Retire

Investment Nutrition: The Fuel For Retirement

14 March, 2019
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"Over the next 20 years, average defined contribution pot sizes are expected to increase by 91%."

There’s no denying it, in the same way fad diets work over the shorter term, simple investment strategies can also provide strong performance when everything works to their advantage. But, over the longer term, the result is likely to be the same for both our physical and financial health – a lack of fuel to power us through retirement. Ongoing investigations of the market for investment consultancy services by the Competition and Markets Authority (CMA) in the UK reinforce this point of view. In a provisional decision report, the CMA stated that they "encourage policymakers to consider how best to address the lower level of engagement by Defined Contributions (DC) schemes in investment matters." But there’s a disconnect between this and the design of DC investment strategies.

Changing Relationship Between Employer and Employee

Rather than the short term objectives, which drive the focus on current thinking in DC pensions, there needs to be an increased focus on investments, with a long-term time horizon and a disciplined set of core principles. This criteria will provide members with the fuel they need for a financially healthy retirement. Below are three key reasons we believe many investment strategies are lacking the ‘nutrition’ they need for the longer term, and why this needs to change.

Deficiency #1: Low Cost = Good Value

There’s no doubt that the current regulatory environment has a strong focus on cost, from the charge cap to value for money assessments. Low cost is also a key driver when selecting a provider. But there’s a key difference between cost and value that’s being missed by the market. This race to the bottom is compromising member outcomes.

Instead, the focus should switch to value – pushing hard on fees, but not compromising on selecting the best investments when they add value for members. An open architecture structure, with transparency on which funds can be used, can help to manage and improve this selection process.

Deficiency #2: A Focus on Cost Means Lack of Diversification

Diversification is said to be “the only free lunch in investments,” but we see a number of investment strategies in the market lacking the balanced nutrition to provide members with a healthy pot at retirement. Whilst we’ve had a market environment over the past 10 years that has broadly been favourable for simple, undiversified strategies, the future is uncertain, with political risk across the globe, uncertainty around the impact of climate change, and DC members who are struggling to save enough for retirement.

There’s a misconception that focusing on cost means you have to invest only in the traditional asset classes – equities and bonds. Not only does this leave members exposed, it also isn’t true. There are a number of more innovative asset classes that tick the box of being both cost-effective and strong diversifiers – emerging markets, infrastructure and property (on a listed basis) to name a few.

On top of this, we believe that set-and-forget long term allocations are leaving money on the table. When you have the right expertise and depth, using a dynamic asset allocation process, adjusting for short to medium term market views, can and does add value by positioning portfolios for all market conditions.

Deficiency #3: Members Move Around – Why Should I Care?

Members will be invested for upwards of 40 years, but on average members will spend 8.6 years at each employer1. So you can see why employers are reticent to spend time, and money, on designing their investment strategies. But if we all took that view, we’d be failing members. Over the next 20 years, average DC pot sizes are expected to increase by 91 percent2. In addition, assets under management in the DC workplace pension market are expected to increase to c. £1.7trn in 20302. Whilst many members may be relying on other sources of income currently, this isn’t going to be the case in the near future, and the shift from DB to DC pensions means more people will be increasingly reliant on their DC pot to fund their retirement.

Most people realise the importance of healthy eating and a balanced diet on their long term health, but often we don’t think they give the same care to investing for retirement. There are a number of reasons and key drivers for this –but these will need to be overcome for us all to have healthy retirements. While investment strategies which fall victim to these deficiencies will falter, and fads will run out of steam, an investment solution based on solid, grounded principles will stand the test of time. Choosing a DC pensions solution that has this at its core is critical. All parties will have a role in this, from members to trustees, pension providers to regulators, and we all need to take action to make sure investments are given the focus they deserve.

Download the Investment Nutrition: The Fuel For Retirement report to continue reading what we believe are the key reasons many investment strategies are lacking the nutrition they need for the longer term, and why it’s critical to implement change now.  You can also visit UK.mercer.com to learn more.
 

Oecd -https://stats.oecd.org/Index.aspx?DataSetCode=TENURE_AVE
FCA - Retirement Outcomes Review.https://www.fca.org.uk/publication/market-studies/retirement-outcomes-review-interim-report.pdf

