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Pwc view-winter08 Pwc view-winter08 Document Transcript

  • viewIn this issue 22 Achieving business agility 38 Maximizing talent winter 08 46 Interview with Andrew Zolli and more...Healthychoices?What election-year healthcare reform proposals meanfor the future of employer-sponsored health insurance 10
  • Departments 3 A new view Business success in the 21st century Tom Craren 4 My view The key to 21st-century competitiveness: Finding the right people Dennis Nally 52 Your view On constant changeView points 6 Solving the tech waste problem 7 Syncing up on info security 8 Joining the consumer conversation 9 The business of bribes 9 International assignmentsFeatures 10 Cover story 22 Change agents Just whose job is it to Healthy choices? What do election-year ensure your business can keep pace with healthcare reform proposals mean for customers, competitors, and suppliers? the future of employer-sponsored health Randy Browning insurance? Sandy Lutz, Benjamin Isgur, and Jeffrey Gartland
  • It’s time to check up on how election-year healthcare reformwill affect employers, page 10.30One global flavor A US move to 38 Maximizing talent There are strategies 46 InterviewInternational Financial Reporting for making the most of your people Piercing the veil Andrew Zolli looksStandards is inevitable. All companies no matter what tomorrow brings. at the future of business and of theshould think strategically about this Steve Rimmer, Karen Vander Linde, world. Interview by Tom Craren andchange and begin to understand Dolores Wilverding, and Warren Cinnick Gene Zasadinskithe impact now. Raymond J. Beier
  • view winter 08 Editorial Contributors Editorial Director In addition to our authors, we thank the following individuals for their contributions Tom Craren to this issue of View: View points Managing Editor Deborah K. Bothun, Principal, Advisory Services, Global Digital Convergence Leader Gene Zasadinski Charles Hacker, Partner, Advisory Services, Investigations Assistant Managing Editor Neil Keenan, Director, Advisory Services, Investigations Christine Wendin Mark Lobel, Partner, Advisory Services, Security Assistant Editor Mitchell Schuckman, Partner, International Assignment Services Reena Vadehra Steven Skalak, Partner, Advisory Services, US and Global Investigations Leader Online Business agility Director, Online Marketing Bo Parker, Managing Director, Center for Technology and Innovation Jack Teuber International Financial Reporting Standards Designer and Producer Sara DeSmith, Partner, National Professional Services Group, Global Accounting Joe Breen Consulting Services Design Photography Odgis + Company Corbis, David Doubilet, Bill Gallery, Getty Images, Matt Goins, Vance Jacobs, JupiterImages, Kit Kittle, National Geographic Image Collection, Reuters Pictures, Creative Director and Leonard Rubenstein Janet Odgis Designers Banu Berker Rhian Swierat To request additional copies of View or to comment: PricewaterhouseCoopers ( provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience, and solutions to develop fresh perspectives and practical advice. © 2008 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US). PricewaterhouseCoopers View winter 08
  • Business successA new view in the 1st century According to naturalist and evolutionary As it does to 21st-century business, theorist Charles Darwin, “It is not the change also applies to View. With a new strongest of the species that survive, nor design, a new format, a new editorial the most intelligent, but the one most approach, and an enhanced online pres- responsive to change.” Whether his words ence, View is evolving to keep pace with accurately describe biological processes a changing business environment. is still a matter of heated debate. But there is no debate about their applicability to In line with those changes, we intend to 21st-century business: Complex forces consistently offer business executives of change are at work, and only those like you straight talk on subjects that companies flexible enough to respond matter. Topics in this issue include health- appropriately will survive and prosper. care policy, agility, International Financial Reporting Standards, and strategies for Addressing these forces of change is what finding and maximizing talent. And there’s View is all about. In each issue we share also an interview with noted futurist insights into challenges that most concern Andrew Zolli. you and that affect your success—chal- lenges such as embedding agility into We hope you enjoy this issue of View and your company and making change stick; that you’ll come back often. We promise discovering opportunities inherent in some to be a friendly, reliable, informative, and risk; attracting and maintaining talent; entertaining place for you to check in on maximizing your corporate social respon- and track the trends and issues that interest sibility efforts; disarming complexity; and and concern you most, not just today, fostering innovation and collaboration. but over time as well. We know your expec- tations are high. We wouldn’t have it any other way. You can be sure that we’ll deliver. Sincerely, Tom Craren Partner-in-Charge US Thought Leadership PricewaterhouseCoopers View winter 08 
  • The key to 1st-century My view Dennis Nally competitiveness Finding the right people In today’s knowledge-based economy, talent will be the defining competitive advantage. And companies that want to succeed are dramatically rethinking the way they find, develop, and hold on to talent. PricewaterhouseCoopers View winter 08
  • In today’s leading organizations, there is no We can start by increasing the visa cap for want us. Yes, that’s right, want us. Today’squestion that talent—finding it, developing international professionals who want to recruits have expectations about theit, and retaining it—affects success more work in the US. This year, for the first time companies they want to work for. They aredirectly than any other single factor. It also in history, the visa cap was reached on the looking for commitments to integrity, tois among the greatest causes of concern. first day of filing. Applications arriving after social responsibility, and to flexibility. And day-one were denied. they are in a position to demand this andOur 11th Annual Global CEO Survey bears more. Companies that meet and exceedthis out. While 89 percent of CEOs assert This and other policies and approaches to these demands will win. Those that don’tthat their companies’ people agendas education and to developing talent need to will fall behind.are among their top priorities, 61 percent change. I firmly believe that to maintain itsexpress concern over the availability of competitive edge, America must become Some companies will find that coping withkey skills. In addition, 62 percent maintain a magnet for talent. But until this happens, these new realities is difficult. Others willthat their organizations need to change we can’t just sit on the sidelines. We’ve pretend they don’t exist and continue onthe way they recruit, motivate, and got to find and cultivate talent in our own with the old ways. However, organizationsdevelop employees. backyards. We’ve got to recruit students that succeed will be those that neither at an earlier age. And we’ve got to learn ignore change nor fear it. Rather, they willResponses such as these to questions how to use newer technologies such as be those that respond to change and turnabout what, a decade ago, was a yawn- mobile email and text messaging as pow- it to their advantage.inducing issue suggest that a fundamental erful, new recruiting tools. We also need toshift has occurred. Perhaps more than any fully exploit rich sources of new talent And that’s my view.other aspect of business, the competition such as virtual online communities andfor talent has changed profoundly. social networks. Dennis Nally is chairman and senior partner of PricewaterhouseCoopers LLP. In the next issue ofThe reasons are not difficult to find. They But most important, we have to find ways View, he continues to examine this critical issue andare related directly to globalization and to of ensuring that the people we want also offers his insights on developing and retaining talent.changes in demographics and technology. 89%Finding the right peopleThere was a time—at least in the account-ing profession—when the only talent youneeded involved understanding a balancesheet and an income statement. Thosedays are long gone.Today, we look for people not only with of CEOs assert that their companies’ people agendas are amongtechnical skills, but with integrity as well.We also look for people with diverse back- their top priorities. 6%grounds and cultures—people who bring abroader understanding of the world aroundthem. Without such people, a companycannot compete globally.However, tapping into this type of work-force is easier said than accomplished, andbusiness leaders must work proactively to of CEOs maintain that their organizations need to change theremove obstacles. But what can be done? way they recruit, motivate, and develop employees. PricewaterhouseCoopers View winter 08 
  • View points Corporate social responsibility Solving the tech waste problem For businesses across the United States, burden of its products—a burden shoul- Research’s November 2007 report titled In yesterday’s technology has become dered by its corporate customers. A Search of Green Technology Consumers— tomorrow’s problem. The millions of com- recent study by PricewaterhouseCoopers which covered American attitudes toward puters, printers, and other gadgets that are surveyed tech industry senior executives green technology—only 12 percent of commonplace in any office—and that we on their companies’ attitudes and policies respondents agree that they would pay steadfastly rely on to conduct business— on environmentalism. When asked which extra for consumer electronics that used can become threats when we discard them. factors were most important in their com- less energy or came from a company that panies’ environmental decision making, was environmentally friendly. Forty-one In the United States alone, approximately nearly half of the respondents cited “meet- percent said that though they are con- 2 million tons of e-waste is tossed into ing customer expectations/requirements,” cerned about the environment, they do not landfills, poisoning the air and the land and but energy savings and regulatory compli- strongly agree that they would pay more exposing people to dangerous toxins. In ance had an even greater impact on their for environmentally friendly electronics. addition, all that hardware—especially data environmentally focused pursuits.1 centers that house a company’s informa- Despite this disconnect, many technol- tion lifeblood—is eating up a lot of energy. So, can customers expect more green ogy companies have jumped on the green In fact, 50 percent of the energy consumed products when a company’s next bandwagon. For instance, Sony is creating in a data center is used just to cool down upgrade cycle rolls around? According to an e-waste drop-off facility where anyone the network system. PricewaterhouseCoopers/National Venture can recycle unwanted electronics. And Capital Association MoneyTree™ Report many technology companies are collabo- Along with these practical problems, com- based on data from Thomson Financial, rating with smaller organizations to develop panies face the challenge of going green venture capitalists invested in 2007 almost and promulgate more environmentally and reducing their carbon footprints. This $2.2 billion in companies that make green friendly processes. is becoming important as public interest in tech products. That investment is more environmentalism increases and as more than the amount spent on green technology Such initiatives and collaborations are organizations want to position themselves companies in 2006 and 2005 combined. pivotal for making green technology as socially responsible businesses. a reality for any business. They reduce While such numbers are impressive, a energy costs and provide an alternative The technology industry is beginning to considerable amount of resistance to to junking used hardware. recognize and address the environmental green tech products still exists. In Forrester 1 Technology Executive Connections: Going Green: Sustainable Growth Strategies, PricewaterhouseCoopers, 2008. Motivation for environmental decision making Percent of tech company executives surveyed 70 60.1 60 50.7 50 44.6 43.2 40 30 20 17.6 14.9 14.2 10 8.8 3.4 0 Potential Complying with Meeting Potential Obtaining Matching the Attracting and Meeting Don’t know/ cost savings environmental customer for gaining tax incentives environmentally retaining staff investor/ Not applicable from energy legislation and expectations/ competitive focused actions shareholder efficiency regulation requirements advantage of competitors demands Source: Technology Executive Connections: Going Green: Sustainable Growth Strategies, PricewaterhouseCoopers, 20086 PricewaterhouseCoopers View winter 08
  • CEOs, CIOs, and CSOs differ in their attitudes about business security matters.Managing riskSyncing up on info security Executive views on security attacks Percent of senior executives surveyed 100 83 80 71 74 65 60 53 50 44 43 40 38 CEO 20 CIO CISO/CSO 0 An employee or A hacker as the Fewer than 10 security former employee as source of an attack attacks in the past year the source of an attack Source: Fifth Annual Global State of Information Security Survey 2007, CIO, CSO and PricewaterhouseCoopersCEOs worldwide might want to sit down page concerning the number one priority Despite security and technology execu-with their information and security offi- for company information security efforts: tives’ growing awareness of the truecers to discuss their differing perceptions maintaining business continuity and alle- nature of security threats, an overwhelm-of risk. According to a recent global viating risk. CSOs, however, place greater ing number of CEOs still say hackers—notinformation security survey conducted emphasis on regulatory compliance. employees—are the culprits who shouldby CIO magazine, CSO magazine, and be targeted. However, CEOs believe morePricewaterhouseCoopers, CEOs, CIOs Perhaps the most interesting finding con- so than their security counterparts that(chief information officers), and CISOs cerns a change in perception with regard their organizations are secure and have(chief information security officers) or to the source of security threats—an area experienced few attacks.CSOs (chief security officers) differ in their that the survey has tracked for five years.attitudes about business security matters. Today, CIOs and CSOs say former and So, how can these differences be rec-The survey concluded that many CEOs are current employees are more likely sources onciled? The survey data leads to whatfar more confident about their companies’ of security attacks than outsiders are. And is perhaps a counterintuitive than their information technology they report that email and abused user While information security strategies need(IT) and security leaders are. accounts are the most common methods to include technical approaches, such of employee attacks. This change, however, technical approaches may not lead to theTypically lacking in-depth technical knowl- does not suggest an increase in corporate whole solution. More extensive or wideredge with regard to IT, CEOs naturally crime over the past few years. Rather, it information sharing between an organiza-have different perspectives on information points to possible cracks that have devel- tion’s top executives could turn out to besecurity from those of the executive team oped in information security infrastructure, equally if not more important.members who manage these functions. and it indicates a greater awareness of theEven so, CEOs and CIOs are on the same changing nature of security attacks. PricewaterhouseCoopers View winter 08 
