Disruption in Financial Services:
Could Libra Drive The Creation Of Central Bank-Issued Digital Currencies?

Technology is touching every aspect of finance, transforming decades-old practices and redefining core tasks. In our Disruption in Financial Services series, we explore how new tools and technologies are changing the business of finance and reshaping how financial professionals do their jobs.

One of the unintended consequences of Facebook’s bid to launch a cryptocurrency may be the emergence of new, central bank-issued digital currencies designed to speed up payments and ensure that global transactions remain transparent. In the face of the threat posed by Facebook’s Libra, major central banks are evaluating the merits of launching digital currencies, rethinking their approach to regulation, and planning upgrades to payments systems.

When Facebook’s Mark Zuckerberg and David Marcus announced the company’s plans to launch a cryptocurrency, the backlash from lawmakers was immediate and intense. In legislatures, concerns centered on privacy issues and the question of whether a company like Facebook could be a responsible steward of consumers’ financial data. At central banks, however, the announcement has sparked a much deeper and more fundamental debate over the nature of money and the need to adapt to new technology.

For governments, the ability to issue and manage a currency is perhaps the single most important economic power they wield. Libra, intended to tap into Facebook’s network of nearly three billion users, has the potential to become a major global currency virtually overnight. It could quickly pose a serious threat to monetary policy, making it harder for major global central banks to manage liquidity and potentially displacing smaller national currencies entirely. This would give private companies an unprecedented level of control over the global economy.

Related tutorial: Monetary Policy Analysis

Facebook claims that its goal is not to dominate global monetary policy, but rather to improve antiquated and slow payments systems. Transferring money, particularly across borders, is notoriously complex and expensive. A digital currency like Libra could dramatically reduce the cost of such transfers and increase their speed, allowing consumers to bypass existing payments networks.

In the face of the threat posed by Libra and in recognition of the problems in existing payments systems, central banks – including the European Central Bank (ECB), the US Federal Reserve, and the People’s Bank of China (PBC) – are investigating digital currencies and their potential to improve global payments systems. Some, such as the ECB and PBC, are actively considering launching their own, publicly-owned and managed digital currencies.

Although plans are in their infancy, an ECB official told journalists that an ambitious European digital currency could allow consumers to use digital cash deposited directly at the ECB, without the need for bank accounts, financial intermediaries, or clearing counterparties. China’s plans are likely to be similarly ambitious in scope.

Libra faces stiff opposition from lawmakers and its long-term fate is unclear. However, it may have unintentionally sparked a financial revolution, forcing global central banks to adapt to new technologies. Libra’s legacy may be a new suite of state-owned global digital currencies that offer consumers new options and enormous potential benefits.

Intuition Know-How has a number of tutorials that are relevant to monetary policy and digital currencies:

• Monetary Policy Analysis
• Financial Regulation – An Introduction
• Financial Authorities (US)
• Financial Authorities (UK) – Bank of England
• Financial Authorities (Europe) – ECB
• Financial Authorities (China)
• Bitcoin & Blockchain
• Blockchain Structure & Security
• Smart Contracts & Blockchain Applications
• Cryptocurrencies & Initial Coin Offerings (ICOs)

New Risks, Old Models: The Asset Management Business

The asset management business is undergoing a period of unprecedented change. Asset managers are struggling to deliver the products and returns that aging populations in Asia and the West demand against the backdrop of negative interest rates and slow growth. As fee levels fall under pressure from low-cost passive funds, asset managers must also grapple with new risks such as climate change, disruptive technology, and cyber threats. This perfect storm demands innovative responses. Asset managers must ask whether their traditional analysis and risk models can cope with the changing environment and adjust them as needed.

Perfect storm

Asset management was once a relatively low-risk business. Against the backdrop of a benign investment environment, asset managers focused on maximizing client returns and enjoying well-established revenue streams. Insulated from the credit risk inherent in banking and – thanks to their agency business model – from most investment risk, asset managers also managed to fly largely under regulators’ radar.

Related tutorial: Asset Management – An Introduction

Times have, however, changed. Today, the industry faces an unprecedented number of new and emerging challenges that are putting growing pressure on business strategies, risk models, and capacity. Even as global assets under management (AUM) hit new highs, downward pressure on fees and rising costs are forcing asset managers to rethink the traditional ways of doing things. At the same time, regulators, concerned about systemic risks, are taking a closer-than-ever look at asset managers’ operations. It all adds up to a time of unprecedented challenge – but also enormous opportunity.

New risks

KPMG’s 2019 Global Asset Management CEO Outlook, which surveys the leaders of the world’s largest asset management firms, reports that CEOs today regard climate change risk as the number-one threat to their companies’ growth.

Source: KPMG 2019 Global Asset Management CEO Outlook

Almost 70% of the CEOs surveyed agreed that their ability to anticipate and navigate the global shift to a low-carbon, clean technology economy would be decisive in determining their companies’ future growth trajectories.

Asset managers must not only grapple with the climate impact of their own business, but must also consider how climate change is affecting the risks inherent in the assets they invest in. This means enhancing their investment models, moving beyond financial metrics and governance concerns to fully integrate environmental and climate considerations. In particular, asset managers must understand the extent to which their portfolios are exposed to growing climate risks and seek ways to mitigate those risks before they arise.

Unfortunately, there is evidence that asset managers are squandering opportunities to take action on climate-related risks. A report from the Washington DC-based Majority Action and the Climate Majority Project found that global asset management firms have consistently voted against climate amendments at energy companies such as ExxonMobil. While these votes may make sense in the short-term, in the long-term, firms risk exposing themselves and their clients to potentially enormous climate-related liabilities.

Related Tutorial: Risk Management for Asset Managers

At the same time as climate change is reshaping investment risk, technology is transforming the asset management industry, creating new hazards even as it opens up new opportunities.

In 2019, cybersecurity risk emerged as a top-five concern for asset managers surveyed by KPMG. After a decade of high-profile data hacks, data losses, and cyberterrorist attacks, asset managers are increasingly recognizing that they must find ways to protect their most valuable asset, their data. This is especially true as many firms, seeking to create a seamless environment for employees and clients, are in the process of migrating their data to the cloud.

While cyber threats pose a risk, technology also offers opportunities. Emerging and disruptive technologies – including FinTech innovations such as automated asset allocation, robotic process automation, and distributed ledger technology – offer the potential for creating new products and targeting new markets.

Asset managers recognize that they must adapt to new technology and find ways to implement it to help their businesses grow. Nevertheless, identifying opportunities, finding tech talent, and ensuring that new processes and products are compliant with an ever-growing host of regulations are major challenges.

Looking ahead

To respond to these challenges, asset management firms must embrace change at both the operational and portfolio levels. They must adapt their investment models to account for the changing global environment and the potential costs of the transition to a low-carbon economy. They must also integrate technology more deeply into their operations and identify ways in which new systems can be deployed to offer innovative products in new and untapped markets.

Source: KPMG 2019 Global Asset Management CEO Outlook

CEOs recognize the challenges. Looking ahead, the firms that succeed will be those that capitalize on opportunities while taking a prudent and cautious approach to managing new risks.

Intuition Know-How has a number of tutorials that are relevant to asset management, risk, and technology:

• Asset Management – An Introduction
• Risk Management for Asset Managers – An Introduction
• Asset Management – Operational Risk
• Asset Management – Market Risk
• Asset Management – Credit Risk & Counterparty Credit Risk (CCR)
• Asset Management – Liquidity Risk
• Asset Management – Other Risks
• Data Analytics
• Robotic Process Automation (RPA)
• Artificial Intelligence (AI)

Tactics to Create a Culture of Learning & Development

Creating a culture of learning and development (L&D) has become a priority for many organizations recently. With numerous driving factors, learning development is an unavoidable element in today’s workplace. Employees want to learn, be challenged, increase productivity, be innovative and have a real impact on company performance.

This article will look at L&D from three different viewpoints:

1. 1. The different types of L&D cultures
   2. The benefits of a culture of L&D
   3. Tactics to use within your learning strategy to maximize engagement

Different types of L&D cultures

All organizations have a learning culture, however, in many cases, it is undefined.

The different types of culture can be divided into 4 broad categories:

1. A culture of compliance.
2. A culture of necessity.
3. A culture of learning.
4. A culture of continuous learning.

A culture of compliance

Organizations with this culture typically pay little attention to learning or its development. This type of culture is in place usually by force, often in the form of laws and regulations required to conduct business.

A culture of necessity

Organizations often require employees to complete specific, company-related training. This is typically training around a specific product or tool the company is rolling out or using in its operations.

A culture of learning

This level of learning is provided through targeted programs and initiatives. It goes beyond compliance and necessary learning and is focused on building relevant skills. This is often seen as an event-driven type of learning with employees being taken out of their jobs to attend a talk or conference.

For example, financial services employees taking a day off work to attend a FinTech conference.

A culture of continuous learning

This is the most advanced level of learning, with employees actively learning to build their skills and progress as professionals. This type of learning is valued by the company and encouraged by upper management.

A simple example is employees being encouraged to research different aspects of their job while at work. Be this using online resources such as Google and YouTube or through reading and other educational avenues.

Benefits of Learning

While the benefits of learning may seem self-intuitive, organizations often neglect their knowledge development strategy. In a professional environment, actions which do not have a direct impact on business KPIs can be shunned by upper management, depending on the type of culture.

The positive impact a system of learning can have justifies its implementation into any organization.

Some benefits include:

1. Out-perform competitors
2. Improved employee retention and engagement
3. Increased productivity

Out-perform competitors

A company’s strategy is often competition-centred. What are key competitors doing and how can their successful activities be replicated in your organization? And how can you ensure you don’t get left behind?

Allowing competitors to gain a competitive advantage can damage the market position of your company. Competitors could begin to out-perform, race further ahead and poach people from within your organization.

Improved employee retention and engagement

Traditionally, salary and security were motivating factors behind employee retention. Today, employees want the opportunity to learn and develop professionally. They are passionate about their work and want to excel.

Neglecting a learning strategy can frustrate employees and leave them feeling unwanted or under-valued.

This could lead to employees wanting to leave the organization in search of a position with a greater likelihood of professional development. For example, Middlesex University reported that from a 4,300 person survey, 74% of respondents felt they were not fulfilling their full potential due to a lack of development opportunities while research has also found 40% of employees who have not received adequate onboarding training will leave their job within the first year.

Increased Productivity

The link between productivity in the workplace and organizational performance is undeniable.

Some key stats related to learning and productivity. Employees are:

• 37% more productive than their peers at organizations that don’t value workplace learning.
• 58% more likely to have the skills in their talent pipeline to meet changing marketplace needs.
• 32% more likely to be the first to market an innovative solution.
• They are 34% more likely to respond faster to and satisfactorily address customer needs.

Tactics for creating a culture of L&D

There are a number of tactics which can help you instill a culture of learning. The below list identifies the successful tactics some companies use.

Stretch-roles

Giving employees stretch roles forces individuals to train consistently to keep up with the demands of their position. This means a person has responsibilities marginally beyond their capabilities. This forces them to up-skill through learning and in turn creates an engaged workforce with a culture of mentoring.

Required and optional training

One method to encourage internal learning is by offering required training along with optional classes employees can take to up-skill. The mindset within some large companies is employees are ‘all learning’ and advancing their knowledge should be an enjoyable process, so optional training should have high engagement rates if delivered in the correct way.

In-house inspiration

Regular in-house events where industry leaders speak to the company workforce on a specific topic can be both educational and inspiring. Focused on professional development, many companies bring in inspirational leaders to educate and motivate their workforce. This inspiration spawns a culture of development among employees which spurs professional progression.

Go beyond the minimum

Employing a combination of eLearning and face-to-face classroom sessions can help employees become their ‘best self’. Allied to this training, consider running a complementing vision and goals program to give employees direction in their career, going beyond the minimum requirement of simply providing eLearning to keep stakeholders happy.

Train and upskill, regardless of experience

In some companies, applicants with all levels of experience are accepted, not just those with experience specific to the role at hand. Offering internal training which allows new hires to train in on new skills and take up unfamiliar roles is an interesting tactic some companies implement.

Personalized programs

Administering each employee with a personalized professional development program is another tactic some organizations use to engage employees with internal learning programs.

Individuals map out what they want to achieve and receive the appropriate training to reach their goal. These goals tie in with company strategy, ensuring learning is aligned to organizational performance.

Provide a budget

Some organizations are so eager to see employees excel in their position, they administer a personal learning budget. Employees are given a professional development budget which they can use throughout the calendar year on the learning avenues they prefer, ensuring an engaging delivery method.

References

1. https://bit.ly/2BjfVmF
2. https://bit.ly/2Grr33Y
3. https://bit.ly/2RD6XG0
4. https://bit.ly/2G6Cw6e

Learning via Gamification: Latest Data, Stats & Trends

The effectiveness of gamification is well-represented in the field of education. Studies involving varied subject groups from young children to older professionals have often churned out positive results. One example is Theresa A. Papp’s paper ‘Gamification Effects on Motivation and Learning: Application to Primary and College Students’.

In the paper, Papp introduces gamification to two separate, and very different, groups of students. One group is attending university, while the other is a primary school class.

The results are interesting; the positive impact gamification had on the student’s motivation, ability to learn and in-class engagement is impressive.

The following is taken directly from Papp’s paper:

‘The consensus for both groups implied they found the gamified approach to be engaging, motivating and a preferred method to learn.’

Papp clearly demonstrated the value gamification can bring to a learning setting. This article looks to lay out the latest information relating to gamification’s impact on learning so you can apply it to your employee education program with confidence.

Gamification is more engaging

Engaging learners in a corporate environment is often the largest obstacle L&D managers need to overcome. Learners simply do not enjoy interacting with traditional forms of learning as much as they do gamification. An immersive experience which drags the user in on an emotional level, it is certainly an engaging form of learning as the below statistics show.

Firstly, eLearning Learning reported 80% of US workers find game-based learning a more engaging form of education, while the introduction of this method was also found to have a positive impact as reported by companies who found using games as part of their learning strategy to increase employee engagement by 60% and productivity by 50%.

89% of employees also reported they would be more productive if their work was gamified (be this learning or operational tasks). It seems gamification is a must-have for any employee education program. This increased level of engagement is even more desirable given European CEO’s research which found 50% of business transformation programs fail because of poor employee engagement.

Gamification increases motivation to learn

While engagement levels are measured intra-learning, motivation to engage in learning is another value which shows the effectiveness of an education program.

Gamification yet again proves to be a powerful method of increasing a learner’s motivation to engage in training. For example, Taylor & Francis reported 67% of students found gamified courses more motivating than traditional course-delivery methods.

Gamification performs strongly in relation to learner motivation, adding to its ability to maintain user’s engagement.

