Pwc view-winter08

view winter 08

22Achieving business agility

38Maximizing talent

46Interview with Andrew Zolliand more...

Healthy choices?What election-year healthcare reform proposals mean for the future of employer-sponsored health insurance 10

In this issue

Features

View points

10 Cover storyHealthy choices? What do election-year healthcare reform proposals mean for the future of employer-sponsored health insurance? Sandy Lutz, Benjamin Isgur, and Jeffrey Gartland

6 Solving the tech waste problem

7 Syncing up on info security

8 Joining the consumer conversation

9 The business of bribes

9 International assignments

22 Change agents Just whose job is it to ensure your business can keep pace with customers, competitors, and suppliers? Randy Browning

Departments 3 A new view Business success in the 21st century Tom Craren

4 My view The key to 21st-century competitiveness: Finding the right peopleDennis Nally

52 Your view On constant change

30 One global flavor A US move to International Financial Reporting Standards is inevitable. All companies should think strategically about this change and begin to understand the impact now. Raymond J. Beier

38 Maximizing talent There are strategies for making the most of your peopleno matter what tomorrow brings. Steve Rimmer, Karen Vander Linde, Dolores Wilverding, and Warren Cinnick

46 Interview Piercing the veil Andrew Zolli looks at the future of business and of the world. Interview by Tom Craren and Gene Zasadinski

It’s time to check up on how election-year healthcare reform will affect employers, page 10.

PricewaterhouseCoopers View winter 08�

Editorial

Editorial Director Tom Craren

Managing Editor Gene Zasadinski

Assistant Managing EditorChristine Wendin

Assistant Editor Reena Vadehra

Online

Director, Online Marketing Jack Teuber

Designer and ProducerJoe Breen

Design

Odgis + Company

Creative Director Janet Odgis

DesignersBanu Berker Rhian Swierat

To request additional copies of View or to comment: www.pwc.com/view.

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience, and solutions to develop fresh perspectives and practical advice.

© 2008 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Contributors

In addition to our authors, we thank the following individuals for their contributions to this issue of View:

View pointsDeborah K. Bothun, Principal, Advisory Services, Global Digital Convergence Leader

Charles Hacker, Partner, Advisory Services, Investigations

Neil Keenan, Director, Advisory Services, Investigations

Mark Lobel, Partner, Advisory Services, Security

Mitchell Schuckman, Partner, International Assignment Services

Steven Skalak, Partner, Advisory Services, US and Global Investigations Leader

Business agilityBo Parker, Managing Director, Center for Technology and Innovation

International Financial Reporting StandardsSara DeSmith, Partner, National Professional Services Group, Global Accounting Consulting Services

Photography

Corbis, David Doubilet, Bill Gallery, Getty Images, Matt Goins, Vance Jacobs, JupiterImages, Kit Kittle, National Geographic Image Collection, Reuters Pictures, and Leonard Rubenstein

viewwinter 08

PricewaterhouseCoopers View winter 08 �

Business success in the �1st century

A new view

According to naturalist and evolutionary theorist Charles Darwin, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Whether his words accurately describe biological processes is still a matter of heated debate. But there is no debate about their applicability to 21st-century business: Complex forces of change are at work, and only those companies flexible enough to respond appropriately will survive and prosper.

Addressing these forces of change is what View is all about. In each issue we share insights into challenges that most concern you and that affect your success—chal-lenges such as embedding agility into your company and making change stick; discovering opportunities inherent in some risk; attracting and maintaining talent; maximizing your corporate social respon-sibility efforts; disarming complexity; and fostering innovation and collaboration.

As it does to 21st-century business, change also applies to View. With a new design, a new format, a new editorial approach, and an enhanced online pres-ence, View is evolving to keep pace with a changing business environment.

In line with those changes, we intend to consistently offer business executives like you straight talk on subjects that matter. Topics in this issue include health-care policy, agility, International Financial Reporting Standards, and strategies for finding and maximizing talent. And there’s also an interview with noted futurist Andrew Zolli.

We hope you enjoy this issue of View and that you’ll come back often. We promise to be a friendly, reliable, informative, and entertaining place for you to check in on and track the trends and issues that interest and concern you most, not just today, but over time as well. We know your expec-tations are high. We wouldn’t have it any other way. You can be sure that we’ll deliver.

Sincerely,

Tom CrarenPartner-in-ChargeUS Thought Leadership


The key to �1st-century competitivenessFinding the right people

My view Dennis Nally

In today’s knowledge-based economy, talent will be the defining competitive advantage. And companies that want to succeed are dramatically rethinking the way they find, develop, and hold on to talent.


In today’s leading organizations, there is no question that talent—finding it, developing it, and retaining it—affects success more directly than any other single factor. It also is among the greatest causes of concern.

Our 11th Annual Global CEO Survey bears this out. While 89 percent of CEOs assert that their companies’ people agendas are among their top priorities, 61 percent express concern over the availability of key skills. In addition, 62 percent maintain that their organizations need to change the way they recruit, motivate, and develop employees.

Responses such as these to questions about what, a decade ago, was a yawn-inducing issue suggest that a fundamental shift has occurred. Perhaps more than any other aspect of business, the competition for talent has changed profoundly.

The reasons are not difficult to find. They are related directly to globalization and to changes in demographics and technology.

Finding the right people

There was a time—at least in the account-ing profession—when the only talent you needed involved understanding a balance sheet and an income statement. Those days are long gone.

Today, we look for people not only with technical skills, but with integrity as well. We also look for people with diverse back-grounds and cultures—people who bring a broader understanding of the world around them. Without such people, a company cannot compete globally.

However, tapping into this type of work-force is easier said than accomplished, and business leaders must work proactively to remove obstacles. But what can be done?

want us. Yes, that’s right, want us. Today’s recruits have expectations about the companies they want to work for. They are looking for commitments to integrity, to social responsibility, and to flexibility. And they are in a position to demand this and more. Companies that meet and exceed these demands will win. Those that don’t will fall behind.

Some companies will find that coping with these new realities is difficult. Others will pretend they don’t exist and continue on with the old ways. However, organizations that succeed will be those that neither ignore change nor fear it. Rather, they will be those that respond to change and turn it to their advantage.

And that’s my view.

Dennis Nally is chairman and senior partner of PricewaterhouseCoopers LLP. In the next issue of View, he continues to examine this critical issue and offers his insights on developing and retaining talent.

89%of CEOs assert that their companies’ people agendas are among their top priorities.

We can start by increasing the visa cap for international professionals who want to work in the US. This year, for the first time in history, the visa cap was reached on the first day of filing. Applications arriving after day-one were denied.

This and other policies and approaches to education and to developing talent need to change. I firmly believe that to maintain its competitive edge, America must become a magnet for talent. But until this happens, we can’t just sit on the sidelines. We’ve got to find and cultivate talent in our own backyards. We’ve got to recruit students at an earlier age. And we’ve got to learn how to use newer technologies such as mobile email and text messaging as pow-erful, new recruiting tools. We also need to fully exploit rich sources of new talent such as virtual online communities and social networks.

But most important, we have to find ways of ensuring that the people we want also

6�%of CEOs maintain that their organizations need to change the way they recruit, motivate, and develop employees.

PricewaterhouseCoopers View winter 086

Research’s November 2007 report titled In Search of Green Technology Consumers— which covered American attitudes toward green technology—only 12 percent of respondents agree that they would pay extra for consumer electronics that used less energy or came from a company that was environmentally friendly. Forty-one percent said that though they are con-cerned about the environment, they do not strongly agree that they would pay more for environmentally friendly electronics.

Despite this disconnect, many technol-ogy companies have jumped on the green bandwagon. For instance, Sony is creating an e-waste drop-off facility where anyone can recycle unwanted electronics. And many technology companies are collabo-rating with smaller organizations to develop and promulgate more environmentally friendly processes.

Such initiatives and collaborations are pivotal for making green technology a reality for any business. They reduce energy costs and provide an alternative to junking used hardware.

For businesses across the United States, yesterday’s technology has become tomorrow’s problem. The millions of com-puters, printers, and other gadgets that are commonplace in any office—and that we steadfastly rely on to conduct business—can become threats when we discard them.

In the United States alone, approximately 2 million tons of e-waste is tossed into landfills, poisoning the air and the land and exposing people to dangerous toxins. In addition, all that hardware—especially data centers that house a company’s informa-tion lifeblood—is eating up a lot of energy. In fact, 50 percent of the energy consumed in a data center is used just to cool down the network system.

Along with these practical problems, com-panies face the challenge of going green and reducing their carbon footprints. This is becoming important as public interest in environmentalism increases and as more organizations want to position themselves as socially responsible businesses.

The technology industry is beginning to recognize and address the environmental

Corporate social responsibility

Solving the tech waste problem

View points

burden of its products—a burden shoul-dered by its corporate customers. A recent study by PricewaterhouseCoopers surveyed tech industry senior executives on their companies’ attitudes and policies on environmentalism. When asked which factors were most important in their com-panies’ environmental decision making, nearly half of the respondents cited “meet-ing customer expectations/requirements,” but energy savings and regulatory compli-ance had an even greater impact on their environmentally focused pursuits.1

So, can customers expect more green products when a company’s next upgrade cycle rolls around? According to PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial, venture capitalists invested in 2007 almost $2.2 billion in companies that make green tech products. That investment is more than the amount spent on green technology companies in 2006 and 2005 combined.

While such numbers are impressive, a considerable amount of resistance to green tech products still exists. In Forrester

0

10

20

30

40

50

60

70

Potential cost savings from energy efficiency

Percent of tech company executives surveyed

Complying with environmental legislation and regulation

Meeting customer expectations/requirements

Potential for gaining competitive advantage

Obtaining tax incentives

Matching the environmentally focused actions of competitors

Attracting and retaining staff

Meeting investor/shareholder demands

60.1

50.744.6 43.2

17.614.9 14.2

8.83.4

Don’t know/Not applicable

Motivation for environmental decision making

1 Technology Executive Connections: Going Green: Sustainable Growth Strategies, PricewaterhouseCoopers, 2008.

Source: Technology Executive Connections: Going Green: Sustainable Growth Strategies, PricewaterhouseCoopers, 2008


page concerning the number one priority for company information security efforts: maintaining business continuity and alle-viating risk. CSOs, however, place greater emphasis on regulatory compliance.

Perhaps the most interesting finding con-cerns a change in perception with regard to the source of security threats—an area that the survey has tracked for five years. Today, CIOs and CSOs say former and current employees are more likely sources of security attacks than outsiders are. And they report that email and abused user accounts are the most common methods of employee attacks. This change, however, does not suggest an increase in corporate crime over the past few years. Rather, it points to possible cracks that have devel-oped in information security infrastructure, and it indicates a greater awareness of the changing nature of security attacks.

CEOs worldwide might want to sit down with their information and security offi-cers to discuss their differing perceptions of risk. According to a recent global information security survey conducted by CIO magazine, CSO magazine, and PricewaterhouseCoopers, CEOs, CIOs (chief information officers), and CISOs (chief information security officers) or CSOs (chief security officers) differ in their attitudes about business security matters. The survey concluded that many CEOs are far more confident about their companies’ security than their information technology (IT) and security leaders are.

Typically lacking in-depth technical knowl-edge with regard to IT, CEOs naturally have different perspectives on information security from those of the executive team members who manage these functions. Even so, CEOs and CIOs are on the same

Managing risk

Syncing up on info security

Executive views on security attacks

Despite security and technology execu-tives’ growing awareness of the true nature of security threats, an overwhelm-ing number of CEOs still say hackers—not employees—are the culprits who should be targeted. However, CEOs believe more so than their security counterparts that their organizations are secure and have experienced few attacks.

So, how can these differences be rec-onciled? The survey data leads to what is perhaps a counterintuitive conclusion. While information security strategies need to include technical approaches, such technical approaches may not lead to the whole solution. More extensive or wider information sharing between an organiza-tion’s top executives could turn out to be equally if not more important.

0

20

40

60

80

100

An employee or former employee as the source of an attack

A hacker as the source of an attack

Fewer than 10 security attacks in the past year

CISO/CSO

CIO

CEO

Percent of senior executives surveyed

83

50

3843

7465

53

71

44

Source: Fifth Annual Global State of Information Security Survey 2007, CIO, CSO and PricewaterhouseCoopers

CEOs, CIOs, and CSOs differ in their attitudes about business security matters.


If you think surfing the Web is better suited to the home office than to the corner one, think again.

Consider this scenario. Your company recently launched a product, and the buzz surrounding the innovation has been rising steadily. Shortly after the launch, a hazardous defect was detected. You do the damage control drill—recalling the product, reaching out to the media, and gauging customer reactions through your call center and focus groups. You hope your collective response is enough to minimize damage, but you’ve overlooked one important thing: online consumer conversations. Damage was brewing in blogs and message boards as angry con-sumers dissected your product’s downfall and debated alternatives. If only you had been listening, your company could have responded proactively.