  • View points Operational excellence Joining the consumer conversation If you think surfing the Web is better suited consumer conversation, along with more How companies better understand their to the home office than to the corner one, traditional customer information, into its customers and markets think again. operations. Millions of Internet-savvy Engage with 2% consumers are now able to (1) instantly customers 6% Consider this scenario. Your company provide feedback via email and text via the Web recently launched a product, and the messages, (2) deeply discuss products 39% 53% buzz surrounding the innovation has been and services on message boards, and rising steadily. Shortly after the launch, a (3) broadcast their opinions on blogs hazardous defect was detected. You do and social networking sites. This largely the damage control drill—recalling the untapped chatter constitutes consumer product, reaching out to the media, and conversation—reflecting the attitudes, gauging customer reactions through your behaviors, and intentions of consumers.1 Monitor customers’ 3% call center and focus groups. You hope online behavior and 9% your collective response is enough to The massive volume and rapid pace of preferences 31% minimize damage, but you’ve overlooked online activity make getting a handle on this one important thing: online consumer fertile ground problematic. Hiring the right conversations. Damage was brewing in people and finding the right tools to analyze blogs and message boards as angry con- 57% business intelligence based on consumer sumers dissected your product’s downfall conversation are critical. According to and debated alternatives. If only you had PwC’s Management Barometer, which reg- been listening, your company could have ularly surveys senior executives on crucial Mine open-ended responded proactively. 3% business issues, 31 percent of respondents comments from 13% monitor their customers’ online behavior on service and The world of digital communications a regular basis. Fifty-three percent say their support calls 42% is burgeoning, and for any business to companies use online devices to engage succeed, it must embed this kind of digital with their customers.2 42% A consumer electronics company real- ized the benefits of this approach when its new product was not selling as robustly Understand views 3% as expected. Through analyzing online of key influencers 12% consumer conversations, the company (advisory boards, discovered that many customers thought experts) 55% the product was incompatible with other 30% brands. After the company changed its marketing campaign, the product went on to become a top seller. As this example demonstrates, compa- Collect and analyze 2% nies that engage in digital conversation observations by 3% 14% by analyzing and integrating the findings employees who with other customer data, and, ultimately, interact with or by embedding this intelligence will be well observe customers positioned to drive business transformation 81% and gain competitive advantage. 1 PricewaterhouseCoopers, How Consumer Conversation Will Yes No Not certain Not applicable Transform Business, January 2008. 2 PricewaterhouseCoopers Management Barometer: Consumer Source: PricewaterhouseCoopers Management Barometer: Conversations, January 2008. Consumer Conversations, January 20088 PricewaterhouseCoopers View winter 08
  • Global mobility International assignmentsEconomic crime North American companies reported having Money doesn’t always make the world go been asked to pay a bribe in their home ’round. Organizations are discovering thatThe business of bribes region, as opposed to 21 to 54 percent of it takes more than high salaries to attract companies doing business in E7 countries. the best potential candidates to interna- Interestingly, the survey also found that tional assignments. companies asked to pay kickbacks were more likely to lose deals to competitors that Recent studies we have undertaken sug- were not asked to pay bribes. gest that the nature of global mobility isThis is the deal your company needs to changing.1 Whereas in the past, busi-secure a position in a vital emerging mar- Why do businesses that succumb to nesses were interested mainly in hiringket. In the middle of negotiations, you’ve bribery suffer losses? The study suggests experienced staff from the West, today’sbeen asked to grant a “commission” to that organizations known to be ethical are expatriates are being recruited from aroundsecure the contract. Should you pay— less likely to be approached with requests the world. They include younger, less ex-just this once? for illicit money. Corrupt individuals prefer perienced workers, who serve for various to deal with companies whose ethical lengths of time. In fact, in an effort to re-According to a recent PwC study on global standards are ambiguous. In addition, duce costs, a growing number of organiza-economic crime, corporate bribery rarely business relationships based on illegal tions have developed program alternativeshas positive results. transactions are not likely to focus on qual- to the traditional expatriate assignment. ity and price—an indicator that the market Almost half the companies we surveyedFor our 4th Biennial Global Economic Crime is not operating according to competi- employ permanent transfers; about 20Survey, we interviewed more than 5,400 tive norms. And companies in the E7 that percent send employees on short-termcompanies in 40 countries and found that had implemented effective anticorruption assignments; and a small percentage usecompanies in E7 countries (Brazil, China, controls and strong, clearly understood virtual staff where the employee doesIndia, Indonesia, Mexico, Russia, and ethical guidelines said they suffered up to not relocate but has responsibilities forTurkey) reported higher incidences of being 50 percent fewer incidents of corruption a foreign office.asked to pay a bribe.1 Only 3 percent of than other companies. Changes are also occurring in the area of In short, the study supports the old adage staff incentives to move abroad. It’s no1 PricewaterhouseCoopers 4th Biennial Global Economic Crime that honesty is the best policy when doing longer enough to simply increase salaries orSurvey - Economic crime: people, culture and controls, 2007. business in any market. provide other monetary perks. Employees want a total package that delivers a cul- tural education, keeps spouses happy, and sets out reasonable career expectations.Lost business opportunities in emerging markets The costs of sending employees and their families abroad are high. If an employee isPercent of companies surveyed80 unhappy in the new environment, he or she 71 70 can jeopardize an overseas project. By im-70 66 proving the help that employees get prior to 6360 58 Companies and during their international assignment, asked to pay50 45 47 a bribe and lost companies can maximize their investments an opportunity in the development of global talent.40 31 Companies30 never asked 23 21 to pay a bribe20 18 17 18 and lost an 14 opportunity10 8 6 Source: 0 4th Biennial 1 International assignment perspectives: Critical issues facing the Brazil China India Indonesia Mexico North Russia Turkey Global Economic globally mobile workforce, PricewaterhouseCoopers, July 2007. America Crime Survey PricewaterhouseCoopers View winter 08 9
  • Cover storyHealthy choices?PricewaterhouseCoopers View winter 08
  • What election-yearhealthcare reform proposalsmean for the future ofemployer-sponsored healthinsuranceBy Sandy Lutz, Benjamin Isgur, and Jeffrey Gartland As the presidential campaign reaches a fever pitch, candidates on both sides of the aisle are promulgating their positions on every- thing from fiscal policy to the war in Iraq. One of the most closely followed public debates centers on healthcare reform. Although all voters have a vested interest in the discussion, voters who are also employers may be most affected by its outcome. If you are an employer, spiraling healthcare costs are eating away at your bottom line. According to the US Census Bureau, 177 million Americans rely on employer-sponsored insurance for their health coverage. At 16 percent of the US economy and growing, healthcare is big business—maybe even your business. Moreover, the health plan options companies offer have become key factors in employee recruitment and retention. Current (and prospective) employees are asking a number of questions. How comprehensive is the existing coverage? How many choices do I have? How much is it costing (going to cost) me? Can I do better elsewhere? It’s no wonder, then, that healthcare consistently ranks as one of the top domestic policy issues on the minds of Americans and that during election years healthcare policy becomes a focal point. (See Figure 1.) Employers, employees, and politicians alike agree that the system is not sustainable and that there is no clear path ahead. As one might expect, Democrats differ from Republicans in their respective approaches to healthcare reform. Generally, Democrats favor broader and more immediate changes through legislation, while their Republican counterparts focus primarily on changes to tax policy as the means of transforming the system. PricewaterhouseCoopers View winter 08 11
  • However, all of the major candidates agree For US businesses, too, the significant income for tax and payroll purposes. In fact, that a single-payer model is not tenable and cost of healthcare is a major concern, one recent study found that employees that going forward, our healthcare system particularly when one considers that would rather receive thousands of dollars will continue to be a public-private partner- while just 61 percent of US businesses in employer-sponsored insurance benefits ship. Just what that partnership will look offer health insurance to at least some than the same amount in additional salary. like is the key question. And top of mind for employees, a whopping 98 percent of (See Figure 4.) employers is cutting through the election- large businesses (those with 200 or more year hype and determining what it really workers) do the same.3 Employers typically The future course for employer-sponsored means to the future of their businesses. spend upwards of 10 percent of payroll insurance may depend largely on the on health insurance for their workers. (See policies initiated by the next president of Scoping the problem Figure 3.) Taken in aggregate, that’s a huge the United States. A new leader will help number—nearly $600 billion, according to decide important policy questions con- Healthcare spending has been increasing at the US Department of Commerce’s Bureau cerning covering the uninsured, improving about twice the rate of inflation, absorbing of Economic Analysis. the quality of care, and using taxes and a larger and larger share of both employers’ other mechanisms to fund coverage. Pro- profits and workers’ salaries. (See Figure 2.) It wasn’t always that way. Employer- posals run the gamut from mandating that For employees, healthcare cost is the top sponsored insurance was introduced dur- all employers provide coverage to doing financial concern facing American fami- ing World War II as a relatively inexpensive away with employer responsibility alto- lies, ranking higher than home ownership, way to recruit and retain employees in a gether. The major differences among the energy costs, debt, retirement savings, and tight labor market where wages were frozen possible approaches involve the following college expenses, according to a recent by the federal government. Americans broad categories: employer mandates, Gallup Poll.1 The problem is compounded quickly became accustomed to healthcare government and worker responsibility, because the high cost of healthcare in the coverage as a benefit of employment. They retiree coverage, tax policy, market United States is directly related to growth in have also gotten used to the favorable tax reforms, and cost control. (For a snap- the number of uninsured people, especially treatment of employer-sponsored insur- shot of the Democratic and Republican when premium increases exceed personal ance benefits under current law, in which approaches to healthcare, see “Opposing income growth, thus making insurance the premiums are excluded from their views,” beginning on page 20.) less affordable.2 1 Gallup Organization, What Is the Most Important Financial Problem Facing Your Family Today? Gallup Poll Social Series, July 12–15, 2007. 2 Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs, vol. 25, no. 6 (2006). 3 The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2007 Summary of Findings, September 2007.1 PricewaterhouseCoopers View winter 08
  • Figure 1: America’s big concern Percent of Americans surveyed, citing healthcare as the nation’s most important problem 1991 1992 1994 1996 1997 1993 1995 2007 1998 1999 2000 2001 2002 2003 2004 2005 20063025201510 5 J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S OND J FMAMJ J A S 1992 1996 2000 2004 2008 Presidential Elections Presidential Elections Presidential Elections Presidential Elections Presidential Elections Clinton’s Task Force on National Health Care ReformSource: PricewaterhouseCoopers, Beyond the Sound Bite, 2007, based upon PwC Health Research Institute analysis of Gallup’s Most Important Problem series, October11-14, 1990 through September 14-16, 2007Figure : Healthcare’s growing 80share of consumer spendingPercent change in wallet share of 70personal consumption components 60 50 40 30 20 10 0 Medical care Services, excluding –10 medical careSource: PricewaterhouseCoopers, Beyond –20 Durable goodsthe Sound Bite, 2007, based upon PwC Nondurable goodsHealth Research Institute analysis of data –30from the Bureau of Economic Analysis,“Personal Consumption Components,” 2007 1980 1985 1990 1995 2000 2005Figure : Rising employer Figure : Health insurance trumps pay increaseshealthcare costs Employer Percent of respondents who would rather havepremium contributions as a $6,700 in employer-sponsored health insurance—share of payroll the average amount spent by employers on each employee at the time of the survey—over the same amount in additional taxable income 5% 20% 10.7% 9.8% Prefer employer- 75% sponsored insurance 8.0% Prefer higher pay Don’t know Source: R. Helman and P. Fronstin, 2006 Health Confidence Survey: Dissatisfaction with Health Care System Doubles Since 1996 2000 2003 2005 1998, EBRI (Employee Benefit Research Institute) Notes, vol. 27, no. 11, November 2006, and earlier publications based on theSource: Bureau of Labor Statistics’ Research Data Center, Employment Cost Index, data accessed from February 2006 to April 2007 EBRI Health Confidence Survey PricewaterhouseCoopers View winter 08 1
  • Figure : Employer attitudes changing on providing coverage Percent of respondents who say employers should move away from providing healthcare coverage for active employees 6% 7% Disagree 87% Agree Neither PricewaterhouseCoopers Health Research Institute, Tailoring the approach: Employer attitudes and healthcare strategies address distinct issues, 2007 Pay, play—or no way Figure 6: Overview of existing state employer mandates According to our analysis of US Census Bureau data, 47 million Americans—more Vermont Catamount Health than 15 percent of the population—do Employers that do not offer health insur- not have health insurance. Of those, a full ance, that offer health insurance only to two-thirds have a connection to a full-time some employees, or that have uninsured job; that is, they either hold full-time jobs employees must pay a quarterly assess- or are dependents of those who do. Given ment fee of $1 per day per full-time these statistics, it is not surprising that equivalent (FTE). FTE exceptions will be made through 2010. The employer assess- both of the major political parties consider ment rate will be raised at the same rate addressing the working uninsured to be a as Catamount Health premiums. high priority. To expand access to care, proposals from the leading Democratic candidates require employers to provide worker health coverage. This approach, often referred to as pay or play, encourages employers to fund employee health insurance by taxing employers that do not. The Democratic mandates strengthen and expand the employer’s role in the health- care market. Today, however, many large companies agree that employers must offer a minimum level of coverage. In a recent PricewaterhouseCoopers survey, 150 US executives at large, publicly held companies agree, with 87 percent reject- ing the notion that employers should not provide such coverage. (See Figure 5.) Since 2005, 31 states have proposed Hawaii Massachusetts a form of pay or play, and employer Prepaid Health Care Act Act providing access to affordable, mandates have already been enacted in Employers must provide health insurance for quality, and accountable healthcare employees working over 20 hours per week. Employers must enroll at least one-fourth Hawaii, Massachusetts, and Vermont. Employers must contribute 50 percent of the pre- of employees in an employer-sponsored (See Figure 6.) In Massachusetts, employ- mium for single coverage and the employee covers plan or pay at least one-third of employee ers with at least 10 workers pay each the additional portion of the premium. Employee healthcare premium costs. Penalities for worker $295 per year if they do not make contribution is not to exceed 1.5 percent of wages. failure to adhere to the mandate are $295 a “fair and reasonable” contribution to the per employee per year. cost of workers’ coverage. In this case, fair and reasonable means either enrolling 25 percent or more of full-time equivalents Employer mandate passed (FTEs) in the employer’s plan or offering to pay at least 33 percent of FTEs’ premiums. Source: National Conference of State Legislatures Universal Employer mandate attempted 2005, 2006, or 2007 Health Care Action Network and Progressive State Network, Towards Health Care for All in the States, September 19, 2007 No mandate being considered at this time1 PricewaterhouseCoopers View winter 08
