ADDRESSING THE UNPRECEDENTED BEHAVIORAL-HEALTH CHALLENGES FACING GENERATION(GEN- Z)

ADDRESSING THE UNPRECEDENTED BEHAVIORAL-HEALTH CHALLENGES FACING GENERATION(GEN- Z)

?INTRODUCTION

Gen Zers report the least positive life outlook, including lower levels of emotional and social well-being than older generations. Nearly two years after?the COVID-19 pandemic began in the??????US, Gen Zers, ranging from middle school students to early professionals, are reporting higher rates of anxiety, depression, and distress than any other age group. The mental-health challenges among this generation are increased with deep intensity concerning that US surgeon general issued a public health advisory on December 7, 2021, to address the “youth mental health crisis” aggravated by the COVID-19 pandemic. Many business leaders see?2023 as a continuation of the most challenging environment?management teams has ever faced—and for good reason. The scenarios we have shared can help give us insight into the range of operating environments we could face, the opportunities and risks of the commitments we make, and where you need the discipline and strength to accelerate execution and build resilience. They can help us set our top priorities?and prosper in a 3 × 3 world where uncertainties are multiplied.

??Numerous surveys have highlighted stark dissimilarities among generations, with Gen Z reporting the least positive life outlook, including lower levels of emotional and social well-being than older generations. One in four Gen Z accepted experience more emotionally distressed almost double the levels reported by millennial and Gen X respondents (13% each), and more than triple the levels reported by baby boomer respondents (8%).?And the COVID-19 pandemic has only amplified this challenge (“The not congruence impact of the COVID-19 pandemic”). While consumer surveys are, of course, subjective and Gen Z is not the only generation to experience distress, employers, educators, and public health leaders may want to consider the sentiment of this emerging generation as they plan for the future.

?Gen Z respondents were more likely to report having been diagnosed with a behavioral-health condition (for example, mental or substance use disorder) than either Gen Xers or baby boomers.?Gen Z respondents were also twice or thrice times more likely than other generations to report thinking about, planning, or attempting suicide in the 12-month period spanning late 2019 to late 2020. Gen Z also reported more unmet social needs than any other generation.?Fifty-eight percent of Gen Z reported two or more unmet social needs, compared with 16 percent of people from older generations. These perceived unmet social needs, including income, employment, education, food, housing, transportation, social support, and safety, are associated with higher self-reported rates of behavioral-health conditions.

As pointed out in a recent nationwide survey, people with poor mental health were two times as likely to report an unmet basic need as those with good mental health, and four times as likely to have three or more unmet basic needs. As these young adults work to develop their resilience, Gen Zers may seek out the holistic approach to health they have come to expect, which includes physical health, behavioral health, and social needs, as future students, employees, and customers. Characteristics of Gen consumers in the healthcare ecosystem Z’s specific needs suggest that improving their behavioral healthcare will require stakeholders to increase access and deliver appropriate, timely services. Gen Z respondents were more likely to report having a behavioral-health diagnosis but less likely to report seeking treatment compared with other generations. For instance, Gen Z is 1.6 to 1.8 times more likely to report not seeking treatment for a behavioral-health condition than millennials. There are several factors that may account for Gen Z’s lack of seeking help: developmental stage, disengagement from their healthcare, perceived affordability, and stigma associated with mental or substance use disorders within their families and communities.

Gen Z respondents identified as less engaged in their healthcare than other respondents. About two-thirds of Gen Z respondents fell into lower engagement segments of healthcare consumers, compared with one-half of respondents from other generations. Gen Z and other people in these less engaged segments reported that they feel less in control of their health and lifespan, are less health-conscious, and are less proactive about maintaining good health. One-third of Gen Z respondents fell into the least engaged segment, who reported the lowest motivation to improve their health and the least comfort talking about behavioral-health challenges with doctors.

