Note: some of the linked articles below require an FT subscription to read
MPs' finger on the Article 50 trigger
Britain's democratic machine moves inexorably towards Brexit as MPs, including ‘Remainers’, vote overwhelmingly for a White Paper on Article 50 that will trigger Brexit. One year ago, or even following the referendum itself, the idea that a pro-EU parliament would vote ‘yes’ to Brexit would have seemed doubtful. The latest development provides a vital lesson for corporate leaders: namely that politics is now moving much faster than traditional risk assumptions anticipate.
As this video interview with FT editor Lionel Barber and FT political columnist Janan Ganesh points out, control of immigration has become a higher priority than protecting the UK economy. That said, Brexit secretary David Davis has hinted that migrant limits may still be some years away, though certain regions and sectors could enjoy specific immigration deals. Mr Davis also confirmed government hopes for an ‘ambitious’ services agreement with the EU, especially in the financial sector, and a resolution mechanism for future trade disputes.
Will parliament continue to support a Brexit deal in two years’ time if the economy slows? Everything hinges on the quality of the deal, says the FT. Brutal negotiations lie ahead.
Supply chain nightmares
This FT must-read for risk managers, Nafta: First shots in a trade war, considers the danger of Nafta breaking up. Described as ‘the most dangerous moment of uncertainty in the [US-Mexico] bilateral relationship in the past 100 years,’ US President Trump’s policy towards Nafta threatens a trading arrangement that supports $1.1trn in commercial flows, $100bn of US FDI, 5m US jobs, and millions of cars produced each year. As the FT reports, ‘A single automotive component may cross the border six or eight times before ending up in a car. Disentangling this supply chain could harm the industry.’ The article is a stark reminder for companies to identify the weak points in their supply chains; consider their response to sudden policy shifts; and assess the potential disruption to their labour costs. How would your company cope in a trade war?
Trump re-affirms his business priorities
The ‘America first’ theme in President Trump’s inauguration speech was unmistakable. If senior executives were hoping that the new US President would backtrack on his anti-trade message and other campaign issues on taking office, they will have to revisit those assumptions.
The FT summarises the 45th US president’s policy first moves. Among key business-related priorities are: withdrawal from the Trans-Pacific Partnership negotiated with Japan and Pacific Rim economies; notifying Canada and Mexico of his intention to renegotiate NAFTA; pro-growth tax reforms favouring US workers and businesses; lower taxes across the board, and a simplified tax code. Moreover, the Trump administration may quickly approval new pipelines as he seeks to ‘take advantage of the estimated $50tn in untapped shale, oil, and natural gas reserves.’
Trump v Human Resources
The fast-moving US immigration furore has placed HR concerns at the heart of international politics. Aside from legal and moral arguments around President Trump’s executive order on immigration, L&D leaders will also have to consider how the US is now viewed by some of the world’s top talent. In the short term, companies have been scrambling to re-assure and support vulnerable staff from targeted Middle Eastern countries. Longer term, all firms—but the tech sector in particular—may have to reconsider how they attract the global talent they need.
There’s also the company brand to consider. Gillian Tett points out that ‘not a single executive expressed any significant criticism of the president and his policies during the quarterly earnings calls…’ Fear, she adds, may explain some of this reluctance—President Trump’s tweets can dramatically affect a company’s fortunes. But failure to speak out could adversely affect the company’s international image and employee loyalty. Howard Schultz, executive chairman of Starbucks, was one of very few outside the tech sector to see this, warning that civility and human rights were “under attack”.
US tech companies have been most vocal. Facebook’s Mark Zuckerberg, Apple CEO Tim Cooke and executives at Google and Microsoft, have all expressed strong opposition. Mr Cooke said: ‘Apple would not exist without immigration.’ Elon Musk, chief executive of Tesla and SpaceX, and Travis Kalanick, Uber CEO who both sit on President Trump’s strategic advisory group, have called for changes to the executive order. Heads of Netflix, Twitter, Airbnb and Lyft have also spoken out, while Google’s co-founder Sergey Brin was seen at a San Francisco international airport demonstration. Other tech leaders are helping to finance legal challenges.
Longer term, Mr Trump’s hardline stance may be undercutting recruitment from overseas. Amit Kumar of software group Trimian told the FT that, “People are thinking what is the right country to base their operations in.” He notes that many start-ups are increasing the size of offices outside the US. This is part of a bigger battle for high skilled immigrants, especially software engineers from India.
Populism v Artificial Intelligence
The new populism, which appeals to the old industrial heartlands of the US and Europe, is not unrelated to two other major strategic business themes: the emergence of job-destroying AI and relentless staff disengagement. Business leaders and thinkers may need to consider their responses to all three together.
Evidence of these broader linkages was apparent at that bastion of the political-business elite, this year’s World Economic Forum in Davos. Indeed, some ideas that were once the domain of the utopian Left—such as a universal income—were discussed. As FT’s Tim Bradshaw reports in this video senior business leaders are taking the job implications of AI far more seriously in the wake of the political backlash in the US. IT leaders are now acknowledging that ‘real people are involved.’ Interestingly, McKinsey research suggests that accountants are most at threat, while manual workers are safest.