  • An individual mandate could coexist with an employer mandate, potentially offering workers affordable coverage options both through their employers and in the individual market.The mandate proposals generally estab- for by the government and administered by tend to believe that existing governmentlish a minimum employer contribution. For private plans. Other Democratic proposals programs are underutilized. Rather thanexample, if an employer currently pays include (1) a new government health insur- expanding government programs, leadingat least 6 percent of payroll costs toward ance option wherein individuals could Republicans would prefer that the gov-employee health insurance, the employer purchase coverage (the program would ernment focus on enrolling uninsuredwould be exempt from any further contri- be modeled after Medicare but not funded Americans who are eligible for Medicaidbution. If the employer provides no health through the Medicare trust fund); (2) a new and for SCHIP but who haven’t signed or pays less than 6 percent of program that would mirror the Federalpayroll, the employer would have to con- Employees Health Benefits Program and Both parties advocate changing thetribute to a public pool that brings the total make the same private insurance options individual’s role in the healthcare system.contribution up to 6 percent of payroll. The enjoyed by federal employees available Democrats would start with an individualpublic pool would then subsidize coverage to all Americans; and (3) the development mandate—that is, with a requirement thatfor the uninsured. of a national health insurance exchange individuals procure health insurance similar that would set standards for participating to the requirement in many states thatGenerally speaking, Republicans do not plans and facilitate the purchasing of individuals procure automobile this approach. They oppose individual coverage. An individual mandate could coexist withadditional federal regulations on the health an employer mandate, potentially offer-industry and specifically reject mandates. Republicans support proposals that would ing workers affordable coverage optionsThey counter that an employer mandate strengthen the individual insurance market both through their employers and in themay not be effective unless the penalty is by extending to that market some of the individual market. Individual mandateshigh enough to make purchasing coverage favorable tax treatment that is currently could be supported by new rules likeattractive. Some critics add that mandates available only for employer-group cover- guaranteed insurability and communitymight cause employers to hire more part- age. Strengthening the individual market rating, which consist of pricing everyonetime or temporary workers who would not would not only provide tax support in a given geography the same, therebybe subject to mandates. for people who do not have access to creating a large pool that spreads the employer coverage; it would also offer risk. Together, guaranteed insurability andChanging government and worker roles more insurance-product choices to community rating facilitate portability of employees who currently are limited to just insurance—something both parties agreeBolstering or diminishing the employer’s one or two health plans. Also, Republicans on. A variation on this approach involvesrole in healthcare is just one lever that isbeing used to address healthcare reform.How the parties see the responsibility ofthe federal government and the respon-sibility of individuals is another key issuethat also gets at the problem—and directlyimpacts employers.Democrats generally favor expandinggovernment programs such as Medicaidand the State Children’s Health InsuranceProgram (SCHIP). Many support a newgovernment-sponsored health insuranceprogram wherein individuals could pur-chase coverage. This could benefit healthplans if the program were structured likethe Medicare drug benefit, which is paid PricewaterhouseCoopers View winter 08 1
  • Health costs600 1 billion USD is the amountemployers spend on health million Americans rely on employer-sponsored insurance million Americans, more than 15 percent of the population,insurance for their workers, for their health coverage. do not have health insurance.upwards of 10 percent Of those, a full two-thirds haveof payroll. a connection to a full-time job.PricewaterhouseCoopers View winter 08
  • Even employers that believe they have aresponsibility to provide health coverageaccess for retirees also feel there are limitsto that responsibility. an individual mandate only for children that by employers—a level that commonly is supported through expanded govern- approaches annual family premiums of ment programs. $15,000 or more. Republicans oppose individual as well as Whichever coverage proposals prevail, employer mandates. They argue that an they will affect employers. On one hand, individual mandate may not be effective public-plan options may crowd out private unless it is coupled with a severe penalty insurance if insured individuals drop their for those who do not enroll in a plan. For private coverage in favor of less expensive example, in Massachusetts—a state that government coverage. Or employers— currently has an individual mandate—the especially employers of low-wage penalty is loss of the individual exemp- workers—may decide not to offer insur- tion. However, the value of the $3,500 ance when public alternatives are readily tax exemption ranges from $0 (for lower- available. On the other hand, any plan that income individuals not paying taxes) to covers more people may have the effect $1,225 (for individuals in the 35 percent of lowering overall insurance premiums, tax bracket). Given that the average annual a trend that could benefit employers. premium cost of single coverage exceeds $4,000, the penalty might not encour- The retiree dilemma age many of the uninsured to purchase Covering active workers and their depen- insurance. In practice, a mandate would dents is one thing, but what about the likely be limited to those who can reason- burden of providing coverage for retirees? ably be expected to afford private health Even employers that believe they have insurance. Unless significant subsidies a responsibility to provide health cover- are provided for middle-income uninsured age access for retirees also feel there are people, such individuals cannot afford to limits to that responsibility. In a recent PwC purchase the level of insurance provided survey, employers were less than certain about their future support for retiree health coverage. When asked to describe their views on the topic, nearly three-quarters said retiree health coverage is placingFigure : Employer attitudes on retiree health coverage In describing your views about financial pressure on companies and thatretiree health coverage, do you agree at least somewhat with the following statements? such coverage will need to be changed Percent agreeing through reduced employer contributions and benefit caps. However, employersRetiree health coverage is placing do show strong support for assistingfinancial pressure on companies andwill need to be changed via reduced 73 employees in managing their ownemployer contributions and benefit caps retirement health and associated costs.Employers should help provide For example, nearly 80 percent supportaccess to affordable retiree health 74 providing retirees with savings accountcoverage but not necessarily fund it mechanisms, tax incentives, and accessEmployees should set aside money to coverage even if they do not fund it.during their active employment years 79 (See Figure 7.)to fund their retirement healthcare needs The parties’ proposals on retiree healthcareThere should be more tax incentivesfor employees to set aside money to 80 closely mirror their positions on increasingfund their retirement healthcare needs healthcare coverage in general. TheSource: PricewaterhouseCoopers Health Research Institute, Tailoring the approach: Employer attitudes and healthcarestrategies address distinct issues, 2007 PricewaterhouseCoopers View winter 08 1
  • Democrats would bring retirees into the sys- their own, affordable policies without help individual coverage more attractive and tem either by expanding existing programs, from employers. This approach weakens begin to disentangle health insurance by prepurchasing retiree healthcare cover- the connection between insurance from employment. age, or by using health markets to increase and employment. access. The Republicans favor tax incen- Under the Republican plan, people tives through the expansion or modification The Republican plans extend the approach who purchase coverage costing less of health savings accounts (HSAs). that President George W. Bush proposed than the deduction amounts would still in his fiscal year 2008 budget: Contribu- receive the full value of the deduction, Tax reformers and market makers tions to employer-sponsored insurance are which could influence individuals to shop included in wages and therefore subject for the most basic coverage. However, Instead of employer or individual mandates, to income and payroll taxes. In exchange, the proposal would offer few incentives to Republicans generally support changes the president’s proposal would provide low-income earners who have no or little to tax policy to stimulate a more robust a standard deduction of $7,500 for all tax income liability. The administration individual insurance market. Their theory insured individuals and $15,000 for insured estimated that its proposal would reduce is that with attractive rates and policies, families. By eliminating the tax advantages the number of uninsured by 3 million. individual consumers—especially those associated with employer-sponsored insur- Critics, however, argue that employer-pur- who are currently uninsured—can secure ance, the president’s proposal would make chased insurance might continue to enjoy an advantage over individually purchased policies because of more favorable pricing based on employer purchasing power. Republicans favor expanding HSAs, which let individuals earmark tax- exempt contributions for healthcare. By increasing contribution limits, they hope to entice more individuals to purchase insurance. Some also favor doing away with high-deductible requirements for HSAs, which would also make the plans more attractive. Opponents say the impact of such HSA changes would likely be modest, based on how changes have been received since their inception a few years ago. The HSA-eligible, high-deductible-health- plan option has attracted about 4.5 million Americans, about one-fourth of whom previously were uninsured.4 However, only about half of those with eligible plans have actually opened HSAs.5 4 America’s Health Insurance Plans Center for Policy and Research: “January 2007 Census Shows 4.5 Million People Covered by HSA/High-Deductible Health Plans,” April 2007. 5 US Government Accountability Office, Consumer-Directed Health Plans, Early Enrollee Experiences with Health Savings Accounts and Eligible Health Plans, report to the Hon. Max Baucus (D-Mont.), August 9, 2006. items/d06798.pdf.18 PricewaterhouseCoopers View winter 08
  • The individual market for health insurance There is emerging evidence to support regulations concerning employers—ruleshas not grown during the past three years, this push, and some of the employers that and regulations designed to help expandand the percent of Americans in high- have instituted wellness and prevention coverage for working Americans. Repub-deductible health plans dropped in 2006, programs have seen a clear return on their lican candidates will frame the discussionaccording to the Commonwealth Fund. investment in terms of improved worker around modifications to the tax code and productivity or reduced absenteeism. reduced regulation of the insurance indus-In keeping with the vision of expanded Employers are encouraged to create incen- try to de-emphasize the employer’s role inindividual markets, Republicans also favor tives for healthy behavior that may prevent favor of market forces.permitting cross-state selling of insurance. chronic disease. That means programs toThe reduced regulations would create promote screenings, smoking cessation, Both parties are likely to promote wellnessnational health insurance markets in which weight loss, and regular exercise. But there strategies designed to encourage healthyindividuals could purchase insurance plans are no quick fixes: Even the best employer lifestyles and to manage the epidemicfrom anywhere in the nation. Under current programs are ineffective unless people of chronic disease. In the end, however,regulations, insurance products may be commit to changing their behavior. commitment by business leaders and col-sold within a state only if the product is laborative public-private partnerships mostapproved by that state’s insurance com- The debate continues likely will help enhance productivity, reducemissioner and if it abides by the individual the number of uninsured, quell the growing As the presidential campaign seasonstate’s mandates. The Republicans pro- burden of healthcare costs, and lead to a continues, employers can expect to seepose replacing 50 different sets of state more healthy community. increased attention paid to the health-regulations with a single national standard. care debate and to the employer’s role in Sandy Lutz is managing director, Benjamin Isgur is workers’ health. Democratic candidates, assistant director, and Jeffrey Gartland is a researchReining in costs who focus on decreasing the number of analyst with the PricewaterhouseCoopers HealthProposed mandates and tax policy changes uninsured, will speak about new rules and Research Institute.focus principally on the issue of expandingcoverage for the uninsured. But controllingskyrocketing healthcare costs is anotherimportant priority—particularly for employ- Employer impactsers. To help control costs, Republicans andDemocrats alike urge an increased focus on The good, the bad, the unknownthe twin pillars of wellness and prevention, At this stage of the election, it’s still too early to assess the bottom-line impact of health-yet the parties have yet to outline significant care reform on employers. However, no matter who is elected, employers will be affected.policies promoting this agenda and the Here are a few of the potential benefits and risks associated with healthcare reform thatemployer’s expanded role. you might want to keep on your radar screen.The consensus is that while tradition- Potentially positive outcomes Potentially negative outcomesally, governments—not employers—havebeen held responsible for a population’s • Fewer uninsured people in the health- • Coverage mandates could lead tohealth, government alone cannot pre- care system may reduce both cost shift- higher costs and/or penalties.vent the spread of chronic disease. The ing and overall premium costs. • Tax credits and deductions that encour-workplace is seen as an important focal • Tax credits to purchase insurance may age workers to buy individual policiespoint for successful prevention strategies, increase attractiveness for recruitment may take away what some employersand employers are seen as being able to and retention at smaller firms. consider to be a key retention tool.influence individual behavior by providinga supportive environment and leveraging • More government spending on wellnessexisting infrastructure to offer low-cost but and prevention could benefit employeeeffective interventions. productivity. PricewaterhouseCoopers View winter 08 19
  • Opposing views You’ve heard all the election rhetoric about how each candidate will reform the healthcare system. While it’s still too early to call the contest, here’s the quick party rundown on what employers can expect once a new presidential term begins. One thing is certain: There will be plenty of changes that affect employees, employers’ obligations, and company profits. Democrats Strengthen the employer’s role through mandates No surprise that it’s How big businesses In reality, an employer mandate likely won’t have the crucial will be affected implications the word mandate implies, because nearly all large all about change employers already provide health coverage. Initially, businesses could see higher benefits costs overall with more workers to cover, for the Democrats. but lower premiums for current workers and retirees could result Expect broad, more from fewer uninsured in the US healthcare system. immediate reform How small The mandate to provide coverage for employees could hurt small across the board, businesses will businesses—whether in the form of higher benefits costs or in with new mandates, be affected the form of penalties. This change may result in the use of new staffing models to replace expensive workers—including hiring government pro- more part-time or temporary help—but increased government spending on wellness and prevention programs could enhance grams, and funding worker productivity. mechanisms. How workers Employees can potentially breathe a sigh of relief, knowing that will be affected they will be eligible for coverage through employers or through new government programs. And if more US families are insured, they may see lower out-of-pocket costs for their share of the bur- den. In an environment where health insurance benefits are a given, workers may look at other criteria when evaluating job offers. How retirees Retired workers without employer benefits would have more will be affected coverage options through new government programs.0 PricewaterhouseCoopers View winter 08