Another driver for Gen Z’s reduced help-seeking may be the perceived affordability of mental health services. One out of four Gen Z respondents said they could not afford mental health services, which had the lowest perceived affordability of all services surveyed.?Across the board, Americans with mental and substance use disorders bear a disproportionate share of out-of-pocket healthcare costs for a range of reasons, including the fact that many?behavioral-health providers do not accept insurance. “I found the perfect therapist for me but I couldn’t afford her, even with insurance,” said one Gen Z respondent. “The absolute biggest barrier to gaining mental-health treatment has been financial,” added another. In addition, the stigma associated with mental and substance use disorders and a lack of family support may be substantial barriers to seeking mental healthcare. Many Gens Zers rely on parents for transportation or health insurance and may fear interacting with their parents about mental health topics. This factor is particularly relevant for communities of color, who report perceiving a higher level of stigma associated with behavioral health conditions. Children of immigrants also may internalize guilt because of their parents’ sacrifices or may have behavioral-health concerns minimized by their parents, who may state or think their children “have it much easier” than they did growing up. Gen Z relies on emergency care, social media, and digital tools when they do seek help

When they do seek support for behavioral-health issues, Gen Z may not be turning to regular outpatient mental health services and instead may rely on emergency care, social media, and digital tools. Gen Zers rely on acute sites of care more often than older generations, with Gen Z respondents one to four times more likely to report using the ER, and two to three times more likely to report using crisis services or behavioral-health urgent care in the past 12 months. Gen Z also makes up nearly three-quarters of Crisis Text Line’s users.?This lack of access is concerning for a generation two to three times more likely to report seeking treatment in the past 12?months for suicidal ideation or attempted suicide, than any other generation.

Many Gens Zers also indicated their first step in managing behavioral-health challenges was going to TikTok or Reddit for advice from other young people, following therapists on Instagram, or downloading relevant apps. This reliance on social media may be due, in part, to the provider shortages in many parts of the country: 64 percent of counties in the United States have a shortage of mental-health providers. Furthermore, 56 percent of counties in the United States are without a psychiatrist (corresponding to 9 percent of the total population), and 73 percent of counties are without a child and adolescent psychiatrist (corresponding to 19 percent of the total population).

Gen Z is less satisfied with the behavioral-health services they receive

Gen Zers say the behavioral healthcare system overall is not meeting their expectations—Gen Zers who received behavioral healthcare were less likely to report being satisfied with the services they received than other generations. For example, compared with older generations, Gen Z reports lower satisfaction with behavioral-health services received through outpatient counseling/therapy (3.7 out of 5.0 for Gen Z, compared with 4.1 for Gen?X) or intensive outpatient (3.1 for Gen Z, compared with 3.8 for older generations).?One Gen Z respondent said, “Struggling to find a psychologist whom I was comfortable with and cared enough to remember my name and what we did the week before” was the most significant barrier to care. Another said, “I have trust issues and find it difficult to talk with therapists about my problems. I also had a very bad experience with a therapist, which made this problem worse.”

Although we have seen high penetration of telehealth in psychiatry (share of telehealth outpatient and office visits claims were at 50?percent in February 2021),?Gen Z has the lowest satisfaction with tele-behavioral health (Gen Z rates their satisfaction with telehealth at a 3.8 out of 5.0, compared with older generations, who rate it 4.1) and digital app/tools (3.5 out of 5.0 for Gen Z, compared with 4.0 for older generations). Around telehealth, Gen Zers cited reasons for dissatisfaction such as telehealth therapy feeling “less official” or “less professional,” as well as more difficult to form a trusting connection with a therapist. For apps, Gen Z respondents noted a lack of personalization, as well as a lack of diversity—both in terms of the racial and ethnic diversity of the stories they presented, and in the problems that the apps offered tools to address. In creating and improving behavioral-health tools, it is crucial to employ a user-centered design approach to develop functionality and experiences that Gen?Zers actually want.

Zen Z cares about diversity when choosing a healthcare provider

Racial and ethnic diversity in the behavioral-health workforce is also important. According to McKinsey’s COVID-19 Consumer Survey, racial and ethnic minority respondents reported valuing racial and ethnic diversity when choosing a physician, citing their physician’s race more frequently than White respondents as a consideration. Because Gen Z cares deeply about diversity, there are opportunities to integrate care and early intervention by offering a more racially and ethnically diverse behavioral-health workforce and culturally relevant digital tools. Potential stakeholder actions to address the needs of Generation Z

Unlocking whole-person care through behavioral health, it is outlined six potential actions integral to improving the quality of care and experience for millions with behavioral-health conditions. Many of those levers apply to Gen Z, but further tailoring is needed to best meet the needs of this emerging generation. Promising areas to explore could include the emerging role of digital and telehealth; the need for a stronger community-based response to behavioral-health crises; better meeting the needs of Gen Z where they live, work and go to school; promoting mental-health literacy; investing in behavioral health at parity with physical health; and supporting a holistic approach that embraces behavioral, physical, and social aspects of health.