Gamification is enjoyable

Introducing methods of delivery learners want to and enjoy engaging with is one of the obstacles L&D managers are often tasked with overcoming.

One survey reported 78% of respondents found gamification would make a company more desirable to work for, aiding in the attraction of talent, while 85% of respondents in a 2018 survey said they would spend more time on an app or software because of gamification elements. While this figure is high, 2019’s report found an even higher number of respondents had the same answer with 89% of professionals stating they would spend more time on a piece of technology if it incorporated gamification.

The role gamification plays in terms of employee happiness should not be underestimated. It is clear learners find it more engaging and motivating, but they also seem to enjoy this method of delivery. Integrating elements of gameplay into learning appears to be a wise move for L&D managers.

Gamification is not just for young people

While some might think gamification is targeted solely at the younger cohort, this simply is not true. The positive impact of gamification can be experienced by a wide range of ages.

Enforcing this point is research conducted recently which found employees to be overwhelmingly positive about the role gamification can potentially play. 97% of employees above the age of 45 agree it would help improve their work while 87% of respondents found it makes them more productive at work and 85% would spend more time on gamified software than traditional technology.

Gamification is clearly a tactic which can be used across different age ranges.

Overall, the benefits gamification provides are valuable to those in charge of learning and development and likely in the areas deemed most valuable overall when it comes to an employee education program.

Video Learning: Latest Data, Stats and Trends

Video learning is no longer seen as a novel idea, it is now considered a common standard of content delivery in the world of corporate learning. Delivery via video has grown rapidly in recent years, and for good reason. It has proven to be an effective, cost-efficient and flexible training medium along with a host of other benefits.

This article presents evidence around video learning and what it can do for your employee education program.

Video learning is more memorable

The measure of a learning mode is often its effectiveness. Effectiveness can be measured in different ways, but when it comes to training, one key performance metric is the ‘stickiness’ of a type of learning i.e. how well it is remembered.

Some frightening statistics have come out of the SAVO Group in recent years in relation to employee memory; the organization found the average worker will have forgotten 65% of material they’ve covered within just 7 days of completion. After 6 months, the group found the average employee will forget 90% of the same content covered.

Data has shown video could bridge this memory gap.

Certain studies have found the use of video to have a positive impact on a learner’s ability to retain information. Presentations containing visuals and video have proven to be 9% easier to recall in comparison to text-only content when assessed right away. This figure jumps to a staggering 83% when tests are delayed. Further reports from Thermopylae back up this point. The technology company reports the human brain to process imagery 60,000 times faster than text and further cements video’s case  with the powerful stat that 90% of information transmitted to the brain is visual.

It is clear, visual content is a more effective or ‘stickier’ form of delivering learning.

Not only is it easier to remember, it is more cost-effective

Many organizations incur huge costs when it comes to employee education, especially those with multiple locations and/or large offices. One might assume implementing some sort of video learning program would add to these costs. However, Microsoft found otherwise.

Microsoft launched an internal video portal designed to deliver training to their employees with the aim of reducing classroom training-related costs. The initiative was a successful one, reducing their per-person cost of eLearning from $320/hour to just $17/hour. A saving of almost 95%.

And it is perfect for microlearning

Microlearning is an emerging medium in the world of corporate training. Defined as bite-sized content which learners typically find more engaging, less time-consuming and cheaper to produce, micro-learning in its simplest form consists of ‘small learning units’.

When it comes to video, micro-learning is a perfect match. Pairing the already naturally engaging form that is video learning with micro-learning packs a powerful punch. In today’s time-strapped working world, Deloitte reported on the time constraints of employees when it comes to important developmental activities such as learning. The report found workers only had an average of 1% of their working time to spend on learning in a typical week. This equates to only 24 minutes of an employee’s time on the clock.

Given the modern worker’s hectic schedule, being able to fit in smaller chunks of learning when able is the perfect solution to a busy work week. Delivering these small learning modules through video allows learners to complete their training on the go and at their own pace. In relation to learning length, when delivered with video and as part of a microlearning strategy, the run length should be no longer than 3 minutes according to elearningindustry.com in their 2019 Video Based Learning Strategy report.

Video drives uniformity

Larger organizations often face issues with disjointed thinking/practices. Having multiple locations, thousands of employees but lacking the appropriate communication structures to convey key messages can result in disjointed organizational thinking.

Being such an easily shared and consumed content type, video provides the perfect opportunity to learning and development managers to distribute content and create a uniformed stream of thought around specific topics.

The ability to create a key message in an engaging format which is distributable world-wide (at low cost) has obvious value. It reduces the amount of noise in the company and maintains consistency behind core company messages.

In conclusion, video and learning appear to be a perfect match. Video provides a host of benefits such as improved information retention, reduced learning costs and increased time-efficiency and is certainly one which should be considered by the modern L&D manager.

Green Bonds Are Growing Fast – But There Are Challenges

Since the launch of the first “green bond” in 2008, the climate-aligned bond market has grown to an estimated $1.45 trillion and the annual issuance of labeled green bonds exceeded $167 billion in 2018. Yet this rapid growth has come with rising risks. Increasingly, some large investors are warning about potential dangers in the green bond market. In particular, they have raised concerns about the so-called “greenium” – a premium that buyers or issuers may pay for costlier green bonds – and the relative shallowness of the green bond market.

In 2008, the World Bank issued the first labeled “green bond” – an earlier, 2007 structured bond targeting climate change initiatives, issued by the European Investment Bank (EIB), was known as a “climate awareness bond.”

Since then, the climate-aligned bond market, which includes not only instruments labeled as green bonds but also bonds from issuers that derive the bulk of their revenues from green business lines, has grown substantially. According to the Climate Bonds Initiative (CBI), in 2018, the annual issuance of green bonds alone hit $167.6 billion, up from less than $20 billion five years earlier.

Related tutorial: Bond Markets – An Introduction

Source: Climate Bonds Initiative.

Today, the CBI reports that the total amount of outstanding climate-aligned bonds exceeds $1.45 trillion, including bonds from issuers that derive over 95% of their revenues from green business lines (fully-aligned issues) and issuers that derive 75%-95% of their revenues from green business lines (strongly-aligned issuers).

As issuance has risen, green bond issuers have become more diverse. Once, only supra-sovereigns such as the World Bank or the EIB issued green bonds, but today, a growing proportion of green bonds are issued by individual cities, national governments, and even corporations, such as Apple.

The explosive growth in green bonds has been driven, in large part, by the growth of socially responsible investing (SRI). SRI is an investment approach in which investors consider factors beyond financial performance. Specifically, SRI investors consider environmental, social, and governance (ESG) factors alongside financial metrics, seeking to invest in companies that not only perform well but also have a positive impact on the world.

Related tutorial: ESG & SRI Investing

Source: Climate Bonds Initiative.

Clouds ahead?

As the green bond market has grown, however, some investors have raised questions about its long-term sustainability. The chief investment officer of Japan’s Government Pension Investment Fund (GPIF) – the world’s largest pension fund – has described green bonds as a “passing fad.” According to the GPIF’s Hiro Mizuno, green bonds are unlikely to become mainstream investment products because of the costly and complex issuance process involved.

Conceptually, green bonds should have the same credit rating and coupons as their issuer’s other fixed income instruments, as they are backed by the same balance sheet. However, their issuance requires a significant amount of additional disclosure compared to traditional bonds.

This is because green bonds must demonstrate their “green” credentials – particularly if they want to be certified as “green bonds” under various protocols, such as the International Capital Market Association’s (IMCA) widely referenced Green Bond Principles. The process of demonstrating their environmental impact, which may involve periodic audits of their activities, imposes an additional cost on green bonds.

Green bonds are therefore more expensive to issue than traditional bonds. This, coupled with the fact that green bond issues are typically heavily oversubscribed by investors searching for sustainable investment options, has led some to anticipate the existence of a “greenium” – a premium on an issuer’s green bonds compared to their traditional ones.

However, as Bloomberg reports, there is little evidence of a consistent greenium in bond markets. Instead, green bonds typically trade on the same terms as an issuer’s traditional bonds. Thus, Mizuno questions the sustainability of green bonds, which cost more to issue but neither attract nor offer a premium.

A second concern, and one raised by several large institutional investors, is that there are relatively few green bonds issued each year. While issuance has grown rapidly, it still accounts for less than 1% of total global bond issuance. This means that the pool of green bonds is shallow, which has potentially negative implications for liquidity.

The green bond market is likely to continue to grow over the next decade. It promises to be an important source of capital for much-needed climate initiatives and a source of investment opportunities for SRI investors and funds. However, its growth creates potential challenges for both investors and bond issuers.

Intuition Know-How has a number of tutorials that are relevant to green investing and bond markets:

ESG & SRI Investing

Bond Markets – An Introduction

Bond Markets – Issuing & Trading

Fixed Income Analysis – An Introduction

Bond Prices & Yields – Excel Interactive

Fixed Income Analysis – Credit Risk

Have Private Equity Valuations Reached Bubble Levels?

Venture capital and private equity have boomed in the last ten years. McKinsey estimates that private market assets under management hit $5.8 trillion in 2019 and that private funds are sitting on dry powder of over $2 trillion. Fueled by cheap debt and investors hungry for yield, the size of private deals has been steadily rising, as have their multiples. In the face of this, some market observers are sounding the alarm on private valuations, especially in the wake of high-profile disasters such as the failed WeWork IPO and the collapse of a number of debt-laden, private equity-backed retail chains.

Private equity boom

The last decade has seen a dramatic boom in private capital markets. Between 2013 and 2018, private equity (PE) fundraising grew by a compound annual growth rate of almost 8% and PE assets under management (AUM) exceeded $3.4 trillion at the end of 2018.

Related Tutorial: Private Equity – An Introduction

Much of this growth in fundraising was fueled by investors’ search for returns in a low-yield world. Since the financial crisis, ultra-low interest rates have made fixed income assets unattractive and growth in public equity markets has been lower than that available in private markets. Against that backdrop, institutions – particularly pension funds struggling with sizeable asset/liability gaps – dramatically increased their private equity allocations.

Source: McKinsey. The chart shows the percentage of private AUM according to asset class and indicates the total AUM per asset class in US dollars.

Debt also played a role in the explosion of private market AUM. Low interest rates meant abundant cheap debt, and private investors – such as buyout PE funds – capitalized on this. The easy availability of cheap debt meant that firms could supercharge the size of their deals. Adding to that, many private funds currently hold a significant amount of unallocated capital or dry powder – as much as $2.1 trillion at the end of 2018, according to McKinsey.

However, this combination of strong fundraising, abundant capital, cheap debt, and a powerful appetite for deals has led to a steady rise in private asset prices. This is because, as appetite for private deals grew, the number of attractive investment opportunities remained relatively constant. As a result, PE deal multiples have risen steadily and, by the end of 2018, were close to their 2007 pre-crisis levels – although debt levels remain below their 2007 highs.

Source: McKinsey. This chart shows the ratio of debt, equity, and total valuation to earnings before interest, tax, depreciation, and amortization (EBITDA). Discrepancies in totals due to rounding and deal structure.

Rising deal prices have led to concerns about valuation levels in private markets, particularly in the highly leveraged buyout space and the fast-growing venture capital sector. Indeed, academic research indicates that, over the last five years, PE returns have converged with public market returns, due in large part to rising valuations.

Related Tutorial: Equity Valuation – An Introduction

Interestingly, as Bain pointed out in its recent private markets report, the traditional gap between higher public market multiples and lower private market multiples has narrowed considerably in the last five years – and in some cases, reversed entirely – suggesting that investors are willing to overlook the opacity and illiquidity of private markets in exchange for the potential for high returns. All of this has implications for the future of both public and private markets.

Goodbye IPOs?

PE exit volumes have been essentially flat since 2015, although much of this slowdown can be attributed to mean reversion after funds unwound their long-held, pre-crisis deals. Another factor may, however, be the slump in IPO exits.

There is mounting evidence that IPO exit strategies are losing favor. IPO activity in the US has declined since the 1990s, and various high-profile IPOs have struggled in recent years due to the mismatch between private and public valuations.

In 2016, for example, a private capital-raising round valued ride-hailing firm Uber at just over $68 billion. The company’s IPO in May this year priced above that level, but since then, its public market valuation has fallen to less than $50 billion.

This performance knocked public market confidence in sky-high private valuations, as illustrated by the failed WeWork IPO. Private money valued WeWork at around $47 billion, but the company was unable to place its shares, even at a valuation of less than $20 billion, and the IPO was withdrawn.

Negative market sentiment, sizeable valuation gaps, and reduced public investor appetite for private market unicorns may mean that, in the future, IPO exits become less common, with PE firms instead selling to large corporations or other PE funds.

For public markets, this may mean less access to high-value, high-growth companies. However, for private markets, the narrowing of exit strategy options may create some risk of capital losses or falling prices. Any change in risk sentiment or interest rates could send PE valuations falling and dampen returns for years to come. There is also a risk of regulatory attention, particularly if the rotation into private equity harms retail investors.

Intuition Know-How has a number of tutorials that are relevant to private equity and company valuations:

Private Equity – An Introduction

Private Equity – Investing

Equity Valuation – An Introduction

Industry & Company Analysis

Equity Returns Analysis

Equity Valuation – DCF Models

Equity Valuation – Other Methods

Equity Markets – Issuing

Create a Learning Culture: Qualities of The People Who Drive Change

The role of knowledge development is ever-present in the workplace.

Oftentimes, there is a particular group in charge of driving/guiding these initiatives, from implementing knowledge management solutions, communicating the initiative internally and measuring its success.

All of the preceding elements will be deemed failures if a culture of learning isn’t created.

In order to create a learning culture, a number of characteristics are required of those driving the initiative. If you are setting up the team to guide this change, or are a team member, examine the 4 qualities below and assess your ability to either pick suitable resources to guide the change that is required or develop them yourself.

1. Position power
2. Expertise
3. Credibility
4. Leadership

1 Position power

Position power refers to a person’s pull on key decisions within the business.

Are the people driving this change key players in important aspects of the organization? Change can only be created when decisions are made around important topics, and those who are too junior in the company won’t have the power to make an impact.

For example, if you are an intern looking to create a culture of learning in your organization, you will likely need to secure a full-time position and get some time at the company in an official role before your suggestions for change will even be heard, let alone acted upon. You’ll also need to prove your worth and have a proven track record of providing value to the company (this lends itself to the other qualities listed in this article).

Key takeaway:

Building up time at a company and getting involved in key projects lends to position power over time.

2 Expertise

Expertise refers to a person’s experience around a specific area, crucially, this will be related to the change initiative. It also refers to the dynamics of the group.