  • RepublicansGive workers the choice throughmarket optionsTaking employers off the hook and creating a more robustindividual market, coupled with tax incentives, could make Republicans lookwork-sponsored plans less popular. This shift could meanlower overall benefits costs for businesses, but the trend to taxes—creditscould weaken a company’s ability to use health benefits as and incentives—toa central recruiting and retention tool. spur increased healthIf workers could procure their own affordable health insurance, insurance marketsmaller employers may be able to stop offering health benefits. competition. And theyThis could mean cost savings but could also hurt worker recruit-ment and retention. don’t want mandates for individuals or employers.More-affordable health insurance options in the consumer mar-ket, along with tax incentives, may entice employees to choosepersonal plans instead of their employers’ plans. This measure offreedom may mean that employees will look at other factors whenconsidering their choices of employers or of careers.A renewed emphasis on health savings accounts and relatedtax incentives may mean that retirees can stretch their healthcaredollars further. PricewaterhouseCoopers View winter 08 1
  • Operational excellence DesigningChange agents agility into your corporate DNA By Randy BrowningPricewaterhouseCoopers View winter 08
  • Just whose job is it to ensure your businesscan keep pace with customers, competitors,and suppliers? Markets aren’t what they used to be. The So, what exactly is agility, and under Internet’s global reach and ability to supply whose job description does it fall? Agility a near-instantaneous flow of information is infusion of your processes and decision have forced businesses to sustain an making—your corporate DNA really—with unprecedented scale and pace. Customers the ability to effect strategic change. It and suppliers are acting accordingly, and involves everything you, your manage- they’re changing their demands quickly. ment team, and your employees choose For every company that can’t keep up, to do. This emphasis on selectivity is key there’s one or more that can and will. because true agility requires establish- ing a fine balance between flexibility and Simply put, you need cultural and standardization. You must determine where operational agility. There’s that word it makes sense to create and anticipate again—agility. It’s been permeating the change and where it is more prudent to corporate lexicon. But agility is more require a fixed approach. This balancing than a buzzword; it’s a survival skill. In an act is necessary: While your customers environment where global reach, techni- expect unique products and services, you cal prowess, and optimal efficiency are have to provide those custom solutions requirements, agility is a key differentiator. from a common, standardized supply chain In fact, the ability to adapt to change was and infrastructure. ranked as one of the most important per- ceived sources of competitive advantage The endgame, of course, is not change for by executives in PwC’s most recent global its own sake but the building of an optimal CEO survey. (See Figure 1.) foundation—one that enables you to respond to crucial opportunities and chal- lenges with maximum results and minimal organizational stress.Figure 1: Perceived sources of competitive Ability to adapt to change 76advantage According to our recent survey of morethan 1,100 global CEOs, agility is squarely at the Improved customer service 76top of the executive agenda. The ability to adapt Access to andto change was cited as one of the most important retention of key talent 74sources of competitive advantage over the next12 months—trumping even technological innova- Technological innovation 65tion and talent. Ability to implement successful collaborative partnerships 61 Improved sourcing/ supply chain management 50 Cross-cultural experience 42 Sole access to scarce resources 18 Other 4 0 10 20 30 40 50 60 70 80 Percent of respondents Source: PricewaterhouseCoopers, 11th Annual Global CEO Survey, 2008 PricewaterhouseCoopers View winter 08 
  • Payback Getting to agility are organized around specialties, thereby Benefits of agility It’s no surprise, then, that achieving agility is not easy. It’s especially difficult creating operational silos. And each is optimized for a specific task, such as sales or engineering. because businesses have spent the past few decades optimizing for efficiency—an In today’s market, the Model T–era approach that typically squeezes out approach whereby each group does its flexibility. Henry Ford famously noted this own thing and then hands off the result contradiction when he said his assembly- Building agility into your business prepares to the next in the chain just doesn’t work. line-produced Model Ts were available in you to respond quickly and efficiently when Being agile requires working across mul- any color a customer wanted—as long as new challenges or opportunities arise. But tiple silos simultaneously. Marketing and it was black! it also brings other benefits: production, for example, need to collabo- rate at all stages of a product’s life cycle to Improved ability to incorporate new As a result, most businesses are efficient at ensure that changing customer needs get business capabilities Acquisitions, alli- what they need to do today, but they can’t incorporated rapidly into a product that is ances, and dispositions often result in adapt themselves quickly or affordably to cost-effective to produce. the need to incorporate new capabilities. what they need to do tomorrow. This lack An agile company can do so quickly and of flexibility isn’t limited to a company’s Yet most executives lack such an inte- cost-efficiently. It can also divest business static systems or production processes; grated view of their organizations. Because activities rapidly without losing any key it’s also embedded in the organization’s they have no idea how all the pieces fit competencies. human processes, such as workflow and together, there’s no way to orchestrate all decision making. Reduced operation costs Taking stock the silos operationally. And there’s even of all your business processes and less ability to execute on new or changed Worse, there’s an organizational bias that analyzing them for cost and value contribu- business strategies. Instead, executives actively inhibits agility. Businesses typically tion provides the opportunity to rationalize are reactive, scrambling as changes occur. or to consolidate those processes that are redundant. Better reporting capabilities By reducing the complexity of business and IT operations, you can define common metrics that will enable you to better evaluate performance. Prioritized innovation Based on a clear understanding of which business activity or core processes contribute the most Most companies lock on to a singular business value, you can focus innovation on those specific areas. strategy based on a set of assumptions about Enhanced predictability of operations With what’s driving markets, customers, and suppli- an end-to-end view of the business, you can more easily collect information across ers, but what if something unanticipated alters the enterprise and the supply chain and the landscape? feed it into predictive models for analysis. PricewaterhouseCoopers View winter 08
  • The business agility blueprint will articulate theset of requirements and expected outcomesneeded for a company to respond to futuremarket demands or opportunities.Planning for what-if creating the blueprint requires companies PitfallsBusinesses greatly improve their long-termsuccess by anticipating key opportunities to take a hard look at how they conduct their businesses today, how they hope to Barriers to agility in the near-term future, and ultimately, howand challenges before they occur and then they might prepare for bigger disruptions inpreparing their organizations to be ready the longer make the needed changes quickly. Thatmay sound like Business Strategy 101, The blueprint provides a singular corporatebut it isn’t. Most companies lock on to view that is often missing, and it helps Why is agility so hard to achieve? Here area singular business strategy based on a make an unknown future easier to predict. some of the biggest culprits:set of assumptions about what’s driving First, it provides a complete picture ofmarkets, customers, and suppliers, but Lack of understanding of business current business processes—where valuewhat if something unanticipated alters the processes You can’t begin making gets created, where there are redundan-landscape, such as a new data privacy changes to what you don’t understand. cies, who owns which processes, andregulation, a supplier’s public relations Many companies have poorly documented where there are connection points. Then—misstep, or a competitive merger? and inconsistent processes that need through high-level scenario analysis—the blueprint facilitates thinking about potential to be addressed before thinking aboutWhat’s needed is a way for companies to agility efforts can begin. changes and about how to operationalizecollectively assess such potential scenarios responses to those changes. Business silos Agility requires an integratedin order to determine which are worthconsidering and then to build in the ability view of your business. But today that view When it’s done, the blueprint will articulate is often missing because the companyto execute them. To determine where to the set of requirements and expected out- operates in silos, each one optimized forstart and how to get there, most companies comes needed to respond to future market specific functions.could use a high-level map of present and demands or opportunities. The blueprintfuture value creation. We call this map a Limitations of supporting systems There might reveal that it’s more cost-effective tobusiness agility blueprint. The process of was a time when technology investments like enterprise resource planning systems once created competitive advantage by helping enterprises increase their scale and efficiency through standardization. Yet it’s that same standardization that makes change so hard. The systems are designed to handle discrete business activity and can’t easily be adapted to support changes in such activity. Little investment in people and process Widespread efforts to gain efficiencies through technology platforms have had the unintended consequence of shifting vital attention away from people and process improvements. PricewaterhouseCoopers View winter 08 
  • Agility must be embedded into the overall management structure rather than treated as yet another specialty function. implement a change today—as part of would an operational excellence effort • Current business architecture: a com- a greater operational excellence effort— such as Six Sigma or Balanced Scorecard. plete view of the organization’s business than to ramp up later. In other cases, processes and their connection points the approach may be to ensure that The business agility blueprint is at the heart • Current enterprise architecture: your processes and technologies are open of your company’s quest to be ready— company’s technical blueprint that shows and changeable so that they can accom- really ready—for whatever the future brings. how and where the supporting informa- modate future capabilities. As with construction of a house or other tion technology (IT) systems are used building, the blueprint is the focal point Creating a business agility blueprint of all of your efforts. To create the final • Senior management’s beliefs about pos- blueprint—a process that may take several sible strategic opportunities and poten- Many executives focus on onetime or months and that involves your entire execu- tially disruptive market changes that will short-term activities that achieve agility tive team—you will need to synthesize require alteration of your business model through force of will, but once the initia- from a number of internal constituents their tive is over, the agility dissipates and the • Input from customer-facing departments information and input, including: original processes and behaviors reas- such as marketing and sales, describing sert themselves. That’s why it’s critical to • Current business strategy the ways current operations limit flex- approach agility as a foundational effort ibility in delivering additional value • Mapping of your discrete business that you execute with the same planning, to customers. processes broad reach, and accountability as you6 PricewaterhouseCoopers View winter 08
  • You can begin to get a glimpse of the Taking a team approach Perhaps a new C-level executive ispotential of the business agility blueprint required—a chief agility officer (CAO), Managing change is difficult even underwhen you consider the example of tele- who would oversee the initiative much as the best of circumstances, when all thecommunications company BT. Realizing a chief financial officer ensures financial factors and requirements are known. It’sthat the British telecommunications market efficiencies and standards across the even harder to manage for the possibilityand the regulatory rules governing it were business. But as tempting as it is to name of future change.likely to undergo profound change, BT an agility czar who can manage suchdecided to rethink its business. Facing the efforts, doing so is not the whole answer. Is it the chief marketing officer’s job toprospect of having to open up its busi- Agility must be embedded into the overall determine potential customer demandsness to competitive service providers, the management structure rather than treated that should be anticipated? Should thecompany consolidated its business pro- as yet another specialty function. In other chief operating officer expand the pro-cesses into 14 platforms to ensure there words, agility should be an integral part of curement system to ensure it can sourcewas only one version of each process, no all aspects of a company’s strategic and products and services not currentlymatter where in the company it was used. operational efforts. Agility is a responsibil- needed? Does the chief information officerNext, it aligned its functional groups with ity of every executive team member and need to upgrade the company’s Webthose process platforms. For instance, should be part of each one’s mandate and platform so it can better analyze customerBT standardized the process of validating mission. These executives will need to data? Maybe—but all of these discreteservice availability for its current and future act both as a team and as individuals to activities miss the point. Acting alone,offerings, such as landline, cellular, DSL, develop an agility plan and ensure that it each of these executives has little chanceor any other future product. Before the gets implemented. of preparing the organization as a wholereorganization, each functional group at for agility.the company had its own ways of meetingthis very common requirement. Now, whenBT wants to bring a new service online,this piece of the offering can be droppedinto place easily.11 PricewaterhouseCoopers, Business Agility white paper, 2008.Agility should be anintegral part of all aspectsof a company’s strategic andoperational efforts. PricewaterhouseCoopers View winter 08 
