A monthly report to keep you thinking about the strategic impact of

society, technology, economics, ecology and politics.

September 2007

This month’s issue:

The Upcoming Talent Crunch

2007 - 2027

Welcome to the STEEP Report.

Here at Competitive Futures, we work every day with leaders of business and government to help them anticipate and profit from future trends.

Our clients have been asking us to develop a different kind of strategic update service. Many of our clients have subscriptions to services that bombard them with interesting facts about the changing world – hundreds of emails a week! They said to us, “Give me ONE trend, ONE thing to tell my CEO about if I get him in the elevator. Give me ONE interesting trend per month – and what to do about it.”

Once a month, the STEEP Report brings you the most important developments in Society, Technology, Economics, Ecology, and Politics. Our goal is to give you a five to twenty year perspective on the major changes of the day – the long-view in a world that prizes next quarter thinking. Unlike many news services that simply push data on you, The STEEP Report brings you strategic implications and recommendations from both our own analysts and world-renowned subject matter experts. We bring you the future, what it means, and what you can do today to profit tomorrow.

I look forward to helping you inspire vigorous strategic discussions and also to help you create a culture of future-focused leaders, wherever you are.

Yours, Eric Garland

Eric GarlandPrincipal

Competitive Futures, Inc.

About THE STEEP REPORT: a monthly service to help businesses anticipate and profit from what’s next

Think S.T.E.E.P. to anticipate future trends

Why do we talk about S.T.E.E.P.? What does it mean?

If you happened to read Eric Garland’s Future Inc: How Businesses

Can Anticipate and Profit from What’s NEXT, then you remember that one of the biggest reasons companies are surprised by the future is that they don’t look at changes outside of their own industries. (Record companies were caught flatfooted by the expansion of the home computer and the MP3, and ended up suing teenagers, for example.)

One remedy we recommend is to look beyond your industry in a systematic way – dividing up trends into groups such as Society, Technology, Economics, Ecology and Politics. This forces you to consider broader changes that are not obvious, not directly from your industry or right in front of your nose. This is essential in a rapidly-changing global economy! Here at Competitive Futures we say the world is superconnected – meaning that family trends, the Internet, biotechnology, agriculture, beer, air travel – it’s ALL going to change your future. So you must stay on top of all kinds of trends.

As such, not every issue of The STEEP Report will appear to pertain directly to you. But think deeper – it will likely mean something to your customers, your suppliers, the government.

Combine insights about this broader future with your tactical, day-to-day, cash-register-filling activities, and you’re practicing future intelligence.

The STEEP Report is designed to help you develop a culture of future intelligence

The STEEP Report is just one tool to use in developing a culture of future intelligence. The Future Intelligence System, elaborated in Eric Garland’s book Future Inc.: How Businesses Can Anticipate and Profit from What’s Next, shows that there is an organized, rigorous way to bring the future into the strategic thinking of your organization. There are six steps:

Systems thinking – thinking broadly Trend analysis – collecting reliable data about the futureForecast assessment – considering the opinion of expertsImplications analysis - asking what it all meansScenario generation – weighing several strategies Communications - sharing your insights with others

The STEEP Report is a point of departure for several of these steps, specifically systems thinking, trend analysis, and implications. Our goal is to bring you the larger system, the relevant trends, and some thinking about what it all means.

The rest is up to you – we hope you’ll use this series of reports to get your organization talking about what these changes mean (implications) and how trends could combine in different ways (scenarios) and to bring more of your company into the discussion (communications).

In the end, we hope this motivates profitable action – ahead of the competition.

Please let us know any feedback at steepreport@competitivefutures.com.

Sept 2007 STEEP Report: At a glance

The Big PictureOverview

60 Seconds with the CEOSystems Map

Timeline

The TrendsTrend #1: Aging populations leads to mass retirement

Trend #2: International competition for talentTrend #3: Increase in knowledge-based industries

Trend #4: Generation X & Y taking power, with different values

What to do TodayStrategic implications

Recommendation

The Big Picture60 Seconds with the CEO

OverviewSystem MapThe Timeline

THIS MONTH’S ISSUEWhy We chose…

THE FUTURE OF THE TALENT CRISIS(Because, oddly, the HR Department could be the key to future profitability)

Human resources is almost NEVER on the vanguard of future trends. Biotechnology and genomics? Sure. Nanotechnology? Frequently. The next generation wireless internet? Absolutely. But the HR Department?