More in Retire

Pat Milligan | 19 Dec 2019

Life expectancies have risen sharply in recent decades, from an average age of under 53 years in 1960 to 72 years in 2017. And in high-income countries, the average life expectancy is closer to 80 years of age.1 Given longer lives and longer work lives across the globe, fewer people today are adhering to a career model defined by three key phases of professional working life: school, work and retirement. Instead, a multistage life is increasingly common — one in which individuals may go in and out of the workforce, work part time or join the gig economy, and get new training or credentials in midlife or later. As workforces live longer and delay retirement, employers are struggling to evolve models, practices and policies that align with this new reality. To permit people to extend working life and remain productive into older age, employers must become "age ready" — or risk losing out on the benefits this growing segment has to offer. Another important factor is ensuring these employees are not victims of age discrimination — a common prejudice that often goes overlooked even in organizations committed to employment equity and that embrace the most comprehensive Diversity & Inclusion strategies. A Global Workforce of Experienced Employees   Mercer's "Next Stage: Are You Age-Ready" report reveals that, though populations across the world are living and working longer, the Asia Pacific region is feeling the greatest impact from a rapidly emerging generation of experienced employees. In fact, the report states that there will more than 200 million people age 65 and older between 2015 and 2030. Japan is becoming the world's first "ultra-aged" population, where those over 65 years of age will comprise more than 28% of the population. Hong Kong, South Korea and Taiwan — designated as "super-aged" populations — are not far behind, with more than 21% of their citizens soon becoming 65 and older. Increasing life expectancies have forced mature employees to face some difficult decisions. While many continue working out of a desire to learn new skills, connect with others or satisfy a desire to contribute to society, some aging workers don't have that choice. Instead, these employees continue working simply to finance the costs of their extended lives. Getting older is expensive, and weakening pension systems, poor savings habits in a context of inequalities in income growth, and low interest rates have all conspired to undermine the security once taken for granted by those nearing retirement age. Aging workers who opt not to retire present their employers, as well as incoming generations of younger workers, with unprecedented challenges and opportunities. Dispelling Preconceived Notions and Biases   Though workplaces around the world have greatly improved their efforts to curtail discrimination related to an employee's race, sexual orientation and gender, efforts to address age discrimination are often overlooked. Here are some of the most entrenched and damaging myths concerning seasoned employees, according to Mercer's Next Stage report: 1.  Myth: "Experienced workers are less productive." Truth: Extensive research dispels the myth that job performance declines with age. 2.  Myth: "Experienced workers have difficulties learning new skills and technologies." Truth: The hurdle here is not that these workers have difficulties learning new skills, but rather they often haven't previously received the training necessary to advance certain skills or knowledge. However, research shows that 85% of workers, including experienced employees, actively seek opportunities for skills development and technical training to enhance their career development possibilities. 3.  Myth: "Experienced workers are more costly." Truth: Pay can be higher for increased age (and responsibility) but older workers can significantly reduce costs for employers in other ways, like through reduced turnover rates. In Mercer's data, some drop off in pay for the same level of job is experienced as workers age. Mercer's penetrating research and analysis on the productivity levels, learning intent and capacities, and employer expenses related to experienced workers reveals a much more nuanced and complex relationship between older employees and their younger colleagues. Even in study cases where older workers did show lower individual productivity levels, the assessments did not account for key nuances, such as the time dedicated to mentoring, training and guiding others instead of focusing on their individual performances. Expanding the Value of Experienced Employees   Businesses must learn to capitalize on the talents, skills and potential of mature employees who are postponing retirement. Mercer's Global Talent Trends 2019 report states that the integration of modern technologies into corporate HR systems presents older employees with powerful tools that can teach them new, valuable skills. In addition, these technologies provide them with curated career development paths using specialized learning functionalities and predictive software algorithms. Corporate learning platforms can be used to shape content relevant to a particular ambition, close a skills gap or build connections among peers who can share expertise. Curated learning programs also allow employees to develop at their own pace and earn credentials based on benchmarks determined by personal career objectives. Professional development opportunities for experienced employees are also limited by many employers' inability to accurately assess the value and scope of their contributions. Mercer's Next Stage report argues that experienced workers can contribute significantly to organizational performance through their deep institutional knowledge, social capital specific to the business and technical or content expertise honed from years of on-the-job practice. Also, critical soft skills, such as listening, communicating, collaborating and team building, are commonly undervalued. Businesses that rely on common proxies for performance, such as performance ratings, promotion probability and pay, are likely to under-appreciate the contributions of their experienced workers and miss opportunities to better leverage their work. By maximizing the value and potential of experienced workers, employers can create new professional development opportunities that leverage these workers' experience, expertise and life-knowledge. With age comes wisdom. When empowered, experienced employees can lead their companies into the future — guided by their invaluable experience with the past. Sources: 1. "Life expectancy at birth, total (years)." The World Bank, 2017, https://data.worldbank.org/indicator/sp.dyn.le00.in

