x Abu Dhabi, UAEFriday 21 July 2017

The melting-pot workforce

The Life: In the United States, a downturn in productivity occurred in the past due to an increase of low-quality managers. Leaders here in the UAE have plenty to glean from that historical lesson.

The country's workforce is comprised of many nationalities and is relatively young, creating a unique leadership challenge. Fatima Al Marzouqi / The National
The country's workforce is comprised of many nationalities and is relatively young, creating a unique leadership challenge. Fatima Al Marzouqi / The National

Every morning across the region, leaders are faced with one of the more complex challenges in modern business: how to lead a demographically diverse workforce.

The UAE's workforce comprises numerous nationalities, as the overwhelming majority are expatriates. Collectively, the workforce is also quite young.

These factors together create a unique leadership challenge.

Given this challenge, and given that history may be the best teacher, let us look at another country that faced demographic anomaly, as a way of understanding the impact on productivity and discover what we can do here in the UAE.

In the United States in the 1970s, the substantial growth of the workforce and the entry of the baby boomers (those born between 1946 and 1964) into the ranks of workers corresponded with a productivity slowdown.

This is when annual productivity growth fell 1 percentage point relative to the previous decade. One notion within this hotly debated topic is that young people's entry into the workforce caused productivity to slow.

But research suggests the downturn was not due to young people's entry. Rather, the influx of young workers created a managerial challenge, and it was the quality of managers that was a significant factor in the decline of output.

During this demographic shift, people who were already in the workforce rose into managerial positions by default, even if they did not have the requisite capability. These additional managers had less talent than the existing pool of managers; otherwise, they would have been managing already.

As a manager's span of control becomes larger, that person's effectiveness tends to diminish. And there is a related productivity drop because the number of employees in relation to existing managers rises.

Here in the Emirates, it is worth asking whether the growth of the workforce has had an impact on productivity. The boom between 2003 and 2008 caused significant changes in the size and demographics of the workforce and the age structure of management. Given the parallel to the US, it is not unrealistic to think that lower management quality will have effects on productivity.

Workers have been called upon to manage earlier than in previous generations.

Growth has been fast, and a general rule has been to promote into management somebody who has been loyal and at least knows the business. Companies have dug deeper into their management distribution, causing a fall in average management quality. In the US, productivity did improve as the quality of management improved, but it took nearly two decades.

Since we do not have the luxury of decades, given that growth has already restarted, the action that is required should take place at the board level. The priority is building leadership and managerial capability now. This is the area in which companies can quickly increase their competitiveness.

Understanding the role of demographic change in productivity movement is of critical importance, given that this region has a youth bubble.

If you are a leader, you need to be proactive and take personal responsibility for building the management capabilities of those who report directly to you.

Tommy Weir is an authority on fast-growth and emerging-market leadership, the author of The CEO Shift and the managing director of the Emerging Market Leadership Center