September 2012: Feature Skilling up The skills shortage is already here - and with baby boomers exiting the

workforce quicker than gen Y replaces them, it's only going to get worse. Leon Gettler investigates the issue and looks at some possible solutions. Over the next decade, Australian managers will struggle to find the talent to fill key positions. The skills shortage is getting worse and that will create enormous challenges for managers and force organisations to restructure work. The problem is exacerbated in Australia by a big skills shortage looming because of the pipeline of projects in the resources sector and related infrastructure, and the needs of other sectors that risk losing out to fast- growing, high-paying industries. At the same time, the skills shortages, particularly on the west coast, are happening at a time when people on the east coast are losing jobs in struggling sectors such as manufacturing and retail, as well as from government cutbacks. The skills crisis is likely to shape politics. The debate over the Gillard government's decision to allow 1700 foreign workers to be employed at Gina Rinehart's $6.5 billion Roy Hill iron ore mine is a taste of things to come. The reality is that Australia has had a skills shortage for the past decade. According to Engineers Australia, about 40 per cent of engineering companies had been complaining about a skills shortage for the five years to 2010. In 2006, it was causing monetary problems for 39 per cent of employers who were being forced to pay extra to recruit talent. This had increased to 54 per cent by last year. One of the big forces helping create the crisis is the ageing population. Global KPMG research shows that boomers are now leaving the workforce faster than generation Y will be entering. KPMG demographer Bernard Salt calls it the "baby bust". He says the boomer hegemony saw 200,000 enter the workforce each year. This has now fallen to 100,000 and will continue scaling down, slipping to 50,000 by 2025. One way to address the issue is for companies to start recruiting older workers. A survey by the Australian Institute of Management Victoria and Tasmania shows it's not happening. Employers are overlooking this group. The annual survey, Australia's Skills Gap, found that 77 per cent of organisations were short on workforce skills but few of these organisations were to trying to fill the skills gap by using the experience of mature-aged workers to mentor younger members of staff. Only 3 per cent of organisations with a skills gap said they were using baby boomers in mentoring or coaching roles.

AIM VT chief executive Susan Heron says the survey found that only 21 per cent had programs in place to access the skill sets of retirees or former long-term workers. "The pattern revealed by our survey is that companies are placing great reliance on training and other mostly internal means to try to close their skills gap but the one potential resource they are overlooking are their older and experienced staff. It's a skills blind spot,'' Heron says. "So, there's a huge upside for our nation's skills-hungry employers if they can better tap into the experience and capabilities of older Australians. Mature-aged Australians, whether they're in the workforce or have retired in recent years, have a wealth of knowledge and job know-how that can provide savvy employers with a competitive edge." All this leads to profound challenges for managers. The NSW- ACT branch of the Australian Institute of Management has published a Green Paper for managers on this issue. The paper, Managing In A Flexible Work Environment, shows how managers will have their work cut out juggling rosters, ensuring sufficient coverage for client- facing tasks, creating detailed forecasts of work volumes, engaging additional staff where necessary, identifying staff that want to job share and working with clients to manage expectations. Managers considering teleworking arrangements will need to look at the nature of the tasks being performed, the resources required to make sure they get performed, the employee's style of work, the availability of communications and other technology and legal issues around health and safety. They will also have to ensure sufficient lines of communication for flexible workers to "stay in touch". Robyn Clough, AIM NSW-ACT's manager for public policy and thought leadership, says increased workforce participation through flexible work "These projects like Roy Hill need labour now and they need it quickly and if they can't get it locally, where else are they going to get it?" According to the latest Clarius Skills Index, there is a shortage of 5500 ICT professionals in Australia. Other big shortages are in trades, particularly for chefs and hairdressers. Clarius CEO Kym Quick says companies will have to look at developing more flexible work practices. That means more part-timers, telecommuting and extended leave periods, for example. She says it's not just important for attracting women - it's now a drawcard for gen Y as they blend work and life, or mix work with study. "They will forego $10,000 in their base salary to be able to go surfing, or work from home or telecommute two days a week," Quick says. Willox says the education system needs to be overhauled. "What we've had in the past is a model driven by the demands of students, rather than the needs of industry," he says. "We have this classic case of having more personal trainers and gym instructors than we would ever possibly need but we can't find boiler makers, electricians and plumbers.