Anil Lobo | 27 Jun 2019

Supplementary retirement savings plans can provide security and stability for older people who no longer have a steady paycheck — and India's National Pension System (NPS) aims to do just that. NPS is a supplementary Defined Contribution pension plan, and subscription to the scheme is purely voluntary in nature. Like most of the world, India's population is aging, and lifespans are increasing. As a result of improved health and sanitation conditions, the global life expectancy is forecast to increase from an average of 65 years in 1990 to 77 years by 2050.1 For most people, living longer means more non-working years to enjoy. But for growing numbers of people around the world, maintaining enough income to live comfortably during those non-working years is expected to be a challenge. Not only are most older people no longer earning income, but as the years advance, the cost of living and inflation continue to increase. As government leaders around the world consider ways to help citizens prepare for retirement, they can look to India's NPS as a model for boosting retirement savings and helping aging workers avoid poverty during old age. The Basics of India's National Pension System   In 2004, the Indian government launched its National Pension System with the goal of providing retirement income to its citizens.2 The system aims to institute pension reform and foster the habit of saving for retirement. Initially, the program was made available for government employees only, but in 2009, NPS became available on a supplementary basis for all Indian citizens between the ages of 18 and 60. A Tier I NPS account (a mandatory account offering tax benefits) is designed in such a way that it discourages early withdrawal until the account owner reaches retirement age. If the account owner intends to withdraw before retirement age, they are allowed to withdraw only 20%, and the balance has to be used to purchase annuity. The NPS offers a decent tax benefit for its participants — contributions are made before taxes — but a portion of withdrawals are subject to taxes. On reaching the retirement age, one can withdraw 60% of accumulations, which are tax free, and the balance of 40% has to be utilized to purchase annuity from approved annuity providers. One can defer the withdrawal and stay invested until the age of 70 or continue to make fresh contributions, if desired. Tier II NPS accounts provide voluntary savings options without stiff exit penalties or lock-ins. There is a proposal to provide some tax benefits under Tier II NPS, which would require a lock-in period of three years; however, this proposal is yet to be confirmed. Since the launch of the system, the Indian government has created additional social security programs to encourage retirement saving, especially among the working poor. In 2010, the government's Swavalamban Scheme committed to depositing 1,000 rupees into the accounts of each saver who contributed 1,000 to 12,000 rupees into their own account annually and was not covered by a government or employer pension. But in 2015, that plan was scrapped in favor of the Atal Pension Yojana (APY), which guarantees defined pension distributions during retirement for savers who meet certain qualifications based on their contributions. APY also offered a government contribution of 50% of the saver's total contribution or 1,000 rupees per year, whichever is lower, for a period of five years (from 2015 to 2020). India's NPS has gone through a few iterations and continues to evolve, but the plan is helping to boost retirement savings among Indian citizens. It's also shifting citizens' expectations: Instead of relying on younger family members to support them in their old age, many are now adjusting their savings and preparing to support themselves in their retirement years. On top of that, NPS is one of the cheapest investment products. Overall costs of the NPS are far lower than those of other products, and it is perhaps the cheapest pension product available. 3 Lessons You Can Learn From India's Model   For organizational leaders around the world, India's experiment in providing a national pension program for all its citizens offers a number of valuable lessons. 