Mercer Critical Workforce Challenges

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Organizations face a world economy that is complex, diverse and, to some degree, still volatile.
Today, many have returned to financial health and stability, while others are taking steps in that direction. Regardless of their current situation, employers around the world will realize greater future success if they are able to effectively confront the critical workforce challenges outlined here.

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Mercer Critical Workforce Challenges

  1. 1. INSIDE EMPLOYERS’ MINDS:CONFRONTING CRITICAL WORKFORCECHALLENGES
  2. 2. INSIDE EMPLOYERS’ MINDS:CONFRONTING CRITICAL WORKFORCECHALLENGES2 INSIDE EMPLOYERS’ MINDS
  3. 3. Four years after the global economicdownturn, organizations face a worldeconomy that is complex, diverseand, to some degree, volatile. Despitethese challenges, many markets andorganizations are steadily gainingfooting, albeit in a roller coaster-likeenvironment with spurts and stalls,talent supply and demand paradoxes,and a push and pull between employeeand employer.The future of the global economy teeters on a delicatebalance of these divergent forces. According to theInternational Monetary Fund’s World Economic Outlook,conditions remain uncertain: “Weak recovery will likelyresume in the major advanced economies, and activitywill remain relatively solid in most emerging anddeveloping economies.”1CONFRONTING CRITICAL WORKFORCE CHALLENGES 3
  4. 4. World economic outlook World output(% change) Advanced economies Emerging and developing economies 6.2% 6.0% 5.7% 4.1% 3.9% 3.5% 2.0% 1.6% 1.4% 2011 2012 2013Source: World Economic Outlook, International Monetary Fund, April 2012The implications for organizations are immense. Those that get it right– finding cost-effective ways to engage employees, drive businessstrategy and solve a number of critical challenges in 2012 and beyond– will be in a position to excel. Those that get it wrong will find theirperformance and competitive position at greater risk.Last year, Mercer surveyed nearly 30,000 workers worldwide to gaugetheir thoughts on key elements of the employment deal, includingengagement, pay, careers, retirement, benefits, company, job andwork/life. Mercer’s What’s Working™ research revealed startlingfindings, including a substantial increase in employees worldwidewho wanted to leave their current organizations. In markets hit hardby the recession, company cutbacks had begun to affect employeesatisfaction and engagement levels. But even in emerging markets, inwhich many organizations excelled during the downturn, employeeswere looking to exit, in search of new opportunities.4 INSIDE EMPLOYERS’ MINDS
  5. 5. Employee engagement, loyalty % of employees seriously considering leavingare eroding globally Asia Pacific North America UK Europe Canada Netherlands Latin America 36% 36% Ireland 28% Germany China America 35% 33% 34% Hong Kong 32% Mexico Italy 56% 39% Spain France 40% Brazil 30% 30% India Australia 56% Argentina 54% Singapore 40% 40% 42%Sources: Mercer’s What’s Working™ Survey, 2011In the wake of these developments, human capital issues havecome more to the forefront, and workers and employers are poised to “Human capital is the second-ranked criticaltry to discover common ground, for the common good. This challenge for CEOs. … The three top-rankedsentiment is manifested through a number of sources, including an strategies (grow talent internally, improveApril 2012 Conference Board report, anecdotes from the field leadership development programs, and provideand follow-up Mercer research with employers around the world employee training and development) involveregarding the most pressing concerns on their minds in 2012. actions to develop and retain employees within a company.”3According to The Conference Board CEO Challenge 2012 report, – The Conference Boardbased on a global study of 776 CEOs, presidents and boardchairs, human capital ranks second after innovation as a top CEOchallenge for 2012. The report states that “the world is a volatile placethat presents not only immense challenges but also an abundance ofopportunities” for organizations that search out unique solutions and“possess an innovative mindset and corporate culture thatbrings out the best in teams of diverse, talented, engaged, andpassionate people.” 2CONFRONTING CRITICAL WORKFORCE CHALLENGES 5
  6. 6. “The global economy has had its rough spots and many challengesawait, but smart companies are seeing the opportunity to recalibratetheir businesses with an eye toward the future,” said Julio Portalatin,who, since being named Mercer President and CEO in February 2012,has traveled the globe for firsthand accounts of client forecasts andconcerns. “An important ingredient for success will be winning the newtalent war. This means understanding the dynamics of change, placinghuman capital at the forefront, calibrating strategies based on differen-tiation through people, and having a winning culture that attracts andretains the brightest and most motivated workers.“The traditional saying that with every challenge comes opportunitycertainly holds true today,” he added. “Executives I met in my travelsnoted that these are tough times, but also confirmed that theseare exciting times for those who embrace the chal­lenges and remainfocused on finding new solutions.”6 INSIDE EMPLOYERS’ MINDS
