Increasing untapped talent and stress: A disaster waiting to happen ...?

Almost one million jobs could be lost in the UK because of government cuts in public spending, a report suggests.  The knock on effect of public sector cuts upon private sector firms is rarely mentioned or taken into account, but this report does attempt to do so.

Accountancy firm PwC said that about 500,000 of those job losses may be in the private sector due to the impact on firms supplying the public sector, with business services and construction would be among the industries hardest hit.

The impact of this is in fact already starting to be seen, with contracts not being renewed, renegotiated or withdrawn altogether (e.g. the building schools for the future programme), and the PwC report puts the total number of job losses arising from the public sector spending cuts - including the knock-on effects in the private sector - at about 943,000.

It also suggests the output of private firms may well fall by £46bn per year by 2014-15.  PwC chief economist John Hawksworth said the predicted levels of job losses would be a drag on the pace of the economic recovery "but should not derail it altogether".

The report said that in absolute terms, the areas worst hit would be the south east of England, the north west and Scotland.  But PwC added that in percentage terms, Northern Ireland would suffer most with one in every 20 jobs set to go.

A Treasury spokesman said "a decisive plan" was needed to "reduce the UK's unprecedented deficit and restore confidence in the UK economy ... and not taking action to tackle this problem would put the economic recovery at risk," they added, saying this was a view shared by many organisations including the International Monetary Fund, the World Bank and the Bank of England.

The question that's never asked (or answered) is where new jobs are going to come from for the economy to start to recover.  For a more prosperous and sustainable future, levels of untapped talent  need to reduce (not increase), and creativity needs to increase to create growth, reduce the deficit and pay back the debt ... and releasing staff without any plan of action for this could make matters worse, not better, with more people without any work and wholly dependent on the state.

The application of a simple, effective and more holistic 'economic' test (of overall 'well-being'), known as "BUTS" test, where:

B = Borrowing

U = Untapped talent

T = Trade deficit

S = Stress

rapidly highlights how well-being in the UK in the future is likely to get much worse, with any reduction in borrowing likely to be at the expense of increased taxes and reduced public services ... as well as growing levels of untapped talent (e.g. unemployment) and increasing levels of stress.

There is growing concern about unemployment, not just from a financial perspective, but from an individual point of view too, as more people lose self-confidence, belief and self-worth. People's natural ability/desire to help others, add value, and make a difference to other people's lives reduces ... reducing the overall well-being of the community, as well as the nation's economy too. There is also the risk of growing frustration & anger, particularly from younger generations, as youth unemployment rates are much higher, they have been saddled further with debt (e.g. due to tuition fees) and given little prospect of a job, house prices still being expensive to rent/buy and they are also the ones who'll have to pay most of the Government current borrowing back (through future tax rises).

Shockingly, the official figures of 2.4 million unemployed are a gross underestimate, as there are in fact over 8 million people of working age able to work but classified as 'economically inactive' ... and even this figures represents just the tip of the iceberg, as levels of untapped talent within the workplace lies at around 90%, due to outdated management practices failing to harness the talents of those in work too!  No economy will ever be successful with such shockingly poor foundations, and outdated leadership and management practices are also generating further unnecessary stress too.  

Outdated leadership and management practices (19th/20th century) primarily rely upon extrinsic motivation, self interest and personal gain ... where management primarily involves managing budgets, telling staff what to do and ensuring they meet internal/arbitrary targets ... rather than going to the front line, listening to customers actually want and supporting front-line staff in their quest to continually improve how value can be provided to customers (nb this is what 21st century leadership and management practice is all about - take a look at my book for instance) ...

The former systematically generates frustration and stress, for customers and front line staff alike. It also drives people to manipulate 'the system' in order to meet their targets & goals; deflecting people away from the real purpose of the enterprise (i.e. to create value for customers) which destroys teamwork, morale, and the future of the enterprise too. Such practices have also been shown to systematically generate between 40-90% waste in terms of both time and resources as well - i.e. traditional enterprises spend most of their time (and resources) wasting time, effort and money, for their customers ... whilst stressing them out in the process too ...