The world of digital communications is burgeoning, and for any business to succeed, it must embed this kind of digital

Operational excellence

Joining the consumer conversation

2%6%

53%39%

Engage with customers via the Web

Collect and analyze observations by employees who interact with or observe customers

View points

consumer conversation, along with more traditional customer information, into its operations. Millions of Internet-savvy consumers are now able to (1) instantly provide feedback via email and text messages, (2) deeply discuss products and services on message boards, and (3) broadcast their opinions on blogs and social networking sites. This largely untapped chatter constitutes consumer conversation—reflecting the attitudes, behaviors, and intentions of consumers.1

The massive volume and rapid pace of online activity make getting a handle on this fertile ground problematic. Hiring the right people and finding the right tools to analyze business intelligence based on consumer conversation are critical. According to PwC’s Management Barometer, which reg-ularly surveys senior executives on crucial business issues, 31 percent of respondents monitor their customers’ online behavior on a regular basis. Fifty-three percent say their companies use online devices to engage with their customers.2

A consumer electronics company real-ized the benefits of this approach when its new product was not selling as robustly as expected. Through analyzing online consumer conversations, the company discovered that many customers thought the product was incompatible with other brands. After the company changed its marketing campaign, the product went on to become a top seller.

As this example demonstrates, compa-nies that engage in digital conversation by analyzing and integrating the findings with other customer data, and, ultimately, by embedding this intelligence will be well positioned to drive business transformation and gain competitive advantage.

Understand views of key influencers (advisory boards, experts)

Mine open-ended comments from service and support calls

Monitor customers’ online behavior and preferences

How companies better understand their customers and markets

3%9%

31%

57%

3%13%

42%

42%

3%12%

55%30%

3%2%

81%

14%

Yes No Not certain Not applicable

Source: PricewaterhouseCoopers Management Barometer: Consumer Conversations, January 2008

1 PricewaterhouseCoopers, How Consumer Conversation Will Transform Business, January 2008.

2 PricewaterhouseCoopers Management Barometer: Consumer Conversations, January 2008.

PricewaterhouseCoopers View winter 08 9

Global mobility

International assignments

Money doesn’t always make the world go ’round. Organizations are discovering that it takes more than high salaries to attract the best potential candidates to interna-tional assignments.

Recent studies we have undertaken sug-gest that the nature of global mobility is changing.1 Whereas in the past, busi-nesses were interested mainly in hiring experienced staff from the West, today’s expatriates are being recruited from around the world. They include younger, less ex-perienced workers, who serve for various lengths of time. In fact, in an effort to re-duce costs, a growing number of organiza-tions have developed program alternatives to the traditional expatriate assignment. Almost half the companies we surveyed employ permanent transfers; about 20 percent send employees on short-term assignments; and a small percentage use virtual staff where the employee does not relocate but has responsibilities for a foreign office.

Changes are also occurring in the area of staff incentives to move abroad. It’s no longer enough to simply increase salaries or provide other monetary perks. Employees want a total package that delivers a cul-tural education, keeps spouses happy, and sets out reasonable career expectations.

The costs of sending employees and their families abroad are high. If an employee is unhappy in the new environment, he or she can jeopardize an overseas project. By im-proving the help that employees get prior to and during their international assignment, companies can maximize their investments in the development of global talent.

This is the deal your company needs to secure a position in a vital emerging mar-ket. In the middle of negotiations, you’ve been asked to grant a “commission” to secure the contract. Should you pay— just this once?

According to a recent PwC study on global economic crime, corporate bribery rarely has positive results.

For our 4th Biennial Global Economic Crime Survey, we interviewed more than 5,400 companies in 40 countries and found that companies in E7 countries (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) reported higher incidences of being asked to pay a bribe.1 Only 3 percent of

Economic crime

The business of bribesNorth American companies reported having been asked to pay a bribe in their home region, as opposed to 21 to 54 percent of companies doing business in E7 countries. Interestingly, the survey also found that companies asked to pay kickbacks were more likely to lose deals to competitors that were not asked to pay bribes.

Why do businesses that succumb to bribery suffer losses? The study suggests that organizations known to be ethical are less likely to be approached with requests for illicit money. Corrupt individuals prefer to deal with companies whose ethical standards are ambiguous. In addition, business relationships based on illegal transactions are not likely to focus on qual-ity and price—an indicator that the market is not operating according to competi-tive norms. And companies in the E7 that had implemented effective anticorruption controls and strong, clearly understood ethical guidelines said they suffered up to 50 percent fewer incidents of corruption than other companies.

In short, the study supports the old adage that honesty is the best policy when doing business in any market.

Lost business opportunities in emerging markets

0

10

20

30

40

50

60

70

80

Brazil China India Indonesia Mexico NorthAmerica

Russia Turkey

Companies never asked to pay a bribe and lost an opportunity

Source: 4th Biennial Global Economic Crime Survey

Companies asked to pay a bribe and lost an opportunity

Percent of companies surveyed

8

58

18

45

23

66

14

63

18

47

21

71

31

70

17

6

1 PricewaterhouseCoopers 4th Biennial Global Economic Crime Survey - Economic crime: people, culture and controls, 2007.

1 International assignment perspectives: Critical issues facing the globally mobile workforce, PricewaterhouseCoopers, July 2007.


Healthy choices?

Cover story


What election-year healthcare reform proposals mean for the future of employer-sponsored health insurance By Sandy Lutz, Benjamin Isgur, and Jeffrey Gartland

As the presidential campaign reaches a fever pitch, candidates on both sides of the aisle are promulgating their positions on every-thing from fiscal policy to the war in Iraq. One of the most closely followed public debates centers on healthcare reform. Although all voters have a vested interest in the discussion, voters who are also employers may be most affected by its outcome.

If you are an employer, spiraling healthcare costs are eating away at your bottom line. According to the US Census Bureau, 177 million Americans rely on employer-sponsored insurance for their health coverage. At 16 percent of the US economy and growing, healthcare is big business—maybe even your business. Moreover, the health plan options companies offer have become key factors in employee recruitment and retention. Current (and prospective) employees are asking a number of questions. How comprehensive is the existing coverage? How many choices do I have? How much is it costing (going to cost) me? Can I do better elsewhere?

It’s no wonder, then, that healthcare consistently ranks as one of the top domestic policy issues on the minds of Americans and that during election years healthcare policy becomes a focal point. (See Figure 1.) Employers, employees, and politicians alike agree that the system is not sustainable and that there is no clear path ahead. As one might expect, Democrats differ from Republicans in their respective approaches to healthcare reform. Generally, Democrats favor broader and more immediate changes through legislation, while their Republican counterparts focus primarily on changes to tax policy as the means of transforming the system.


However, all of the major candidates agree that a single-payer model is not tenable and that going forward, our healthcare system will continue to be a public-private partner-ship. Just what that partnership will look like is the key question. And top of mind for employers is cutting through the election-year hype and determining what it really means to the future of their businesses.

Scoping the problem

Healthcare spending has been increasing at about twice the rate of inflation, absorbing a larger and larger share of both employers’ profits and workers’ salaries. (See Figure 2.) For employees, healthcare cost is the top financial concern facing American fami-lies, ranking higher than home ownership, energy costs, debt, retirement savings, and college expenses, according to a recent Gallup Poll.1 The problem is compounded because the high cost of healthcare in the United States is directly related to growth in the number of uninsured people, especially when premium increases exceed personal income growth, thus making insurance less affordable.2

For US businesses, too, the significant cost of healthcare is a major concern, particularly when one considers that while just 61 percent of US businesses offer health insurance to at least some employees, a whopping 98 percent of large businesses (those with 200 or more workers) do the same.3 Employers typically spend upwards of 10 percent of payroll on health insurance for their workers. (See Figure 3.) Taken in aggregate, that’s a huge number—nearly $600 billion, according to the US Department of Commerce’s Bureau of Economic Analysis.

It wasn’t always that way. Employer- sponsored insurance was introduced dur-ing World War II as a relatively inexpensive way to recruit and retain employees in a tight labor market where wages were frozen by the federal government. Americans quickly became accustomed to healthcare coverage as a benefit of employment. They have also gotten used to the favorable tax treatment of employer-sponsored insur-ance benefits under current law, in which the premiums are excluded from their

income for tax and payroll purposes. In fact, one recent study found that employees would rather receive thousands of dollars in employer-sponsored insurance benefits than the same amount in additional salary. (See Figure 4.)

The future course for employer-sponsored insurance may depend largely on the policies initiated by the next president of the United States. A new leader will help decide important policy questions con-cerning covering the uninsured, improving the quality of care, and using taxes and other mechanisms to fund coverage. Pro-posals run the gamut from mandating that all employers provide coverage to doing away with employer responsibility alto-gether. The major differences among the possible approaches involve the following broad categories: employer mandates, government and worker responsibility, retiree coverage, tax policy, market reforms, and cost control. (For a snap-shot of the Democratic and Republican approaches to healthcare, see “Opposing views,” beginning on page 20.)

1 Gallup Organization, What Is the Most Important Financial Problem Facing Your Family Today? Gallup Poll Social Series, July 12–15, 2007.

2 Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs, vol. 25, no. 6 (2006).

3 The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2007 Summary of Findings, September 2007.

PricewaterhouseCoopers View winter 08 1�

1996 2000 2003 2005

8.0%

9.8%

10.7%

Figure 1: America’s big concern Percent of Americans surveyed, citing healthcare as the nation’s most important problem

Figure �: Health insurance trumps pay increasesPercent of respondents who would rather have $6,700 in employer-sponsored health insurance— the average amount spent by employers on each employee at the time of the survey—over the same amount in additional taxable income

Prefer employer-sponsored insurance

Prefer higher pay

Don’t know

5%

20%

75%

Figure �: Rising employer healthcare costs Employer premium contributions as a share of payroll

Figure �: Healthcare’s growing share of consumer spending Percent change in wallet share of personal consumption components

5

10

15

20

25

30

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2004

2003

2005

2006

2007

2004Presidential Elections

2008Presidential

Elections

1996 Presidential Elections

2000Presidential Elections

Clinton’s Task Force on National Health Care Reform

1992 Presidential Elections

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A SJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N DJ F M A M J J A S O N D

Medical care

Services, excludingmedical care

Durable goods

Nondurable goods–30

–20

–10

0

10

20

30

40

50

60

70

80

200520001995199019851980

Source: PricewaterhouseCoopers, Beyond the Sound Bite, 2007, based upon PwC Health Research Institute analysis of Gallup’s Most Important Problem series, October 11-14, 1990 through September 14-16, 2007

Source: Bureau of Labor Statistics’ Research Data Center, Employment Cost Index, data accessed from February 2006 to April 2007

Source: R. Helman and P. Fronstin, 2006 Health Confidence Survey: Dissatisfaction with Health Care System Doubles Since 1998, EBRI (Employee Benefit Research Institute) Notes, vol. 27, no. 11, November 2006, and earlier publications based on the EBRI Health Confidence Survey

Source: PricewaterhouseCoopers, Beyond the Sound Bite, 2007, based upon PwC Health Research Institute analysis of data from the Bureau of Economic Analysis, “Personal Consumption Components,” 2007


Pay, play—or no way

According to our analysis of US Census Bureau data, 47 million Americans—more than 15 percent of the population—do not have health insurance. Of those, a full two-thirds have a connection to a full-time job; that is, they either hold full-time jobs or are dependents of those who do. Given these statistics, it is not surprising that both of the major political parties consider addressing the working uninsured to be a high priority.

To expand access to care, proposals from the leading Democratic candidates require employers to provide worker health coverage. This approach, often referred to as pay or play, encourages employers to fund employee health insurance by taxing employers that do not.

The Democratic mandates strengthen and expand the employer’s role in the health-care market. Today, however, many large companies agree that employers must offer a minimum level of coverage. In a recent PricewaterhouseCoopers survey, 150 US executives at large, publicly held companies agree, with 87 percent reject-ing the notion that employers should not provide such coverage. (See Figure 5.)

Since 2005, 31 states have proposed a form of pay or play, and employer mandates have already been enacted in Hawaii, Massachusetts, and Vermont. (See Figure 6.) In Massachusetts, employ-ers with at least 10 workers pay each worker $295 per year if they do not make a “fair and reasonable” contribution to the cost of workers’ coverage. In this case, fair and reasonable means either enrolling 25 percent or more of full-time equivalents (FTEs) in the employer’s plan or offering to pay at least 33 percent of FTEs’ premiums.

