It’s hard to focus on the future, when the present is so disruptive. After the trials of COVID and natural disasters, we’re facing the near-forgotten spectre of inflation, accelerated climate change, serious cyber-attacks and geopolitical instability and, for many, the dead weight of uncertainty.
Still, Australian companies remain profitable and strong. Unemployment is low. Australian government is stable. We can continue to build a workforce – both nationally and as individual organisations ‒ that keeps ahead of long-term trends to seize any number of economic opportunities.
Those trends are forcing a complete rethink of how our people work. They are headlined by technology-driven speed and complexity, but include a prolonged productivity slump, and a shortage of the talent and skills we need to deliver on high community and financial expectations.
This is what over 360 delegates sat down to discuss at the 2023 Australian Financial Review Workforce Summit on 22 February. What did they see as the ‘future of the workforce’? What were the deeper lessons from the companies, researchers and Ministers who presented, and what was the response of the audience?
If there’s a single strong impression, it’s the need to find smarter ways to increase the capability and capacity of our people so they can reach their full potential in a modern, collaborative and inclusive workforce.
There’s a bit there to unpack, and our reflections look at both our national and organisational preparedness.
How Australia can rise to the opportunity of a workforce in this new era
Despite isolated signs to the contrary, notably recent layoffs in the tech sector, the Australian labour market remains keenly tight. More to the point, the long-term demographic and industrial stories haven’t changed. Australia has an ageing population, and needs more people working to maintain our productivity and quality of life. We need a third more doctors than we have now. Tech jobs continue to rise at triple the rate of the rest of the economy, and Australia has a deficit of tech-capable people. The energy transition will double the demand for skilled labour in large-scale renewable energy in the five years to 2027.1 In this environment, Australia needs more than its usual generous dollop of luck. Only hard thinking and action will build the workforce we need.
The Summit reflected four national priorities by concentrating on the role of technology, education (to develop our own people from their earliest years to retirement), immigration (to bring in the international talent we have always benefited from), and workplace cultures (to make the most of incredible, diverse talent with sometimes unfulfilled promise).
1. A tech sector as an engine of growth and opportunity
If the Summit seemed to have a sector focus, it was in advanced technology – perhaps because technology is now all-pervasive through our primary, secondary and tertiary sectors. The Tech Council of Australia’s recent report on Australia as a regional tech hub noted that the sector already generates 8.5 percent of Australia’s GDP, with 20 of the world’s tech ‘unicorns’, and has strengths across SaaS, fintech, biotech, medtech, mining, education and energy.
Despite our tech successes, we still lag in getting things ‘from lab to live’ ‒ in converting our world-class lab research into commercial success. In the OECD Science, Technology and Innovation Scoreboard, Australia ranked 10th out of 38 for research outputs, but 32nd out of 32 for academic-industry collaboration to translate research to commercial outcomes. So in business, we are less likely than peer economies to risk failure for the payoffs of learning and future success.
2. An education sector that prepares the future workforce
To advance Australia, industries can’t expect to ‘stand at the end of the tertiary pipe’ and scoop up what they need.
The broad agreement at the Summit was that our higher education providers could claim their spaces more confidently, and that employers should also be playing a role. Traditional learning is evolving. For the undergraduate years, our students need a launching pad for a career of lifelong learning: deep understanding of a chosen field, the C-skills (critical thinking, creativity, curiosity, communication and collaboration) as well as life-changing new friends, experiences and mentoring. We are also seeing increasing innovation for example, partnerships between education providers and industry to provide training while working, such as the Ramsay Health NSW TAFE partnership where nurses receive their training on the job.
However traditional masters degrees are becoming less attractive to Australian talent. Instead, people want to take short courses which enable them to stack and build their skills to match their career journey across their lifetime. These are questions that are being tackled by the Australian Universities Accord.
Perhaps part of the solution is for employers to start to climb up into the education pipelines: not only by supporting their people through courses, but by partnering with education providers to evolve the curriculum, as well as provide on the job learning experiences and employment opportunities to graduates.
3. An immigration system that welcomes the world’s best
No matter if we had every job filled here, we would still want to draw on the global skill base. The Minister for Home Affairs, the Hon Clare O’Neil MP reminded us that migration is “Australia’s special sauce”. In the decade after the 1990s recession, the share of skilled migrants in our annual intake doubled, helping to drive Australia’s economic miracle.
Yet the system upon which both migrants and our economy rely has unravelled. The Summit learned of a system encumbered with arcane rules chasing a purpose that has never been clear. Twenty-five years ago, the future Nobel Prize winner and ANU Vice-Chancellor Brian Schmidt needed only 4 days to get his visa; today it takes 178 days on average. Today, we have 1.9 million people on temporary residency visas, unable to fully contribute the skills they have or are here to learn.