This quality is different in that a number of different viewpoints are needed, so a certain level of diversity is required. One person’s point of view around the change initiative is insufficient. There needs to be a few different voices.

For example, when creating a team whose goal is to create a learning culture, consider different aspects such as their demographics, departments of work and past experience in different roles, preferably in different companies.

Key takeaway:

Recruiting those with varied (but relevant) backgrounds lends itself to the effectiveness of the change initiative.

3 Credibility

Credibility refers to the reputations of the people who are driving the initiative.

People with a proven track record of success will likely repeat this pattern, making them ideal candidates to drive the project. Likewise, those who have been effective in the past will be listened to, given their credibility gained from previous success. Those who have failed will be ignored.

An example would be an employee who has attempted to implement a number of initiatives in the past, but who usually failed. Their opinion around the change initiative will fall on deaf ears due to their past downfalls.

Key takeaway:

Those who have shown success in the past have credible opinions. Their reputations go before them and are capable of inspiring others to act.

4 Leadership

The final quality is deemed the most important of the four.

Leadership refers to the leading characteristic required to instill action. Often deemed an inherent quality, or at best, difficult to develop/recreate.

Leading, at its most basic level, is centered around action. Those who are proactive around the initiative will be best suited to drive change. Those who can inspire others into action will be of even more value to the initiative.

Take a senior-level employee who takes it upon themselves to spearhead research around a knowledge management solution. They assess the different options, speak to the various company representatives and write a detailed report on their findings. This is leadership through action. The communications this executive initiates at the next step will aim to inspire. Be this through educational email summarising the report, in-house meetings outlining his/her findings or casual conversation.

Key takeaway:

Leaders through both action and inspiration will be most effective at driving change.

Characteristics to avoid

There are two predominant characteristics which are not suitable for driving change.

They are:

• Inability to work in a team
• Lack of trust

Inability to work in a team

Those who are incapable of putting their own priorities aside will fail in a position requiring change. Never deviating from a personal opinion, or refusing to acknowledge the opinions of others is deemed a barrier to collaboration. These types of people aren’t good in teams but can excel in other areas.

A potential reasoning behind this is described by Dr. Tomas Chmorro-Premuzic in his article A Psychologist Finally Explains Why You Hate Teamwork So Much.

Premuzic cites a competitive instinct and driving ambition to excel as a blocker to effective teamwork. Some individuals can sometimes find it hard to align with others and work collaboratively. An obsession with success/targets/power is the predominant issue here.

Lack of trust

Heavily linked to a driving need for success, a lack of trust can be an inhibitor to change. Those incapable of trusting others with tasks or information will work poorly as part of a team looking to drive an initiative.

Petersen and Corderey examined the role of trust in the workplace and its impact on teamwork in their research entitled Trust, individualism and job characteristics as predictors of employee preference for teamwork.

The study found the two situational forms of trust (trust in co-workers and trust in management) were strong predictors of an employee’s preference for teamwork. As a result, this could be seen as a precursor to effectiveness in teamwork.

Mobile Learning: Latest Data, Stats and Trends

The rise of mobile learning has left many L&D managers asking questions about their current content delivery methods. Is mobile the way forward for eLearning? Or is it just a fad?

This article presents evidence around mobile learning and what it can do for your employee education program.

Smartphone users love learning

L&D managers often have difficulty implementing employee education programs due to a lack of buy-in from users. Implementing mobile into the learning blend may be a solution to help solve this long-standing issue.

Learners love their smartphone, but they also love learning. Towards Maturity reported 89% of smartphone users to be regular app downloaders, and of these apps, roughly 50% are used for learning. The research on when mobile learners engage with their learning content is even more impressive. Learner Events discovered 46% of learners use mobile learning before they go to sleep at night.

And businesses love mobile devices

Unsurprisingly, businesses are capitalizing on the popularity of mobile devices. Mobile device’s combined market value was expected to grow to over 53 billion last year according to Statistica.

Not only are smartphones a major contributor to the global economy, but their prominence in day-to-day life is leading to BYOD (Bring Your Own Device) policies being implemented. Gartner predicts by 2020 45% of companies will have some sort of BYOD policy in place.

Mobile is a great learning tool for young and old

The flexibility of smartphones and other mobile devices has resulted in a piece of technology which has several purposes. One of which is learning.

There’s quite a large body of research to suggest mobile is an effective medium for learning, particularly with the younger cohort. Gallup reported millennials find it easier to engage with learning delivered via mobile rather than traditional methods such as desktop.

While millennials find it a more engaging medium, it appears the effectiveness of mobile-learning extends beyond the younger generation. LearnDash found 70% of learners felt more motivated when on a mobile device as opposed to a desktop.

It is hard to deny the value of mobile as a learning tool and this looks set to rise as more tech-savvy workers enter the workplace.

Mobile learning is growing rapidly

When the iPhone was launched in 2007, it was the beginning of the meteoric rise of the smartphone. It quickly became a must-have device for people of all ages all across the world.

Organizations have also been quick to the uptake of mobile in their operations. While it is common for an employee to receive a company phone, few might think one of this device’s uses would be mobile learning.

Towards Maturity reported 47% of organizations currently use mobile devices in their training programs and roughly 50% of all organizations understand the importance of providing mobile-friendly content to their employees.

So much so, it is becoming a key part of organizational strategy

As mobile learning becomes more popular and smartphone users appear to be an ever-growing group, organizations are moving with the times.

In 2016, Brandon Hall group reported mobile learning to be among the top 3 business development priorities for organizations, only falling behind seamless business alignment and improved data mining.

Supporting this finding is ARD’s company survey in 2015 which found 34% of respondents to have aggressively implemented a mobile learning program. This figure was just 15% in 2010.

Mobile is great in certain situations

While it is important to understand why mobile devices are useful tools for employee education programs, it is equally important to understand what contexts they should be used in.

Mobile devices are best used in certain situations. For example, elucidat.com reported mobile works well with microlearning content (short 2 to 3 minute modules), video content and simple interactions such as polls and short quizzes.

Overall, mobile learning is hugely beneficial

It seems quite clear that the introduction of mobile technology is having a positive impact on the learning community. This particular method of content delivery is showing to have a host of benefits for learners.

For example, Sciedu reported 70% of mobile learners are more motivated to learn when using mobile devices, while an Asia-Pacific Skillsoft survey discovered 72% of participants reported increased engagement when learning via a mobile device. 

Mobile learning can be a time-saver, too. Merrill Lynch GoLearn reported mobile learners are, on average, 45% faster at completing online courses than desktop learners

These benefits extend far beyond the individual user, seeping down into organizational performance, with the findings of a 2015 Asia-Pacific Skillsoft survey indicating that mobile learning drives business improvement: 76% of the decision-makers reported business growth while 55% reported improved business outcomes after embracing mobile learning.

Overall, the use of mobile learning should not be overlooked by those in charge of implementing employee education programs in organizational settings. It is clear this method of delivery is effective at an individual and organizational level, as illustrated by the above research.

How to Create Buy-In Around Employee Education

Intuitively, one would assume a culture of collaboration within an organization lends itself to overall performance. One of these performance goals is closing the skills gap through internal learning initiatives. Key to this initiative is collaboration (or buy-in) from the relevant parties.

From a scientific standpoint, there is evidence to support collaboration and performance are related.

In March 2016, The Economist conducted a report surveying 249 business leaders to determine why and how companies collaborate internally. About 50% of respondents were C-suite executives and the rest held a variety of high-level management positions. The survey spanned over North America, Europe and Asia-Pacific. Over 50% of the respondent’s organizations have annual revenues exceeding $500m.

There were 6 main findings from the report:

1. Effective collaboration correlates with better business results
2. In top-performing companies, collaboration is more effective at every level
3. Top-performing companies use collaboration to fix organizational issues
4. In top-performing companies, employees have a strong belief in, and commitment to, collaboration and results
5. There can be disadvantages to collaboration
6. Large companies find collaboration more challenging

A finding from the report relevant to this article was the highest-performing companies are best at getting buy-in from employees. While lower-performing companies tend to have less buy-in.

This information highlights the importance of a common goal, one which the organization believes in and can work toward as a team. When these goals are clear and have obvious value, they are easy to communicate and implement.

Goals such as bridging skills gaps are less definable, and resources can often give little time to their professional learning. This is a result of a lack of buy-in toward learning and development.

This article examines the Dial-In strategy as a method of creating buy-in within an organization. This article applies the strategy to the goal of bridging skills gaps.

The ‘Dial-In’ Strategy

Kristi Hedges is a leadership coach, speaker and author of The Power of Presence: Unlock Your Potential to Influence and Engage Others. Kristi dubs her 4-step strategy the Dial-In.

Its steps are as follows:

1. Formulate a coherent vision or idea
2. Expose the idea to outside criticism
3. Leverage feedback
4. Communicate progress

She’s taken inspiration from several industry leaders, notably John Kotter, a pioneer of change management whose writings have received worldwide recognition.

Step 1: Formulate a Coherent Vision or Idea

The first step is to create a vision/idea. A word of warning, she advises this be kept in draft form initially and be developed over time. Multiple iterations may be required.

In this step, lay out the problem as clearly as possible. This way, when communicating it to the relevant parties, they’ll be easier influenced. Back it up with relevant examples (providing evidence makes the point compelling).

In 1992, Burt Nanus defined the term ‘vision’ in his book Visionary Leadership. In it, he highlighted 8 elements to an effective vision statement.

A vision statement:

1. Is future-oriented
2. Is likely to lead to a better future for the organization
3. Reflects the organization’s values
4. Sets standards of excellence
5. Clarifies the organization’s purpose and direction
6. Inspires enthusiasm and commitment
7. Reflects the uniqueness of the organization
8. Is ambitious

In a learning context, the first draft of a vision or idea could be guided by these 8 elements initially and refined by subsequent feedback.

Below is some evidence to support organizational learning/bridging the skills gap:

1. Implementation of informational technology has a significant impact on learning
2. The coupling of continuous learning and information technology has a positive impact on organizational performance
3. The process of learning in business lends itself toward innovation
4. Organizational learning culture has a positive impact on business performance
5. Organizations with the highest levels in knowledge stock and learning flows obtain superior performance

Hedges suggests concerns be expressed related to the vision along with evidence to promote the idea. Rather than just focus on the positives of learning and development, identify the challenges and manage expectations of those about to engage in the learning and development initiative.

2 Expose the idea to outside criticism

Conflict is an engaging form of communication. If those who are involved in the initiative are not engaged, success will be difficult to achieve.

Hedges quotes Kotter in her piece when he says:

“If people have no opinions, no objections and no emotions, it usually means they don’t care. And you’ll be hard-pressed getting their help when you have to actually implement your idea. But conflict shakes people up and gets them to pay attention in a novel way. This gives you the opportunity to say why your idea really is valuable and explain it in a way that wins over hearts and minds – securing their commitment to implementing the solution.”

Productive advocacy is employed at this stage to progress the initiative. This involves taking a general interest in other’s opinions and not allowing confirmation bias to seep in. This can be done by encouraging honest communication. Hedges suggests asking questions such as “what am I missing?” and “how can this idea be stronger?”

In a learning context, this step involves gathering opinions around the knowledge implementation plan created in order to bridge the organization’s skills gap. Communicate the plan to those who will be involved and gather honest feedback which will guide iterations of the initiative. Expose employees to the Learning Management System which will hopefully be implemented. Ask for feedback on proposed learning topics and determine which mode of delivery employees find most engaging (artificial intelligence/mobile/gamification).

Productive inquiry is an offshoot of productive advocacy. It involves skilful engagement which allows the problem to be examined fully. If the opinions portrayed are not fully understood, effective iterations will be difficult to create.

Hedges explains this as acknowledging other’s criticisms. If these opinions are difficult to understand, Hedges suggests using engaging language and asking questions such as “would you walk me through your thinking?” and using clarifying statements such as “let’s make sure I’m understanding you correctly.”

Engagement is key in this step.

3 Leverage Feedback

A natural follow on from step 2 is to use the feedback gathered. Create an action plan based on the information acquired and use it to improve the initial idea.

Feedback has proven a useful tool when implemented correctly in the workplace. A systematic review of multiple studies found a positive effect on business performance after appropriate workplace-based feedback.

A 4-step process can be applied to ensure effective utilization of feedback.

• Step 1: Develop a plan to improve
• Step 2: Seek external advice
• Step 3: Explore the new changes
• Step 4: Reflect on the outcomes

Applying this process will allow you to maximize the ROI in this step.

4 Communicate Progress

Continuous updates to those involved along with regular feedback are important in step 4. Keep relevant parties informed on the initiative and its current status. Continuous feedback can still be gathered and acted upon during this step, improving the project further.

Hedges describes how an idea can sometimes be met with resistance. She suggests combatting any difficulties with open-ended communications to promote strong understanding on both sides.

Asking questions such as “what can I do to help overcome your concerns?” and “is there anything I can do to make you more comfortable with the solution?” can be useful in this step.

Applying these 4 steps toward the goal of bridging the skills gap in an organization can prove useful. Buy-in around learning and development is challenging. Using these tactics can convey the benefits and help optimize the system prior to implementation and ensure a smooth transition to the agreed solution.

If you’d like to create a specific strategy to implement an employee education program where you work, download our workbook: Implement an Employee Education Program. 

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Energy Revolution: Fracking Is Out, Renewables Are In

The coal and oil and gas (OG) industries are experiencing a period of upheaval. Demand for cleaner, low-carbon electricity is driving a switch away from coal and oil to natural gas and renewable energy. At the same time, the fast-growing shale industry – which uses horizontal drilling and hydraulic fracturing (fracking) to access crude oil deposits in dense rock formations – is facing major headwinds. Further, a long-term supply glut has led to a fall in investment, which now threatens to ignite a supply crunch. As global energy demand rises and the global energy mix evolves, the coal and OG industries must adapt or face the risk that their assets may be stranded as fossil fuels are phased out.

For many years, the electricity that powers our lives, from our phones to our homes to our factories, was primarily produced by burning coal and oil. As demand for energy grew, extractive industries like coal and OG flourished. Today, however, these industries are facing a host of challenges.

Shifting energy mix

In recent decades, growing concern about the impact of carbon emissions on the climate has led to a shift in the energy mix. Natural gas, which emits as much as 60% less carbon than coal when burned, has become an increasingly popular option for electricity generation, particularly in North America, where it has quickly replaced coal as the fuel of choice. This switch has hit the coal industry hard and put pressure on OG firms to produce more natural gas.

At the same time, renewable energy sources, such as wind, solar, and hydropower, have grown in importance – some estimates put the compound annual growth rate for the renewables industry at over 6% in the coming years. Today, according to the 2019 REN21 Renewables Global Status Report, renewables account for over a quarter of global electricity production.