Executives hope that AI and robotics, widely deemed vital for future global growth, will augment rather than replace workers. Others, however, fear that tech companies will simply grab all the benefits of this next economic revolution, prompting a popular backlash against silicon valley not dissimilar to the banker bashing of recent years.
Time to act is short. As Infosys CEO Vishal Sikka writes in the FT, artificial intelligence and automation technologies are already starting to affect our work and daily lives. But ‘we are still in the early stages of understanding how intelligent systems can work with people more seamlessly.’ Mr Sikka urges organisations ‘to make life-long learning resources available for employees to enhance skills development’. Infosys is rethinking its training infrastructure with, for example, ‘nanodegrees’ to help employees acquire new skills rapidly at scale.
Meanwhile, Microsoft CEO Satya Nadella is future proofing his staff, creating a 5000-strong AI team of academics and engineers to design the operating system of the future. ‘Even if the learn-it-all starts with less innate capability, they will always do better than the know-it-all.’
No respite for disengaged staff
The rise of the digital assistant and other AI innovations might signal the sunlit uplands of tomorrow’s working world. A life of continual learning in and out of work, supported by AI and robots, and a universal income for those who still just can’t find sufficient reason to work. But would we still be happy? ‘The biggest reason for unhappiness’, according to Lucy Kellaway ‘is that we expect too much. Office jobs may have improved, but our expectations have far outstripped them’ she argues. As FT|IE Corporate Learning Alliance has suggested before, maybe it’s because we work in organisations that are just too big to foster a sense of common goals.
Nowhere is the lack of collegiality more apparent than during leadership succession. Threats to the best-laid succession plans, writes FT’s Andrew Hill include the sudden departure of the heir apparent, internal rivalries, and all-consuming efforts to placate the losers.
Overworked in Japan, sleep deprived in the US
The counterproductive effects, including health dangers, of long working hours was noted in FT | IE Corporate Learning Alliance’s recent article The Long Hours Delusion. Too often excessive hours is viewed, wrongly, as a sign of energy, stamina and productivity in senior executives, who then set a poor example for all staff.
Nowhere is this misplaced work ethic so acute as in Japan, as this FT article explains. It reports that at least 200 victims of karoshi (death by overwork) are recorded annually. Unfortunately, defeating karoshi ‘will require a simultaneous huge shift in Japanese society itself’.
Part of the long hours delusion relates to lack of sleep. The FT also reports sleep deprivation research which claims lack of sleep in the US could be costing companies an estimated $US411bn annually. Fortunately, the article also provides ways to combat the crisis.
Sexism at business school
When it comes to changing deep-seated work attitudes, recognising and acting against gender inequality remains a colossal challenge. One approach, adopted by London Business School students and highlighted by the FT, is the creation of so-called ‘Manbassadors’. Male MBA students take a lead to support female colleagues, pledging to engage fellow students and continue their support after graduation. Manbassadors run skills workshops to help students recognise and avoid sexual bias. These might involve such ‘microsexism’ as unthinkingly interrupting women in meetings. Wharton, Harvard and Columbia business schools have similar initiatives. Business schools are an effective place to start, say participants, because they are likely to be running companies in the future. But there’s no reasons why executives can’t instigate similar projects now.
Notes on a scandal
In this excellent view on the legacies of corporate scandal, the FT’s management editor Andrew Hill considers what German car maker VW might learn from BP’s experience with Deepwater Horizon disaster. In the short term, VW’s scramble to draw a line under its US exposure looks sensible, he writes. But before the heat starts to abate, companies can expect lawsuits, independent reports, official external reports, documentaries, books and even Hollywood movies. Moreover, old cultural failings may resurface long after new managers think they have stamped out former bad habits. ‘The half-life of corporate scandal is long — and largely beyond companies’ control.’
In the FT’s opinion, ‘picking a deceptive strategy and then (if all the allegations are true) doubling down on it as the net closed looks mad.’ The bigger problem, however, is one of regulation, in which ‘poor regulatory incentives met a governance regime that discourages accountability.’ Fiat Chrysler, too, is defending itself against similar emissions-evading accusations by the US Environmental Protection agency, and could face a $US4.6bn fine.
Industrial strategy by tweet
‘Government by tweet’ may be a novel way to communicate industrial policy, but US companies seem to be taking it seriously. Car giant, Ford, appears to have responded to President-elect Trump’s tweeted threat of stiff import taxes on General Motors if it shifts production abroad. Ford has now agreed to scrap plans to build a $US1.6bn plant in Mexico, saying it will invest $US700m in a Michigan factory instead to build new electric and hybrid vehicles, with obvious HR implications.
Reinforcing his US-first message, Mr Trump made his final economic appointment, selecting the protectionist Robert Lighthizer as US trade representative. Meanwhile, the proposed Secretary of State, Rex Tillerson, is to receive a $US180m payout to sever ties with his former employer, Exxon. Presented as a conflict of interest issue, the staggering sum raises more questions than it answers: not least whether there is any upper limits on executive pay, and what such a deal might imply for Mr Trump’s own business interests.