Disagree

Agree

Neither

6%7%

87%

Figure 6: Overview of existing state employer mandates

HawaiiPrepaid Health Care ActEmployers must provide health insurance for employees working over 20 hours per week. Employers must contribute 50 percent of the pre-mium for single coverage and the employee covers the additional portion of the premium. Employee contribution is not to exceed 1.5 percent of wages.

MassachusettsAct providing access to affordable, quality, and accountable healthcareEmployers must enroll at least one-fourth of employees in an employer-sponsored plan or pay at least one-third of employee healthcare premium costs. Penalities for failure to adhere to the mandate are $295 per employee per year.

VermontCatamount HealthEmployers that do not offer health insur-ance, that offer health insurance only to some employees, or that have uninsured employees must pay a quarterly assess-ment fee of $1 per day per full-time equivalent (FTE). FTE exceptions will be made through 2010. The employer assess-ment rate will be raised at the same rate as Catamount Health premiums.

Figure �: Employer attitudes changing on providing coveragePercent of respondents who say employers should move away from providing healthcare coverage for active employees

Employer mandate passed

Employer mandate attempted 2005, 2006, or 2007

No mandate being considered at this time

Source: National Conference of State Legislatures Universal Health Care Action Network and Progressive State Network, Towards Health Care for All in the States, September 19, 2007

PricewaterhouseCoopers Health Research Institute, Tailoring the approach: Employer attitudes and healthcare strategies address distinct issues, 2007


The mandate proposals generally estab-lish a minimum employer contribution. For example, if an employer currently pays at least 6 percent of payroll costs toward employee health insurance, the employer would be exempt from any further contri-bution. If the employer provides no health insurance or pays less than 6 percent of payroll, the employer would have to con-tribute to a public pool that brings the total contribution up to 6 percent of payroll. The public pool would then subsidize coverage for the uninsured.

Generally speaking, Republicans do not support this approach. They oppose additional federal regulations on the health industry and specifically reject mandates. They counter that an employer mandate may not be effective unless the penalty is high enough to make purchasing coverage attractive. Some critics add that mandates might cause employers to hire more part-time or temporary workers who would not be subject to mandates.

Changing government and worker roles

Bolstering or diminishing the employer’s role in healthcare is just one lever that is being used to address healthcare reform. How the parties see the responsibility of the federal government and the respon-sibility of individuals is another key issue that also gets at the problem—and directly impacts employers.

Democrats generally favor expanding government programs such as Medicaid and the State Children’s Health Insurance Program (SCHIP). Many support a new government-sponsored health insurance program wherein individuals could pur-chase coverage. This could benefit health plans if the program were structured like the Medicare drug benefit, which is paid

for by the government and administered by private plans. Other Democratic proposals include (1) a new government health insur-ance option wherein individuals could purchase coverage (the program would be modeled after Medicare but not funded through the Medicare trust fund); (2) a new program that would mirror the Federal Employees Health Benefits Program and make the same private insurance options enjoyed by federal employees available to all Americans; and (3) the development of a national health insurance exchange that would set standards for participating plans and facilitate the purchasing of individual coverage.

Republicans support proposals that would strengthen the individual insurance market by extending to that market some of the favorable tax treatment that is currently available only for employer-group cover-age. Strengthening the individual market would not only provide tax support for people who do not have access to employer coverage; it would also offer more insurance-product choices to employees who currently are limited to just one or two health plans. Also, Republicans

tend to believe that existing government programs are underutilized. Rather than expanding government programs, leading Republicans would prefer that the gov-ernment focus on enrolling uninsured Americans who are eligible for Medicaid and for SCHIP but who haven’t signed up.

Both parties advocate changing the individual’s role in the healthcare system. Democrats would start with an individual mandate—that is, with a requirement that individuals procure health insurance similar to the requirement in many states that individuals procure automobile insurance. An individual mandate could coexist with an employer mandate, potentially offer-ing workers affordable coverage options both through their employers and in the individual market. Individual mandates could be supported by new rules like guaranteed insurability and community rating, which consist of pricing everyone in a given geography the same, thereby creating a large pool that spreads the risk. Together, guaranteed insurability and community rating facilitate portability of insurance—something both parties agree on. A variation on this approach involves

An individual mandate could coexist with an employer mandate, potentially offering workers affordable coverage options both through their employers and in the individual market.


600billion USD is the amount employers spend on health insurance for their workers, upwards of 10 percent of payroll.

1��million Americans rely on employer-sponsored insurance for their health coverage.

��million Americans, more than 15 percent of the population, do not have health insurance. Of those, a full two-thirds have a connection to a full-time job.

Health costs


an individual mandate only for children that is supported through expanded govern-ment programs.

Republicans oppose individual as well as employer mandates. They argue that an individual mandate may not be effective unless it is coupled with a severe penalty for those who do not enroll in a plan. For example, in Massachusetts—a state that currently has an individual mandate—the penalty is loss of the individual exemp-tion. However, the value of the $3,500 tax exemption ranges from $0 (for lower-income individuals not paying taxes) to $1,225 (for individuals in the 35 percent tax bracket). Given that the average annual premium cost of single coverage exceeds $4,000, the penalty might not encour-age many of the uninsured to purchase insurance. In practice, a mandate would likely be limited to those who can reason-ably be expected to afford private health insurance. Unless significant subsidies are provided for middle-income uninsured people, such individuals cannot afford to purchase the level of insurance provided

by employers—a level that commonly approaches annual family premiums of $15,000 or more.

Whichever coverage proposals prevail, they will affect employers. On one hand, public-plan options may crowd out private insurance if insured individuals drop their private coverage in favor of less expensive government coverage. Or employers—especially employers of low-wage workers—may decide not to offer insur-ance when public alternatives are readily available. On the other hand, any plan that covers more people may have the effect of lowering overall insurance premiums, a trend that could benefit employers.

The retiree dilemma

Covering active workers and their depen-dents is one thing, but what about the burden of providing coverage for retirees? Even employers that believe they have a responsibility to provide health cover-age access for retirees also feel there are limits to that responsibility. In a recent PwC survey, employers were less than certain about their future support for retiree health coverage. When asked to describe their views on the topic, nearly three-quarters said retiree health coverage is placing financial pressure on companies and that such coverage will need to be changed through reduced employer contributions and benefit caps. However, employers do show strong support for assisting employees in managing their own retirement health and associated costs. For example, nearly 80 percent support providing retirees with savings account mechanisms, tax incentives, and access to coverage even if they do not fund it. (See Figure 7.)

The parties’ proposals on retiree healthcare closely mirror their positions on increasing healthcare coverage in general. The

Even employers that believe they have a responsibility to provide health coverage access for retirees also feel there are limits to that responsibility.

Figure �: Employer attitudes on retiree health coverage In describing your views about retiree health coverage, do you agree at least somewhat with the following statements?

Retiree health coverage is placingfinancial pressure on companies and will need to be changed via reduced employer contributions and benefit caps

Percent agreeing

Employers should help provideaccess to affordable retiree health coverage but not necessarily fund it

Employees should set aside moneyduring their active employment yearsto fund their retirement healthcare needs

There should be more tax incentivesfor employees to set aside money tofund their retirement healthcare needs

73

74

79

80

Source: PricewaterhouseCoopers Health Research Institute, Tailoring the approach: Employer attitudes and healthcare strategies address distinct issues, 2007


their own, affordable policies without help from employers. This approach weakens the connection between insurance and employment.

The Republican plans extend the approach that President George W. Bush proposed in his fiscal year 2008 budget: Contribu-tions to employer-sponsored insurance are included in wages and therefore subject to income and payroll taxes. In exchange, the president’s proposal would provide a standard deduction of $7,500 for all insured individuals and $15,000 for insured families. By eliminating the tax advantages associated with employer-sponsored insur-ance, the president’s proposal would make

individual coverage more attractive and begin to disentangle health insurance from employment.

Under the Republican plan, people who purchase coverage costing less than the deduction amounts would still receive the full value of the deduction, which could influence individuals to shop for the most basic coverage. However, the proposal would offer few incentives to low-income earners who have no or little tax income liability. The administration estimated that its proposal would reduce the number of uninsured by 3 million. Critics, however, argue that employer-pur-chased insurance might continue to enjoy an advantage over individually purchased policies because of more favorable pricing based on employer purchasing power.

Republicans favor expanding HSAs, which let individuals earmark tax- exempt contributions for healthcare. By increasing contribution limits, they hope to entice more individuals to purchase insurance. Some also favor doing away with high-deductible requirements for HSAs, which would also make the plans more attractive.

Opponents say the impact of such HSA changes would likely be modest, based on how changes have been received since their inception a few years ago. The HSA-eligible, high-deductible-health-plan option has attracted about 4.5 million Americans, about one-fourth of whom previously were uninsured.4 However, only about half of those with eligible plans have actually opened HSAs.5

Democrats would bring retirees into the sys-tem either by expanding existing programs, by prepurchasing retiree healthcare cover-age, or by using health markets to increase access. The Republicans favor tax incen-tives through the expansion or modification of health savings accounts (HSAs).

Tax reformers and market makers

Instead of employer or individual mandates, Republicans generally support changes to tax policy to stimulate a more robust individual insurance market. Their theory is that with attractive rates and policies, individual consumers—especially those who are currently uninsured—can secure

4 America’s Health Insurance Plans Center for Policy and Research: “January 2007 Census Shows 4.5 Million People Covered by HSA/High-Deductible Health Plans,” April 2007.

5 US Government Accountability Office, Consumer-Directed Health Plans, Early Enrollee Experiences with Health Savings Accounts and Eligible Health Plans, report to the Hon. Max Baucus (D-Mont.), August 9, 2006. http://www.gao.gov/new.items/d06798.pdf.


The individual market for health insurance has not grown during the past three years, and the percent of Americans in high-deductible health plans dropped in 2006, according to the Commonwealth Fund.

In keeping with the vision of expanded individual markets, Republicans also favor permitting cross-state selling of insurance. The reduced regulations would create national health insurance markets in which individuals could purchase insurance plans from anywhere in the nation. Under current regulations, insurance products may be sold within a state only if the product is approved by that state’s insurance com-missioner and if it abides by the individual state’s mandates. The Republicans pro-pose replacing 50 different sets of state regulations with a single national standard.

Reining in costs

Proposed mandates and tax policy changes focus principally on the issue of expanding coverage for the uninsured. But controlling skyrocketing healthcare costs is another important priority—particularly for employ-ers. To help control costs, Republicans and Democrats alike urge an increased focus on the twin pillars of wellness and prevention, yet the parties have yet to outline significant policies promoting this agenda and the employer’s expanded role.

The consensus is that while tradition-ally, governments—not employers—have been held responsible for a population’s health, government alone cannot pre-vent the spread of chronic disease. The workplace is seen as an important focal point for successful prevention strategies, and employers are seen as being able to influence individual behavior by providing a supportive environment and leveraging existing infrastructure to offer low-cost but effective interventions.

There is emerging evidence to support this push, and some of the employers that have instituted wellness and prevention programs have seen a clear return on their investment in terms of improved worker productivity or reduced absenteeism. Employers are encouraged to create incen-tives for healthy behavior that may prevent chronic disease. That means programs to promote screenings, smoking cessation, weight loss, and regular exercise. But there are no quick fixes: Even the best employer programs are ineffective unless people commit to changing their behavior.

The debate continues

As the presidential campaign season continues, employers can expect to see increased attention paid to the health-care debate and to the employer’s role in workers’ health. Democratic candidates, who focus on decreasing the number of uninsured, will speak about new rules and

regulations concerning employers—rules and regulations designed to help expand coverage for working Americans. Repub-lican candidates will frame the discussion around modifications to the tax code and reduced regulation of the insurance indus-try to de-emphasize the employer’s role in favor of market forces.

Both parties are likely to promote wellness strategies designed to encourage healthy lifestyles and to manage the epidemic of chronic disease. In the end, however, commitment by business leaders and col-laborative public-private partnerships most likely will help enhance productivity, reduce the number of uninsured, quell the growing burden of healthcare costs, and lead to a more healthy community.

Sandy Lutz is managing director, Benjamin Isgur is assistant director, and Jeffrey Gartland is a research analyst with the PricewaterhouseCoopers Health Research Institute.

At this stage of the election, it’s still too early to assess the bottom-line impact of health-care reform on employers. However, no matter who is elected, employers will be affected. Here are a few of the potential benefits and risks associated with healthcare reform that you might want to keep on your radar screen.

Employer impacts

The good, the bad, the unknown

Potentially positive outcomes

Fewer uninsured people in the health-care system may reduce both cost shift-ing and overall premium costs.

Tax credits to purchase insurance may increase attractiveness for recruitment and retention at smaller firms.

More government spending on wellness and prevention could benefit employee productivity.

