6:15 – 6:30 Review of previous material </li></ul><ul><li>Preview of current week’s material </li></ul><ul><li>6:30 – 7:30 Lecture </li></ul><ul><li>7:30 – 7:45 Break </li></ul><ul><li>7:45 – 9:00 Lecture & Material/Topic Discussion </li></ul><ul><li>8:45 – 9:30 Case Examples & Discussions </li></ul><ul><li>9:30 – 10:00 Professor Available for Q&A, Discussion, etc. </li></ul>READINGS Mische: Strategic Renewal , Chapter 4 Einstein: “How Fiorina Shattered the Glass Ceiling,” Forbes , July 19, 1999. Hardy: “All Carly, All the Time,” Forbes , December 13, 1999. Peters: “Opportunity Knocks,” Forbes , June 2, 1997. Jones: “Gender Motors,” Forbes , May 17, 1999. CASES Hewlett Packard (article-built case)
  4. 4. Lecture 5: <ul><li>CONCEPT DISCUSSION & QUESTIONS </li></ul><ul><li>What are the current major trends in working and employment patterns and how do these factors influence career choices, “career behavior”? </li></ul><ul><li>What are the key differences between pluralism, diversity and multiculturalism? What are the common mistakes and strategic “traps” managers often fall into with respect to creating a “diverse” and resourceful workforce? </li></ul><ul><li>How do multiculturalism and increasingly diverse workforce challenge current leadership styles and management practices? What new qualities and approaches do they demand? </li></ul><ul><li>What are the differentiating features and qualities of multicultural workforces? How can/should they be used as a source of competitive advantage and a catalyst for change? </li></ul><ul><li>Discuss some real life examples of companies and organizations that successfully create and maintain multicultural workforces? How do these organizations use this assets to develop competitive advantage? How do they sustain it? </li></ul><ul><li>Discuss the rationale and imperatives behind the portfolio approach to career management? </li></ul>CASE DISCUSSION & QUESTIONS Current material available at http://www- rcf . usc . edu /~ mische (September 2000) Interactive class discussion
  5. 5. Lecture 5: <ul><li>LECTURE SUMMARY </li></ul><ul><li>With regard to multiculturalism, high-performance organizations understand the following imperatives: </li></ul><ul><ul><li>Developing an effective strategy in an increasingly diverse environment requires a working knowledge and commitment to enterprisewide coalition and collaboration. </li></ul></ul><ul><ul><li>Multiculturalism is a source of competitive and operational advantage. </li></ul></ul><ul><ul><li>Income, education, compensation, personal choices and technology are creating new challenges for strategic thinking and formulation. </li></ul></ul><ul><ul><li>Understanding strategic change requires an understanding that changing workforce pattern and arrangement are presenting new benefits as well as challenges to both workers and organizations. </li></ul></ul><ul><ul><li>Leadership styles and practices are largely affected by workforce changes, which require new management patters as well as different leadership skills and qualities. </li></ul></ul><ul><ul><li>As increasingly mobile and flexible workers are seeking more challenging environments, non-traditional compensation and reward systems, and learning opportunities, organizations must compete for talents and skill with increasing intensity. </li></ul></ul>CLASS & INDIVIDUAL ASSIGNMENTS Current material available at http://www- rcf . usc . edu /~ mische (September 2000) SUPPLEMENTAL MATERIAL Current material available at http://www- rcf . usc . edu /~ mische (September 2000)
  6. 6. “ The question is this: Is there a black, a Hispanic, or a woman in your company who, if all things are equal, can expect to become chairman within the next ten years? ” Reverend Jesse Jackson Sr., Fortune Magazine