Source: REN21 Renewables Global Status Report 2019

While hydropower, most commonly generated by dams and waterfalls, remains a major source of renewable energy, in some countries, solar and wind power are fast becoming the most important sources of electricity, ahead of hydro, coal, gas, and oil. Enhanced storage technology in the form of more-sophisticated batteries has enhanced the usefulness of renewable sources.

Source: REN21 Renewables Global Status Report 2019

As renewables continue to grow and climate concerns become more prominent in markets like China, coal and OG firms will come under growing pressure to adapt to the changing energy mix.

Fracking failures and supply worries

At the same time as they face a potential long-term decline in demand for their products, especially in Europe and North America, coal and OG companies are simultaneously struggling with potential medium-term supply issues.

Rapid economic growth in emerging markets has led to soaring energy demand. Thus, even as renewables have gained market share at the expense of fossil fuels, the total market has grown fast enough to increase overall demand for oil, gas, and coal – this is especially true in China, where many of the plants built in the 1990s are coal-burning. Some industry watchers have recently raised alarms about the availability of supply to meet this expanded demand.

In the wake of the financial crisis, investment in the coal and OG industries fell and new discoveries declined. In many areas, investment has not recovered to pre-crisis levels, suggesting supply growth will be limited.

Even one of the industry’s investment bright spots, fracking, is facing challenges Shale or fracking firms, particularly those active in the Permian basin in the US, have for many years been a key driver of supply growth in the OG industry. Shale firms produce both crude oil and natural gas, and over the last fifteen years, the enormous growth in fracking has made the US the world’s number one oil producer, ahead of traditional powerhouse Saudi Arabia.

In 2019, however, cracks began to show in the fracking revolution.

While fracking firms have been highly effective at growing production, they have struggled to deliver reliable profitability and positive cash flows, especially as growing supply has kept oil prices around $50 a barrel. Thus, many firms have been heavily reliant on cheap debt financing to keep their operations afloat.

At the same time, the industry’s strategy of drilling wells ever-closer together to boost production has backfired. So-called child wells – secondary wells drilled near initial, parent wells – have consistently produced up to 30% less oil and gas than anticipated. Experts believe the problem is related to the reduction in internal pressure in oil pockets created by the presence of multiple wells.

This combination of lackluster profitability, low oil prices, and production risks has soured investor sentiment. Many US shale firms are virtually locked out of capital markets and bankruptcies in the industry have risen. This has the potential to threaten US oil supply in the medium-term.

Adapt or die

Coal and OG firms face multiple strategic challenges. Over the long-term, the world is shifting from fossil fuels to renewables, a shift that may gain momentum if China implements a more-aggressive environmental policy. At the same time, medium-term demand means that significant investment is needed to maintain supply.

This raises the specter of stranded assets – assets that suffer premature or unexpected devaluations or conversions to liabilities. It is conceivable that a major oil project initiated today could, in 15 years, find itself reclassified as a liability as renewables gain traction and fossil fuels lose favor. The OG firm that owns the asset may find that it no longer produces fuel but instead requires further investment to decommission or clean it. This has serious implications for balance sheets.

Intuition Know-How has a number of tutorials that are relevant to the oil and gas and energy sectors. Click on any of the links below to view the tutorial intro video.

• Commodities – An Introduction
• Commodities – Trading
• Commodities – Oil
• Commodities – Natural Gas
• Commodities – Coal
• Commodities – Electricity
• Commodities – Emissions

Commercial Real Estate Boom Turns Bust As Pressure Piles On

After collapsing during the financial crisis, commercial real estate (CRE) has enjoyed a decade-long boom. Fueled by historically low interest rates, the sustained CRE bull market has seen prices hitting all-time highs from Asia to the Americas and beyond. However, clouds are gathering on the horizon as overbuilding concerns are rising in Asia while economic slowdowns threaten Europe and North American CRE markets.

Around the world, city skylines are dotted with dozens of cranes, a tangible symbol of the world’s enormous investment in commercial real estate.

Encouraged by a decade of ultra-low interest rates, CRE developers have built hundreds of skyscrapers, tens of thousands of luxury apartment units, and millions of square feet of office space in the world’s major cities. However, various unfavorable developments now jeopardize the CRE boom.

Retail apocalypse

Across the US, the UK, and many other countries, retail chains have been closing at an accelerated pace. High profile bankruptcies have shuttered anchor stores in malls across North America and elsewhere as changing consumer tastes and the rise of online shopping have slashed sales in traditional stores.

Source: Coresight Research.

The impact of the retail crunch has been uneven. The UK has been particularly hard hit – an estimated 29,000 retail units have been vacant for more than twelve months – while some parts of Europe remain relatively unaffected. However, at the industry level, retail bankruptcies and store closures threaten rental income for CRE managers and have dented confidence in the retail real estate subsector.

Luxury apartment bust

Over the last ten years, the liberalization of global capital flows and rising wealth in emerging markets has led to the creation of a luxury apartment bubble in many global cities. Wealthy investors in China, India, and elsewhere were invited to purchase units in luxury buildings in cities such as London, Vancouver, Sydney, and New York. Developers promised quick, double-digit returns and housing prices in these cities soared as foreign capital flowed in.

However, local housing markets proved, in many cases, unable to sustain those high prices and thousands of luxury units today sit empty. StreetEasy estimates that over 25% of the units built since 2013 remain unsold, including up to 40% of the ultra-luxury units on Billionaires’ Row.

As a result, many investors have been forced to sell at a loss, and governments came under pressure to stem housing price rises through punitive taxation and other measures. Today, thousands of luxury apartments sit empty in global cities while homelessness has risen.

Asian slump

Massive construction in Asia, particularly in China, has been fueled by both rapid economic growth and historically low rates. However, as growth in Asia slows in the face of trade disruption, heavily-indebted CRE developers are struggling to fill their malls, offices, and apartment blocks and generate the rents they need to service their debts.

Together, these developments are putting pressure on CRE developers and investment funds. Capital inflows into the sector remain relatively robust, but a growing number of high-profile projects have been put on hold or have struggled to sell or find renters.

With interest rates set to remain low – the European Central Bank and US Federal Reserve are both loosening monetary policy in anticipation of an economic slowdown – the risk of a credit crunch in the sector looks limited. Nevertheless, many believe that the prospects for attractive returns in CRE are crumbling.

Intuition Know-How has a number of tutorials that are relevant to real estate. Click on any of the links below to view the tutorial intro video.

• Real Estate – An Introduction
• Real Estate – Investing
• Real Estate – Valuation
• Asset Classes – Primer
• Asset Classes & Investing
• Asset Classes – Types

Upgrade your Learning Ability Series:

Supercharge your Learning Programs Now

Two tips that will supercharge your learning programs. And won’t cost you a cent.

In this series of Upgrade your Learning Ability we’re offering you evidence based tips to help you upgrade your own ability to learn better, so that you can learn faster and smarter, alongside some clever tips and tricks for supercharging learning programs for your participants.

Our two simple yet powerful tips today will help you upgrade the impact of your learning programs and come at no extra cost to provide. They arise from the science of the brain and learning and will maximize the impact of your training programs no matter your content area or delivery mode.

Related article: Upgrade Your Learning Ability: 3 Tips to Supercharge your Personal Ability to Learn

Tip 1: Engineer Exercise into your Learning Programs

Aerobic exercise is vital for your brain. Many brain experts tell us this, from John Medina who says exercise boosts brain power[1], to Dr. John J. Ratey, author of Spark: The Revolutionary New Science of Exercise and the Brain [2], a book in which the Harvard Medical School Clinical Professor of Psychiatry explains that regular exercise and movement can improve brain power and make you more productive. Not only can exercise impact on positive feelings of wellbeing, cognitive function like attention and memory and reduce stress levels but it can literally make you learn better. Exercise makes your brain cells bigger and better, building the brain. It is the polar opposite to a sedentary screen based existence where little exercise can ultimately shrink the brain. [3]

Bring movement back into learning

In spite of this last attention-focusing fact, and in spite of the activity trackers that many of us sport today, pushing us into greater daily movement, many of our learning environments remain sedentary.  Consider conference theatres, webinar sessions, learning at our desks and general classroom design. We’ve engineered physical activity out of both our everyday lives and our learning. Reintroduce it and benefits will follow.

When we stand rather than sit, we liberate neurotransmitters like norepinephrine (noradrenaline) and dopamine, and when we exercise, our levels of serotonin increase.  Simply put, these neuro chemicals turn on our attention system, our memory system, and our motivation system and literally help us focus, learn and retain better.

Why not consider incorporating some exercise into your learning program? At a minimum, aim to decrease overall sedentariness:

• Suggest a standing up or light movement period during a lecture or class room based workshop; set signals that will allow you end the exercise break quickly in order to continue learning. (Remember you can recommend a light movement period even within online learning.)
• The workplace has promoted a non-sedentary approach for almost a decade now and standing desks in an office space promote not just health and well-being but better productivity and learning. Consider a standing approach either in your workplace or in your learning centres. Remember however that according to some experts standing in one place for hours, say at a desk, is only marginally better than sitting at a desk for a similar period.[4] Think about actual movement, and engineer it into work activities during the day and particularly into learning moments.  A coaching session might for example, take place during a brief walk.
• Include at least one short exercise moment into each day of a training program, if you can’t manage it during the actual teaching time, require everyone to take a short walk/physical movement break at recess or lunchtime.

Tip 2: Promote Sleep as a Learning Tool

While it used to be cool to brag about how little sleep you can survive on, increasingly, science is proving the value of sleep, and, in some cases, the far-reaching negative effects of sleep deprivation. When it comes to learning and sleep, we’ve also now got science putting weight behind the sleep message.  As an area of increasing interest to medics and scientists, research is revealing why sleep might be a vital ingredient for better learning.

A whistle stop tour of recent sleep science findings include:

• Your brain washes itself while it sleeps! In a study of mice, it was shown that cerebrospinal fluid in the brain increases dramatically during sleep to wash away harmful waste proteins built up between brain cells during the day.[5]
• Shut eye is important for every part of our health including our ability to learn. Sleep before and after learning may be vital (preparing your brain for learning and helping you lay down memories for retrieval after learning).

By using these two simple no-cost hacks – engineering some exercise into your learning interventions, and explicitly promoting sleep both before and after training, you may discover some no-cost ways to enhance your own and/or your participants’ learning experience and retention.

Whether you’re participating in training as a learner, or delivering or facilitating learning, make sure your approach includes the latest science-based techniques for improving learning effectiveness. You’ll sleep easy knowing you’re using the latest science of learning!

[1] http://www.brainrules.net/the-rules

[2] Spark: The Revolutionary New Science of Exercise and the Brain by John J. Ratey

[3] https://www.laboratoryequipment.com/news/2018/04/sedentary-life-linked-shrinking-brain-lobe

[4] https://www.theguardian.com/news/2019/jan/03/why-exercise-alone-wont-save-us

[5] https://www.npr.org/sections/health-shots/2013/10/18/236211811/brains-sweep-themselves-clean-of-toxins-during-sleep?t=1564502549723

Three Essentials of Every Learning Delivery: Micro, Mobile and Multi-Device

In recent blogs we have highlighted some of the current innovations and emerging trends in learning delivery channels, from video to mixed realities to the rise and rise of the virtual classroom.

Whatever the choice or blend of delivery channels, there are three important elements that feature in almost every conversation about learning delivery:

• Microlearning
• Mobile and
• Multi-device

MICROLEARNING

Microlearning still appears on many ‘top 10’ Learning Trend Lists¹, but it has actually arrived so to speak: it’s in widespread use by L&D and no longer a method we need to call out as new.

While it’s already been embraced by professional educators, it’s still worth pointing out that microlearning has a distinct place in the organizational learning ecosystem.

Microlearning is good for rapid, discrete, self-contained topics frequently delivered in a just-in-time style, or equally material that needs to be repeated or retaken frequently, for example spaced learning inputs like summaries, checklists, tips, or quizzes. Micro is not, however, ideal for more complex topics, or ‘bigger picture’ coverage that demands a larger time commitment. Macro delivers more elegantly and efficiently to such larger more complete content areas.

Our take on Micro versus Macro? Consider micro and macro as two sides of the learning coin, and two systems that can complement each other, together delivering the best outcomes for learners.

MOBILE AND MULTI-DEVICE

Mobile devices account for almost 50% of web page views worldwide as of Feb 2019, and in Asia it’s 60%², meaning that, for learning providers, mobile and multi-device playability of learning content is no longer an option but an essential in any learning delivery.

Embedding ourselves in the learner’s journey and being with them wherever they are on that journey means on whatever device they are most comfortable using. Entertainment platforms have also shifted towards mobile, particularly for young smartphone users. Ericsson’s TV and Media 2017³ reported that 70% of viewers now watch TV and video on mobile devices, with an estimation that by 2020 half of all viewing will be done on mobile screen.

In the corporate world, as BYOD policies are widely used (currently 59% of organisations allow employees to use their own devices for work purposes), digital learning experiences need to be available as a seamless experience of any device, whether it’s desktop, laptop, tablet or phone, and learners are bound to be more comfortable using their own.

Seamless is the key concept here: customers look for seamless journeys, so that moving from one device to another should make no difference to the quality of the experience, though it may be implemented somewhat differently with each device, and for different modalities.

Watch out too for emerging trends with a new cohort coming to a workplace near you: Generation Z. This latest generation to join the workforce may not be yet easily characterised (a topic we’ll cover in an upcoming piece) but they are of course the generation most ‘raised on digital’ yet, and trends such as their multi-screen habit – using multiple screens at once – will up the ante further for some of the must-haves of digital learning delivery.

Right now, mobile and multi-device is very much an expectation, and learning experiences need to be designed to smoothly adapt and flow whatever mix of devices, locations or learning modes the learner choose or weaves between.

References

1. http://donaldhtaylor.co.uk/report19/
2. https://www.statista.com/statistics/306528/share-of-mobile-internet-traffic-in-global-regions/
3. https://www.ericsson.com/en/trends-and-insights/consumerlab/consumer-insights/reports/tv-and-media-2017

Technology is touching every aspect of finance, transforming decades-old practices and redefining core tasks. In our Disruption in Financial Services series, we explore how new tools and technologies are changing the business of finance and reshaping how financial professionals do their jobs.

Disruption in Financial Services:

Big Tech’s Move into Finance Is Raising Regulatory Hackles

Given their dominance of digital spaces, it’s no surprise that Big Tech firms like Facebook are eyeing financial services – it’s a logical next step for them as finance becomes increasingly digital. With their enormous networks, huge data troves, and trusted platforms, adding payments solutions and other financial services is an obvious way to boost revenues and enhance their relationships with users. Regulators and politicians, however, have greeted Big Tech’s moves to offer financial services with suspicion. Although these organizations may offer benefits to the financial industry, there are significant risks associated with the growing role these newcomers are playing.

