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Managing tomorrow’s people* The future of work to 2020 *connectedthinking

Contents Introduction 02 Small is beautiful: welcome to the Orange World 18 2020: where three worlds co-exist 04 The journey to Orange 18 Life in the Orange World: the main themes 19 Corporate is king: welcome to the Blue World 06 Work in the Orange World: the people challenges 21 The journey to Blue 06 The Orange HR business model 22 Life in the Blue World: the main themes 07 Work in the Blue World: the people challenges 09 Are you ready for tomorrow’s world? 25 The Blue HR business model 10 Appendix 27 Companies care: Definitions: Scenarios, Millenials 27 welcome to the Green World 12 Our methodology 28 The journey to Green 12 Global forces 29 Life in the Green World: the main themes 13 PwC Graduate Survey findings 30 Work in the Green World: the people challenges 15 Contacts 32 The Green HR business model 16

Foreword 01 The journey to 2020 about the future of people management. Our team has At the beginning of 2007, a team from identified three possible ‘worlds’ PricewaterhouseCoopers gathered to explore the – plausible futures to provide a future of people management. Our thinking was context in which to examine the sparked by the rising profile of people issues on way organisations might operate the business agenda – the talent crisis, an ageing in the future. In addition we surveyed almost 3,000 workforce in the western world, the increase in Managing tomorrow’s people Foreword MillennialsA1 – new graduates from the US, China global worker mobility and the organisational and and the UK who represent a generation just joining cultural issues emerging from the dramatic pace of the workforce, to test their views and expectations business change in the past decade. We wanted on the future of work. to explore how these issues might evolve and how organisations need to adapt to stay successful. We hope you will help us to encourage debate Many studies have attempted to capture a vision around this critical topic. It is said that the future is of the workplace of the future, but we set out to not a place we go to, but one which we create. And understand the people challenges that will impact while things happen that we cannot predict, we can organisations and consequently the implications still be prepared. this will have on the HR function as we know it. Few business thinkers have proposed that the marketing or finance functions might cease to exist in their present forms, but some are starting to say this about HR. Michael Rendell With the help of the James Martin Institute for Partner and leader of Human Resource Services Science and Civilisation at the Said Business PricewaterhouseCoopers LLP School in Oxford, we used ScenariosA1 to think A1 – Appendix 1, see appendix page 27

02 Introduction 2,739 When we started our research we had some preconceived ideas about tomorrow’s world. Many • large corporates turning into mini-states and taking on a prominent role in society In July 2007, 2,739 graduates studies have been undertaken to explore the future • specialisation creating the rise of collaborative from China, the US and the UK of society, the environment, business and even the networks told us about their workplace. Our challenge was to focus explicitly expectations of work. They had on the business context and the impact on people • the environmental agenda forcing fundamental all been offered jobs with PwC and work. changes to business strategy. but had yet to start. Some of While we cannot claim to have identified all the the key findings are highlighted possibilities, several strong themes have emerged: 2. People management will present one throughout this report of the greatest business challenges While some of the findings 1. Business models will change Businesses currently grapple with the realities of seem to confirm current dramatically skills shortages, managing people through change received thinking about the and creating an effective workforce. By 2020, the future of work, a number of The pace of change in the next decade will be radical change in business models will mean themes defy conventional even more fundamental. Technology, globalisation, companies facing issues such as: thinking. demographics and other factors will influence organisational structures and cultures. Our • the boundary between work and home life PwC is the biggest recruiter disappearing as companies assume greater scenarios outline three organisational models of the of graduates in the UK and responsibility for the social welfare of their future: a leading global recruiter employees of graduates. A3 A3 – Appendix 3, see appendix for a full breakdown of the findings page 30

03 3. The role of HR will undergo “HR needs to fundamental change ensure it is fit for HR has been perceived by many as a passive, purpose in order service oriented function, but given the context of tomorrow’s workplace and business environment, to be proactive we believe HR is at a crossroads and will go one of and maintain or Managing tomorrow’s people Introduction three ways: develop its • with a proactive mindset and focused on influence in the business strategy, HR will become the heart of the organisation taking on a new wider people future.” remit incorporating and influencing many other Keith Murdoch, aspects of the business Remuneration and • the function will become the driver of the Benefits Manager, corporate social responsibility agenda within the British American Tobacco organisation • stringent people measurement techniques to control and monitor productivity and • the function will be seen as transactional and performance almost entirely outsourced. In this scenario, HR will exist in a new form outside the organisation • the rise in importance of social capital and and in house HR will be predominantly focused relationships as the drivers of business success. on people sourcing.

04 2020: Where three worlds co-exist We believe it We identified a number of global forces that will have significant influenceA2, and of those we felt is possible that all that individualism versus collectivism and corporate three worlds will integration versus fragmentation would be the most significant. From this axis we identified three worlds co-exist in some and business models for the future. form, perhaps (See figure 1 opposite.) distinct by We tried to capture the events and trends which geographic region, draw a picture of life in tomorrow’s world and the people management challenges that might prevail. or industry sector The forecasting timelines and world descriptions for example. are not intended to be taken literally as complete visions of alternative futures. They are designed to present ideas and illustrate the more important points around the people management challenges. We believe it is likely that all three worlds will co-exist in some form, perhaps distinct by geographic region, or industry sector for example. As you read this document think about how your own organisation might be positioned within these scenarios and what implications this has upon your current people management strategy. A2 – Appendix 2, see appendix page 28

Figure 1 2020: three worlds Managing tomorrow’s people Introduction 05

Corporate is king: the Blue world Where big company capitalism reigns supreme In a nutshell: The globalisers take centre stage, consumer preference dominates, a corporate career separates the haves from the have nots. 2011 2012 2013 2014 2020 The Indian World’s biggest The brain-drain of A decade of M&A Global warming economy expands search engine and Eastern European consolidation changes the dramatically as largest technology workers starts to across industry climate of Europe; it goes through company merge reverse as workers sectors peaks as the snow on the a new wave of return home Alps melts, skiers cross-border to set up and head to the US acquisition sprees lead corporates, and becomes a building on global leader in expertise gained several industry in several sectors sectors

07 90% Corporates divide the haves and “Our search for have nots talent is now a of Chinese respondents expect The power of corporations means that a much global search. they will use a language at work greater divide has opened up between those The competition working for global corporations and those other than their mother tongue working in smaller enterprises. Employees of for talent will only Managing tomorrow’s people Blue World mega-corporations have everything they need laid increase further.” Size matters on. Those working for smaller businesses remain at the whim of housing markets and basic statutory Hanspeter Horsch The sheer size of corporations in 2020 means entitlements, needing to self-supplement Associate Director, that a significant number now operate with annual educational support, health and insurance Human Resources turnovers that far exceed the GDP of many coverage, what remains of the public health Samsung Semiconductor individual countries, particularly in the developing system, and so on. Europe GmbH world. With echoes of the business models promoted by companies like General Motors in the middle of the last century, many companies now Welcome to the technology age provide the equivalent of the welfare state for their Technology is all pervasive, entire cities in the employees to ensure they lock the best talent into US, Japan and the UK operate with ubiquitous their organisations. Internally managed service high-speed wireless networks that allow all centres are sophisticated and highly efficient – commercial transactions, entertainment and using processes perfected by the outsourcers of communications to be handled by every individual the ‘nineties. People metrics become an essential on credit card-sized devices. Pinpointing exactly part of everyday life to keep track of individual what you want and being shown where it is performance and productivity. available from wherever you happen to be is now taken for granted, allowing businesses continuously to refine and individualise their relationships with consumers, employees and shareholders.

08 75% Corporates drive lifestyle choices • Mass consolidation has had an impact on cultural issues. Leadership teams now have a Sophisticated measurement and segmentation high focus on the evolution of the corporate of respondents strategies mean companies can target goods and culture with rigorous recruitment processes to think that workplace services across their customer base and to ensure new employees fit the corporate ideal. employees. For example ‘green politics’ is seen as flexibility will not Existing staff are subject to compulsory a lifestyle choice rather than a meaningful political corporate culture learning and development exist; they believe movement. Corporations provide environmental programmes. products and services to those who express a they will be working preference. • Huge people costs drive the need for robust formal office hours metrics and analysis. Employee engagement, performance and productivity are all measured Managing people in the Blue World systematically. Leadership can access people • Companies have become the key provider of data on a daily basis. This also provides an early services to employees. People management warning signal of non-corporate behaviour or now encompasses many different aspects of below standard performance. employees lives’, often including housing, health • Technology pervades every realm of business and even education for their children. and leisure activity. The line between inside • This strategy has led to an increase in staff work and outside work is often blurred by retention rates as people policies seek to lock in technology with employers providing the talent, but the top talent is still hard to attract platform. This also provides employers with and retain, many senior executives use personal added insights to staff preferences. agents to seek out the best deals.

Who leads people Organisational Employee profile 09 strategy? challenges • The Chief People Officer (CPO) is a powerful • Quality assurance across the globe drives • People are graded and profiled at the age of and influential figure, sometimes known as the need to create consistency across the 16 and categorised for work suitability both the ‘Head of People and Performance’ who organisational supply chain. in terms of capability and individual sits on the leadership board. preference. • The challenges of size and scale mean that • Metrics and data are used to drive business these organisations are at greater risk from • The top talent is highly prized and fought performance through complex staff external threats such as technology over. In most cases people are linked to an segmentation strategies which identify terrorism or meltdown and they find it organisation by the age of 18. Managing tomorrow’s people Blue World thousands of skills sets – creating precision difficult to effect change quickly. • University education is managed by the around sourcing the right candidates for the • As companies try to reinforce corporate company according to the organisational right tasks as well as on the job performance values, these can often be at odds with career path chosen by the individual. measurement and assessment. cultural values and can present challenges. • At the top level, employees take far greater • The science of human capital has developed • Organisations must develop models and control of their careers; often senior to such a degree that the connection systems designed and run by HR executives have their own personal agents between people and performance is professionals which enable individuals and who represent them to find the best roles explicitly demonstrated by the CPO. their agents to negotiate the value of their and deals. • As organisations increase in size, their risk human capital based on employees’ • Lower level employees are also taking management systems are similarly extended. personal investment strategies. active charge of their careers; they are • The people risk agenda is one which is taken aware of the value that their human capital seriously by the board – as a result, the CPO represents and are demanding about the and HR business partners become more circumstances in which they will invest. influential. • Those outside the corporate sphere find • Those responsible for people management employment choices are limited to smaller increasingly need financial, analytical, companies that are unable to provide the marketing and risk management skills to same level of development and financial measure the impact of the human capital in benefits. their organisation and to attract and retain the best talent.

10 A people management model for the Blue World In the Blue World where corporate is king, the people and performance model below is the closest to what many leading companies are aspiring to today – linking HR interventions to improvements in business performance and using more sophisticated human capital metrics to evaluate corporate activity. Under this scenario the management of people and performance becomes a hard business discipline, at least equal in standing to finance in the corporate hierarchy. Human resources: the current model People and performance: the 2020 model Figure 2

11 Future view Extract from a newspaper in 2016 People metrics are integral to analysts’ pricing strategies WORLD FINANCIAL NEWS 3rd April 2016 NEWS IN BRIEF Managing tomorrow’s people Blue World Italian pharmaceutical The quarterly report generating a much giant Como saw its will be looked at improved return on shares climb higher closely by companies human capital. yesterday in inside the industry and expectation of positive beyond. Many credit Mr Fabrizzi said, “You news in its quarterly Como’s unusually have to measure the results due next week. rapid rise and things you attach value The company, now dominance of parts of to. Measuring the worth an estimated the sector to the way performance of our € 20bn has profited CEO Mario Fabrizzi people has allowed from the success of its manages the us to quickly make new line of statins in organisation’s human improvements to any Europe and America, capital, which the underperforming part but also in China, the company also reports of the business, to fastest growing on in detail. Last year make effective plans pharmaceutical market earnings per employee for succession and to globally. rose by 7% while costs return real value to our per employee fell 5%, shareholders.”

Companies care: the Green World Where consumers and employees force change In a nutshell: Companies develop a powerful social conscience and green sense of responsibility. Consumers demand ethics and environmental credentials as a top priority. Society and business see their agenda align. 2010 2012 2013 2018 2020 The UK launches The US signs the India becomes a Hybrid or fully A group of the London Kyoto II agreement key player in the electric cars scientists confirm Carbon Trading and becomes a corporate social outnumber that the rate of Exchange leading advocate responsibility petrol-powered global warming for actions to agenda with a cars is slowing reduce the rate of focus on global warming preserving the Indian culture and heritage

13 94% components of the supply chain through vertical integration. Rigid contractual obligations are in “We are place covering every eventuality. developing an of respondents believe they will employer brand work across geographic borders How green are you? reflecting our more than their parents did. The audit process and quarterly company reports identity as an Managing tomorrow’s people Green World are characterised by a focus on measuring Consumers drive corporate behaviour employer and greenness detailing carbon emissions ratings, and The environmental lobby is so pervasive that carbon exchange activity, as well as the more promoting our companies must be quick to react to consumer traditional company valuations. This is an indication long term concerns about any aspect of their business which of the importance shareholders and investors place on these issues which are reflected in the share commitment could be deemed unethical. Clear communication and clarity about products and services is essential. price. with our employees.” Supply chain control Big corporate fines Hughes Fourault, Companies have strong control over their supplier In the business world ethical behaviour is the most Global Head of networks to ensure that corporate ethical values important attribute to attain and preserve. Brands Compensation, Benefits are upheld across the supply chain, and be able to can rise and fall on the basis of perceived green and International Mobility, troubleshoot when things go wrong. This has led to credentials, with government imposed corporate Société Général many organisations taking greater ownership of key fines for bad behaviour in this highly regulated world. Corporate responsibility is not an altruistic nice to have, but a business imperative.

14 90% Managing people in the Green World • New graduates look for employers with strong of US respondents environmental and social credentials; in will actively seek out response HR departments play a key role in developing the corporate social responsibility employers whose programme. corporate • Employees are expected to uphold corporate responsibility values and targets around the green agenda. Most are given carbon credit tokens which are behaviour reflects Working across teams in different locations used like ration books to be cashed in for therefore presents enormous challenges to their own. printing documents in hard copy, company global businesses, and the HR function travel and other anti-societal activities. dedicates significant energy to generating virtual • The HR function is renamed ‘People and social networks across the operation and the Society’, the leader being a senior member of client base. the company’s executive team. • Most companies provide staff with corporate • The need to travel to meet clients and transportation options between work and home colleagues is replaced with technological to minimise the need for car use. This has led to solutions which reduce the need for face-time. many companies choosing to relocate parts of Air travel in particular is only permitted in their operation to where people are based and exceptional circumstances and is expensive. out of big cities.