Human resources is going to be one of THE key drivers of the 21st century. Here’s why. Think of the following activities. Designing missile guidance systems. Accounting for oil and gas. Fixing elevators. Delivering great customer service. Performing colonoscopies. Formulating arms proliferation policy in Central Asia.

What do they have in common? NONE OF THEM ARE EASY. NONE OF THEM ARE SIMPLE. The critical skills of a developed economy cannot be learned at some weekend training seminar in the ballroom of a Holiday Inn. The experts take time and effort to develop. Due to global aging , nearly HALF of all subject-matter experts are retiring, leaving a GLOBAL TALENT CRISIS for companies to navigate. Moreover, it’s a global issue, touching all industrialized – and industrializing! – countries.

This doesn’t mean there’s going to be NO talent. It means there will be increased competition for the best brains – and your future profitability may rest in the hands of your HR department.

There’s more to consider. Come with us as we explore the factors that will change the nature of recruiting and retaining talent.

When the Boomers retire, your company is going to be strapped for talent. This you know. Remember that nearly EVERY company throughout the industrialized world is going to be lacking skilled workers, and thus competing for the same brains.

There are two major fixes: Recruitment, and knowledge management. The smart money is preparing human capital systems that attract and keep top people and keep valuable knowledge in your company any way you can.

When this crisis hits over the next 15 years, successful companies may be defined by those who build their human resources today.

HUG A 30 YEAR OLD. Loss of human capital due to global aging and mass retirement will challenge long-term profitability. To assure your success over the next fifteen years, your organization must

take a proactive approach to human capital and knowledge management.

Alumni relations

Demographics

Education

RecruitmentRetention

Workforce Development

Retirement

WILDCARD:Technology:Will robots & IT help any of

this?

Gen Y needs work skills in addition to their tech

savvy

Generation X needs

leadership training

Boomers demand the

new retirement:

Half retirement,

Late retirement,

NO retirement

Form consulting relationships with

retirees – an alumni network

Skyrocketing cost of college

and grad school makes young workers more indebted

than ever

Unprecedented global aging

sends millions of experts into

retirement

New immigration:

H1B Visas hard to get

Branding & marketing as important for HR as it is

customers!

Talent poaching may

be more important than price wars in the

competition of tomorrow

Need for a variety of

compensation:

Money, time, education,

lifestyle

Outsourcing increases to find scarce

talent

TALENT CRUNCH2007 – 2025

A systems view

Birthrate insufficient to

provide enough workers

Immigrants starting to go BACK after working in USA

Trend #3: Industries more

knowledge-based than ever

Trend #1: Aging populations

around the world

Trend #4: Gen X & Y ascending to

management

Trend #2: Global demand for

talent increasing

2009 2013 2017 2020 202720072007: Business and government begins to take the upcoming talent crunch seriously – Now, what

comes next?

2015: Missing 200,000 doctors,

800,000 nurses in the USA

alone!

2010: Millions of Boomers

discover $50,000 not enough to

retire, seek consulting positions

2011: More Latinos returning home to take advantage of booming

economy in Mexico, Costa Rico, not to mention good

coffee, fresh fruit, good music.

YOU, 2020:Did you use the trends you see here to anticipate and

profit from what’s next, or did these developments

take you by surprise?

2012 :People hiring ANY 26 year old off the

street to be director of

marketing – gotta have

someone, right?

TIMELINE: A short history of the future

2020: China needs 1.1

billion workers to operate its

economy

In Future Intelligence, we like to see the next 15 years of developments and compare them with what we expect in our own industry.

What does your timeline look like?

2009: Lack of engineers and

scientists intensifies

The Trends

Four major trends are making human resources

a strategic issues for the next fifteen years

MASS GLOBAL RETIREMENT

INTERNATIONAL COMPETITION FOR TALENT

INCREASINGLY KNOWLEDGE-based industries

Generation x & y take power and have different values

Trend #1: Global aging leads to mass retirement

50% of top execs at Fortune 500 ready to retire within five years

Italy: Rapidly aging population, birthrate of only

1.2

Federal government losing people en masse: 60% of total federal workforce, 90% of senior executive staff in next ten years

Healthcare workforce: Short 200,000 doctors, 800,000 nurses by 2020

U.S. Fed Chief Ben Bernanke: “Avoiding dealing with the Boomer retirement may harm the U.S. economy.”