When David Marcus, the head of Facebook’s Libra digital currency unit, went to Washington to testify before the Senate Banking Committee in July, he was greeted by lawmakers and leaders almost uniformly hostile to Facebook’s currency plans.

Treasury Secretary Steven Mnuchin, speaking the day before the Senate hearings, described Facebook’s proposed Libra coin – a blockchain-based digital coin that would be backed with fiat currency and allow Facebook users to freely exchange funds across borders – as a “national security threat.”

US President Donald Trump expressed similar reservations about the coin over Twitter, and the Senate committee said it did not believe Facebook could or should be trusted to create a currency that could conceivably threaten the dominance of the US dollar and US monetary policy. Congress even proposed legislation to prohibit Facebook from operating Libra.

Lawmakers elsewhere have been similarly skeptical about Facebook’s plans. The G7, for example, announced it would plan joint regulatory action to ensure that Libra and other financial innovations by tech giants would not threaten the nations’ sovereignty and the stability of the global financial system.

Why are lawmakers so concerned about Big Tech moves into finance, and what does this mean for financial innovation?

The power of Big Tech

It’s important to distinguish between FinTech – the development of new technologies to deliver financial services and products more efficiently – and Big Tech doing finance, which means technology giants that already dominate some aspect of the market adding either traditional or innovative financial services to their offerings.

While FinTech poses its own risks, lawmakers agree that Big Tech doing finance is a far greater threat. The Bank for International Settlement (BIS) – which is responsible for promoting global monetary and financial stability – recently released a report on Big Tech and finance that shines a light on what regulators fear.

The report acknowledges that tech companies have the potential to make a significant positive contribution to financial services. Thanks to their network scale, platforms like Facebook, Alibaba, Google, PayPal, Baidu, and Vodafone M-Pesa can reach many millions of users. Their extensive technology infrastructure means that they can offer low-cost financial solutions to those users, potentially improving access to financial services among historically underserviced populations.

Big Tech revenues by activity. Source: BIS. The sample includes Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Grab, Kakao, Mercado Libre, Rakuten, Samsung, and Tencent.

M-Pesa is a good example of this. The mobile payments platform, which works using the credit users have on their mobile phone accounts, allows its many African users to make electronic payments even though many do not have access to formal banking channels.

Another advantage of Big Tech is that these companies have access to enormous amounts of user data and can use this data to assess creditworthiness. While traditional banks must rely on a specific set of data that users provide, Big Tech companies have access to detailed transaction information and other relevant data points. China’s Ant Financial, for example, engages in extensive lending and BIS research shows that its Big Data approach to credit profiling outperforms credit bureau ratings and analysis based on traditional borrower characteristics.

Their network clout also gives Big Tech firms an advantage when it comes to collection. Platforms such as Alibaba or Amazon, for instance, have a virtual monopoly on third-party vendors’ ability to sell online. If these companies lent money to their vendors, they could ensure repayment by retaining a portion of the business transacted on their platforms. They therefore may need less collateral than traditional banks.

But this monopoly power over networks, data, and user livelihoods also makes the prospect of Big Tech involvement in finance dangerous. If a company with billions of users, like Facebook, were to offer a coin that operates like a traditional currency, it could very quickly become the most widely used means of exchange on earth. Facebook could then use its control over this coin to affect global monetary policy or to destroy rivals by denying them access.

Similarly, Amazon could quickly use its platform dominance to undercut banking rivals and then use its monopoly over financial services to extract rents and overwhelm potential competitors.

Big Tech data monopolies also hold the potential for harm. These companies have already engaged in data practices that have attracted the ire of users and regulators. With access to extensive personal financial data, they would hold even more power. While companies have always used what they know about customers to decide what prices to charge or what services to offer, Big Tech firms’ monopoly over a very wide range of data about users poses significant privacy and fair use challenges.

The BIS concludes that existing financial services regulation will not be up to the task of managing Big Tech’s entry into the finance business. Most existing regulation focuses on issues such as credit risk management, solvency, and liquidity risk, and does little to address the competition and data issues the changing environment creates.

The future

Big Tech companies have the potential to strengthen financial systems. They may offer more accessible and affordable services to those who need them and may use their data processing power to lower systemic credit risk.

However, they also pose a significant threat to competition in the financial system. They could quickly build unassailable monopolies that could stifle competition, increase system fragility, and harm consumers. They also introduce a range of new data security and privacy concerns.

Regulators will need to tread carefully to ensure that new rules strike a balance between encouraging innovation and development and protecting consumers and the global financial system.

Intuition Know-How has a number of tutorials that are relevant to Big Tech and financial services. Click on any of the links below to view an intro video to the same tutorial.

• Bitcoin & Blockchain
• Blockchain Structure & Security
• Smart Contracts & Blockchain Applications
• Cryptocurrencies & Initial Coin Offerings (ICOs)
• Data Analytics
• Artificial Intelligence (AI)
• Transaction Banking – An Introduction
• Transaction Banking – Payments Services
• Financial Regulation – An Introduction

EMIR Refit Is Live – What’s Changed?

The final text of the revisions to the European Market Infrastructure Regulation (EMIR), known as EMIR Refit, was published in May. The legislation is now live, and firms must be fully compliant with its various provisions. EMIR Refit made some important changes to the original regulation, many of which sought to lower compliance costs and ease the burden on small financial firms and nonfinancial firms. It is important that all firms that use OTC derivatives fully understand EMIR Refit and its key provisions.

EMIR Refit came into force on June 17, 2019. Some of its key provisions include:

• Small financial counterparties (SFCs) – The Refit introduced the category of SFCs, which are exempt from the clearing obligation (see What Is EMIR? box). The category is defined based on the gross notional amount of OTC derivatives positions a firm has. For SFCs, the threshold is less than €1 billion for credit and equity derivatives contracts, and less than €3 billion for interest rate, foreign exchange, commodity, and other OTC derivatives contracts.
• Nonfinancial counterparties (NFCs) – NFCs that fall below the clearing thresholds specified above are exempt from the clearing obligation. They may calculate their position annually, rather than monthly as required by the original EMIR rules. NFCs will only have to clear the category of OTC contracts for which they exceed the threshold.
• Historical transactions – The original rules required extensive reporting of historical OTC derivatives transactions. As firms worked to implement this provision, it became clear that this would be extremely challenging. The Refit thus removed the historical reporting requirement.
• Fair, Reasonable, Non-Discriminatory and Transparent (FRANDT) commercial terms – The Refit introduced a requirement that clearing members, and clients providing indirect clearing, must offer their services on FRANDT terms. The goal of this rule is to ensure that small firms can access clearing services on an equitable basis. These terms have yet to be fully defined by regulators.
• Extension of pension scheme exemption – The original EMIR rules exempted pension schemes from the clearing obligation. The Refit extended this exemption until August 2020 and allows for an additional two-year extension.

Brexit Anxiety

As firms work to complete their threshold calculations and to ensure they are meeting their clearing, reporting, and risk mitigation obligations, many worry that the UK’s upcoming exit from the European Union will disrupt clearing activities.

The EU has granted certain extensions that will allow European derivatives counterparties to use UK market infrastructure until next spring. However, the EU has declined to extend this beyond that point and many are concerned that clearing and trading firms are ill-prepared to handle the consequences of a potential no-deal Brexit.

Intuition Know-How has a number of tutorials that are relevant to EMIR Refit and central clearing of OTC derivatives:

• EMIR
• Derivatives – An Introduction
• Derivatives – Markets
• Swaps – An Introduction
• Swaps – Clearing
• Swaps – Documentation
• Counterparty Credit Risk (CCR) – Management
• Life of a Trade – Clearing & Settlement

Learning Trend 5: Wired for Speech

Each decade has brought with it a new interface to interact with our computers and electronic devices. Where once we typed into a command line beside a blinking green cursor, today we use a mouse with a visual graphical user interface or swipe, tap and pinch our commands into our screens.

More recently voice has emerged as a way to engage and interact with devices. The rise of voice as a user interface [VUI] has taken off exponentially and can be found today in phones, TVs, radios, and an increasing array of smart home gadgets like microwaves, lighting and heating systems as well as being gradually integrated into the product and services design of a range of industries from aviation to healthcare and banking.

Voice interface features can be optional as a method of interaction, say when you click the microphone icon on Google search and speak your query into the search bar or voice first as with the Alexa powered Amazon Echo or Google Home where voice is the primary input mode.

Smart speakers are becoming an integral part of our lives as voice controlled virtual assistants like Alexa, Google Assistant, Apple’s Siri, and Microsoft’s Cortana become part of our daily routine.

“Global smart speaker installed base to top 200 million by end of 2019.”¹

VOICE TECHNOLOGY DEVELOPMENTS

Voice technologies are growing in sophistication with device ability to recognize different users’ speech patterns. This allows voice assistants offer individualized experiences to different users in different ways and so can offer customized services to specific queries, directly linking a user for example to their Google Play, Spotify or Netflix accounts.

All of these developments are supported by a variety of maturing smart technologies including Text to Speech (TTS) and natural language processing.

VOICE IN THE WORKPLACE

Within the workplace, having a virtual assistant to talk with may optimize efficiency, freeing up hands and body to continue with the task at hand. Gartner, Inc. predicts that a quarter of digital workers will use a virtual employee assistant [VEA] on a daily basis by 2021.³

VOICE FOR LEARNING

If voice makes sense in the workplace as an employee assistant, it also brings the concept of learning as you work, or ‘learning in the flow of work’ as it’s often been referred to, closer to reality. Chatbots or educational assistants have already made an impact in educational spheres. Several research universities introduced Echo Dots to help students with queries around campus life. ⁴

Voice interfaces offer potential for education where learners might turn to them for information and facts, clarification or questions, or in a more active teaching mode provide interactive material to follow lectures in the shape of interactive games and exercises to help embed learning. In the workplace, voice based digital assistants might help with providing:

• Reference material – quick access via voice led UX to appropriate standards and procedures.
• Instructional Assistance – what form do I need?
• Performance Support – what’s the correct order of tasks in this process?
• Coaching and Mentoring – role play scenarios with personalized feedback.

DESIGNING THE VOICE EXPERIENCE

How people interact with voice technology is very different from how they work with other interfaces e.g. a graphical one. People’s expectations of a conversational interface, even though they realize it’s artificial, is that they are communicating, not just using voice technology. This new area of design, VUI [Voice User Interface design] has similar departure points to other design areas, like clarification of user goals and end points, user testing and so on. The bits in between, however, are somewhat different, including scripting of potential dialogue flows, key words assignation, and branch planning to cover different conversational eventualities.

Personality and emotion become an important element in voice designed applications and the role of emotion within this conversational interface design cannot be underestimated. We believe the interest in audio will continue. Moving from consumer electronics and driven by the growth in smart speakers, voice will migrate into every experience including workplace learning. Flipping the interaction model towards  conversation potentially offers many areas of interest. Today much learning in the workplace is about solving problems or rapidly locating a nugget of content and for this, voice will enable learning. However, much of these conversations still sit in the realm of questions and answers or basic instructions so we may have to wait a little longer for some higher level voice-based learning applications to emerge.

WHAT TO DO NEXT?

Consider possible applications for voice in current learning or work challenges. Could voice based digital assistants help your people with reference material, quick instructional assistance or performance support? Could you use voice-led UX to access content, coaching and mentoring?

REFERENCES
1. https://www.canalys.com/newsroom/canalys-global-smart-speaker-installed-base-to-top-200-million-byend-
of-2019
2. https://www.cmo.com/features/articles/2018/9/7/adobe-2018-consumer-voice-survey.html#gs.bbje5u
3. https://www.information-age.com/virtual-employee-assistants-gartner-123478012/
4. https://www.chronicle.com/article/Hey-Alexa-Should-We-Bring/244129

Learning Trend 4: Big Data and Learning Analytics

Uncovering useful knowledge from the data we collect has been happening for some time now, at least since the 90s but when the term ‘Big Data’ entered the Oxford Dictionary in 2013, the ‘big’ that set this data apart referred to a volume, speed and complexity of data so large and so rapidly generated that it could not be managed or analysed using traditional business intelligence tools.

From 2005 onwards, the sheer volume and variety of online touch points whether tweets, YouTube videos, Instagram stories, web based financial transactions; all forming potential data points in the modern digital world has resulted in this exponential growth and importance of Big Data.

While earlier this decade, mere terabytes of data were gathered, now exabytes of data are collected in a couple of days and the resulting era of data information has provoked a whole new discipline of data science alongside the role that manages it, the data scientist, which according to HBR is the ‘sexiest job of the 21st century’.[1]

Data scientists collect and analyse big data using data analytics to discover relevant patterns or inferred intelligence around customer choices and preferences, market trends and more, and use these insights to improve product or service offerings and drive more competitive and successful business outcomes.

A large part of data and analytics pivots around machine learning, a specialized subfield of AI. If AI is the broad science of imitating human abilities and intelligence, machine learning is about training a machine to learn with minimal human intervention. The system learns by taking data, reviewing data sets, identifying patterns and making decisions.  Machine learning uses a number of approaches to improve performance and intelligence, and so produce more accurate predictions and data driven decisions for businesses.

A QUANTIFICATION BIAS

While Machine Learning and data analytics continue to grow in popularity and many organizations use this AI in their talent development and HR departments, it’s worth pointing out that a number of writers have warned against a data driven approach overshadowing a knowledge driven approach. Many writers highlight the importance of having a human narrative accompany data analysis. This approach of recognizing the qualitative, human narrative behind data has been dubbed ‘thick data’ or ‘insight IQ’.

By using primary and secondary research approaches including surveys, questionnaires, focus groups, and interviews and by asking questions like ‘why is this happening?’ rather than fixating on data alone, more meaningful and important information will emerge. The integration of big data with thick data creates a bigger, better picture to drive improved learning and talent choices.

Data science and analytics are fast-moving fields and according to a Gartner report[2] the next generation of analytics is Augmented Analytics where analytics automated by machine learning and AI accelerate every facet of the discipline from collection and analysis to generating information, outcomes and intelligence. By using new AI based tools, businesses will benefit from instant, real time insights and be capable of leveraging analytics to figure out what they need to do to remain competitive.

LEARNING ANALYTICS – A TRENDING TOPIC

The science of learning seeks to describe, explain and predict how well learning happens as well as what hinders it. A key trend in the analytics space is the research field of learning analytics [LA]. Learning analytics emerged as a phrase around 2010 coming to us from experts and thinkers in the higher education arena. By looking at how students behave and perform as well as their experience and outcomes across different learning systems, interventions and social interactions within a university environment, new and exciting data emerges to contribute to the development of more effective and personalized learning interventions.