1. Unsustainable National Debt Requires New Solutions   Long before the NPS was launched, India's federal and state government employees were covered by a tax-funded defined benefit pension program that provided a 50% replacement wage at retirement with an inflation-linked adjustment. In the mid-1980s, this program cost the country less than $0.5 billion annually, but by 2006, with people living longer, the price tag jumped to more than $600 billion per year.3 Maintaining the program was unsustainable, and leaders realized they needed to develop a replacement program to ensure successful retirements for future workers and protect the nation's finances. Since the launch of NPS, all new government employees have been enrolled in it, fostering a responsibility among workers to prepare for their own retirement and protecting the government from continuing to run up unsustainable pension debt. 2. Tax Advantages Are Key for Supplementary Retirement Savings Plans   Most participants choose to invest in the NPS due to the tax benefits. However, some Indian citizens report that they did not opt for participating in the NPS as they perceived that some mutual fund instruments and private retirement savings vehicles have greater potential to beat the market and also provide better tax benefits. In order to encourage citizens and promote NPS, the government developed three categories of tax-saving options. The third of these options is exclusively for salaried employees whose contributions are made through the corporate model of NPS. All three categories can be availed together and exclusive of each other. Moreover, there was a recent relaxation in the tax-free withdrawal limit of corpus allowed at the time of retirement (from an earlier limit of 40% of corpus to 60% of corpus). Originally, though 60% was allowed to be withdrawn, the balance of 20% was taxed at normal rates, and making it entirely tax free has made it even more attractive. While a few senior executives may have access to other retirement savings plans, including employer-sponsored Defined Contribution superannuation plans, most of the population (particularly among the working class) do not have access to other retirement savings plans, and hence, the tax advantages inherent in NPS are crucial encouragement for them to save for retirement. 3. Citizens Need Education About the Model's Benefits   While the NPS offers a number of benefits to savers, participation rates remain relatively low.4 Some respondents to a recent survey revealed that not understanding the importance of saving and the advantages of compounding interest could have influenced their choice to stay out. NPS leaders have used a variety of methods for communicating and educating the population about the system. For instance, pilot programs staged in two different geographic areas hosted workshops, meetings and camps targeting unorganized sector workers and key stakeholders. Information was also distributed through cable television networks, radio, mobile publicity vans, seminars and road shows. India continues to measure the success of its pension program and may make more changes in the future. Many countries are struggling to solve the potential challenge of poverty in old age, but the NPS in India is an encouraging step toward protecting the future for many of its citizens, and it's worth taking a look at the model for inspiration. Sources: 1. United Nations: Department of Economic and Social Affairs,"World Population Prospects — 2017 Revision: Global life expectancy," United Nations: Department of Public Information, June 21, 2017, https://www.un.org/development/desa/publications/graphic/wpp2017-global-life-expectancy./ 2. "National Pension System — Retirement Plan for All," National Portal of India, October 22, 2018, https://www.india.gov.in/spotlight/national-pension-system-retirement-plan-all. 3. Kim, Cheolsu; MacKellar, Landis; Galer, Russel G.; Bhardwaj, Guatam, "Implementing an Inclusive and Equitable Pension Reform," Asian Development Bank and Routledge, 2012, https://www.adb.org/sites/default/files/publication/29796/implementing-pension-reform-india.pdf. 4.Zaidi, Babar, "5 Reasons Why Investors Stay Away From NPS. But Should You?" The Economic Times, December 27, 2018, https://economictimes.indiatimes.com/wealth/invest/5-reasons-why-investors-stay-away-from-nps-but-should-you/articleshow/61890679.cms.

