At the start of 2018, there were multiple big questions. How will the UK separate itself from the EU? How bad will the U.S.-China trade war become? How will brick-and-mortar retailers survive? Will we ever get raises?
As 2018 closes, the answers were, respectively, who knows, it’s unclear, maybe, and sort of. Indeed, the year brought about few new curveballs for leaders, but few clear resolutions to the balls already in play. Here’s a countdown of the five biggest trends leaders faced in 2018.
5. ‘Deus Ex Machina’ Disruptions
None of the big disruptions in 2018 could be considered new. Sparring over trade between the US and other countries started in 2017. Brexit issues have been around since 2016. The populist tide causing unrest in Europe has been around since at least 2016, too.
Nevertheless, those upheavals continue to have an impact because they have yet to be resolved. For private sector leaders, these disruptions have led to uncertainty about the job market, the risks businesses face, and where to find talent. In fact, one recent survey out of the United Kingdom found that, thanks to the Brexit decision, a large swath of employers are having a harder time identifying talent than a year ago. “There are a lot of things leadership organizations are trying to grapple with,” says Mary Macleod, a Korn Ferry senior client partner and head of the firm’s Government and Public Enterprise practice in the UK.
But while physical changes like the UK’s impending split from the European Union are affecting how organizations operate, the uncertainty around those disruptions is only in the short-term, Macleod adds. Once business leaders understand what opportunities are available as a result of these changes, they’ll be more at ease. Plus, she says, “many organizations have quite a lot of capital and money behind processes that deliver against that uncertainty.”
4. Purpose Drives Performance … and Profits
Leaders being motivated by purpose, rather than working to maximize profit, is not a new phenomenon, but 2018 saw more and more companies following suit. A growing number of businesses have stopped pitting profits against purpose, and instead, began integrating the two principles so that “purpose drives profit and performance to new heights,” says Kevin Cashman, a Korn Ferry senior partner and leadership coach. Even big institutional investors are asking for executives to show how their firms will make a “positive impact on society.” In fact, research has shown that companies that organize themselves around something other than making money — known as purpose-driven organizations — are more profitable for shareholders in the long term. “The big trend is not to take these concepts into opposition,” Cashman adds. “They’re not separate choices.”
3. The Future of Work is Human
One day, robots will outperform humans, and take over millions of jobs. At least, that was the oft-repeated prediction heard this year.
But the truth is a lot complex. Yes, as artificial intelligence (AI) gains in popularity, more and more executives have started—or at least considered—adopting the technology into their business models. But Yannick Binvel, president of Korn Ferry’s Global Industrial Markets practice, believes the fear of an AI takeover is misplaced. Incorporating AI into business can “replace, augment, transform, and create new activities” within a company that, in turn, would generate new job opportunities, Binvel says, not eliminate them.
At the same time, those organizations could use that same technology to scale up training of current employees to fill those roles, Binvel adds. After all, a recent Korn Ferry study found that, by 2030, the global market will grapple with a human talent shortage of more than 85 million people, one that could result in about $8.5 trillion in missed annual revenues. Teaching AI-appropriate skills to their existing workforces is one way that businesses could offset that looming dearth of talent.
In other words, companies should deploy AI in service of people—not in place of them. “It’s about augmenting the capacity of doing things with new technology,” Binvel says. “We need to make sure that technology helps to grow their connectivity.”
2. The Mystery of the Missing Raise
It was certainly a buyer’s market for jobs, but a record number of job openings hasn’t yet translated to major salary gains for most workers. Unemployment in the United States is at its lowest level since 1969 and the economy continues to grow at a decent clip. Still, companies continue to keep a tight hold on across-the-board pay raises. The median rate of merit increases has remained flat at 3% for the last six or seven years. In 2019, employers are expected to raise pay 3.1%, but when adjusted for inflation, real wages will be less than 1%, according to a new Korn Ferry study. People at the ends of the job spectrum fared better this year. Some cities, as well as individual companies, increased their minimum wage to $15 an hour, while highly-skilled executives are getting increasingly attractive offers.
On the other hand, more businesses have started to boost their so-called secondary benefits, according to Tom McMullen, a senior client partner and leader of Korn Ferry’s North American Total Rewards Expertise practice. Shifting values and priorities among today’s workforce has caused more employers to include options like paid parental leave, employee discount programs, telehealth services, and unlimited vacation time as part of their benefits package. In 2017, for example, only 47% of businesses offered parental leave — this year, that’s up to 52%, according to McMullen. “Companies are trying to differentiate themselves in the war of talent by offering these benefits,” McMullen says.
1. A More Diverse and Inclusive Workforce?
But in the end, our top trend has to be the one that no one could look away from: diversity. After decades of little real change, this year saw a few wins for diversity in the workplace. The 2018 midterm elections resulted in the greatest number of women being voted into Congress in history. Several cities and states passed equal pay measures or took policy action to improve equality. Many companies have initiated important pay equity analyses to better understand risks and close wage gaps. Hundreds of CEOs have pledged to make their firms more diversity and inclusive. Plus, awareness around the lack of women in leadership roles had reached a new high.
Yet, where gender diversity is concerned, awareness hasn’t necessarily translated into engagement. Although more firms are tackling the question of how to get more women on their boards or into executive positions, very few are making any significant moves, says Jane Stevenson, vice chairwoman of Korn Ferry's Board and CEO Services practice and executive sponsor of the firm's Advancing Women Worldwide program. “If you really want to change numbers, you’ve got to take action,” Stevenson says.
The same can be said for people of color in leadership. Despite calls for diversity, as of this year, only three black CEOs lead Fortune 500 companies — in 2012, there were six. Latino CEOs head up 11 Fortune 500 companies. “Corporations are overlooking people of color at a great detriment not only to people of color, but to themselves,” says. Andrés Tapia, a Korn Ferry senior client partner who specializes in Diversity and Inclusion strategy.