Tag Archives: Jobs

Updates from McKinsey

The drumbeat of digital: How winning teams play
Pace and power go hand in hand for digital leaders, which typically run four times faster and pull critical strategic levers two times harder than other companies do.
By Jacques Bughin, Tanguy Catlin, and Laura LaBerge – Most executives we know have a powerful, intuitive feel for the rhythm of their businesses. They know how hard and fast to pull strategic levers, move their organization, and drive execution to achieve their objectives. Or at least they did. Digitization has intensified the rhythm of competition in many industries, leaving executives adrift, with information-gathering systems that are too slow or disconnected, direction-setting approaches that are too timid, and talent-management norms that are misaligned and incremental.

These leaders know their companies must adjust and accelerate. Digital is putting pressure on profit pools as it transfers an increasing share of value to consumers. Furthermore, those profit pools are bleeding across traditional industry lines as advanced technologies enable companies to forge into adjacencies, changing who in the value chain is making money, what share of the pie they capture, and how. The slow and inefficient are left behind, competing for scraps.

What is unclear to these executives, however, is how much and how fast to adapt their business rhythms. The exhortation to “change at the speed of digital” generates more anxiety than answers. We have recently completed some research that provides clear guidance: digital leaders appear to keep up a drumbeat in their businesses that can be four times faster, and twice as powerful, as those of their peers.

You can’t quicken the pace of an organization by fiat. You have to build it by accelerating the frequency of manageable practices that are integral to achieving key goals, such as serving the customer or driving internal efficiency. These “light-touch” actions are low risk and low investment, but they can provide high-yield returns. We have grouped them into two buckets that can help mold incumbents into digital players.

How often does your organization analyze customer data to look proactively for new ways of delighting your customers?

How frequently do your senior business leaders take time to investigate and understand new digital technologies so that they recognize which ones are truly relevant to their areas of the business?

How quickly and consistently does your company share lessons acquired from test-and-learn experiments performed by those on the front lines? more>

Updates from McKinsey

Redefining the role of the leader in the reskilling era
To enable continuous learning, leaders will need to think and act differently.
By Lynda Gratton, Joe Voelker, Tim Welsh and David Rock – ontinuous learning in the workplace must become the new norm if individuals and organizations want to stay ahead. This places more demand than ever on leaders to take on a new role they might initially find unfamiliar—that of learning facilitator-in-chief.

It’s harder to learn new things as an adult; the pain of making mistakes doesn’t roll off as quickly as it might have when we were younger. So how can leaders foster an environment of psychological safety where employees are supported but still productively challenged? The members discussing this problem concluded that part of the solution may be for leaders to dial up their levels of empathy and humility and focus more on enabling the best in their people, rather than commanding it from them.

When we think about reskilling, our minds immediately go to the idea that you do a program or a course, something concrete that upskills you. Actually, for most people, their capacity to reskill comes from the job itself. So the crucial role for leaders is to be thoughtful about the way they design jobs, how they allow their people to move across different types of positions at the company, and allowing those employees to build their skills and forge a navigable path.

Because for most people, it’s likely that the job they’re in now will not exist in the future—or at least not in the same form. So leaders need to provide ongoing momentum for people to use their agency to decide for themselves, “What am I going to do next?

To give employees the insights they need to make informed decisions, it’s also important for leaders to help people in their organization understand what’s happening in the world—maybe not in 30 years’ time, but certainly in three years’ time. Data show clearly that people want some sort of insight about where they might be going in their organization and what role they might play in it or not. Leaders need to be transparent and honest about those changes, engaging in an adult conversation about what might realistically happen in the future and how it could affect employees. more>

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Low unemployment isn’t worth much if the jobs barely pay

By Martha Ross and Nicole Bateman – Each month, the Bureau of Labor Statistics releases its Employment Situation report (better known as the “jobs report”) to outline latest state of the nation’s economy. And with it, of late, have been plenty of positive headlines—with unemployment hovering around 3.5%, a decade of job growth, and recent upticks in wages, the report’s numbers have mostly been good news.

But those numbers don’t tell the whole story. Are these jobs any good? How much do they pay? Do workers make enough to live on?

Here, the story is less rosy.