Who leads people Organisational Employee profile 15 strategy? challenges • The CEO drives the people strategy • Quality assurance and vigilance to • The common belief is that employees for the organisation, believing that the minimise risk is paramount. choose employers who appear to people in the organisation and their match their beliefs and values. The • The greatest threat to businesses in behaviours and role in society have a reality is that the talent pool for the this scenario is the possibility of direct link to the organisation’s brightest and best remains non-socially responsible behaviour success or failure. competitive, and whilst CSR rankings either within the organisation or in any are a factor, the overall incentive Managing tomorrow’s people Green World • The CEO works closely with the Head part of its supply chain. package remains all important. of People and Society (HPS) who, • Organisations operate in a highly Incentives however are not just with a team comprising a mix of HR, regulated world, where employment reward-related; for example, they marketing, corporate social law makes it difficult to lay people off include paid secondments to work responsibility and data specialists, in line with market fluctuations. They for social projects and needy causes drives the social responsibility struggle to monitor everything across – a popular trend post-2010. programme. the operation to be compliant with the • Because organisations adopt a more • Employment law drives responsible ethical ideal for which they strive. But holistic approach to developing employer behaviour and forces the being compliant is not enough: their people, including personal HPS to develop innovative solutions in organisations are under pressure to development and measuring the times of downturn – such as sending raise the bar and establish policies impact they have on the wider world, employees on secondments to other and practices which go beyond employees are more engaged and as organisations where they can develop regulatory requirements. The danger a result are often likely to have a job their skills and contribute to the wider in such a regulated world is that for life. society, bringing employees back in companies are so preoccupied with when the economic environment compliance policies that the ability to improves. The HPS is therefore a be flexible and explore new well-networked individual. opportunities is hampered.

16 A people management model for the Green World In the Green World where companies care, corporate responsibility (CR) is good. The CR agenda is fused with people management. As society becomes a convert to the sustainable living movement, the people management function is forced to embrace sustainability as part of its people engagement and talent management agendas. Under this scenario successful companies must engage with society across a broader footprint. Communities, customers and contractors all become equal stakeholders along with employees and shareholders. Human resources: the current model People and society: the 2020 model Figure 3

17 Future view Extract from operating review G-Bank Sustainable business report G- BANK In 2020, it is a legal requirement that companies disclose their G-BANK recognises its statutory responsibilities under the environmental activity. This also Climate Change Act 2015, Ecosystem Change Act 2016, acts as a key differentiator when and all other sustainability legislation. We have been active Managing tomorrow’s people Green World recruiting and retaining talent. participants in the International Business Panel on Climate Change since it was established in 2010. The group has adopted the European allowed G-Bank to retain its status as Sustainable and Responsible a AA+ company within the S&P Corporations guidance and has sustainability index. comprehensive company-wide policies Key environmental data is provided on sustainability, energy and climate below change, and responsible procurement. We require all suppliers to be certified Key Environmental Statistics 2020 2019 as carbon balanced and eco-friendly. Energy use – properties During 2020 G-Bank made further Total energy consumption – Gw 1,015 1,200 changes in its energy providers in 25 Energy consumption/FTE – Kw 0.10 0.13 countries, so that 95% of our total Renewables as a 95% 91% energy consumption now comes from % of total energy consumption renewable sources. Our extensive use of videophone technology and virtual CO2 emissions – properties meeting software means that business CO2 – kilotonnes 21.0 21.8 travel has reduced by 75% over the CO2 – tonnes/FTE 0.21 0.23 past five years. In the last quarter of the year our Business travel environmental auditors completed their Total travel-related CO2 – kilotonnes 1.0 1.9 annual sustainability audit and issued Travel-related CO2 0.01 0.02 an unqualified opinion. This has per FTE – tonnes/FTE

Small is beautiful: the Orange World Where big is bad, for business, for people and for the environment In a nutshell: Global businesses fragment, localism prevails, technology empowers a low impact, high-tech business model. Networks prosper while large companies fall. 2009 2010 2012 2014 2020 Facebook global Skill shortages Record number 71% of Europeans The California membership push up wages in of corporate shop at local Gaming Guild reaches 1 billion China, switching demergers and farmers markets, achieves record people the balance of spin-offs popularity of pay deal for its power to the supermarkets in 7 Star rated individual away steep decline contractors from the collective

19 0.6% Complex supply chains “Diversity is a Supply chains are built from complex, organic huge challenge, Only 0.6% of UK respondents associations of specialist providers, varying greatly but also a great think that they will mainly work from region to region and market to market. The solution is now not to outsource, but to fragment. opportunity. from home Looser, less tightly regulated clusters of companies Getting diversity Managing tomorrow’s people Orange World are seen to work more effectively. Often functions A free economy are picked up on a task by task basis by ‘garage’ right will be a Trade barriers come down creating a truly free operations, with each transaction bought and sold critical future by the second on one of a number of electronic market economy and countries such as China success factor trading platforms, with local and global exchanges. quickly realise that without embracing full for us.” free-market forces they will be unable to compete. Millennials drive technology use Peter Johann Director Global HR Networks are key The millennial generation, comfortable with technology, is driving the usage of technology as Management The dream of a single global village has been BASF the interaction with services, government and work, replaced by a global network of linked, but with an emphasis on choice and anti-monopoly separate and much smaller communities. The thinking encouraging innovations in this area. exponential rise in the efficiency of online systems for buying, selling and trading services and skills has debunked completely the old orthodoxy that economies arise from scale. Businesses are much smaller and roles are more fluid.

20 11.5% Labour market enters the guild era • Employees are usually aligned to guilds and access opportunities through professional In a tightening labour market individuals develop portals provided by guild networks – work of Chinese female portfolio careers, working on a short-term, can be bought, sold and traded in this way. respondents expect contractual basis. They join craft guilds which Employment contracts are flexible to manage career opportunities, provide training and to have more than accommodate staff churn and a rapid development opportunities. turnaround. ten employers during • Workers are categorised and rewarded for their career Managing people in the Orange World having specialist expertise; this has created • Organisations recognise that their employees increased demand for workers to have a and the relationships they have across their personal stake in the organisation’s success networks are the foundation of company with direct ownership share schemes and success. Companies seek to promote and project delivery-related bonuses becoming sustain people networks. This is achieved the norm. through incentivising employees around • Recruitment has become largely a sourcing achieving connectivity goals and collaborative function and has been merged with the behaviours. management of the huge number of contracts • As guilds become more important, they take on and price agreements required for each many of the responsibilities previously assumed company’s network of partner organisations. by employers including sourcing talent, medical insurance and pensions, development and training.

Who leads people Organisational Employee profile 21 strategy? challenges • People strategy is replaced with • Organisations are heavily reliant on • The responsibility for skills sourcing strategy, as maintaining the their external networks to deliver what development shifts wholesale to optimum supply chain of people is they need, and a combination of individuals. key to this networked world. watertight contractual agreements • People are more likely to see combined with a healthy degree of • The People Sourcing Director liaises themselves as members of a business trust is imperative. with expertise networks and guilds to particular skill or professional network Managing tomorrow’s people Orange World attract what they need for the best • When a part of the network breaks than as an employee of a particular price. down, the smaller size of company. organisations means they are able to • Employees rely on achieving high flex and adapt quickly to change. But scoring ‘eBay’ style ratings of past job the flip side of this means that the performance to land the next lack of company infrastructure and contract. resources to deal with sudden problems can be a challenge • Specialisation is highly prized and workers seek to develop the most • There is also a strong emphasis on sought after specialist skills to technology to support the supply command the biggest reward chain and to develop social capital package. and collaboration.

22 A people management model for the Orange World Our third world is in many ways the most radical. In this world, economies are comprised primarily of a vibrant middle market, full of small companies, contractors and portfolio workers. People management is about ensuring these small companies have the people resources they need to function competitively. This allows an important role to be carved out for HR, one where the people supply chain is a critical component of the business and is strategically led by the HR function. But the flip side is that this could also see in-house HR becoming a sourcing or procurement function, with the high-end people development aspects of HR being managed externally by guilds. Current model Operational model in 2020 Figure 4

23 Future view Extract from employment networking site in 2020 In the Orange World, Workbook, an employment networking site, is used as a key route for people Managing tomorrow’s people Orange World to find jobs, host their work experience and join networks

24 Summary A summary of Blue World Green World Orange World the people Resourcing Long careers and career Holistic whole company Short-term careers. Lots of and planning. Succession plans for approach to manpower planning. contracting. HR strongly focused management Succession key performers. on filling fixed-term vacancies. characteristics Talent Strong performance focus Broad definition of talent. Minimal – key players in the in 2020 Management across all levels. Top talent have Competencies focus. central ‘core’ only, but liaison personal agents. with external agents crucial Employee Engagement around Engagement around work-life Short-term engagement around Engagement performance and performance balance and social responsibility. projects. metrics. Heavy promotion of corporate culture attributes and behaviours. Reward and Strongly performance-related. Focus on total reward over Contract based-pay for projects. Performance Pay for performance. Highly career life-time. Individual stake in projects as structured according to role incentive for contractors. segmentation. Learning and Begins at school. Focus on skills Holistic approach to learning Minimal provision in house. Skills Development for the job – metrics driven. – much provided in-house. training via new crafts guilds. But secondments and paid sabbaticals for worthy causes are common Table 1

Are you ready for tomorrow’s world? 25 What will the world look like in 2020 – Blue, Green, “HR will continue Orange or something else entirely? We believe it is highly plausible that all three organisational models to increase its described in this report will feature in tomorrow’s alignment to Managing tomorrow’s people Are you ready for tomorrow’s world world, sometime or somewhere and to some the business, extent. We already see some multinationals heading in the direction of the Blue World business model. with greater The energy industry has been demonstrating accountability for elements of the Green World for some time. We firmly believe that, as the CSR and sustainability delivering specific The world of work is going to become even more corporate agenda grows many other industries (and complex. Our message is: take a long hard look geographies) will take on characteristics of the objectives. This at your organisation models and current people green business model, for example the retail and manufacturing sectors. Consumer preference will management strategies; how are you addressing will result in a reward, international mobility, employee have a huge impact when it comes to the green engagement, development and learning? Think greater need for agenda. about how these might change in the future and HR to quantify The Orange World in some ways represents the whether or not the strategy you currently have in itself in respect of most radical departure. Will big business find place is future proof, is sustainable, sufficient and itself outflanked by a vibrant, innovative and relevant for the plausible worlds of tomorrow. how we deliver entrepreneurial middle market? Will the work The survey we conducted is clearly representative against the expectations of the millenials be such that portfolio lives will become far more pervasive? Will some of only a part of the millennial generation. But what bottom line. ... truly surprised us is the desire in this group for larger organisations introduce internal markets and stability and regularity in a changing world. Many formal networks in place of old style hierarchies to people said they expect to work regular hours, from create structures where agility, speed and flexibility the office or on location, and would have only are key to success?

26 ...We will also need between two and five employers in a lifetime. But How can organisations plan for the equally let’s not ignore the Chinese women in our to prepare ourselves future of people management? sample who expected far more flexibility and to for a new generation have at least ten employers in a lifetime – perhaps these might be workers for the Orange World of the entering the market future. place. A significantly Our final message is to the HR function itself. We more mobile believe there is a significant opportunity for the HR generation with function to really own the people management agenda within organisations, to truly drive strategy differing expectations and have the tools and information to become one from an employer, of the most powerful and influential parts of the and we will need to business operation. But – and yes there is a but – we can also see that complacency and a failure by adapt to reflect this.” HR to take the lead could result in the function Michael Poulten being outsourced almost entirely, or absorbed by Personnel Manager line managers or into other functions such as Reward and Benefits finance or marketing. The fate of HR as a function Tesco Stores hangs in the balance. The challenge for HR is to figure out how to make itself relevant for tomorrow’s world. Figure 5

27 Appendix A1 Definition Scenarios Millenials We worked with the James Martin Institute for Wikipedia says ‘The Millenials’ are also known as: Science and Civilisation at the Said Business ‘Generation Y – a term used to describe someone School in Oxford to think about the factors that born immediately after Generation X…one of Managing tomorrow’s people Appendix currently affect business and those which we several terms (also including The Internet believe will grow in importance in the future. We Generation) used to identify the same group. There mapped these around a matrix and developed a is much dispute as to the exact range of birth years number of scenarios: plausible futures around each. that constitutes Generation Y and the Millennials The result was the three worlds which we describe and whether these terms are specific to North in this report. Shell famously used scenarios to help America, the Anglophone world, or people them to predict the Middle East oil crisis in 1973. worldwide.’ The process can help organisations think differently For the purposes of this document, we refer to about the future and plan for the inevitable ‘Millennials’ as those who entered the workforce surprises. after 1 July 2000.

28 A2 2020: our methodology Scenarios Our scenario planning exercise revealed that individualism, collectivism, corporate integration and business fragmentation would be the most significant factors affecting global business for the purposes of our study. We aligned these along two axes, around which we developed our scenarios further. We call these ‘worlds’. We began with four worlds: yellow, red, blue and green, with the yellow and red worlds straddling the top half of the We started our research by examining the forces quadrant. In these fragmented worlds we that currently affect global business and are likely discovered through our analysis that the differences to have significant impact on the future. Clearly across individualism and collectivism were hard to there are many social, environmental, religious and define in the fragmented world. Both of these demographic factors that will have significant worlds relied upon networks to survive, were, small, influence but we felt that some of these issues have nimble and adaptable. The motivations were the been tackled extensively in other studies. We chose only variant factor where the red world was more to focus on a number of potentially conflicting self-serving than the collective altruism of the factors which we feel have the greatest impact on yellow world. We decided therefore to combine our subject matter – people management. Initially these themes to create a single orange world which we explored the following eight forces: (see represented the fragmented business model. diagram opposite).

Figure 6 Global forces Managing tomorrow’s people Appendix 29

30 A3 PwC graduate survey findings In July 2007, 2,739 Total China US UK graduates from Yes 93.9% 97.2% 92.1% 92.9% China, the UK and Do you believe you will work across geographic borders more than your the US were polled parents did? No 6.1% 2.8% 7.9% 7.1% about their Do you envisage using a language other Yes 52.7% 89.4% 32% 35.3% expectations of than your first language at work? work. They had all No 47.2% 10.4% 68% 64.7% been offered jobs Will you deliberately seek to work for Yes 86.9% 87.2% 90.2% 71.2% at PwC but had yet employers whose corporate responsibility behaviour reflects your own values? to start. No 13% 12.6% 9.6% 28.8% A mix of Do you think you’ll work...? 74% 75.7% 71.8% 79% locations Mainly from 4.6 7.4% 3.8% 0.6% home Mainly in an 21.2% 16.7% 24.3% 20.4% office Not answered 0.1% 0.1% 0% 0%

31 Total China US UK Mainly flexible Do you think your office hours will 13.9% 17.6% 12.9% 7.4% hours be…? Mainly regular 11% 7.1% 14.0% 10.0% office hours Managing tomorrow’s people Appendix Regular office 75% 75.1% 73.1% 82.5% hours Not answered 0.1% 0.2% 0.1% 0% How many employers do you think 1 8% 9% 8% 7.4% you will have in your career? 2-5 78.4% 74.4% 80.4% 79.6% 6-9 7.9% 6.3% 8.5% 9.7% 10+ 5.5% 10.3% 3.2% 2.6% Not answered 0.1% 0.0% 0.1% 0.6%

32 Acknowledgements Contact There were numerous people involved in this Michael Rendell project both within and outside Partner and leader of Human Resource Services PricewaterhouseCoopers. Our particular thanks to PricewaterhouseCoopers LLP (UK) Angela Wilkinson and team at the James Martin +44 (0) 20 721 24945 Institute and to all the companies who shared their michael.g.rendell@uk.pwc.com views and insights. Sandy Pepper Our thanks to the core project team: Sandy Pepper, Partner/Project leader Cecilia Nordqvist, Matthew Blakstad, Leyla Yildirim, Human Resource Services Rachael Davison, Andrew Smith, Jackie Gittins, PricewaterhouseCoopers LLP (UK) Sonja Jones and the rest of the team who took part +44 (0) 20 721 34948 in the scenarios workshop. We would also like to sandy.a.pepper@uk.pwc.com thank Sivaramakrishnan Balasubramanian, Indrani Rana (India), Svetlana Kruglova (Russia), Shinya Karen Vander Linde Leader, People and Change Yamamoto (Japan), Steve Rimmer (US) and many PricewaterhouseCoopers LLP (US) other contributors from across our global network +1 (703) 918 3271 of PricewaterhouseCoopers firms. Our final karen.m.vanderlinde@us.pwc.com acknowledgement goes to our internal human capital teams around the world who helped us to Leyla Yildirim conduct the graduate survey. Marketing Human Resource Services PricewaterhouseCoopers LLP (CI) +44 (0) 1481 75 2039 leyla.yildirim@uk.pwc.com

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, Managing tomorrow’s people to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2007 PricewaterhouseCoopers LLP. All rights reserved. ‘PricewaterhouseCoopers’ refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) 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.

