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The Bigger Picture

Trends tend to connect with one another like pieces in a puzzle. Here’s a quick sketch of some major trends that stand out in recent studies and the overall picture they present.

Piece 1: Connective Fiber. There are huge amounts of fiber optic cable laid throughout much of the world. In fact, until recently, there was much more in the ground and under the oceans than people could use. Last August, however, the Wall Street Journal reported that the glut of supply isn’t what it used to be. “We’re in the stage where people don’t have extra lit capacity,” said Prof. Andrew Odlyzko of the University of Minnesota, referring to cable that’s already hooked up to the telecommunications network. Usage has particularly picked up in the fiber optic cables under the Atlantic Ocean and in swaths of Asia (Heinzl and Young 2006). The bottom line is that, while there’s still plenty of room for growth, the wired world has come into its own, maturing to a place where many thought it would be some years ago.

Piece 2: Ultracompetition. The connective fiber—along with the world’s transportation system—is the backbone of global commerce. It’s not only making it easier for U.S. and European companies to do business elsewhere in the world, it’s making it easier for companies in the developing world to compete. In fact, BusinessWeek reports that a “new breed of ambitious multinational is rising on the world scene, presenting both challenges and opportunities for established global players.” The emerging corporate powerhouses from Latin America, Asia and elsewhere have often survived cutthroat competition in their domestic markets and so are excellent at keeping prices low and appealing to diverse groups of customers (Engardio, Arndt, and Smith).

This trend was well borne out by a recent McKinsey Quarterly “Global Survey of Business Executives.” When respondents were asked what single factor contributes most to increasing competitive intensity in their industries, the top two answers were “improved capabilities of competitors” and “more low-cost competitors” (Becker and Freeman 2006).

Piece 3: The Offshoring Urge. The connective fiber makes it ever easier for conventional multinationals to offshore portions of their labor needs, and ultracompetition pressures them to do so. Business leaders are compelled to at least look at how offshoring might help their organizations. PricewaterhouseCoopers (2006) notes in its Key Trends in Human Capital report, “With this trend looking likely to continue, all executives involved in human capital investment need to understand the key benefits and risks underpinning the successful use of third parties and off-shored employees, to enable them to guide their organizations in the strategic decision-making process.”

As executives look at offshoring, so must the HR professionals who support them. In fact, “increased use of outsourcing of jobs to other countries” was seen as the second most important trend identified in the Society for Human Resource Management’s Workplace Forecast survey (Schramm 2006). HR professionals often have to provide executives with the information they need to make a decision about offshoring, and they may have to be directly involved in the decision itself. HR managers must also handle many of the associated logistics and the work-force repercussions. PricewaterhouseCoopers reports, “The success or failure of these [outsourcing and offshoring] decisions has been shown to depend largely on addressing the associated human capital issues.”

Piece 4: The Health-care Conundrum. The number-one trend identified in SHRM’s Workplace Forecast survey was “rising health-care costs.” It’s easy to see why, with the cost of providing medical benefits rising faster than inflation in the U.S. These costs have long been a major headache for businesses in general and HR in particular, but ultracompetition makes these rising costs even harder to bear. In fact, SHRM’s survey shows that the “threat of increased health care/medical costs on the economic competitiveness of the United States” was the top-rated economic trend in the survey, with 45% of respondents identifying it as a trend likely to have a major impact on the workplace and a quarter saying it is likely to result in a “radical restructuring.”

Piece 5: Productivity Imperatives. U.S. employers can’t easily solve the healthcare conundrum on their own, but it seems unlikely that, as in most other industrialized nations, the U.S. government will soon step in to create a universal healthcare program with cost controls. Instead, the primary way that U.S. employers plan to deal with rising health-care costs is, according to the SHRM survey, by further boosting productivity (Schramm, 2006). This means that there will be ever-growing pressure on U.S. employers to implement the most productive practices possible. Leaders are increasingly likely to insist that their management teams—including HR professionals—go the extra mile in boosting output per employee. Today’s business focus on performance is just the tip of this iceberg.

The Overall Picture

When we put these pieces together, we can see that employers all over the world are increasingly enmeshed in a single, complex economic system. As the lines between the developed and developing worlds continue to blur, there will be a growing emphasis on controlling costs, raising productivity/performance, and orchestrating execution on a global scale. The human and logistical challenges are immense, but the potential payoff is the most efficient business system in the history of the world.

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Documents used in the preparation of this article include:

Becker, Wendy M., and Vanessa M. Freeman. “Going from Global Trends to Corporate Strategy.” The McKinsey Quarterly, no. 3 (2006).

Engardio, P., M. Arndt, and G. Smith. “Emerging Giants.” BusinessWeek, July 31, 2006.

Heinzl, Mark, and Shawn Young. “With Rising Internet Traffic, Spare Fiber-Optic Lines Fill Up.” Wall Street Journal. ProQuest. April 27, 2006.

PricewaterhouseCoopers. Key Trends in Human Capital: A Global Perspective2006.

Schramm, Jennifer. SHRM Workplace Forecast, June 2006.