In a recent analysis, we found that 53 million workers ages 18 to 64—or 44% of all workers—earn barely enough to live on. Their median earnings are $10.22 per hour, and about $18,000 per year. These low-wage workers are concentrated in a relatively small number of occupations, including retail sales, cooks, food and beverage servers, janitors and housekeepers, personal care and service workers (such as child care workers and patient care assistants), and various administrative positions. more>

Updates from McKinsey

How to develop soft skills
As today’s skill shift accelerates, it is essential that organizations enhance and expand development initiatives for business longevity.
By Julie Avrane-Chopard, Jaime Potter, and David Muhlmann – As automation and artificial intelligence dramatically change the nature of work, employees must fine tune the social and emotional abilities machines cannot master. To encourage this behavior, employers must adjust the ways they assess, educate, train and reward their workforce on soft skills such as collaboration, communication and critical thinking.

Soft skills, which are commonly defined as non-technical skills that enable someone to interact effectively and harmoniously with others, are vital to organizations and can impact culture, mindsets, leadership, attitudes and behaviors. These skills fall into the following categories:

  1. Advanced communication and negotiation skills
  2. Interpersonal skills and empathy
  3. Leadership and management skills
  4. Entrepreneurship and initiative-taking
  5. Adaptability and continuous learning skills
  6. Teaching and training skills

A key difference among today’s large-scale skill shift and those in the past—including the transformative transition from agriculture to manufacturing—is the urgency for workers who exhibit these capabilities.

Developing required soft skills and ensuring employees, and in turn organizations, are set up for success isn’t as simple as popping in a training video. Instead, companies must change their employees’ processes and behaviors—a much harder task.

Assessment is an important first step. Sizing the soft skill gap proves particularly challenging, since they typically lack systematic evaluation and certification mechanisms. HR departments must be equipped with a framework that codifies soft skills and defines their respective evaluation criteria.

For example, several European firms are employing “stepping stone” initiatives to build a digital platform to help workers evaluate their soft skills, know their strengths and development needs, gain access to specific trainings, and get certified.

Effective reskilling requires blended learning journeys that mix traditional learning, including training, digital courses and job aids, with nontraditional methods, such as peer coaching. One retail giant has distributed over 17,000 virtual reality headsets that immerse employees in unfamiliar situations, such as their first Black Friday sales day, and is training them in new tech, soft skills and compliance.

People naturally operate based on incentives—they do what is rewarded. To encourage people to not only begin their soft skill learning journey but to continue with it, rewards and incentives are critical. more>

Updates from McKinsey

How smart choices on taxation can help close the growing fiscal gap
The growing fiscal gap has policy makers in a difficult position. Swift action in a few areas can help them improve the operational efficiency of fiscal systems.
By Aurélie Barnay, Jonathan Davis, Jonathan Dimson, and Marco Dondi – Governments around the world have implemented a range of fiscal and debt measures to fund policy initiatives over recent decades. As a result, tax revenues as a proportion of GDP have risen four percentage points across Organization for Economic Cooperation and Development (OECD) countries since 1980. However, many governments remain inadequately funded. Despite higher tax revenues, spending is rising faster than income, leading to widening budget deficits and higher levels of debt.

Four distinct trends are playing out: increasing automation in the workplace, leading to pressure on employment; the evolution of global trade through the proliferation of e-commerce and digital business, raising questions over cross-border taxation; rising self-employment; and an aging population. Each of these could further widen the fiscal deficit in the years ahead. Moreover, we see all four accelerating, placing policy makers in an ever-tightening fiscal bind.

Basic economics provides two options for balancing the books: either increase revenues or decrease spending.

The bottom line for governments is that there are no easy answers. Whether they seek to increase taxation or boost efficiency, they are likely to face headwinds. Still, decisive and rapid action is essential to optimize tax collections and keep pace with an inevitable rise in demand for services.

Tax revenues in OECD countries have risen slightly over the past 35 years. However, spending has risen more, leading to widening deficits that governments have bridged with debt. OECD tax revenues were 34 percent of GDP in 2017. Because of tax deficits and the effects of the 2008 financial crisis, the average ratio of gross debt to GDP rose from 66 percent of GDP in 1995 to 88 percent in 2017.

Sources of tax revenue have remained stable over time. Over three decades, personal income and consumption together accounted for 82 to 89 percent of revenues. The biggest single contributor was payroll and income tax, accounting for 50 to 55 percent of revenues (even though the contribution of personal income tax declined by nearly 7 percentage points). Consumption and excise duties remain little changed at 32 to 34 percent of revenues.