David Anderson | 03 Apr 2019

Asian pension systems are facing major challenges. The region is experiencing seismic demographic changes, with rapidly aging populations and declining birthrates. But investment returns are relatively low due to geopolitical uncertainty and minimal interest rates. With the region having relatively few robust retirement systems, many Asian countries will struggle to provide adequate pensions. Governments need to take positive action now to reduce financial pressures and avoid intergenerational conflicts between the young and old. Life expectancy at birth in the region has increased by seven to 14 years in most countries during the last 40 years, according to the 2018 Melbourne Mercer Global Pension Index (MMGPI), which ranks pension systems round the world on adequacy, sustainability and integrity. This is an average of one additional year every four years. The increased life expectancy of a 65-year-old over the last 40 years has ranged from 1.7 years in Indonesia to 8.1 years in Singapore. Much of the rest of the world is facing similar challenges relating to aging populations, and nations are pursuing similar policy reforms. These include raising pension ages, encouraging people to work longer, increasing the funding levels set aside for retirement and reducing the amount of money people can take out of their pension accounts before they reach retirement age. The 2018 MMGPI findings pose the fundamental question: What reforms can Asian governments implement to improve the long-term outcomes of their retirement income systems? The natural starting place to create a world-class pension system is ensuring the right balance between adequacy and sustainability. A system providing generous benefits in the short-term is unlikely to be sustainable, while a system that's sustainable over many years usually provides modest benefits. Without changes to retirement ages and eligibility ages to access social security and private pensions, the pressure on retirement systems will increase, which could threaten the financial security provided to the elderly. Increased workforce participation by women and older workers can improve adequacy and sustainability. Japan, China and South Korea rank near the bottom of the Mercer index. Their pension systems do not represent a sustainable model to support the retirement of current and future generations. If left unchanged, these countries will suffer social conflicts, since pension benefits will not be distributed equally between generations. Japan, for instance, is taking baby steps to reform its pension system by gradually raising the mandatory retirement age of some 3.4 million civil servants to 65 from the current 60 years of age. Japanese retirees can now choose to start receiving their pensions at any point between the ages of 60 and 70, with greater monthly payments offered to those who start at age 65 or older. Having the world's highest life expectancy and lowest birthrate, Japan's population is expected to shrink. This challenging situation is already contributing to skill shortages, which will further impact Japan's shrinking tax revenue base. The Japanese government could improve its pension system by encouraging higher levels of household savings and continuing to increase the level of state pension coverage, since 49 percent of the working age population is not covered by private pension plans. Introducing a requirement that part of the retirement benefit must be taken as an income stream and not a lump sum will improve the overall sustainability of the social security system — as would reducing government debt as a percentage of gross domestic product, as this improves the likelihood that the current level of pension payments can be maintained. China faces different issues. China's unique pension system comprises various plans for urban and rural populations, as well as for rural migrants and public sector workers. The urban and rural systems have a pay-as-you-go basic pension consisting of a pooled account (from employer contributions or government expenditure) and funded individual accounts (from employee contributions). Supplementary plans are also provided by some employers, particularly in urban areas. The Chinese pension system could be improved by increasing the use of workers' contributions to pensions to enhance the overall retirement protection of workers and increasing minimum support for the poorest retirees. A requirement that part of the supplementary retirement benefit must be taken as an income stream should be introduced, as well. More investment options should be offered to pension holders to permit a greater exposure to growth assets, while pension plans should improve their communications with members. Hong Kong should consider introducing tax incentives to encourage voluntary member contributions, thus increasing retirement savings. Hong Kong should also require that part of the retirement benefit be taken as an income stream. Older workers should be retained in the labor market as life expectancies rise. South Korea suffers from one of the weakest pension systems for the poor when expressed as a percentage of the average wage at just six percent. Its system would benefit by improving the level of support provided to the poorest pensioners, introducing a requirement that part of the retirement benefit from private pension arrangements be taken as an income stream and increasing the overall level of contributions. Singapore's well-structured pension system is ranked top in the region and has seen improvements in sustainability. Its retirement system, the Central Provident Fund, provides flexibility to its members, who include all employed Singaporean residents and permanent residents. But more can be done. Barriers to establishing tax-approved group corporate retirement plans should be reduced, and the CPF should also be opened to temporary nonresident workers who comprise more than a third of the labor force. The age that CPF members can access their savings should be raised, as well. Since pension systems are an intergenerational issue, they require a long-term perspective. Pension systems, which are one of the largest institutional investors in any market, should increasingly recognize the importance of acting as good stewards of the capital entrusted to them, including managing risks, such as climate change. With Asia's aging populations staying productive well into their 70s and even 80s, it is critical to improve the provision of adequate and sustainable retirement income. Raising the retirement age, expanding the coverage of private pensions for workers and encouraging financial planning and early savings should be the focus of employers and policy makers. Article originally published in Nikkei Asian Review.