  • Staff and management alike need to value agility as much as they do performance and efficiency. As a team, the officers’ responsibilities incentives—for the desired actions—that blueprint, however, is not the CEO’s job. are twofold: First, using the business are consistently applied no matter what That responsibility rests with a person or agility blueprint, they must define where department is involved. This can be tricky an entity responsible for coordination and agility should be designed into the busi- in culturally siloed organizations, but it is oversight and might fall to the chief strategy ness. Second, they must ensure that the fundamental to success. officer or to an agility program office. requisite changes get implemented and are maintained. Much of the detail work will be A CEO who delegates agility solely to The CEO also bears the ultimate respon- delegated to appropriate staff, under the operational experts sends a clear mes- sibility for ensuring success. While much officers’ direction and review. sage: Agility is not important. And with of the work for facilitating agility falls to that kind of tone from the top, the results other executives, the CEO must ensure the The executive officer team should be pre- from any agility initiatives will likely be desired outcome by periodically assessing pared to make changes in pursuing agility. disappointing. whether the goals set forth in the business Many processes that used to be self- agility blueprint are being met. While a contained would, under an agility mindset, In essence, the CEO owns the business monitoring group, such as a program span multiple departments, requiring agility blueprint. Because the CEO ulti- office, can help provide the information greater alignment across business units. mately sets business strategy, he or she to determine compliance, only the CEO Such efforts may require reworking depart- also bears final responsibility for deter- can decisively act on that information. ments to bring together processes that are mining which future scenarios the business now closely related, or they may require should support through agility. Of course, Sustaining success coordinating entities to ensure that their the rest of the executive team and other key Achieving agility is not a one-off set of efforts are mutually supportive. At the very staff will help identify and evaluate poten- activities. While the executive team’s least, the executive team needs to set tial scenarios. Managing the details of the continual focus on agility is critical,8 PricewaterhouseCoopers View winter 08
  • ultimately, achieving and sustaining agilityare everyone’s responsibilities. Staff andmanagement alike need to value agilityas much as they do performance andefficiency. They need to support thebusiness agility blueprint and its goalsin their individual actions and decisions.Executive management can make suchbuy-in the path of least resistance byoffering appropriate incentives and byfostering the right culture. And execu-tive management has to practice what itpreaches. Only then will a company bewell positioned to cope with the businessreality of constant change.Randy Browning is the clients and industries leaderof our US Advisory services practice.For a more detailed discussion on how to achievebusiness agility, read the new white paper PricewaterhouseCoopers View winter 08 9
  • Compliance One global flavor Thinking about International Financial Reporting Standards and how leading US companies are getting ready for them By Raymond J. Beier A US move to IFRS is inevitable. All companies should think Globalization has changed nearly every aspect of how companies manage their strategically about this change and begin to understand the business—sourcing, distribution, consumer impact now. pricing, raising of capital, and so much else. Financial reporting has also been greatly influenced by globalization. In fact, it is not an overstatement to say that a financial reporting revolution is now under way. Increasingly, International Financial Reporting Standards (IFRS) is how most of the world talks to investors and other stakeholders about corporate performance. Changing to IFRS alters how companies prepare and report their financial results and necessitates that investors understand any forthcoming changes. Anticipating that the US will soon join the rest of the world by allowing or mandating a move to IFRS, some leading US companies are already beginning to prepare for IFRS adoption. Even if your company is not yet ready to embrace IFRS, it makes sense for senior0 PricewaterhouseCoopers View winter 08
  • management to take action so they can International Accounting Standards Board and Exchange Commission (SEC) hasunderstand how a move to IFRS will impact (IASB) and with IFRS since their incep- already taken preliminary steps that historyreporting of financial performance, opera- tion in 2001. In the past five years, the will almost certainly show to have beentions, and communications with investors. IASB and FASB have worked to improve tipping points in the course of events: and converge both US GAAP (Generally • The SEC no longer requires foreignIFRS: The world’s new reporting Accepted Accounting Principles) and IFRS, private issuers to reconcile their IFRSframework with an increasing focus on the end goal of filings to US GAAP so long as they use achieving high-quality, globally understoodThe message is clear: IFRS is becoming IFRS as issued by the IASB. reporting standards.the global accounting language. Virtually • The Commission is studying whetherall major territories other than the US use The year 2007 brought a new perspective US companies should have the optionor are moving to IFRS. Approximately to that goal for US constituents. Would of reporting under IFRS rather than12,000 public companies around the world adoption of IFRS in the US make sense? under US GAAP.already use IFRS in territories such as the In a global economy, do the reasons forEuropean Union, Australia, Singapore, adoption outweigh the reasons for retain- As early as spring 2008, the SEC mayand Hong Kong. China, Canada, Japan, ing our own US standards? And then this issue proposed rules that designate a dateand South Korea have announced their intriguing question: Would adoption of for optional and/or mandatory adoptionintention to convert to IFRS in the not-too- IFRS help to eliminate many of the difficul- of IFRS by US public companies. Thedistant future. Although IFRS only recently ties in US GAAP, which in certain respects speed with which a move to IFRS hashas made headlines in the US, the US has come under increasing and well-taken progressed—from a mere possibility tostandard setter, the Financial Account- criticism? The answers to these questions inevitability—has landed this topic squarelying Standards Board (FASB), has been are now being weighed. The US Securities on the radar screen of many multinationaldeeply involved with the London-based PricewaterhouseCoopers View winter 08 1
  • capital markets to IFRS is relatively young, it is too soon to tell whether the anticipated decrease in cost of capital will prove out. However, due to the sheer size of most cap- ital-raising efforts and the long-term nature of the payoff, even slight improvements in transaction terms such as interest rates can translate into significant dollar savings. Within individual companies, the ability to centralize and streamline accounting functions and move financial personnel freely around the world will lower costs and strengthen internal controls. Today, multinational corporations with numerous statutory filing requirements around the world need to employ staff with expertise in each national GAAP to prepare filings and then translate financial statements from national GAAPs to the parent-company reporting GAAP. Use of IFRS globally will reduce these reporting efforts and related costs and decrease the risk of errors. Challenges of many kinds companies and their boards. However, options, fewer barriers of entry to non-US Although the benefits at both the macro some pioneering US companies that rec- markets, and, potentially, a lower cost of and micro levels are attainable, the associ- ognize the inevitability of IFRS are not just capital. Moving to a single global account- ated challenges are meaningful and need talking about it— they are actively begin- ing and reporting language also will reduce to be addressed. Key for companies is ning the conversion process. complexity—a welcome improvement understanding how their financial report- for the companies that prepare financial ing will change under IFRS and what This article looks in broad terms at the reports and for the investors and other those changes will mean to investors and shift from US GAAP to IFRS and at the stakeholders who rely on them. other financial statement users. Managing emerging best practices of leading US and communicating the impact of these companies that view IFRS reporting as not From a capital markets perspective, many changes appropriately are defining points only inevitable, but also beneficial. These multinational companies believe IFRS in a successful conversion plan. companies are aware of the challenging offers an opportunity to lower their cost of scope of implementation. They want to be capital. Widespread acceptance of IFRS Perhaps the most immediate hurdle US ready to seize the advantages and make a financial statements allows companies to companies will face in a conversion to IFRS smooth transition. And they want to control seek capital across a broad base of global is a limited pool of IFRS-knowledgeable the costs of doing so. funding without having to incur additional resources. Companies need to determine financial-reporting costs based on the if they already have the right skill sets in- Benefits of IFRS source of funding. Anticipating increased house to manage the change, and, if not, competition among global investors and From a macroeconomic perspective, whether individuals who possess those financiers for attractive investments, strong the benefits of using one global financial skills should be hired. Learning IFRS is companies expect their cost of capital to reporting language are evident: increased a challenge for the US at all levels, from decrease. Because the conversion of major comparability across global investment colleges and universities educating future PricewaterhouseCoopers View winter 08
  • accounting professionals to retraining for This point is dramatically illustrated by and other detail over the years thatcurrent financial executives, auditors, comparing the modest number of IFRS the process of applying it has becomeanalysts, and professional investors. accounting standards that address the cumbersome and complex. accounting for financial instruments withBeyond learning the principles of IFRS, the mass of US GAAP literature on the Conversions to IFRS by companies in otherpreparers, users of financial reporting, and same topic. (See Figure 1.) The IFRS lit- countries, particularly in the Europeaneducators will need to change how they erature isn’t weak or incomplete. It clearly Union and Australia, lay excellent ground-think about and practice their disciplines. states the principles, avoids unnecessary work for US companies to follow. WithThe needed changes are broad in scope: rule-making, and relies on preparers— different national GAAPs as starting points,cultural, behavioral, and institutional. Unlike CFOs, controllers, and others—to exercise it’s true that each country’s conversion toUS GAAP, IFRS is intentionally light on inter- professional judgment. Undoubtedly, many IFRS varied in its challenges and level ofpretive guidance. Principles and a minimum Americans will initially find it challenging difficulty. Due to the long-standing globalof necessary rules require accountants to and uncomfortable to navigate without influence of US GAAP and the conver-make more professional judgments about prescriptive guidance and to set aside gence agenda between the FASB andthe nature of transactions when determining time-honored practices. the IASB, many IFRS standards issued inhow to account for them. The principles are recent years are based on principles thatgenerally consistent with those in US GAAP Here is an issue worth considering more are fairly consistent with existing US GAAPor closely similar, but much greater exercise closely. The principles underlying IFRS are standards. This should translate into fewerof judgment is needed in a framework that in fact designed to narrow the acceptable accounting differences for US companiesdeliberately doesn’t carry the same weight alternatives. US GAAP is similarly based that are converting to IFRS as comparedof detailed rules, bright lines, safe harbors, on fundamental accounting principles, but with many of the other countries that haveand exceptions. it has become laden with so many rules already done so.Figure 1: Financial instruments Key differences between US GAAP and IFRS US GAAP IFRS FAS 5 IAS 32 FAS 91 IAS 39 FAS 107 FAS 114 FAS 115 FAS 133 FAS 138 FAS 140 FAS 149 FAS 150 DIGs EITFs Industry guides PricewaterhouseCoopers View winter 08 
  • Differences between IFRS and US GAAP Despite the large number of parallel principles underlying IFRS and US GAAP, the devil is in the details, and differences can be significant for certain industries and types of transactions. The following examples of key differences are somewhat technical in nature, but readers familiar with accounting and reporting will see at a glance the primary implications. IFRS US GAAP Implications Asset write offs Impairment assessment of Impairment analysis is a Impairment charges may be long-lived assets is a one-step two-step process based first recognized more frequently, process based on discounted on undiscounted cash flows. earlier, and for different amounts cash flows. Under certain Reversal of impairments is under IFRS. Combined with the circumstances, previously prohibited under US GAAP. ability to reverse impairments, recognized impairments the result is greater potential are reversed. earnings volatility. Fair value accounting Greater use of fair value, Requires historical cost The result is a very different and certain assets, such as valuation of such assets. balance sheet and a clearer property, plant, and equipment; view for investors of the intangible assets; and invest- unrealized appreciation in ment property can be carried certain major asset categories. and remeasured to fair value each period. Development costs Development portion of Both research and develop- Development costs do not hit research and development ment costs are expensed. the bottom line immediately costs is capitalized if certain but, rather, are expensed over criteria are met. an estimated life, typically as the associated revenues from the development activities are earned. Liability versus equity Classification of an instrument Instruments with both liability The result is an increase in classification as a financial liability versus and equity characteristics can interest expense, greater equity is stricter and based on often qualify for treatment as volatility in the income state- the substance of the instrument mezzanine equity and are not ment, and less equity on rather than on its legal form. marked to fair value. the balance sheet than under Compound instruments must US GAAP. be bifurcated between the liability and equity components. Pension accounting Recognition of pension expense Requires actuarial gains and The cost of providing pension may be accelerated: Companies losses to be amortized over life benefits is not deferred as far can elect to recognize actuarial expectancy, and prior-service into the future under IFRS as gains and losses immediately cost is amortized over the it is under US GAAP. rather than deferring for a remaining service period. period of time, and prior-service cost is recognized over the vesting period. As the option to use IFRS becomes available in the United States and companies decide to adopt, each company will need to undertake an extensive review of financial policies to determine the impact of these and many other differences between the two frameworks. PricewaterhouseCoopers View winter 08
  • A clean-sheet-of-paper approach willbe beneficial for many companies;some may be tempted to try to forcetheir historical US GAAP policies tofit into IFRS as a means of simplifyingthe conversion process.Preparing for the move to IFRS Other key lessons learned include: customer and vendor contracts and employee compensation arrangements toBecause IFRS appears inevitable, compa- Selecting new IFRS accounting policies planning for M&A activity and income taxnies need to begin actively assessing what A clean-sheet-of-paper approach will be structures. The involvement of key companysuch a move will mean to their operations, beneficial for many companies; some may expertise—legal and risk management,financial statements, and stakeholders. be tempted to try to force their histori- treasury, sales, tax, human resources andThe European conversion to IFRS taught cal US GAAP policies to fit into IFRS as investor relations—at the right stage isus that companies that take the initiative a means of simplifying the conversion essential to a successful will benefit by enjoying a smoother process. But conversion to IFRS is a rare,transition with fewer fire drills. onetime opportunity to comprehensively Planning the IFRS conversion project reassess all accounting policies. IFRS Conversion projects can vary in length, may offer alternatives that US GAAP did difficulty, and cost depending on the level not—alternatives that may better reflect of complexity in a company’s transactions, the economic substance of transactions operational structure, and regulatory and positions. Benchmarking against environment. Another lesson to be learned global peers and competitors that have from Europe’s mass adoption in 2005 already adopted IFRS will provide valu- is that conversion will take longer than able insight into what is acceptable in the expected. US companies that have started marketplace. the process—mostly large multinational companies—estimate that it will take at Involving the whole company New financial- least two to three years and significant reporting principles can impact nearly every resources—both internal and external— aspect of a company’s operations—from to complete a quality conversion project. PricewaterhouseCoopers View winter 08 