... and the traditional response to this ... "it's just the way work is" ... and "let's send everyone on a 'stress management' course - to help them to process stress" (and to also reduce the risk of being sued!) ...

The problem with the traditional management statements above is that they are both wrong - and flawed. 21st century management practices do not involve helping people to 'process stress' - they focus on systematically 'eliminating stress'! ... so there is no need for stress management courses at all ... (i.e. such courses are a 'cost of failure', and they do not reduce the risk of leaders/managers being sued either).

Enterprises applying 21st century leadership and management practices do not just transform the performance of the enterprise, they transform the lives of people - forever, and for the better. Most enterprises applying such practices quickly transform their capability (e.g. improvements of between 40-1000%) and change out of all recognition. Staff moral is positively transformed and stress is systematically reduced. People are naturally motivated to innovate, to add value and to help others. They are also more than capable of finding new ways to improve current products/services and to find new products/services that would allow even more value to be created too (given the opportunity). All they need is clear direction, as well as trustworthy leaders & managers who support them on the front line, who listen, learn, and help them to systematically improve how value is provided. Again not rocket science - just rarely practiced in traditional enterprises.

Stress, and the impact of stress, on people is heavily responsible for the 'eighth waste' in 21st century management practice ('untapped talent') - as it destroys people's desire/ability to contribute, to be creative or to think rationally (e.g. take a look at Ch. 8 of my book). It also impacts on people's overall well-being, as well as the well-being of those around them ... which impacts on communities/nations as a whole too (NB hence it's inclusion in the 'BUTS' test).

The National Institute for Health and Clinical Excellence (NICE) has said the cost of work related mental illness was £28bn - a quarter of the UK's total sick bill, and it also made clear that the stress created as a result of bad management/managers was the single biggest cause of problem. The 'economic loss' of stress goes way beyond the £28bn referred to here too ... this is literally just the tip of the iceberg, with actual figures more likely to be around 80-90% (and growing).  

Those leaders who believe stress management courses will 'protect them' from 'being sued' are I'm afraid also sadly wrong ... as 'ignorance' is 'not bliss' (or a defence - nb landmark cases are already occurring - but are mostly settled out of court to avoid publicity). The writing is on the wall now that 21st century leaders & managers have demonstrated the capability/outcomes created from applying 21st century practices ... which highlight the way forward, as well as the fundamental flaws in traditional practices ...

21st century leadership/management practice and examples will no doubt be used in evidence against those continuing to apply outdated traditional 19th/20th century practices ... and as millions of law suits start to get filed, yet more traditional private enterprises will go bankrupt ... and yet more taxpayers money will be diverted away from providing front line services (to pay for millions of out-of-court settlements) ... joining all the taxpayers money already being diverted to service Government debt, as well as the colossal (and unfunded) civil service pension liability ...

A 'Double Dip" is on the way I'm afraid ... and a 'triple dip', and a 'quadruple dip', may well follow too I'm afraid ... unless current leaders/managers change course quickly ... as it's also the adoption of 21st Century leadership/management practices that will harness and unleash the untapped potential within our society, and systematically uncover the plethora of world-class solutions people around the globe are looking for and more than willing to pay a premium for ...

A 'political response' which goes ahead and slashes millions of jobs, without any clear understanding or robust plan to harness untapped talent/potential to systematically provide the future product/services the world needs, is in fact not a 'solution' at all, but a short-sighted and flawed act, which will have a huge, negative and corrosive impact on individual/community well-being ... and will not provide any robust foundation for reducing borrowing (or reversing the massive trade-deficit) in any sustainable way either.  It is a systematic change the UK now requires, not a political one.

Employment down - Economically inactive up

Every month the Office for National Statistics publishes the UK's unemployment figures. But the report doesn't just give the big numbers. It includes a fascinating breakdown of the UK at work - and out of it.

Here are few things we learnt this month:

1. There are fewer people employed than at any time in the last 12 years.

The employment rate in the three months to January 2010 is 72.2% - it fell by 54,000 on the quarter to reach 28.86m. 