U.S. Defense contractor: “We expect 2/3 of our engineering staff to leave within 5 – 8 years.”

Japan: Turning Daycare Centers right into Senior Care Centers

Worldwide, the Boom Generation (born 1945 – 1961) is preparing to leave the workforce. Its effect will be unprecedented in the history of industry

Most industrialized countries are

unprepared for the shock!

Twenty and thirtysomethings remain hungry to prove themselves, to buy houses, and to pay off recently-acquired student loan debt. So Boomers may stay in the workforce, but they won’t be a replacement for hungry, motivated, (indebted) talent.

Let’s take a second away from strategy to deal with a particular psychological blindspot in America. At Competitive Futures, we have heard people try to dismiss the impact of the aging and talent crunch trend, implying that Boomers will be different in their old age. After all, for Boomers it was “Life Begins at 40” then “Fabulous at 50,” and now even – “60 is the new 40.”

IT AIN’T. And that’s not because of Boomers, who may in fact be more social, healthy, and active than previous generations of sixty- and seventy-somethings. It’s not about Boomers being different. It’s that 30 is about the same as it ever was.

But wait, we’re Boomers and we feel great.

Isn’t 60 just the new 40?

COMPETITIVE FUTURES NEWSFLASH:

60 IS NOT “THE NEW 40.”

Not shockingly, 2/3 of Boomers want a phased-retirement – some work, some play

The IRS has put forth a proposal to allow workers to collect ½ salary, ½ social security

It used to be a pretty straight line from the office chair to the rocking chair. But there are financial and industrial realities that may change what the next retirement looks like.

So Boomers may not leave the workforce entirely, but will likely create

THE NEW RETIREMENT

ITEM: 55% of Boomers aged 45 – 54 have less than $50,000 saved toward retirement. 66% have less than $100,000. 90% have less than $250,000

Trend #2: Competition for talent is global

India

Malaysia

Costa Rica

“The IT industry in the country could be running out of ‘employable talent,’ especially where new recruitments are concerned.”

“93% of companies report having trouble finding skilled workers.”

“The rapid growth of our nation’s industries is leaving our companies hurting for skilled labor.”

People often think only the United States and Europe are going to be looking for talent

Match the talent crisis with the country:

Trend #2: Competition for talent is global

India’s thriving economy is leading directly to a homegrown talent crunch. Due to the linguistic and cultural barriers inherent in global work, only 25% of tech grads and 10-15% general grads of India are ready for work with Western companies

Australia and New Zealand are especially looking for talent – 61% of companies report difficulty finding appropriate candidates

As Latin America increases in prosperity, its brain drain of the 1970s, 80s, and 90s, due largely to civil strife, is causing a lack of homegrown talent

A dangerous assumption people make is, “Well, if we’re short of talent, we’ll just import more from (Mexico, Turkey, Philippines - wherever.)”

Not so fast. The critical, oft-forgotten aspect about global aging and talent crisis is that it’s GLOBAL! Just as many countries are establishing advanced industries, they are becoming crippled for talent.

Trend #2: Competition for talent is global Here’s a quick hint about a counter-trend to immigration U.S. and European

: Immigrants making money, getting educated in the U.S., then returning

HOME.

IT Talent recruiterRanjit Pradesh:

“Many Americans still believe that that everybody on earth would like to live in America. In fact, many Indians I recruit find American life to be a pain – high stress, expensive, and you have to do your own laundry! Life at home is quite a bit easier.”

Washington DC salsa singer Verny Varela:

“Cali, Colombia is probably poorer now than when I left eight years ago, but the life style is still better than the United States. Fresh fruit, good coffee, and you always have time for your family.

Many Latinos are saving up money to go home – they don’t want to stay here permanently. ”

ESPECIALLY IMPORTANT The future of immigration is changing just as fast as the global labor market is changing.