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Managing tomorrow’s people How the downturn will change the future of work

About Managing tomorrow’s people At the end of 2007, PricewaterhouseCoopers (PwC)* This new report looks at the impact of the global economic published its first report on the future of people management. downturn on people management. We explore how the We believed the growing talent crisis, demographic shifts, actions of businesses as a result of the crisis determine their advances in technology and the rise of sustainability readiness for the upturn and their ability to compete in the issues on the corporate agenda would dramatically change second decade. organisational models and the way in which companies manage their people.1 Quotes from CEOs featured in this report were taken from the PwC 12th annual global CEO survey. The report, Managing tomorrow’s people: the future of work to 2020, produced with the help of the James Martin Institute for Science and Civilisation at Said Business School, Oxford, explored three scenarios or ‘worlds’ which we believe will co-exist in 2020. The report generated a high level of interest from business leaders, HR professionals, the media, academics and bloggers around the world. It is clear that the future of work is a hotly debated subject. This led us to produce a follow up study at the end of 2008 on the views of the new generation – Millennials at work: perspectives from a new generation. The report detailed insights from over 4,000 new graduates from 44 countries and was designed to help companies understand how millennial attitudes to work differ from previous generations. *PricewaterhouseCoopers’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 1 See Appendix 1: Global forces

Contents 01 Introduction 02 2020: where three worlds co-exist 05 The Green World: sustainable business is good business 06 The Blue World: corporate is still king 12 The Orange World: tribes thrive 18 Managing tomorrow’s people Contents Summary 25 Conclusion: is your people strategy fit for the future? 26 Some of the key decisions made by each company as a result of scenario planning 29 Appendix 1: global forces 30 Appendix 2: from scenarios to real options 31 Publications 36 Acknowledgements 37 Contacts 37

02 Introduction ‘To echo the recent The credit crisis and subsequent global recession has created We outline three possible worlds or business models the biggest challenge to economic prosperity since the which will co-exist in the future, illustrating three fictitious words of our CEO, “the 1930s. Focused on survival, many companies are slashing companies as they look back from 2020. Some common workforce headcount and drastically reducing their themes have emerged: future is not cancelled”. expenditure on people. While managing costs • Demands for greater transparency and social The economic crisis has raised fundamental questions about responsibility in business have been magnified by and capital closely, we the institutions and practices of modern business life. Belief in the crisis and combine with the call for environmental a self-regulating financial system has been shaken, confidence responsibility already present in the green agenda. This will still invest for future in the foundations of business has been eroded and a new impact many areas of people management, particularly growth by continuing generation of workers are reassessing the relationship between in relation to how people are rewarded. This is expressed employer and employee. in our Green World scenario. to hire graduates, Here, as part of our Managing tomorrow’s people series, we • Increased focus on hard people metrics to measure run development explore the impact of the downturn on people management, performance and productivity as companies look at a programmes and target the different options open to companies and the scenarios we long-term reality of having to do more with less. Our Blue believe will play out in this time of great change. As we head World scenario imagines the performance and efficiency reward to our better towards the upturn, we examine how the decisions companies culture necessary for global companies (some larger than performers. We do not make today will affect their ability to compete in the future. many individual countries) to succeed within a new order of economic superpowers. want gaps in our future talent pipeline.’ Carole Crossley, VP HR International Mobility, BP plc

03 • The opportunity for radical new ways of working will Is your people strategy fit for the future? Do you think you ‘The ability to emerge in our Orange World scenario. We take the concept can compete with the companies outlined in this report? of outsourcing and globalisation of the workforce to an One thing is certain, the decisions you are making today attract people – extreme portfolio working model where people organise are already creating a legacy for the future and determining their working lives like individual businesses in a highly how successful you will be in 2020. to motivate them networked world. while they’re with The global economic downturn has forced many companies to you and motivate Managing tomorrow’s people Introduction make important and difficult choices about how they manage and motivate people, with both immediate and long-term them to stay with consequences. you – is going to As you read this document think about your people be the challenge. management strategy as a result of the downturn. What Michael Rendell scenarios are plausible realities for your business in the decade Partner and leader of Human Resource Services We’re in a period ahead? And what practical steps do you need to take now2 to PricewaterhouseCoopers LLP (UK) when the demand realise your vision and limit the possibility of long-term damage to your talent pipeline? for people is going to be greater than it’s ever been before.’ James E. Rogers, Chairman, President and CEO, Duke Energy Corporation, US 2 See Appendix 2: From scenarios to real options

2020: Where three worlds co-exist 05 The Orange World Tribes thrive Managing tomorrow’s people 2020: Where three worlds co-exist In the Orange World businesses are fragmented, ‘companies’ are usually small, lean and nimble, relying on an extensive network of suppliers. They have multiple clients and contracts and access a globally diverse workforce of ‘team workers’ on a supply and demand basis. Communication networks are enabled by continual technological advancement and innovation. Loose collaborative ‘cloud’ networks come and go project by project. Employees in the Orange World are technology savvy and networked to communities of other employees with similar skills. The Green World The Blue World Sustainable business is good business Corporate is still king Companies have a powerful social conscience intrinsic to the brand and ‘green’ In 2020, Blue World companies embody big company capitalism and individual sense of responsibility. The focus is on sustainable and ethical business preferences override belief in collective social responsibility. Blue World practice and a strong drive to minimise and mitigate risky business practices. companies have invested in size, technology, the talent pipeline, strong The responsibility ethos is enforced by governments and regulators and is more leadership and sophisticated metrics. They have highly engaged and committed prevalent in certain industries such as energy, automotive and financial services. workforces who are well trained, skilled and operate globally. Work may be Green World employees engage with the company brand because it reflects pressurised and fast-paced, but staff enjoy a wide range of benefits which help their own values. They are recognised for good corporate behaviour, not just them run busy lifestyles and ‘lock’ them into the organisation. For those who business results. perform well, the rewards can be very high. Figure 1

06 The Green World: sustainable business is good business G-Bank in 2020 into the environmental agenda. G-Bank’s strategy explicitly recognises the need for strong environmental credentials G-Bank is a US based investment and commercial bank, in as an essential part of an ethical and sustainable business. business since 1922. In a tough new regulatory environment G-Bank has provided shareholders with steady growth and Employees are rewarded with a rich selection of benefits but the solid (if modest) returns by managing risk within its workforce company rarely offers short-term incentives for performance. and business. Its behaviour is always geared toward the long This is partly due to the rigorous US regulatory framework and term, to ensure both economic and environmental sustainability. partly that G-Bank’s business model is geared towards slow but It’s corporate responsibility values permeate throughout the sustainable growth. organisation. G-Bank realises that failure to uphold these values G-Bank reports extensively on its people risk and reward could damage the brand with customers, and lead to penalties performance as well as a host of other metrics around being enforced by governments or regulators. customer knowledge, ethical behaviour and supply chain efficiency. During recruitment, G-Bank assesses professional Managing people in the Green World qualifications but also the contributions made to society G-Bank’s relatively conservative approach to lending meant and environment of the individual. it was able to weather the storm during the great credit crisis In G-Bank, as with many other Green World companies, people of 2008-10. G-Bank recognised that increased government management focuses on achieving high levels of employee scrutiny and the demands for more ethical business behaviour engagement. Pay is moderate compared to pre-crisis standards. arising from the credit crisis would inject renewed vigour Timeline of company 2009 2011 2015 2016 2018 G-Bank adopts new G-Bank is first US bank to G-Bank adds a permanent Announces early adoption G-Bank relocates HQ to new ‘principles for pay’ for its publish audited accounts representative from an NGO of guidelines from Climate energy efficient eco building executive cadre; at least of its environmental activity to its board of directors Change Act 2015 and in the suburbs 60% of any individual’s Ecosystem Act 2016 pay must be based on group performance

07 Recognition is achieved through compensation being aligned to This approach proved attractive to the millennial generation ‘86% of carefully regulated financial and non-financial KPIs. Engagement and placed G-Bank at the top of graduate ‘employer of the levels are not just influenced by pay, but the chance to work for year’ lists in many countries. Other new people management millennials would a company with strong values, an ethical culture and behaviours strategies which gave G-Bank the edge over the competition aligned to its employees’ values. during the upturn included: consider leaving an employer Radical new benefits model – G-Bank recognised that the How G-Bank emerged from the global crisis workforce was more diverse than it ever had been and that whose behaviour Managing tomorrow’s people Green World current flexible benefits programmes were out of touch with the Transparency became the key principle through which the millennial generation. They had to think creatively about other no longer met bank maintained the trust of its customers. The bank began incentives to motivate and engage staff beyond salary. A benefit their corporate to disclose the positive and negative impacts of its portfolio credits system was introduced which enabled employees of activities, so that customers could see exactly where their to earn bonus credits (earned on an ongoing basis for good responsibility money was going. performance and demonstrating company values). These could be used for a whole range of options such as: secondment to expectations.’ The bank facilitated a ‘green new deal’, where environmentally an overseas office, government department, non-governmental Millennials at Work friendly technologies led the recovery from the recession. organisation (NGO) or other socially responsible organisation; The bank applied its long-term view on climate change personal career/life coaching (various levels); learning a new and began to finance the adaptation of its customers to the vocation/language (not necessarily related to current job); impacts of global warming and insuring against the costs. subsidies/advice for green improvements on their homes and Its early acceptance of climate change as a business driver paid sabbaticals or extended maternity/paternity leave. gave it a leadership position relative to latecomers, particularly in the US with a new climate conscious government. G-Bank In G-Bank we trust – G-Bank wanted to change the corporate was the first to introduce carbon and sustainability related culture and reinforce new behaviours among its staff. Having metrics to monitor and reward its employees and businesses. been criticised for accepting a high-risk culture under the old regime, the bank was keen to refocus its brand as an honest,

08 ‘One of the things safe bank with a conscience. HR teams led an extensive How green are you? – G-Bank recognised the growing cultural change programme internally to get staff to live by strength of the environmental lobby and the need for that the survey told a new code of conduct. To help the company focus their companies to react quickly to consumer concerns about any minds from the boardroom down, they invited three of their aspect of their business deemed unethical. G-Bank introduced us is that employees key corporate sustainability (CS) partners to join the board as an audit process and quarterly company reporting that focused attach a great deal of observers and influencers on the leadership. on measuring CS practices by detailing carbon emission ratings and carbon exchange activity as well as more traditional importance to the bank’s proactive stance Corporate responsibility is key. 88% of millennials would deliberately seek employers on issues of corporate whose CR behaviours reflect their own values responsibility. These % issues resonate very 100 94 90 93 88 89 89 strongly with our 80 81 82 employee base. You 60 see the same level of 40 interest among the 20 graduates we recruit.’ 0 All regions Asia Australasia Central Western Middle East North South and and Europe and Africa America and continued on p09 Pacific Eastern and the Central Islands Europe Caribbean America Base: 3922 global respondents Source: Millennials at work: perspectives from a new generation (PwC December 2008) Figure 2

09 company valuations. This is an indication of the importance continued from p08 shareholders and investors began to place on these issues, Sustainable reward: G-Bank’s seven and how they were reflected in the share price. Employees ‘Taken as a whole, ‘principles of pay’ were also asked to complete annual ethical and environmental you can see that reviews as part of the compliance process. 1. Incentive payments should be based on performance measures that adequately account for the risk taken our commitment Risk under the microscope – G-Bank was criticised (but not as much as some other financial institutions) for rewarding in producing profits to corporate responsibility Managing tomorrow’s people Green World the previous management team, despite poor financial results 2. Bonus pools should not be struck below the level during the downturn. New performance review metrics for staff at which cost and risk can be allocated included measurement of the level of risk taken by the individual supports our 3. Rewards should be aligned with the time profile as well as other key non-financial metrics. Employees could of the risk borne by the firm sustainable be penalised for excessive risk taking even if the outcome had been profitable. Performance reviews were linked directly to the 4. Deferrals should be linked to the realised profitability employee benefit credits system and staff could see their credits removed as well as being rewarded. of the business on which the bonus was based engagement 5. Managers should have a significant proportion of policy, which, in New reward model – G-Bank was one of the pioneers of ‘new remuneration based on divisional or group-based bonuses turn, is critical reward’ in financial services, introducing a radical shake up to the previous reward for individual performance model. It adopted ‘seven key principles of pay’ across the organisation from the top 6. Compensation design should be considered a key to the customer business competence and resourced accordingly down. The model was praised by shareholders and regulators relationship that and was quickly copied by other companies (see Sustainable 7. Compensation should be viewed in conjunction with reward. G-Bank’s seven ‘principles of pay’ opposite). G-Bank wider people management practices in order to support is the basis of our also adopted innovative new approaches to retirement funding. a consistent approach to achieving desired culture year-end results. It all hangs together.’ Stephen Green, Group Chairman, HSBC Holdings plc, UK

10 Future view ‘An employer’s policy Extract from operating review G-Bank on climate change G-Bank was one of the first organisations Sustainable business report G- BANK to disclose their environmental activity. and environment is G-BANK recognises its statutory responsibilities under the important to 58% Climate Change Act 2015, Ecosystem Change Act 2016, of millennials when and all other sustainability legislation. We have been active participants in the International Business Panel on Climate choosing an employer. Change since it was established in 2010. This rises to 82% of The group has adopted the European allowed G-Bank to retain its status as respondents in Central Sustainable and Responsible a AA+ company within the S&P Corporations guidance and has sustainability index. and South America.’ comprehensive company-wide policies Key environmental data is provided on sustainability, energy and climate Millennials at Work below change, and responsible procurement. We require all suppliers to be certified Key Environmental Statistics 2020 2019 as carbon balanced and eco-friendly. Energy use – properties During 2020 G-Bank made further Total energy consumption – Gw 1,015 1,200 changes in its energy providers in 25 Energy consumption/FTE – Kw 0.10 0.13 countries, so that 95% of our total Renewables as a 95% 91% energy consumption now comes from % of total energy consumption renewable sources. Our extensive use of videophone technology and virtual CO2 emissions – properties meeting software means that business CO2 – kilotonnes 21.0 21.8 travel has reduced by 75% over the CO2 – tonnes/FTE 0.21 0.23 past five years. In the last quarter of the year our Business travel environmental auditors completed their Total travel-related CO2 – kilotonnes 1.0 1.9 annual sustainability audit and issued Travel-related CO2 0.01 0.02 an unqualified opinion. This has per FTE – tonnes/FTE

11 How the downturn affects your ability to compete • Stripping back travel to save costs. Many organisations that operate globally rely on ‘social capital’ – the ability of in the Green World the global network to work across borders to support the • Changing the compensation and benefits model. Some business and deliver products and services to customers. companies will consider radical changes to reward/bonus By limiting face to face contact, companies risk the programmes and staff contracts because of the backlash break down of many years’ investment in building social against perceptions of excessive pay. New legislation capital across the operation. If travel must be contained, may also trigger the need for a review, but purely reactive then companies need to look at alternatives e.g. using Managing tomorrow’s people Green World changes could result in first mover disadvantage if staff technology to maintain networks. feel there has been a significant reduction in key benefits • The job for life concept disappears as companies feel compared to other organisations. forced to make redundancies even two years after the low • New ‘zero tolerance/zero risk’ tactics. Companies can of the economic crisis. Research shows that unemployment achieve good short-term results by giving the market a follows the economic curve but lags by three years. signal that bad behaviour will be stamped out. However, Companies should consider alternatives to redundancy the creation of a highly risk averse culture will hamper through careful workforce planning. creativity, innovation and profitability over the long-term. • Disillusionment with some industries, as a result of A strong risk/compliance culture could also affect the the downturn, may lead to talent turning its back on the speed of delivery to customers. corporate sector in favour of other sectors or NGOs. • Companies in survival mode often view the sustainability/ To compete in the Green World, organisations must have green agenda as not being business critical and therefore a robust and transparent CS strategy. This should be put CS projects on the backburner. We would argue that clearly linked to the people strategy and, hence, actively ignoring these issues will negatively impact the brand and engage employees. seriously impair an organisation’s future ability to engage with customers and staff.