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•

•

Potentially negative outcomes

Coverage mandates could lead to higher costs and/or penalties.

Tax credits and deductions that encour-age workers to buy individual policies may take away what some employers consider to be a key retention tool.

•

•

PricewaterhouseCoopers View winter 08�0

Democrats

Strengthen the employer’s role through mandates

In reality, an employer mandate likely won’t have the crucial implications the word mandate implies, because nearly all large employers already provide health coverage. Initially, businesses could see higher benefits costs overall with more workers to cover, but lower premiums for current workers and retirees could result from fewer uninsured in the US healthcare system.

How big businesses will be affected

The mandate to provide coverage for employees could hurt small businesses—whether in the form of higher benefits costs or in the form of penalties. This change may result in the use of new staffing models to replace expensive workers—including hiring more part-time or temporary help—but increased government spending on wellness and prevention programs could enhance worker productivity.

How small businesses will be affected

No surprise that it’s all about change for the Democrats. Expect broad, more immediate reform across the board, with new mandates, government pro-grams, and funding mechanisms.

Employees can potentially breathe a sigh of relief, knowing that they will be eligible for coverage through employers or through new government programs. And if more US families are insured, they may see lower out-of-pocket costs for their share of the bur-den. In an environment where health insurance benefits are a given, workers may look at other criteria when evaluating job offers.

How workers will be affected

Retired workers without employer benefits would have more coverage options through new government programs.

How retirees will be affected

Opposing views You’ve heard all the election rhetoric about how each candidate will reform the healthcare system. While it’s still too early to call the contest, here’s the quick party rundown on what employers can expect once a new presidential term begins. One thing is certain: There will be plenty of changes that affect employees, employers’ obligations, and company profits.

PricewaterhouseCoopers View winter 08 �1

Give workers the choice through market options

Republicans

Taking employers off the hook and creating a more robust individual market, coupled with tax incentives, could make work-sponsored plans less popular. This shift could mean lower overall benefits costs for businesses, but the trend could weaken a company’s ability to use health benefits as a central recruiting and retention tool.

If workers could procure their own affordable health insurance, smaller employers may be able to stop offering health benefits. This could mean cost savings but could also hurt worker recruit-ment and retention.

Republicans look to taxes—credits and incentives—to spur increased health insurance market competition. And they don’t want mandates for individuals or employers.

More-affordable health insurance options in the consumer mar-ket, along with tax incentives, may entice employees to choose personal plans instead of their employers’ plans. This measure of freedom may mean that employees will look at other factors when considering their choices of employers or of careers.

A renewed emphasis on health savings accounts and related tax incentives may mean that retirees can stretch their healthcare dollars further.


Change agents

By Randy Browning

Designing agility into your corporate DNA

Operational excellence

PricewaterhouseCoopers View winter 08 ��

Just whose job is it to ensure your business can keep pace with customers, competitors, and suppliers?

Markets aren’t what they used to be. The Internet’s global reach and ability to supply a near-instantaneous flow of information have forced businesses to sustain an unprecedented scale and pace. Customers and suppliers are acting accordingly, and they’re changing their demands quickly. For every company that can’t keep up, there’s one or more that can and will.

Simply put, you need cultural and operational agility. There’s that word again—agility. It’s been permeating the corporate lexicon. But agility is more than a buzzword; it’s a survival skill. In an environment where global reach, techni-cal prowess, and optimal efficiency are requirements, agility is a key differentiator. In fact, the ability to adapt to change was ranked as one of the most important per-ceived sources of competitive advantage by executives in PwC’s most recent global CEO survey. (See Figure 1.)

So, what exactly is agility, and under whose job description does it fall? Agility is infusion of your processes and decision making—your corporate DNA really—with the ability to effect strategic change. It involves everything you, your manage-ment team, and your employees choose to do. This emphasis on selectivity is key because true agility requires establish-ing a fine balance between flexibility and standardization. You must determine where it makes sense to create and anticipate change and where it is more prudent to require a fixed approach. This balancing act is necessary: While your customers expect unique products and services, you have to provide those custom solutions from a common, standardized supply chain and infrastructure.

The endgame, of course, is not change for its own sake but the building of an optimal foundation—one that enables you to respond to crucial opportunities and chal-lenges with maximum results and minimal organizational stress.

Figure 1: Perceived sources of competitive advantage According to our recent survey of more than 1,100 global CEOs, agility is squarely at the top of the executive agenda. The ability to adapt to change was cited as one of the most important sources of competitive advantage over the next 12 months—trumping even technological innova-tion and talent.

0 10 20 30 40 50 60 70 80

Ability to adapt to change

Percent of respondents

Improved customer service

Access to and retention of key talent

Technological innovation

Ability to implement successful collaborative partnershipsImproved sourcing/supply chain management

Cross-cultural experience

Sole access to scarce resources

Other

76

76

74

65

61

50

42

18

4

Source: PricewaterhouseCoopers, 11th Annual Global CEO Survey, 2008

PricewaterhouseCoopers View winter 08��

Getting to agility

It’s no surprise, then, that achieving agility is not easy. It’s especially difficult because businesses have spent the past few decades optimizing for efficiency—an approach that typically squeezes out flexibility. Henry Ford famously noted this contradiction when he said his assembly-line-produced Model Ts were available in any color a customer wanted—as long as it was black!

As a result, most businesses are efficient at what they need to do today, but they can’t adapt themselves quickly or affordably to what they need to do tomorrow. This lack of flexibility isn’t limited to a company’s static systems or production processes; it’s also embedded in the organization’s human processes, such as workflow and decision making.

Worse, there’s an organizational bias that actively inhibits agility. Businesses typically

are organized around specialties, thereby creating operational silos. And each is optimized for a specific task, such as sales or engineering.

In today’s market, the Model T–era approach whereby each group does its own thing and then hands off the result to the next in the chain just doesn’t work. Being agile requires working across mul-tiple silos simultaneously. Marketing and production, for example, need to collabo-rate at all stages of a product’s life cycle to ensure that changing customer needs get incorporated rapidly into a product that is cost-effective to produce.

Yet most executives lack such an inte-grated view of their organizations. Because they have no idea how all the pieces fit together, there’s no way to orchestrate all the silos operationally. And there’s even less ability to execute on new or changed business strategies. Instead, executives are reactive, scrambling as changes occur.

Most companies lock on to a singular business strategy based on a set of assumptions about what’s driving markets, customers, and suppli-ers, but what if something unanticipated alters the landscape?

Building agility into your business prepares you to respond quickly and efficiently when new challenges or opportunities arise. But it also brings other benefits:

Improved ability to incorporate new business capabilities Acquisitions, alli-ances, and dispositions often result in the need to incorporate new capabilities. An agile company can do so quickly and cost-efficiently. It can also divest business activities rapidly without losing any key competencies.

Reduced operation costs Taking stock of all your business processes and analyzing them for cost and value contribu-tion provides the opportunity to rationalize or to consolidate those processes that are redundant.

Better reporting capabilities By reducing the complexity of business and IT operations, you can define common metrics that will enable you to better evaluate performance.

Prioritized innovation Based on a clear understanding of which business activity or core processes contribute the most value, you can focus innovation on those specific areas.

Enhanced predictability of operations With an end-to-end view of the business, you can more easily collect information across the enterprise and the supply chain and feed it into predictive models for analysis.

Payback

Benefits of agility


Planning for what-if

Businesses greatly improve their long-term success by anticipating key opportunities and challenges before they occur and then preparing their organizations to be ready to make the needed changes quickly. That may sound like Business Strategy 101, but it isn’t. Most companies lock on to a singular business strategy based on a set of assumptions about what’s driving markets, customers, and suppliers, but what if something unanticipated alters the landscape, such as a new data privacy regulation, a supplier’s public relations misstep, or a competitive merger?

What’s needed is a way for companies to collectively assess such potential scenarios in order to determine which are worth considering and then to build in the ability to execute them. To determine where to start and how to get there, most companies could use a high-level map of present and future value creation. We call this map a business agility blueprint. The process of

Pitfalls

Barriers to agilitycreating the blueprint requires companies to take a hard look at how they conduct their businesses today, how they hope to in the near-term future, and ultimately, how they might prepare for bigger disruptions in the longer term.

The blueprint provides a singular corporate view that is often missing, and it helps make an unknown future easier to predict. First, it provides a complete picture of current business processes—where value gets created, where there are redundan-cies, who owns which processes, and where there are connection points. Then—through high-level scenario analysis—the blueprint facilitates thinking about potential changes and about how to operationalize responses to those changes.

When it’s done, the blueprint will articulate the set of requirements and expected out-comes needed to respond to future market demands or opportunities. The blueprint might reveal that it’s more cost-effective to

The business agility blueprint will articulate the set of requirements and expected outcomes needed for a company to respond to future market demands or opportunities.

Why is agility so hard to achieve? Here are some of the biggest culprits:

Lack of understanding of business processes You can’t begin making changes to what you don’t understand. Many companies have poorly documented and inconsistent processes that need to be addressed before thinking about agility efforts can begin.

Business silos Agility requires an integrated view of your business. But today that view is often missing because the company operates in silos, each one optimized for specific functions.

Limitations of supporting systems There was a time when technology investments like enterprise resource planning systems once created competitive advantage by helping enterprises increase their scale and efficiency through standardization. Yet it’s that same standardization that makes change so hard. The systems are designed to handle discrete business activity and can’t easily be adapted to support changes in such activity.

Little investment in people and process Widespread efforts to gain efficiencies through technology platforms have had the unintended consequence of shifting vital attention away from people and process improvements.


Current business architecture: a com-plete view of the organization’s business processes and their connection points

Current enterprise architecture: your company’s technical blueprint that shows how and where the supporting informa-tion technology (IT) systems are used

Senior management’s beliefs about pos-sible strategic opportunities and poten-tially disruptive market changes that will require alteration of your business model

Input from customer-facing departments such as marketing and sales, describing the ways current operations limit flex-ibility in delivering additional value to customers.

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•

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•

implement a change today—as part of a greater operational excellence effort— than to ramp up later. In other cases, the approach may be to ensure that processes and technologies are open and changeable so that they can accom-modate future capabilities.

Creating a business agility blueprint

Many executives focus on onetime or short-term activities that achieve agility through force of will, but once the initia-tive is over, the agility dissipates and the original processes and behaviors reas-sert themselves. That’s why it’s critical to approach agility as a foundational effort that you execute with the same planning, broad reach, and accountability as you

would an operational excellence effort such as Six Sigma or Balanced Scorecard.

The business agility blueprint is at the heart of your company’s quest to be ready—really ready—for whatever the future brings. As with construction of a house or other building, the blueprint is the focal point of all of your efforts. To create the final blueprint—a process that may take several months and that involves your entire execu-tive team—you will need to synthesize from a number of internal constituents their information and input, including:

Current business strategy

Mapping of your discrete business processes

•

•

Agility must be embedded into the overall management structure rather than treated as yet another specialty function.


You can begin to get a glimpse of the potential of the business agility blueprint when you consider the example of tele-communications company BT. Realizing that the British telecommunications market and the regulatory rules governing it were likely to undergo profound change, BT decided to rethink its business. Facing the prospect of having to open up its busi-ness to competitive service providers, the company consolidated its business pro-cesses into 14 platforms to ensure there was only one version of each process, no matter where in the company it was used. Next, it aligned its functional groups with those process platforms. For instance, BT standardized the process of validating service availability for its current and future offerings, such as landline, cellular, DSL, or any other future product. Before the reorganization, each functional group at the company had its own ways of meeting this very common requirement. Now, when BT wants to bring a new service online, this piece of the offering can be dropped into place easily.1

Taking a team approach

Managing change is difficult even under the best of circumstances, when all the factors and requirements are known. It’s even harder to manage for the possibility of future change.

Is it the chief marketing officer’s job to determine potential customer demands that should be anticipated? Should the chief operating officer expand the pro-curement system to ensure it can source products and services not currently needed? Does the chief information officer need to upgrade the company’s Web platform so it can better analyze customer data? Maybe—but all of these discrete activities miss the point. Acting alone, each of these executives has little chance of preparing the organization as a whole for agility.

Perhaps a new C-level executive is required—a chief agility officer (CAO), who would oversee the initiative much as a chief financial officer ensures financial efficiencies and standards across the business. But as tempting as it is to name an agility czar who can manage such efforts, doing so is not the whole answer. Agility must be embedded into the overall management structure rather than treated as yet another specialty function. In other words, agility should be an integral part of all aspects of a company’s strategic and operational efforts. Agility is a responsibil-ity of every executive team member and should be part of each one’s mandate and mission. These executives will need to act both as a team and as individuals to develop an agility plan and ensure that it gets implemented.

Agility should be an integral part of all aspects of a company’s strategic and operational efforts.

