Implications for hospitality and travel: The growing demand for specialists to join in task-oriented teams will reduce the number of broadly experienced industry generalists needed by large hospitality and travel operators. Unfortunately, by relying on specialists for their expertise in relatively narrow aspects of company operations, it also will make it difficult to train promising staff members in the broad range of skills needed for promotion to higher management positions.
48. Organizations are simplifying their structures and squeezing out personnel.
Computers and information-management systems have stretched the manager’s effective span of control from six to twenty-one subordinates. Information now flows from frontline workers to higher management for analysis. Thus, fewer mid-level managers are needed, flattening the corporate pyramid.
The span of control could stretch again if computer science finally delivers on its long-delayed promise of artificial intelligence. Opportunities for advancement are shrinking, because they come within the worker’s narrow specialty, rather than at the broader corporate level. By 2001, only one person in fifty was promoted, compared with one in twenty in 1987.
Assessment: In the United States, downsizing, restructuring, reorganization, and cutbacks of white-collar workers will continue at least through 2025. Its pace will not slow unless technology ceases to deliver new ways to replace human workers with faster, cheaper, more reliable hardware and software.
Implications: The current recession will be filled by another “jobless recovery” as companies squeeze still more productivity out of their existing workforce, rather than hiring new employees.
A typical large business in 2015 will have fewer than half the management levels of its counterpart in 1995, and about one-third the number of managers.
Information-based organizations have to make a special effort to prepare professional specialists to become business leaders. Broad experience of the kind needed by a CEO no longer comes naturally during an executive’s career.
Top managers must be computer-literate to retain their jobs and must make sure to oversee the increased spans of control that computers make possible.
Finding top managers with the broad experience needed to run a major business already has become difficult. It can only grow more so as the demand for specialization grows. This will reduce promotion from within and encourage companies to seek upper-level execs from other firms, and even industries.
Executives increasingly will start their own companies, rather than trusting the old-fashioned corporate career path to provide advancement.
Ultimately, this trend will require a wholesale rethinking of the social contract, as it becomes difficult or impossible to create enough fulfilling, well paid jobs for human workers to support the population. The end of salaried work is not yet near, but it could arrive within the lifetimes of today’s younger generations.
Implications for hospitality and travel: This trend could endanger the hospitality and travel industries’ tradition of promoting from within. Because there will be fewer opportunities for promotion, it will be difficult to provide employees with the breadth of experience required of top executives. Thus, high-level managers are likely to come increasingly from competitors and from other industries. This is likely to increase the turnover of management personnel, who can no longer look forward to the rewarding careers that these industries once offered.
This also will force corporate managers to develop new ways to motivate their employees and provide them with the kind of experience needed to fill the few positions remaining at upper levels of the company.
49. Government regulations will continue to take up a growing portion of the manager’s time and effort.
In 1996, the U.S. Congress passed regulatory reform laws intended to slow the spread of government regulations. Nonetheless, by 2001 more than 14,000 new regulations were enacted. Not one proposed regulation was rejected during this period. The Brussels bureaucrats of the European Union are churning out rules at an even faster rate, overlaying a standard regulatory structure on the national systems of member countries.
This is not all bad. A study by the Congressional Office of Management and Budget estimated that major federal regulations enacted in the decade ending September 2002 cost between $38 billion and $44 billion per year. However, the estimated benefits added up to between $135 billion and $218 billion annually.
Assessment: If the future holds an end to this trend, it is not yet in sight.
Implications: Regulations are necessary, unavoidable, and often beneficial. Yet it is difficult not to see them as a kind of friction that slows both current business and future economic growth.
The proliferation of regulations in the developed world could give a competitive advantage to countries such as India and China, where regulations that impede investment and capital flow are being stripped away, and health, occupational safety, and environmental codes are still rudimentary or absent.
However, there is a significant penalty for the kind of risk that comes from inadequate regulation. China pays an estimated risk penalty of 6.49 percent for international borrowing. Per capita GDP, access to capital, foreign direct investment, and other measures of a country’s economic health all decline directly with a rising Opacity Index, which is heavily influenced by the lack of effective regulations to guarantee a level playing field for those doing business there. As a result, lands such as Russia will remain at a competitive disadvantage until they can pass and enforce the regulations needed to ensure a stable, fair business environment.
Implications for hospitality and travel: Airlines regulations will focus on safety and customer convenience. The most costly would be installation of an effective bomb detection system for checked luggage. It will be required only if an American flight is bombed. (It is far from impossible. Officials at the U.S. Transportation Safety Administration worry that a bomb could still be smuggled aboard as tiny parts, then assembled for use.) Other rules are likely to demand installation of more crashworthy seating, new user fees, and switching schedules to relieve peak-hour congestion.
A regulation proposed in February would require foreign-flagged cruise ships leaving from the U.S. to spend at least two days in a foreign port before returning, and at least one day in a foreign port for every two in an American port. The rule, proposed to limit competition for two American-flagged ships operated out of Hawaii by Norwegian Cruise Lines, would change itineraries for thousands of cruises. It might also devastate profits at American home ports. Juneau, Alaska, alone would lose an estimated $68 million in one summer. Forecast: This regulation is unlikely to pass scrutiny. If enacted, it will be rescinded quickly.
Hotels already are so well regulated that this sector should be relatively immune to new government-mandated complications. Relatively. Of course, any new rules that apply to restaurants will apply to hotel-based eating establishments just as they do to free-standing outlets.
Restaurant operators trying to avoid cluttering their menus with nutrition information are fighting a losing battle. Calorie counts, fat content, and other unpleasant details soon will be there for patrons to see when choosing their meals. And that sausage and pepperoni pizza will have a warning label that could scare the customer into a heart attack. This could easily sink the market for some traditionally popular—but unhealthy—dishes and raise demand for fish (omega-3 fatty acids), cruciferous vegetables (cancer fighters), and other “healthy” alternatives. We can expect significant menu revisions in the next few years.
The biggest regulatory changes ahead for travel are the global move to biometric passports, prompted largely by Washington’s fear of another major terrorist attack, and—within the U.S.—the REAL ID program.
According to plan, anyone seeking to enter the United States—including American citizens who have been out of the country—will need a biometric passport to get in. Countries from Switzerland to Singapore have adopted them in recent years. However, delays in pulling the American program together have forced Washington to waive the scheme for some travelers.
Under REAL ID, before granting a driver’s license, states must carry out extensive checks to confirm the applicant’s identity. By 2014, anyone under 50 living in a state that does not provide compliant licenses will be unable to board an airliner or enter a federal building. Those over 50 can fly until 2017. Several states have said they will not comply with the program, and their citizens now face being unable to travel by air.
Thus far, the Department of Homeland Security has backed down from a possible confrontation with these states, but we believe the REAL ID program eventually will be enforced.