More from Voice on Growth

Lewis Garrad | 30 Jan 2020

Employee engagement has become a critical topic for HR over the last 10 years as leaders have become convinced by two fundamental management ideas: having the best talent is essential to the future success of any organization, and having a highly engaged workforce is the most effective route to mobilize that talent to deliver what is needed. The result is that many organizations now invest in programs to boost engagement — mostly via an annual employee feedback survey. Yet, many organizations struggle to improve engagement and productivity in their workforce — no matter how much attention leaders and HR teams pay. Organizational inertia (or "drag") is a widespread phenomenon impacting progress on multiple levels.1 Most organizations find that people prefer to maintain the status quo rather than push for real change. This has led many HR leaders to explore what factors create more relevant and meaningful employee engagement. What Does the Science Say?   In a recent meta-analysis, scientists set out to understand how much of someone's engagement at work is predicted by personality.2 With so many organizations focusing on cultural and environmental factors, they wondered to what extent individual differences influence the way people engage with their organization. Their analysis showed that around half of someone's engagement at work is predicted by personality — with enthusiastic, upbeat and conscientious people generally displaying higher levels of engagement. This finding helps us understand why engagement can be so difficult to change. If half of engagement is predicted by personality, then organizational initiatives targeting work practices or work environment can only succeed if they include some impact at the individual level. If engagement is driven by both employee perception and personality, a shift needs to occur at the manager level. Initiatives should be implemented to target the individual employee to help create a stronger connection between that person and the work they do. Cultural/collective changes should also occur to improve conditions, like wellbeing, collaboration, creativity and productivity. This does not mean that hiring "engagable" people is a strategy for success. Diversity in an organization is an incredibly important resource. People who are more skeptical and critical might be more difficult to engage — but they are also far more likely to challenge the status quo. These people are just as important to have in the workplace, and screening them out is not an effective approach. Job Design Can Make Work More Engaging   Recently, the Facebook HR team published research that examined some of the reasons people at the company quit.3 The main reason is that employees find the day-to-day work they are doing less interesting and engaging than they want. For Facebook, it's not managers that are disengaging — it's the jobs. However, job design is typically something that managers do, and they often do it poorly. Managers are rarely given any guidance about how to do it, especially compared to the amount of training they are given about other factors, like performance management. But job design has the potential to be a more important function in people management. As AI becomes more accessible, organizations will outsource transactional work. This creates substantial opportunities to rethink how work gets done, which means we can actually use technology to help us redesign work to make it more interesting and engaging. The second opportunity in this area is adopting evidence-based management. The science behind effective job design is well established. Implementing a simple process and framework is important in empowering managers to assess current job design and improve the quality of work they create. While designing work might seem like an easy task for managers, very few employees will stick to their specific job description. By making job design a collaborative process between manager and employee, research has shown that people who craft their roles are more engaged, productive and see more meaning in what they do. Careers Can Connect Employees With the Future of Your Organization   Most organizations have been focusing on career trajectory for years. Talent reviews, internal job boards, career development conversations with your manager — all these things are designed to enable a more optimistic view about career progression. The problem is these actions do not work as well as they should. Why? Because many people are not clear about the realistic career options available to them at any one time, and the careers that are available now quickly become outdated as the organization changes structure and requirements. Carefully planned careers end up becoming irrelevant as talent demands shift. This is a really challenging topic. Even educators in schools and universities struggle with this problem — what jobs and future careers are available to students now and in the future? Constant social, technological and economic changes make this question impossible to answer. Businesses have the best opportunity to help with this challenge — but it requires a shift in focus from jobs to skills. If organizations can move from thinking of jobs as a list of functions to a bundle of adaptable skills that provide value to customers, then we can start to understand where the valuable and transferable skills are in the business. Making this shift also helps leaders talk to employees in a different way about career progression. Using technology, we can help people see the valuable skills they have, the skills that are decreasing in value and skills they need to stay relevant. Technology can also use individual engagement data to help advise employees which experiences excite them and coach them in a direction that will be the best fit for their personality. In addition to technical skills, organizations also need to think about talent for leadership. Maximizing leadership potential is a topic that many organizations care about but that few do well. As the volume of people data increases, helping people build stronger self-awareness is critical, so those who are best fit for people leadership roles can focus on developing the necessary capabilities. The Benefits of Building a More Holistic Employee Value Proposition   Work needs to be elevated from a list of tasks to be completed and instead viewed as a set of actions that have both personal meaning and commercial value. This shift isn't possible unless the HR function starts to think of the employee value proposition in a vastly different way. The most effective value propositions appreciate the whole employee experience rather than just the narrow "economic" role that work plays. It's relatively easy to make a living but it's hard to do work worth doing. A compelling employee value proposition makes an effort to do both. This means thinking past the transactional elements of the employee (pay and benefits) to incorporate more future-oriented elements of the relationships — the opportunity to innovate and create, experience a sense of sustainable wellbeing and develop new skills. The Value of Thriving at Work   Currently, many engagement programs are focused on answering how to get employees to do more for the organization. But the question that should be asked is, "How can the organization and the employee create a shared future together, using technology to create a healthier and more productive experience?" This changes the relationship dynamic and starts to value the contribution people make in a much broader way. HR leaders should look at building tools that help improve employee self-awareness, connecting what employees think about their work and how they behave in a powerful way. In summary, employee survey programs have been failing for years, in part because they have been so narrowly focused on outcomes, like an "engagement index." As technology starts to democratize the way we use employee feedback data, there is an opportunity to use it in a more two-way fashion to coach both individuals and managers. Keeping improved personal experience at the heart of innovations in employee surveys and feedback can help HR leaders make better decisions in adopting tools that will really work. For more information connect with us here: https://www.mercer.com/what-we-do/workforce-and-careers/talent-strategy/allegro-pulse-survey-platform.html Sources: 1. Garton, Eric. "Your Organization Wastes Time: Here's How to Fix It." Harvard Business Review, 13 Mar. 2017, https://hbr.org/2017/03/your-organization-wastes-time-heres-how-to-fix-it. 2. Young, Henry R.; Glerum, David R.; Wang, Wei; Joseph, Dana L. "Who Are the Most Engaged at Work? A Meta‐Analysis of Personality and Employee Engagement." Wiley Online Library, 23 Jul. 2018, https://onlinelibrary.wiley.com/doi/10.1002/job.2303. 3. Goler, Lori; Gale, Janelle; Harrington, Brynn; Grant, Adam. "Why People Really Quit Their Jobs." Harvard Business Review, 11 Jan. 2018, https://hbr.org/2018/01/why-people-really-quit-their-jobs.

