Businesses today operate in a rapidly changing political, technological and economic environment. In addition to globalization and the digital revolution, changing demographics are also creating challenges for companies everywhere: With an aging workforce in the West and a burgeoning new generation bringing to bear its own attitudes and expectations around the world, employee training and development are increasingly gaining in strategic importance for companies.
“When the outside world changes, organizations must change or die.” This is the stark warning from Dr. Dave Ulrich, Professor at the Ross School of Business at the University of Michigan and a partner at the RBL Group. “When social, political, economic and demographic trends change, so too do the expectations of customers, investors, suppliers and regulators.” And so too do the expectations of the people who work for those businesses. For companies, managing these changes is vital to survival.
In the industrialized West, businesses are having to face up to the challenge of an aging population. Lower birth rates have produced a younger generation that is significantly smaller than its predecessors. Added to this, the legal retirement age in many Western countries is increasing and older people are remaining fitter for longer. The impact on the world of work is clear. In the future there will be a higher proportion of older employees at work. By 2017, around 60% of the workforce will be over the age of 50 and working into your late 60s and 70s will become the norm.
Businesses and individuals alike need to prepare for this change now because technological and other societal changes mean that no job will stay the same for long. In many countries, today’s 40-year-old has almost 30 years left until reaching the legal retirement age. Companies have to ensure that the skills of all their employees keep up with these changes.
“As the half-life of knowledge gets shorter, individual ability and the capability of organizations have to adapt more quickly,” explains Ulrich. “In the past, organizations succeeded as a result of role clarity and predictability. Now, organizations succeed with adaptability and innovation.” His recommendation? Employee learning – because learning creates individual ability and capability of organizations and enables both to adapt to changing conditions.
How do 40, 50 and 60-year-olds learn best? This has become a focus of much attention in the West. The common perception is that the older we get, the less readily we learn new skills. Yet research shows that this does not have to be the case. People who continue the learning habit throughout their lives remain just as capable of learning in old age as they were when they were younger. It is therefore in everyone’s interest to keep learning. The longer we keep learning, the longer we will have the mental agility to learn new skills.
The idea of “life-long learning,” which has been around for decades, is now becoming widely recognized as a commercial necessity for companies managing an aging workforce.
The traditional view that training is only for new recruits and young management hopefuls is disappearing. “Companies are only just starting to understand that it’s one thing to retain an employee and it’s another thing to develop that person. Not only in the typical vertical way: You also have to develop people along a lateral career path, to find new activities over and again,” says Professor Dr. Ursula M. Staudinger, an expert on lifespan development and aging, and founding director of a new Aging Center at Columbia University in New York (read our interview with Prof. Dr. Ursula M. Staudinger). Training is no longer just about climbing the corporate ladder, it is about ensuring the whole workforce is in shape to master future challenges.
But traditional training programs aimed at new recruits simply do not fulfill today’s requirements. A different approach is necessary. Training needs to be designed to be of value and relevance to each individual, taking into account their particular circumstances (read more about training worldwide). So training has to become more individual, but it also has to become a shared responsibility. It is no longer good enough to sit back and wait for your superior to send you to a course. We all have to wake up to the need to continue learning and keeping our skills relevant if we do not want to be left by the wayside.
This can have other benefits as well. Look at what happened when the Hong Kong-based airline Cathay Pacific changed its approach to training. The airline’s business success is based on customer retention and its motto is “Service straight from the heart.” But it found that its old approach to training and development was promoting a culture of compliance, rather than one of commitment. Cathay Pacific decided to encourage its employees to take responsibility for their own performance and plan their own development. In discussion with their managers, employees began to assess how they were doing, consider what they could do better and set their own goals. Together, they developed their own personal plan for achieving those goals. The company found that when people take responsibility for their own success, they not only get more satisfaction from their work, it also increases their commitment toward their company.
The country’s authoritarian and hierarchical tradition meant, in the past, that employee empowerment and participation were not so readily accepted. Employee loyalty was also rather low. But as market reforms and global competition take hold, the need for training has increased. The strong reciprocal culture means that companies that offer training and development receive increased commitment from their employees.
India is fast picking up best practices from the foreign companies outsourcing there. Companies now invest substantial time and money to train new recruits. Employees participate in a wide range of education programs, including not only technical training but also soft skills and management skills. Career advancement and salary increases are usually tied to the completion of such training.