  7. 7. Key Issues Regarding Multiculturalism… <ul><li>How do changing work patterns and worker mobility drive strategic renewal ? </li></ul><ul><li>Which differentiating and sustained competitive advantages are created by multicultural workforces and organizations ? </li></ul><ul><li>What new and different management challenges are presented by multiculturalism ? </li></ul><ul><li>What are the new and/or emerging work patterns and individual choices that are driving change and strategic renewal ? </li></ul><ul><li>How do changing work patterns and demographics neutralize the traditional sources of competitive advantage and strategy formulation ? </li></ul>
  8. 8. Changes in the Workplace… <ul><li>Changes in the current workforce are caused by five major factors , which drive further implications… </li></ul>Life Style Choices Changes in Political Systems New Technology & Innovations Changing World Economies Changing Demographics <ul><li>Increasing globalization </li></ul><ul><li>Higher level of worldwide economic & business integration </li></ul><ul><li>Growing workforce & job mobility </li></ul><ul><li>Increasingly diverse & multicultural societies and labor compositions </li></ul>
  9. 9. Understanding Multiculturalism & Diversity… <ul><li>There some major challenges to understanding these concepts: </li></ul><ul><li>Distinction between diversity and multiculturalism </li></ul><ul><li>Leading multiculturalism for competitive advantage </li></ul><ul><li>Factors driving and changing work lives, styles, employment patterns </li></ul><ul><li>Strategic impact of multicultural workforces and related issues/aspects </li></ul>
  10. 10. Defining Multiculturalism and Diversity… <ul><li>There are definitional and operational differences between diversity and multiculturalism: </li></ul><ul><li> </li></ul><ul><li>DIVERSITY: </li></ul><ul><li>Thought of as gender, ethnic and racial proportionality and representation relative to a population. </li></ul><ul><li>Is statutorily defined. </li></ul><ul><li>MULTICULURALISM: </li></ul><ul><li>Encompasses more than ethnic, gender and racial diversity. </li></ul><ul><li>Involves the concept of pluralism : </li></ul><ul><ul><li>Includes diversity plus different life experiences, religion, age, income, customs, sexual preferences, physical and intellectual capabilities, and personal choices. </li></ul></ul>
  11. 11. Comparing Diversity and Multiculturalism… There are important differences between homogeneity, diversity, and multiculturalism as sources of competitive advantage. <ul><li>Low Source </li></ul><ul><li>Low Impact </li></ul><ul><li>Medium Source </li></ul><ul><li>Medium Impact </li></ul><ul><li>High Source </li></ul><ul><li>High Impact </li></ul>Strategic Impact Strategic Impact Strategic Impact <ul><li>Uniform ethnic and social construct </li></ul><ul><li>Insular focus to the exclusion of others </li></ul>Multi-Cultural Diversity Homogeneous <ul><li>Pluralistic </li></ul><ul><li>Inclusive and representative of society and institutions </li></ul><ul><li>Highly dynamic and energized </li></ul><ul><li>Socially mandated </li></ul><ul><li>Gender, race, age and life experience focus </li></ul><ul><li>Inclusive of cultural heritage </li></ul><ul><li>Representative sample </li></ul><ul><li>Gender and race focused </li></ul><ul><li>Regulatory mandates </li></ul><ul><li>Improves sensitivity and understanding </li></ul><ul><li>Diverse ethnic and social construct </li></ul>