Nancy Mann Jackson | 30 Jan 2020

Blockchain technology is not just for high-tech industries; it's gradually becoming an important part of even the most traditional professions, including agriculture. For example, India's Ministry of Commerce and Industry recently announced a blockchain-based e-marketplace for coffee producers. The marketplace is helping bridge the gap between coffee growers and buyers, allowing farmers to drastically increase their income. This initiative reflects a global trend of merging technological advances with agriculture. Blockchain Is Boosting India's Coffee Producers   Coffee produced in India is a premium product, produced by farmers who grow their beans under shade, hand pick them and dry them in the sun. The coffee is sold at premium prices around the world, but the farmers receive only a small portion of the profits, because there are many layers of buying and selling between the grower and the final consumer. The new blockchain-based marketplace app for trading Indian coffee brings growers closer to their ultimate customers, helping them earn fair pay and provide reliable traceability that allows consumers to trace their coffee from bean to cup. For customers, the ability to track the journey of the product they are buying can build trust. From the business perspective, that traceability can result in faster and more accurate recalls, reducing risk of food poisoning. By using the online marketplace, growers no longer have to depend on intermediaries. They can interact directly with buyers and earn fair prices for their products. Exporters can also use the online marketplace to quickly find reliable suppliers and traceable coffee products to meet their needs. When the Indian Coffee Board, a division of the Ministry of Commerce and Industry, introduced the e-marketplace in March 2019, a group of about 20 coffee farmers, exporters, importers, roasters and retailers were already registered on the platform from India and abroad.1 From a user perspective, the platform is easy to use. Coffee farmers can log their product credentials, including their relevant certificates, growing location and elevation, details about the crop and other information. For each lot of coffee sold on the marketplace, the system creates a block. That block and its credentials are then stored on the blockchain throughout its journey and are unalterable, creating a record known as a blockchain ledger. A blockchain ledger is useful for all types of agricultural products because of its ability to record and update the status of crops — from planting and harvesting to storage and delivery. A secure, immutable ledger ensures that large agricultural operators never lose a load and that consumers can access the history and details of their food's background. Agricultural Uses of Blockchain Are Expanding Globally   India isn't the only place where the benefits of blockchain technology are having a positive impact on agriculture. France and Ethiopia have also instituted blockchain marketplaces for coffee, and similar marketplaces are operating or under development around the world for other crops and agricultural products. In China, for instance, e-commerce platform JD.com traces the production, selling and delivery process for beef raised in Inner Mongolia and purchased by customers in Beijing, Shanghai and Guangzhou. By scanning a QR code, a consumer or retailer can see the size and age of the cow, its diet, when it was slaughtered, when the meat was packaged and what the results of the food safety tests were. Another Chinese company uses ankle bracelets on chickens to record the details of each chicken's life using blockchain, providing assurance to consumers that the free-range chicken they're paying for is actually free-range.2 Analysts expect that the blockchain technology market for agriculture around the world will continue to escalate, growing 56.4% from 2018 to 2022.3 Blockchain marketplaces allow producers and buyers to view trade history, local prices and other information that allow them to negotiate prices with confidence. As food producers around the world continue adopting blockchain technology, they bring more efficiency to their supply chains, improving food safety and traceability, as well as profit margins and consumer trust. Clearly, blockchain can bring about positive change in a variety of ways, but adopting and implementing the technology is much easier said than done. In an industry like agriculture, blockchain will have to reshape a decades-old framework, and that won't happen overnight. It's up to leaders everywhere to understand the value of this technology and get their teams on board with implementing it to achieve that value — even if it means starting small. Sources: 1. "Coffee Board Activates Blockchain Based Marketplace in India." Press Information Bureau, 28 Mar. 2019, http://pib.nic.in/newsite/PrintRelease.aspx?relid=189586. 2. Peters, Adele. "In China, You Can Track Your Chicken On–You Guessed It–The Blockchain." Fast Company, 12 Jan. 2018, https://www.fastcompany.com/40515999/in-china-you-can-track-your-chicken-on-you-guessed-it-the-blockchain. 3. "Global Blockchain Technology Market in the Agriculture Sector 2018-2022." Global Banking & Finance Review, 26 Sep. 2018, https://www.globalbankingandfinance.com/global-blockchain-technology-market-in-the-agriculture-sector-2018-2022-market-to-grow-at-a-cagr-of-56-4-with-agriledger-full-profile-ibm-microsoft-ripe-technology-te-food-dominating-rese/.