“Learning Analytics is a new tool for Talent and Learning Development to become familiar with.”

Analytics are everywhere, but how to get the most from them may involve more than just facts and stats. Data driven decisions are important for L&D. Learning ROI measures performance outcomes and so can place a value on specific learning interventions. Learning analytics changes gear to move away from more traditional metrics of learning like pass/fail, started/in progress, test and score results and seeks more meaningful data and insights to give organizations better and richer insights into pedagogy, patterns of interaction between learners, faculty and systems, and thus inform and develop more focused, personalized learning solutions.

Learning Analytics is a new tool for Talent and Learning Development to become familiar with. And while the popular job of data scientist remains, such expertise coupled with learning analytics may be one to watch and consider. Keep an eye too on the higher education space, as they continue to work in and develop this niche.

WHAT TO DO NEXT?

1. AI and data and learning analytics are growing in sophistication and will become a game changer for Talent development; get on board.
2. Consider moving beyond the old metrics to a more nuanced focus e.g. evaluation of course impact on performance, quality of course etc.
3. Use data to better understand
   • • • • • • • • • how well learning might be happening,
                   • what might be preventing it and
                   • how to improve it.
4. Add thick data and human narrative to your mix of data analysis.
5. Watch higher education space for developments and start to consider learning analytics as an area to track.

[1] https://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century

[2] https://www.gartner.com/en/documents/3773164

Learning Trend 3: Social Learning Comes of Age

This trend has been through some ups and down over the last number of years. Social and collaborative learning gained some traction from expectations that everything would become social, paralleling the power of social at the consumer level, then followed by the ‘reality check’ of the complexities of social in a corporate context, particularly so in areas like banking.

Social and collaborative is on the up again, however, with LXPs that capitalize on the power of sharing and knowledge exchange, and the growth of data analytics that can help drive curation, sharing of relevant knowledge, and personalization. And it’s an important trend, given the increasingly recognised effectiveness of peer-based learning, as well as the potential role of social in facilitating both informal and formal learning.

New tools and collaboration platforms like Microsoft Teams, Slack, Facebook’s Workplace, Asana and Jive are increasingly popular in the corporate world. Slack, a collaboration tool for real time messaging and file sharing, now has 10 million daily active users on the platform including 65 of the Fortune 100[1]. Microsoft teams was being used by 329,000 organisations as of September 2018[2], and reportedly ranked as the second most popular business chat app by late last year.[3] Facebook also recently released figures for its Workplace tool, its enterprise focused collaboration platform, saying that it now has 2 million paying users.[4] It seems that the connected workplace is where it’s at. Or at least where it’s all headed.[5]

In Deloitte’s 2018 report on the rise of the social enterprise[6], Deloitte highlights the trends of the ‘hyper-connected workplace’ as part of the increased level of collaboration in the evolving social enterprise, reflected in a much greater level of interaction between and amongst workers and with the outside world, alongside the rise of workplace collaboration tools, in an environment with both responsibility and opportunity. For the enterprise as a whole, this social enterprise evolution must be well managed and carefully led to the benefit of the organisation. As far as employee learning is concerned, this increased focus on collaboration presents an opportunity to also drive learning in a way that supports and enables individual and organizational success. And like the organization as a whole, collaborative learning must be managed and led with clear and careful strategy to deliver on its potential.

Donald Taylor’s Global Sentiment survey 2019 places Social/Collaborative 4th (down from 2nd in 2018).

http://donaldhtaylor.co.uk/report19

We believe social learning is (finally) coming of age. It can be used to facilitate both formal and informal modes of learning, through structured modes such as communities of practice as well as unstructured methods, such as shared content and feedback and discussion that can occur organically around sharing. It can help promote active learning and empower learners to meaningfully direct their own learning.

It is social learning wrapped into a strong work function however, and not just social for social’s sake. Now, with the advent of strong enterprise collaboration tools with built in social channels, video meeting tools, content sharing and editing platforms and a capacity to integrate with other social tools and productivity apps, we see a game changing social learning come about. Coupled with a range of new platforms that make it easier than ever before for organizations to successfully and securely enable collaborative learning, and a large segment of the workforce raised on digital social, the obstacles are being wiped away, social learning is integrated into a seamless work environment and the benefits accrue.

Fostering an environment of social and collaborative learning should be on the radar of everyone with responsibility for organizational learning.

WHAT TO DO NEXT? 

1. Use systems and tools that help your organization and your workers harness the benefit of social for sharing, contributing, knowledge exchange and development. Consider what tools will work for your context and culture.
2. Encourage people to connect with both peers and more experienced colleagues.
3. Think curation: how can social help your people curate effectively, continually enriching the resources at their disposal with accurate, relevant and quality materials.
4. Social requires a different mindset from L&D: think facilitation rather than delivery, enabling rather than controlling

[1] https://slackhq.com/slack-has-10-million-daily-active-users/

[2] https://venturebeat.com/2018/09/24/microsoft-teams-is-now-used-by-329000-organizations-up-from-200000-in-march/

[3] https://news.microsoft.com/en-gb/2018/12/12/number-of-companies-using-microsoft-teams-to-double-within-two-years/

[4] https://techcrunch.com/2019/02/28/facebook-says-that-workplace-now-has-2m-paying-users/

[5] https://www.intuition.com/the-connected-workplace-ringing-the-changes-of-a-new-era-in-collaborative-working/

[6] https://www2.deloitte.com/content/dam/insights/us/articles/HCTrends2018/2018-HCtrends_Rise-of-the-social-enterprise.pdf

6 Reasons Modern Workers Quit

Today, HR and talent development staff often experience high employee turnover. Why is this?

Ireland and the UK lead the way when it comes to percentage of population with third-level degrees. According to a 2016 OECD report, the UK claims top spot, with 44% of its population holding a bachelor’s degree or higher – Ireland follows closely behind at 43%.

Drilling further down into this data, it’s clear financial and business-based degrees are the backbone of a university’s course offerings, with consistently above-average enrolment figures in these courses.

In 2017 in the UK, business and administrative-related degree programs attracted the highest number of students with 333,425 enrolled in these courses. In the US, the pattern continues, with the National Center for Education Statistics reporting 364,000 graduates in 2015 holding business majors; the highest figure nationally.

The number of graduates from these types of courses won’t slow down any time soon and the pattern is the same when it comes to graduate employment. The number of positions in business and finance is rising in some regions and remaining steadily strong in others. The Irish Times reported an increase in Irish financial sector job advertisements of 45% between 2016 and 2018.

In London, there has been steady employment across the sector as reported by statistica.com, with 1.1 million people employed within the financial industry in 2018, and a rising number of financial advisors and analysts in the city. London’s financial sector provides 21.4% of its economic output.

While there are plenty of positions in finance, retention can be an issue, particularly with modern young workers. The stereotype of this generation and their careers is accurate, according to Visier, which reported modern workers are almost twice as likely to quit their job – 34.5% of “modern” employees chose to leave their jobs compared to 19.4% of more established workers.

Below are six reasons for the high exit rate of modern-day employees, with relevant research to support each point.

Reason 1: Modern workforce, modern values

In 2016, Deloitte published ‘The 2016 Deloitte Millennial Survey: Winning over the next generation of leaders’, which predicted 2 out of every 3 modern workers would leave their job by 2020. In a survey ran for the report, Deloitte found that 25% of modern workers would likely leave their job within a year. 

Many modern workers marry later, have children later, are more technologically native, and are focused on finding meaningful careers. Their values differ, and naturally, so do their career patterns.

Reason 2: Recession hyper-awareness

Many modern-day workers grew up during times of recession, making them aware of the instability of even the most established companies. Some of the biggest, most successful banks in the world fell foul to the financial downturn, forcing redundancy on long-standing employees.

In an anonymous survey by fowmedia.com, one university found young professionals to be hyper-aware of the possibility of redundancy, especially during economic uncertainty. Growing up during a recession period has resulted in a generation who seek out new opportunities for fear of their current position falling victim to an economic downturn.

Reason 3: Opportunity

In 2018, the number of tech companies in London grew by 14%, while start-up investment in fintech companies in the city reached record highs – there was an 18% increase in venture capital and private equity investment. Ireland is expecting major growth in the sector. Irish fintech companies expect their turnover to rise by more than 50%.

In a period of economic growth, the opportunities available to the workforce enables those within it to shift jobs/careers easily. Modern employees aren’t afraid to move company/sector, and with several opportunities in this industry, career moves are common.

Reason 4: Flexibility matters

Working remotely is becoming more common, with 19% of employees working from home in some capacity in 2003 and 23% in 2015. Modern workers are driving this switch – 68% of modern generation job seekers are more interested in employers who allow the option to work remotely.

Working from home is an advantage to the younger cohort. Strictly office-based positions are not as attractive and may be the reason behind a move to a more work flexible organization.

Reason 5: The social revolution

The ability to find a new position has been revolutionized in recent years, thanks to tools like LinkedIn. It’s now easier than ever to apply for a job and/or look for a suitable candidate to fill a position. With 100 million job applications on LinkedIn every month, a 40% increase in LinkedIn InMail from 2015 to 2017, and 94% of recruiters using LinkedIn to vet candidates, there’s clear evidence showcasing the platform’s dominance in this area.

The modern workforce is a tech-savvy segment of the population and young people are active social media users. Forty million students and recent college graduates use the business and employment-oriented platform, giving them access to easy-to-apply-for positions worldwide and making career and role changes more accessible than ever.

Reason 6: Inadequate onboarding

Gallup found 88% of US organizations don’t perform well when it comes to onboarding, and with Glassdoor’s research showing an effective employee onboarding strategy being capable of improving retention by up to 82%, it’s clear the first few weeks of an employee’s time with an organization are pivotal.

Modern employees want to feel valued by their organization, and their onboarding process is one of the best times to create this feeling. If sufficient time and training is given, younger employees will integrate better into a company and be less likely to leave.

This generation approaches work differently. One of their goals is to find meaning and to enjoy what they do. Being aware of their perceptions of work can give you greater insight as an HR/talent development professional.

References

Battered by Uncertainty, Global Bond Markets Are Acting Strangely

In the US, yields on speculative-grade corporate bonds fell below yields on speculative-grade corporate loans, despite loans’ higher standing in the capital structure. Meanwhile, in Europe, corporate bond issuers successfully raised bonds at negative yields, upending the normal functioning of capital markets. Why are global bond markets behaving so strangely? The answer appears to lie in a volatile combination of ongoing extraordinary monetary policies and broader economic issues.

US capital markets are thriving, but risks remain

At the end of April, US corporate junk bonds rallied strongly, to the point where their yields fell below those of comparable speculative-grade corporate loans – an unusual situation. Loans sit above bonds in the capital structure and are therefore more likely to be paid in the event of bankruptcies. As a result of this higher-priority ranking, yields on loans are generally lower than those on comparably rated bonds.

This anomalous bond pricing raised eyebrows in US capital markets, with market observers generally attributing it to a combination of the Federal Reserve’s decision to pause its rate tightening cycle and the ongoing strength of the US economy.

The Fed’s change of heart on interest rates made loans’ floating coupons less appealing – without rising rates, investors won’t enjoy rising interest payments. Simultaneously, the rude good health of the US economy eased investors’ concerns about the risk of US corporate defaults, further undermining the case for more-secure loans.

However, in the wake of this market anomaly, some are wondering about the long-term outlook for capital markets, given the atypical combination of a growing but fragile domestic economy, a long-in-the-tooth bull market, stretched asset prices, weakening global growth, and relatively supportive monetary policy.

At this point in the economic cycle, rates would typically be slowly rising. However, the current US expansion has been unusual in that it has been very long, but not very strong. Sustained but moderate growth has kept inflation low despite years of near-zero interest rates. These low yields have pushed investors into riskier assets, including speculative debt, leveraged loans, equity, and other, more-exotic instruments.

Now, strains such as rising trade tensions and slowing global growth have some worrying that a downturn may be around the corner even as many economic indicators continue to paint a rosy picture.

In this uncertain environment, every piece of news has the capacity to jolt markets. The Fed’s unexpectedly dovish March rate decision – policymakers unanimously decided to hold rates steady and indicated there would be no additional hikes in 2019 – sent shivers through the market, as did the news that the Treasury yield curve had inverted.

Treasury yields have moved erratically throughout May as conflicting job, inflation, wage growth, and other data have fueled ongoing ambiguity. More pricing anomalies may lie ahead as markets grope for a clear direction.

Trouble ahead for European capital markets?

In Europe, capital market participants are also observing an anomalous circumstance, albeit a very different one: In the first quarter, two French companies both raised bonds with sub-zero rates.

Today, these notes are both trading at negative yields – investors are effectively paying the companies for the privilege of lending to them. This is a highly unusual situation, although it’s not unheard of.

For several years, certain high-quality European government bonds have been trading at negative yields. But in recent months, the proportion of eurozone government debt with negative yields has ticked up, rising above $10 trillion (€9 trillion) – its highest level since 2016. Negative-yielding instruments now include various maturities of German, Irish, and Swedish debt.

At the same time, as the French corporate notes show, negative-yielding corporate debt is rematerializing. This is a phenomenon first seen in 2016, which was dismissed at the time as a temporary issue driven by the European Central Bank’s corporate bond-buying activities. Its reemergence suggests that the ECB’s monetary policy and other activities continue to distort normal capital market behavior.

This situation, coupled with rising concern about European economic growth, seems to have convinced investors that even the negative yields available on certain government and corporate debt instruments are better than the yields they’ll get holding cash. And for many, buying negative-yielding corporate debt makes sense because they may be able to sell those instruments at a profit when yields fall even further.

With no end in sight to Europe’s combination of slow or negative growth and ultra-low rates, it looks like negative yields may become a troubling new normal for bond markets.

• Bond Markets – An Introduction
• Bond Markets – Issuing & Trading
• US Bond Market
• European Bond Market
• UK Bond Market
• Fixed Income Analysis – An Introduction
• Yield Curves – An Introduction
• Monetary Policy

Trends 2019: The Future of Work and the Shape of Future Skills

The paradigm shift we identified last year, largely driven by what we called ‘the 3As’ of AI, Automation and Analytics, continues to reshape the nature of work. Depending on how you look at it, these ‘3As’ predict a wonderful life of leisure where robots do all the work and we sit back and relax, or they will take away all our jobs and with them our livelihoods. The reality is, of course, not quite so simple.

These ‘3As’ herald the biggest change in the way we work since the industrial revolution of the 19th century, creating a future of work that will be complex and dynamic. The type of work we do will be altered as well as how our work and workplaces will be organized, affecting how we secure work, how we work with others and what we actually do ‘at work’.

