I Quit

According to an article in Wall Street Journal, this announcement from employees is likely to increase now that the market begins to loosen up.

The article points at the number of employees who voluntarily quit their jobs in February. For the first time since October 2008, this number surpassed the number being fired or discharged, according to the Bureau of Labor Statistics.

Recent research indicates that the number will continue to grow. In a survey conducted by Right Management at the end of 2009, 60 % of workers said they intended to leave their jobs when the market got better.

This might be surprising to many, but in fact it should not be. Let us look back a couple of years. These are the findings from Boston Globe in 2004:

•          “83 percent of employees are likely to seek new employment once the economy improves”

•          48 percent of managers are likely to seek new employment once the economy improves

•          75 percent of those managers are actively looking now

•          56 percent of HR professionals indicated it is likely that voluntary turnover would rise due to the improving economy.

Employee engagement tends to fall at times when there are fewer employees to contribute to the tough job of keeping the company alive. This statement is also supported in the article in Wall Street Journal where a survey for the Conference Board found that the drivers of the drop in job fulfillment included less satisfaction with wages and less interest in work.

In 2009, 34% of workers were satisfied with their wages, down more than seven percentage points from 1987. About 51 % in 2009 said they were interested in work, down 19 percentage points from 1987.

Let us combine this with the increasing shortage of talents.  In the United States, there are approximately 40 230 000 people over the age of 65. There are approximately 30 700 000 aged 18-24.

According to Financial Times (May 2009), 800 000 people aged 55+ have returned to the workforce due to the decreasing value of their savings and pensions. Many more are postponing their retirement for the same reasons. My prediction is that this group is temporary back, but will soon be out.

This could, and probably will, lead to:

•          Attrition boom

•          Retirement boom

•         Increased recruitment costs due to shortage of talent and severe competition

It is estimated to cost 30-50 % of the annual salary to replace entry-level employees, 150 % for middle level employees, and astonishing 400 % for specialized, high level employees.  Interesting times..

What is next for Toyota?

Maybe one of the most discussed business cases the last six months has been the situation at Toyota. I have therefore tried to analyze what exactly are the problems at once one of the most respected companies in the world, and it looks like there are more underlying problems at the organizations than simple floor maths and accelerators. 

First of all, it is interesting to see how Toyota has changed their strategic focus over the years; the company was near bankruptcy in the 1940s, but through an obsessive focus on quality in the manufacturing process (with the development of the famous “Toyota Way”), they managed to earn themselves a vital position in the automotive industry.

From the 1980s however, there seems to be a change in focus in their strategic direction; with market share as the indicator of success, they expanded their production systems into western countries – and this might be the root of the problem. And when the downturn in financial markets came around year 2000, they were forced to cost-cutting activities within manufacturing and human resources. Have Toyota finally paid a price in terms of quality for their increased quantity?

What is interesting is that Toyota tried to copy their success in Japan to other countries – completely ignoring cultural differences that are well documented. Already in the 1990s there were some signal of dissatisfaction from Toyota’s employees in the United States; a Tayloristic approach combined with arrogance from the top-management in terms of ignoring and accepting cultural and language barriers seem to split the organization.

It is interesting to see how a well-respected organization seem to completely have ignored basic management assumptions. Although sales are increasing at the moment, it will be interesting to see how they will prevent such a crisis to happen again; will they continue ignoring less quantifiable social benefits of an organization, or will they follow in the footsteps of Chrysler who, through a higher level of empowerment and less level of standardization, managed to reduce it’s time-to-market ratio at the same time as they managed to increase product quality significantly?  

An Alternative Strategy-Making Process

Continuing from my previous post, I would like to share some ideas on how strategies not necessarily have be the result of deliberate planning processes, but rather how they can blossom and emerge from every corner of the organization.

As far as I’m concerned, the concept of emerging strategies was first suggested by Henry Mintzberg in the 1980s. Since then, the concept has gained support both among researchers and business leaders who successfully have built their organizations around elements such as involvement, consistency, and adaptability.

