Geoffrey Colvin wrote a cover story entitled “America Isn’t Ready [Here’s What To Do About It]” in the July 25 issue of Fortune magazine. It is a real wake-up call to American workers regarding the growing challenge from offshore labor pools. It’s a very good article, but it ultimately diverts attention from the key element required to address the challenge.
Colvin begins by outlining three familiar drivers:
- the increasing importance of information in economic activity
- the ability to digitize this information and stream it anywhere in the world more and more cheaply
- the large number of college graduates, especially engineering graduates, being produced in China and India relative to the U.S.
In discussing these trends, he reviews the findings of the recent study from the McKinsey Global Institute that I blogged earlier. Bottom line? More and more U.S. jobs are vulnerable to offshoring and the U.S. educational system is producing fewer graduates able to compete in technology-related jobs. Some of the most interesting charts in his article contrast the number of Asian students earning doctorates in the U.S. versus in Asian universities.
What’s the answer? If you read Colvin, the most urgent priority is to fix the educational system. Other prescriptions include immigration reform, more spending on R&D (especially government funded research), more investment in communications infrastructure. But then Colvin warns that all of this still might not work. The more fundamental problem is that American workers are more expensive than similarly skilled workers in Asia, raising the most important question: “How can they be worth what they cost?” Colvin suggests that “what happens next in the U.S. depends on how workers respond.”
I beg to differ. What happens next depends on how U.S. companies respond. Despite cursory references to companies like Trilogy, the article largely lets companies off the hook. According to the article, the answers either involve public policy initiatives or efforts by workers to get the training required to justify their higher cost (despite the earlier point in the article that workers at all skill levels are available for lower wages in Asian countries).
In searching for a more satisfying answer, we might start with the observation of Robert Litan, an economist at the Brookings Institution, quoted in a side-bar to the article: “By and large government retraining programs don’t work. The best training takes place on the job.” Amen.
Let’s also add that the best way to protect American jobs is not to focus narrowly on the training of individual workers. Instead, we need to figure out how aggressively build the capabilities of groups of workers – it’s not just about skills, it’s about shared practices and the processes required to amplify the value of these shared practices.
Finally, let’s also recognize that this is not a one-time challenge, but an ongoing requirement. What matters is not just relative skill levels or organizational capability at any point in time, but the relative pace and trajectory of capability building. The growing competitiveness of Asian companies is not just due to their lower wage rates or access to large pools of educated workers. It increasingly stems from their mastery of management techniques that enable them to get better faster by working with others.
If we recognize all this, the search for answers shifts squarely onto companies, not individual workers or government policy. Companies need to re-conceive their role. American companies, responding in part to impatient financial markets, have increasingly focused on efficiency, especially in terms of near-term cost reduction. This focus is driving the current trends towards offshoring and outsourcing. Efficiency is essential, but it is not sufficient.
Rather than viewing themselves as narrow efficiency engines, companies need to re-conceive their roles in terms of accelerating capability building. In an increasingly competitive global economy, the reason people will join companies is because they believe that they can get better faster by working with others in a company rather than acting as free agents. If companies don’t deliver against this expectation, they will find it harder and harder to attract and retain talented employees. Delivering against this expectation will require a much greater focus on growth and innovation, rather than narrow efficiency. It will also require deeper skill in collaborating with other highly specialized companies to get better even faster.
Let’s face it, one reason our schools are not graduating more engineers is that students look out into the job market and don’t see as much advancement opportunities for engineers and scientists as in years past. This is not just a problem of our educational system – it’s a problem of opportunity creation by our companies.
I have a growing concern that corporate executives are beginning to use our educational system as a scapegoat. Sure, it is broken – severely broken. It may even need to be fundamentally re-conceived rather than reformed. But it is far too convenient for CEO’s to point the finger at our educational system and avoid looking at what their own companies need to be doing to create more opportunities to pull and develop talent.
A similar concern applies to immigration policy. One of my biggest concerns is the growing trend of Asians who already reside in the U.S. deciding to return to their home countries. What is driving this? There are many factors, but one that my Asian acquaintances increasingly cite as they pack up and move out is that they have become convinced that the most significant opportunities for advancement are now over in Asia rather than here. We can relax immigration policy as much as we want but, if the best and brightest in Asia perceive that their best opportunities for advancement are at home, these policy reforms will have little impact.
The answers to the challenges outlined in the Fortune article begin in the executive boardroom. Before pointing the fingers at others, executives need to ask themselves three basic questions:
- What is the really distinctive capability that will allow us to compete successfully in the global economy?
- What do we need to do to get better faster in these areas?
- How can we learn to work with other companies in ways that help all partners to get better even faster?
The Fortune article asks “where to start?” Senior executives should start by looking in the mirror and asking themselves hard questions about what their own companies need to do to get better faster. By spending so much time on public policy and the workers themselves, Fortune did its readers a disservice. Sure, there is a lot to be done on those fronts as well, but the senior executives that Fortune targets as its readers can have the greatest impact by focusing on their own companies first. The article would have been a lot more powerful if Fortune had begun with what its own readers could do.