2. There are over 8m 'economically inactive' people in the UK.

8,157,000 people between 16 and retirement age to be exact - of whom 71% do not want a job. The biggest group are the 2.3m people looking after their families - up by 32,000 on the year. Next come students (2.3m) and the long-term sick (2m). 74,000 are 'discouraged' - up by 21,000 on the year.

3. If you work in the private sector, wages are going down … in the public sector, they're going up.

Average weekly earnings in the private sector are £426 per week - down 0.7% on January 2009. In the public sector, they're higher - £461 per week, up 4.1% on Jan 2009. 

4. Public sector jobs are still going up.

6m people are employed in the public sector - +46,000 on the year. 21.1% of us work in the public sector. The biggest percentage increase has been in the NHS - up by 4% on the year to 1.6m people in January. In contrast, private sector employment is down by 527,000.

5. There are more long-term unemployed

Those unemployed over six months has gone up by 58.7% to 549,000 people.

6. More of us are part-time

Part-time jobs are up - by 1.3% or 87,000 on the year. Meanwhile full-time employment has gone down by 3.4% (-642,000).

7. There are less young people employed

Employment is down for 16-17 year-olds (by 22.2% or 109,000) and 18-24 year-olds (down 6.6% or 237,000).

This is just the tip of the iceberg. Yet the BBC headlines prefer to tell us how unemployment figures are down! I wonder why?

'Recession' and 'Depression'

Official figures confirmed last week that the UK economy 'contracted' once again - pointing to the fact that the country is still in recession - and it's the first time that UK Gross Domestic Product (the total amount of goods and services produced by a country) has contracted for six consecutive quarters (ever since quarterly figures began to be recorded in 1955). The pound fell further after the figures were released, reflecting the fact that many investors had expected the UK economy to 'grow' slightly in the last quarter, which would have technically taken the UK 'out of recession'.

Despite 'printing money' and generating a 'great deal of spin', the UK is one of the few G20 countries still to technically come 'out of recession' (e.g. France and Germany came out of recession six months ago). Potential investors have seen the effective devaluation of the UK's currency (through the £150bn Quantitative Easing programme), but they are also now able to see through the 'spin', and to see the fundamental weaknesses within the UK economy.

The 'stock market recovery' and 'housing recovery' are all part of the 'spin'/'scam' to artificially raise confidence, as 'assets' such as these 'appear to rise' because the 'value of every pound has been reduced'! As highlighted previously, as the pound slides against foreign currencies (nb the UK pound has already lost nearly 30% of its value against currencies such as the euro), the price of imported goods entering the UK will rise (e.g. including oil & gas), pushing up prices and affecting people's purchasing power further. High unemployment may hold back 'wage inflation', but it will not stop 'import price inflation' or people becoming 'progressively worse off'.

As import prices rise, unemployment grows, taxes increase and massive cutbacks are introduced (to pay back spiraling Government debt), the UK will start to feel the real impact of this Government's failure, their lack of prudence, their self-interest (e.g. MP's expenses) and their support of greed (e.g. diverting tax payers money to bail out banks and effectively paying for their excessive bonuses, rather than fixing the problem and helping hard-working people/businesses) - all of which will negatively impact the overall well-being of our nation for generations to come.

Gordon Brown is telling us we will come out of recession by the next quarter, but as many analysts have pointed out, this will mainly be because of a rush of purchases taking place before the Government puts VAT back up to 17.5% at the end of the year! The timing of this change, alongside the delay in addressing spiraling Government debt, are clearly linked to Gordon's own personal agenda/self-interest and demonstrates a cynical 'misuse of power' ... as he wants to say 'he was the one who brought the UK out of recession' (just before the election), as well as to 'blame others' for it all going wrong afterwards! (e.g. see my previous post on the double-dip recession) ... which shows the sheer hypocrisy of a man who is happy to preach to us about 'values' and 'prudence', despite demonstrating neither of these qualities himself.