Need for action now

Gen Z is our next generation of leaders, activists, and politicians; many of them have already taken on adult responsibilities as they start climate movements, lead social justice marches, and drive companies to align more closely with their values. Healthcare leaders, educators, and employers all have a role to play in supporting the behavioral health of Gen Z. By taking a tailored, generational approach to designing messages, products, and services, stakeholders can meaningfully improve the behavioral health of Gen Z and help them achieve their full potential. This investment could be viewed as a down payment on our future that will bear social and economic returns for years to come.

?GENERATION Z NEWS: LATEST CHARACTERISTICS, RESEARCH, AND FACTS

Generation Z refers to the generation born between 1997-2012, following?millennials. Gen Z will soon become the largest cohort of consumers—and brands who want a piece of this change will need to understand their tendencies and digital chances. Generation Z (aka Gen Z, iGen, or centennials), refers to the generation that was born between 1997-2012, following millennials. This generation has been raised on the internet and social media, with some of the oldest finishing colleges by 2020 and entering the workforce. Insider Intelligence has been tracking Gen Z’s characteristics, traits, values, and trends to develop in-depth statistics, facts, and marketing strategies targeting what will soon become the largest associate of consumers.

GEN Z TERMS AND DEFINITIONS

Generation Z, is the youngest, most?ethnically diverse, and?largest?generation in American history, comprising 27% of the?US population. Pew Research recently defined Gen Z as?anyone born from 1997 onwards. Generation Z is broadly defined as the 72 million people born between 1997 and 2012. Gen Z grew up with technology, the internet, and social media, which sometimes causes them to be stereotyped as tech-addicted, anti-social, or “social justice warriors. The number of US Gen Z digital buyers will surpass 41 million in 2022.?

?Millennials (Gen Y) known as Generation Y, include anyone?born between 1981 and 1996?(ages 26 to 41 in 2022) and represent about a quarter of the US population. Much of this buddy entered the workforce at the height of the Great?Recession and has struggled with the subsequent widening of the generational wealth gap. Millennials have led older generations in technology adoption and embracing digital solutions. Their financial status and tech-savviness have fundamentally changed how they live and work—earning them stereotypes that they job hop and have killed a number of industries. Prior to Gen Z, millennials were the largest and most racially and ethnically diverse generation.

?Generation X (Gen X)?also known as Gen X, the key of an outer door generation or, flippantly, the forgotten or middle child generation, consists of people born?between 1965 and 1980?(ages 42-57 in 2022). Currently, Gen X?comprises 20.6%?of the US population, making them smaller than any other age demographic. This fellow?grew up with higher divorce rates and more two-income households, resulting in a general lack of an adult presence in their childhoods and teenage years. As such, Gen X is generally viewed as peer-oriented and entrepreneurial in spirit.

?Generation Alpha: (Gen Alpha) which includes children born after 2010, is already set to be the most transformative generation yet. Alphas haven’t just grown up with technology—they’ve been completely immersed in it since birth. Early in their formative years, these children are comfortable speaking to?voice assistants?and swiping on smartphones. They don’t consider technologies to be tools used to help achieve tasks, but rather as deeply integrated parts of everyday life.

GENERATION Z VS. MILLENNIALS (GEN Y)

Gen Z most closely mirrors millennials on key social and political issues, but without much optimism; More US Gen Zers than any other generation (68%) feel the US is headed in the wrong direction, and fewer Gen Zers than any other generation (32%) feel the country is headed in the right direction.

SOME OF THE COMMON CHARACTERISTICS OF GEN Z

Generation Z, or Gen Z, is also sometimes referred to as iGen, or Centennials. The generation that follows Gen Z is Generation Alpha, which includes anyone born after 2010. Gen Alpha is still very young but is on track to be the?most transformative age group?ever. Generation Z considers itself?more accepting and open-minded?than any generation before it.?Almost half?of Gen Zs are minorities, compared to 22% of Baby Boomers, and the majority of Gen Z supports social movements such as Black Lives Matter, transgender rights, and climate change.

