So much is changing around the world that portfolio companies are having to adapt fast. So what are the key forces for change? What are the challenges and opportunities? How will we work over the coming decade and beyond? And what will tomorrow’s leader look like? We asked management practice expert Lynda Gratton. Interview by Vicky Meek.
Organisations are having to become increasingly adept at managing change as a number of forces transform the way processes are managed, work completed and communications handled. Lynda Gratton, professor of management practice at London Business School, author of a series of books on change, including The Shift – The Future of Work, and founder of the Hot Spots Movement, has identified the five most important forces that will affect the way we work: technology, globalisation, demography, society and a need to reduce carbon emissions. In a keynote address at the 2012 Private Equity Findings Symposium, she set out how these would impact portfolio companies in the future, offering her view of what tomorrow’s company would look like. We caught up with her to discuss her ideas.
Can you give me a brief outline of how these five forces are impacting organisations?
“They are already having a profound impact, but we will really see change accelerate over the next 10 years. There are so many effects, but let’s look at globalisation and technology as a start. By 2025, there will be more than five billion people using the internet through mobile devices, so they will all be interconnected by technology across the world. That will create new talent clusters.
“Any job that can be done by technology will be. The internet cloud will deliver low-cost computing services and an increasing amount of work will be performed by robots. Globally, billions of cognitive assistants will collect information, monitor people’s behaviour and take actions from their preferences. This will bring knowledge to people in remote places in a way never experienced before.
“Anything that can be outsourced will be. That will result in a hollowing out of the middle part of the economy in more developed nations. The remaining parts will be those jobs that can’t be shifted to low-cost centres – services such as hairdressing and caring, or the highly skilled jobs such as physicians or lawyers.
“If we next look at demographic trends, we’re all living and working longer and so traditional work practices are being eroded. Add to that the challenges of issues such as growing inequality in society, increasing poverty and environmental degradation, and companies have to start focusing much more on sustainability issues.
“All these changes present both challenges and opportunities for companies and individuals.”
What about the effect on emerging markets?
“On an individual and company level, these changes are relatively good news. The financial markets have gone global, enabling companies to access new sources of capital, transforming the opportunities available. Many firms are grasping these opportunities – Indian technology firms, for example, use some of the most innovative management practices around. Take, for example, the way Infosys connects over 58,000 employees to talk about the strategy of the company, or the way TCS builds trust in virtual teams.
“Until 20 years ago, people in emerging markets didn’t have access to the global labour market. Now they do. If someone is motivated and intelligent enough, they now have the chance to participate in the global economy like never before.”
What will tomorrow’s workplace look like?
“Over the next five to 10 years, we’ll see a significant shift away from the model of going into an office every day and performance being based on being present at a desk. Companies are realising that it’s very expensive to house people in offices; they tend to be less productive in this setting and they prefer to work flexibly as they are becoming increasingly individualistic and prepared to forge lifestyles based on their own needs rather than societal expectations.
“Businesses will also need to reduce their carbon footprint and a key way of doing this is cutting down on employees commuting. When Unilever CEO Paul Polman set a goal of halving the corporation’s CO2 footprint – it was agile working that he looked to as part of the solution. We are seeing the development of local hubs by some of the most forward-thinking companies where creative spaces are set up closer to people’s homes and shared between organisations. There will still be offices, but there will no longer be just one way of doing work – there will be a broad mix of homeworking, shared spaces and offices. More people will work as freelancers or ‘neo-nomads’.”
How can businesses adapt to the challenges of managing such dispersed workforces, particularly if they are working globally?
“You have to start with bringing in the right people. There has historically been a strong focus on leadership creating value, but increasingly technology is enabling value to be created by a much broader base of people. You need to employ the sort of people who are skilled and purposeful so they don’t need micromanaging.
“But future-proofing businesses is not just about the people. It’s also about whether a business is making effective use of collaborative technology. Companies with a global footprint will have pockets of people with specialist skills across the world. They have to find ways of working collaboratively to ensure the innovation potential of diversity is realised.”
Private equity’s mantra is management, management, management. So is the overall workforce the more important consideration?
“The companies that have consistently grown and remained successful over time usually have great employees. But you do need to look carefully at who is leading them to ensure their efforts are not in vain. It’s the extremes that make the real difference – either the really great or the downright awful.”
So what characteristics should private equity firms look for in a portfolio company leader?
“They need to ensure that a CEO is a person they can trust – and that they can trust to behave authentically. These days, there is no place for a leader to hide, so they need integrity of behaviour. When hiring, you want to be sure that what you see in the recruitment process is what you get in the many different settings in which a CEO will find himself or herself leading a business today. Transparency has become incredibly important. People don’t listen to PR announcements; they read blogs and listen to social media.
“CEOs also need to have done interesting things so you can see they have been able to deal with many different situations. Most value will be created through alliances in the future, so their network is key – and I don’t mean the old boys’ network. Who do they know that is different from them? Do they, for example, know academics or people in NGOs? If they have a wide circle of contacts, they will have a much greater capacity to listen to and understand diverse views.
“This is vital because as the forces for change accelerate, decisions and actions will throw up all kinds of unintended consequences that can only be dealt with if you are able to take on board new and different ideas and to work in a multistakeholder context.”
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