Increased levels of training are often driven by international investors requiring consistency across their operations. A major focus has been skill development for lower-level employees. As young people often lack the resources to fund their own further education and typically start contributing to their family’s income relatively early, company training and development is seen as an important stepping stone to a better future.
Vocational training has long been highly valued by employers and employees alike. Job-specific technical training has a strong tradition in many industries in Germany, with trainees following a dual system of formal and on-the-job training. Although further training opportunities tended in the past to be restricted to conventional courses for potential managers, this attitude is now changing.
Ellen A. Drost et al., Benchmarking Training and Development Practices: A Multi-Country Comparative Analysis, 2002.
Vivek Wadhwa, India’s Workforce Revolution, The Wall Street Journal, July 23, 2008.
Vinod Mishra / Russell Smyth, High Performance Work Practices and Workplace Training in China: Evidence from Matched Employee-Employer Data, 2012.
German Federal Institute for Vocational Education and Training (BIBB), Continuing Education and Training in Germany (“Berufliche Weiterbildung in Deutschland”), August 1, 2007.
Of course it is not just age that differentiates people – they have different learning styles and requirements. In order to meet the individual training needs of each employee, we can no longer think of training as just attending seminars. Standardized offerings have to be supplemented by a whole array of training tools. Companies are providing a wider range of options from job rotation and job shadowing to coaching and e-learning.
Increasingly, companies are realizing that development means benefiting from one’s own and others’ experience and applying the knowledge daily in a practical and profitable manner. HR professionals talk about the 70:20:10 learning formula. This describes the split between different types of learning, whereby 70% of what you learn is from your own experience at work because this is the best way to learn, 20% is learned from those around you, and only 10% is from formal training.
At the BASF Leadership Experience Center established this year in Ludwigshafen, Germany, the company offers managers the opportunity to work together as teams to improve collaboration and develop a common management understanding. An essential aspect is that the team members bring their own questions or challenges with them from their business units. The one-day workshop is not so much about knowledge transfer as about learning from experience and from others.
Job-sharing and mentoring schemes are also growing in popularity. New employees learn quickly and effectively in this kind of exchange with their colleagues. At Mars, the food company behind brands such as Mars® chocolate bars and Whiskas® pet food, employees are offered a range of opportunities for growth and advancement. “Mentoring is an important part of our culture,” explains André Martin, Chief Learning Officer at Mars. As a highly decentralized company, building good relationships is essential.
New “associates” receive mentoring as a way of introducing them to the corporate culture. It is also part of the training for high-potential associates. Mars puts great emphasis on ensuring that senior leaders who volunteer to be mentors are given the right tools and knowledge to be good mentors. “Mentoring is not the same as coaching. Mentoring is about sharing stories. It is a relationship fundamentally driven by the mentee,” says Martin.
Among the diverse business units at Mars, mentoring is used in different ways. One of the U.S. business units, for example, introduced peer-to-peer mentoring among women, as part of its focus on diversity, to help build networks among like-minded people at a similar place in their careers. “There is no vanity around learning at Mars,” says Martin. “It is part of our culture of mutuality.” At another U.S. business unit, the management team was mentored by the younger generation and introduced to the use of social media. “It is all part of understanding what the world looks like through the eyes of the next generation so we can begin creating organizations that will be attractive to them,” says Martin.
Let’s focus now on these younger employees – the people in their 20s and 30s. The generation born between 1981 and 2000, labeled by demographers as “Generation Y”, is the first truly digital generation – a generation of young people who have grown up with computers, the internet and social media. They are well educated, tech-savvy, and they know a lot about the world around them. They want a workplace that offers inspiration and responsibility and high on their list of priorities is career development and training. But what is important about this generation is not only the different attitudes and expectations, but also the fact that their numbers vary from country to country.
In the aging West, they form a smaller cohort than the preceding generations. In Germany, the problem is very clear: Whereas today there are 9.7 million Germans between the ages of 20 and 30, by 2030 there will only be 7.5 million. In rapidly developing regions like Asia, the demographic picture is very different and the number of educated young people is growing rapidly. According to Oxford Economics, already more than half of the world’s college graduates (54%) come from the top emerging markets – China, India, Indonesia, Brazil, Mexico, Russia and Turkey (the “E7”). Over the next decade, this percentage is predicted to rise to 60% – that’s around 217 million college graduates, as opposed to 143 million in the developed world. It is, of course, not just the higher birthrates in these countries that are helping them overtake the West; equally essential is the combination of accelerating economic growth and technology-enabled training.