1 PricewaterhouseCoopers, Business Agility white paper, 2008.


As a team, the officers’ responsibilities are twofold: First, using the business agility blueprint, they must define where agility should be designed into the busi-ness. Second, they must ensure that the requisite changes get implemented and are maintained. Much of the detail work will be delegated to appropriate staff, under the officers’ direction and review.

The executive officer team should be pre-pared to make changes in pursuing agility. Many processes that used to be self- contained would, under an agility mindset, span multiple departments, requiring greater alignment across business units. Such efforts may require reworking depart-ments to bring together processes that are now closely related, or they may require coordinating entities to ensure that their efforts are mutually supportive. At the very least, the executive team needs to set

incentives—for the desired actions—that are consistently applied no matter what department is involved. This can be tricky in culturally siloed organizations, but it is fundamental to success.

A CEO who delegates agility solely to operational experts sends a clear mes-sage: Agility is not important. And with that kind of tone from the top, the results from any agility initiatives will likely be disappointing.

In essence, the CEO owns the business agility blueprint. Because the CEO ulti-mately sets business strategy, he or she also bears final responsibility for determining which future scenarios the business should support through agility. Of course, the rest of the executive team and other key staff will help identify and evaluate poten-tial scenarios. Managing the details of the

blueprint, however, is not the CEO’s job. That responsibility rests with a person or an entity responsible for coordination and oversight and might fall to the chief strategy officer or to an agility program office.

The CEO also bears the ultimate respon-sibility for ensuring success. While much of the work for facilitating agility falls to other executives, the CEO must ensure the desired outcome by periodically assessing whether the goals set forth in the business agility blueprint are being met. While a monitoring group, such as a program office, can help provide the information to determine compliance, only the CEO can decisively act on that information.

Sustaining success

Achieving agility is not a one-off set of activities. While the executive team’s continual focus on agility is critical,

Staff and management alike need to value agility as much as they do performance and efficiency.


ultimately, achieving and sustaining agility are everyone’s responsibilities. Staff and management alike need to value agility as much as they do performance and efficiency. They need to support the business agility blueprint and its goals in their individual actions and decisions. Executive management can make such buy-in the path of least resistance by offering appropriate incentives and by fostering the right culture. And execu-tive management has to practice what it preaches. Only then will a company be well positioned to cope with the business reality of constant change.

Randy Browning is the clients and industries leader of our US Advisory services practice.

For a more detailed discussion on how to achieve business agility, read the new white paper at www.pwc.com/view.


Compliance

A US move to IFRS is inevitable. All companies should think strategically about this change and begin to understand the impact now.

Globalization has changed nearly every aspect of how companies manage their business—sourcing, distribution, consumer pricing, raising of capital, and so much else. Financial reporting has also been greatly influenced by globalization. In fact, it is not an overstatement to say that a financial reporting revolution is now under way. Increasingly, International Financial Reporting Standards (IFRS) is how most of the world talks to investors and other stakeholders about corporate performance. Changing to IFRS alters how companies prepare and report their financial results and necessitates that investors understand any forthcoming changes. Anticipating that the US will soon join the rest of the world by allowing or mandating a move to IFRS, some leading US companies are already beginning to prepare for IFRS adoption. Even if your company is not yet ready to embrace IFRS, it makes sense for senior

One global flavor

By Raymond J. Beier

Thinking about International Financial Reporting Standards and how leading US companies are getting ready for them


management to take action so they can understand how a move to IFRS will impact reporting of financial performance, opera-tions, and communications with investors.

IFRS: The world’s new reporting framework

The message is clear: IFRS is becoming the global accounting language. Virtually all major territories other than the US use or are moving to IFRS. Approximately 12,000 public companies around the world already use IFRS in territories such as the European Union, Australia, Singapore, and Hong Kong. China, Canada, Japan, and South Korea have announced their intention to convert to IFRS in the not-too-distant future. Although IFRS only recently has made headlines in the US, the US standard setter, the Financial Account-ing Standards Board (FASB), has been deeply involved with the London-based

International Accounting Standards Board (IASB) and with IFRS since their incep-tion in 2001. In the past five years, the IASB and FASB have worked to improve and converge both US GAAP (Generally Accepted Accounting Principles) and IFRS, with an increasing focus on the end goal of achieving high-quality, globally understood reporting standards.

The year 2007 brought a new perspective to that goal for US constituents. Would adoption of IFRS in the US make sense? In a global economy, do the reasons for adoption outweigh the reasons for retain-ing our own US standards? And then this intriguing question: Would adoption of IFRS help to eliminate many of the difficul-ties in US GAAP, which in certain respects has come under increasing and well-taken criticism? The answers to these questions are now being weighed. The US Securities

and Exchange Commission (SEC) has already taken preliminary steps that history will almost certainly show to have been tipping points in the course of events:

The SEC no longer requires foreign private issuers to reconcile their IFRS filings to US GAAP so long as they use IFRS as issued by the IASB.

The Commission is studying whether US companies should have the option of reporting under IFRS rather than under US GAAP.

As early as spring 2008, the SEC may issue proposed rules that designate a date for optional and/or mandatory adoption of IFRS by US public companies. The speed with which a move to IFRS has progressed—from a mere possibility to inevitability—has landed this topic squarely on the radar screen of many multinational

•

•


capital markets to IFRS is relatively young, it is too soon to tell whether the anticipated decrease in cost of capital will prove out. However, due to the sheer size of most cap-ital-raising efforts and the long-term nature of the payoff, even slight improvements in transaction terms such as interest rates can translate into significant dollar savings.

Within individual companies, the ability to centralize and streamline accounting functions and move financial personnel freely around the world will lower costs and strengthen internal controls. Today, multinational corporations with numerous statutory filing requirements around the world need to employ staff with expertise in each national GAAP to prepare filings and then translate financial statements from national GAAPs to the parent-company reporting GAAP. Use of IFRS globally will reduce these reporting efforts and related costs and decrease the risk of errors.

Challenges of many kinds

Although the benefits at both the macro and micro levels are attainable, the associ-ated challenges are meaningful and need to be addressed. Key for companies is understanding how their financial report-ing will change under IFRS and what those changes will mean to investors and other financial statement users. Managing and communicating the impact of these changes appropriately are defining points in a successful conversion plan.

Perhaps the most immediate hurdle US companies will face in a conversion to IFRS is a limited pool of IFRS-knowledgeable resources. Companies need to determine if they already have the right skill sets in-house to manage the change, and, if not, whether individuals who possess those skills should be hired. Learning IFRS is a challenge for the US at all levels, from colleges and universities educating future

companies and their boards. However, some pioneering US companies that rec-ognize the inevitability of IFRS are not just talking about it— they are actively begin-ning the conversion process.

This article looks in broad terms at the shift from US GAAP to IFRS and at the emerging best practices of leading US companies that view IFRS reporting as not only inevitable, but also beneficial. These companies are aware of the challenging scope of implementation. They want to be ready to seize the advantages and make a smooth transition. And they want to control the costs of doing so.

Benefits of IFRS

From a macroeconomic perspective, the benefits of using one global financial reporting language are evident: increased comparability across global investment

options, fewer barriers of entry to non-US markets, and, potentially, a lower cost of capital. Moving to a single global account-ing and reporting language also will reduce complexity—a welcome improvement for the companies that prepare financial reports and for the investors and other stakeholders who rely on them.

From a capital markets perspective, many multinational companies believe IFRS offers an opportunity to lower their cost of capital. Widespread acceptance of IFRS financial statements allows companies to seek capital across a broad base of global funding without having to incur additional financial-reporting costs based on the source of funding. Anticipating increased competition among global investors and financiers for attractive investments, strong companies expect their cost of capital to decrease. Because the conversion of major


accounting professionals to retraining for current financial executives, auditors, analysts, and professional investors.

Beyond learning the principles of IFRS, preparers, users of financial reporting, and educators will need to change how they think about and practice their disciplines. The needed changes are broad in scope: cultural, behavioral, and institutional. Unlike US GAAP, IFRS is intentionally light on inter-pretive guidance. Principles and a minimum of necessary rules require accountants to make more professional judgments about the nature of transactions when determining how to account for them. The principles are generally consistent with those in US GAAP or closely similar, but much greater exercise of judgment is needed in a framework that deliberately doesn’t carry the same weight of detailed rules, bright lines, safe harbors, and exceptions.

This point is dramatically illustrated by comparing the modest number of IFRS accounting standards that address the accounting for financial instruments with the mass of US GAAP literature on the same topic. (See Figure 1.) The IFRS lit-erature isn’t weak or incomplete. It clearly states the principles, avoids unnecessary rule-making, and relies on preparers—CFOs, controllers, and others—to exercise professional judgment. Undoubtedly, many Americans will initially find it challenging and uncomfortable to navigate without prescriptive guidance and to set aside time-honored practices.

Here is an issue worth considering more closely. The principles underlying IFRS are in fact designed to narrow the acceptable alternatives. US GAAP is similarly based on fundamental accounting principles, but it has become laden with so many rules

and other detail over the years that the process of applying it has become cumbersome and complex.

Conversions to IFRS by companies in other countries, particularly in the European Union and Australia, lay excellent ground-work for US companies to follow. With different national GAAPs as starting points, it’s true that each country’s conversion to IFRS varied in its challenges and level of difficulty. Due to the long-standing global influence of US GAAP and the conver-gence agenda between the FASB and the IASB, many IFRS standards issued in recent years are based on principles that are fairly consistent with existing US GAAP standards. This should translate into fewer accounting differences for US companies that are converting to IFRS as compared with many of the other countries that have already done so.

Figure 1: Financial instruments Key differences between US GAAP and IFRS

US GAAPFAS 5FAS 91FAS 107FAS 114FAS 115FAS 133FAS 138FAS 140FAS 149FAS 150DIGsEITFsIndustry guides

IFRSIAS 32IAS 39


IFRS US GAAP Implications

Differences between IFRS and US GAAP

Despite the large number of parallel principles underlying IFRS and US GAAP, the devil is in the details, and differences can be significant for certain industries and types of transactions. The following examples of key differences are somewhat technical in nature, but readers familiar with accounting and reporting will see at a glance the primary implications.

Impairment assessment of long-lived assets is a one-step process based on discounted cash flows. Under certain circumstances, previously recognized impairments are reversed.

Asset write offs

Fair value accounting

Development costs

Impairment analysis is a two-step process based first on undiscounted cash flows. Reversal of impairments is prohibited under US GAAP.

Greater use of fair value, and certain assets, such as property, plant, and equipment; intangible assets; and invest-ment property can be carried and remeasured to fair value each period.

Requires historical cost valuation of such assets.

Development portion of research and development costs is capitalized if certain criteria are met.

Both research and develop-ment costs are expensed.

Impairment charges may be recognized more frequently, earlier, and for different amounts under IFRS. Combined with the ability to reverse impairments, the result is greater potential earnings volatility.

The result is a very different balance sheet and a clearer view for investors of the unrealized appreciation in certain major asset categories.

Development costs do not hit the bottom line immediately but, rather, are expensed over an estimated life, typically as the associated revenues from the development activities are earned.

Liability versus equity classification

Classification of an instrument as a financial liability versus equity is stricter and based on the substance of the instrument rather than on its legal form. Compound instruments must be bifurcated between the liability and equity components.

Instruments with both liability and equity characteristics can often qualify for treatment as mezzanine equity and are not marked to fair value.

The result is an increase in interest expense, greater volatility in the income state-ment, and less equity on the balance sheet than under US GAAP.

Pension accounting Recognition of pension expense may be accelerated: Companies can elect to recognize actuarial gains and losses immediately rather than deferring for a period of time, and prior-service cost is recognized over the vesting period.

Requires actuarial gains and losses to be amortized over life expectancy, and prior-service cost is amortized over the remaining service period.

The cost of providing pension benefits is not deferred as far into the future under IFRS as it is under US GAAP.

As the option to use IFRS becomes available in the United States and companies decide to adopt, each company will need to undertake an extensive review of financial policies to determine the impact of these and many other differences between the two frameworks.


Preparing for the move to IFRS

Because IFRS appears inevitable, compa-nies need to begin actively assessing what such a move will mean to their operations, financial statements, and stakeholders. The European conversion to IFRS taught us that companies that take the initiative now will benefit by enjoying a smoother transition with fewer fire drills.

A clean-sheet-of-paper approach will be beneficial for many companies; some may be tempted to try to force their historical US GAAP policies to fit into IFRS as a means of simplifying the conversion process.

