EMBA 716 2008 - University of Nevada, Las Vegaskleong.faculty.unlv.edu/EMBA716PowerPoint_files... · World population is expected to increase from 6.5 billion in 2005 to 9.1 billion

EMBA 7162008

Chapter 16Global Human

ResourceManagement

Global HRM

• Global population trends– “The real population problem - Too few

working, too many retired” (William Poole and David Wheelock)

• Aging and its impact on global wealth• Developing global managers and managing

global talent• American families tackle Shanghai

Global HRM

“Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital - the world's best talents and greatest ideas.”

Jack Welch

Birthrates & World Prosperity

"There are people who cling to the hope that you can have a vibrant economy without a growing population, but mainstream economists are pessimistic."

Phillip Longman

(Michael Meyer, “Birth Dearth,” Newsweek, 27 September 2004, http://msnbc.msn.com/id/6040427/site/newsweek)

"Capitalism is the best contraception."Ben Wattenberg

World Population Trend

• World population is expected to increase from 6.5 billion in 2005 to 9.1 billion in 2050

• Population growth has declined from 2% per year in the 1960s to 1.2% per year today

• Population in Africa and parts of Asia will increase in the coming decades

• India is expected to overtake China as world’s most populous country by 2030

(http://www.un.org/esa/population/publications/pop_challenges/Population_Challenges.pdf)

Countries with Population Growth

• Albania and the outlier province of Kosovo are reproducing energetically as are countries in Asia such as Mongolia, Pakistan & Philippines

• The United Nations forecasts that the Middle East’s population will double from 326 million today to 649 million by 2050

• Saudi Arabia has one of the highest fertility rates in the world at 5.7, after Palestinian territories (5.9) and Yemen (7.2)


Countries with Population Decline

(http://yaleglobal.yale.edu/display.article?id=4413)

USA – Just Chugging Along!

• US is the only modern nation that will continue to grow• Population growth in US is about 4% of world growth

but 40% of the growth is coming from international immigration

• Over the next 45 years it is estimated that the US will gain 100 million people, while Europe will lose about as many


(http://www.un.org/esa/population/publications/pop_challenges/Population_Challenges.pdf)

Declining Birth Rates & Aging

• Today, in one country out of three, the fertility is below two children per woman, the level needed to ensure stable population numbers

• Armenia, Italy, South Korea, & Japan, have fertility levels closer to one child per woman

http://yaleglobal.yale.edu/display.article?id=4413; (http://www.bis.org/publ/gten04.htm)

World Population Aging

World Population Ageing 1950-2050, Population Division, Department of Social and Economic Affairs, United Nations

Population Pyramids

China

India

World Population Ageing 1950-2050

Population Pyramids

USA

Japan


Aging Population

• As the 21st century began, the world population included approx. 600 million older persons, triple the number recorded 50 years earlier.

• By mid-century, there will be some 2 billion older persons–once again, a tripling of this age group in a span of 50 years.

• Globally the population of older persons is growing by 2 percent each year, considerably faster than the population as a whole.

• The growth rate of those 60 or older will reach 2.8 percent annually in 2025-2030.


Median Age

(http://www.stlouisfed.org/publications/re/2005/b/pages/population.html)

Median Age

• Today the median age for the world is 26 years. • The country with the youngest population is Yemen,

with a median age of 15 years, and the oldest is Japan, with a median age of 41 years.

• By 2050, the world median age is expected to have increased by ten years, to 36 years.

• The country with the youngest population in 2050 is projected to be Niger, with a median age of 20 years, and the oldest is expected to be Spain, with a median age of 55 years.


Major Findings

• “Population ageing is unprecedented, without parallel in the history of humanity. Increases in the proportions of older persons (60 years or older) are being accompanied by declines in the proportions of the young (under age 15).

• “By 2050, the number of older persons in the world will exceed the number of young for the first time in history.”

• “Population ageing is pervasive, a global phenomenon affecting every man, woman and child.”

• “The steady increase of older age groups in national populations, both in absolute numbers and in relation to the working-age population, has a direct bearing on the intergenerational and intragenerational equity and solidarity that are the foundations of society.”


Major Findings

• “In the economic area, population ageing will have an impact on economic growth, savings, investment and consumption, labor markets, pensions, taxation and intergenerational transfers.”

• “In the social sphere, population ageing affects health and health care, family composition and living arrangements, housing and migration.”

• “In the political arena, population ageing can influence voting patterns and representation.”