The call for efficient visa processing is loudest from the health and tech sectors, for whom the COVID-19 pandemic worsened existing talent shortages at every level. Repeated labour market testing is surely unnecessary when there is an obvious national shortage, especially in regional healthcare. The main issue is not one of numbers, but of the need for a quick answer to those who offer to add to our nation.
4. Workplace policies that welcome our own
Large as they are, Australia’s graduate and immigrant pools of talent are comfortably outsized by the number of adult Australians seeking greater opportunities. Those under-represented in the workforce, compared to the levels they should be, still include women, First Nations Australians, regional youth, older people, people from lower socio-economic backgrounds and from culturally and linguistically diverse (CALD) backgrounds, and people living with a disability.
The push for gender equity in the workforce remains tied to gender equity at home and through society. As more men adopt more flexible work options or roles that are inherently more flexible, more women will be able to pursue their careers on an equal footing. As more women find careers in high-growth, high-wage industries like tech, wage equity will improve. Shared parental leave is critical, as shifting the dynamic for home care at an early age carries through as a family norm.
It may be harder still for many to appreciate the barriers that people with a “postcode disadvantage” face in starting a career journey. For many Australians, the prospect of investing money they don’t have in a vocational course, on the possibility that they will find a job at its end, is no option at all. So, the notion of firms being more involved in education and training becomes stronger, especially in a labour market as tight as ours.
The panel noted that First Nations employment continues to be held back by a lack of pre- and early-career education. While there is strong growth in the number of First Nations-owned businesses, most are mum-and-dad and sole trader operations. Even though there are long-standing government and corporate quotas for indigenous suppliers, they are hard to fulfil. Corporates and policies must continue their roles in nurturing the capabilities of emerging First Nations leaders, ensuring they get senior experience and opportunities, so that they can build businesses from within or independently.
How modern organisations can fulfill their potential in this new era
No matter how strong the national environment, it is still up to our private and public organisations to build the collective capacity of their people. The Workforce Summit confirmed what is becoming more and more obvious: that the modern 21st century workforce will need to be something truly different from the past, with changes in the way we organise, select, develop and lead our people.
Based on our learning from the Summit, and our collective experience on these challenges, we’ve outlined five critical pillars organisations will need to fulfil their potential in this new era.
1. The modern organisation must be less hierarchical than the past; more a ‘Team of Teams’
The speed of change in this, the fourth industrial or digital revolution, is outpacing all previous industrial revolutions. There is next to no chance that old hierarchical structures can operate in this environment. The modern operating model is one of small, collaborative, nimble teams that form and re-form, taking on challenges that are part-personal and part-organisational, delivering things that large stable departments just aren’t able to do. Somehow, the old favourite org chart needs to be busted apart. Indeed, new ways of visually imagining the organisation are needed - neat dynamic ones that can be viewed on a mobile phone.
That’s not as easy as it sounds. You still need the basics of clear roles and decision rights, and transparent processes – perhaps even more than traditionally, where they may sometimes rely on custom or known individual preferences. You also need to break up large annual strategies into the single steps on the journey. Get clear on a handful of priorities, and see them through more quickly.
2. These teams will have hybrid intelligences: technology and human; STEM and humanities
For the first time in history, the workforce will be one of hybrid intelligences – the coming together of human and machine intelligence – with a new challenge to make that relationship productive and trusted. Generative AI and our other breakthroughs promise much, but must still be set in constructive directions, and guided safely past the risks inherent in learning from historic data.
These hybrid teams will have a multitude of skillsets. Technical skills in data science, health and engineering can build what may be needed, while human skills like human-centric design and frontline change management will make those services both relevant and successful. That implies a balance of abilities that are nurtured from both STEM and humanities education. Our technical specialists need to learn from the humanities how different people have different perspectives that need to be integrated; and our social scientists need the mathematical literacy and critical thinking skills that STEM can bring, a creative awareness of the skills needed to solve problems and the tools that the data and traditional sciences have to draw on.
Then, perhaps, we will have more of what has been lacking: a more scientific, data-driven understanding of how collaboration and communication works, and the ability to systematically improve it.
3. People will be recruited and mentored for their potential, tapping diverse and perhaps unfamiliar pools of labour
In an ever-tightening labour market, organisations need to draw on all options: people you already have, people with potential rather than qualifications, people from under-represented populations and people who might rather a change in career rather than retirement. To find that potential, look beyond the familiar. Evaluate people not only for their current abilities, but also for their potential: their empathy, attitude and capacity to learn.
That potential might well lie within the organisation. Our research confirms that over 75% of global executives think at least half their skills gaps will be filled by their own people. Mentoring an existing workforce and encouraging people to pursue lateral career paths, is as legitimate an option as building a new one.
Nonetheless, the task of renewal and growth through recruitment remains. At McKinsey, we’re looking for distinctive talent across multiple recruitment pathways. For technical roles, we used to focus on hiring people with a masters qualifications and relevant work experience as credentials. Now we also hire people who excel in code camps and have the necessary aptitudes to learn, succeed and lead.