In the 21st century, GDP is not a true indicator of a nation's 'economic success' either. The use of the word 'recovery' whilst everyone is effectively becoming worse off, and more and more people are losing their jobs, is arguably perverse too. Such outcomes not only result in 'recession', they also create 'depression'. More holistic measures are needed to assess the overall well-being of a nation (e.g. take a look at the 'BUTS' test for instance) and as the overall situation continues to gets worse, ignorance will reduce, depression will grow and anger will increase (e.g. towards the bankers who are once again 'pocketing' billions in bonuses, whilst everyone else pays for it through increased taxes, and and through more and more people losing their jobs).

Traditional economics is dead, and a new economics & politics is about to emerge (powered by the internet) ... focused on community contentment, the well-being of people, and the ability to create real value for others (founded upon fundamental values such as trust, honor, responsibility, respect) ... instead of focusing on wealth manipulation, based on poor moral values, self-interest and greed (e.g. fueled by envy, celebrity and the media).

The battle of the future is one that transcends nations, and is a battle of values:

Leanomics vs Poweromics & Ignoromics

... where values (and value creation) once again return to challenge poor moral values, self-interest & greed (and wealth manipulation)

Nations that fail to change will fail to survive ... and with the advent of modern communication people now have far more 'information', 'choice', and 'power' ... they just haven't realised, or exercised, it yet ... but they will ... and as Ignoromics reduces Poweromics will be challenged, in many different ways ...

Challenging Poweromics ... and looking for Recovery

Insightful words were this week articulated by the head of Britain's trade union movement, Brendan Barber, as he pointed out the fundamental flaws in Politicians' actions over the last ten years ... as well as the fallacy in promoting the 'green shoots of recovery' ...

"Politicians bought the line that 'Finance' should be 'King' and deregulation the answer to every problem ... activities so well described by Adair Turner as 'socially useless' were seen as 'economically essential' ...

... set finance free we were told, have a bonfire of regulations, let the super rich get even richer ... it will somehow trickle down to the rest of us ... 'manufacturing is old fashioned', 'let the city rule', 'greed is good' ... these were the 'watch words' ... and those whose still preach that greed want us to forget the crash and tell us the economy is now in recovery ...

... but the economy has fallen off a cliff and the green shoots mean little ... when 1000's of people a day are joining the dole queue ... and rising share prices count for little when a million and more young people can't find work ...

and bumper bonuses ... an obscene joke, when it was our money that rescued to banks, and its our public services that are now being told they will have to face the consequences ...

... it's only when unemployment starts coming down, only when we create decent jobs that pay decent wages, and only when vital public services are safe from cuts, that we will be able to talk about a real recovery ..."

Wise words, well spoken, from a leader who can clearly see the wood from the trees ... but what's arguably most shocking & surprising of all is that he's describing the behaviour & actions of a supposed Labour Government (led by 'leaders' supposedly also brought up in the church!) who were once thought of as the voice of communities and hard-working people ... how things have changed ... and how things will have to change for us to get back on course ...

... but unfortunately none of the current politicians & bankers will do this for us ... it will require brand new leadership, new people who truly represent the voice of the people, to take responsibility and turn around our failing economy, and society ... we face a huge battle, a battle of values, one that needs to challenge Poweromics and the basic premise that 'greed is good' ... we need to quickly introduce Leanomics (and leanomics indicators such as the 'BUTS' test - where U refers to unemployment/untapped talent as mentioned above), else we will resign our economy/society to history ...

'For evil to flourish, all it needs is for good men to do nothing' [Edmund Burke]

'Cutting' your way to 'success' is flawed

Supporting enterprise that creates value for others (and wealth for the nation) would be a good idea - as the revenues, and hence the taxes paid for by corporations / workforce, is what's actually needed to fund any public services in the future ... yet little mention / action by politicians with regard to this ... they all show they have no real policy/ideas on this at all ... hence their focus on cutting costs ... and they haven't really got a clue about that either.