"Look at the way kids are taught and what they're taught. We only have 300 non-Chinese students learning Chinese in Year 12 across Australia." Little interest in making a move The fly-in, fly-out phenomenon is a sign of change with the skills shortage: workers no longer live where jobs are expanding. Getting people to relocate for work is one of the biggest drivers of skills shortages in regional Australia. According to the Australian Bureau of Statistics, 7000 people came to Western Australia from the east in the 12 months to last September. This is little for a state that has attracted up to 48,000 people from overseas. A federal government discussion paper released by the Australian Workforce and Productivity Agency - which replaced Skills Australia - found that lack of labour mobility was a big problem in regional areas. A government scheme to encourage people to move attracted only 584 relocations to regional areas and 60 per cent of them moved within (or to) New South Wales or Queensland. By way of contrast, only 8 per cent of applicants were willing to move from the east to Western Australia and only 8 per cent of people were willing to move for jobs in the mining industry.

When times are tight Many Australian businesses will have to change their game plan if they are to survive a slowgrowth domestic and global environment, says Leon Gettler Australian managers are entering virtually uncharted waters. The prospect of prolonged low growth and possibility of a global recession are creating new challenges. Most of today's managers are downturn novices. Few managers have had to guide their operations through a lowgrowth environment. Apart from a brief period during the recession of the early 1990s, and stagflation of the late '70s and early '80s, managers have had a good run. The past 20 years leading to the financial crisis was a bubble. It was a win-win world where the constraints on capital were masked by free credit, deregulated global markets and bigger markets with the rise of the internet consumer. It was a system that was blind to the signs of a crisis that first emerged in late 2007 and could intensify with the United States and most of Europe dealing with high levels of bank and sovereign debt. The collaboration emerging in Europe, led by Germany, may avert a meltdown but it will require intense fiscal restraint for years. Australia was the envy of the global economy after avoiding a recession created by the global financial crisis. It came at a price with a large increase in levels of government debt and almost certainly would not have succeeded, but for the strength of the mining and resources sector. However, our economy faces a triple whammy of downturns in Europe, United States and China. The Reserve Bank has cut interest rates by 1.25 per cent since November last year, but it has had no impact on public spending because people are worried about their jobs. The consumer concern may be overblown, but as long as it remains, the growth in the domestic sector of the economy, which is the major driver of employment, will remain subdued. The latest Dun & Bradstreet business expectations survey shows Australian enterprises expect lower profits in the September quarter. A survey from The Boston Consulting Group showed Australians were among the most worried and financially insecure in the developed world and planned further cutbacks in their discretionary spending. Nearly half - or 47 per cent - of Australian respondents said they felt financially insecure. This was on par with the US, which has almost double Australia's unemployment rate, and greater than Europe, including France, Germany and the devastated economy of Spain. For Australia, the largest concern is whether the economic situation becomes a contagion that affects China and India which are crucial to growth in the Asian region. Robin Low, a partner in the risk and control team at PricewaterhouseCoopers, says Australian managers should learn from their counterparts in the US, United Kingdom, Europe and particularly Japan where managers have been working in an environment mired in deflation since 1999, a period known as the lost decade.

"There are lessons and discussions happening globally,'' Low says. "The slight difference in Australia is that we didn't feel the GFC to the same extent as the US and UK and maybe the sense of a second wave is hitting us harder whereas they have built in this resilience a little earlier." She says managers need to think about how they want the business to emerge out of this lowgrowth period. We are, after all, in a cycle. "There is a need for leadership to be thinking about the longer term and what they want the business to look like when they come out this time,'' she says. "There are some companies that will come out of this much stronger than they came in. Those will be the ones that see the opportunity and start to rethink the way they solve some of those problems. "Maybe it might be about how they use new technology. Or maybe it might be how they partner or team up with another business to do things differently so they come up with a solution that's better than the one they have. "It's asking what your business model will look like a few years out, what might be different, what might be the different ways of going to market, what your people will be like." She says having a strategy keeps staff focused through the upheaval. "It is important to have a strategy that people believe in and commit to. It's an opportunity to take the long-term view and see what your target business is and what you can do differently." Low growth will, in the short-term, require managers to examine pricing structures with the risk of shrinking markets and fewer customers. This will be just the beginning as companies re-think strategies in areas such as cost control, marketing, product range and new technology. It could lead to a period of intense creativity for many organisations, but inevitably it will result in winners and losers. John Downes, a consultant who runs the company Acorro, says in a low- growth environment businesses have to be clear about their priorities. He says they can be innovators or premium service providers or low-cost providers but not "all three simultaneously". "It is a conundrum and there has to be a real focus for the next five years by businesses consciously choosing what their market niche is and whether their current market niche is large enough to support them. If they are going to change niche, they have to look at whether it will be business nourishing or permanently brand-damaging," Downes says. "These are difficult questions and will require a great deal of management focus.

