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Leadership Challenges in the Context of Demographic Change Dr. Johannes Meier HHL, Leipzig, 26. 05. 2004
Our Future? Seite  Aktion Demographischer Wandel 20. 5. 2004
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
Seite  20. 5. 2004 Germany‘s population will shrink dramatically until 2050  Source: Enquete-Kommission Demographischer Wa...
Seite  Aktion Demographischer Wandel 20. 5. 2004 Source: Fuchs/Thon 1999 ,  The working population will shrink most dramat...
Seite  Aktion Demographischer Wandel 20. 5. 2004 Source: Fuchs/Thon 1999,  Quelle: Statistisches Bundesamt, Prognos The ag...
Seite  20. 5. 2004 Employment Rates of Older People (55 – 64 Jahre) Source: OECD-LMS
Seite  20. 5. 2004 The baby boomers are moving towards retirement
Seite  20. 5. 2004 The debt crisis (I): Spending commitments Source: DIW; middle sceanrios and status-quo taxationt; Färbe...
Seite  20. 5. 2004 Direct taxes  VAT  Total tax Tax Income % Mrd. € The debt crisis (II): Shrinking tax income Source: DIW...
Need for a turn-around <ul><li>Public social systems will collapse unless changed fundamentally </li></ul><ul><li>Pay-as-y...
Corporate warning signs <ul><ul><li>Significant differences in accounting practices and interpretation by rating agencies ...
Seite  20. 5. 2004 Qualification structure of German population Dramatic increase of youths without formal degree or finis...
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
Complications: Bail-out opportunities for the talents and wealthy <ul><li>Bail-out 1: Migration and brain drain </li></ul>...
Seite  Aktion Demographischer Wandel 20. 5. 2004 Migration 1999-2020 (Optimistic scenario)
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
How to manage a corporate turn-around? <ul><li>Lesson 1: Face reality </li></ul><ul><ul><li>Fact-based analysis of drivers...
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
Seite  20. 5. 2004 More work for the young and the old is possible  Employment rates of young and older population segment...
Seite  20. 5. 2004 Measures taken M 1  .. M x A paradigm for change ( Performance Metrics t Positive Vision ‚ Horror‘ 5 Y....
Szenario planning as tool for making vision concrete Seite  20. 5. 2004 Social  civil society Dynamic  growth society Toug...
Demographic change as opportunity  for wide-ranging innovation of society Seite  Aktion Demographischer Wandel 20. 5. 2004...
Agenda Seite  Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany:  Need for a turn-around </l...
What does it mean for you? <ul><li>New concept of work </li></ul><ul><li>New concept of age </li></ul><ul><li>New concept ...
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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.

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Leadership Challenges in the Context of Demographic Change