The demographic diversity these approaches bring is a proxy for something equally as important: diversity of perspective. Diversity matters. Companies whose leadership teams have a high percentage of women and culturally diverse backgrounds, are significantly more likely to have above-average profitability.
Although everyone tends to agree with theory, it seems hard to act on. When the moment comes, few of us have the confidence to go beyond our comfort zone: to hire people who are different to ourselves, from the networks less known. This propensity to continue hiring the familiar means many workplaces don’t reflect their diverse communities or consumers, and don’t have access to all the talent they might need.
Part of the answer is in job design. A successful career often brings with it greater workloads and responsibilities, with an expectation of full-time availability. For parents, carers and others with distinct community responsibilities, this is a major difficulty; a sacrifice that may not be worth taking. Positions must be designed to prevent a 4-day-a-week person being knocked back for what has been perceived to be a 5-day job, with the support structures at home and at work to deliver that.
The other part is culture. Comfort works both ways. If people from diverse backgrounds feel safe ‒ and, more than that, feel they belong, that their voices are heard ‒ then they can contribute with all their energy and talent. Creating that culture of belonging opens the door to so much more talent.
4. The culture will encourage continual development and learning, where leaders and individuals are working in the ‘stretch zone’
Much of the discussion at the Summit scanned what people are looking for in their jobs: flexibility, meaning, leadership and remuneration – but especially personal development.
Robert ‘Bob’ Kegan, Professor of Adult Learning and Professional Development at Harvard Graduate School of Education, cites research showing that the single biggest cause of work burnout is not work overload, but working too long without personal development. The biggest reason both younger and older workers cite for leaving a job is that they are not developing their talent or careers, and they don’t see a path to do so. But there are three steps to reduce the risk of that happening, and they are the same actions that will accelerate the teams and leaders’ capabilities.
The first step he suggested was to bust the myth of ‘the grown-up’. It’s not at all true that mental development slows after the first 25 years of life. It continues right through ‘adulthood’, which has more “developmental expanse” opportunities than a childhood can ever have. To make the most of those opportunities, he recommends working on the adaptive, transformative power of the mind itself, rather than pumping in more training and technical upskilling.
The second step Professor Kegan suggests is to work teams and leaders in a ‘stretch zone’, where learning and development is most effective, where problems are challenging but can be solved, where people grow through solving them, and organisational goals are reached. This is in contrast to a ‘comfort zone’, where people aren’t called upon to learn and develop, or a ‘snap zone’ where the risks and discomfort prevent learning. Leaders can create the ‘stretch zone’ by drawing on curiosity, critical thinking and empathy to build the capacity of their teams. That’s not an easy place to lead well in, and requires leaders to be voracious learners themselves.
The third step is to foster a developmental culture where there are learning opportunities every day, where opportunities for transformative learning are a universal and permanent part of the workplace. This must be fostered for all, not the ‘high potential’ few; together at work, rather than off-site; every day, rather than at special times; tightly coupled with business imperatives rather than divorced from them. In other words, we don’t need to offer our people a ‘great new talent development program’, but a ‘continuously available, world-class incubator of talent’.
5. An execution and outcomes focus will enable an organisation to thrive in a fast-paced, uncertain world
Many panellists reflected on the increasing pace of change, and the need for organisations both to build resilience and to capture opportunities as they arise. The aftermath of the 2008 financial crisis saw resilient yet quick thinking organisations be richly rewarded. Then as now, successful organisations have a clear execution and outcomes focus, ensuring they have the capacity to get through a heavy change agenda, and know whether outcomes are being reached. They are likely to have an independent execution team that creates a common language and clockspeed, supporting the organisation, holding it to account on agreed changes, and holistically tracking impacts on people, financials, the environment and communities. Such rigour can also help organisations trace the effectiveness and then scale new workforce approaches, such as piloting a 4-day working week, or different hybrid working models.
We trust those attending the AFR Workforce Summit learned as much as we did, and that some of that learning comes through in these reflections.
In considering our five pillars, one might recognise that most organisations would need to make quite a shift from their current design, culture and practices. For some it may be a massive shift: adjusting to a more nimble model and overcoming inertia. That is not going to happen overnight, nor without a catalyst for change and a transformative energy and discipline to carry it through.
Organisational strategies and national policies face similar challenges, and must support similar solutions. Perhaps more than ever, those strategies and policies need a clear-eyed view of a fast-moving future.
To start, organisations and their leaders may first have to answer the call of Irish poet Seamus Heaney, cited by Professor Kegan: “Believe there is a further shore, reachable from here.”
About the authors Ben Fletcher is a senior partner in McKinsey’s Sydney office where Helen Mayhew is a partner and leader of QuantumBlack. Gemma Corke is a partner in McKinsey’s Melbourne office where Wesley Walden is Managing Partner for Australia and New Zealand.
1. AEMO, 2022 ISP p 98