12 The Blue World: corporate is still king Yao in 2020 Managing people in the Blue World Yao is a global pharmaceutical company. It was formed by Yao has become synonymous with dynamic, innovative the agreed takeover of Como by China’s state-owned Yao capitalism. Its reward structure favours innovation and Generics in 2012. Como was originally founded in Treviso, entrepreneurial behaviour. Yao continues to reward risk taking Italy in 1913 as a soap manufacturer, later becoming a global – when it works. It is a highly profitable business and provides leader in the branded pharmaceuticals market in the 1990s shareholders with enviable returns. and 2000s. The company has performed the neat trick of creating Patent expiries, an insufficiently developed drug pipeline and elements of a small business culture within a global giant increasing competition from generic producers left Como by rewarding entrepreneurial behaviour. Ironically, close vulnerable after the global recession of 2008-10. Yao’s ‘Isis’ management and measurement maintain this culture of longevity range, its euthanasia product ‘Anubis’, and ‘Rise’, healthy, competitive innovation and creative freedom. (its popular antidepressant) now make Yao the most profitable More measurement of performance and output happens pharmaceutical company in the world. at Yao than at almost any other company. The HR people say they know everything about their employees, ‘down to the colour of their eyes’. Timeline of company 2010 2012 2013 2016 2017 Como introduces mass Como bought by Yao-Como data theft scandal Yao-Como’s ‘Resilience’ New CEO Betty Chang people measurement regimen China’s Yao Generics prompts ‘dark pool’ recruiting wellness at work programme moves the HQ from Rome to across the organisation and becomes Yao-Como. is cited by the World Health Shanghai (China remains its Other acquisitions follow Organisation as ‘best biggest market) and changes of breed’ model name to Yao

13 Yao’s search and selection activities are meticulous in the Rewards for performance are high and non-financial ‘47% of extreme. From the beginning of the recruitment process, benefits (such as the employee health and wellness strategy) candidates (at all levels) have to undergo an intensive process enhance the value of the overall remuneration package. millennials think of medical, physical and psychological tests to ensure they With the company providing lifestyle services as part of the have the stamina and desired attributes of a Yao employee. benefits package, employees are expected to use the resulting China, Russia & savings in net income to make their own arrangements India will have Work at Yao is known to be pressurised and fast-paced, but for pensions and medical insurance during retirement. there are benefits. Yao invests significantly in training and Yao’s strategy has incorporated the lessons learned from more economic development across all levels. International assignments are Managing tomorrow’s people Blue World common, especially for junior employees, but they do not often iconic employers that failed because of crippling worker influence than the healthcare and pension costs. get to choose where to go. Yao helps workers manage their lives US & Europe by outside work and many see the company as an iconic employer and a breaking ground for tomorrow’s business leaders. How Yao emerged from the crisis 2020. Only 28% The company’s obsession with measurement is not just about The takeover of Como by Yao Generics acknowledged the shift of US graduates performance and productivity, but enables it to keep its ‘core’ in global economic power to the East, already underway in the disagreed.’ employees engaged through training and role rotation. The mid-2000s, but accelerated by the global credit crisis of 2008-10. Chief People Officer (CPO) sits on the board and is highly Millennials at Work influential. Yao was one of the first organisations to consciously Like other pharmaceutical companies at the time, Yao faced an capitalise on the link between employee engagement, ongoing challenge to maintain its drug pipeline, and viewed the productivity, retention and customer loyalty. ailing Como as a long-term investment which would bring new products, key talent and a strong foothold in the European and Yao is good at spotting underperformers and redeploying or US drug market. Yao admired the people measurement and exiting them – it is part of what makes Yao successful. There productivity monitoring pioneered by Como and also saw this are quarterly performance reviews and staff work in a super- as a key component of its strategy to become the dominant charged, competitive atmosphere. player in the industry. Yao focused on:

14 ‘Over one third of Making HR a hard discipline – the leadership of Como had Blurring the line between work and home – Yao recognised pioneered a sophisticated people metrics regime across the the desire by many employees for the company to take greater millennials believe organisation. In the downturn years this helped Como to strip responsibility for their lives outside the workplace. Needs costs out by ‘surgically’ removing poorly performing individuals differed significantly by geography, but also by generation. that by 2020 or parts of the organisation. When the upturn came, Yao For example, US workers wanted more flexible working companies will be capitalised on the metrics programme to spot opportunities arrangements and time off, whereas Chinese workers looked for growth and to nurture strong performers. upon Yao as a place that could offer security, stability and the more influential than possibility of employment to other family members. Millennials Introduction of private equity style structures in parts of the governments.’ organisation enabled Yao to maintain an innovative edge in wanted overseas working opportunities and lots of training, whereas retirement age workers in Europe were keen to work Millennials at Work an industry where fortunes rest on a healthy pipeline of new beyond retirement to supplement minimal or non-existent products. This allowed individual divisions to share in the government funded pensions. profits of successful new products they created and promoted a high performance culture internally. Fit workforce is a fit business – Both Como and Yao were strong advocates of promoting employee wellness, viewing Recruiting talent from ‘dark pools’ – Yao’s extensive regular health checks as part of ‘employee maintenance customer and employee information database exposed checking’. The development of the employee health and them to e-espionage and cyber attacks. In response they wellness strategy, had a dramatic impact on levels of recognised the need to recruit technology problem solvers with absenteeism due to sickness which saw a fall by 60% unconventional résumés who could protect, manipulate and in the first year of the programme. manage data in better ways (see dark pools on page 16). Continued investment in training and development – Yao’s high performance culture is supported by strong training and development activity across the organisation at every level. Employees are encouraged to broaden their skills, and mobility of roles is the norm.

15 Many millennials would be comfortable with an employer providing personal Business passports services such as housing/food/regular doctor and dentist appointments. In certain parts of the world Yao has secured access to a number of % who answered yes 100 ‘business passports’, issued to those highly skilled individuals constantly travelling between markets. This Managing tomorrow’s people Blue World 80 73 72 enables Yao to move some of its key 66 68 65 66 61 61 employees more freely, in some cases 60 negating the need for entry visas. It has worked particularly well for technical 40 staff that need to be able to service and adapt the increasingly sophisticated 20 technology infrastructure common to all large multinational organisations. 0 All countries Asia Australasia Central Western Middle East North South Often this cannot be done remotely. The and and Europe and Africa America and vetting procedures for these passports Pacific Eastern and the Central Islands Europe Caribbean America are tough and their future validity is not guaranteed. Any serious increase Base: 3,884 global respondents in international terrorism will likely see Source: Millennials at work (PwC December 2008) them revoked. Figure 3

16 Future view ‘We see many Dark pool talent enterprises around Data, intellectual property and intangible assets became A recruitment gap was identified: companies needed complex the world cutting an increasingly core part of many business models. Some puzzle solvers who happened to use technology, not just jobs because of the companies relied heavily on banks of customer data (some technology experts. Initially, there was a trend for companies of it updated in real time) to intelligently target bespoke to go looking for dark pool talent directly. The recruitment financial crisis, and products and services through the consumer’s life span and industry eventually caught up and began to test routinely we work with leading changing circumstances. Performance management within for problem solving abilities. organisations increasingly focused on capturing, monitoring human resource and manipulating a vast range of employee metrics. Data Although small in number, some of these employees assumed and communications networks (including mobile phones positions of great power quickly and had a significant consultancies to and hand-held devices) were increasingly vulnerable to impact on the work culture within organisations. The influx recruit more Western e-espionage, cyber attacks and theft by organised criminals of dark pool talent provided challenges for managers and for who were then able to compromise a business and leadership teams who understood the need for, but not the professionals.’ blackmail its employees. nature of, the work these employees undertook. Some were unconventional and eccentric characters with values and life REN Jianxin, President, China Companies needed to find a way of countering these experiences very different from traditional candidates. Care National Chemical Corporation threats. They started to fish in ‘dark pools’ for the talent needed to be taken to manage and incentivise these people (ChemChina), China they needed to create a protective shield. This new wave through their time at a company and especially during their of corporate employee included those previously involved exit. Many of them carried knowledge that could be used to in covert government operations, the military, technological compromise, even destroy operations. innovators (often under twenty years old) and ex-criminals.

17 How the downturn affects your ability • Employees committing fraud in the workplace increases ‘Generation Y during a downturn. Companies need to ensure they have to compete in the Blue World is much more the right processes in place to minimise the possibility of fraud being committed. Employee fraud can be large or For most companies, people costs represent the largest small scale and can damage both the reputation and the focussed on business cost – up to 70% in some organisations. During a downturn, spend on people is usually the first area to be profitability of the business. This kind of fraud is usually work life balance. scrutinised and cut. In the Blue World, long-term investment borne out of low employee morale, individuals feeling in the ‘talent pipeline’ is critical for businesses to remain personal financial pressure and an increased ability to They want to get Managing tomorrow’s people Blue World competitive. Some of the ways companies could be affected justify the crime to themselves. recognition much by the downturn include: • Not having the right data. Although most organisations more quickly. • Reducing graduate intake numbers for a couple of years would lay claim to using some employee measurement will seriously affect the talent pipeline and limit the number of techniques, many organisations struggle with what to The idea of being options for leadership succession planning in the long term. measure and then how to interpret the data. In Yao’s world, mentored by a HR has become a hard discipline with people measurement • Training and development budgets are often cut when at the heart of financial reporting. The danger in a downturn senior manager companies are in difficulty. As well as a potential negative impact on customer service or product quality, cutting is that companies make cuts based on inappropriate data is very attractive. which damages the business in the long term. investment would mean the company lacks the right skills But there’s less of to compete when the upturn comes, incurring the higher To complete in the Blue World, organisations must become cost and delays of hiring in people. more focused on measurement and making HR a hard the ‘time served’ discipline. The ability to invest in a talent pipeline for the future mentality before is critical. they expect to see reward.’ Vivien Broughton, Career Development Manager, Europe & African Unit, Transocean

18 The Orange World: tribes thrive Data Honey Managing people in the Orange World Data Honey was established by Sven Norstaad and Petr Data Honey has managed to align its workforce size and Burgin in 1999. By 2020 it was a business of around 100 core capacity to its workload through clever use of collaborative employees, but using a network of contractors or ‘team tie-ins, international networks and its relationship with the workers’ of 1,500+. Data Honey is a highly successful market technology guilds which have established themselves and research and consumer communications agency based on the flourished over recent years. outskirts of Oslo, Norway. Almost half its permanent staff work remotely from around the world. Despite its relatively small Data Honey uses many contractors, known as ‘team workers’. employee population, Data Honey’s 2019 turnover was over Both permanent and temporary employees are encouraged to €4bn. Fragmenting global structures and the growth of new, join the appropriate global guilds for everything from training dynamic local markets helped Data Honey thrive. and development to retirement, insurance and healthcare needs. HR as we knew it at the start of the century is almost non-existent. All that remains in-house is a talent sourcing role, which has been expanded to include management of internal Timeline of company 2010 2012 2016 2017 2019 Data Honey helps to establish Data Honey creates Workbook takes care of 95% Workbook now has three seri- Guild of Web Designers the first global guild – The Head of Talent of Data Honey’s team worker ous rivals and introduces the successfully sued by Guild of Web Designers Sourcing role recruitment needs. All team Universal Employee Rating to ex-Data Honey employee workers belong to guilds regain its market lead for unfair employee rating

19 communications. Most recruitment is run through Workbook, Technology developers now leverage the power of the guilds ‘85% of millennials the universal recruitment podium (see page 23). and application marketplaces to sell these products direct to enterprise. The former barriers to entry – high capital costs are members Mobility is high. Data Honey believes that most people lose for product testing as well as the fast burn rate of marketing their creativity if they stay too long in the same role. Many and advertising expenditure – are borne by the guilds and of online social people leave to go and work for Data Honey’s clients and the platform providers in exchange for a share in the upside. networks.’ end up returning a few years later. A lot of the management Data Honey benefits from being able to either buy talent is remote, which has involved specialised training for some or buy products depending on a particular need. Millennials at Work Managing tomorrow’s people Orange World of the senior managers and a constant investment in communication technologies. In the Orange World, individuals providing professional services (such as programming expertise) now market themselves more like companies than freelancers. Some will offer a specific skill set to a prospective employer such as capability with a particular portfolio of software. Others have changed their value proposition by offering ‘microproducts’ or highly specialised applications which they have developed themselves.