  • Integrating the change Integrating IFRS Impact analysis A company’s legal contracts represent principles into operations from the ground another layer of impact for consideration. To scope a conversion project effec- up is a necessity. Companies that left their A change to IFRS may result in a dramati- tively, companies need to understand the IFRS conversions to the last minute often cally different balance sheet and changes multiple moving parts and wide-ranging tried to complete the transition by making in earnings projections, key performance impacts that a move to IFRS will bring. An top-side adjustments to their existing prac- indicators, and financial ratios. In response, impact analysis helps identify the depth tices. IFRS is not a bolt-on solution to be debt agreements and specific covenants and breadth of necessary changes, how layered on top of old conventions. Compa- may need to be modified. Changes in long they could take to implement, what nies that do so will strain internal controls accounting policies and disclosure require- resources are needed to bring them to frui- over financial reporting and increase their ments may necessitate new information tion, and what impact they could have on risk of reporting errors. needs. Customer and vendor contracts the companies’ stakeholders. Some facets may need to be revised and compensation of an impact analysis include: Each company’s road map to IFRS will be agreements restructured. unique, but the following steps provide Understanding what is affected Conver- an approach and key considerations for The impact on accounting and reporting sion to IFRS will change the way certain a well-orchestrated conversion plan. processes, controls, and IT systems needs transactions are accounted for. A thor- to be considered. A move to IFRS can cre- ough review of the financial statements, ate new information needs and impact how with detailed identification of differences controls are designed or implemented, how between current accounting and IFRS, will consolidations are achieved, and how finan- help a company assess the dimensions of cial systems record and report information. the conversion and the scope of the infor- Changes in these areas need to be vetted mation needs. and will eventually need to be documented and tested.6 PricewaterhouseCoopers View winter 08
  • A change to IFRS may result in a dramaticallydifferent balance sheet and changes inearnings projections, key performanceindicators, and financial ratios.Understanding resource needs and Although milestones and timelines at this Final thoughtstimelines Assessment of the quantitative early stage of a conversion project are As the move to International Financialand qualitative levels of resources needed, tentative, having them in place is key to Reporting Standards gains momentum,coupled with decisions on whether to scoping the project, assessing the cor- more and more forward-thinking compa-train internal resources (and what amount rect level of urgency of various tasks, and nies are preparing for a move to IFRS. Theyof training is necessary) or hire external keeping all participants focused on the are identifying the benefits they expect toresources, is critical and frequently under- many moving pieces of the project. realize and the challenges they will faceestimated. Decisions on resources also along the way. At a minimum, all companiesplay a key role in budgeting the cost of Project management reminder: A formally should consider undertaking an impacta conversion project. established and executive-sponsored analysis now so that they have an accurate project with a dedicated project team is appreciation of what IFRS will mean to their needed in most cases to manage success- business when it arrives on US shores. fully through completion. Raymond J. Beier is the partner responsible for strategic policy and analysis within PwC’s National Professional Services Group. PricewaterhouseCoopers View winter 08 
  • People management Maximizing talent Strategies for making the most of your people no matter what tomorrow bringsPricewaterhouseCoopers View winter 08
  • By Steve Rimmer, Karen Vander Linde, Why should executives worry about the next talent crisisDolores Wilverding, and Warren Cinnick when they have their hands full with current people challenges? Times are changing, and they’re changing fast. The battle for talent—always fierce—is escalating. According to the US Department of Labor, surveyed by PricewaterhouseCoopers indi- by 2014, more than one out of every three cated they will actively seek out employers US workers will be 50 years of age or older. whose corporate social responsibility The exodus of baby boomers from the behavior reflects their own.1 workforce will leave vacancies in critical leadership and other pivotal roles. This However, as many companies are raises a crucial question: How does a busi- discovering, reacting and adapting to ness make the most of the talent it has to current talent trends will not be enough. ensure the right skills are in the right place Thinking about talent like a long-term asset at the right time—no matter how often its and viewing talent as a distinctive competi- needs change? Businesses that build their tive attribute are significant shifts away talent pipeline internally, evaluate alterna- from thinking about talent as a discrete tive work pools, and explore ways to meet war that can be won. Anticipating and their future employee needs will be better preparing for future organizational, societal, positioned than their competitors to face and marketplace changes—and then these kinds of challenges. weighing their implications on how to secure talent—are aspects of an organiza- Today, companies are already beginning to tional sustainability mindset. In an effort see the profound need for a new approach to gain insight into how businesses to maximizing talent—companies like the can accomplish this talent objective, a international technology manufacturer that PricewaterhouseCoopers team conducted determines it must address the gap left by a scenario planning exercise to envision the retirement of some 50,000 managers ways that businesses could evolve to and leaders over the next decade and the meet future workforce challenges. successful midsize financial services firm that enters expanding markets and must The resulting report—Managing Tomorrow’s learn to supplement internal talent with key People: The Future of Work to 2020— contractor relationships so that the company presented three business scenarios. does not risk derailing its rapid growth. Or In one, big companies reign supreme consider that most of the nearly 3,000 new graduates from China (87 percent), the 1 PricewaterhouseCoopers, Managing Tomorrow’s People: UK (71 percent), and the US (90 percent) The Future of Work to 2020, 2008. PricewaterhouseCoopers View winter 08 9
  • Key considerations Organizational talent levers The following are questions to consider when integrating key levers to maximize talent: Talent lever Key considerations Strategy How do we align and integrate talent in attracting top talent and treat social strategies into business planning? responsibility as optional; in a green model, social responsibility is paramount, and consumers and employees together drive corporate accountability and responsibility; and in the third scenario, localism prevails, Planning What will help us anticipate and proactively and a global network of linked but separate create talent plans for the future? small businesses prospers under entre- preneurial leaders while larger companies flounder. Assessment What is the best way to assess talent Applying the lessons strengths and gaps? Though these scenarios are extreme, they raise important considerations for real businesses today. Fundamentally, all sce- narios or types of organizations begin with Development What tools and processes will help us build the key talent levers: strategy, planning, our talent bench at multiple levels? assessment, development, succession management, rewards and recognition, and measurement. The actions related to these levers will shape the future of the work- place and, ultimately, the business itself. Succession management What processes should we put in place to plan to fill every key job whether it is open As a practical exercise, we will consider or not? how the levers are used in prototypical organizations of our future scenarios: large, corporate entities; midsize, highly networked companies;2 and, where appropriate, Rewards and recognition What will energize our culture, encourage companies driven by social responsibility. individual excellence, and help us retain the best talent? We present these examples to show how different kinds of companies are tailoring core talent maximization principles to meet Measurement What metrics and gauges can we visibly their specific needs. However, these levers display about our organizational and apply to any business. In fact, we have individual performance? 2 A highly networked organization is one in which specialized skills or intellectual property is central. Examples would be technology companies and professional services firms.0 PricewaterhouseCoopers View winter 08
  • found that companies of all sizes understand the need for a systematic future, however, organizations will needand types can and do benefit from approach to assessing, planning, devel- to find ways to increase the frequency ofintegrating the following key principles oping, and deploying talent to leverage assessment and their ability to developinto their talent planning. resources. They are using mechanisms talent rapidly; ultimately, they will need to to control the process of identifying build agile workforces that can adapt toCreating a strategic workforce plan strengths and gaps regarding talent built changing market needs. into service-level agreements with vendors.In our experience, we have found that suc- Likewise, some larger companies that are Assessment processes are even morecessful companies align and integrate their seeking to build up strength in key areas important in companies that are growingtalent strategies around future business are also attempting to leverage unique through acquisitions. Such companies areplans and review those strategies regularly. talents from alternative sources. discovering that it is critical to assess theirFor example, a forward-thinking global people resources throughout the process,conglomerate we know of currently inte- Identifying talent strengths and gaps not just during due diligence. For example,grates its talent strategy and planning into we know an electronics manufacturer thatits annual three-year business-planning To remain ahead of competitors, businesses seemed to have lost its entrepreneurialprocess. As part of key business strategies must regularly assess their existing work- edge after successfully growing moreto sell or acquire divisions, part of the due force to better leverage strengths and fill than 20 times larger through a series ofdiligence process involves assessing cur- gaps through developing, recruiting, or international mergers and and future talent requirements. Given acquiring the skills they need. Unless dealt Management recognized that leading athe rapid pace of change, even corpora- with effectively, small gaps almost always company of that size and complexity wouldtions that have already embedded the grow larger, but merely understanding the require different skills and so establishedtalent-planning process into their strategic gaps won’t move a business ahead as much a set of critical competencies tied to itsplanning must be prepared to do it more as will making the most of its strengths. For future strategy. The existing leadershipfrequently—even quarterly for economi- example, successful organizations where team was assessed against those newcally vibrant regions—in order to anticipate recruitment has always been strong have competencies in order to identify leadershipemerging changes and to be able to typically built upon that competency in a gaps to fill and develop. Looking ahead, thismodify strategies quickly. competitive market, and attracting talent large, flexible company plans to continue with speed and a passion for quality are to conduct assessments regularly and hasUnlike large corporate entities, smaller, differentiators for successful growth. developed systems for providing feedbackmore highly networked organizations rely on the set of skills it needs for specificon the talent that is resident in their orga- Increasingly, successful large corporations growth and improvement projects.nizations and in their networked alliances. are implementing continuous assess-Their ability to change direction and grow ment processes. Today, a global financial Developing talent that is strongdepends on their ability to maintain these services company might get away with and deepalliances in order to anticipate and secure annually assessing all managers andthe right kind of talent. For a networked above to identify strengths and gaps—at The cycle of workforce expansion andorganization, acquiring new talent often both the organizational and the individual retrenchment that prevailed in the 1990smeans entering into an alliance or a joint levels—and then incorporating the results is simply not a viable approach in today’sventure. Savvy networked organizations in its overall talent-planning process. In the talent-lean environment. Instead, building PricewaterhouseCoopers View winter 08 1
  • talent needs a broad skill set to be able to adapt quickly to changing needs and to provide support for one another. In these companies, frequent job rotations and mul- tifunctional career paths are expected and required aspects of leadership develop- ment. For unique skill sets or highly refined technical skills, they maintain alliances and alternative talent pools to ensure that they are flexible enough to respond and With most companies facing changing talent are able to expand capability as the market changes its requirements. demands and a shrinking talent pool, large organizations are placing more focus on Achieving these objectives poses a prob- lem. Integrating outside talent into the identifying emerging leaders throughout an organization requires a level of transparency about skills and capabilities and a level of enterprise. candid dialogue about talent that typically does not exist today between organizations linked by service and partnership agree- ments. However, successful networked organizations of the future will build ongoing development of talent into provisions in their service-level agreements with alliance partners or outsourcing providers. a nimble workforce through training, selected a group of pivotal employees coaching, and mentoring will define from a variety of functions. The team success—and even survival. focused one-third of its efforts for 120 days on a critical product issue. Large corporations that focus only on The team uncovered, tested, and solicited developing a targeted group of high-poten- management’s approval for a solution to tial individuals to fill positions at the top of the problem that resulted in an annual the organization are at risk. More and more, increase in profitability of $6 million. You executives are finding that they need to can bet that team members learned more develop talent at all levels because pivotal than a bit about business strategy and roles and employees exist in all functions. planning in the process. Given the rapid pace of change, success- ful, large organizations are looking beyond Unlike their larger counterparts, highly traditional classroom and online training. networked organizations tend to be lean. They are also providing individuals with Therefore, when it comes to talent, their embedded learning and on-the-job experi- key challenge lies in the availability of ence that will continue their development sufficient talent alternatives. The compa- and increase their readiness to step up to nies we have studied typically meet that broader roles or expand their expertise. challenge through outsourcing, alliances, and joint ventures. However, they have For example, rather than training employ- also discovered the need to develop talent ees about business strategy and planning, for key leadership positions and pivotal one global consumer products company roles. In fact, they have found that internal PricewaterhouseCoopers View winter 08