The question is whether the supply of these young, educated people meets demand. The situation is not the same everywhere. In parts of the West, there are fewer of these young people than there are job opportunities. And they know they have a competitive advantage. In strong economies, companies wishing to attract them face fierce competition and therefore have no choice but to take seriously their values and attitudes.
The emerging economies, meanwhile, are booming as businesses increasingly choose to base themselves in these countries. Demand for young graduates is therefore also growing. As a result, surveys predict that future demand for young talent is likely to grow fastest in Asia, by more than 20% over the next ten years. But the rate of growth of demand and supply is not the same everywhere (learn more about the supply of educated workers meeting demand in 2021).
In China, increasing numbers of graduates are met by increasing numbers of job opportunities. This young generation is faced with a world of choice unlike anything their predecessors knew. Many businesses are facing the problem of job-hopping, with younger employees simply moving on to a new job as soon as something does not suit them. For a well-educated graduate it is easy to do – the opportunities are there. To stem the problem, companies have to work hard to prove they can offer their young workforce an exciting career path with real learning and development possibilities.
In India, by contrast, although companies are increasingly looking to the subcontinent to set up business there, the fast expanding pool of skilled and educated young people still outweighs the opportunities. As a result, competition among young Indians for jobs at multinational companies is intense. This can lead to problems of its own and highlights the need for a regionalized approach to employee development and learning, as Philipp von Sahr, President of the BMW Group in India found out.
Over the next decade, as access to higher education improves in fast developing economies, the pool of educated people available for work will increase dramatically. In developed economies, by contrast, lower birth rates mean growth will be slower or even grind to a halt.
Will there be enough job opportunities in countries with a large number of qualified young people? Which countries will experience shortages and where will supply and demand be in balance?
The chart shows how the gap between supply and demand is expected to evolve in different countries over the next decade. A surplus is shown in the lighter colors while a deficit is shown in darker colors. The middle of the graphic shows the countries with a broad balance. The numbers report the average annual percentage change of the deficit or surplus.
Source: Oxford Economics, Global Talent 2021, 2012.
“We believe that if employees are healthy, they will perform better – this is true for every organization.”
Philipp von Sahr, President of the BMW Group in India
BMW has around 650 employees across India. When von Sahr first took over at the BMW office in Delhi he was impressed by the level of dedication and stamina shown by his employees. Many of them stayed working in the office late into the night. “With the average age at 30, we have a lot of young managers in the company who are highly motivated and want to excel at their work. They are self-driven and put in additional effort and work hours over and above what is expected,” he explains.
But von Sahr came to realize that the long hours were having a detrimental effect on their creativity and decision-making. His ambitious and hard-working staff were putting BMW before everything else – even before their own health. The company therefore introduced a range of initiatives to encourage employees to put their health and families first, followed by BMW, so that they could be fit to meet the daily challenges of a globally competitive business on a sustainable basis. “The leadership team at BMW India places high importance on maintaining a work-life balance. We believe that if employees are healthy, they will perform better – this is true for every organization,” says von Sahr. “We make a conscious effort so employees can leave work on time and are able to have a life outside of office hours.”
The idea of work-life balance – like the idea of life-long learning – has been around for many years. What is interesting about this example is that it shows that today’s competitive pressures mean there is no choice but to address this issue and to take it seriously.
That’s why BASF is establishing its Center for Work-Life Management in Ludwigshafen. The center provides all BASF employees a range of offerings relating to family and career, fitness and health, as well as social and care counseling. It aims to meet employees’ needs in all their different phases of life, allowing them to bring the demands from the private and professional sides of their life into balance.
With older people staying in the workforce longer, staying healthy is good not just for the individual, but also for the company. People who are physically healthy will be able to continue learning and developing through every stage of life and into ripe old age.
Training is no longer just about skills acquisition for younger employees – it is now a life-long pursuit that empowers the individual. It also creates a workforce that, whatever their age, has the agility and creativity to keep the business ahead in today’s highly competitive global economy. For all of us around the world, in whatever profession, the message is: never stop learning.