20 ‘I think the first thing How Data Honey emerged from the crisis Early adopters of Workbook – when Workbook came on the scene in late 2010, Data Honey encouraged its social is having clarity about When many people (particularly in the technology, advertising networking group to support the site. The reason Workbook and marketing sectors) lost their jobs in 2008-10, Data Honey succeeded where other large recruitment firms failed, was who the top talent is, realised there was a lot of good talent looking for work. They the pricing model. Candidates posted their information for and second, ensuring invested in creating social networks and support services for a small fee and employers were charged a commission fee redundant workers as a way to make connections with new commensurate with the project length or level of expertise that you reward them talent. In the short term, there was no real gain for Data Honey needed. As overheads were lower, the commission fees were both financially and with (although, reputationally, they became known as a forward far less than fees charged by the traditional recruitment firms. thinking, good company to work for). But when the upturn expanding opportunity came and demand for these services increased again, Data Having a talent pipeline for the upturn – when the upturn Honey was in the enviable position of having access to some came, Data Honey’s competitors were still struggling with the as well as with personal of the best talent around the world. This gave them huge old model of hiring talent back into their organisations for acknowledgement. advantages over the bigger, more traditional players and permanent positions. Data Honey developed a market leading they stole market share. reputation for being able to cherry pick the best people from a At the same time, it’s global talent pool for its clients – if necessary, within a matter Creating social networks – the HR chief at Data Honey counterproductive to began to track layoffs at big competitor companies during of hours. lavish acknowledgement the downturn. Data Honey created a number of social networking sites for jobless talent where they could find on your top talent if it’s advice, share experiences and, in some cases, find new job done at the expense opportunities. In fact, Data Honey was able to offer a number of short-term contracts to members of this network to support of everyone else in its client needs. your company.’ John Donahoe, President and CEO, eBay Inc., US

21 Setting up the guild model – Data Honey quickly spotted in an age of complete adoption of social media, networks have ‘40% of Millennials the trend for freelancers to act and market themselves as become so large that they are pervasive and self-validating. companies, rather than merely self-employed contractors, The transparency of online profiles allows prospective would be prepared and supported this trend by helping to set up the first guilds employers to check potentially inflated credential claims, which (see Global guilds page 22). led to the requirement by professional services companies – to give employers now adopted in other industries – that all employees maintain greater access Universal employee ratings – early adopters of Workbook and available online profiles. the Universal Employee Rating, Data Honey recognised that to personal Managing tomorrow’s people Orange World information, only 35% disagreed.’ Most millennials have at least one email account, 44% have at least 3 or more Millennials at Work % who answered yes 100 4+ 13 14 12 15 11 12 13 22 3 80 2 31 32 46 32 28 1 35 60 51 39 40 44 44 41 44 48 46 34 20 37 11 11 9 9 13 11 0 6 All countries Asia Australasia Central Western Middle East North South and and Europe and Africa America and Pacific Eastern and the Central Islands Europe Caribbean America Base: 3,864 global respondents Source: Millennials at work (PwC December 2008) Figure 4

22 Global guilds The global guilds are professional bodies for the technology particular company. Many of these individuals, however, and related industries. They were established by groups of were not experts at completing tax returns, sending successful professionals (with some international development invoices or planning their own training programmes. and industry funding) from each of the represented disciplines. In just a few years, they have grown to a combined global The global guilds have stepped in to provide these services, membership of over five million professionals, all of whom pay which has also made life easier for employers. The guilds an annual membership subscription and additional fees can manage payroll, tax, global resource mobility and depending on their use of guild services. Most of the training, as well as legal representation for individuals and technology guilds were established in India from 2010-15. small companies. Their association and collaboration with universal employee podiums (notably Workbook) has The latent demand for guilds was obvious from the outset. enabled small but growing companies like Data Honey to The dot com crash of 2000-02 and global recession of effectively outsource most of their HR activities. The guilds’ 2008-10 created a highly successful, mobile and qualified standards and codes of practice mean they can ‘vet’ group of technology freelancers. These technology tribes Workbook’s members and, to some extent, carry the risk include information architects, web designers, game engine through its disciplinary procedures and membership criteria. developers, technology consultants, search optimisers, online marketers, software engineers and systems testers. The guilds’ adoption of Workbook’s Universal Employee The freelancers that form them thrive on the variety of Rating (UER) has helped employers and employees contacts, employers, sectors and locations they experience. navigate the recruitment terrain, although this has not been Their membership of a still fairly new peer group provided without obstacles as the UER has now acquired a quasi- them with a professional identity, not their employment in a legal status and can be challenged in court.

23 Future view Extract from employment ‘The shortage of networking site in 2020 talented people in In the Orange World, Workbook, an many of the markets employment networking site, is used as a key route for people to find jobs, host where we are is their work experience and join networks going to be a huge concern just for sheer Managing tomorrow’s people Orange World demographics. That’s why the investment in technology is going to Chin Han’s be even more critical, Universal Employee Rating so people have the tools to be able to provide more sales per employee with the same amount of demand on hours as they have today.’ Group Chief Executive, FTSE100 global company

24 ‘The key for HR in these How the downturn affects your ability • Technology investment is another area likely to be hit during a downturn. Spend on technology enhancements times is to focus on to compete in the Orange World can seem like luxuries when there are more pressing issues, but companies need a competitive and relevant technology being more engaged During a downturn, many organisations switch to survival platform to support the business when growth returns. mode, cut costs and take cover until the storm blows over. in the business, Data Honey remained focused on the future and the belief • Networking sites – companies need to embrace the that they could capitalise on the changing world more quickly Attracting talent is than their competitors. Its flexibility and entrepreneurial new currency of social networking sites and see them as a tool for developing contacts, new clients and promoting going to be challenging approach helped to create a completely new way of working services. On the flip side, disgruntled employees can vent for an entire industry. when companies are their frustrations on these sites and irreparably damage • Being innovative and taking risks. During tough times, a brand within a short space of time. cutting back. Trying companies often shift focus to the short term. Companies • Millennial employees have different needs and to make sure that we need to continue to innovate, and anticipate or create their expectations from previous generations. This tech-savvy own futures. keep that influx of new generation expect employers to embrace technology • Cost cutting can lead to reducing numbers of external and the flexibility it brings to their working lives. talent coming into the contractors and bringing a number of areas back in house. To complete in the Orange World, organisations need to organisation will be This might seem like a good short-term strategy to save continue encouraging innovation and exploring new ways costs, but may not be the best model for the supply chain critical.’ over the long term. of doing things. The fast rate of technological advances cannot be ignored. Barise Hatfield, Global Mobility Advisor, Huntsman International LLC

Summary 25 Green World Blue World Orange World Focus on socially and Fast-paced, global operator, Flexible and highly networked Workplace culture environmentally responsible with high performance culture with a focus on the short term business practices ‘Your corporate values match ‘Only the best work here ‘I will work with you because Employee profile mine – I belong here.’ – I am the best.’ it suits me right now.’ Managing tomorrow’s people Summary Coaching and HR is a hard discipline, very Emphasis on global talent People management style nurturing to promote metrics focused with rigorous sourcing, global guilds replace the right behaviours recruitment processes the HR function CS and transparency underpin Controlling talent is key, the Small means agile, innovative Key themes everything to drive moderate line between home and work and able to adapt to change but steady growth is blurred quickly Sustainable business for Perform well all of the time Networks make the world Corporate ethos a better society and everybody wins go round

26 Is your people strategy fit for the future? ‘As an employer Of course we cannot be certain about the future, but we know • Employees, business leaders and governments have that talent will be as critical tomorrow as it is in today’s world. had to weather the economic crisis together. Some with 250,000 97% of CEOs in PwC’s 12th annual global CEO survey said businesses will come out better than others, but we are employees, we are that having access to talent and key skills was the most critical likely to see renewed efforts to restore trust. This will factor for their long-term business strategy. come in the guise of new regulation or tighter controls to also dependent upon manage risk. The ‘once in a lifetime’ shift in our notion We can also draw some conclusions from the case studies access to manpower, presented in each of our worlds where each company of performance related pay will change our outlook on company reward and retirement arrangements. particularly since embedded best practice, but at the same time was not afraid to take on board fresh ideas. • The importance of hard measurement of people has there is a high never been more crucial. HR can no longer be a ‘soft’ turnover of personnel • It is clear that the millennial generation have different discipline. Today’s people cost cutting has been likened expectations of work and career. Businesses will need to conducting surgery by candlelight, but tomorrow’s in the security to think carefully about how they engage with employees competitive world will demand much greater precision. industry... In the of different generations. • The health and wellbeing of the workforce will be a long term, however, • Corporate sustainability and climate change issues key focus in tomorrow’s metrics oriented world. Sick, have gathered momentum. Perhaps dependent on demographic location or industry, companies will be forced to make unhealthy or unhappy employees = reduced productivity and absenteeism. development is a significant changes as a result of new regulation, but also to remain competitive and sustainable in the eyes • Companies slashing training and development budgets risk factor. Europe is of customers, shareholders and employees. The debate will regret it. In the rush to reload the talent supply when expected to undergo will move on beyond carbon to other issues such as the upturn comes, these companies will be left behind. water scarcity. We also know that training and development is the most a population decline important benefit in the eyes of millennials. to an extent that has not been seen since the Black Death.’3 Alf Göransson, President and CEO, Securitas, Sweden 3 Extract from the full interview with Alf Göransson which can be found on pwc.com/ceosurvey

27 • The impact of the economic crisis was felt everywhere and finance or marketing functions take over HR? Whatever the even emerging markets were not ‘decoupled’ from the crisis outcome companies need to ask: is the HR function fit for as some had predicted. Global mobility of talent will be the future? essential to manage operations, optimise success in key markets and to maintain the talent supply in the organisation. We believe that all companies should be thinking about scenarios for their own organisations. They need to examine • Companies need to accept the implications of social how macro trends (demographics, globalisation, technology, networking and use it to target new customers, attract climate change, etc.) will impact their business or industry, talent and manage customer relationships. Companies and how these might play out into future scenarios. Thinking Managing tomorrow’s people Conclusion that innovate in this area will succeed. through what these scenarios would mean for an organisation and what decisions or options need to be considered, will help • Having the right technology platforms to run the to prepare for the future. business will be vital to compete. Businesses might struggle to keep up with technological advances and the For employees, the future is likely to be a world where many inevitable cost of change, but customers and employees different ways of working are on offer. The opportunity to will demand it. experience multiple cycles of experience either in one or many organisations will exist. Employees will align themselves with • And finally, how is the Human Resource function positioned organisations that fit their priorities and ideals more than in for tomorrow’s world? HR decision making will be key to the current world, whether that be in relation to financial gain, the organisation’s cultural evolution and change. Is the social and environmentally responsible practices, aligning era of ‘business partners’ coming to an end? Could we with personal beliefs, the opportunity to work overseas end up outsourcing everything to global guilds? Might the or being self employed.

28 For employers the challenge will be much harder. The competition for talent will continue to be intensely fought. What should you do now? Employee expectations will be far greater, and organisations will face these challenges against an even more competitive Determine how future proof your business and people global market. strategy is against the global drivers that will impact in the coming decade This report has outlined three very different business models co-existing in tomorrow’s world. Each organisation faced ▼ Develop scenarios appropriate for your company, different challenges and tackled the downturn in unique industry or geography ways. As companies contemplate the next decade, many will consider rethinking and reshaping their strategy. In these three ▼ Understand how your business fits into these diverse worlds one common theme is that G-Bank, Yao and scenarios and how well prepared you are to meet Data Honey invested in their own scenario planning process tomorrow’s challenges to identify opportunities to innovate, increase competitiveness, ▼ Drill down into specifics on people management; and identify real options to mitigate risks. This strategy for example, your reward strategy, retirement plans, helped each company to become the dominant players recruitment policies – are they future-proof? in their industries. ▼ Consider what ‘real options’ or actions you might take now to mitigate any risks and capitalise on opportunities to put yourself in a competitive position for the future ▼ Challenge the HR function to be more externally focused on customers, markets and trends – HR needs to harden up Recognise that the future is not a place you go to, but one which you create

Some of the key decisions made by each 29 company as a result of scenario planning 2020 – Data Honey 2019 Number of staff is still maintained at a minimal level of 108 but at the annual general team meeting there are 120,000 online participating team members 2016 HR function is closed down and Head of Talent Sourcing role moves into Procurement, managing outsourcing arrangements with various guilds 2015 Workbook becomes the preferred sourcing provider and manages Managing tomorrow’s people Conclusion 95% of Data Honey’s team worker recruitment 2012 Creates Head of Talent Sourcing role with sole responsibility for contractor arrangements, including sourcing and payment 2011 Data Honey agrees outsource arrangements for recruitment and 2008-10 Economic crisis training with two guilds; one in San Francisco and one in the Philippines 2010 Data Honey helps to establish the first global guild 2010 The recruitment team launches new CS 2010 Introduction of mass people measurement requirements e.g. an NGO reference for each applicant 2012 Employee engagement/productivity measurements detect 2011 Publish audited accounts of environmental some serious absence issues in one of the research activities and introduced carbon metrics facilities in Italy 2014 Wellness programme is awarded best of breed model 2012 Head of HR takes over responsibility for by the WHO the corporate CS agenda 2017 New CEO moves the HQ from Rome to Shanghai 2015 Three key CS partners appointed to Board of Directors 2018 Yao participated in the Pharma CEO awards and was recognised for outstanding 2017 Relocation to a number of new achievement in people and metrics ecologically sustainable complexes, all equipped with virtual meeting 2019 Yao sets up a People and Metrics rooms and an auditorium for credential programme open to annual events external applicants 2020 – G-Bank 2020 – Yao

30 Appendix 1: global forces Business fragmentation: the potential break-up of large businesses and the rise of collaborative networks Technology controls me: Globalisation: allowing technology into almost the free-market trend prevails every part of a person’s life as trade barriers disappear Collectivism: Individualism: the common good prevails over focus on individual wants; personal preference, e.g. collective Global forces a response to the infinite choices responsibility for the environment available to consumers over individual interest Reverse globalisation: I control technology: protectionist policies begin to a yearning for the human touch rebuild barriers to free movement minimises the personal impact of people and goods of technology on consumers Corporate integration: big business rules all

31 Appendix 2: from scenarios to real options During periods of economic upheaval and increased • In the recession of the early 1990s many professional uncertainty, the difficulties of plotting the future course of a services firms slashed their graduate recruitment budgets. business are brought more sharply into focus. Successful This short-term approach damaged their brands among the companies are those which, rather than reacting to unfolding student population and, five years later when the markets events, take a proactive stance and incorporate the possibility had recovered, left them desperately short of experienced of change into their business strategy. staff. One consulting company took a different approach. At the low point of the cycle in 1991-92, rather than cutting Two very different historical examples graphically illustrate numbers and withdrawing offers like their competitors, they Managing tomorrow’s people Appendices how specific action based on foresight and planning can turn offered candidates the opportunity to defer entry for a year adverse economic circumstances into competitive advantage. or two along with a modest travel bursary. Job candidates loved the idea and many accepted the offer willingly. The • In the early 1970s, with crude oil in plentiful supply, high company’s reputation among the student population was demand for shipping capacity meant that oil companies greatly enhanced and the firm saved costs in the short term were obliged to charter tanker space far in advance while guaranteeing its supply of labour in the long term. to ensure they could ship their product. When OPEC announced in October 1973 that they would no longer supply oil to nations supporting Israel in the Yom Kippur war, many companies were left with excess tanker capacity, at considerable expense. But one oil major anticipated the possibility of a global oil crisis and, at only modest additional cost, built options into its tanker contracts, allowing the company to decline shipping capacity in excess of its requirements.