Imagine a salesman visiting a customer. The product is not quite right, but together they work out some modifications to suit the customers’ needs. The salesman returns back to his office and puts the changes through. After a couple of more rounds with modification, they finally get it right; a new product emerges. This new product eventually opens up a new market. The company has changed strategic course. Is this event highly unlikely? Not if you ask those over at SAS Institute. Having appeared in the top 20 of Fortune’s 100 Best Companies to Work For list every year it’s been published, and with a turnover rate around 4 % compared to industry average of 20 %, and with a subscription renewal rate for their products on astonishing 98 %, SAS Institute should be a company to take notice of.

In short, SAS has learned to exploit the creative energies of all its stakeholders; managers, software developers as well as their customers! Their principles are driven by assumption that creative capital is not just a collection of individuals’ ideas, but a product of interaction. Their view is supported by Ronald Burt at University of Chicago who has shown that long-term relationships between employers and customers add to a company’s bottom line by increasing the likelihood of “productive accidents”.

In my opinion, the associations connected with the strategist have to change. The association of a senior manager sitting in an office formulating courses of actions for everyone else to implement went out of the door with the “great man” theory as far as I am concerned.

This is also supported by an experiment by Google who decided to track the development of the ideas generated by their management compared to the ideas generated by employees in lower levels in the organizations. Surprisingly (or maybe not) they found that the ideas generated by the latter category had a higher success ratio than the former one. The reason: Those working further down in the hierarchy were more frequent in touch with the market and are therefore better suited to predict future trends.

There are numerous of other examples of how strategies have emerged and how successful strategies can stem from other members of the organization than those sitting at the top. The question should be asked: Is it time to drop the traditional hierarchy of experience for a hierarchy of innovators? After all, those who are on top of the hierarchy of experience can only predict the future if the future mirrors the past. How likely is that?

How can we distinguish between good and poor strategy?

This question was raised on LinkedIn a while ago and received massive feedback from professionals from a wide variety of industries.

One of the respondents answered the question by referring to a blog by Roger Martin for Harvard Business Review and argues that a good strategy “provides the road map to future with data driven sign posts. It tells you what to do and which way to move forward depending upon key big events (e.g. if Event A occurs we will move to doing this and if Event B occurs then we will move to doing that)”.

This view gained a fair share of support in the discussion and other participants provided their insights by claiming that the major difference between a “good” and a “poor” strategy comes from the execution of the strategy. “An excellent strategy (on paper) which is poorly executed is always worse than a fair strategy which is exceptionally executed”, a participant claimed.

Another participant stressed the importance of building the strategy upon the company’s existing capabilities and resources and the opportunities and threats posed by the environment.

The reason why I found this discussion interesting is that, although strategy making goes thousands of years back, we are still struggling in defining the term – let alone distinguishing between a good and a poor strategy.

Furthermore, most of the answers on LinkedIn seemed to be made on the following two assumptions:

•         Strategy is prescriptive.
•         Strategies are developed at the top of the organization

Therefore, in my next posts I will challenge these two assumptions and come up with alternative strategy development processes.

Winning the Talent War in China

As stated in my last post, I was quite disappointed with McKinsey Quarterly’s article on employer branding in China.

As this subject seems to be quite relevant to managers today, I intend to share some of our findings in the Chinese talent market in order for managers to make up more concrete thoughts of what they need to be aware of when entering such an emerging market.

To illustrate the importance and the differences to more “common” markets, I will compare the Chinese market with [at least according to Hofstede] a completely opposite market.

According to our annual ranking in China, traditional strong employers such as McKinsey, BCG, Bain, Accenture and the “Big Four” all drop considerably from last year’s ranking. The company who dropped the most was KPMG who fell 36 places and is ranked as the 75^th most attractive employer among business professionals. As we can see from our Global Ranking below, this differs significantly from other markets.

In Europe, and maybe particularly in Scandinavia, employers often emphasize the development opportunities available within the company when communicating with talents. According to our survey, this seems to be even more important in China! Therefore, when winning the talent war in China, you have to think about how your company is structured in order to give the talents personal development opportunities. In Norway, a large amount of employers have done this by developing trainee programs. Does your company offer such opportunities in China?

Furthermore, while Scandinavian talents seem to call for leaders who support their development, the Chinese talents seem to neglect having a supportive leader and instead appreciate a good future prospect for future earnings (hence the McKinsey interview that talents in China does not come cheap). Potential future earning is even more important than a competitive base salary which suggests that they are more receptive to reward system linked to company performance.

