Beyond the horizon

It is not clear what firms of the future will look like, how they'll be staffed and what shape management will take however, resisting
change is never the way forward, advises Geraint Jones

It is not often that I admit to reading the McKinsey Quarterly, however, a recent article on how management and by extension, businesses are likely to change over the next 50 years caught my eye.

The central thesis of the article was that over the next 50 years, there will be huge geopolitical and economic changes in the world. Populations will age initially in the western economies and then in the new developing economies. Technologies, communications and artificial intelligence will all completely transform the world both politically and economically. All of this will result in a future economy that is far more volatile and unpredictable.

On a micro level, the way we do business will also change completely and only firms who recognise this and allocate resources accordingly will prosper. Research by McKinsey and Company has apparently shown that firms tend to allocate resources based on historical data rather than future expectations, with predictable results. Therefore management will need to significantly change the parameters by which it determines asset allocation.

McKinsey's have also predicted that markets will become more specific and that not only will firms need to have broad strategic plans, but also micro plans that will focus on a more granular level. We already accept that marketing may differ from country to country, however we are also to face a world where strategies will differ from city to city within the same country.

As we will all be facing significant change in the future, firms will need to be light on their feet to take advantage of the new opportunities. However they will need for all their staff to be ready to respond to changes that will take place.

Change happens

Most human beings, by their nature, do not like to change. People fear the future because it represents uncertainty and the possibility that they may not fit in, that they may not be able to cope or in extreme circumstances, that they may lose their job. This fear of the unknown is a natural response to any change. These are however fears that need be allayed. Change does not mean unemployment, but it does mean the need to learn new skills, to adapt and to enter into the change with a positive attitude.

If firms are to develop and prosper, it is important that staff understand why change needs to happen and they must be made to feel a part of the evolution of the firm. They need to understand how it will happen and how they will fit into it. The instinctive reaction to change is to presume that you will be a net loser and that it will only be the senior management who will benefit. If however staff are consulted, asked for input and suggestions, and made to feel part of the development they are more likely to welcome any changes. Change will always create new opportunities and people need to understand how those changes will benefit them.

It is not just the staff that will need to adapt. Management will also need to adjust. They will need to be more diverse, more technologically savvy and focussed on a less parochial and a more global horizon. Diversity does not just mean ethnicity or gender. Businesses will be marketing to a global audience and need a work force whose experiences and knowledge reflect that.

Not everyone will prosper in the future just as they have not in the past. Already we can see economies suffering in southern Europe. Even in the UK, we are becoming more and more dependent on the affluent south east. However if firms recognize the possibilities and adapt accordingly, they will find success.

An old boss of mine used to say, "The status quo is not an option", and he was correct. Whatever shape change comes in, it should not be feared. It is an opportunity that should be embraced which can benefit everyone. The McKinsey report is certainly optimistic about the future, but warns that only those who understand the opportunities ahead will benefit. We all need to make an effort to try to understand and prepare for what lies beyond the horizon; our

Geraint Jones is a tax partner at BKL Tax

He writes the regular in-practice article on doing business for Private Client Adviser