32 Building the bigger picture From macro to micro Before specific real options can be incorporated into the Using the first-level scenarios as the starting point, more business strategy, the broader economic backdrop and the detailed company specific or ‘decision’ scenarios can then be ways in which it might change must be examined. developed. These examine the implications of the big picture scenarios on the company, its competitors and the industry The process begins with the development of big picture or in which it operates. The scenario builders will think about ‘first level’ scenarios, which are deliberately painted on a the response of individuals, organisations and governments. broad canvas. This process is about building strategies by What will be the effect of changes in the environment on imagining plausible futures, being creative and using inductive consumer preferences and government regulations? How will logic. Planners think about global macroeconomic trends, the company itself react, taking into account its know-how, the geo-politics, changes in society – including individual values competencies of its people and its financial resources? and consumer preferences – industry trends, environmental changes and technological innovations. Of course, while there are many possible scenarios, a company can only execute one corporate strategy at any time. While current trends will inform this thinking, scenario builders The challenge is to move from a number of different plausible need to consider the possibility of major discontinuities – views of the future, with different consequences and requiring events like the September 11 terrorist attacks on New York different responses, to one set of actionable plans. This is or the sub-prime loan crisis, which can have dramatic effects where the corporate planning technique called ‘real options’ on business and society. comes into play. Figure 1: From scenarios to real options First-level scenarios High level, descriptive, creative, inductive, general, a basis for strategic discussions Decision scenarios More detailed, deductive, company-specific, a basis for strategic planning Real options Very detailed, a basis for decisions

33 Real options Timing is everything: real options should be bought or constructed when the cost of doing so is cheap, creating competitive Both case studies above are examples of ‘real options’. They advantage if an option comes to be exercised and minimising are ‘real’ in the sense that they relate to something tangible – cost in the event that the option turns out to be unnecessary. in these instances tanker capacity and people. Real options come in many forms. They may be rights to buy or A real option gives management a right, but not an obligation, to sell, opportunities to switch between different internal business to utilise an asset in pursuance of the strategic goals of the processes or external suppliers, or toe holds in different markets. organisation. Real options create flexibility in an uncertain Managing tomorrow’s people Appendices Options may be acquired on the external market, created world. They buy time to think, to allow managers to watch internally, or they may already exist within an organisation. trends and look for early warning signs, to experiment without making irrevocable commitments. A longer list of different types of option is shown in figure 2 below. Figure 2: Types of real options Inherent options Already exist for free, simply need to be identified Created options Need to be consciously constructed or acquired, possibly at a price Switching options Give the possibility of switching between products, processes, inputs or business activities Modification options Create additional possibilities by modifying products, processes, infrastructure Platform options Investment in new infrastructure or capabilities to give new business opportunities Capability options Development of distinct competencies – human resources, brands, reputation, culture, knowledge, processes Portfolio options Development of new markets, channels to market, products, pricing strategies

34 Incorporating multiple possible outcomes In the fourth case the decision works well in scenario C but not in the other two. Unfortunately, the categories of decision When a set of decisions work well in all imagined scenarios, represented by questions 3 and 4 are more common than the appropriate course of action is clear. Conversely, for clear-cut decisions like 1 and 2. decisions that would not work in any possible scenario, it is equally clear that the course of action should not be taken. This is where real options come into play. Rather than gamble, The real world, however, is rarely so straightforward. management should try to identify real options which cover the implications of a ‘yes’ decision to question 3 if scenario A Consider the four key decisions and three possible scenarios comes about, and of a ‘no’ decision to question 4 if scenario shown in figure 3. In the third case the decision works well C turns out to be the case. These options can then be in scenarios B and C but not in the case of scenario A. incorporated into a single business strategy. Fig 3: Linking scenarios and real options Scenario A Scenario B Scenario C Decision 1 Positive outcome Positive outcome Positive outcome Decision 2 Negative outcome Negative outcome Negative outcome Decision 3 Negative outcome Positive outcome Positive outcome Decision 4 Negative outcome Negative outcome Positive outcome

35 Real options in managing people – examples: • Using internships and bursaries to build relationships with universities to access knowledge and as a source • Building research centres in different geographical locations of graduate recruits. around the world solely with the aim of accessing wider talent pools. • Experimenting with different learning strategies, including computer-based training. • Recruiting people with an unusual mix of experience and qualifications in order to broaden a company’s capabilities. • Incorporating greater flexibility into reward arrangements. Managing tomorrow’s people Appendices • Increasing workforce flexibility by using a mix of different • Running some HR systems in-house while outsourcing others. types of employment arrangement – fixed term as well If you would like more information about scenario planning or as permanent contracts. real options, contact Jon Andrews, jon.andrews@uk.pwc.com • Maintaining networks of self-employed contractors to supplement full-time staff.

36 Publications 12th Annual Global CEO Survey Redeﬁning success PricewaterhouseCoopers 12th Annual Global CEO Survey: Redefining success Fool Views from 1,124 CEOs from more than 50 countries, the report discusses the impact of the proof plans downturn, biggest threats to business growth and the talent management challenges facing Future businesses across the world. proof www.pwc.com/ceosurvey plans Millennials at work: Perspectives from a new generation Contents Next Managing tomorrow’s people Millennials at work: Over 4,000 new graduates from 44 countries were interviewed to explore their hopes Perspectives from a new generation and expectations as they enter the workforce for the first time. www.pwc.com/managingpeople2020 Managing Managing tomorrow’s people: tomorrow’s people* The future of work to 2020 The future of work to 2020 The first report in our tomorrow’s people series, uses scenario planning to envisage three business models or ‘worlds’ which we believe will co-exist in 2020. *connectedthinking www.pwc.com/managingpeople2020

37 Contacts Michael Rendell Europe Acknowledgements Partner and leader, Human Resource Services Henk van Cappelle There have been PricewaterhouseCoopers LLP (UK) Partner many people from +44 (0) 20 7212 4945 PricewaterhouseCoopers (Netherlands) within and outside michael.g.rendell@uk.pwc.com +31 20 568 6210 PricewaterhouseCoopers Managing Managing tomorrow’s people Introduction contacts henk.van.cappelle@nl.pwc.com who have been involved in Leyla Yildirim the development of these tomorrow’s people Acknowledgements and Asia ideas. Our particular thanks Marketing, Human Resource Services PricewaterhouseCoopers LLP (CI) Ron Collard to Alexander Pepper at +44 (0) 1481 752039 the London School of Partner leyla.yildirim@uk.pwc.com Economics and to all the PricewaterhouseCoopers LLP (Singapore) companies who shared +65 6236 7278 their views and insights. US ron.pa.collard@sg.pwc.com Our thanks to the PwC Karen Vander Linde Mandy Kwok project team which Partner and leader, People and Change involved many dozens Partner PricewaterhouseCoopers LLP (US) of subject matter experts PricewaterhouseCoopers (Hong Kong) +1 (703) 918 3271 from across our network +852 2289 3900 karen.m.vanderlinde@us.pwc.com of firms. In particular our mandy.kwok@hk.pwc.com thanks to the core editorial John Caplan team: Jon Andrews, Partner and leader, Human Resource Services Cecilia Ford, Andrew Smith PricewaterhouseCoopers LLP (US) and Leyla Yildirim. +1 (646) 471 3646 Visit our Managing tomorrow’s people site at: john.caplan@us.pwc.com www.pwc.com/managingpeople2020

www.pwc.com/managingpeople2020 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Designed by studioec4 19905 (08/09)

Contents Next Managing tomorrow’s people Millennials at work: Perspectives from a new generation

Home Next Back Contents 2 Introduction 4 Employee loyalty 14 Talent crunch 4 Training and development 15 Report highlights 5 Retirement 16 Thoughts on 2020 17 About the survey 6 So what do these findings mean for Key findings 7 companies in their search for talent? 18 Global mobility 7 Message to the CEO 18 Sustainability and climate change 8 Market challenges 18 Technology at work 10 A connected world 18 Work place flexibility 11 Generation X and the Baby Boomers 19 Sharing personal information 12 Managing millennials 20 Portfolio careers 13 Contacts 21 2

Home Contents Next Back 3 Managing tomorrow’s people In late 2007 PricewaterhouseCoopers1 (PwC) released a report on the future of people management: Managing tomorrow’s people – the future of work to 2020, which outlined a series of possible scenarios, depicting how businesses would operate in tomorrow’s world. The report specifically focused on the people impact of new business models, and the ramifications for people management and the HR function. We identified three scenarios defined as blue, green and orange worlds which we believe will co‑exist in 2020. • The blue world – the big company model rules as organisations continue to grow bigger and the divide between work and home begins to blur. • The green world – social responsibility dominates the corporate agenda with concerns about demographic changes, climate and sustainability becoming the main business drivers. • The orange world – companies begin to break down into collaborative networks of smaller organisations; specialisation is key. Our follow‑up report looks at real options for business in light of tomorrow’s trends and challenges. What do businesses need to do now in order to be successful in 2020? The first part of this analysis has been to examine a new generation of workers, the millennials, which is explored in this publication. For more information about our 2020 worlds and to view all our latest analysis and reports on this theme, please visit our website: www.pwc.com/managingpeople2020 Millennials Wikipedia says ‘the millennials’ are also known The results of this survey (conducted during as: ‘Generation Y – a term used to describe September 2008) are the views of recent university someone born immediately after Generation X… graduates who were due to begin working for one of several terms (also including The Internet or were already working for PwC. Of the 4,271 Generation) used to identify the same group. There graduates we surveyed, a small proportion were is much dispute as to the exact range of birth years non‑PwC graduates. Although the results give us a that constitute Generation Y and The Millennials and good insight into the views of new graduates from whether these terms are specific to North America, around the world, they are clearly not a proxy for the the Anglophone world or people worldwide.’ entire millennial group. For the purposes of our Managing tomorrow’s We also conducted a similar survey on a smaller people series, we refer to millennials as those who scale in 2007 with new graduates from the US, ’PricewaterhouseCoopers’ refers to the network of member firms 1 of PricewaterhouseCoopers International Limited, each of which is entered the workforce after 1 July 2000. China and the UK. a separate and independent legal entity.

Home Contents Next Back Introduction 4 “Future generations Much has been written about millennials, but how much do we really understand about their expectations of work? Demographic shifts show the steady creep upwards of life expectancy will continue to be in many parts of the world, whilst at the same time birth‑rates are in rapid decline in most significantly different and of the old economies. Even Latin America, the US and Asia are heading towards a ‘greying’ of the population. These dramatic shifts will lead to an unprecedented shortage of younger firms and institutions workers and the need to keep employees working until well past current retirement ages. The idea that companies would source talent needs from an unlimited supply of workers from who adapt fastest will emerging markets has not materialised. Talent shortages are just as critical in China, India, capture the highest Eastern Europe and parts of South America. quality employees.” As a consequence of these factors, fewer younger people will be working to support a significantly larger older generation in the future. Even if we assume that older generations stay in work for longer, it is clear that the millennials will have a significant role to play in driving businesses forward. The race to capture the best has Quotes from millennials who participated always been challenging, but with even less talent available in tomorrow’s world, we can expect a talent crunch in the survey are included throughout which will have a significant impact on the world of work. Business success is driven by having the right people to deliver the strategy and create growth. By 2020 we believe people supply will be the most critical this publication driving factor for business success. Companies may go to extreme lengths in their search for talent, and once they have it, they will take measures to keep people ‘locked in’ to their organisations. Without this talent, they will be unable to compete. Talent crunch The consequences of these changes could mean that millennials will be a powerful generation of workers. It is likely that those with the right skills and abilities will be in high demand. They may be able to command not only creative reward packages by today’s standards, but also influence the way they work and where and how they operate in the workplace. The employer brand and the ability to engage will be key as employees identify by their own measures which organisations are desirable and which are not. The internet generation with their social networking sites and technological savvy will lead to companies using technology innovatively to attract and engage with employees. We could see the employer/employee dynamic shift dramatically – the employee may call the shots in tomorrow’s world. But do we understand what drives this new generation, their priorities and expectations of employers and the world of work? Are they really so different from previous generations? By better understanding what motivates employees and potential recruits, organisations will be in the best position to develop strategies to attract and keep young talent and nurture tomorrow’s leaders. Our survey aims to provide some insight into the minds of new graduates from around the world entering the workforce for the first time. As they begin their working lives, what are the hopes and expectations of these millennials? And most importantly do business leaders and HR teams need to revise their current strategies to accommodate these factors?

Home Contents Next Back 5 Report highlights Many of the key findings reflect the changing mindset of the new generation. We noticed only nominal differences between this survey and our previous study in 20072, suggesting a consistency of views both pre and post‑credit crunch. Although we do not have comparative generational data to examine trends, we think many of these issues would have been viewed very differently even a decade ago: • Millennials expect job mobility and want the • Training and development is the most highly opportunity to experience overseas assignments – valued employee benefit. The number choosing 80% would like to work abroad and 70% expect to training and development as their first choice of use other languages during their career. benefit is three times higher than those who chose cash bonuses. 98% believe working with strong • Corporate responsibility is critical – 88% of coaches and mentors is an important part of millennials said they will choose employers who their development. have corporate social responsibility (CSR) values that reflect their own and 86% would consider • Only 7% of the sample said time off to do leaving an employer if CSR values no longer community/charity work would be one of the top matched their expectations. three benefits they would value over the next five years. • The theory that future generations will reject traditional work practices is debunked. • Over half the sample believes they will personally The majority expect some element of office based fund their retirement with only 5% believing their work and only 3% expect to work mainly at home/ retirement would be funded by the government/ other locations. Most expect to be working mainly state and 17% by their employer. regular office hours with only 18% expecting • Our millennials envision a 2020 world where mainly flexible hours. China, India and Russia will have more economic • The notion of portfolio careers is not likely to influence than the US and Europe (47%). Only 30% become a reality for this group – 75% of whom of US respondents disagreed. And over a third of believe they will have between two and five respondents believe that companies will be more employers in a lifetime. influential than governments by 2020. 2 Managing tomorrow’s people – the future of work to 2020 (published by PwC in October 2007)

Home Contents Next Back 6 As we endure the ramifications of a global economic downturn, some might ask why we need to be concerned about what millennials think. Many companies are looking to cut back the workforce and reduce people spend to cut cost. Some may be reducing their graduate intake or introducing a total hiring freeze. But in order to achieve long‑term growth objectives, it is critical that organisations have the right talent to help them navigate the challenges of a downturn and see them through to the other side. Businesses which cut back now might find that when the economic environment rebounds, they do not have enough of the right people to be in the best position for the upturn and to remain competitive. Balancing short‑term pressures with long‑term business objectives is not easy. The businesses which get the balance right and invest in understanding and nurturing the millennial generation will be best positioned in the future. The success stories of tomorrow are companies that address their long‑term skills needs both creatively and holistically, today. About the survey PricewaterhouseCoopers surveyed a total of 4,271 graduates about their expectations of work. Graduates from 44 countries took part in the research in September 2008. The regional breakdown included: 1,004 in North America and the Caribbean, 943 in Asia, 759 in Western Europe, 481 in Central and Eastern Europe, 215 in South and Central America, 139 in Australasia and the Pacific Islands, 67 in Middle East and Africa. The majority of respondents were new graduates who were due to start work for PwC. Respondents were encouraged to forward the survey on to their graduating peers and we received 144 completed responses from non‑PwC graduates. Respondents from Ireland (38) had been working with PwC for the longest period (one year) and this should be considered when interpreting the results. Direct quotes from the graduates on how they view the world of work changing between now and 2020 have also been used throughout this report. The findings and conclusions from this survey are combined with insights from our previous analysis on the future of work and other data sources.