(“The demographic deficit: How aging will reduce global wealth,” The McKinsey Quarterly, March 2005)

Impact of Aging on Global Wealth

• “The world's population is aging, and as it gets even grayer, bank balances will stop growing and living standards, which have improved steadily since the industrial revolution, could stagnate. The reason is that the populations of Japan, the United States, and Western Europe, where the vast majority of the world's wealth is created and held, are aging rapidly.”

• “During the next two decades, the median age in Italy will rise to 51, from 42, and in Japan to 50, from 43. Since people save less after they retire and younger generations in their prime earning years are less frugal than their elders were, savings rates are set to fall dramatically.”

(“The economic impact of an aging Europe,” The McKinsey Quarterly, May 2005)

The Aging of Europe

• “By 2025, one in five Europeans will be more than 65 years old, up from 16 percent in 2002.”

• “Across the continent, the number of working-age citizens will stagnate or shrink while the number of retirees explodes.”

• “As a result, household financial wealth, which had enjoyed steady, healthy growth during past decades, will slow drastically over the next 20 years, according to new research by the McKinsey Global Institute.”

• The slowdown will leave households in three of Europe's biggest economies—the United Kingdom, Germany, and Italy—with a total of more than $4 trillion less than they would have accumulated if historical growth rates had persisted.”

The Aging of Europe

“Although Germany has the traditional hump-shaped life cycle savings curve, it also has a rather unique pattern: savings rise steeply to a peak in the late 40s, slope markedly down in the late 50s, and then plateau at a low level into retirement (Exhibit 4). Compared with other countries, savings start tailing off at a relatively early age, and this magnifies the impact of aging. In 2024 German household wealth will be 25%, or €1.2 trillion, below what it would have been.”

(“The economic impact of an aging Europe,” The McKinsey Quarterly, May 2005)

China’s Dilemma

• According to the U.N., China’s fertility rate has declined from 5.8 in 1970 to 1.8 today. The Chinese census data puts it lower at 1.3. The Center for Strategic & International Studies in Washington reported that coupled with increasing life spans, China's population will age as quickly in one generation as Europe in the last 100 years. With an expected median age of 44 in 2015, China will be older on average than the US. By 2019, the population in China will peak at 1.5 billion, followed by a steep decline. By mid-century, China could lose 20-30% of its population every generation.


The Aging of Japan

“During the next 20 years, the financial wealth of Japanese households will stop growing and begin to decline, leaving them with $8 trillion less than they would have if historical growth rates persisted, according to new research from the McKinsey Global Institute. Wealth will decline not only in the aggregate but also for average Japanese households, which will be no wealthier in 2024 than they were in 1997. The continual improvement in living standards the Japanese have enjoyed during the past half century will come to an end. The heart of the problem, as many observers have noted, is the fact that Japan is getting much older. By 2024, more than a third of the population will be over age 65—one of the developed world's largest proportions of elderly citizens.”

(“The economic impact of an aging Japan,” The McKinsey Quarterly, May 2005)


An Aging Japan


Savings Drop

“Further contributing to the challenge, the younger generation is saving far less than older generations have. Households led by people born in the 1960s and 1970s have been moving into the prime saving years since 1990. These households have higher disposable incomes than earlier generations did, but they also spend more. The net effect is that this younger generation saves less (Exhibit 2). When current retirees were 35, they saved 26 percent of their disposable income. Today, 35-year-olds save just 6 percent of their income.”


From Saver to Borrower

• “Since 1981, Japan has produced enough savings to finance its domestic investment needs and still export savings. In 2004, it sent about $170 billion in savings to other countries. But as Japan grows older & its pool of savings shrinks, it is likely to become a net borrower.”

• “If that happens, the United States in particular could face a painful adjustment, since Japan has played an important role in financing the massive US current- account deficit. As of October 2004, Japan owned more than $715 billion in US Treasury bonds—nearly 40 percent of the Treasuries held by foreigners. As Japanese funding dries up, the United States will probably be forced to trim its trade deficit.”

Economic Impact

• The legendarily high savings in Japan have long fueled the local economy and financed borrowing worldwide, especially by the US.

• Will US and global interest rates rise as an aging Japan use up those assets in retirement?

• Japanese businesses will likely be competing for increasingly scarce investment capital.

• What is the effect on national infrastructure? With lower expected tax revenues, government may be forced to skimp on or delay repairs to the country’s roads, bridges, rail lines, etc.