The average Gen Z got their?first smartphone?just before their 12th birthday. They communicate primarily through social media and texts and spend as much time?on their phones?as older generations do watching television. The majority of Gen Zs prefer streaming services to traditional cable, as well as getting snackable content they can get on their phones and computers. In terms of?US population by generation, Gen Z is the most ethnically diverse and?largest generation?in American history and eclipses all other generations before it in embracing diversity and inclusion. Generation Z will soon become the most pivotal generation in the?future of retail, and many will have huge spending power by 2026. To capture a piece of this growing cohort, retailers and brands need to start establishing relationships with Gen Zers now. But Gen Zers are different from older generations because they are the first consumers to have grown up wholly in the digital era. They’re tech-savvy and mobile-first—and they have high standards for how they spend their time online. After ignoring the digital revolution and millennial buyers for too long, retailers and brands have spent the last decade trying to catch up to millennials’ interests and habits—so it’s critical for them to get ahead of Gen Z’s tendency to be online at all times, and make sure to meet this generation’s digital expectations.

THE 10 BIGGEST RETAIL COMPANIES IN THE US, BY E-COMMERCE SALES

Adapting to inflation.?Apparel companies are taking a hit from inflation and rising supply chain costs. But an agile pricing strategy can help retailers?ADAPT—or adjust, develop, accelerate, plan, and track—by controlling costs and retaining loyal customers.

Old habits die hard.?Coming out of the pandemic, will?US consumers stick to new behaviors or go back to old habits? See how Americans are viewing online shopping, home improvements, and more.?

Pizza or turkey??Drought, inflation, and bird flu have led to an increase in the cost of turkey: an impressive $1.99 a pound, up 84 cents from last year. Gen Z might be opting for more affordable meals instead of the traditional fare this Thanksgiving. [Bloomberg]

Low on eggs.?Amid a bout of bird flu, the UK is currently experiencing egg shortages that are predicted to last past Christmas. Find out how the poultry industry and people in the UK will cope. [Guardian]

In these present times.?Inflation, tightening budgets, and possible job loss have led American Gen Zers to feel pressure to spend more than they can afford this holiday season, according to one survey. [Bankrate]

?Younger generations are holding companies accountable through greener consumer decisions, creating a possible €650 billion annual opportunity for European companies. However, just because Gen Z is looking to splurge doesn’t mean they’re buying everything in sight.?Gen Z is a bit more particular about their spending than other generations. Gen Zers are holding brands accountable by looking for companies that support causes they believe in, such as sustainability. Additionally, this generation is willing to opt for more expensive luxury items, but they value uniqueness more than other generations. A luxury item might not be a name-brand bag but rather an item that stands out among the noise of fast-fashion retail. In addition,?inflation is a big source of stress?for many Gen Zers. In Europe, about 75% of young people say that?inflation is influencing their holiday-shopping decisions, spurring them to put together some practical wish lists.?Money, household items, and food and beverage?all made the top ten items on young Western European’s lists. But even if they have a tight grip on their wallets in some regions, don’t count Gen Z out of the holiday fun

The US holiday season is here, and Gen Z is ready to spend some serious cash.??In the US, many of us will soon be sitting down to Thanksgiving dinner: turkey, mashed potatoes, stuffing, mac and cheese, cranberry sauce, and pumpkin pie. And after the big feast, it will be time for the next big treat: Black Friday. Rather than being up at 4 a.m. fighting for the best deals at a brick-and-mortar big-box retailer, you might be online shopping from the comfort of your couch. Either way, plenty of?Gen Zers will be ready to spend. The US holiday shopping season doesn’t start when the clock strikes midnight on November 25—it’s already begun.

?? ’TIS THE SEASON TO SPEND?