  • In addition, we have noted that to facilitate Saratoga research group noted that the important, that they must continuouslyongoing development, enterprises of many percentage of key roles for which orga- assess how to deploy people to broadenshapes and sizes have relied on coach- nizations have either one or two unique their skills through experience. Foring and mentoring for every employee. succession candidates identified per key example, if a large US organization needsMany organizations assign a coach or role has been increasing dramatically. In to send talent to oversee a manufacturingmentor who is not the same person as the 2006, the median company over a two- facility in China, it would benefit by choos-employee’s manager. By so doing, they are year period had nearly doubled the number ing an individual whose future career roleexpanding access to key resources that of roles that have at least one successor.3 will require significant exposure to Chinesewill help individuals broaden their perspec- culture and China’s economy. In mosttives and skills. While developing a pipeline to fill leader- companies with multinational footprints, ship roles in the top two or three tiers the opportunity to deploy talent returningAn organization seeking to become more is critically important, large integrated from international assignments to positionsgreen might have key top talent work on a corporations with foresight are also build- that make use of the experience and skillsstrategy to develop talent via activities that ing talent pipelines at multiple levels. With acquired there is an underdeveloped area.demonstrate social responsibility, such as most companies facing changing talentassisting with an environmental organiza- demands and a shrinking talent pool, these Highly networked organizations approachtion or foreign aid program. organizations are placing more focus on succession planning differently. They focus identifying emerging leaders throughout on cross-functional development to ensureManaging succession an enterprise and preparing them not only that talent is ready to step into new roles to step into higher roles but also to take and to rapidly assimilate new responsibili-Organizations that manage succession well on broader responsibilities for helping the ties. Such companies have recognized thedo so by building a deep pipeline of talent organization fulfill its strategic plans. To be need to broaden the boundaries of suc-and by planning proactively with regard to effective, organizations are realizing that cession management to include alliancesdeveloping and deploying these resources. they have to better anticipate the need and alternative work pools and thus ensureIn its most recent annual report, PwC’s for new skills and knowledge and, equally they have the talent expertise they need 3 PricewaterhouseCoopers, US Human Capital Effectiveness Report 2007/2008, 2007.The cycle of workforce expansion and retrenchment that prevailedin the 1990s is simply not a viable approach in today’s talent-leanenvironment. Instead, building a nimble workforce through training,coaching, and mentoring will define success—and even survival. PricewaterhouseCoopers View winter 08 
  • Executives at many organizations are realizing that placing talent on the business agenda is not enough. Going forward, measures around talent need to be part of a corporation’s overall performance metrics. to meet market demand. Companies that bonuses and high salaries. A prime parking use talent development–related criteria spot, tickets to a sporting event, or a gift when selecting members of their networks certificate to a day spa could go a long are increasingly addressing standards way in promoting short-term job satisfac- for development and succession in their tion and attracting talent. Similarly, on service-level agreements. They are also the other end of the demographic spec- utilizing methods for trading talent in order trum, employees approaching retirement to best service projects. Highly networked have views different from those of their organizations are also considering exploit- predecessors regarding how to leave the ing the portability of benefits and defined workforce. No company has yet mastered contribution plans within their networks the concept of phased retirement as a of business partners and turning this means of managing knowledge and of col- potential liability into an advantage in the laboratively extending the working lives of job market. highly valued employees. This is a frontier where the reward, recognition, benefits, Rewarding and recognizing and policy tools will need to come together performance to help close the knowledge gap that is part of the current retirement process. In the current talent environment, organi- zations of all sizes are inspiring both Large corporate organizations traditionally individuals and teams with flexible and have had well-defined reward systems targeted forms of reward and recognition. that include annual raises and bonuses. As the rising generation of Millennials enters To facilitate teamwork across organi- the workforce, organizations recognize the zational and geographic boundaries, importance of understanding what kinds some large, integrated organizations are of rewards and recognition motivate these considering offering more incremental individuals. And it’s not always about big team-based rewards and individual peer recognition. A number of highly networked organizations are starting to associate flexible cash and noncash reward and recognition programs with individual projects. Vesting individuals in a project’s success offers great incentive for the contractors on which highly networked organizations depend. Looking ahead, businesses of all types are rethinking their reward and recognition systems to accommodate and motivate workforces with diverse attitudes about job satisfaction. For example, there is rising evidence to suggest that employees are more focused on environmental issues and are making good corporate citizenship a part of the reason they choose to join or stay with an organization. Under such PricewaterhouseCoopers View winter 08
  • circumstances, socially conscious orga-nizations are rewarding talent for leavinga more gentle carbon footprint on Earthby traveling less, carpooling to work, orparticipating in community service oppor-tunities. To develop new approaches tosocial issues, some organizations are tak-ing a forward-looking approach by offeringemployees opportunities for increasedcommunity, external organization, andworkplace involvement. Ultimately, thispart of the public talent-attraction profilefor your company will be measured bywhat actions occur, not by what aspira-tions are stated.Measuring individual and organizationaltalent attributes Executives at many organizations are In the future, organizations that uphold realizing that placing talent on the busi- socially responsible ideals will haveIf talent issues are to be taken seriously, ness agenda is not enough. Going forward, organizational and individual performancemeasurement is essential. A PwC report measures around talent need to be part metrics in place to balance corporatecovering more than 15,000 organizations of a corporation’s overall performance results with the public good. To accomplishin the US and Europe found that few orga- metrics. For example, an annual report this, an organization might measure andnizations have achieved truly global and discussing business performance might report the number of hours spent by itsreal-time people measurement capabilities include how the company is performing employees on community service projects.or have quantified the financial value of on its talent metrics.their talent, even when it is possible to do Looking aheadso.4 The continued adoption of enterprise Large corporations rely on the promotionresource planning systems is actually a No matter which path a business takes, of corporate culture attributes and behav-boon to the measurement and tracking there is one clear constant: More than iors as a means of engaging employees.of talent. With a properly configured ever, it must manage talent resources as Today’s employees are looking to seesystem, the year-over-year and long-term carefully as it does business operations. these attributes and behaviors representedviews of individuals as measurable and Businesses seeking to practice talent in how people are measured, rewarded,valuable resources can be well served by maximization and sustainability are culti- and promoted. Clearly, how metrics areenterprise systems. vating talent in their organizations today applied will have an impact on attracting, in order to prepare for the future. acquiring, and keeping talent.This will change. In the future, leadersof both large companies and networked To continuously improve, highly networkedorganizations will be held accountable for organizations are integrating talent metricsdeveloping and coaching people. Talent at the project level to evaluate talent and Steve Rimmer is a principal in PwC’s Humanwill be a core part of their responsibility. As its relevant impact. Among the challenges Resource Solutions practice and the HRlarge corporations move toward engaging networked organizations face are partners Transaction Services leader. Karen Vander Lindetalent across organizational boundar- is a principal in and the global leader of PwC’s whose systems of measuring contributions People and Change practice. Dolores Wilverdingies, others—in addition to an individual’s are completely different from their own. is a managing director in the People and Changeimmediate manager—will participate in the Thus, it is important to align talent metrics practice, and Warren Cinnick is a director in theperformance management process. to the goals currently at hand. People and Change practice.4 PricewaterhouseCoopers, Key Trends in Human Capital:A Global Perspective, 2006. PricewaterhouseCoopers View winter 08 
  • Interview Piercing the veil Does your Andrew Zolli looks at organization the future of business need the world and of a chief agility Interview by Tom Craren and Gene Zasadinski officer?6 PricewaterhouseCoopers View winter 08
  • Back to the Future is the name of a movie, but it also Andrew Zolli is an expert in global foresight and innovation, studying the complex trends at thedescribes Andrew Zolli’s professional landscape. Zolli is a intersection of technology, sustainability, andfuturist, and—at least imaginatively—the future is where he global society that are shaping our future. His firm, Z + Partners, helps senior leaders at some of thespends most of his time. A century ago, the word futurist world’s preeminent companies, institutions, and governments see, understand, and respond toconjured up images of crystal balls, tarot cards, and Ouija complex change.boards. While modern-day prognosticators depend on othertools, all futurists—past and present—rely on the rare abilityto predict drivers and trends with some degree of accuracy.As his clients affirm, Andrew Zolli has a generous measureof that ability. In our interview, he applies his gift of foresightto the world of business and to the world at large. PwC: You are often referred to as a futur- PwC: So how should companies be en- ist. What does that term mean to you, and gaging a foresight researcher like you, and is that how you define yourself? how far out should they be looking? AZ: I actually prefer foresight researcher or AZ: First, companies should work with global trends analyst. A lot of what I do is foresight researchers to perform what I like about looking at critical places—where you to call environmental scanning—that is, can see future trends emerging that are scanning within such defining driving areas going to be definitive for the whole planet as demographics, emerging technologies, or for a culture or an industry—and then and economics to get a sense of how thinking through with senior leaders about those environments are unfolding. Com- how those trends might shape the global panies should then develop scenarios that operating environment. look specifically at how the individual data points in each one of those areas might PwC: You refer to these as intersections. unfold. I think organizations should do en- AZ: That’s right. The big ones that I pay vironmental scanning every year. And they attention to are demographics, globaliza- might want to do scenarios every three to tion, environmental issues, some global five years. policy—especially global business is- PwC: Can you describe a typical scenario- sues—and emerging technologies. But the building process? most fruitful terrain lies between those ver- tical areas of focus. For example, it’s not AZ: The process begins by identifying key so much demographics as it is the effect of uncertainties. For example, a current key demographics on healthcare, public policy, uncertainty right now involves the American or the environment. What I do is develop economy. Will it go into recession, and— visions of the future that share key themes more important—will it drag down the and that help senior leadership teams look global economy in the process? Another just a little bit further out. Sometimes you key uncertainty is about the price of oil. should act on great opportunities while If you place just those fundamental macro they’re still over the horizon. drivers on a two-by-two grid, you can PricewaterhouseCoopers View winter 08 
  • Drivers and trends: Zolli looks ahead First, there are the fundamental long-term trends that you and I can’t do anything about, such as demographics. The second would be large structural forces like long-term climate change. The third would involve big global economic forces. But you also have to look at what we think of as the accidents and incidents. These are wild cards—low-probability but high-impact events, such as terrorist plots or, for that matter, breakthrough technology inventions. Long-term trends + Structural forces + Economic forces + ? Wild cards envision four different worlds that suggest number of old and young people who have PwC: You mentioned healthcare. These a number of future policy implications. ever coexisted in our society’s history. This demographic changes must have a pro- What you’re really after when you’re will result in some interesting paradoxes. found impact on the future structure of developing scenarios are data rich stories Let’s take the workforce, for example. Many healthcare, right? that are expressed in a number of ways. boomers soon will be retiring, but many will AZ: Of course, and I think it’s a combination A scenario that draws on only the left stay on the job. That creates a paradox for of really complicated issues. You’ve got the hemisphere of the brain—the one that’s all Generation Xers. Many will move up the general frame of the traditional healthcare charts and numbers—misses the nuances. management chain much sooner than their system—as we understand it—pushing us The reality is, we’re not exclusively rational predecessors did. Others will get trapped toward new political circumstances. You’ve creatures. We’re semirational creatures behind a new glass ceiling created by got the rise of network consumers acting in who make decisions based on our emo- boomers who won’t or can’t retire. their own interests in healthcare for the first tions and our own experience. Our visions PwC: Beyond the workforce, what else will time. But most interesting will be the rise of of the future need to reflect that. change? healthcare innovations. PwC: You mentioned a number of powerful AZ: I think we’ll also be seeing some very PwC: Can you give an example? drivers. What should companies focus on interesting changes in the structure of in terms of some of the major trends that AZ: Yes. Take pharmacogenomics. The families. For instance, because of advances you see? pharmacogenomics revolution is the in healthcare, many people are outliving intersection of drug targeting and genetics. AZ: First of all, demographics are criti- their incomes and in a sense, moving back For example, in today’s healthcare environ- cal. Historically, the American population home to live with or close to their children. ment, if three people get sick, it’s very likely architecture has looked like a pyramid—with PwC: What’s the impact of this change? that within a certain set of parameters, young people significantly outnumbering they’ll each be given the same medicine— older people—but the baby boomers are AZ: When you change the family, you often in the same doses. Unfortunately, creating a big bulge in the middle. Over the change the basic unit of consumption. because of genetic factors, the same course of the next two decades, we’re going For instance, who makes healthcare medicine that heals one does nothing for to see a new population structure emerge in decisions? Who makes entertainment deci- or kills the others. We’re only just beginning the United States. Instead of a pyramid, that sions? Everything is affected. Take product to understand the intersection between structure will resemble an hourglass, the design, for example. Designing for three genetic triggers and medical effectiveness. two ends of which will represent the largest generations as opposed to two involves very different sets of issues.8 PricewaterhouseCoopers View winter 08
