Monday, June 4, 2012

Sustaining Growth in a 21st Century Economy

The ‘productivity imperative’ described in McKinsey’s “What happens next? Five crucibles of innovation that will shape the coming decade,“ came to life in last week’s employment report.   The unemployment rate showed little movement by holding steady at 8.2 percent; less then 70,000 jobs were added to the US economy; and the GDP grew at 1.9 percent last quarter.

 US companies are utilizing fewer employees, yet they are neither creating new jobs nor is there growth in our GDP.  Thus, there is little wealth creation without improving the productivity.

“These countries’ best hope for keeping the wealth creation engine stoked is improved productivity – producing more with fewer workers. Paradoxically, doing that well across an economy is also the only way to generate lasting employment gains. In the United States for example, every point of productivity-led GDP growth has historically generated an incremental 750,000 follow-on jobs,” (“What happens next? Five crucibles of innovation that will shape the coming decade.“ McKinsey & Company, 2010, pg 9).

Companies continue to site the lack of skilled candidates as a reason for sluggish performance. 

“The Western economies have built a workforce optimized for mid-20th-century national industries, yet the jobs now being created are for 21st-century global ones- we need knowledge workers, not factory workers,” (McKinsey & Company, 2010, pg 9).

Improving productivity requires producing more with fewer skilled workers thus generating GDP growth that leads to job creation.  How will we train workers in 21st century skill sets while they remain on the unemployment line?  Companies are looking to hire people with previous experience for jobs that were not in existence just a few short years ago.

In the United States, for example, 85 percent of the new jobs created in the past decade required complex knowledge skills: analyzing information, problem solving, rendering judgment, and thinking creatively.  And with good reason: by a number of estimates, intellectual property, brand value, process know-how, and other manifestations of brain power generated more then 70 percent of all US market value created over the past three decades, (McKinsey & Company, 2010, pg 9).

To combat this persistent issue, companies have begun to think in broader terms of how to generate the workforce they will need to succeed – with better training of current staff and preparing future employees.

Kentamental is investing in the long-term future wit their Young Engineer program aimed at introducing kindergarten to 12th grade students on the value of a manufacturing career.

“We felt that we needed to get ahead and start talking to students at the K-12 level. Because at the end of the day, if they're not presented with manufacturing or engineering as a career choice in high school, if they don't get the math skills and the science skill necessary to go into a technical career and/or an engineering career earlier, their fate is sealed as far as what they're going to be doing.
Another stunning statistic is that 2.7 million manufacturing jobs are going to be open in the next decade because those folks are going to be retiring. So if we don't do something now, this is only going to get worse as the economy comes back,” (Kennametal CEO Calls on Executives to Talk Up Manufacturing's Strengths, Industry Week, Jan. 10, 2012).

While Cisco System is investing in their current human capital by developing curriculum and degree programs for their staff by partnering with the University of Phoenix.

“The University designed an innovative program with Cisco to offer curriculum that enables students to complete their degree while simultaneously talking qualifying courses to pass the Cisco® Certified Network Associate (CCNA®) certification. “By combining the two, we are helping students rapidly ready themselves to contribute higher value to workforce,” says Smith. “With the robustness of the new network, we will offer a program that can immediately have long-term benefits for those seeking a career in the technology industry,” (Case Study, Cisco, 2011)

The productivity imperative will require so long-term, broad-range strategy if it is to be reached and sustainable growth created.

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