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Leadership Challenges in the Context of Demographic Change

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Lecture given at HHL's MBA Leadership Seminar on 26 May 2004.

Lecture given at HHL's MBA Leadership Seminar on 26 May 2004.

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  • 1. Leadership Challenges in the Context of Demographic Change Dr. Johannes Meier HHL, Leipzig, 26. 05. 2004
  • 2. Our Future? Seite Aktion Demographischer Wandel 20. 5. 2004
  • 3. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 4. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 5. Seite 20. 5. 2004 Germany‘s population will shrink dramatically until 2050 Source: Enquete-Kommission Demographischer Wandel, UNFPA, Eurostat, Bundesminister des Inneren
  • 6. Seite Aktion Demographischer Wandel 20. 5. 2004 Source: Fuchs/Thon 1999 , The working population will shrink most dramatically
  • 7. Seite Aktion Demographischer Wandel 20. 5. 2004 Source: Fuchs/Thon 1999, Quelle: Statistisches Bundesamt, Prognos The aging of the working population has started already
  • 8. Seite 20. 5. 2004 Employment Rates of Older People (55 – 64 Jahre) Source: OECD-LMS
  • 9. Seite 20. 5. 2004 The baby boomers are moving towards retirement
  • 10. Seite 20. 5. 2004 The debt crisis (I): Spending commitments Source: DIW; middle sceanrios and status-quo taxationt; Färber, 1995 Pension entitlements Cities, Counties State Fed. States % Mrd. €
  • 11. Seite 20. 5. 2004 Direct taxes VAT Total tax Tax Income % Mrd. € The debt crisis (II): Shrinking tax income Source: DIW; middle sceanrios and status-quo taxation; Färber, 1995 Cities, Counties State Fed. States Pension entitlements
  • 12. Need for a turn-around
    • Public social systems will collapse unless changed fundamentally
    • Pay-as-you-go-system of pension financing no longer robust given jobless rates and demographics
    • Financing for health system linked too much to employment income as basis for contributions
      • Corporate pension systems likely to be under-financed
    • Prevalent accounting practices may not properly reflect the longer life expectancy of former employees with pension rights
    • Education system not performing adequately to guarantee necessary productivity increases to maintain prosperity levels
    • PISA-study reveals fundamental deficits in education system
    Seite Aktion Demographischer Wandel 20. 5. 2004
  • 13. Corporate warning signs
      • Significant differences in accounting practices and interpretation by rating agencies of on- vs. off-balance sheet funding of pensions
      • IAS accounting practices regard pension commitments equivalent to credits (taking account of long-term capital market interest rates and future income and pension increases) whereas HGB accounting practices uses a fixed discounting factor of 6% without taking account of future income and pension increases.
      • Thyssen-Krupp with on-balance sheet pension accruals of 6,6 bn € and 440 mill. € annual pension payments in defined benefits pension system was downgraded from 'Investment Grade' to 'Junk' status by S&P.
      • Many corporations moving from defined benefits to defined contribution systems: 84 of the 1000 largest British corporations shut down their «Defined Benefits»-pension systems in 2002 (National Association of Pension Funds)
      • British Telecom pension fund had assets of 25 bn £ in 2003 with commitments exceeding assets by 4,2 bn £.
      • British Airways has off-balance-sheet pension fund assets of 10 bn £ and a market cap of 2 bn £.
    Seite Aktion Demographischer Wandel 20. 5. 2004
  • 14. Seite 20. 5. 2004 Qualification structure of German population Dramatic increase of youths without formal degree or finished apprenticeship by age of 25
  • 15. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 16. Complications: Bail-out opportunities for the talents and wealthy
    • Bail-out 1: Migration and brain drain
      • Intra-national migration: The emptying of some parts of the country
      • International migration: Brain drain towards attractive regions (currently USA)
    • Bail-out 2: Career wins against child bearing especially among educated women
      • Better educated women get less children and at a later stage in life
    • Potential results of bail-outs for Germany
      • Note: School performance of children correlates with education of parents
      • Risk: We may end up with those who do not have the talent, education and mobility
    Seite Aktion Demographischer Wandel 20. 5. 2004
  • 17. Seite Aktion Demographischer Wandel 20. 5. 2004 Migration 1999-2020 (Optimistic scenario)
  • 18. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 19. How to manage a corporate turn-around?
    • Lesson 1: Face reality
      • Fact-based analysis of drivers of success or failure
      • Performance metrics for the whole value-chain
    • Lesson 2: Create a positive vision
      • Without hope there is no reason why employees should bother
      • Positive earnings above the cost of capital are a must for survival
    • Lesson 3: Measure and celebrate success on the way
      • Many steps are necessary on all levels for an effective turn-around
      • Clear priorities need to be set and measured relentlessly
      • Celebrate each successful step!
    Seite Aktion Demographischer Wandel 20. 5. 2004
  • 20. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 21. Seite 20. 5. 2004 More work for the young and the old is possible Employment rates of young and older population segments, 2001 Source: DIW
  • 22. Seite 20. 5. 2004 Measures taken M 1 .. M x A paradigm for change ( Performance Metrics t Positive Vision ‚ Horror‘ 5 Y. 10 Y. M 1 M 2 M X
  • 23. Szenario planning as tool for making vision concrete Seite 20. 5. 2004 Social civil society Dynamic growth society Tough competitive society Declining envy society Nostalgic state society Current state?
  • 24. Demographic change as opportunity for wide-ranging innovation of society Seite Aktion Demographischer Wandel 20. 5. 2004
    • FROM
    • Longer life working time
    • Need for private insurance
    • Loneliness in old age
    • Young generation as financial burden bearer
    • Children as poverty factor
    • TO
    • Ability to work longer
    • Permission to work longer
    • Freedom of own responsibility
    • Contribution to society value chain in old age
    • Young generation as our future
    • Children as basis for meaning in life
  • 25. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004
    • Demographic change in Germany: Need for a turn-around
    • Complication: Bail-out opportunities for the talented and wealthy
    • Excursion: How to manage a corporate turn-around
    • Application of leadership lessons from corporate turn-arounds to demographic challenge
    • What does it mean for you?
  • 26. What does it mean for you?
    • New concept of work
    • New concept of age
    • New concept of society
    • New concept of identity
      • Additional focus on value add for society
      • Work outside employment contexts
      • Multi-generational, multi-level division of work
      • Older age with large productivity potential
      • Older age with large responsibility to harness productivity potential
      • Opportunity for civil society
      • Competition for talents and youths among communities
      • Balance between self-interest and interest in self
      • Multi-cultural, global development space
    Seite 20. 5. 2004