  1. 1. Leadership Challenges in the Context of Demographic Change Dr. Johannes Meier HHL, Leipzig, 26. 05. 2004
  2. 2. Our Future? Seite Aktion Demographischer Wandel 20. 5. 2004
  3. 3. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  4. 4. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  5. 5. Seite 20. 5. 2004 Germany‘s population will shrink dramatically until 2050 Source: Enquete-Kommission Demographischer Wandel, UNFPA, Eurostat, Bundesminister des Inneren
  6. 6. Seite Aktion Demographischer Wandel 20. 5. 2004 Source: Fuchs/Thon 1999 , The working population will shrink most dramatically
  7. 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. 8. Seite 20. 5. 2004 Employment Rates of Older People (55 – 64 Jahre) Source: OECD-LMS
  9. 9. Seite 20. 5. 2004 The baby boomers are moving towards retirement
  10. 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. 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. 12. Need for a turn-around <ul><li>Public social systems will collapse unless changed fundamentally </li></ul><ul><li>Pay-as-you-go-system of pension financing no longer robust given jobless rates and demographics </li></ul><ul><li>Financing for health system linked too much to employment income as basis for contributions </li></ul><ul><ul><li>Corporate pension systems likely to be under-financed </li></ul></ul><ul><li>Prevalent accounting practices may not properly reflect the longer life expectancy of former employees with pension rights </li></ul><ul><li>Education system not performing adequately to guarantee necessary productivity increases to maintain prosperity levels </li></ul><ul><li>PISA-study reveals fundamental deficits in education system </li></ul>Seite Aktion Demographischer Wandel 20. 5. 2004
  13. 13. Corporate warning signs <ul><ul><li>Significant differences in accounting practices and interpretation by rating agencies of on- vs. off-balance sheet funding of pensions </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>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) </li></ul></ul><ul><ul><li>British Telecom pension fund had assets of 25 bn £ in 2003 with commitments exceeding assets by 4,2 bn £. </li></ul></ul><ul><ul><li>British Airways has off-balance-sheet pension fund assets of 10 bn £ and a market cap of 2 bn £. </li></ul></ul>Seite Aktion Demographischer Wandel 20. 5. 2004
  14. 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. 15. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  16. 16. Complications: Bail-out opportunities for the talents and wealthy <ul><li>Bail-out 1: Migration and brain drain </li></ul><ul><ul><li>Intra-national migration: The emptying of some parts of the country </li></ul></ul><ul><ul><li>International migration: Brain drain towards attractive regions (currently USA) </li></ul></ul><ul><li>Bail-out 2: Career wins against child bearing especially among educated women </li></ul><ul><ul><li>Better educated women get less children and at a later stage in life </li></ul></ul><ul><li>Potential results of bail-outs for Germany </li></ul><ul><ul><li>Note: School performance of children correlates with education of parents </li></ul></ul><ul><ul><li>Risk: We may end up with those who do not have the talent, education and mobility </li></ul></ul>Seite Aktion Demographischer Wandel 20. 5. 2004
  17. 17. Seite Aktion Demographischer Wandel 20. 5. 2004 Migration 1999-2020 (Optimistic scenario)
  18. 18. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  19. 19. How to manage a corporate turn-around? <ul><li>Lesson 1: Face reality </li></ul><ul><ul><li>Fact-based analysis of drivers of success or failure </li></ul></ul><ul><ul><li>Performance metrics for the whole value-chain </li></ul></ul><ul><li>Lesson 2: Create a positive vision </li></ul><ul><ul><li>Without hope there is no reason why employees should bother </li></ul></ul><ul><ul><li>Positive earnings above the cost of capital are a must for survival </li></ul></ul><ul><li>Lesson 3: Measure and celebrate success on the way </li></ul><ul><ul><li>Many steps are necessary on all levels for an effective turn-around </li></ul></ul><ul><ul><li>Clear priorities need to be set and measured relentlessly </li></ul></ul><ul><ul><li>Celebrate each successful step! </li></ul></ul>Seite Aktion Demographischer Wandel 20. 5. 2004
  20. 20. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  21. 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. 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. 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. 24. Demographic change as opportunity for wide-ranging innovation of society Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>FROM </li></ul><ul><li>Longer life working time </li></ul><ul><li>Need for private insurance </li></ul><ul><li>Loneliness in old age </li></ul><ul><li>Young generation as financial burden bearer </li></ul><ul><li>Children as poverty factor </li></ul><ul><li>TO </li></ul><ul><li>Ability to work longer </li></ul><ul><li>Permission to work longer </li></ul><ul><li>Freedom of own responsibility </li></ul><ul><li>Contribution to society value chain in old age </li></ul><ul><li>Young generation as our future </li></ul><ul><li>Children as basis for meaning in life </li></ul>
  25. 25. Agenda Seite Aktion Demographischer Wandel 20. 5. 2004 <ul><li>Demographic change in Germany: Need for a turn-around </li></ul><ul><li>Complication: Bail-out opportunities for the talented and wealthy </li></ul><ul><li>Excursion: How to manage a corporate turn-around </li></ul><ul><li>Application of leadership lessons from corporate turn-arounds to demographic challenge </li></ul><ul><li>What does it mean for you? </li></ul>
  26. 26. What does it mean for you? <ul><li>New concept of work </li></ul><ul><li>New concept of age </li></ul><ul><li>New concept of society </li></ul><ul><li>New concept of identity </li></ul><ul><ul><li>Additional focus on value add for society </li></ul></ul><ul><ul><li>Work outside employment contexts </li></ul></ul><ul><ul><li>Multi-generational, multi-level division of work </li></ul></ul><ul><ul><li>Older age with large productivity potential </li></ul></ul><ul><ul><li>Older age with large responsibility to harness productivity potential </li></ul></ul><ul><ul><li>Opportunity for civil society </li></ul></ul><ul><ul><li>Competition for talents and youths among communities </li></ul></ul><ul><ul><li>Balance between self-interest and interest in self </li></ul></ul><ul><ul><li>Multi-cultural, global development space </li></ul></ul>Seite 20. 5. 2004

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