Other key lessons learned include:

Selecting new IFRS accounting policies A clean-sheet-of-paper approach will be beneficial for many companies; some may be tempted to try to force their histori-cal US GAAP policies to fit into IFRS as a means of simplifying the conversion process. But conversion to IFRS is a rare, onetime opportunity to comprehensively reassess all accounting policies. IFRS may offer alternatives that US GAAP did not—alternatives that may better reflect the economic substance of transactions and positions. Benchmarking against global peers and competitors that have already adopted IFRS will provide valu-able insight into what is acceptable in the marketplace.

Involving the whole company New financial-reporting principles can impact nearly every aspect of a company’s operations—from

customer and vendor contracts and employee compensation arrangements to planning for M&A activity and income tax structures. The involvement of key company expertise—legal and risk management, treasury, sales, tax, human resources and investor relations—at the right stage is essential to a successful conversion.

Planning the IFRS conversion project Conversion projects can vary in length, difficulty, and cost depending on the level of complexity in a company’s transactions, operational structure, and regulatory environment. Another lesson to be learned from Europe’s mass adoption in 2005 is that conversion will take longer than expected. US companies that have started the process—mostly large multinational companies—estimate that it will take at least two to three years and significant resources—both internal and external— to complete a quality conversion project.


Integrating the change Integrating IFRS principles into operations from the ground up is a necessity. Companies that left their IFRS conversions to the last minute often tried to complete the transition by making top-side adjustments to their existing prac-tices. IFRS is not a bolt-on solution to be layered on top of old conventions. Compa-nies that do so will strain internal controls over financial reporting and increase their risk of reporting errors.

Each company’s road map to IFRS will be unique, but the following steps provide an approach and key considerations for a well-orchestrated conversion plan.

Impact analysis

To scope a conversion project effec-tively, companies need to understand the multiple moving parts and wide-ranging impacts that a move to IFRS will bring. An impact analysis helps identify the depth and breadth of necessary changes, how long they could take to implement, what resources are needed to bring them to frui-tion, and what impact they could have on the companies’ stakeholders. Some facets of an impact analysis include:

Understanding what is affected Conver-sion to IFRS will change the way certain transactions are accounted for. A thor-ough review of the financial statements, with detailed identification of differences between current accounting and IFRS, will help a company assess the dimensions of the conversion and the scope of the infor-mation needs.

A company’s legal contracts represent another layer of impact for consideration. A change to IFRS may result in a dramati-cally different balance sheet and changes in earnings projections, key performance indicators, and financial ratios. In response, debt agreements and specific covenants may need to be modified. Changes in accounting policies and disclosure require-ments may necessitate new information needs. Customer and vendor contracts may need to be revised and compensation agreements restructured.

The impact on accounting and reporting processes, controls, and IT systems needs to be considered. A move to IFRS can cre-ate new information needs and impact how controls are designed or implemented, how consolidations are achieved, and how finan-cial systems record and report information. Changes in these areas need to be vetted and will eventually need to be documented and tested.


Understanding resource needs and timelines Assessment of the quantitative and qualitative levels of resources needed, coupled with decisions on whether to train internal resources (and what amount of training is necessary) or hire external resources, is critical and frequently under-estimated. Decisions on resources also play a key role in budgeting the cost of a conversion project.

Although milestones and timelines at this early stage of a conversion project are tentative, having them in place is key to scoping the project, assessing the cor-rect level of urgency of various tasks, and keeping all participants focused on the many moving pieces of the project.

Project management reminder: A formally established and executive-sponsored project with a dedicated project team is needed in most cases to manage success-fully through completion.

A change to IFRS may result in a dramatically different balance sheet and changes in earnings projections, key performance indicators, and financial ratios.

Final thoughts

As the move to International Financial Reporting Standards gains momentum, more and more forward-thinking compa-nies are preparing for a move to IFRS. They are identifying the benefits they expect to realize and the challenges they will face along the way. At a minimum, all companies should consider undertaking an impact analysis now so that they have an accurate appreciation of what IFRS will mean to their business when it arrives on US shores.

Raymond J. Beier is the partner responsible for strategic policy and analysis within PwC’s National Professional Services Group.


Maximizing talent Strategies for

making the most of your people no matter what tomorrow brings

People management


Why should executives worry about the next talent crisis when they have their hands full with current people challenges? Times are changing, and they’re changing fast. The battle for talent—always fierce—is escalating.

According to the US Department of Labor, by 2014, more than one out of every three US workers will be 50 years of age or older. The exodus of baby boomers from the workforce will leave vacancies in critical leadership and other pivotal roles. This raises a crucial question: How does a busi-ness make the most of the talent it has to ensure the right skills are in the right place at the right time—no matter how often its needs change? Businesses that build their talent pipeline internally, evaluate alterna-tive work pools, and explore ways to meet their future employee needs will be better positioned than their competitors to face these kinds of challenges.

Today, companies are already beginning to see the profound need for a new approach to maximizing talent—companies like the international technology manufacturer that determines it must address the gap left by the retirement of some 50,000 managers and leaders over the next decade and the successful midsize financial services firm that enters expanding markets and must learn to supplement internal talent with key contractor relationships so that the company does not risk derailing its rapid growth. Or consider that most of the nearly 3,000 new graduates from China (87 percent), the UK (71 percent), and the US (90 percent)

surveyed by PricewaterhouseCoopers indi-cated they will actively seek out employers whose corporate social responsibility behavior reflects their own.1

However, as many companies are discovering, reacting and adapting to current talent trends will not be enough. Thinking about talent like a long-term asset and viewing talent as a distinctive competi-tive attribute are significant shifts away from thinking about talent as a discrete war that can be won. Anticipating and preparing for future organizational, societal, and marketplace changes—and then weighing their implications on how to secure talent—are aspects of an organiza-tional sustainability mindset. In an effort to gain insight into how businesses can accomplish this talent objective, a PricewaterhouseCoopers team conducted a scenario planning exercise to envision ways that businesses could evolve to meet future workforce challenges.

The resulting report—Managing Tomorrow’s People: The Future of Work to 2020— presented three business scenarios. In one, big companies reign supreme

By Steve Rimmer, Karen Vander Linde, Dolores Wilverding, and Warren Cinnick

1 PricewaterhouseCoopers, Managing Tomorrow’s People: The Future of Work to 2020, 2008.


in attracting top talent and treat social responsibility as optional; in a green model, social responsibility is paramount, and consumers and employees together drive corporate accountability and responsibility; and in the third scenario, localism prevails, and a global network of linked but separate small businesses prospers under entre-preneurial leaders while larger companies flounder.

Applying the lessons

Though these scenarios are extreme, they raise important considerations for real businesses today. Fundamentally, all sce-narios or types of organizations begin with the key talent levers: strategy, planning, assessment, development, succession management, rewards and recognition, and measurement. The actions related to these levers will shape the future of the work-place and, ultimately, the business itself.

As a practical exercise, we will consider how the levers are used in prototypical organizations of our future scenarios: large, corporate entities; midsize, highly networked companies;2 and, where appropriate, companies driven by social responsibility.

We present these examples to show how different kinds of companies are tailoring core talent maximization principles to meet their specific needs. However, these levers apply to any business. In fact, we have

The following are questions to consider when integrating key levers to maximize talent:

Strategy How do we align and integrate talent strategies into business planning?

Planning What will help us anticipate and proactively create talent plans for the future?

Assessment What is the best way to assess talent strengths and gaps?

Development What tools and processes will help us build our talent bench at multiple levels?

Succession management What processes should we put in place to plan to fill every key job whether it is open or not?

Rewards and recognition What will energize our culture, encourage individual excellence, and help us retain the best talent?

Measurement What metrics and gauges can we visibly display about our organizational and individual performance?

Key considerations

Organizational talent levers

Talent lever Key considerations

2 A highly networked organization is one in which specialized skills or intellectual property is central. Examples would be technology companies and professional services firms.


found that companies of all sizes and types can and do benefit from integrating the following key principles into their talent planning.

Creating a strategic workforce plan

In our experience, we have found that suc-cessful companies align and integrate their talent strategies around future business plans and review those strategies regularly. For example, a forward-thinking global conglomerate we know of currently inte-grates its talent strategy and planning into its annual three-year business-planning process. As part of key business strategies to sell or acquire divisions, part of the due diligence process involves assessing cur-rent and future talent requirements. Given the rapid pace of change, even corpora-tions that have already embedded the talent-planning process into their strategic planning must be prepared to do it more frequently—even quarterly for economi-cally vibrant regions—in order to anticipate emerging changes and to be able to modify strategies quickly.

Unlike large corporate entities, smaller, more highly networked organizations rely on the talent that is resident in their orga-nizations and in their networked alliances. Their ability to change direction and grow depends on their ability to maintain these alliances in order to anticipate and secure the right kind of talent. For a networked organization, acquiring new talent often means entering into an alliance or a joint venture. Savvy networked organizations

future, however, organizations will need to find ways to increase the frequency of assessment and their ability to develop talent rapidly; ultimately, they will need to build agile workforces that can adapt to changing market needs.

Assessment processes are even more important in companies that are growing through acquisitions. Such companies are discovering that it is critical to assess their people resources throughout the process, not just during due diligence. For example, we know an electronics manufacturer that seemed to have lost its entrepreneurial edge after successfully growing more than 20 times larger through a series of international mergers and acquisitions. Management recognized that leading a company of that size and complexity would require different skills and so established a set of critical competencies tied to its future strategy. The existing leadership team was assessed against those new competencies in order to identify leadership gaps to fill and develop. Looking ahead, this large, flexible company plans to continue to conduct assessments regularly and has developed systems for providing feedback on the set of skills it needs for specific growth and improvement projects.

Developing talent that is strong and deep

The cycle of workforce expansion and retrenchment that prevailed in the 1990s is simply not a viable approach in today’s talent-lean environment. Instead, building

understand the need for a systematic approach to assessing, planning, devel-oping, and deploying talent to leverage resources. They are using mechanisms to control the process of identifying strengths and gaps regarding talent built into service-level agreements with vendors. Likewise, some larger companies that are seeking to build up strength in key areas are also attempting to leverage unique talents from alternative sources.

Identifying talent strengths and gaps

To remain ahead of competitors, businesses must regularly assess their existing work-force to better leverage strengths and fill gaps through developing, recruiting, or acquiring the skills they need. Unless dealt with effectively, small gaps almost always grow larger, but merely understanding the gaps won’t move a business ahead as much as will making the most of its strengths. For example, successful organizations where recruitment has always been strong have typically built upon that competency in a competitive market, and attracting talent with speed and a passion for quality are differentiators for successful growth.

Increasingly, successful large corporations are implementing continuous assess-ment processes. Today, a global financial services company might get away with annually assessing all managers and above to identify strengths and gaps—at both the organizational and the individual levels—and then incorporating the results in its overall talent-planning process. In the


a nimble workforce through training, coaching, and mentoring will define success—and even survival.

Large corporations that focus only on developing a targeted group of high-poten-tial individuals to fill positions at the top of the organization are at risk. More and more, executives are finding that they need to develop talent at all levels because pivotal roles and employees exist in all functions. Given the rapid pace of change, success-ful, large organizations are looking beyond traditional classroom and online training. They are also providing individuals with embedded learning and on-the-job experi-ence that will continue their development and increase their readiness to step up to broader roles or expand their expertise.

For example, rather than training employ-ees about business strategy and planning, one global consumer products company

selected a group of pivotal employees from a variety of functions. The team focused one-third of its efforts for 120 days on a critical product issue. The team uncovered, tested, and solicited management’s approval for a solution to the problem that resulted in an annual increase in profitability of $6 million. You can bet that team members learned more than a bit about business strategy and planning in the process.

Unlike their larger counterparts, highly networked organizations tend to be lean. Therefore, when it comes to talent, their key challenge lies in the availability of sufficient talent alternatives. The compa-nies we have studied typically meet that challenge through outsourcing, alliances, and joint ventures. However, they have also discovered the need to develop talent for key leadership positions and pivotal roles. In fact, they have found that internal

With most companies facing changing talent demands and a shrinking talent pool, large organizations are placing more focus on identifying emerging leaders throughout an enterprise.

talent needs a broad skill set to be able to adapt quickly to changing needs and to provide support for one another. In these companies, frequent job rotations and mul-tifunctional career paths are expected and required aspects of leadership develop-ment. For unique skill sets or highly refined technical skills, they maintain alliances and alternative talent pools to ensure that they are flexible enough to respond and are able to expand capability as the market changes its requirements.

Achieving these objectives poses a prob-lem. Integrating outside talent into the organization requires a level of transparency about skills and capabilities and a level of candid dialogue about talent that typically does not exist today between organizations linked by service and partnership agree-ments. However, successful networked organizations of the future will build ongoing development of talent into provisions in their service-level agreements with alliance partners or outsourcing providers.