"The reality is some businesses are not going to survive and if the strategy is fundamentally flawed we have to revisit it. This is absolutely a time where we don't have a lot of growth in the economy to challenge whether or not we are in the right niche, whether that niche is sufficient to support and what is driving us to change that niche if we feel we are in the wrong one." Downes says the key strategy should be to challenge existing business operations and seek opportunities to strengthen links. "What that really means is we won't get the best deal and value from our suppliers unless we are more tightly coupled to them and share our production forecasts. We have to be prepared to be intelligent and collaborative around procurement practices and contracts with customers. "We need to be close to them and their requirements and their expectations. We have to make a really conscious decision about who we partner with, what risks we introduce into the business. "Service is still a fundamental criteria and the success premise for any business dealing with customers." For some businesses, layoffs will be inevitable, but Downes says they need to be managed carefully. And some companies are being extra careful with layoffs. When Queensland-based medical device manufacturer Cook Medical was restructuring, it spent 18 months retraining staff, paying for any training they wanted and offered them other positions in the company. Staff, including the ones who weren't targeted, appreciated that. Downes says the traditional mass sackings on a Friday afternoon are not the answer in an economy where there is a skills shortage, where mining companies are recruiting talent and where a company's brand and reputation is critical. "We are asking our staff to do more with less and there is no sign of let-up in the foreseeable three to four years and what that means is we need to make sure our relationships with our staff actually are as strong and as authentic as possible. "For that to occur well, and all lay- offs suck, the reality is it has to be done in a dignified manner, regardless of what the cause is. "It has to be transparent and it should be done with dignity. The organisation should use its networks to look for other employers to employ the people it is letting go. Things like pink slips on Fridays are unacceptable, unconscionable and brand-destroying." Management consultant Kevin Dwyer, who runs The Change Factory, suggests a first step for managers is to separate their good from bad costs. He says if you want to grow the business, you don't cut sales and marketing or training. "But you scrap discretionary spending, such as the corporate box at the football," Dwyer says. He concedes the process can be difficult and sensitive.

"It requires a lot of thinking to work out what the hell those costs are,'' Dwyer says. "You can do all the theoretical thinking but until you have seen what makes your business tick and what comprises your profit margin, then your theoretical constructs are quite often wrong. "If I was in a sales environment, there are people out there selling to your key customers. Keeping that relationship going would be a good cost. But sales people filling in lots of paperwork back behind the scenes and doing some analysis to think about something is a bad cost." Dwyer says managers should be watching their competitors carefully - because they will also be struggling. "If you stay close to your competitors and understand what your competitors are doing and if they are, in fact, decreasing advertising and decreasing marketing efforts, then you can stand out by ramping up yours and maintaining it at the level it used to be." A good example of that was Bakers Delight which enjoyed steady growth and healthy sales during the GFC. It stepped up its marketing and advertising. With a proportion of its turnover going into marketing, its profile increased during the downturn. While other retailers were closing down, Bakers Delight was opening new stores. The company expected a global sales turnover of $587 million in 2011-12, an improvement of $571 million on the previous year. Struggle street: sectors vulnerable to low growth Housing and construction: Housing is already struggling. Building approvals have plunged to their lowest level since the global financial crisis. According to the Australian Bureau of Statistics, 10,330 building approvals were granted in April, down 24.1 per cent from a year ago. Nationwide, it was the lowest number of houses approved since January 2009 when the country was feeling the impact of the global financial crisis. The renovation business is also feeling the pinch. Hospitality: Restaurants and hotels are expected to struggle. According to IBIS World, the sector is expected to grow by only 2.3 per cent in the next 12 months. They are also facing significant increases in utilities and other fixed business costs. Tourism: Hit hard by a strong Australian dollar, it will also be affected by international downturns while fewer Australians are spending on holidays and those who do head overseas. Aviation: When Qantas announced in June this year its profits would dive by up to 90 per cent, it was a sign of how badly the aviation sector had been faring. Qantas is a yardstick of Australian aviation and its competitors, Virgin and Tiger, are also struggling. Jet fuel prices may be stabilising, but expect business to be more reluctant to spend on travel and increase the use of

video conferencing. Qantas has been hit hard by sagging demand because of the European crisis and strong Aussie dollar.