This is a key point: Believe it or not, the whole world is not necessarily scrambling to work in the United States.

More on this in a future issue of The STEEP

Report

Trend #3: Industries are becoming more knowledge-based than ever.

According to the U.S. Dept. of Education: 60% of all new jobs in the 21st century will require skills that are possessed by only 20% of the current workforce.

Research and development is more essential than capital investment for future success--the top-ten R&D spenders increased R&D by 42% since 2000, while only increasing capital investments 2% in the same period. Businesses are investing in brains.

China and India taking next step into value added products – the more complex their economy becomes, the more they require brains as well. Consider the billions of dollars they are investing in nanotechnology. They aren’t just looking for simple machinists or guys who can paint. Asian industries are becoming every bit as knowledge-intensive as Western ones.

In short, replacing people is going to get even harder, because world-class companies are increasingly driven by innovation and intellectual

capital than by physical capital and brute strength.

Trend #4: Generation X & Y ascending to power……but with a different set of values

“Slackers”ApatheticCynicalRebellious against traditional authority

Since we’re talking about attracting the next wave of talent, it bears mentioning that the people for which you are competing are going to be a bit different than past generations.

Let’s have a quick look.

Generation X Cliches

Generation Y Cliches

Old stereotypes that have been beaten to death in the media

SelfishWhinersCreativeNever even heard of how traditional authority is supposed to work

Think deeper about these upcoming generations and how they will LEAD, not just how they work!

The point is, they are soon to be LEADERS!

The job market has never been good or stable for either generation. Even the Dot Com boom was chaotic, if well-paid.

Degree inflation has requires Gen X and Y to get lots of expensive masters degrees – they are chomping at the bit for real jobs

Both generations in record levels of debt – housing and education costs have skyrocketed well ahead of wages

Gen Y is the YouTube community, and virtual networks are more comfortable than typical military-styled hierarchies

Cliches aside – here’s the real issue:Gen X and Y will be entering positions of responsibility very quickly once people

begin to retire – and they lack managerial experience as well as practical business

experience.

Trend #4: Generation X & Y ascending to power……but with a different set of values

What To Do Today

WHY THIS FUTURE IS DIFFERENT

Competition for skills is not new, but the upcoming global demand is unprecedented.

Plus, one hundred years of constant economic development throughout the world means some formerly poor nations (India, China, Malaysia, Korea) are

competing for the exact same types of brains.

We’ve never had to deal with anything like this.

Trend #3: Industries more

knowledge-based than ever

Trend #1: Aging populations

around the world

Trend #4: Gen X & Y ascending to

management

Trend #2: Global demand for

talent increasing

There has never been global demand of this magnitude for highly-

skilled talent.

Act TODAY.

Strategic implications – why you should care

Strengthening human resources is one of the keys

to the future of competition

Need for immigration will

exacerbate ethnic tensions –

especially in Europe and Asia

Likely, in your career, human resources has been the office that deals with health insurance paperwork and runs the career fair at the college. They are about to be the lynchpin in ALL of your strategic plans.

We can talk glibly about talent crossing boundaries, but not every nation is culturally ready to accept new people. Japan and Europe have need of MILLIONS of workers, but they will have to come from other countries. This is going to mean ethnic tensions unprecedented in their history. The United States and Canada may benefit as places that have practical experience bringing in new cultures.

Information is headed for the golf course – and must be caught on the way out the door!

Chances are, you will never hire and train enough people to make up for the talent getting ready to walk out the door, especially in very technical fields. To make up, you must improve your knowledge management systems, capturing tacit-but-vital knowledge from your talent before they retire

Strategic implications – why you should care

India, China, Latin America, and

other economies will be constrained

by this talent crunch

Consulting / outplacement

firms will catch up the slack – but at a

cost

For years, we have heard about how fearsome India and China are as competitors. As the talent crunch hits, they will be just as susceptible as everyone to the lack of talent. Manufacturing may not just be about price when engineers start aging in Asia.

Consulting firms and other contractors are often used to make up for talent that their customers cannot find. As the talent crunch hits, many organizations will turn to them as a short-term fix. Naturally, the more that talent is found this way, the more labor costs will increase.