Jackson Kam | 30 Jan 2020

China is fostering a culture of innovation throughout its society — but most notably in its startup businesses. Multinationals can take advantage of this increased energy by investing in Chinese startups or taking a cue from how the successful ones — the "unicorns" — are meeting the demands of a growing Chinese consumer base. Multinationals must also be mindful of what Chinese workers desire most from employers, which is the ability to have a healthy work-life balance, according to Mercer's Global Talent Trends 2019 study. Currently, this is a very real challenge for employees working at tech startups. Developing a Culture of Innovation   To foster this culture of innovation within its industries, the Chinese government is making it easier for entrepreneurs to experiment and grow by implementing more "benign" business regulations. It's also ensuring that there is efficient infrastructure and local support in place.1 One sector that is particularly thriving under this new spirit is insurtech. For example: ZhongAn Online, a digital insurer backed by Ping An, Tencent and Alibaba, has launched a Software as a Service (SaaS) platform for insurance companies, giving them rapid access to ZhongAn's accumulated data on medical claims, medical insurance directories, drug prescriptions and local hospital information across the country.2 Another insurtech example is the partnership between Rui Xin Insurance Technology and China Lending, which aims to help the insurance company develop its own consumer financial platform offering China Lending's products. The two companies will also collaborate to develop more insurance products and attract more customers on both of their platforms.3 These insurtech partnerships exemplify how China is now setting the stage for experimental collaboration and innovation that challenges the status quo. Taking a Cue From Chinese Unicorns   Across many sectors, thousands of Chinese startups are disrupting industries — and stealing customers from established companies — by developing innovative business models to sell even more innovative products.4 Indeed, China has 120 successful startups, more than half of the 234 unicorns globally.5 Chinese startups are excelling because they can quickly reach scale in the large market, and they can tap a growing talent pool, particularly professionals with PhDs — twice as many as those in the U.S. They are also exhibiting a higher risk tolerance that's enabling them to conduct "fearless experimentation" to push out new products as fast as possible. With the rise of digital disruption, these unicorns are eager to take big risks and put their country back on the map as an innovator.5 How Multinationals Can Leverage This Energy   Hengyuan Zhu, associate professor and deputy chair in the Department of Innovation, Entrepreneurship and Strategy at Tsinghua University, believes that startups are successful because they are practicing "contextualized innovation." This entails collaborating with local customers within the country to make sure products meet the specific demands of those localities — and multinational companies operating in China should take a cue.6 "If they want to be successful, multinational companies will have to give more decision-making power to their local branches in China," Zhu said. "They need to do this so that they can leverage global resources, integrate into the innovation system and innovate in China for Chinese customers." An innovative workplace culture must be counterbalanced for organizations to be successful. For instance, organizations need to be willing to experiment but in a highly disciplined manner. Carefully taking this line of thought into consideration in all aspects of the workplace will ensure the success and application of a productive, innovative culture. Dealing with 996: An Unhealthy Work-Life Balance   There is a rising backlash occurring in the Chinese tech community, particularly among startups, that centers on what is known as "996.ICU." The name comes from the typical work schedule for Chinese programmers: 9 a.m. to 9 p.m., six days a week.7 Some startups are forcing their workers to abide by this schedule, either explicitly or by demanding certain KPIs in an unreasonable amount of time. Others are encouraging these schedules by appealing to long-held beliefs within the Chinese culture. For example, Alibaba founder Jack Ma has stated, "No company should or can force employees into working 996 . . . But young people need to understand that happiness comes from hard work. I don't defend 996, but I pay my respect to hard workers!"7 These sentiments are contrary to what the majority of polled Chinese workers shared during the Global Talent Trends 2019 study — that the foremost condition that would help them thrive in the workplace is the ability to manage their work-life balance. This also ranks ahead of their desire to have opportunities to learn new skills and technologies and have a fun work environment. Multinationals considering investment in Chinese startups or taking cues from unicorns may consider adopting many of the attributes of those successfully innovating while fostering a healthier work-life balance for Chinese workers — which can ultimately benefit the organization's bottom line, as well. Sources: 1. Jun, Zie. "Whole-of-society effort drives technology development in China," Global Times, 25 Jun. 2019, http://www.globaltimes.cn/content/1155732.shtml. 2. Fintech News Hong Kong. "ZhongAn Technology Launches AI-Powered Data Platform for China's Insurance Industry," Fintech News, 14 Aug. 2018, http://fintechnews.hk/6308/insurtech/zhongan-technology-saas-insurance-data/. 3. China Lending Corporation. "China Lending Forges Strategic Partnership with Rui Xin Insurance Technology to Develop Online Financial Services Platform," PR Newswire, 15 Jul. 2019, https://www.prnewswire.com/news-releases/china-lending-forges-strategic-partnership-with-rui-xin-insurance-technology-to-develop-online-financial-services-platform-300884622.html. 4. Greeven, Mark J; Yip, George S. and Wei, Wei. "Understanding China's Next Wave of Innovation," MIT Sloan Management Review, 7 Feb. 2019, https://sloanreview.mit.edu/article/understanding-chinas-next-wave-of-innovation/. 5. Nheu, Christopher. "The Secret Behind How Chinese Startups are Winning," Startup Grind, 1 May 2018, https://medium.com/startup-grind/the-secret-behind-how-chinese-startups-are-winning-44876b196626. 6. Zhu, Hengyuan and Euchner, Jim. "The Evolution of China's Innovation Capability," Research-Technology Management, 10 May 2018, http://china.enrichcentres.eu/sharedResources/users/4807/The%20Evolution%20of%20China%20s%20Innovation%20Capability.pdf. 7. Liao, Rita. "China's startup ecosystem is hitting back at demand-working hours," TechCrunch, Apr. 2019, https://techcrunch.com/2019/04/12/china-996/.

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