  12. 12. Strategic Implications of Multiculturalism… <ul><li>Multiculturalism creates segments and micro-markets , which represent sources of talent. </li></ul><ul><li>Companies must constantly search these segments for talent. </li></ul><ul><li>Multiculturalism leads to more creative and innovative breakthroughs. </li></ul><ul><li>Multiculturalism enhances critical thinking. </li></ul>
  13. 13. Multiculturalism at Work… <ul><li>The Diversity Elite (50 companies) outperformed the S&P 500 on a continuous basis (as of 1997). </li></ul><ul><li>They averaged returns of 125.4 percent versus 112.2 percent, and 200.8 percent versus 174.2 percent for the three and five year periods, respectively, as compared to the S&P 500 (in 1997). </li></ul><ul><li>In a 1992-1994 survey of over 3,200 companies found that affirmative action programs had little or no negative impact on productivity . </li></ul><ul><li>The “best practice” company has the following profile : </li></ul><ul><ul><li>Minority individuals represent 11.7 percent of their boards of directors. </li></ul></ul><ul><ul><li>Minorities comprise 24.9 percent of its total workforce . </li></ul></ul><ul><ul><li>23.8 percent of new hires are minorities . </li></ul></ul><ul><ul><li>7.2 percent of minorities are among the highest paid employees . </li></ul></ul>
  14. 14. Executives’ Focus on Diversity… <ul><li>75% of Fortune 500 have formal diversity programs; however, only 54 percent measure the results of their programs. </li></ul><ul><li>Over 80% consider diversity important. </li></ul><ul><li>Program focus: </li></ul><ul><ul><li>93% are focusing their development efforts on African Americans </li></ul></ul><ul><ul><li>92% are concentrating on women </li></ul></ul><ul><ul><li>85% target Latino/Hispanic Americans </li></ul></ul><ul><li>Diversity programs included: </li></ul><ul><ul><li>Diversity training </li></ul></ul><ul><ul><li>Employee affinity groups </li></ul></ul><ul><ul><li>Mentoring </li></ul></ul><ul><ul><li>Career development </li></ul></ul>
  15. 15. The Common Misconception… <ul><li>Many organizations are lured into a false sense of multiculturalism based on statistical representation and a statutorily prescribed definition of diversity . This perception: </li></ul><ul><ul><li>Excludes critical factors such as: </li></ul></ul><ul><ul><ul><li>Cultural background </li></ul></ul></ul><ul><ul><ul><li>Life experiences </li></ul></ul></ul><ul><ul><ul><li>Professional and geographical diversification </li></ul></ul></ul><ul><ul><ul><li>Educational background, etc. </li></ul></ul></ul><ul><ul><li>Emphasizes “statutory” diversification </li></ul></ul><ul><ul><li>Ignores pluralism </li></ul></ul>
  16. 16. Multiculturalism as a Source of Competitive Advantage… <ul><li>The most critical aspect of multiculturalism regarding competitive advantage is the collective wisdom . </li></ul><ul><li>Companies must ensure diversity of cultures, life experience and backgrounds . </li></ul>“ Diversity in information sources and perspectives suggests differentiation in an organization’s belief structure that in turn leads to a perception of the feasibility of change and a momentum toward change.”
  17. 17. Changing Workforce & Strategic Renewal <ul><li>The Imperative Is Clear: </li></ul><ul><ul><li>Depending on the given market, high performers incorporate in their cultures an appreciation and awareness of local: </li></ul></ul><ul><ul><ul><li>Societal values </li></ul></ul></ul><ul><ul><ul><li>Social behaviors </li></ul></ul></ul><ul><ul><ul><li>Political situation </li></ul></ul></ul><ul><ul><ul><li>Religious convictions and customs </li></ul></ul></ul><ul><ul><ul><li>Cognitive and communication practices </li></ul></ul></ul>Organizations that aggressively pursue diversity and multiculturalism are better positioned for successfully competing in global environments and for continuous renewal .