Home Contents Next Back 7 Key findings We expect global mobility in our jobs, and we want to experience opportunities to work overseas Preferred destination of those who would like to work outside their home country in their career to Preferred destination of those who would like Almost everyone believes they will work across geographic borders more than The most desired their home country in their career and Australia, work outside location is the US, followed by the UK their parents did with 94% of the sample agreeing. The graduates seem very open (see figure 2) but overall Western Europe was the most desired with 31%. to the idea of an overseas assignment with 80% wanting to work overseas during Preferred country – Top 5 their career. The country difference is interesting with 93% of Indian millennials Preferred country – Top 5 wishing toin working outside home country in careerfrom the Netherlands Interest work overseas compared to 62% of those – by country (see figure 1). USA 26% USA 26% 100% 93% 92%90% 89%89% 88% 86%85%85% 85%85% 84%84% 82%81% 80% United Kingdom 19% 80% 80% 77% 74% 70% 69%69% United Kingdom 19% 65% 62% 60% Australia 10% Australia 10% 40% France 4% 20% France 4% 0% China 4% All countries Netherlands Hong Kong Hungary Belgium South Africa Ireland Turkey Poland India Argentina Australia China Slovakia Chile Germany Brazil Russia Spain UK Canada France USA Greece China 4% Q: Would you like to work outside your home country in your career? Q: Would you like to work outside your home country in your career? IfQ: Would you like to work outside your home country in your career? yes, where would be your preferred destination? (% who agreed) If yes, where would be your preferred destination? Base: 3043 global graduates Base: 4140 global respondents Figure 1 Base: 3043 global graduates Figure 2 “International experience is an essential requirement for future leaders and as such should be cultivated from the very beginning of a graduate’s career.”

Home Contents Next Back 8 70% of our millennials expect to use another language at work. This is higher Our employer must have a strong stance on sustainability and understandably in countries where English is not the main language. But even in climate change countriesto use a language other than first language an work – By country Expect where English is the main language, there is at expectation that another language will be needed at work, for example in the US 34% agreed (see figure 3). Corporate social responsibility (CSR) is very important to millennials with 88% stating that they seek employers with social responsibility values that reflect their own, suggesting perhaps the growing importance of the issue. What is interesting, 99%99%99%97%97%97%95%95%95% 100% 93%91%91%90%90% 90% is the very high number (86%) who say they would consider leaving an employer 84% 80% whose social responsibility values no longer reflected their own (see figure 4). 80% 70% 59% 59% Respondents from Argentina (94%),leaving an employer whose92%) were the Percentage who would consider the US and Brazil (both at behaviour 60% most likely to leave whilst Indian respondents were the least (66%). 46% no longer met corporate responsibility expectations – By region 38% 40% 34% 100% 91% 91% 18% 86% 84% 82% 82% 82% 85% 20% 80% 0% 60% All countries Netherlands Hong Kong Hungary Belgium South Africa Ireland Turkey Poland India Argentina Slovakia China Australia Chile Germany Brazil Russia Spain UK Canada France USA Greece 40% Q: Do you envisage using a language other than your first language at work? 20% (% who agreed) 0% All countries South and Central and Middle East Caribbean Western and Pacific Australasia and Africa America America Europe and the Central Asia Eastern North Europe Islands Base: 4084 global respondents Figure 3 Q: Would you consider leaving an employer whose behaviour no longer meets Whilst only 38% of the sample cited English as their first language, 83% expect to your corporate responsibility expectations? use English at work. French and Spanish were the next most likely with 19% and 14% respectively. (% who agreed) The apparent willingness of this generation to travel should be a positive message Base: 3906 global respondents Figure 4 to businesses. Globalisation has led to an increase in demand for more mobile workers3, yet companies often struggle to incentivise more senior workers to take on overseas assignments. Might there be a case for encouraging more global mobility at junior levels? This would give employees valuable experience early in their careers and potentially alleviate the financial burden of many costly overseas assignments for businesses. 3 Managing Mobility Matters: A European Perspective (PwC published December 2006)

Home Contents Next Back 9 An employer’s policy on climate change is also seen as important to 58% of respondents. The contrasting views between countries who state employer’s policy on climate change and the environment Percentage is interesting as those in Brazil (86%) felt this was an important issue compared to “I hope that people only 40% ofis important in deciding whetherfigure 5). work for company – by country US and Belgian respondents (see or not to are more aware of the 100% environmental and social impact of companies. I do 86% 90% 81% 77% 76% 80% 73% 73% 70% 70% 68% not think people should 67% 65% 70% 58% 62% 61% 58% 55% 60% 53% 53% 52% 51% work for a company with 46% 50% 43% 40% 40% 40% 30% 20% whom their values do 10% 0% not align.” Republic of Netherlands Hong Kong Hungary respondents Belgium Kingdom South Africa Turkey Poland India Argentina China Chile Australia Slovakia Germany Brazil Russia Spain Canada France USA Greece United Ireland All Q: How important is an employer's policy on climate change and the environment in deciding whether or not you should work for them? Base: 3924 global respondents “Sustainability in the Figure 5 This may reflect the higher profile of environmental issues in certain parts of the world – the concerns over the Brazilian rainforest being a good example. workplace will be key as CSR and climate change are clearly topics of the moment and there may be a degree to which millennials want this is how a company’s to be seen to be saying the right things about these issues. Instinctively they feel it is an issue they should be supporting. Nevertheless the high response rate coupled with the verbatim comments we received on this image will be seen in an topic support the idea that corporate responsibility and climate change are important issues for millennials and employers need to take note. ever increasing view of the current climate changes and their impact.”

Home Contents Next Back 10 “Technology will be at the We use technology to enhance our ability to network Much has been written about the technical savvy of the internet generation. Our survey findings confirm that centre of everything we millennials see technology as a key device for social and networking purposes. 85% of respondents belong to Percentage who are a member of an do, in ways that may now a social networking site such as Facebook (see figure 6). online social network – by country be unimaginable.” 100% 97%96%95%94%93%93% 92%90%90%89% 85% 88%87%87% 84%83%81% 80% 75%74%73% 65% 61%58% 60% 51% 40% 20% 0% Republic of Netherlands Hong Kong Hungary respondents Belgium Kingdom South Africa Turkey Poland India Argentina China Chile Australia Slovakia Germany Brazil Russia Spain Canada France USA Greece United Ireland All “Technology advances will Q: Are you a member of an on-line social network (e.g. Facebook, Bebo, MySpace etc)? change the way we work. All peripherals used now Base: 3822 global respondents Figure 6 would probably no longer Almost everyone owns a mobile phone and 86% own an iPod or MP3 player. A lesser number have access to be used in the future. handheld computers, but we would expect this number to increase over the next few years as technological advances make these items more accessible to all. Everyone has to keep up The millennials seem to believe very strongly that technology will play a critical role in tomorrow’s workplace and emphasised the need for companies to keep apace with technology advancements. the pace with the change The desire of millennials to want to share knowledge can bring benefits to a business in terms of sharing best in modern technology.” practice and for employee engagement. But this open and instant style of knowledge share could also present significant risk. Companies who may have rejected a candidate, or created delays during the recruitment process for example, could find a disgruntled candidate making public criticisms on the internet which could be viewed by thousands of people across the world instantaneously. This could have damaging consequences for the employer brand.

Home Contents Next Back 11 We do not expect work flexibility “Employees may have The theory that future generations will reject traditional work practices is debunked. The majority expect some element of office based working and only 3% expect to work mainly at home/other locations. Australasia and more flexibility in choosing the Pacific Islands had the highest percentage who thought they would be working mainly in an office (41%) compared with only 9% in the Middle East and Africa. where to work, when to Respondents also expect to be working regular office hours with some flexible working (66%). There are some work, how to work.” exceptions however, in Germany (54%), Turkey (59%) and France (50%) the majority expect to be working mainly flexible hours. This is contrasted with Ireland where 53% expect to be working mainly regular office hours (see figure 7). Although the millennials seem to indicate flexibility is not expected, we did however receive many comments about wanting more flexibility. Perhaps the millennials do not feel that total flexibility is a realistic possibility, even though it is something they might desire. We also believe that their expectations may change as they get older and the need for greater flexibility for example to look after family members may become more of a priority. Expectations of office hours – by country 100% 11% 9% 17% 12% 10% 13% 13% 8% 13% 6% 17% 7% 3% 4% 2% 6% 16% 24% 23% 23% 20% 29% 29% 80% 11% 15% 13% 7% 19% 24% 31% 18% 18% 21% 33% 18% 6% 8% 53% 23% 50% 49% 54% 3% 7% 21% 27% 60% 59% 40% 66% 78% 76% 76% 75% 71% 71% 69% 69% 69% 68% 68% 66% 3% “I think that people will be able to work more from 64% 63% 60% 60% 56% 53% 20% 47% 47% 45% 44% 35% 0% their homes, but I wouldn’t Netherlands Hong Kong Hungary countries Belgium Ireland South Turkey Poland India Argentina China Australia Slovakia Chile Germany Brazil Russia Spain UK Canada France Africa USA Greece like that there would All Regular office hours with some flexible working Mainly flexbile hours Mainly regular office hours not be interaction with Q: Do you think your office hours will be mainly flexible hours/ mainly team mates.” regular office hours / regular office hours with some flexible working? Base: 4142 global respondents Figure 7

Home Contents Next Back 12 “It is very likely that We are open to sharing personal information with employers – the lines between work and home are blurring the employer will Millennials have split views about giving employers greater access to their personal information in the interests intervene more directly of personal and business security. 40% were comfortable with the idea, while 36% were unwilling and 24% did not know (see figure 8). in the personal life of Certain parts of the world seem more inclined to share personal information than others with the Netherlands the employee.” and Slovakia being the most willing (49%). We wonder if it might be the case that millennials, more used to posting personal information on social networking sites, are becoming far more relaxed about giving access to employers than previous generations may have done. Perhaps they have faith in data protection legislation to safeguard their personal data. But given the number of high profile accidental losses/leakages of personal data by governments and companies in recent years, millennials may need to be more cautious. Two thirds of the sample are comfortable with the idea of employers providing more personal services to workers such as housing, food, regular doctor and dentist appointments. Most of our verbatim comments seemed to support the idea of the employer having more influence over employees’ lives in this way. These views might be at odds with older workers who could be less comfortable about opening up access to their home/personal lives. to give employer greater access to personal information Willingness in the interest of personal and business security – By region 100% 25% 25% 20% 23% 20% 18% 29% 26% Don't know / 80% Don't understand 60% 36% 30% 40% 38% 42% 42% 34% 27% 40% No 47% 20% 40% 44% 40% 39% 38% 40% 38% 0% All regions Asia Australasia Central Western Middle North South and Yes and Pacific and Europe East and America Central Islands Eastern Africa and the America Europe Caribbean Q: In the interests of personal and business security would you be prepared to give your employer greater access to personal information? Base: 3884 global respondents Figure 8

Home Contents Next Back 13 The concept of portfolio careers in the future is not a reality for us Almost half of the respondents in South Africa (48%) expect to have multiple roles in multiple organisations. Brazilian respondents seem the most committed to the Another theory apparently turned on its head is the idea of working for multiple employer with almost one third expecting to stay in the same field in the same employers over a career lifetime. The vast majority of respondents believe they will organisation. have between two and five employers (75%). Only 7% believe they will have ten or more employers. By region, Middle East and Africa respondents were the most These findings seem to dispel the idea of employees job hopping in a portfolio likely to think they would have more than ten employers (11%). Only 10% of North working arrangement. This was an idea much touted in the early 1990s as the Americans think they will have more than six employers. By country, Spain and future of work. But clearly this audience does not think it will happen, and may Turkey seem the most inclined to portfolio working (see figure 9). therefore not be most likely to follow – by country Career path attuned to cope if it does. But millennials do expect a certain degree of job mobility with 30% saying they would like to stay within the same organisation, but in a variety of different roles and fields. Only 17% of the sample expected to remain within the same 8% Experience a number of different roles/ fields organisation and in the same field (see figure 10). 19% in a variety of organisations Number of employers expect to have in career – by country 12% Progress within the field I have been recruited to in a variety of organisations 100% 7% 18% 13% 12% 11% 11% 10% 10% 7% 7% 6% 4% 6% 6% 5% 4% 11% 3% 3% 7% 2% 13% 2% 7% 2% 1% 9% 13% 11% 21% 8% 10% 14% 10% 5% 4% 10% 11% Progress within the field I have been recruited 80% 10% 21% 23% 31% 8% 23% 19% to within the same organisation 19% 60% 14% Progress within the same organisation but in a 73% 82% 73% 81% 83% 79% variety of roles/ fields 75% 73% 80% 76% 82% 81% 40% 73% 76% 80% 90% 76% 53% 60% 70% 60% 65% 71% 66% Take the path that permits me the fastest progression 20% 30% 17% 12% 12% Don't know 17% 11% 11% 0% 8% 10% 7% 5% 6% 8% 8% 7% 10% 9% 4% 2% 5% 5% 2% 6% 0% Slovakia South Africa India Hong Kong Ireland Poland Belgium Spain Argentina All countries Turkey China Chile Canada Australia Netherlands Greece France UK Brazil Hungary Russia USA Germany Q: Please tell us which of the following best describes the career path you hope to follow. 1 2-5 6-9 10+ Q: How many employers do you think you will have in your career? Figure 9 Base: 4039 global respondents Figure 10 Base: 4065 global respondents

Home Contents Next Back 14 We are loyal to our employers... for as long as it suits us “I believe that employees who are not happy Over 90% of respondents expressed loyalty to the organisation they worked for. We varied the loyalty statements (see figure 11) to ascertain exactly how deep with their employers will be more inclined to the loyalty was. Australia, Germany and Turkey had the highest agreement that look for another job with another employer.” they are loyal to the organisation they work for. Regionally, Australasia showed the highest degree of loyalty, whereas respondents in the Middle East and Loyalty to organisation – by region Africa (38%) and South and Central America (43%) were the most likely to put self‑interest first (see figure 12). 100% 91% 92% 95% 89% 92% German respondents were the least likely to agree with the third statement 88% 85% 86% 90% regarding career objectives taking priority over the employer – only 15% of them 80% 68% 66% agreed with this statement. 70% 59% 63% 55% 59% 60% 55% 54% We feel that graduates are more likely to aspire to being loyal employees at the 50% 43% 38% start of their careers, so in that sense the findings are not a surprise. However 40% 30% 31% 27% 32% 30% 28% 30% there is clearly an element of self‑preservation in the findings, by hinting that they 20% were not willing to commit to blind loyalty. We mentioned at the start of this report 10% our belief that millennials will be a generation in high demand. We feel that this 0% group will put more pressure on employers to have clear employer brand values All regions Asia Australasia and Central and Pacific Islands Eastern Europe Western Europe Middle East and North America Africa and the South and Central America against which they can be evaluated. If employers do not live up to employee I will be loyal to the organisation I work for Caribbean I will only be loyal to the organisation I work for as long as I feel fulfilled in my role expectations, millennials may be more likely to look elsewhere. My loyalty is to myself and my career objectives rather than my employer Loyalty to organisation Q: Please tell us how much you agree or disagree with the following statements Strongly agree Agree Neutral Disagree Strongly disagree Don't know Base: 3915 global respondents Figure 12 I will be loyal to the 1% 49% 42% 8% organisation I work for I will only be loyal to the organisation I work for as long as I fulfilled in my role 23% 35% 20% 16% 1% 5% “Gen Y will continue to look for employers who embrace their desire for challenging My loyalty is to myself and my career objectives 8% 22% 34% 27% 1% 8% work, amazing development and training rather than my employer opportunities, and travel possibilities.” Q: Please tell us how much you agree or disagree with the following statements. Base: 3915 global respondents Figure 11