  7. 7. WHATEMPLOYERS ARETHINKINGWhile business leaders may have initially been taken aback bythe strength of employee sentiment expressed through Mercer’sglobal survey on employee perceptions, Mercer’s more recentresearch among employers worldwide shows that senior leadersare aware of their workers’ concerns and the human capital issuesaffecting the organization. Specifically, employers say thatthey are deeply concerned about three issues in the coming year:1.Taking pension risk offthe tableEmployers are increasingly concerned about matters of cost andrisk, especially risks related to their growing pension liabilities “The explicit financial risk posed by pensionsand the potential impact on corporate cash flow, P&L and balance has the power to make or break a companysheets. With risks stemming from many sources – including stock by lowering its share price and underminingmarket volatility, fluctuating interest rates, shifting demographics plans for expansion and growth.”and more stringent pension funding, accounting and solvency – Simon O’Regan, Global Leaderrequirements – it’s imperative for plan sponsors to understand Retirement, Risk & Financetheir own risk profiles and create long-term strategies for Mercertaking pension risk off the table.Of the three major risk categories – funding level, regulatory andoperational – pension financial risk emerges as a critical area dueto the potential for significant damage. Organizations have only justbegun to address this critical issue.CONFRONTING CRITICAL WORKFORCE CHALLENGES 7
  8. 8. 2.Making smart benefitchoicesEmployers have asked employees to take greater accountabilityfor their retirement and health benefit decisions. Given these new “We have long been a society thatresponsibilities and the range of options involved, employees don’t values choices, but when you think aboutalways make good choices. Sometimes, they do nothing at all. That’s it, those choices at times are really verynot good for employees or employers. To address this challenge, overwhelming.”employers must first know which benefits their employees value and – Mindy Fox, Senior Partnerthen offer the appropriate options and educate employees about US Region Leaderhow to make the best choices. MercerCompanies also are looking to develop attractive benefit packagesin their fight for talent globally, but they have encountered obstaclesdue to a proliferation of diverse local plans, governance issues andongoing risk management. Overall, employers say they want greaterefficiency for both employees and employers; higher-quality investmentofferings aligned with employee needs and local expectations; simpleand effective governance and risk management frameworks; andflexibility to expand plans to new markets or operating centers.3.Building high-impacttalentAround the world, there’s a clear mismatch between the talentthat’s available and what’s needed to drive economic growth. This is “Most organizations around the world viewtrue within organizations and across organizations and geographies. talent as their most vital and sustainableDespite global unemployment of 205 million people, 34% of competitive advantage. Right now, everyemployers can’t fill their job openings. 4 single high-quality worker is an asset you can’t afford to lose.”Employers today must find new ways to build agile, world-class – Pat Milligan, Presidentworkforces that are ready and able to respond to evolving business Talent, Rewards & Communicationneeds and new opportunities. The solution is talent mobility in the Mercer8 INSIDE EMPLOYERS’ MINDS
  9. 9. broadest sense. Employers – both multinational and domestic – areinvolved in a global search to locate the right talent for the rightjobs at the right cost, and the next few years may very well go downin history as the great migration of, and search for, workers.FINDING THE RIGHTBALANCESuccess in 2012 and beyond will require organizations to find the right balance betweenemployer needs and employee expectations and, in particular, to effectively address thethree critical workforce challenges outlined previously.Mercer has developed a suite of resources and solutions to help employers do just this.Visit www.mercer.com/insideemployersminds to take advantage of insights fromboth Mercer experts and other respected thought leaders whose views and experiencescan help your organization define the right path forward.1 World Economic Outlook, International Monetary Fund, April 2012.2 Risky Business: Focusing on Innovation and Talent in a Volatile World, The Conference Board CEO Challenge 2012, RESEARCH REPORT TCB-R-1491-12-RR.3 Ibid.4 US Department of Labor – Bureau of Labor Statistics; 2011 Gallup Employ ment Survey; Manpower Group’s 2011 Talent Shortage Survey.CONFRONTING CRITICAL WORKFORCE CHALLENGES 9
  10. 10. For further information, please contactyour local Mercer office or visit our website at:www.mercer.comArgentina MexicoAustralia NetherlandsAustria New ZealandBelgium NorwayBrazil PeruCanada PhilippinesChile PolandChina PortugalColombia Saudi ArabiaCzech Republic SingaporeDenmark South KoreaFinland SpainFrance SwedenGermany SwitzerlandHong Kong TaiwanIndia ThailandIndonesia TurkeyIreland United Arab EmiratesItaly United KingdomJapan United StatesMalaysia VenezuelaCopyright 2012 Mercer LLC. All rights reserved. 10881B-EN

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