Taking the next step Women in business need to recognise their own talents to climb the corporate ladder; being too modest is not a good career move. By Hannah Flannery Three years ago only 5 per cent of new directors appointed to the boards of ASX 200 companies were women, a statistic that has improved to 27 per cent this year in the wake of the publication of the Equal Opportunity for Women in the Workplace Agency census in 2010. Gender equality on boards will be a key issue at the annual Women, Management and Work Conference, to be held in Sydney this month. According to conference director and CEO of The Morawska Group, Jenny Morawska, women still represent an under-used talent pool in Australia. "Women need to be empowered to acknowledge their capacity to be great leaders." Morawska says the conference (presented by Macquarie University) will be an excellent opportunity for women of all ages to be inspired by other women. Why do some women fail to step up? Suzanne Mercier, managing director of Liberate Leadership, will address the conference on why many talented women won't "step up". Mercier's research into what is known as the Imposter Syndrome helps aspiring leaders to understand their own mindset and how mindset can impact on leadership effectiveness. The Imposter Syndrome has been identified in professionals who are successful, but perpetually concerned about failure. Many of these individuals attribute their success to good luck. While psychologists in Atlanta first developed the theory during the 1970s, Mercier is investigating the effect the syndrome has in business. Individuals who don't recognise their own talents don't tend to claim responsibility for their successes, she says "This can even happen to particularly talented people." Mercier says the syndrome impacts men as it does women, but tends to play out differently. "Many women just don't feel good enough and don't think they measure up, which undermines their confidence and their ability to step up," she says. "For aspiring leaders to be confident in their ability, they need to recognise their own strengths.

"It is not about suddenly being brash and arrogant, but instead acknowledging skills and knowing that is OK." Positive psychology and women's leadership Co-founder of the Positive Psychology Institute Suzy Green says for women to be strong leaders, it is essential they identify their strengths. "The greatest challenge is to constantly use those strengths and align them with goals," she says. Making explicit links to goals and working out how to use strengths to pursue those goals is crucial, but Green says aspiring leaders are often guilty of identifying modesty as their greatest strength. "Many women are not comfortable talking about what they do and as a result they hold themselves back," Green says. "Having a vocabulary to acknowledge strengths is really important and leaders and aspiring leaders have the capacity to be the change agent and start strength spotting." Green says identifying signature strengths relies heavily on authenticity. If people are not true to themselves and fail to act on their emotions, needs, wants, preferences and personal beliefs, then the ability to build on personal strengths is compromised. "It's a matter of knowing yourself, being comfortable in yourself and being able to express that to the world," Green says. "Authenticity is not only a precursor to wellbeing and strong leadership, it is absolutely core." Morawska, who formerly worked as the CEO of Research Infrastructure Support Services Ltd, was deputy secretary of two commonwealth departments, a director at Ernst and Young and an executive director at Price Waterhouse, is familiar with being the only woman around the board table. "I was nearly always the only woman in my environment," she says. Morawska says the conference will address leadership obstacles, positive psychology, career development, management trends, diversity issues and the value of mentoring and coaching. "The opportunity to meet like-minded women is particularly valuable and although there will be women from a range of working environments, many will find they are dealing with similar issues," she says. As a single mum, Morawska admits her personal success has required a juggling act.

"If you don't have a way of maintaining a balance, then none of it is sustainable. You must find your own way to maintain balance, or you can't value-add to your organisation, nor can you achieve your personal goals," she says. Morawska says the greatest lesson she has learnt during her career is that doing our best is all we can ask of ourselves. "If you try hard, acquire the skills you need and are passionate about what you do, then you are going to do a good job. Stop beating yourself up. You did the best you could at the time," she says. She says the important thing is the lessons you take from challenging experiences. Macquarie University's annual Women, Management and Work Conference (www.mm.mq.edu.au/women_management_work_conference) will be held in Sydney on July 12-13.

GETTING ON BOARD What is the ratio of male to female graduates?

While the Australian Bureau of Statistics shows a consistent majority of female university graduates over the past decade in Australia, that majority is yet to reflect itself in top jobs. Between 2002 and 2011 in the 25-29 age group, the proportion of women with a bachelor degree or above rose from 29 per cent to 41 per cent and from 25 per cent to 40 per cent in the 30-34 age group. For men in the 25-29 and 30-34 age groups, the rise was from 22 per cent to 30 per cent and from 23 per cent to 30 per cent respectively over the nine-year period.

Will we achieve gender balance in leadership? While statistics indicate some improvement in the gender equality of senior management in Australia, meaningful movement is slow. In 2010, the Equal Opportunity for Women in the Workplace Agency (EOWA) released census data suggesting 46 per cent of ASX 200 companies have at least one female board director. In the US, the comparable figure is 87.7 per cent, in South Africa 78.5 per cent, in Canada 58.1 per cent, in New Zealand 40 per cent and the UK 75 per cent. Helen Conway, director of EOWA, says since the release of the agency's 2010 census results, there has been a renewed enthusiasm for gender equality in the workplace.

"Most visible are the changes at board level in the ASX top 200 companies," she says. The Australian Institute of Company Directors tracks appointments to boards of these companies and the most recent data shows that among the ASX 200, almost one-third of appointees so far this year have been female. This year, EOWA will again conduct its census of women in leadership. It will extend the pool to the ASX top 500 companies. Outcomes of the 2012 census will be published in November.