  • PwC: That explains innovation, but where does foresight fit in? AZ: Foresight is a core cognitive skill—just like playing, having a think tank, doing ethnography, or building networks. It’s also a core leadership skill, and in my research, the organizations that have proved to be the best sustained innovators are also the best at foresight. PwC: It must be incredibly difficult to embed these types of thinking into an organization. AZ: It is. Thinking about the future and thinking about innovation are whole-brain exercises, and big companies typically are not whole-brain organizations. But in making decisions, leaders of whole-brain organiza- tions draw on both rational—left brain—and intuitive—right brain—mental resources. PwC: Should companies be taking this whole-brain approach to today’s hot- button issues like climate change and sustainability—especially in the US, whichPwC: We’ve talked a lot about demo- AZ: Yes. What we’ve discovered about or- some perceive as being behind the rest ofgraphics. What else should companies ganizations that are very good at becoming the world in its response to these areas?look at? sustained innovators is that they share com- AZ: Yes, but let’s separate the two issues.AZ: Three things: First, there are the mon characteristics. First, they spend a lot They’re related, but they’re not the same.fundamental long-term trends that you of time paying attention to weak signals as Climate change is a critical, fundamentaland I can’t do anything about, such as part of their culture, and they’re very good challenge for the planet. Sustainability is ademographics. The second would be at identifying what they don’t know. Sec- business issue. The first thing to say aboutlarge structural forces like long-term ond, sustained innovators use a portfolio of climate change is that it will continue toclimate change. The third would involve five cognitive styles simultaneously. The first accelerate. There is a 30-year lag betweenbig global economic forces. But you also is the classic think-tank model: You take a when we put carbon and greenhouse gaseshave to look at what we think of as the group of experts, lock them in a closet, and into the atmosphere and when they haveaccidents and incidents. These are wild hope you get a solution to your problem. a measurable effect. So we’re dealing thiscards—low-probability but high-impact Eighty-five percent of the time, you don’t. A year with 1978’s carbon, and that’s a realevents, such as terrorist plots or, for that second style of thinking and style of prob- issue for us. Long before we have to dealmatter, breakthrough technology inven- lem solving is about ethnography: sending with the full effects of climate change, we’lltions. Will understanding all of these things people out into the field to see what people have run out of oil. That’s an absolutelylead to perfectly accurate predictions all of are doing. Using this method, about 70 per- done deal. So we’re going to have to learnthe time? Of course not. It’s not so much cent of the time you get real but incremental how to live in a postcarbon economy. Thethat you turn to experts to give you all the innovation. The third style is what I call the good news is that this is an opportunityanswers all the time but that you develop play category, in which you put a problem for tremendous wealth creation. The greena culture of constant investigation—con- through thousands of iterations until you energy revolution is going to make the ITstantly scanning the weak signals that are either solve it or redefine it. The fourth one revolution look minuscule in comparison.going to be definitive in the years to come. is about scenario planning, where you ask yourself what your organization would look PwC: But what’s the bad news?PwC: Companies that are good at fore- like under a certain set of circumstances AZ: The bad news is that climate changesight also seem to be the best innovators. and then work backward from there. And is going to adversely affect poor countriesIs there a connection between foresight finally, the fifth style involves leveraging theand innovation? power of networks. PricewaterhouseCoopers View winter 08 9
  • There will always be superpowers, but what will be most important over the next 20 years is the gentle, continuous expansion of what I call the dominant global superconduit. much more than wealthy countries. Dis- PwC: And what’s the other side of 75 percent of global GDP was generated ease will spread faster, and catastrophic sustainability? by two countries: India and China. In climate-related events will increase and search of more-efficient routes to that AZ: The other side is really about a cluster disproportionately affect such areas as wealth, Europe discovered North and of business issues, chief of which is talent. coastal Africa and coastal Asia. South America: resource-rich places that Young people—those we label as Millen- could be mined and could be absorbed PwC: What about sustainability? nials—have an abundance of choices. and could be exploited. So you’ve got this They’re looking for meaning and purpose. AZ: There are two sides to sustainability. 500-year delta of Western preeminence They’re more likely than their seniors to The first involves an eco-industrial revolu- based on the compounding value of this say, “I’d rather have a meaningless job at tion that we are in the midst of. We’ve had enormous, extraordinary wealth reserve, a meaningful company than a meaningful three waves of environmental thinking in and now we’re seeing the return to histori- job at a meaningless company.” Does that the post–World War II period. In the 1960s cal norms. While this will bring with it the make sense? and 1970s, we saw the rise of conserva- inevitable decline of single currencies, it tion—preserving parks and so on. This led PwC: Yes, it does. will also create a more multipolar planet. in the 1980s and 1990s to a second great AZ: And that is a deep psychographic and PwC: So are you saying it’s likely that there revolution: the sustainability revolution. But generational shift that’s propelling the green won’t be superpowers at some point? there’s a problem with sustainability. The movement and the issues around sustain- markets do not uniformly reward sustain- AZ: No. There will always be superpowers, ability. It’s also driving the brand inside the able behavior, so there aren’t efficient and but what will be most important over the company. In today’s world, a company’s consistent definitions. The third wave that next 20 years is the gentle, continuous ex- essence or brand is as important to the we’re starting to see emerge is a post- pansion of what I call the dominant global company’s employees as it is to the sustainability era where we’re using new superconduit. company’s customers and shareholders. technologies to look at the natural world PwC: What’s that? as a library of engineering solutions. A PwC: We mentioned earlier that climate great example of this is the lotus leaf. Even change and sustainability are areas in AZ: If you look at a GDP-per-square- though lotus leaves grow in brown, brack- which some feel the US needs to catch up. kilometer map of planet Earth—that is, a ish water, they never appear to be dirty. Are there other aspects of US competitive- map showing where in the world all the The leaf is covered with a special wax in a ness—or lack thereof—that companies money is—you’ll see a highway that runs series of little bumps and ridges that pre- should be keeping their eyes on? over North America, over the Atlantic vent organic material from adhering to the Ocean, over Europe, down to the Middle AZ: You know, I think there’s something surface. A group of German engineers used East, down through India, up through really important here. Some business this property as the basis of a self-cleaning China and Japan, back up over the Pacific leaders are worried about the decline house paint. In other words, we’re start- Ocean, and then back to North America. of American preeminence in the world. ing to view the natural world as a library of Almost 90 percent of all global transac- I think the answer is a couple of different latent applications and new approaches tions occur along that highway. The people things. First of all, it’s going to happen. to solving business issues, resulting in a situated on the highway are living well And it’s going to happen faster than I think whole bunch of new technologies. beyond the means of their local environ- a lot of people know. But this is simply a ments. They’re net importers from the rest return to historical norms. In the year 1500,0 PricewaterhouseCoopers View winter 08
  • of the world. Life in this superconduit is Connectionsgoing to continue to be fast, consumptive,and deeply intermingled, and it’s going to The space shuttle and the Appian Waycontinue for the foreseeable future.PwC: Is that a good thing?AZ: Not entirely. One problem is that everymajor period of massive global integrationhas ended in global war. So one of the big Understanding the future is all about un- Thousands of years ago, two Romanquestions is, Can we shift from a unipolar derstanding connections—even those that legionnaires walking down a road, side byor a bipolar to a multipolar world and avoid reach across centuries. side, defined the size of the roads in whatreal conflict? would become Europe. So the means by Only the most avid space shuttle enthusi- which the material used for building thePwC: Can we? asts may know that by federal mandate, international space station was transportedAZ: There’s reason for hope. It used to the payload of the shuttle has to be able to the space shuttle is directly connectedbe that two places that had large stand- to fit on a railcar. Why? Under President to a standard of measurement that goesing armies pointed at each other were not Lyndon Johnson, the fledgling space pro- back thousands of years.going to go to war. Then it was two places gram received a big boost, and it becamethat both had significant densities of necessary to be able to move large quanti- In the same way, much of the world of thefast-food restaurants would not go to war. ties of materials around the country quickly future will be predicated on standards be-And now I think, arguably, the situation and efficiently. ing developed today. You could say that inis that any two countries that exchange almost everything we do—from designingat least 15 petabytes of email a week are But here’s where the connections come cars to building skyscrapers—we are inprobably not going to go to war. The level in. The size of a railcar is based on the fact measuring our future.—AZof economic, cultural, and technological width of its axles. Because vehiclesexchange between them is so great. occasionally have to intersect with railcars, the width of a railcar’s axles is defined byPwC: In 50 years, will the world be a the size of the road—a size determined bybetter place? the European standard.AZ: I think so. We tend to envision thefuture as a blank slate, but that’s really notthe case. In many ways, the future is now.Much about the world we currently livein—the good and the bad—will follow usinto the future. If the past 50 years havetaught us anything, it’s that with advancesin technology and science, we can tilt thatequation toward the good. So, yes, I’mquite optimistic about the future. PricewaterhouseCoopers View winter 08 1
  • Your view Constant change has become a given in today’s business environment. And you know how crucial it is to adjust your organization to this new imperative. But what is top of mind for a business leader who is considering organizational change? In our 11th Annual Global CEO Survey, we asked senior executives worldwide to give us their candid views on change. Do their sentiments echo your thoughts, or is there something else on your mind? Let us know at “I would like to change the mindset of people about change itself. “A vision of continuous improvement and capacity for adaptation.” Even when they agree to the process of change, they tend to lose Argentina sight of long-term objectives and do not implement change posi- tively enough.” Belgium “People’s attitude to change.” Hungary “To be more patient about driving change.” Canada “The ability to identify the changes that are coming about and to adapt quickly. Must anticipate the changes ahead and prepare.” “To create even more willingness to change among executives.” United Kingdom Germany “I think people have to be more open to change, collaboration, “I would like to change the internal processes and decision mak- and innovation in this competitive business environment. Business ing processes. We also need to look at people issues—the middle as usual is not acceptable; we need an open architecture to be and senior management needs to have strong leadership skills. successful in this competitive environment.” United States The recruitment process would need an extensive review.” China “Our responsiveness to the changing market needs. Basically “Space for creativity and innovation in the rigid structure of the we are not able to anticipate or address the problem practically.” company.” Argentina India “Lack of willingness to meet/make change.” Finland “Work-life balance.” South Africa “Not to see change as a threat but as an opportunity.” “Develop more collaboration among senior management.” the Netherlands Australia “More effort has to be taken to make sure that people really “Support by staff for a change.” Japan understand the reason for and benefit of the change.” Indonesia “Creating an organization that’s strong and flexible to react to an “The ability of the whole team to carry out changes, integrate increasingly volatile external market.” United States themselves in the different functions, and react quickly to changes.” Italy PricewaterhouseCoopers View winter 08
  • “Internally there is a need for the ability to absorb new ideas and “People’s attitude to change.” Hungaryaccept the changes in business models.” Hong Kong “To know what customers really want.” Japan“Change-management clarity related to response to change in myorganization.” Thailand “The possibility to take a longer term view of the business. Short-term business pressure is overwhelming. We focus so“The ability to adapt quickly and cope with the change.” much on a 12-month horizon. I’d like to be looking out threeSouth Korea to five years.” Poland“Explaining the benefits of change to employees.” United States “Make decisions more quickly.” Mexico“To be able to better transmit the necessities of the change of “My own attention to the quality of collaboration at the highestbusiness.” Portugal executive level and my own engagement to effect changes.” United States“I would like to improve the ability to address cross-culturaldifferences and make people understand each other easier.” “I wish I had more time for my staff.” GermanyTurkey “To change the culture of the organization so it becomes more“Getting everyone to row in one boat in the same direction.” powerful and entrepreneurial.” United StatesCanada “Better coherence between the corporate goals and individual“Get people across the company to always think positive and also tasks for each department.” Ukrainehave the conviction to achieve what they dream.” IndiaView magazine is printed at an ISO 14001:2004 certified plant with Forest By using postconsumer recycled fiber in lieu of virgin fiber:Stewardship Council (FSC) Chain of Custody and Green-e certifications.It was printed with the use of renewable wind power resulting in nearly zero 22.54 trees preserved for the futurevolatile organic compound (VOC) emissions. The paper used is 10 percentrecycled with postconsumer waste. 65.09 lbs of waterborne waste not createdBy printing at a facility that uses wind-generated electricity: 9,574 gallons of wastewater flow saved 6,798 lbs of greenhouse gases prevented 1,059 lbs of solid waste not generated equivalent to 5,845 miles driven in an automobile eliminated 2,086 lbs net of greenhouse gases prevented equivalent to the planting of 458 trees 15,974,870 of BTUs energy not consumed
  • Rear Are you maximizing talent in your organization? ° Have I integrated a talent strategy as part of my business plan? ° Do I treat the talent process like the quarterly sales review, operations review, or quarterly financial close? ° Does our annual report review how well we are maximizing our talent assets? ° Do our executives and managers at all levels dedicate time to being actively involved in training, coaching, and mentoring? ° How do we develop the people who report to us? ° Are we creating a learning culture where continuous development and coaching are the norms? ° What are we doing to build a strong leadership pipeline to ensure our leaders are prepared to lead in the future? ° What are we doing to develop emerging leaders? Do they have clearly defined development plans to help their career progression? ° Are our organization’s leaders held accountable for modeling our values and leadership behaviors? ° What types of flexible rewards and recognition am I implementing to motivate a diverse workforce? ° What metrics do we report on and monitor that help us anticipate key talent trends? ° How does our talent compare to the talent at our fiercest competitors?*connectedthinking