Don’t expect other countries to take this lying down- according to Manpower, the Malaysian government is planning to offer significant “come home” bonuses. As standards of living increase throughout the developed world, it will be more difficult to attract top talent from abroad –they may be living quite well where they are!

Smaller nations will fight to keep their homegrown

talent

Recommended options:What can you do today?

Start an alumni network

Long-term relationships are the

key to profit

Knowledge capture, expert systems

Audit your human capital “balance sheet”

You study all kinds of risk when you make future plans. Quick – how much is your human capital worth? Where are you lacking? If you don’t know the answer – find out now! By the way, the HR Department may not have a reliable way to give you numbers – it’s still a new field!

Part of a long-term approach to relationships is keeping in touch with people after they leave – whether they are 30 or 70. Facebook is already offering social networking for companies. Think of ways to keep people involved after they leave your company. You’ll need access to those brains!

We always hear “Oh, there’s no loyalty anymore.” Hey, for years there’s been no loyalty on anything – not in a world where companies are bought, refinanced, downsized, and shipped overseas. But today is a perfect day to start thinking about everything in terms of long-term relationships with people. You future profitability will depend on keeping people and their knowledge over the long term.

At the very least, you should attempt to capture the “lessons learned” of your most experienced employees. Some corporations are using “corporate historians” to chronicle these lessons in an organized way. But you may want to go further. Back in the 1970s and 80s, people started experimenting with “expert systems” software-based processes that would mimic the decision making ability of the pilots, surgeons, and other specialists. It didn’t work that well at the time. Tomorrow, there will be new impetus to make up for the lack of expertise – it could work this time around.

Recommended options:What can you do today?

Make friends with Universities

Have multiple “retirement” options

for employees

We talk about the future of retirement. Have you asked what your employees want? One study showed that 93% of executives surveyed believe aging workers want to remain in the workforce for financial reasons – but a whopping 80% of them have not asked their aging workers about their intentions and their needs! So ask today – and start to design custom retirement options.

The American Association of College’s and Employers says one best practice is to forge long-term relationships with the universities and colleges that will be training your next workforce. This may be more than just sponsoring basketball games and coming to the jobs fair. Do you have a network of career professionals at your local universities? What about the people who make the curricula for the professions you need most? Time to forge closer ties.

Mentor, mentor, mentor

For decades, employers have had their pick of Boomer aged talent – after all, the generation is just so big, there is lots to choose from! This has had an unintended consequence – many companies look around and realize they haven’t planned sufficiently for a succession plan. MENTORING is the answer. Hug a 30 year old today– they are about to get scarce. Pick leaders in your organization while they are young and offer them long-term career ladder. Trust us – Generation X isn’t used to that kind of treatment!

Brand yourself as a great place to work

over a lifetime

Branding – it’s not just for customers anymore. Since you are about to be trying as hard to get talent are you are customers, your branding must serve two roles. You must show your products are great, but just as important, you must show what a great choice you are an employer. After all, young talent is going to get so scarce, they will have their pick of companies. Start branding now.

Find Out MoreThe Talent Crunch is a complex topic and means different

things to different organizations.

We hope you’ll use this briefing as just the beginning of this subject.

For more, check out the references included below.

Find out more: Books

Lost Knowledge: Confronting the Threat of an Aging Workforce by David Delong

Doing Nothing is NOT an Option!: Facing the Imminent Labor Crisis, Robert Critchley

The 2010 Meltdown: Solving the Impending Jobs CrisisBy Edward Gordon

Bridging the Generation Gap: How to Get Radio Babies, Boomers, Gen Xers, And Gen Yers to Work Together And Achieve More by Linda Gravett and Robin Throckmorton

…And many other titles.