  18. 18. Three Major Forces Drive Workforce Shifts… Systemic Change in WORKING ARRANGEMENTS Significant Shifts in INDIVIDUAL EXPECTATIONS Influence of EDUCATION, EARNINGS AND INCOME
  19. 19. Each Force Involves a Set of Factors… <ul><li>Working Arrangements: </li></ul><ul><ul><li>Free Agency </li></ul></ul><ul><ul><li>Women Leaders </li></ul></ul><ul><ul><li>Position Tenure </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><li>Individual Expectations: </li></ul><ul><ul><li>Lifestyle and Living </li></ul></ul><ul><ul><li>Longevity </li></ul></ul><ul><li>Education, Earnings, and Income: </li></ul><ul><ul><li>Education and Earnings </li></ul></ul><ul><ul><li>Income and Earning Power </li></ul></ul><ul><ul><li>Executive Compensation, Organizational Performance and Income Equity </li></ul></ul>
  20. 20. Working Arrangements… <ul><li>Free Agency </li></ul><ul><ul><li>Migration of workers from rural to industrial areas due to industrialization </li></ul></ul><ul><ul><li>Structural shift and a change in the workforce and the working habits </li></ul></ul><ul><ul><li>Increased mobility of labor force </li></ul></ul><ul><ul><li>Growth of employment in smaller businesses… entrepreneurship </li></ul></ul><ul><li>ORGANIZATIONAL ADVANTAGES OF FREE AGENCY: </li></ul><ul><ul><li>Flexibility </li></ul></ul><ul><ul><li>J-I-T worker utilization </li></ul></ul><ul><ul><li>Access to best/expert resources </li></ul></ul><ul><ul><li>Simplified termination and reduced legal consequences </li></ul></ul><ul><li>WORKER AND COMPANY IMPLICATIONS OF FREE AGENCY: </li></ul><ul><ul><li>Portfolio approach to career management… balance and expand experience, skills and talent </li></ul></ul><ul><ul><li>Increase in corporate competition for talent </li></ul></ul>
  21. 21. Working Arrangement… Increasing Flexibility and Fluidity <ul><li>Currently, 6-7% of US workforce are independent contractors </li></ul><ul><li>In 1997, around 29% of workers stayed on the same job for a year or longer as contract workers </li></ul><ul><li>Total wages and salaries for independent workers exceeded $30 billion in 1996… a 360% increase over a 10-year period </li></ul><ul><li>The professional segment of independent workers is growing, mainly in: </li></ul><ul><ul><li>High-tech areas </li></ul></ul><ul><ul><li>Professional/management services </li></ul></ul>A distinct shift in emphasis from employment to “employability” . PORTFOLIO APPROACH TO CAREER MANAGEMENT
  22. 22. Entrepreneurship… A New Wave of Employment <ul><li>Between 1989 and 1995, 2.9 million new companies were created and 2.6 million died ; a positive net change of 300,000 new businesses. </li></ul><ul><li>Companies with fewer than 500 employees generated 76.5% of all new jobs added to the private sector between 1990 and 1995 . </li></ul><ul><li>In 1995, workers employed by companies with less than 500 people represented 52.5% of the entire private sector workforce . </li></ul><ul><li>The number of independent contractors is growing; in 1995 this category represented: </li></ul><ul><ul><li>31% of professional women </li></ul></ul><ul><ul><li>25% of professional men </li></ul></ul>
  23. 23. Women in Workforce… A Gradual Progression <ul><li>In 1997: </li></ul><ul><ul><li>65% women were working compared to 35% in 1966. </li></ul></ul><ul><ul><li>Women accounted for 46% of the total labor force. </li></ul></ul><ul><ul><li>70% of women between 15 and 64 are working. </li></ul></ul><ul><li>Yet… women’s earnings lag behinds men’s: </li></ul><ul><ul><li>Overall, women earn 74% of men earnings. </li></ul></ul><ul><ul><li>At top executive levels, women earn only 68% of men’s salaries. </li></ul></ul><ul><li>The “Glass Ceiling” still exists: </li></ul><ul><ul><li>Only 2.5% of top executive positions are occupied by women. </li></ul></ul><ul><ul><li>Only 5.3% positions leading to the CEO are held by women. </li></ul></ul><ul><ul><li>Women constitute only 10.6% of all corporate officers in Fortune 500. </li></ul></ul><ul><li>Nevertheless… the US is leading the rest of the world with respect to these statistics. </li></ul><ul><ul><li>Only 5% board members in UK are women, comp. to 11.2% in US </li></ul></ul><ul><ul><li>Women represent only 30-40% of managerial positions in Europe, compared to 40% in the US </li></ul></ul>