More people are working for themselves, either as a contractor to several companies or a single company. This emerging gig economy accounts for an estimated 28 percent of EU and US employment. The proportion would rise to 46 percent if everyone had their preferred working arrangement, according to MGI research.

However, the gig economy creates challenges for tax authorities. First, independent workers are generally less compliant than their employed peers, and in some countries are required to pay less taxes. Evidence from the US suggests that workers subject to limited information reporting, such as the self-employed, have an around 50 percentage point lower rate of tax compliance than traditional workers. There are also ongoing legal debates in some jurisdictions over whether gig economy workers are employees for the purposes of worker classification and social security contributions.

Governments can close the widening gap between revenues and expenditures in a variety of ways through tax revenues, nontax revenues, and spending optimization. In addition, some governments are either implementing or considering approaches based on monetary finance.

The gap between government revenues and spending has widened and is likely to continue to do so. The onus, then, is on tax authorities to act now. more>

Updates from Chicago Booth

How Norway reduced the rich-poor earnings gap
By Dwyer Gunn – In the United States, vocational and technical education at the high-school level has long been controversial. Critics argue that vocational schools serve as warehouses for disadvantaged students, depriving them of the opportunity to attend college. Advocates maintain that vocational schools provide valuable labor-market skills and may better serve students who struggle with traditional academics or who can’t or don’t wish to attend college.

In recent years, however, a new vision has emerged, one that emphasizes increasing access to alternative educational models while ensuring that students who choose these pathways can still ultimately pursue higher education. Many states are exploring or have launched high-school apprenticeship programs, and there’s been renewed interest in the Career Academies education model, a 35-year-old approach aimed at restructuring high schools to create alternative pathways that lead to higher education or the workplace.

American reformers may find further inspiration in the results of a 25-year-old overhaul of vocational education in Norway. Research by Chicago Booth’s Marianne Bertrand and Jack Mountjoy, along with University of Chicago’s Magne Mogstad, suggests the reforms helped reduce the eventual earnings gap experienced by poor students, particularly boys, although not without some unintended consequences.

The sweeping changes, known as Reform 94, increased access to apprenticeships and altered the country’s vocational-track high-school degrees to allow graduates to attend college after a semester of supplemental academic courses. Before the changes, students in Norway who obtained vocational-track degrees had to restart high school and secure an academic diploma if they wanted to attend college. more>

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This is the one secret to managing an organization

By Maynard Webb – It’s all about people. You don’t have anything if don’t have great people doing great things.

So, what’s the secret? You have to have conviction about what you are doing. You have to have a mindset that says you are doing something amazing and exciting and people will want to be a part of it. In order to attract people to your endeavor, you must believe that it’s an incredible opportunity for others and you must execute and deliver on that promise.

Always be on the lookout for great people, and do so with a mindset of abundance. People are yearning for good opportunities and you have the privilege of being able to offer them a chance. See what you have as what’s scarce—a rare and special opportunity. Instead of thinking of hiring as chore, see it as a gift that can change someone’s life.

Always pick and promote people who will help you and your culture grow.

Don’t eliminate people because they don’t seem like a “culture fit”—embrace differences and stay rigorously focused on the cultural attributes that actually define your company. more>

The Unwinnable Trade War

By Weijian Shan – There are at least two reasons why Chinese exports to the United States have not fallen as much as the Trump administration hoped they would. One is that there are no good substitutes for many of the products the United States imports from China, such as iPhones and consumer drones, so U.S. buyers are forced to absorb the tariffs in the form of higher prices.

The other reason is that despite recent headlines, much of the manufacturing of U.S.-bound goods isn’t leaving China anytime soon, since many companies depend on supply chains that exist only there. (In 2012, Apple attempted to move manufacturing of its high-end Mac Pro computer from China to Texas, but the difficulty of sourcing the tiny screws that hold it together prevented the relocation.)

Some export-oriented manufacturing is leaving China, but not for the United States. According to a May survey conducted by the American Chamber of Commerce in Shanghai, fewer than six percent of U.S. businesses in China plan to return home. Sixty percent of U.S. companies said they would stay in China.