What we see is current 'leaders' failing to 'lead' ... the government gave hundreds of billions of taxpayers money to financial institutions ... who prefer to i) make money from money (i.e. wealth manipulation'), to ii) gamble using other peoples' money, and to iii) profit from the good times and get bailed out by us in the bad ... nothing has changed, and we are continuing down this road again ... but with very little to show for it, except a massive debt to pay off, higher taxes and less & less cash to pay for public services.

Investment in entrepreneurship and real enterprise is needed to rebuild a sustainable economy and to fund future public services ... instead of trying to get investment to return into property again (alongside gambling) in the hope that international markets believe people in the UK will be prepared to take on more debt so that they can take a disproportionate chunk of people's salary in the process (for adding little/no value at all) once again ...

If the UK still plans to go for the latter, don't expect it to last for very long, as debt will continue to spiral out of control, more unemployed will need to be supported by the state due to the lack of enterprise, and many more enterprising/hard-working people will make a different choice on where they would like to live (e.g. remember EU borders are all open now)- and they will be unlikely to choose here (e.g. because of high property prices, high taxation and imploding public services ...)

Simply 'cutting' your way to 'success' is a flawed strategy. Innovation and value-added enterprise, supported by freeing up more resources to allow more value to be created, is far better (e.g. robust & sustainable) ... but current 'leaders' haven't got a clue ... fail to understand this ... and unfortunately the chicken's will eventually coming home to roost.

Posted on the Stephanomics blog (Post 17), and links to chapter 1 (page 9) of my book!

Employment - more 'spin' than 'recovery'

As predicted the 'spin' of 'recovery' is getting louder, and wider ... for instance a BBC headline today referred to the UK jobs market starting to show signs of 'recovery', making reference to monthly research from KPMG and the Recruitment and Employment Confederation which found "marginal increases" in appointments in August.

"It seems that employers are becoming more confident in their hiring decisions," said Kevin Green, chief executive of the Recruitment & Employment Confederation, the survey's other co-sponsor. Again it doesn't take very long to spot the clear 'self-interest' in such statements, given the interest of such groups to talk confidence/recruitment up.

Despite all the current hype about recovery, little has changed and the latest official unemployment figures show that the number of people out of work in the UK is continuing to rise (unemployment increased by 220,000 to 2,435,000 - to 7.8%) and a picture can often says a thousand words ... and the graph below clearly tells a story (even after all the Government's manipulation - e.g. moving unemployed people out of this category and onto incapacity benefit, moving more students into colleges/universities etc) ...

... and the levels of unemployment are set to rise much further in the future too. If that's what we call 'recovery' ... one has to wonder what 'disaster' looks like? ... and given concerns raised about 'double dip recessions', are we about to find out?

... In my humble opinion I think this is highly likely for a number of reasons (e.g. tax increases/public sector job cuts to try to balance the books and pay off the some of massive Government debt) ... and it's unlikely to be very long before it arrives ... and it sounds like Lord Mandelson (the ultimate 'spin doctor') quietly acknowledges/knows this already too ...

The end of an 'era'

As time progresses, many are looking for the 'green shoots' of recovery (e.g. see my previous post) ... but many people are starting to realise we are coming to the end of an 'era' (see Stephanie Flanders' latest blog). With the UK consumer debt now standing at £1,400,000,000,000, and more & more people worried about their jobs (with unemployment continuing to rise rapidly), it's definitely time to start asking more questions ... the Government are trying to respond early to the risk of another 'lost generation' now too (and to try to reduce this risk of social unrest), but once again this only addresses the symptoms ... it does not fix the fundamental problem.

The fundamental problem is 'traditional economics' is 'too narrow in scope', and is 'effectively dead' ... and the current toxic mix of 'Poweromics' & 'Ignoromics' is now starting to collapse too (nb the advent of internet/mobile technology will predictably make this so) ... a new 'values system' will emerge, and a 'new economics' focused on 'adding value for others' will be needed (see Leanomics) too ... but such changes requires 'leaders' to learn from mistakes ... and they will need to do a U-turn in many of their policies & practices too ... but are the current 'leaders' likely to do this ... well history suggests not and recent articles suggest very different people will be needed to bring this about too ... so there's a lot more to do, and much more to come ... before we reach the 'real turning point' and start along the 'road to recovery', and the 'path to prosperity' ...