  24. 24. Women Leaders… Some Unique Qualities <ul><li>Women managers and leaders are: </li></ul><ul><ul><li>More participative </li></ul></ul><ul><ul><li>More relational </li></ul></ul><ul><ul><li>Better listeners </li></ul></ul><ul><ul><li>Clearer and honest speakers </li></ul></ul><ul><ul><li>Better negotiators </li></ul></ul><ul><ul><li>Creating more positive influence in the workplace </li></ul></ul><ul><ul><li>More comfortable with ambiguity and change </li></ul></ul><ul><ul><li>More flexible </li></ul></ul><ul><ul><li>Better at sharing power and information </li></ul></ul><ul><ul><li>Better at collaboration </li></ul></ul>
  25. 25. Issues and Challenges in Women Leadership <ul><li>Glass Ceiling persists: </li></ul><ul><ul><li>Preconception, stereotyping and exclusion from influential networks, especially in case of minority women </li></ul></ul><ul><ul><li>Corporate rigidity </li></ul></ul><ul><ul><li>Lack of sincere opportunities </li></ul></ul><ul><li>Cultural issues and barriers in certain cultures and societies </li></ul><ul><ul><li>Predefined roles and customs; societal, cultural, religious, etc. </li></ul></ul><ul><ul><li>e.g. Arabic cultures, some Asian societies </li></ul></ul>
  26. 26. Cultural Dexterity … Key to Successful Global Workforce <ul><li>To become successful as a global competitor and leader: </li></ul><ul><ul><li>Know the cultural rules and norms of each local market </li></ul></ul><ul><ul><li>Appreciate and respect the nuances of local cultures </li></ul></ul><ul><ul><li>Rely on signals, cues, and networks to establish informal and formal relationships </li></ul></ul><ul><ul><li>Increase efforts and work harder, as driven by the local customs and demands </li></ul></ul><ul><ul><li>Be patient while establishing presence in a new markets, especially if considerably different from the home environment </li></ul></ul><ul><li>Although valid for all, these imperatives are especially critical for women and minority individuals </li></ul>
  27. 27. Position Tenure… <ul><li>“ Transitory tenure” has become an employment standard </li></ul><ul><li>Several factors drive job changes: </li></ul><ul><ul><li>Corporate downsizing </li></ul></ul><ul><ul><li>Outsourcing trends </li></ul></ul><ul><ul><li>Globalization and geographical shifts </li></ul></ul><ul><ul><li>New processes and technologies </li></ul></ul><ul><ul><li>Changing lifestyles and individual perspectives and needs </li></ul></ul>
  28. 28. Position Tenure… A Downward Trend <ul><li>Between 1983 and 1996 the average tenure for a male worker over the age of 55 declined by 6 years from almost 18 years to 12 years or by 29% </li></ul><ul><li>For males between the ages of 25 and 64, the average tenure fell by 19%from 1991 to 1996. Today, a 35-year-old male has an average job tenure expectancy of around six years </li></ul><ul><li>Since 1983, nearly every age group of men experienced a decline in median tenure, with particularly sharp drops occurring among men ages 45 to 54 and 55 to 64 </li></ul><ul><li>Since 1983, nearly every age group of men experienced a decline in median tenure, with particularly sharp drops occurring among men ages 45 to 54 and 55 to 64 </li></ul><ul><li>Tenure for women from 1983 to 1991 changed little, but was up slightly in 1996 to 3.5 years </li></ul><ul><li>The overall median tenure for women rose between 1983 and 1996, with nearly all of these gains taking place from 1991 to 1996 . </li></ul>
  29. 29. Position Tenure… A Downward Trend <ul><li>For overall population, the average tenure is estimated at 4 years </li></ul><ul><li>A 35-year old man has an average job tenure expectancy of 6 years </li></ul><ul><li>63% MBAs intend to stay with their first employer for less than 4 years </li></ul><ul><li>The average tenure of a terminated manager was approximately 10.0 years as of March 31, 1998, with severance packages ranging between 13 to 25 weeks </li></ul><ul><li>For managers between 35 and 45, it takes about 9 months = 36 weeks to find better or equivalent position </li></ul><ul><li>77% respondents (Exec-U-Net survey) experienced age discrimination with regard to tenure </li></ul>
  30. 30. Strategic Challenges of Declining Tenure… <ul><li>The decrease in tenure present two major issues: </li></ul><ul><li>Limited tenure translates into lower benefit relative to cost, especially for less experienced personnel. </li></ul><ul><li>The most valuable tacit knowledge possessed by experienced personnel is lost once they leave the organization. </li></ul>Organizations striving for high performance and global leadership must effectively address these challenges.