Even who does the work is changing – human, robot, or co-bot. The division of labour between humans, machine and AI is shifting quickly. By 2025, it is expected to shift to 48% human, 52% machine or algorithm.(1)

While the impact will be greater for some industries and some types of jobs than others, for businesses and workers alike the onward march of AI, Automation and Analytics cannot be ignored. Over the next decade, millions of workers will switch occupational categories, and correspondingly our skills requirements for the future will shift.

While a skills shift is nothing new in the evolution of work, in general automation and AI are expected to accelerate the pace of the skills shift. According to the World Economic Forum in a 2018 report, between 2018 and 2022 we can expect to see the proportion of core skills to do a job that will remain the same at 58%, meaning that there will be an average shift in workplace skills of about 42%.(2)

While basic cognitive skills such as data input and some manual skills will decline, however, demand for physical and manual skills will remain as the largest category of workforce skills (in terms of time spent) in many countries even in 2030 and will be different in different sectors and in different countries.(3) In general, though, lower skills jobs are more likely to be more adversely affected, while higher skills jobs perhaps less so.

THE CHALLENGES

In addition to the concerns of workers and potential workers in the face of this changed landscape, employers are concerned that they lack the skills for automation adoption. PwC’s 21st CEO Survey found ‘availability of key skills’ as one of the top 5 threats identified by CEOs.(4) And with good reason. While there may be many opportunities in this 4th industrial revolution, there are fears that the workforce may not be able to keep up.

MORE JOBS TO DO THAN PEOPLE TO DO THEM

As of June 2018, there were 6.66 million unfilled jobs in the US while there were 6.58 million individuals seeking employment. More jobs than people; sounds like a picture-perfect world for job seekers, but the reality is more complex. There are indications that there is a gap between the skills required for some of these jobs and those who are looking for jobs, with severe shortages in specific areas and wider shortages in some types of skills.(5)

MULTIGENERATIONAL WORKFORCE

While much has been said and written about meeting the needs of Millennials, and, more recently, Gen Z-ers in the workforce, the reality is that a significant proportion of the workforce is older than either of these cohorts.(6) The shortening shelf-life of skills is true for all workers, of all ages, and continuing to invest in learning is a must for all.

FILLING THE GAP

For organizations fearing that a skills gap in their workforce will affect their organisation’s performance, there are a number of options – retrain, redeploy, hire, release, and contract – each with its own set of benefits and challenges.

Overall, efforts for reskilling in most countries, both public and private, are not at the level, scale and quality needed to address the talent war and skills mismatch, according to the WEF.(7) Governments, educators and employers alike need to look for ways to reach workers more effectively with skills and training initiatives.

This is a significant moment for workplace learning. Work in the decades ahead may no longer mean what it used to, but learning will no longer be the same either. Learning organisations must adapt, change and work to a model of agility to help their businesses survive, perform and succeed in this next wave of the fourth industrial revolution.

Intuition’s series Trends 2019: The Future of Workplace Learning looks at the most significant emerging digital learning trends and what Learning and Talent Development needs to do to survive and thrive in this changed workplace and learning landscape. 

If you would like to discuss any of the insights in this piece with our consultants, email info@intuition.com.

Part 1: preview

References:

[1] https://www.weforum.org/agenda/2018/09/future-of-jobs-2018-things-to-know/

[2] http://www3.weforum.org/docs/WEF_Future_of_Jobs_2018.pdf

[3] McKinsey Global Institute (May 2018) Skill Shift: Automation and the Future of the Workforce

[4] https://www.pwc.com/gx/en/ceo-survey/2018/pwc-ceo-survey-report-2018.pdf

[5] https://www.clomedia.com/2018/12/27/we-are-underinvesting-in-human-capital/

[6] https://www.clomedia.com/2018/11/28/never-too-late-to-learn-new-tricks/

[7] http://www3.weforum.org/docs/WEF_EGW_White_Paper_Reskilling.pdf

M&A Activity Heats Up But Antitrust Regulators Are Wary

Competition regulators in the UK rejected a proposed merger between grocery chains Sainsbury’s and Asda, citing potential harm to shoppers in the form of higher prices and less choice. Meanwhile, in the US, the Department of Justice appears poised to reject a merger between wireless networks T-Mobile and Sprint, barring some significant changes to the deal’s terms to address concerns about its impact on competition. Why are regulators hesitating to approve these big deals and what might this mean for Occidental’s $38 billion, Warren Buffett-backed bid for energy rival Anadarko?

Antitrust regulators on both sides of the Atlantic have been breaking hearts lately.

In the UK, a £7 billion deal between Sainsbury’s and Asda was blocked by the Competition and Markets Authority (CMA) on the grounds that it would make shoppers and motorists worse off. In response, Asda’s parent company Walmart has said it plans to list the struggling discount grocer on public markets.

In the US, meanwhile, the DOJ has taken a hard line on some recent mergers. It fought bitterly to block AT&T’s acquisition of Time Warner, unsuccessfully appealing a judge’s decision to allow the deal to proceed, and it is reportedly ready to block a $26 billion deal between the third- and fourth-biggest wireless carriers in the US: T-Mobile and Sprint.

 According to reports, the DOJ is concerned that the tie-up would hurt consumers, especially the rural and low-income consumers who rely on prepaid service – together, T-Mobile and Sprint dominate the prepaid market.  The companies are reportedly considering significant asset sales and other concessions to address the regulator’s competition concerns and clear the merger.

Antitrust regulators have a difficult task. They must predict – often with scanty evidence – how a merger or acquisition will affect consumers, both in terms of price and its impact on innovation. In the case of the Asda/Sainsbury’s and the T-Mobile/Sprint deals, regulators focused on the fact that the various players operated in the same geographies and markets and would therefore well-placed to raise prices once a deal was done.

What might this mean for the proposed deal that has markets buzzing, namely Occidental Petroleum’s aggressive bid for Anadarko Petroleum?

Occidental’s Anadarko bid

After running off rival bidder Chevron, Occidental won the hearts of Anadarko shareholders with a 78% cash offer backed by legendary investor Warren Buffett.

The purpose of the deal is to turn Occidental into the biggest producer in the Permian Basin, an oilfield in West Texas and New Mexico that recently beat Saudi Arabia’s Ghawar to rank as the world’s most productive. Occidental has long vied with Chevron for domination of the Permian, and with this deal, it looks set to take the lead in the region. Anadarko owns about 600,000 acres in the Permian and has identified 10,000 potential drill sites, which are generally expected to be highly productive and profitable.

Admittedly, the deal is by no means a sure thing. Occidental shareholders object to some of the terms – particularly the high cost of the $10 billion financing provided by Buffett as well as management’s decision to boost the cash portion of the bid, thereby avoiding a shareholder vote on the deal. Anadarko shareholders also have yet to have their say. Nevertheless, it looks likely that the next big hurdle for the deal will be regulatory approval.

On this score, the Occidental deal enjoys some advantages. Oil markets are global and highly competitive, meaning that no single company – even Saudi Aramco, the world’s largest oil firm – has the power to meaningfully affect oil prices. As for the impact on innovation, given that much of the country’s oil is found outside the Permian, in the Gulf of Mexico and elsewhere, and that – unlike the relatively concentrated media and wireless markets – the oil industry includes a large number of small firms, it seems highly likely that the deal will get the nod.

But few expected the DOJ to take its fight against the AT&T/Time Warner deal to the appellate court. When it comes to antitrust regulation, anything can happen.

Intuition Know-How has a number of tutorials that are relevant to M&A deals and the content of this article:

• Mergers & Acquisitions (M&A) – An Introduction
• Mergers & Acquisitions (M&A) – Analysis
• Corporate Valuation – Merger Analysis
• Merger Model Building – Excel Interactive
• Commodities – Oil

Trends 2019: The Future of Workplace Learning

The world of work is experiencing what looks like a perfect storm of changing forces:

• Rapid advances in technologies like AI and automation
• New business models
• Changing workforce expectation and demographics
• The rise of a digitally native, globally dispersed workforce

Every year we take a look at the trends that are emerging in the learning industry, what’s in, what’s out, what’s up and what’s down. We look at new trends coming in, and previous trends growing or declining, and at what they mean for how we support our clients in equipping their workforces with the skills they need.

In this perfect storm of change and disruption, predicting what’s coming next becomes particularly challenging. The pace of change is so fast, technological advancements so rapid and the buzz about the latest new thing often so loud that it becomes difficult to separate the noise from the significant news, the fads from the trends that are here to stay. What is clear, however, is that there is one important area of change that is gathering pace like never before, that is: how we go about doing business.  As changes to the way we work gather pace at an unparalleled rate, with them, workplace learning faces an unprecedented level of disruption.

In our new series, Trends 2019: The Future of Workplace Learning, we look at the trends that are driving corporate learning. The key forces of AI, Automation and Analytics continue and indeed up the pace of driving change in how people work, calling for new skillsets, changing the nature of jobs and shaping the nature of learning. Against this backdrop, we cover the most important trends that we see driving the shape of corporate learning in the coming year:

1 Learning Experience

Placing learners – at long last, some might say – at the centre of the learning experience, with new platforms promising a rich learner-driven experience where learners can truly drive and contribute rather than just ‘receiving’ learning, where content comes from many sources and can be created and shaped on the fly, and where learning can become truly integrated with productivity, the evolution of learning experience is one of the most important trends we see in the coming year.

2 Personalization

With learners placed firmly at the centre, the drive to personalization has accelerated in the last year. We look at what’s shaping it, what’s helping it become a reality and the level of expectation.

3 Data and Learning Analytics

Once upon a time, learning professionals spoke of metrics such as learning engagement, impact and, most important of all, measurable ROI. In many ways, these were the grail of learning and, to be blunt, like the grail they often evaded being witnessed. Today, fuelled by AI, analytics have replaced metrics or at least evolved metrics into the nascent trend of Learning Analytics, offering L&D new tools to create measurable, positive business and people outcomes through learning.

4 Social and Collaborative Learning

For years on the periphery in corporate learning, or with successful but niche applications, today’s collaborative tools support true collaboration in the workplace environment and integrate with mainstream productivity tools. Organizations and workers are realising the benefits for sharing, contributing, knowledge exchange and development through channels specially designed for social collaboration and learning in a corporate context.

5 Wired for Speech

Voice is emerging as a new medium, with far-reaching implications for how we engage in and experience work and learning. Increasingly used in a wide array of devices and gadgets, we look at the potential of voice and what the voice experience could bring to workplace learning and performance support.

We also look at trends at the more discrete level, at what learning experiences will look and ‘feel’ like for learners. Some technologies that were young or adolescent last year are starting to move towards maturity. Others may be emerging from a niche application to more mainstream training domains where their potential to improve learning and learning outcomes is being increasingly recognised, and their availability and cost-effectiveness make them more attainable. We take a look at modalities that might be considered ‘established but evolving’, as well as some that are just emerging or in the nascent stages. Amongst them:

• Video
• Augmented, immersive and mixed realities
• Chatbots and digital assistants
• Webinars and Virtual Classrooms.

Work in the decades ahead may no longer mean what it used to, and learning will no longer be the same either. It is hard to predict what the decade ahead may look like but it is time to kickstart your thinking now.

We believe the future will be customer centred and experience centred. Learning will not just be about learning new things and skills, it will be about learning new ways of thinking, new ways of being and above all of nurturing our ability to learn and re-skill constantly.

L&D in this new, innovative and disruptive workplace, will take on a new and critical role, this role is centre stage and will have a vital impact on what lies ahead for every organization.

In the coming weeks, Intuition will be discussing these trends in more detail and exploring what they mean for anyone involved in delivering or enabling corporate learning. In the meantime, if you would like to discuss any of these areas with our consultants, fill in the form below.

Onboarding in a Digital Era: Bridging the Gaps

Firms are planning for a digital future, when the world of work will be unpredictable. While many see the implementation of new technologies as a vital competitive advantage, we believe people make the real difference.

 ‘Digital technologies provide huge possibilities for efficiency gains and customer intimacy. But if people lack the right mindset to change and the current organizational practices are flawed, digital transformation will simply magnify those flaws.’[i] (HBR,2019)

Last year alone, over $1.3 trillion was spent on digital transformation initiatives but it’s estimated that up to 70% was wasted.[ii] With investment in new technologies expected to grow exponentially over the coming years, the price paid by firms for failing to keep its people strategy in step with its tech strategy should not be overstated.

While the reskilling of existing staff represents the largest immediate obstacle to overcome, the methods by which firms approach new talent acquisition will have a major bearing on whether their existing culture and practices are reinforced or superseded in the coming years.

Financial firms have long held a monopoly over the recruitment of the best and brightest at source. The prestige of Wall Street or the City coupled with high wages has for generations lured Oxbridge and Ivy League graduates. Today, the landscape has changed, and banking attraction and retention rates are suffering more than any time in living memory.

“In 2017, just 9.6% of London School of Economics graduates applied for roles in investment banking, compared to 41% in 2012.”[iii]

Even after fending off competition for recruits, the reality of 100-hour weeks and prescriptive career tracks means graduates are finding themselves drawn to alternative sectors such as technology or Fintech.

So, how can banks get back to the top of the pile?

Broadly speaking, we believe it comes down to an acceptance of a new reality and a determination to bridge the gaps that are at the root of the problem.

We examine three of these disconnects below and discuss what firms need to do to recalibrate.

• Disconnect between Graduates and Employers
• Disconnect between University and Corporates
• Disconnect between Short-Term and Long-Term

Graduates and Employers

Everyone has nightmares about turning up for the first day of a new job to find out you’re in the wrong building. Feeling like you’re at the wrong company can be a lot worse.

People quickly form opinions about the company they have joined. In fact, 90% of new employees decide to stay in or leave within their first six months.[iv]

Most of the reasons for leaving stem from a misalignment between what the employee was expecting and the reality of life at the company. The effect is even more pronounced for millennials and Gen Z who are, more so than any previous generation, seeking more than just a paycheck.

It goes without saying that being left isolated and feeling neglected in a strange environment is not going to win over any new recruits but for banks in particular, ensuring recruits buy into your mission and culture carries even more importance in the face of competition from the world’s most admired companies – namely Apple, Google, Amazon, and Facebook.

For these reasons, it is crucial that the onboarding process for new hires is not only a positive experience, but one that creates a sense of belonging and dispels the myth that working at a bank and making a valuable contribution to society have to trade off.

University and Corporates

Creating an inclusive culture can ensure you have the best shot at keeping talent beyond the first 90 days, but they won’t last long without the right skills needed to be productive.