Find out more: Articles• “Winning the Talent Wars” by Lars Daggard http

://www.businessweek.com/careers/content/feb2007/ca20070207_039145.htm?chan=search

• “How ‘Boomerang Recruiting’ Brings Valued Execs Back” (from 2000) http://www.businessweek.com/careers/content/jul2000/ca20000726_862.htm?chan=search

• “The Future of the Global Workforce” January 2006 – registration required http://www.forbes.com/leadership/2005/12/30/manpower-careers-employment-cx_0102mckinsey.html

• “Few U.S. Employers Retain, Recruit Older Workers Despite Feeling the Crunch from Talent Shortages” http://www.thematuremarket.com/SeniorStrategic/manpower_seniors-8955-5.html

• “The Battle for Brainpower” The Economist” October 2006 http://www.economist.com/surveys/displayStory.cfm?story_id=7961894

• “Generation Y: What is With You People and 8:30 AM?” Harvard Business Review Online; July 2007; http://discussionleader.hbsp.com/erickson/2007/07/what_is_it_with_you_people_and_1.html

• Generarion Y at the workplace http://www.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm

• Dealing with Generation Gap at the Workplace, http://www.cnn.com/HEALTH/library/WL/00045.html

• Generation X and the Work-Life Balance http://www.careerjournal.com/hrcenter/articles/20051205-chao.html

•Generation X Retention Tips http://www.fastcompany.com/articles/2007/06/retaining-younger-workers.html?partner=rss-alert

Addendum: Talent Crunch - By the Numbers

Figure Source

50% of top execs at Fortune 500 ready to retire within five years

Fortune, Sept 25, 2006http://www.fortune.com/whatever

Federal government losing people en masse: 60% of total federal workforce, 90% of senior executive staff in next ten years

Office of Personnel Management: May 5, 2007www.fcw.com/article102606-05-07-07

Healthcare workforce: Short 200,000 doctors, 800,000 nurses by 2020

USA Today, March 2, 2005http://www.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm

Japan expects its workforce to shrink by 16% (some 10 million people) over the next 25 years.

The Economist. “How to manage an aging workforce.” 18 February 2006

Between 2025 and 2030, 12 million people a year will be exiting the global workforce

Manpower White Paper: 2007http://www.age-platform.org/EN/IMG/pdf_OlderWorkforce_Global_US_Letter.pdf

78% of respondents say that ‘increasingly global talent and labor markets are important/very important’ but only 48% of companies are taking action on that trend.

The McKinsey Quarterly: 2007http://www.mckinseyquarterly.com/article_abstract_visitor.aspx?ar=1998&pagenum=1

93% of surveyed employers believe older workers want to work longer for financial reasons; 80% of those surveyed have not bothered to ask their older workers about their intentions

Corporate Voices for Working Families: 2006http://www.cvworkingfamilies.org/downloads/TalentDebate.pdf?CFID=22487671&CFTOKEN=60403015

Addendum: Talent Crunch - By the Numbers

Figure Source

According to research from the International Workforce Survey of May 2007, 68% of companies worldwide do not have an employer brand strategy.

Robert Half Financial Services Grouphttp://www.accountemps.net/Site/showpage.jsp?s=RHB_UKE&p=PRESS_DETAIL&prid=449

Only 25% of technical graduates and 10-15% of general graduates are suitable for employment in offshore IT/BPO industries in India.

The Hindu, February 2, 2006.www.thehindu.com/2006/02/02/stories/2006020206230400.htm

69% of surveyed HR practitioners said that attracting new talent posed the greatest threat to competitiveness.

Deloitte LLC, May 19, 2005http://www.deloitte.com/dtt/press_release/0,1014,sid%253D2834%2526cid%253D94680,00.html

90% of companies surveyed in a March 2007 study by ERC reported having difficulty finding the talent they needed; 20% considered the problem severe.

Worldwide ERChttp://www.erc.org/news_events/Press_Releases/03-05-07_newhire.shtml

55% of boomers aged 45-54 have less than $50,000 saved for retirement; 2/3 have less than $100,000 saved.

US News & World Report, June 5, 2005http://www.usnews.com/usnews/biztech/articles/050613/13squeeze.htm

Nearly two-thirds of workers over 50 hope to scale down their hours or work in a flexible environment before retiring completely.

Watson Wyatt Worldwidehttp://www.watsonwyatt.com/research/resrender.asp?id=w-731&page=1

According to AARP, 69% of workers plan to work in some capacity in their retirement years – or not retire at all.

AARPhttp://www.aarp.org/money/careers/employerresourcecenter/trends/business_case_for_workers_age_50_key_findings.html

Coming next month in:

The slow collapse of the American healthcare system

ContactFor more information or to discuss what this means for you, contact:

steepreport@competitivefutures.com

(202) 508-1496