For instance - take a look at my comment added to Stephanie's blog below:

Post 6 (leanomist) wrote:

"IMHO I believe we are coming to the 'end of an era' - and the signs of recovery should not be focused on house prices rising again, people starting to borrow heavily again, or GDP simply stabilizing (or rising slightly again). Traditional 'economics' is too narrow in scope, and effectively 'dead' ... and a 'new economics' will emerge (nb Dr. W. Edwards Deming highlighted the needs for this way back in the 1990's) and new 'economic indicators' will be needed. For those interested in exploring this a little more you can take a look at this post, which also looks at some alternative indicators to use whilst searching for signs of a 'turning point' and the 'start of the recovery'..."

Leanomics - looking for signs of recovery ...

There is currently a great deal of searching (and spin) associated with the 'green shoots of recovery', but what should we really be looking for ...? House prices increasing again ...? Stock Markets rising again ...? Well this post seeks to answer this question, by using one simple Leanomics test, known as the 'BUTS' test.

The BUTS 'economic' test looks at a number of factors ... and combines individual well-being & community indicators with financial indicators too. For instance it looks at:

B - Borrowing

U - Untapped Talent

T - Trade deficit

S - Stress

Whilst Government borrowing continues to rocket, and the Bank of England prints more money, to 'buy' more UK Government debt, it is not hard to see how bad borrowing is, and how it's now likely to be with us for decades to come ... and the trade deficit, and budget deficits, are also the worst they have ever been too ...

Stress is also growing rapidly, and even before the current crisis started, it was already (using the most simple and conservative of measures) standing at 1 in 4.

So what about the last one, 'untapped talent' ... well despite official unemployment figures being manipulated downwards for the last decade (e.g. by pushing numerous people to claim 'invalidity benefit' instead), the figures are continuing to show unemployment rising rapidly - reaching 2,400,000 people already and it's set to go well beyond 3,000,000 next year. Yet such figures are just tip of the iceberg, as the real level of 'untapped talent' it is actually far greater than this (and well over 50%).

There is growing concern about this, not just from a financial perspective, but from an individual point of view too, as more people lose self-confidence, belief and self-worth. There is also concern about all the social implications too, as stress increases and motivation reduces ... and as people's natural desire and ability to add value (and make a difference) to other people's lives reduces, reducing the overall well-being of the community, as well as the nation's economy, too. There is also the risk of growing frustration & anger, particularly from younger generations, as youth unemployment rates are much higher, they have been saddled with debt (e.g. due to tuition fees) and given little prospect of a job, house prices are still expense to rent/buy and they are also the ones who'll have to pay most of the Government current borrowing back (through future tax rises).

With all the government spin, the BUTS test is the real one to look at for signs of recovery, i.e. not house prices appearing to stabilise or stock market prices rising again (see my previous post to see more explanations for this), and because the Government have changed very little in terms of the 'leadership', 'management practices' & 'policies' they apply ... the actual unemployment, debts, deficits and stress levels all tell us that the real situation is continuing to get worse ...

But the youth are also more savvy, and are far more effective at using 21st century communication technology too ... so they have the power to change everything, and it will only be a matter of time before they do ... which is what the current 'politicians' are actually really worried about ... i.e. as it will change the balance of 'power', create a new form of 'politics' and a new 'economics' too ...

"I predict a riot" - says the World Bank

World Bank warns that the global economic crisis could lead to serious social upheaval.

So Frank Field is not alone - he's being joined by the Head of the World Bank too.  Robert Zoellick said yesterday "If we do not take measures, there is a risk of a serious human and social crisis with very serious political implications."

Mr Zoellick suggested governments should start preparing for high levels of unemployment, whilst the retiring Bank of England rate-setter David Blanchflower has said at least one million more people in the UK will lose their jobs and there is a real risk of a lost generation.

Are they right, wrong, or could it be much worse than this ...?