40% of employers say a lack of skills is the main reason for entry-level job vacancies, and the same study suggested that as many as 60% of new graduates are ill-prepared to do their job efficiently. [v]

There is much finger-pointing between firms and universities about who exactly is to blame for a widening gap between campus and corporate life. With the shelf-life of university-acquired skills now reduced to just five years, there are real questions being asked about the validity of some university degrees, not just from debt-ridden students but also from employers.

The traditional trajectory of school > university > job was once able to sustain both employer and employee for long periods of time, but the digitally induced dwindling lifespan of ‘hard’ skills means more agile models and more agile personnel are necessary to keep pace with change.

In the future, banks will be increasingly reliant on a core of permanent personnel who will not only need the hard skills to perform in their role but the broader soft skills necessary to effect change. On the flipside, it means that banks will increasingly need to get better at training specialised, and often contracted, staff more quickly and more often.

While this has led to a growing proliferation of outsourcing and resourcing companies lining up to sell skilled personnel to banks on a short-term basis, it doesn’t relieve banks of their responsibility to ensure staff are trained to the standards required for growth.

This means banks must get better at prioritising investment in different areas and on different skills. In the digital era, sheep-dipping must go the way of the dodo.

Short-Term and Long-Term

Since the dawn of time, firms have tried to strike the right balance between growth and profitability but in the past ten years, a singular approach to profitability has dominated the strategies of most financial institutions amid a weaker trading environment.

In the intervening decade as banks indulged in navel-gazing, star-gazing competitors have exploded onto the scene to steal market share and syphon off would-be banking talent all at once.

In a talent context, banks short-term focus has manifested itself in an emphasis on ‘desk-readiness’. As a result, graduate programmes have favoured shorter, more-intense bootcamps focused on drilling recruits for survival on the front line.

Unsurprisingly, army analogies have done nothing to dispel graduates perception of themselves as banking fodder. Gen Z, having grown up in the aftermath of the financial crisis, are more attuned to the impermanence of work than perhaps any other generation. As a result, they value lifelong learning and are attracted to firms who offer the opportunity to skill and reskill as standard.

94% of employees would stay at a company longer if firms invested in their development[vi]

Bootcamps might serve the business in the short term but if banks want to retain staff over the long haul, they will need to get better at outlining what career development looks like and what lifelong learning means beyond buzzwords.

Conclusion:

The workforce is transforming, and we must consider how roles are being displaced and which roles will emerge as a critical priority for business.

Financial services firms are struggling to attract and retain quality candidates. Couple this with the pace of emerging skills gaps, and organisations are under enormous pressure. For digital transformation to be a success, firms must rethink talent as a strategic priority.

Onboarding is only one part of the equation, but it is a good place to start.

Download our backpack to briefcase guide to ease the transition to a new world of work.

[i] https://hbr.org/2019/03/digital-transformation-is-not-about-technology

[ii] https://hbr.org/2019/03/digital-transformation-is-not-about-technology

[iii] https://news.efinancialcareers.com/uk-en/289796/brexit-graduate-programmes

[iv] https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/onboarding-key-retaining-engaging-talent.aspx

[v] https://www.mckinsey.com/featured-insights/employment-and-growth/technology-jobs-and-the-future-of-work

[vi] https://learning.linkedin.com/resources/workplace-learning-report-2018#

Upgrade Your Learning Ability:

3 Tips to Supercharge your Ability to Learn (L2L)

Here are three big ideas from educational science to improve your ability to learn.

If the bad news is that many people are inefficient learners; the good news is that this ability can be upgraded. Through brain imaging techniques, neuroscience has shown that brains have the ability to form neuronal connections constantly throughout our lives – this is called neuroplasticity. There’s no time-critical window on our ability to learn as was once believed. Learning is ongoing and life-long.

Related article: The superskill for staying on top in a 21st century workplace

TIP 1: Tap into neuroplasticity and awaken a love of learning by deciding to learn something new every day: new vocabulary, a new language, a new instrument, or a new physical activity.

It doesn’t really matter what it is, choose something that interests you and dive in. The more you learn, the more neural connections your brain forms, and the more you will be able to learn.

Activate your brain every day to develop a habit of learning that will simply grow.

TIP 2: Mix it up

The psychological term is ‘interleave’. Most learners erroneously believe it’s good to learn and practice in blocks of content, largely because they’ve been schooled this way. But in fact,  the research shows afascinating outcome – if we mix up topics when learning and practicing them, mastery and long-term retention are improved.(1)

While you don’t immediately notice the effect of this approach, particularly in the learning phase, and it may initially create a sense of difficulty, over time this technique delivers better results – much better than simply spending chunks of time focussed uniquely on one topic.

Mix up topics when learning and practicing.

Tip 3: Embrace Forgetting

Many people see forgetting as the enemy of learning, when in fact it is quite the contrary. Embrace the friend of forgetting – it’s the other side of learning. The brain constantly prunes or forgets material it doesn’t need. We forget because we can’t hold everything in our minds. Forgetting is natural and good. We can use forgetting as an active learning device. Follow every piece of learning with a retrieval moment. In other words, quiz yourself on what you’ve just learned. This offers an opportunity to relearn and this second phase of active learning, provoked by the realization that you’ve forgotten the material, is much more powerful than you may think.

Retrieval is an active learning method that is often overlooked and seen as a chore. We constantly overestimate our own learning, particularly when we enjoy it, and retrieval is the only way to see if you’ve really ‘got’ it. We are susceptible to the illusion of knowing and constantly overestimate what we’ve learned. Use your ability to forget as a clever tool to springboard your learning: test yourself constantly.

Quiz yourself on your learning, you will be surprised!

By using these three simple hacks – setting yourself something small to learn each day, mixing what you want to learn up with other content so that you’re not learning in content blocks, and lastly questioning yourself on what you think you’ve learned – you will develop your ability to learn, enhancing a tool vital to your future.

You may literally be developing a superpower, the L2L superpower, perhaps the superpower needed to survive and thrive in the 21^st century. Upgrade your learning power. Start now.

(1) Make it Stick, the Science of Successful Leaning Peter C. Brown, Henry L. Roediger III, Mark A. McDaniel (2014)

Big US Merger Signals Banks Have Put the Financial Crisis Behind Them

Two large regional US banks, BB&T and SunTrust, recently announced a “merger of equals” that will create. America’s sixth-largest bank. The deal is the biggest US bank merger since the height of the global financial crisis,which saw huge distressed sales such as Bank of America’s 2008 acquisition of Merrill Lynch in a $50-billion allstock deal. It is a sign that the US banking industry has emerged from a difficult decade and underscores the growing importance of scale in a business increasingly dominated by a handful of giants.

In early February, North Carolina-based BB&T announced that it will buy Atlanta-based SunTrust in an all-stock transaction that values the combined entity at $66 billion. SunTrust shareholders will receive 1.295 BB&T shares for each SunTrust share they hold, leaving BB&T shareholders with 57 percent of the combined entity and SunTrust shareholders with 43 percent. The deal is priced at a 7 percent premium to the SunTrust share price.

BB&T hopes to combine its community banking and insurance operations with SunTrust’s middle-market corporate banking business and digital consumer lending operations. The two banks estimate that the deal will net them $1.6 billion in annual cost savings by 2022 and will generate an internal rate of return of 18 percent.

For the US banking industry, the deal has been perceived as a healthy sign. During the global financial crisis, a number of financial entities merged under pressure. In 2008, for example, JPMorgan Chase snapped up Bear Sterns and Washington Mutual in distressed sales and Wells Fargo picked up troubled Wachovia. Regulators quickly approved deals that were seen as vital to sustaining the financial system and preventing collapse.

But in the wake of the crisis, deal-making dried up almost entirely. Banks found themselves hamstrung by new regulations and their already-battered balance sheets were not capable of financing major deals. For years, banks’ focus was on recapitalizing and introducing new risk management measures in line with global and domestic rules.

Slowly, however, the environment has changed.

Under President Donald Trump, banking regulations have been scaled back. In 2018, for example, Trump signed a partial repeal of the Dodd-Frank Act. In addition to other changes, the new rules raised the asset threshold at which banks become subject to closer regulatory scrutiny. Under Dodd-Frank, banks with more than $50 billion in assets were deemed too big to fail and subject to additional compliance rules. The repeal raised the threshold to $250 billion, freeing small banks like BB&T and SunTrust, neither of which individually exceeded the threshold, from additional oversight.

In addition to regulatory changes, there have also been fundamental changes in retail banking.

Historically, regional banks were attractive to locals looking for a long-term relationship with a banking team. Today, however, consumers, especially young consumers in urban areas earning higher incomes, are increasingly attracted to large national banks that offer sophisticated digital services. As more and more banking activity takes place online, the local branch appeal of regional banks is waning and they are losing ground in consumer lending and transactional banking.

At the same time, the competitive field is becoming increasingly crowded. Premier investment bank Goldman Sachs,for example, entered the mass retail market in 2016 with its Marcus online lending tool and an instant access GS Bank savings account.

For SunTrust and BB&T, the solution to these competitive challenges is to join forces and leverage economies of scale to allow for greater investment in technology. With a bigger asset pool – the combined entity will have assets estimated at $442 billion – and more customers, the to-be-renamed new bank will have an enhanced ability to take the fight to its national competition.

The renewal of M&A activity in the banking sector is, for many, an encouraging sign. However, some observers note that much of the damage of the financial crisis stemmed from problems in large institutions. As certain banking activities became concentrated in the hands of a small number of global giants, the risks posed by their failure grew, until these entities became too big to fail and taxpayers were forced to bail them out to avoid economic collapse.

If the BB&T/SunTrust deal is just the first of a new wave of consolidation in the US banking industry, concentration risk may once again rise, and post-crisis prudential rules such as Basel III may face a real test.

Know-How

Intuition Know-How has a number of tutorials that are relevant to mergers and acquisitions:

• Corporate Valuation – An Introduction
• Corporate Valuation – Merger Analysis
• Corporate Finance – An Introduction
• Mergers & Acquisitions (M&A) – An Introduction
• Mergers & Acquisitions (M&A) – Analysis • Merger Model Building – Excel Interactive

Learning Technologies 2019: 3 Key Takeaways

Last week at the ExCel, London, the Learning Technologies 2019 conference took place. With more than 8,500 visitors, 150 free L&D seminars, over 200 exhibitors, an exhibition hall packed with the latest learning technologies, innovation and best practice and the industry’s leading L&D conference, it provided a unique and exciting environment for all those involved in workplace learning.

Many Intuition employees attended the event as a professional development exercise, attending a number of talks and speaking to others in the employee education industry.

There were a number of takeaways from the event, but three stood out:

1. Get creative around buy-in
2. Content trumps creativity
3. The role of neuroscience

Get creative around buy-in

Probably the most prominent barrier to effective employee education programs in today’s workplace, buy-in, was given considerable attention at this year’s conference. With employees and upper-management sometimes questioning the value of these initiatives, specific strategies must be implemented to change the learning culture of an organization.

One interesting mode of attack around this challenge is the implementation of marketing principles to the internal communications around learning strategy. The person tasked with knowledge development in the company is unlikely to have a marketing background, but the science of communication is both easily understood and applied to different concepts.

The first model, which can be seen below, is a derivative of a standard marketing model used to find members of a target market and turn them into reoccurring customers.

Learning Technologies 2019: Buy-in

Various tactics are used during this process to push a member of the target market down the funnel, who is likely unaware of the product/service being sold.

Applying this to internal initiatives is simple. Instead of a marketeer pushing a specific campaign to a specific target market, a knowledge development professional will push the strategy to the members of the organization who need it.

A revised model based on this internal communication can be seen below.

Learning Technologies 2019: Buy-In

In the awareness stage, the person(s) tasked with implementing the program will promote the initiative via email, posters, flyers, events etc.

In the engage stage, the goal is to get employees to access the solution and understand why they need to engage with it. This can be done by communicating the value of learning along with ensuring people know how to access the solution. This can be done through follow-up emails and conversations.

The action stage requires fully integrating the solution into the culture of the business, both from an engagement perspective (is it being used regularly?) and a practical perspective (are the learnings being applied to practical, everyday situations?).

At this stage, ROI needs to be measured. It’s not enough to measure compliance, the organization needs to see tangible improvements.

The promote stage passes the baton over to the user. Hopefully, the value of the learning solution has been recognized at this point and those who are using it are speaking to their peers and encouraging them to use the resource.

Content trumps creativity

At the conference, there was a huge push on creative delivery methods. Fully immersive learning experiences such as virtual and artificial reality were promoted by many exhibitors.

There’s no doubting the role of creativity in knowledge development, but it must be used in the correct context. Unfortunately, not all delivery methods align with the content they’re providing, so forcing these types of channels isn’t wise. It’s similar to putting a round peg into a square hole.

Learning Technologies 2019: Virtual Reality

Being able to bake in these forms of delivery seems to have huge importance in the industry, and rightly so. If content can be delivered effectively in an immersive fashion, the learning experience is bound to be more engaging. The issue centers around the pairing of content and context.

Regardless of VR/AR’s popularity and future importance, content will always be the key driver of learning and this should be a company’s focus when looking at a learning solution provider.

The role of neuroscience

Ongoing employee education is becoming a greater priority for organizations, and as a result, there is more emphasis being put on effective implementation and development. One talk explored scientific principles around learning. Specifically, the role neuroscience can play in retention of information.

Learning Technologies 2019: Neuroscience

The talk described the role emotions can play. Our brains can only retain so much information and as a result, must filter through our experiences and cherry-pick the ones we should keep and get rid of the rest. One way to do this is through emotive connections. Our brain is far more likely to remember experiences with strong emotions attached. For example, if something happens which evokes fear, the brain sees this as an important event to remember as if it happens again, it will know how to react.

3 tips to use emotion in your program delivery:

1. Seek out emotive stories and use them to connect with your learners
2. Negative emotions are powerful – use them
3. Use emotion in simulated environments

The second part of this talk explored loss aversion.

Statistically, we are twice as upset when we lose something than we are when we gain the same thing.

For example, on a scale of -10 to 10, when we gain something our happiness level could be 3. If we lose the same thing, our sadness level will be -6.

The speakers applied this example to gamification. Yet again, an interesting method of delivery, but is it effective? The speakers questioned the relevance of a game if there was no consequence to losing. Quizzes at the end of a module is a common example of gamification, but if the learner gets all the questions wrong and can still progress on to the next module, is it really a game?

3 tips to using loss aversion:

1. Focus on loss rather than gain. It’s more powerful
2. Make the loss personal
3. Be brave – don’t be afraid to annoy people (make it hard to win)

In conclusion, the 3 main takeaways from this year’s Learning Technologies conference were:

1. The importance of buy-in and the need to get creative in this area
2. The realization that content should take precedence over delivery methods
3. The emergence of science to improve learning effectiveness