There is a tremendous difference between China and Norway and this could very well be the case in your main market as well. In order to give a simple overview, I would like to finish off with the thirty most attractive employers in China according to the Universum Professional Survey. If you have any questions regarding employer branding in China, I suggest you contact Johan Ramel as this market is far from my expertise.

China Mobile	1
Google	2
Procter & Gamble	3
SGCC	4
China Development Bank	5
PetroChina Company	6
Bank of China	7
Apple	8
CICC	9
ChinaTelecom	10
China Merchants Bank	11
Sinopec	12
HSBC	13
ICBC	14
Citi	15
Morgan Stanley	16
Baidu	17
L'Oréal	18
Alibaba	19
Air China	20
McKinsey & Company	21
China Construction Bank	22
TENCENT	23
IBM	24
The Coca-Cola Company	25
IKEA	26
BMW	27
CITIC	28
CNOOC	28
Nokia	30

Employer Branding in China

For those of you who are subscribing to McKinsey Quarterly, I am sure you have read the article “Winning the talent war in China” where Emmanuel Hemmerle, a principal with executive search firm Heidrick & Struggles is being interviewed.

If not, here is a link to the article; http://www.mckinseyquarterly.com/links/36562

Although he makes some good points about how you need to take risks when recruiting – especially seniors – as the market economy is relative new compared to Western markets, I must say I am surprised that a prestigious business review such as McKinsey Quarterly actually publish following recommendations when thinking of recruiting and building your employer brand in China:

-          Have confidence in mainland Chinese talent

-          Look for the best talent

-          Create a culture that is attractive

For me, these are all pretty obvious things you have to think about when building a strategy. I would much rather read about what these talents are looking for and how to build such a culture – this is what I will reveal in my next blog post.

Universum Global Top 50: the World's Most Attractive Employers

Recently we published our very first “Global Ranking”. We surveyed over 100,000 students from the 11 largest economies in the world which companies they find attractive. These rankings receive much attention – often because people disagree with it. I’m sure a lot of people have been surprised to find that their company is not on the list.

Business			Engineering
Google	1		Google
PricewaterhouseCoopers	2		Microsoft
Microsoft	3		IBM
Goldman Sachs	4		BMW
Ernst & Young	5		Intel
Procter & Gamble	6		General Electric
J.P. Morgan	7		Sony
KPMG	8		Siemens
McKinsey & Company	9		Shell
Deloitte	10		Procter & Gamble
The Boston Consulting Group	11		Johnson & Johnson
BMW	12		Hewlett-Packard
Coca-Cola	13		Cisco
L'Oréal	14		Esso/ExxonMobil
Morgan Stanley	15		McKinsey & Company
Sony	16		Schlumberger
IBM	17		BP
Johnson & Johnson	18		L'Oréal
Deutsche Bank	19		Nokia
General Electric	20		Accenture
Citigroup	21		Coca-Cola
HSBC	22		Philips
Accenture	23		Goldman Sachs
Nestlé	24		Nestlé
Credit Suisse	25		Pfizer
Bain & Company	26		Bosch
Unilever	27		The Boston Consulting Group
UBS	28		J.P. Morgan
Nokia	29		Deloitte
Intel	30		Morgan Stanley
Esso/ExxonMobil	31		GlaxoSmithKline
Kraft Foods	32		Ericsson
Shell	33		Ernst & Young
Hewlett-Packard	34		ABB
Mars (Masterfoods)	35		Bayer
Pfizer	36		Unilever
Siemens	37		PricewaterhouseCoopers
Philips	38		Deutsche Bank
Oracle	39		HSBC
Bayer	40		Kraft Foods
Philip Morris	41		Bain & Company
DHL	42		Citigroup
BP	43		Alcatel-Lucent
Bosch	44		Daimler
Cisco	45		Novartis
Daimler	46		Mars (Masterfoods)
Ericsson	47		KPMG
ABB	48		Credit Suisse
Novartis	49		DHL
Schlumberger	50		UBS

These companies have clearly succeeded in their work with employer branding – this is not to say that companies not included in the list have not, but what does these companies have in common?

First of all, they have a global strategy for their employer brand that supersedes geographical borders. 

Furthermore, their work is focused and long term.

And at last, the work is spread across many different departments; HR, marketing, communications and the top management are all involved.

In three years we will have three people leaving the job market for every one person entering it - is your company ready for such a battle?