  31. 31. Technology and Workforce Impacts… <ul><li>IT has a significant impact on workforce and working processes: </li></ul><ul><ul><li>Enables worker and location interconnectivity </li></ul></ul><ul><ul><ul><li>4.5% of US workers telecommuted in 1998… will be 8% in 2001 </li></ul></ul></ul><ul><ul><li>Creates personal, intra-corporate as well as inter-corporate networks </li></ul></ul><ul><ul><li>Provides for instantaneous communication and information transfer </li></ul></ul><ul><ul><li>Obsoletes traditional ways and methods of management and leadership </li></ul></ul><ul><li>Emerging workforces are: </li></ul><ul><li>More decentralized </li></ul><ul><li>Increasingly independent of traditional structures and working processes </li></ul><ul><li>More knowledgeable </li></ul><ul><li>More empowered </li></ul><ul><li>Agile </li></ul><ul><li>“ Closer” to clients and business partners despite physical distances </li></ul>
  32. 32. Expectations Driven by Lifestyles and Longevity… <ul><li>LIFESTYLES </li></ul><ul><li>More disposable income (dual income) </li></ul><ul><li>Greater costs </li></ul><ul><li>Increased mobility </li></ul><ul><li>Less free time </li></ul><ul><li>Less family time </li></ul><ul><li>Careers are becoming a priority </li></ul><ul><li>LONGEVITY </li></ul><ul><li>Productive lifetime has increased </li></ul><ul><li>Extending retirement age </li></ul><ul><li>Need for more benefits and long-term financial security </li></ul><ul><li>Demand for job-enrichment programs </li></ul><ul><li>Workers are seeking new employment value propositions: </li></ul><ul><li>More meaningful/rewarding working relationships </li></ul><ul><li>Empowerment </li></ul><ul><li>Recognition, respect and benefits aside from mere compensation </li></ul><ul><li>Learning opportunities </li></ul><ul><li>Collaborative and challenging environments </li></ul><ul><li>Organizational Implications: </li></ul><ul><li>Attracting and retaining talent is increasingly difficult… </li></ul><ul><li>Create new, non-traditional means of performance recognition and rewarding </li></ul><ul><li>Establish an exciting, challenging and learning environment </li></ul>
  33. 33. Lifestyle & Living… Some Interesting Facts <ul><li>Households with dual income have doubled since 1950, from 20% to 40% in 1996 </li></ul><ul><li>7% of US households earned over $100,000 in 1995… a 109% increase over a 19-year period </li></ul><ul><li>US workplaces with “flextime” represented 61% in 1998, up from 40% in 1996 </li></ul><ul><li>Overall, US companies lag behind European organizations in ancillary benefits </li></ul><ul><ul><li>e.g., Norway provides paid child leave at 80% of the salary </li></ul></ul><ul><ul><li>Germany provides free day care for 3-6-year olds </li></ul></ul><ul><li>Workforce values are changing… an MBA survey: </li></ul><ul><ul><li>71% considered family important </li></ul></ul><ul><ul><li>4% placed their careers ahead of families </li></ul></ul><ul><ul><li>78% wanted good reference from employers for future jobs </li></ul></ul><ul><ul><li>62% wanted to work for exciting companies </li></ul></ul><ul><li>Compensation alone does not create employee satisfaction… especially in the light of CEO earnings </li></ul>
  34. 34. Longevity… <ul><li>Average life expectancy in the US is around 76 years </li></ul><ul><li>75 million baby boomers in the US workforce… about 37% of the workforce </li></ul><ul><li>In 2000, 27% of the US workers will be 55 or older… this will be about 37% by 2020 </li></ul><ul><li>Financial security leads to longer “work lives” </li></ul><ul><ul><li>Social Security concerns </li></ul></ul><ul><ul><li>Medicare concerns </li></ul></ul><ul><li>Organizational payrolls, health benefits and social administration costs will escalate </li></ul><ul><li>More creative management and job enrichment programs will be required </li></ul>