Impact of Aging Population

• Ageing increases the consumers relative to producers. Material living standards (i.e. consumption per capita) will decline unless relative decrease in the workforce are offset by increases in labor productivity & the effective supply & utilization of labor.

• Tensions over immigration: Labor would flow from the overpopulated, resource-poor countries to the depopulating countries, where there would be plenty of jobs.

(http://www.bis.org/publ/gten04.htm)

Shrinking Work Force

• “ … a shrinking work force requires higher productivity and greater flexibility, reflected in a new need for continuing job training, career switches and the heath care needed to keep workers working into old age.”

• “Decreases in workforce associated with projected demographic trends alone would reduce GDP growth by as much as ½-1% point per year in many G-10 countries between 2010 and 2030.” (G-10: Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, United Kingdom, & US)


Developing Global Managers and Managing Global Talent

Developing Global Managers

“Managing in a global environment means you manage people who are separated not only by time and distance but also by cultural, social, and language differences. … And you also need to be sensitive to and respect the cultural differences. People from different cultures tend to misunderstand each other’s behaviors or stereotype people from other countries. It is essential to recognize the discrepancies between cultures in order to work together effectively.”

S. Devarajan, Managing Director of CISCO India

(“Building Better Global Managers,” Harvard Management Update, March 2006)

Differences Matter

• The yawning cultural chasm• “Understanding how people think, work, eat, and

interact in a foreign workplace is crucial to building a successful operation”

• Example: Deckers in China“You have to realize the complexity that is involved in managing people in different countries. What is important to them? How do they take information you give them and interpret it back to those who work for them?”

Pat Devaney, Senior VP, Deckers Outdoor, Inc.

(“Building Better Global Managers,” Harvard Management Update, March 2006)

(When Cultures Collide, By Richard D. Lewis)

"Learning to become an effective leader is like learning to play music: besides talent, it demands persistence and the opportunity to practice. Effective monocultural leaders have learned to play one instrument... Leading in a multicultural and diverse environment is like playing several instruments. "

Geert Hofstede

Managing Global Talent

• “Global consistency in a company’s talent evaluation processes is important, because for mobility to succeed, line managers need to feel confident that employees transferring into their units from other parts of the organization meet the same standards that their own people do.” (Exhibit 2)

• “Companies should focus hard on rotating talent globally across divisions and geographies. Not only will this rotation support the development of company talent, it will also promote greater cultural awareness and diversity.” (Exhibit 3)

(http://www.mckinseyquarterly.com/Why_multinationals_struggle_to_manage_talent_2140)



Exhibit 2 Global Best



Ex 3. Standing Out From Crowd

The Payoff


The most interesting finding was that “companies scoring in the top third of the survey (when all ten dimensions were combined) earned significantly higher profit per employee than those in the bottom third.”

Exhibit 1

American Families Tackle Shanghai

• “My family and I moved to Shanghai a few short months ago, and let me tell you, it has been difficult. Shanghai is becoming Westernized, in a way. But for an all- American family, it is still a challenge.”

• “In the grocery store, most poultry still have heads, and the feet and beaks are definitely around, waiting to be purchased by the kilo. Clothes hang from high-rises to be dried by what the Shanghainese believe to be the fresh air. Babies are carried around without diapers only to do their duty on the streets. Disposable diapers cost a fortune. And yes, my blonde-haired, blue-eyed children are the main attraction when we go to the zoo.”

(“American Families Tackle Shanghai Realities,” Wall Street Journal, August 10, 2005)

American Families Tackle Shanghai

• “But at the same time, I have a very inexpensive Chinese woman who cleans our apartment and watches my kids when I run to the store or to exercise. I grocery shop for less than in the U.S. as long as I buy Chinese or Australian products. I shop for clothes and have them made for nothing. I travel to places in the world where I might never have traveled. Our family has developed a bond unlike one we might ever experience back home. I am learning another language, as are my children.”

• “I appreciate the freedom that I was born into more than ever, and I am happy and thankful for this amazing cultural experience. I am sad and frustrated and happy and excited and truly amazed.”

Amanda Carlson(“American Families Tackle Shanghai Realities,” Wall Street Journal, August 10, 2005)

Thank You

Questions?

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EMBA 716 2008 - University of Nevada, Las Vegaskleong.faculty.unlv.edu/EMBA716PowerPoint_files... · World population is expected to increase from 6.5 billion in 2005 to 9.1 billion