Thoughts on ways to improve the management of professional services firms

Tuesday, October 31, 2006

People Management in Professional Services- the Demographic Time Bomb

On 12 October in Changing Gender Balances in the Professions - a question for you? I reported on the changing gender balance in Australia - the increasing dominance of women in many professional courses. I wondered if this pattern was repeated in other countries, what practical impact it was having in management terms.

This shift in gender balance is taking place at a time of demographic change in developed countries, an aging of the population. I looked at the Australian impact of this in Demography, Universities and the Trades in Australia, a post on my personal blog. One of my key conclusions was that numbers in the traditional university entry level cohorts were essentially stuck in a narrow band.

This comes through when we look at student numbers. In a later story I discussed the report released by Bob Birrell and Virginia Rapson. This suggested that there had been no real increase in the number of Australians attending university in the decade since 1996, with all the apparent increase in numbers coming from an increase in overseas full fee paying students. Education services is now one of Australia's largest export industries.

With stagnant numbers expected to continue in the entry level age cohorts for the next decade, and in the absence of significant change in post school education participation rates, by 2016 Australia will have had two decades of zero increase in actual numbers attending university.

Over the last decade the Australian economy has grown rapidly by world standards. We have accommodated this growth largely through improved productivity aided by skilled migration. Part of the productivity growth has been real (working better), but another part has simply come from working harder as measured by increased working hours.

After a decade of fast growth, skilled labour shortages have emerged across the Australian economy from skilled trades through para professionals and professionals. In some cases, engineering and dentistry are examples, these have reached crisis point requiring urgent corrective action.

There is a further factor. Skilled people are increasingly mobile in a world marked by global skills shortages and increasing competition for particular skills. Something over 800,000 Australians now live abroad. In the words of a Senate Committee (here) that examined the expatriate issue, "Australian expatriates increasingly tend to be young, highly skilled and highly educated", that is just the group the professions need.

Australia clearly has a problem. If we now track forward, you have to ask how we are going to sustain growth in the face of stagnant student numbers combined with growing global competition for good people. Worse, over the next decade an increasing number of baby boomers will retire, so we have to find replacement people as well as people required to carry out new activities.

I have painted a fairly stark macro picture. If my analysis is in any way correct, then individual firms are going to be struggling to get and hold the people they need. They will also be facing another challenge as well in that attitudes within the professional work force towards work have changed, a process that continues.

I know a fair number of Australian senior professionals. I find it disturbing that so many of them are to greater or lesser extent unhappy with their professional life. They are, quite simply, tired of the constant pressure. In the words of one person I know well, "It's just not fun any more."

When you look at younger age groups, you find an increasing proportion that are no longer prepared to pay the price associated with traditional career success. They, and especially the women, want a different life style.

I am writing from an Australian perspective. However, I do not think that this is a uniquely Australian problem. The demographic patterns that I have talked about are wide spread, while my monitoring of global discussions suggests that the attitudinal issues I am talking about are also wide spread.

This brings me to something that puzzles me. If my analysis is correct, the people challenge is going to be the single most important strategic issue all firms will need to address over the next decade. Why, then, is there so little apparent interest in it? The discussion is there, you only have to look at David Maister or Bruce MacEwen to name just two to see it, but it does not seem to be getting the traction it deserves.

Is it because individual firms think that they can deal with it themselves? Are people just too busy to focus? Have I simply missed the discussion?

I don't know, and I find it very frustrating. There are so many things that firms could and in my mind should be doing now to set themselves up to manage the issue, things that would improve performance anyway. How do we get the story across?

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