Saratoga research group noted that the percentage of key roles for which orga-nizations have either one or two unique succession candidates identified per key role has been increasing dramatically. In 2006, the median company over a two-year period had nearly doubled the number of roles that have at least one successor.3

While developing a pipeline to fill leader-ship roles in the top two or three tiers is critically important, large integrated corporations with foresight are also build-ing talent pipelines at multiple levels. With most companies facing changing talent demands and a shrinking talent pool, these organizations are placing more focus on identifying emerging leaders throughout an enterprise and preparing them not only to step into higher roles but also to take on broader responsibilities for helping the organization fulfill its strategic plans. To be effective, organizations are realizing that they have to better anticipate the need for new skills and knowledge and, equally

important, that they must continuously assess how to deploy people to broaden their skills through experience. For example, if a large US organization needs to send talent to oversee a manufacturing facility in China, it would benefit by choos-ing an individual whose future career role will require significant exposure to Chinese culture and China’s economy. In most companies with multinational footprints, the opportunity to deploy talent returning from international assignments to positions that make use of the experience and skills acquired there is an underdeveloped area.

Highly networked organizations approach succession planning differently. They focus on cross-functional development to ensure that talent is ready to step into new roles and to rapidly assimilate new responsibili-ties. Such companies have recognized the need to broaden the boundaries of suc-cession management to include alliances and alternative work pools and thus ensure they have the talent expertise they need

In addition, we have noted that to facilitate ongoing development, enterprises of many shapes and sizes have relied on coach-ing and mentoring for every employee. Many organizations assign a coach or mentor who is not the same person as the employee’s manager. By so doing, they are expanding access to key resources that will help individuals broaden their perspec-tives and skills.

An organization seeking to become more green might have key top talent work on a strategy to develop talent via activities that demonstrate social responsibility, such as assisting with an environmental organiza-tion or foreign aid program.

Managing succession

Organizations that manage succession well do so by building a deep pipeline of talent and by planning proactively with regard to developing and deploying these resources. In its most recent annual report, PwC’s

The cycle of workforce expansion and retrenchment that prevailed in the 1990s is simply not a viable approach in today’s talent-lean environment. Instead, building a nimble workforce through training, coaching, and mentoring will define success—and even survival.

3 PricewaterhouseCoopers, US Human Capital Effectiveness Report 2007/2008, 2007.


to meet market demand. Companies that use talent development–related criteria when selecting members of their networks are increasingly addressing standards for development and succession in their service-level agreements. They are also utilizing methods for trading talent in order to best service projects. Highly networked organizations are also considering exploit-ing the portability of benefits and defined contribution plans within their networks of business partners and turning this potential liability into an advantage in the job market.

Rewarding and recognizing performance

In the current talent environment, organizations of all sizes are inspiring both individuals and teams with flexible and targeted forms of reward and recognition. As the rising generation of Millennials enters the workforce, organizations recognize the importance of understanding what kinds of rewards and recognition motivate these individuals. And it’s not always about big

Executives at many organizations are realizing that placing talent on the business agenda is not enough. Going forward, measures around talent need to be part of a corporation’s overall performance metrics.

bonuses and high salaries. A prime parking spot, tickets to a sporting event, or a gift certificate to a day spa could go a long way in promoting short-term job satisfac-tion and attracting talent. Similarly, on the other end of the demographic spec-trum, employees approaching retirement have views different from those of their predecessors regarding how to leave the workforce. No company has yet mastered the concept of phased retirement as a means of managing knowledge and of col-laboratively extending the working lives of highly valued employees. This is a frontier where the reward, recognition, benefits, and policy tools will need to come together to help close the knowledge gap that is part of the current retirement process.

Large corporate organizations traditionally have had well-defined reward systems that include annual raises and bonuses. To facilitate teamwork across organi-zational and geographic boundaries, some large, integrated organizations are considering offering more incremental team-based rewards and individual peer recognition. A number of highly networked organizations are starting to associate flexible cash and noncash reward and recognition programs with individual projects. Vesting individuals in a project’s success offers great incentive for the contractors on which highly networked organizations depend.

Looking ahead, businesses of all types are rethinking their reward and recognition systems to accommodate and motivate workforces with diverse attitudes about job satisfaction. For example, there is rising evidence to suggest that employees are more focused on environmental issues and are making good corporate citizenship a part of the reason they choose to join or stay with an organization. Under such


circumstances, socially conscious orga-nizations are rewarding talent for leaving a more gentle carbon footprint on Earth by traveling less, carpooling to work, or participating in community service oppor-tunities. To develop new approaches to social issues, some organizations are tak-ing a forward-looking approach by offering employees opportunities for increased community, external organization, and workplace involvement. Ultimately, this part of the public talent-attraction profile for your company will be measured by what actions occur, not by what aspira-tions are stated.

Measuring individual and organizational talent attributes

If talent issues are to be taken seriously, measurement is essential. A PwC report covering more than 15,000 organizations in the US and Europe found that few orga-nizations have achieved truly global and real-time people measurement capabilities or have quantified the financial value of their talent, even when it is possible to do so.4 The continued adoption of enterprise resource planning systems is actually a boon to the measurement and tracking of talent. With a properly configured system, the year-over-year and long-term views of individuals as measurable and valuable resources can be well served by enterprise systems.

This will change. In the future, leaders of both large companies and networked organizations will be held accountable for developing and coaching people. Talent will be a core part of their responsibility. As large corporations move toward engaging talent across organizational boundar-ies, others—in addition to an individual’s immediate manager—will participate in the performance management process.

Executives at many organizations are realizing that placing talent on the busi-ness agenda is not enough. Going forward, measures around talent need to be part of a corporation’s overall performance metrics. For example, an annual report discussing business performance might include how the company is performing on its talent metrics.

Large corporations rely on the promotion of corporate culture attributes and behav-iors as a means of engaging employees. Today’s employees are looking to see these attributes and behaviors represented in how people are measured, rewarded, and promoted. Clearly, how metrics are applied will have an impact on attracting, acquiring, and keeping talent.

To continuously improve, highly networked organizations are integrating talent metrics at the project level to evaluate talent and its relevant impact. Among the challenges networked organizations face are partners whose systems of measuring contributions are completely different from their own. Thus, it is important to align talent metrics to the goals currently at hand.

4 PricewaterhouseCoopers, Key Trends in Human Capital: A Global Perspective, 2006.

In the future, organizations that uphold socially responsible ideals will have organizational and individual performance metrics in place to balance corporate results with the public good. To accomplish this, an organization might measure and report the number of hours spent by its employees on community service projects.

Looking ahead

No matter which path a business takes, there is one clear constant: More than ever, it must manage talent resources as carefully as it does business operations. Businesses seeking to practice talent maximization and sustainability are culti-vating talent in their organizations today in order to prepare for the future.

Steve Rimmer is a principal in PwC’s Human Resource Solutions practice and the HR Transaction Services leader. Karen Vander Linde is a principal in and the global leader of PwC’s People and Change practice. Dolores Wilverding is a managing director in the People and Change practice, and Warren Cinnick is a director in the People and Change practice.


Does your organization need a chief agility officer?

Interview

Piercing the veil Andrew Zolli looks at the future of business and of the worldInterview by Tom Craren and Gene Zasadinski


Back to the Future is the name of a movie, but it also describes Andrew Zolli’s professional landscape. Zolli is a futurist, and—at least imaginatively—the future is where he spends most of his time. A century ago, the word futurist conjured up images of crystal balls, tarot cards, and Ouija boards. While modern-day prognosticators depend on other tools, all futurists—past and present—rely on the rare ability to predict drivers and trends with some degree of accuracy. As his clients affirm, Andrew Zolli has a generous measure of that ability. In our interview, he applies his gift of foresight to the world of business and to the world at large.

PwC: You are often referred to as a futur-ist. What does that term mean to you, and is that how you define yourself?

AZ: I actually prefer foresight researcher or global trends analyst. A lot of what I do is about looking at critical places—where you can see future trends emerging that are going to be definitive for the whole planet or for a culture or an industry—and then thinking through with senior leaders about how those trends might shape the global operating environment.

PwC: You refer to these as intersections.

AZ: That’s right. The big ones that I pay attention to are demographics, globaliza-tion, environmental issues, some global policy—especially global business is-sues—and emerging technologies. But the most fruitful terrain lies between those ver-tical areas of focus. For example, it’s not so much demographics as it is the effect of demographics on healthcare, public policy, or the environment. What I do is develop visions of the future that share key themes and that help senior leadership teams look just a little bit further out. Sometimes you should act on great opportunities while they’re still over the horizon.

Andrew Zolli is an expert in global foresight and innovation, studying the complex trends at the intersection of technology, sustainability, and global society that are shaping our future. His firm, Z + Partners, helps senior leaders at some of the world’s preeminent companies, institutions, and governments see, understand, and respond to complex change.

PwC: So how should companies be en-gaging a foresight researcher like you, and how far out should they be looking?

AZ: First, companies should work with foresight researchers to perform what I like to call environmental scanning—that is, scanning within such defining driving areas as demographics, emerging technologies, and economics to get a sense of how those environments are unfolding. Com-panies should then develop scenarios that look specifically at how the individual data points in each one of those areas might unfold. I think organizations should do en-vironmental scanning every year. And they might want to do scenarios every three to five years.

PwC: Can you describe a typical scenario-building process?

AZ: The process begins by identifying key uncertainties. For example, a current key uncertainty right now involves the American economy. Will it go into recession, and—more important—will it drag down the global economy in the process? Another key uncertainty is about the price of oil. If you place just those fundamental macro drivers on a two-by-two grid, you can


?envision four different worlds that suggest a number of future policy implications. What you’re really after when you’re developing scenarios are data rich stories that are expressed in a number of ways. A scenario that draws on only the left hemisphere of the brain—the one that’s all charts and numbers—misses the nuances. The reality is, we’re not exclusively rational creatures. We’re semirational creatures who make decisions based on our emo-tions and our own experience. Our visions of the future need to reflect that.

PwC: You mentioned a number of powerful drivers. What should companies focus on in terms of some of the major trends that you see?

AZ: First of all, demographics are criti-cal. Historically, the American population architecture has looked like a pyramid—with young people significantly outnumbering older people—but the baby boomers are creating a big bulge in the middle. Over the course of the next two decades, we’re going to see a new population structure emerge in the United States. Instead of a pyramid, that structure will resemble an hourglass, the two ends of which will represent the largest

number of old and young people who have ever coexisted in our society’s history. This will result in some interesting paradoxes. Let’s take the workforce, for example. Many boomers soon will be retiring, but many will stay on the job. That creates a paradox for Generation Xers. Many will move up the management chain much sooner than their predecessors did. Others will get trapped behind a new glass ceiling created by boomers who won’t or can’t retire.

PwC: Beyond the workforce, what else will change?

AZ: I think we’ll also be seeing some very interesting changes in the structure of families. For instance, because of advances in healthcare, many people are outliving their incomes and in a sense, moving back home to live with or close to their children.

PwC: What’s the impact of this change?

AZ: When you change the family, you change the basic unit of consumption. For instance, who makes healthcare decisions? Who makes entertainment deci-sions? Everything is affected. Take product design, for example. Designing for three generations as opposed to two involves very different sets of issues.

PwC: You mentioned healthcare. These demographic changes must have a pro-found impact on the future structure of healthcare, right?

AZ: Of course, and I think it’s a combination of really complicated issues. You’ve got the general frame of the traditional healthcare system—as we understand it—pushing us toward new political circumstances. You’ve got the rise of network consumers acting in their own interests in healthcare for the first time. But most interesting will be the rise of healthcare innovations.

PwC: Can you give an example?

AZ: Yes. Take pharmacogenomics. The pharmacogenomics revolution is the intersection of drug targeting and genetics. For example, in today’s healthcare environ-ment, if three people get sick, it’s very likely that within a certain set of parameters, they’ll each be given the same medicine—often in the same doses. Unfortunately, because of genetic factors, the same medicine that heals one does nothing for or kills the others. We’re only just beginning to understand the intersection between genetic triggers and medical effectiveness.

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Drivers and trends: Zolli looks ahead First, there are the fundamental long-term trends that you and I can’t do anything about, such as demographics. The second would be large structural forces like long-term climate change. The third would involve big global economic forces. But you also have to look at what we think of as the accidents and incidents. These are wild cards—low-probability but high-impact events, such as terrorist plots or, for that matter, breakthrough technology inventions.

Long-term trends

++Structural forces Economic forces Wild cards


PwC: We’ve talked a lot about demo-graphics. What else should companies look at?