  35. 35. Purchasing Power… <ul><li>The US income and wealth gap is widening </li></ul><ul><li>In 1995, the disparity between median and rich income was 15x </li></ul><ul><li>The income for top 10% of US workers has grown by 0.6% annually from 1965 to 1995 </li></ul><ul><li>It has increased by 8% for the bottom 10% </li></ul><ul><li>US per capita income is 31% higher than for other industrial nations </li></ul><ul><li>In 1999, the US average per capita income ranged between $34,000 and $43,000 </li></ul><ul><li>Average US income was: </li></ul><ul><ul><li>$40,000 for Caucasians </li></ul></ul><ul><ul><li>$27,000 for African-Americans </li></ul></ul><ul><ul><li>$28,000 for Latino/Hispanic Americans </li></ul></ul>
  36. 36. Executive Compensation… <ul><li>In 1997, CEO pay was 326 times higher than the average salary for US workers </li></ul><ul><li>Typical annual compensation for a Fortune 500 CEO is $7.8 million, including stock options, bonuses, incentives, etc. </li></ul><ul><li>In 1996, executive base salaries increased by 39%, and by 54% including stock options, benefits, etc. </li></ul><ul><li>11 percent of America’s largest companies would move from a profit to loss position, and 13 percent would have sustained a 50 percent reduction in profit, if the financial performance of these companies were restated for the cost of CEO stock options </li></ul><ul><li>When the former US company Chrysler Corporation was acquired by Germany’s Daimler Benz, Robert Eaton, CEO of Chrysler, earned eight times more than Juergen Schrempp, the CEO of the acquiring and dominant company </li></ul>
  37. 37. Education and Earning Power… <ul><li>In 1980, a person with a degree could expect to earn about 45% more over their lifetime than a person who did not have a degree. By 1996, the differential had grown to 85% </li></ul><ul><li>The number of people with four years of college education as a percentage of its total population over 25 years of age in 1995 was 23 percent as compared to only 14 percent in 1976 </li></ul><ul><li>From 1965 to 1995, the average number of years of education increased from 11.8 to 12.7 years </li></ul><ul><li>The number of people between the ages of 25 and 29 who have college degrees increased from 23.2 percent to 27.3 percent </li></ul><ul><li>Among 25 to 64 year olds the relative earnings of a college graduate are, on average, about 60 percent higher than for those who do not have a college degree </li></ul><ul><li>While the mean unemployment rate was 4 percent for college graduates, it was 7 percent for non-college graduates </li></ul><ul><li>graduates from the top twenty-five business schools command starting salaries averaging $20,000 per year higher than those who graduate from “second-tier schools” and generally earn more throughout their lifetimes </li></ul>
  38. 38. Strategic Importance and Implications… <ul><li>Increasing income in all societal groups translates into expanded and more sophisticated markets. </li></ul><ul><li>Creates new sources of revenue and growth. </li></ul><ul><li>Directly drives and impacts organizational renewal. </li></ul><ul><li>Increasing at a rate higher than for the general population… growing gap between top executive pay and worker salaries. </li></ul><ul><li>Frequent misalignment with organizational performance. </li></ul><ul><li>Strong correlation between education and earning potential and market power. </li></ul><ul><li>The percentage of population with college and advanced degrees is increasing. </li></ul>INCOME & PURCHASING POWER: High performers must attend to the communities to cultivate such markets and sources talent. EXECUTIVE COMPENSATION: Leaders must and should be compensated for making organizations great, expanding employment and adding to the wealth of the stakeholders. EDUCATION AND EARNING POWER: High performers must attend to the education and learning needs of their workers, as these qualities/assets are directly linked to their strategic success.

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