Home Contents Next Back 15 Top 3 benefits respondents would most value over the next 5 years other than salary We prefer development opportunities to cash bonuses We were surprised by the results of this part of the survey. When we asked what 1st choice 2nd choice 3rd choice benefits they would value most over the next five years, the most important All respondents Training and Cash bonuses Flexible working benefits for our millennials are related to training and development activity Development (53%) (41%) hours (41%) (see figure 13). Asia Training and Financial assistance Cash bonuses (39%) Development (64%) with housing (46%) Almost one third of respondents chose training and development as their first Australasia and Pacific Training and Flexible working hours Cash bonuses (42%) choice benefit other than salary. This was three times higher than those who Islands development (58%) (45%) chose cash bonuses as their first choice benefit. Central and Training and Cash bonuses Flexible working Eastern Europe development (61%) (40%) hours (32%) Only 7% cited time off for doing charity or community work as a top three benefit. Western Europe Training and Flexible working Cash bonuses (36%) Yet we saw how important corporate responsibility values were to millennials development (57%) hours (38%) in our earlier questions on the subject. Perhaps they see this as more of the Middle East Flexible working Training and Cash bonuses (42%) and Africa hours (55%) development (46%) employer’s responsibility than a personal one? North America and Flexible working Cash bonuses (43%) Free private In terms of development 98% of the sample stated working with strong coaches the Caribbean hours (53%) healthcare (38%) South and Central Training and Cash bonuses (45%) Flexible working and mentors was important to their personal development. All aspects of personal America development (73%) hours (41%) development scored very highly in the survey (see figure 14). The least important was e‑learning, but even e‑learning was cited to be very Q: Please select the benefits you would value most over the next 5 years other than your salary? important or quite important by 62% of the sample. We would challenge whether business leaders are attuned to the importance of Importance of global respondents Base: 3953 development opportunities – by Region Figure 13 development opportunities to this group. In fact, our experience is that in many sectors training and development budgets are usually the first to be hit when the 100% 99% 100% 98% 97% 97% 97% 96% 97% 97% 98% business or market is doing badly. 96% 94% 94% 96% 94% 94% 94% 92% 92% 91% 91% 89% 90% 91% 88% Formal face-to- 85% 85% 85% 85% 83% 85% 84% face learning The very high results for advocating coaches and mentors are also a key issue for 80% 67% businesses to take away from this study. Most employers only provide coaches 62% 62% 64% 59% 65% E-learning 60% 59% and mentors to more senior individuals in the organisation. Younger workers are usually given more vocational/educational training opportunities. The context of 43% 40% Working with the question asked for views on their preferences over the next five years. So we strong coaches and mentors feel there is a gap between the personal development aspirations of millennials 20% and where companies typically invest their training and development budgets Rotational assignments particularly in a one‑to‑one coaching context. 0% All Asia Australasia Central and Western Middle North South and countries and Pacific Eastern Europe East and America Central Support for “Personally I find it very important that personal Islands Europe Africa and the America further academic Caribbean training coaching is present.” Q: Please tell us how much you value the following development opportunities. Base: 3907 global respondents Figure 14

Home Contents Next Back 16 Expectations for retirement I will have to take personal responsibility for funding my retirement Funded by myself e.g. through Millennials have accepted the idea that neither the state nor their employer will investments and saving plans 57% fund their retirement, with over half (57%) saying they expected to fund their own Funded by my employer's retirement 17% retirement through personal investments and saving plans (see figure 15). scheme Australasia has the highest percentage which expect their retirement to be Haven't thought about it yet 16% funded personally (76%), Asia has the lowest (38%) with over a quarter of Asian respondents expecting their employer’s retirement scheme to meet their needs. Funded by the government/ state 5% Germans have the highest percentage who expect their retirement to be funded Non-existent. I will continue working after personally (90%), the Netherlands had the lowest (27%). 41% of respondents 3% retirement age from the Netherlands expect their retirement to be funded by their employer’s My children will support me financially retirement scheme (highest percentage across all the countries), compared with 0% when I retire 0% of those in Germany (see figure 16). Don't know 3% The high profile in recent years of company pension deficits in defined benefit schemes, may have led our millennials to conclude that they need to fund their own retirement. This may be particularly true of Germany for example where Q: Do you expect your retirement will be …? companies have suffered crippling pension deficits for the last decade. And in the US, until recent events, there was a belief that very low (or negative) savings rates Base: 3898 global respondents Figure 15 would not ultimately affect the economy, as Baby Boomers could retire on their Expectations for retirement – By region asset price and housing price growth without saving out of earnings. During the 2000s, Americans have reduced the amount of disposable income being saved 100% 3% 2% 1% 3% 5% 6% 3% 4% 14% 2% 8% 10% Don't know to just about 0%.4 We believe that these factors compounded by the global 16% 20% 1% 21% 21% 16% 1% 7% Haven't thought financial crisis may have influenced the millennials’ resignation to self‑funding 80% 3% 4% 6% 4% 1% 15% about it yet 17% 13% Non-existent. I will their retirement. 10% 16% continue working 60% 27% after retirement age My children will support me 40% 76% 73% 72% financially when I 57% 58% 53% 64% retire “I think that it is extremely important to have 38% Funded by my 20% employer's a good pension scheme, as the governments retirement scheme Funded by myself 5% 10% 1% 5% 5% 3% 1% 2% 0% e.g. through scheme fails to keep up with the cost of living. All countries Asia Australasia Central and and Pacific Eastern Western Europe Middle East and North America South and Central investments and saving plans Therefore, as I get older, this will be one of my Funded by the Islands Europe Africa and the America government/ state Caribbean main criteria when picking who to work for.” Q: Do you expect your retirement will be...? Base: 3898 global respondents 4 Bureau of Economic Analysis, Economic Intelligence Unit, Figure 16 PwC Analysis

Home Contents Next Back 17 Thoughts on 2020 “China will be more and more influential in the following years, and will be one of the most important markets of all enterprises from many countries.” We presented a series of statements to the sample relating to the world in 2020. 57% of respondents do not believe that DNA profiling will be part of the graduate recruitment process. Only 15% felt that DNA profiling would be a feature, although By 2020 some believe that companies will run their own universities to have the this rises to 30% of Middle Eastern and African respondents. right skills to fulfil their needs (30%). Response was highest in Asia 44% and Central and Eastern Europe (40%). This reinforces again the point that millennials Almost half of the respondents believe that China, Russia and India will have more believe development is important, so much so that some companies will even economic influence than the US and Europe by 2020. Perhaps unsurprisingly have their own universities in tomorrow’s world. the highest rate of agreement to this question came from the emerging markets cited in the statement. However only 30% of US respondents disagreed with the Over one third of the sample believes that companies will be more influential than statement (see figure 18). governments by 2020 (36%). Almost half of South and Central Americans agreed By 2020 companies will be more influential (see figure 17). By 2020 China, Russia and India will have more economic than governments… – By region influence than the US and Europe… – by country 100% 4% 4% 7% 7% 3% 3% 2% 3% 2% 5% 2% 5% 3% 3% Strongly 100% 5% 5% 7% 8% 10% 11% 5% 3% 7% 3% 5% 2% 7% 3% Strongly 16% 15% 13% 11% 17% 14% 16% disagree 19% 24% 17% 26% 17% 26% 17% 21% 14% 20% 80% 18% 27% 25% 25% 21% 24% 24% disagree 25% 16% 80% 29% 29% 25% 32% 33% 7% 13% 16% 30% 29% 32% 31% 46% Disagree 60% 36% 41% 20% 31% 32% 31% Disagree 30% 24% 26% 24% 38% 27% 60% 29% 29% 27% 23% 33% 50% 32% 48% 47% 37% 32% 31% 38% 27% 29% 40% 40% Neutral 40% 36% 37% 40% 32% 25% 26% 41% Neutral 29% 34% 34% 35% 33% 36% 37% 20% 30% 43% 35% 37% 37% 36% 38% 20% Agree 29% 29% 28% 27% 27% 28% 22% 35% 30% 20% 18% 17% 17% 25% 15% 16% 15% 14% 12% 12% 12% 11% 10% 0% 8% 8% 7% 3% 3% Agree 8% 9% 12% 7% 10% 12% 0% Netherlands Hong Kong 6% Hungary countries 5% Belgium Ireland South Turkey Poland India Argentina China Australia Slovakia Chile Germany Brazil Russia Spain UK Canada France Africa USA Greece Strongly All All Asia Australasia Central Western Middle North South and agree countries and Pacific and Europe East and America Central Strongly Islands Eastern Africa and the America agree Europe Caribbean Q: By 2020 China, Russia and India will have more economic influence Q: By 2020 companies will be more influential than governments than the US and Europe Base: 3862 global respondents Figure 17 Base: 3866 global respondents Figure 18

Home Contents Next Back So what do these findings mean for 18 companies in their search for talent? Although the PwC survey does not claim to represent to place more emphasis on what millennials value the entire millennial generation, we do believe a most e.g. personal development opportunities, and number of indicative themes have emerged. We were working with coaches and mentors. struck by the similarity of responses across the globe to a number of these issues. Should organisations Market challenges tear up their people strategy and start again? Not necessarily. But do companies need to review The pressures of economic downturn are likely to what they are doing in light of some of these findings? remain a global issue affecting businesses for some Almost certainly. We believe that many organisations time. We may see higher unemployment affecting are not fully tuned into the millennial mindset. many parts of the world, and it is likely that business leaders will find it difficult to justify investing in people programmes, while they work through these Message to the CEO challenging conditions. But investing in talent is In the PwC 12th annual CEO survey5, 61% of CEOs exactly what organisations need to do, to be certain say they have challenges recruiting and integrating of having a strong footing when the market recovers. younger employees. When we asked CEOs what Employers must look for ways to manage costs are the key components of their talent strategy, whilst remaining focused on long‑term strategy. the majority sampled believe that flexible working Past recessions have seen companies use arrangements are one of the most critical components innovative ideas to meet short‑term challenges. to their ability to attract and retain talent. Yet it seems, One organisation deferred its graduate intake for the millennials do not expect flexibility and value other 12 months and offered said graduates a lump sum benefits more highly. Perhaps their views will change to spend on travelling during the enforced gap as their life priorities change. 62% of CEOs say year. The uptake for the scheme was very high – providing opportunities for employees to get involved the graduates were grateful for the opportunity to in socially responsible activities is key. Yet only 7% explore the world and return when things had picked of our millennials would choose to have time off up. The employer was able to reduce the cost burden for doing social or charity work as one of their top of a large number of graduates which it had no work three benefits. for, whilst retaining their loyalty and commitment to Perhaps CEOs and business leaders need to consider start the following year. whether their strategies are valid for all generations of As many parts of the world grapple with uncertainty, workers. For example, do they need greater flexibility companies need to explore innovative ways to meet in terms of how they incentivise different segments both short and long‑term demands. of the workforce? Could we see more emphasis on worker profiling in the future to help companies better understand their staff diversity and what drives A connected world employee loyalty and behaviours? If CEOs really want The demand for global worker mobility has increased to get better at attracting and integrating younger dramatically in the last decade with the emergence of workers as the CEO survey suggests, then they need new markets and the globalisation of many industries. 5 PwC 12th annual CEO survey published January 2009

Home Contents Next Back 19 Companies struggle to get people to work overseas and the average cost of an assignee can be three different to what previous generations have wanted? We do not think so. But it is the greater ability of this “Employers need to to four times higher than a local hire. The return on investment of international assignments is often new generation to mobilise themselves quickly and easily into employment elsewhere that CEOs need recognise that young very poor, with up to 40% of assignees leaving the organisation within 12 months of returning to their to worry about. The survey responses to the CSR issues and the questions on loyalty indicated that joiners today and in the host country.6 Our millennials survey suggests we if millennials do not get what they want with their future will have different have a generation who are enthusiastic about working current employer, they will go elsewhere. overseas. How can companies capitalise on this to Companies in 2020 will find that they are dealing demands and aspirations meet their needs? with a complex workforce of different generational to those generations that Our millennials are at ease with technology which expectations and needs. At one end of the spectrum permeates many facets of their lives, but are workers could continue working until well past have preceded us.” companies keeping up? There will likely be an retirement age – what impact will this have on expectation that companies are at least apace with pension planning, health and wellness and how they technological advancements. For example, we are interact with younger workers in the organisation? all used to using search engines to find exactly what The millenials will be in their 30s and 40s by then. we need on the internet, but is it as easy to find How will they have shaped the workplace of knowledge and connect people in large companies? tomorrow with their advanced technological Today, some large companies do not even know on a savvy, social responsibility values and global given day, their total number of employees. outlook? Organisations need to work through the complexity of having such diversity in the workforce. Smart companies are already ahead of the game, Many organisations today use customer segmentation replicating the likes of Facebook networking strategies to understand the orientations of their sites internally. Other organisations are making customer base. We believe companies need to look foreign assignments part of the promotion criteria. at using similar methodologies to understand the Many organisations are taking people metrics to segmentation and orientation of their workforce. a highly sophisticated level, way beyond the staff Having the flexibility to provide tiered offerings to suit satisfaction survey which has become the norm. employees at different stages of their life‑cycle as well as from different generations will be key to drive And what about Generation X and the maximum value and loyalty from employees. Baby Boomers? All organisations and their Human Resource teams Our survey suggests a number of similarities between need to look seriously at the millennial generation if millennials and previous generations. The new they want to be able to compete in tomorrow’s world. generation want stability, security and variety in One thing we can be absolutely certain of – good their working environment. They want to be loyal to people will continue to be incredibly hard to find and an organisation that they are proud to work for and difficult to keep. reflects their own values. Are these aspirations so PwC Measuring the value of international assignments [2006] 6

Home Contents Next Back 20 Managing millennials 1. Use metrics and benchmarking to segment your workforce in order to understand what millennials want and how these desires might differ from older workers. 2. Think creatively about reward strategies and what motivates millennials? For example, is it time to shift focus from cash bonuses and company cars to other things? 3. Consider global working opportunities – how might this enthusiastic generation support your global mobility needs? 4. Continue to invest in personal development and training – explore expanding coaching/mentoring programmes to younger workers. 5. Articulate your employer brand – communicate internally and externally what it means to work for your organisation. 6. Have a clear statement about corporate responsibility – make this part of your employer brand and be committed to deliver the promise. 7. Think creatively about how technology can be used to engage this audience e.g. avatars, internal networking sites etc. 8. Provide variety and fresh challenges – consider promoting cycles of experience in other parts of the organisation. Our thanks to all the graduates who participated in this survey, and to the PricewaterhouseCoopers human capital teams around the world.

Home Contents Back 21 Key contacts Michael Rendell Leyla Yildirim Partner and leader of Human Resource Services Marketing PricewaterhouseCoopers LLP (UK) Human Resource Services +44 (0) 20 721 24945 PricewaterhouseCoopers LLP (CI) michael.g.rendell@uk.pwc.com +44 (0) 1481 75 2039 leyla.yildirim@uk.pwc.com Karen Vander Linde Partner and leader of People and Change Visit our Managing tomorrow’s people site at: PricewaterhouseCoopers LLP (US) www.pwc.com/managingpeople2020 + 1 (703) 918 3271 karen.m.vanderlinde@us.pwc.com www.pwc.com/managingpeople2020 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. PricewaterhouseCoopers provides industry‑focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. © 2008 PricewaterhouseCoopers. All rights reserved. ‘PricewaterhouseCoopers’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Ref 2008BHM22013.

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Etude pwc

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