AZ: Three things: First, there are the fundamental long-term trends that you and I can’t do anything about, such as demographics. The second would be large structural forces like long-term climate change. The third would involve big global economic forces. But you also have to look at what we think of as the accidents and incidents. These are wild cards—low-probability but high-impact events, such as terrorist plots or, for that matter, breakthrough technology inven-tions. Will understanding all of these things lead to perfectly accurate predictions all of the time? Of course not. It’s not so much that you turn to experts to give you all the answers all the time but that you develop a culture of constant investigation—con-stantly scanning the weak signals that are going to be definitive in the years to come.

PwC: Companies that are good at fore-sight also seem to be the best innovators. Is there a connection between foresight and innovation?

AZ: Yes. What we’ve discovered about or-ganizations that are very good at becoming sustained innovators is that they share com-mon characteristics. First, they spend a lot of time paying attention to weak signals as part of their culture, and they’re very good at identifying what they don’t know. Sec-ond, sustained innovators use a portfolio of five cognitive styles simultaneously. The first is the classic think-tank model: You take a group of experts, lock them in a closet, and hope you get a solution to your problem. Eighty-five percent of the time, you don’t. A second style of thinking and style of prob-lem solving is about ethnography: sending people out into the field to see what people are doing. Using this method, about 70 per-cent of the time you get real but incremental innovation. The third style is what I call the play category, in which you put a problem through thousands of iterations until you either solve it or redefine it. The fourth one is about scenario planning, where you ask yourself what your organization would look like under a certain set of circumstances and then work backward from there. And finally, the fifth style involves leveraging the power of networks.

PwC: That explains innovation, but where does foresight fit in?

AZ: Foresight is a core cognitive skill—just like playing, having a think tank, doing ethnography, or building networks. It’s also a core leadership skill, and in my research, the organizations that have proved to be the best sustained innovators are also the best at foresight.

PwC: It must be incredibly difficult to embed these types of thinking into an organization.

AZ: It is. Thinking about the future and thinking about innovation are whole-brain exercises, and big companies typically are not whole-brain organizations. But in making decisions, leaders of whole-brain organiza-tions draw on both rational—left brain—and intuitive—right brain—mental resources.

PwC: Should companies be taking this whole-brain approach to today’s hot-button issues like climate change and sustainability—especially in the US, which some perceive as being behind the rest of the world in its response to these areas?

AZ: Yes, but let’s separate the two issues. They’re related, but they’re not the same. Climate change is a critical, fundamental challenge for the planet. Sustainability is a business issue. The first thing to say about climate change is that it will continue to accelerate. There is a 30-year lag between when we put carbon and greenhouse gases into the atmosphere and when they have a measurable effect. So we’re dealing this year with 1978’s carbon, and that’s a real issue for us. Long before we have to deal with the full effects of climate change, we’ll have run out of oil. That’s an absolutely done deal. So we’re going to have to learn how to live in a postcarbon economy. The good news is that this is an opportunity for tremendous wealth creation. The green energy revolution is going to make the IT revolution look minuscule in comparison.

PwC: But what’s the bad news?

AZ: The bad news is that climate change is going to adversely affect poor countries


much more than wealthy countries. Dis-ease will spread faster, and catastrophic climate-related events will increase and disproportionately affect such areas as coastal Africa and coastal Asia.

PwC: What about sustainability?

AZ: There are two sides to sustainability. The first involves an eco-industrial revolu-tion that we are in the midst of. We’ve had three waves of environmental thinking in the post–World War II period. In the 1960s and 1970s, we saw the rise of conserva-tion—preserving parks and so on. This led in the 1980s and 1990s to a second great revolution: the sustainability revolution. But there’s a problem with sustainability. The markets do not uniformly reward sustain-able behavior, so there aren’t efficient and consistent definitions. The third wave that we’re starting to see emerge is a post-sustainability era where we’re using new technologies to look at the natural world as a library of engineering solutions. A great example of this is the lotus leaf. Even though lotus leaves grow in brown, brack-ish water, they never appear to be dirty. The leaf is covered with a special wax in a series of little bumps and ridges that pre-vent organic material from adhering to the surface. A group of German engineers used this property as the basis of a self-cleaning house paint. In other words, we’re start-ing to view the natural world as a library of latent applications and new approaches to solving business issues, resulting in a whole bunch of new technologies.

PwC: And what’s the other side of sustainability?

AZ: The other side is really about a cluster of business issues, chief of which is talent. Young people—those we label as Millen-nials—have an abundance of choices. They’re looking for meaning and purpose. They’re more likely than their seniors to say, “I’d rather have a meaningless job at a meaningful company than a meaningful job at a meaningless company.” Does that make sense?

PwC: Yes, it does.

AZ: And that is a deep psychographic and generational shift that’s propelling the green movement and the issues around sustain-ability. It’s also driving the brand inside the company. In today’s world, a company’s essence or brand is as important to the company’s employees as it is to the company’s customers and shareholders.

PwC: We mentioned earlier that climate change and sustainability are areas in which some feel the US needs to catch up. Are there other aspects of US competitive-ness—or lack thereof—that companies should be keeping their eyes on?

AZ: You know, I think there’s something really important here. Some business leaders are worried about the decline of American preeminence in the world. I think the answer is a couple of different things. First of all, it’s going to happen. And it’s going to happen faster than I think a lot of people know. But this is simply a return to historical norms. In the year 1500,

75 percent of global GDP was generated by two countries: India and China. In search of more-efficient routes to that wealth, Europe discovered North and South America: resource-rich places that could be mined and could be absorbed and could be exploited. So you’ve got this 500-year delta of Western preeminence based on the compounding value of this enormous, extraordinary wealth reserve, and now we’re seeing the return to histori-cal norms. While this will bring with it the inevitable decline of single currencies, it will also create a more multipolar planet.

PwC: So are you saying it’s likely that there won’t be superpowers at some point?

AZ: No. There will always be superpowers, but what will be most important over the next 20 years is the gentle, continuous ex-pansion of what I call the dominant global superconduit.

PwC: What’s that?

AZ: If you look at a GDP-per-square- kilometer map of planet Earth—that is, a map showing where in the world all the money is—you’ll see a highway that runs over North America, over the Atlantic Ocean, over Europe, down to the Middle East, down through India, up through China and Japan, back up over the Pacific Ocean, and then back to North America. Almost 90 percent of all global transac-tions occur along that highway. The people situated on the highway are living well beyond the means of their local environ-ments. They’re net importers from the rest

There will always be superpowers, but what will be most important over the next 20 years is the gentle, continuous expansion of what I call the dominant global superconduit.


of the world. Life in this superconduit is going to continue to be fast, consumptive, and deeply intermingled, and it’s going to continue for the foreseeable future.

PwC: Is that a good thing?

AZ: Not entirely. One problem is that every major period of massive global integration has ended in global war. So one of the big questions is, Can we shift from a unipolar or a bipolar to a multipolar world and avoid real conflict?

PwC: Can we?

AZ: There’s reason for hope. It used to be that two places that had large stand-ing armies pointed at each other were not going to go to war. Then it was two places that both had significant densities of fast-food restaurants would not go to war. And now I think, arguably, the situation is that any two countries that exchange at least 15 petabytes of email a week are probably not going to go to war. The level of economic, cultural, and technological exchange between them is so great.

PwC: In 50 years, will the world be a better place?

AZ: I think so. We tend to envision the future as a blank slate, but that’s really not the case. In many ways, the future is now. Much about the world we currently live in—the good and the bad—will follow us into the future. If the past 50 years have taught us anything, it’s that with advances in technology and science, we can tilt that equation toward the good. So, yes, I’m quite optimistic about the future.

Understanding the future is all about un-derstanding connections—even those that reach across centuries.

Only the most avid space shuttle enthusi-asts may know that by federal mandate, the payload of the shuttle has to be able to fit on a railcar. Why? Under President Lyndon Johnson, the fledgling space pro-gram received a big boost, and it became necessary to be able to move large quanti-ties of materials around the country quickly and efficiently.

But here’s where the connections come in. The size of a railcar is based on the width of its axles. Because vehicles occasionally have to intersect with railcars, the width of a railcar’s axles is defined by the size of the road—a size determined by the European standard.

Connections

The space shuttle and the Appian Way

Thousands of years ago, two Roman legionnaires walking down a road, side by side, defined the size of the roads in what would become Europe. So the means by which the material used for building the international space station was transported to the space shuttle is directly connected to a standard of measurement that goes back thousands of years.

In the same way, much of the world of the future will be predicated on standards be-ing developed today. You could say that in almost everything we do—from designing cars to building skyscrapers—we are in fact measuring our future.—AZ


Your view

Constant change has become a given in today’s business environment. And you know how crucial it is to adjust your organization to this new imperative. But what is top of mind for a business leader who is considering organizational change? In our 11th Annual Global CEO Survey, we asked senior executives worldwide to give us their candid views on change. Do their sentiments echo your thoughts, or is there something else on your mind? Let us know at www.pwc.com/view.

“I would like to change the mindset of people about change itself. Even when they agree to the process of change, they tend to lose sight of long-term objectives and do not implement change posi-tively enough.” Belgium

“To be more patient about driving change.” Canada

“To create even more willingness to change among executives.” Germany

“I would like to change the internal processes and decision mak-ing processes. We also need to look at people issues—the middle and senior management needs to have strong leadership skills. The recruitment process would need an extensive review.” China

“Space for creativity and innovation in the rigid structure of the company.” Argentina

“Lack of willingness to meet/make change.” Finland

“Not to see change as a threat but as an opportunity.” the Netherlands

“More effort has to be taken to make sure that people really understand the reason for and benefit of the change.” Indonesia

“The ability of the whole team to carry out changes, integrate themselves in the different functions, and react quickly to changes.” Italy

“A vision of continuous improvement and capacity for adaptation.” Argentina “People’s attitude to change.” Hungary

“The ability to identify the changes that are coming about and to adapt quickly. Must anticipate the changes ahead and prepare.” United Kingdom

“I think people have to be more open to change, collaboration, and innovation in this competitive business environment. Business as usual is not acceptable; we need an open architecture to be successful in this competitive environment.” United States “Our responsiveness to the changing market needs. Basically we are not able to anticipate or address the problem practically.” India “Work-life balance.” South Africa

“Develop more collaboration among senior management.” Australia

“Support by staff for a change.” Japan

“Creating an organization that’s strong and flexible to react to an increasingly volatile external market.” United States

“Internally there is a need for the ability to absorb new ideas and accept the changes in business models.” Hong Kong

“Change-management clarity related to response to change in my organization.” Thailand

“The ability to adapt quickly and cope with the change.” South Korea

“Explaining the benefits of change to employees.” United States

“To be able to better transmit the necessities of the change of business.” Portugal

“I would like to improve the ability to address cross-cultural differences and make people understand each other easier.” Turkey

“Getting everyone to row in one boat in the same direction.” Canada

“Get people across the company to always think positive and also have the conviction to achieve what they dream.” India

“People’s attitude to change.” Hungary

“To know what customers really want.” Japan

“The possibility to take a longer term view of the business. Short-term business pressure is overwhelming. We focus so much on a 12-month horizon. I’d like to be looking out three to five years.” Poland

“Make decisions more quickly.” Mexico

“My own attention to the quality of collaboration at the highest executive level and my own engagement to effect changes.” United States

“I wish I had more time for my staff.” Germany

“To change the culture of the organization so it becomes more powerful and entrepreneurial.” United States

“Better coherence between the corporate goals and individual tasks for each department.” Ukraine

View magazine is printed at an ISO 14001:2004 certified plant with Forest Stewardship Council (FSC) Chain of Custody and Green-e certifications. It was printed with the use of renewable wind power resulting in nearly zero volatile organic compound (VOC) emissions. The paper used is 10 percent recycled with postconsumer waste.

By using postconsumer recycled fiber in lieu of virgin fiber:

22.54 trees preserved for the future

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1,059 lbs of solid waste not generated

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By printing at a facility that uses wind-generated electricity:

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equivalent to 5,845 miles driven in an automobile eliminated

equivalent to the planting of 458 trees

Rear view

*connectedthinking

Are you maximizing talent in your organization?

Have I integrated a talent strategy as part of my business plan?

Do I treat the talent process like the quarterly sales review, operations review, or quarterly financial close?

Does our annual report review how well we are maximizing our talent assets?

Do our executives and managers at all levels dedicate time to being actively involved in training, coaching, and mentoring?

How do we develop the people who report to us?

Are we creating a learning culture where continuous development and coaching are the norms?

What are we doing to build a strong leadership pipeline to ensure our leaders are prepared to lead in the future?

What are we doing to develop emerging leaders? Do they have clearly defined development plans to help their career progression?

Are our organization’s leaders held accountable for modeling our values and leadership behaviors?

What types of flexible rewards and recognition am I implementing to motivate a diverse workforce?

What metrics do we report on and monitor that help us anticipate key talent trends?

How does our talent compare to the talent at our fiercest competitors?

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