The damage to the economy on the import side is even more pronounced for the United States than it is for China. Economists at the Federal Reserve Bank of New York and elsewhere found that in 2018, the tariffs did not compel Chinese exporters to reduce their prices; instead, the full cost of the tariffs hit American consumers. As tariffs raise the prices of goods imported from China, U.S. consumers will opt to buy substitutes (when available) from other countries, which may be more expensive than the original Chinese imports but are cheaper than those same goods after the tariffs. The price difference between the pre-tariff Chinese imports and these third-country substitutes constitutes what economists call a “dead-weight loss” to the economy.

Beijing’s nimble calculations are well illustrated by the example of lobsters. China imposed a 25 percent tariff on U.S. lobsters in July 2018, precipitating a 70 percent drop in U.S. lobster exports. At the same time, Beijing cut tariffs on Canadian lobsters by three percent, and as a result, Canadian lobster exports to China doubled. Chinese consumers now pay less for lobsters imported from essentially the same waters.

The uncomfortable truth for Trump is that U.S. trade deficits don’t spring from the practices of U.S. trading partners; they come from the United States’ own spending habits.

The United States has run a persistent trade deficit since 1975, both overall and with most of its trading partners. Over the past 20 years, U.S. domestic expenditures have always exceeded GDP, resulting in negative net exports, or a trade deficit.

The shortfall has shifted over time but has remained between three and six percent of GDP. Trump wants to boost U.S. exports to trim the deficit, but trade wars inevitably invite retaliation that leads to significant reductions in exports.

Even a total Chinese capitulation in the trade war wouldn’t make a dent in the overall U.S. trade deficit. more>

Updates from Chicago Booth

Whistle-blowers act out of a sense of morality
By Alice G. Walton – Say you witness a coworker subtly misleading a client, or rounding off sales numbers in her favor. Do you report it, or not?

Chicago Booth postdoctoral scholar James A. Dungan, Boston College’s Liane Young, and Northwestern’s Adam Waytz looked at what goes into the calculation people make when considering whether to report bad behavior. Moral concerns figure highly, they find, above employees’ feelings about their employers, fear of reprisal, and satisfaction with the recognition and rewards they receive at their job.

To understand the factors that predict the likelihood of whistle-blowing, the researchers analyzed data from more than 42,000 participants in the ongoing Merit Principles Survey, which has polled US government employees since 1979, and which covers whistle-blowing. Respondents answer questions about their past experiences with unethical behavior, the approaches they’d take in dealing with future unethical behavior, and their personal characteristics, including their concern for others and their feelings about their organizations.

Concern for others was the strongest predictor of whistle-blowing, the researchers find. This was true both of people who had already blown the whistle on bad behavior and of people who expected they might in the future.

Loyalty to an immediate community—or ingroup, in psychological terms—was also linked to whistle-blowing, but in an inverse way. “The greater people’s concern for loyalty, the less likely they were to blow the whistle,” write the researchers.

Organizational factors—such as people’s perceptions about their employer, their concern for their job, and their level of motivation or engagement—were largely unconnected to whether people spoke up. more>

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Economics Can’t Explain Why Inequality Decreases

A problem with Piketty’s explanation
By Peter Turchin – In September I went to an international conference in Vienna, Austria, The Haves and the Have Nots: Exploring the Global History of Wealth and Income Inequality. One thing I learned at the conference is that, apparently, economists don’t really know why inequality increases and decreases. Especially, why it decreases.

Let’s start with Thomas Piketty, since Capital in the Twenty First Century is currently the “bible” (or should I say “Das Kapital”?) of inequality scholars.

Piketty provides a good explanation of why inequality increases. It’s good not in the sense that everybody agrees with it, but in the sense of being good science: a general mechanism that is supported by mathematics and by data.

So far so good. But how does Piketty explain the decline of inequality during the middle of the twentieth century? It was a result of unique circumstances—two destructive world wars and the Great Depression. In other words, and forgive me for crudeness, shit happens.

This is not a particularly satisfactory conclusion. Of course, it’s possible that the general trend of inequality is always up, except for random exogenous events that knock it down once in a while. So devastating wars destroy property, and by making the wealthy poorer reduce inequality. This is one of the inequality-reducing forces that Piketty mentions several times in his book.

To me such exogenous explanations are not satisfactory. My intuition (which I understand may not be shared by all) is that when inequality gets too high, there are forces that bring it down. In other words, to some degree it’s a regulatory process, and that’s why we don’t see truly extreme forms of inequality (when one person owns everything).

In Piketty’s view, the only reason we don’t see such extremes is because some kind of random event always intervenes before we get to it. more>