Coming on three years of COVID-19-cautious holidays, Gen Zers are ready to binge and celebrate. If they have the cash to spend, Gen Zers are going to spend it.?More than any other generation and up 28% from 2021.? One?survey?found that almost half of Gen Z respondents are planning to capitalize on?“buy now, pay later” services for the holidays to avoid hurting their bank accounts. Some are low on cash (19% ), but the rest may be ready to take advantage of any deals this holiday season has to offer. Retailers have caught on that Gen Z wants to shop. We’re seeing price-match promises, longer return windows, and membership discounts that are too good to pass up. Also, social media is now a one-stop shop. Eighty percent of?Gen Z shoppers are looking to social media platforms such as TikTok and Instagram?to find gifts, and 41% are looking to actually buy gifts on these platforms. Many consumer-facing brands will likely be cashing in on influencer and social-media marketing this holiday season

ROUND AND ROUND WE GROW

Consumer demand is shifting toward greener goods. are expressing their worth through their purchasing decisions, leading toward a sustainable and increasingly circular model for consumer products, instead of the established take-make-waste model. A rough estimate, the shift in demand could result in €400 billion to €650 billion annual breaks for European companies. Every manager needs to be able to have conversations that help put on the table some of the social and emotional issues going on in the workplace and be able to coach somebody through??them.”

Be honest.?Gen Z wants their accomplishments recognized, but few new hires would believe they’re doing everything right. Straightforward feedback?serves as a road map?for them to do better—and imagine a future at the company as they grow.??Take stock of unique ads.?For one, we’re the most digitally savvy generation, and that has benefits—Gen Z workers in?one survey?reported spending eight hours per week helping older colleagues look for digital files.? Also, Gen Z is already a quarter of the world population, and dozens of countries have a median age below 25. Tapping young employees’ knowledge as your consumers, clients, or patrons among the generation grow can?help companies stay ahead of the curve.?

Consider that your eyes aren’t everywhere. Hybrid work means you might spend less time directly overseeing employees, especially new hires, which can create the illusion work isn’t taking place. Make sure to ask for feedback from your reports’ coworkers too, and spoiler alert: the companies that prize value creation over just “work” tend to?come out on top. Gen Z is also deeply concerned with DEI efforts and creating an inclusive environment—critical work that our?Women in the Workplace 2022?report, in partnership with LeanIn.Org, found is rarely recognized formally in performance reviews.?

GEN Z SEES ITS PLACE IN THE WORKING WORLD ?WITH APPREHENSION

Americans 18 to 24 years old report high rates of mental health challenges, impediments to effective work, and worries about the future, our latest American Opportunity Survey shows. Youth can be an exhilarating time but also one of high anxiety,?as young people struggle to establish themselves economically and find their place in society. Each generation may encounter struggles and doubts as they join the workforce, Generation Z?has entered the working world during a global pandemic and amid concerns over rising inflation rates, recession fears, geopolitical conflicts, and climate change. It is observed a generational gap in the workplace, with marked differences between how Gen Z and other generations view themselves, their ability to work effectively, and their futures.

Unlike other generations, they are less likely to expect this period of financial insecurity to end and have high levels of doubt about their eventual ability to either buy homes or retire. Employed Gen Z respondents are more likely to report that the pay they receive for their work does not allow them a good quality of life. ?While some degree of job churn in early careers is expected, the economic pessimism reported by Gen Z—only 37 percent believe that most people in this country have economic opportunities—suggests a deep malaise about their own prospects and those of other Americans.

OUR METHODOLOGY

Some of the dissents in how the generations showed more distress. A public health advisory in December 2021 to address the “youth mental-health crisis” exacerbated by the COVID-19 pandemic.??Some dissimilar between age groups are also notable. Young people report physical-health issues as an impediment to effectively performing work at higher rates than the general population, which includes people decades older than them. In fact, on every metric that interferes with effectively performing work, Gen Z reports more struggles than the general population. The AOS gives us a window into the mindset of the newest generation to enter the job market. Employers and other stakeholders may want to reflect upon this research and use it to gain a deeper understanding of how Gen Z feels about itself and its place in the working world, and how they can best support this cohort in the workforce.

GEN Z’S EMPLOYMENT PATTERNS ARE LESS STABLE—AND THAT WORRIES THEM

Slightly more than half of the 18- to 24-year-olds surveyed are employed, but they have not alike felt than workers of other ages. To start, they are more likely to be working multiple jobs?and are more likely to be doing independent work. ?While a portion of young people do independent work because they enjoy the work?or because of the autonomy and flexibility it offers, a majority would prefer work as a permanent or noncontract employee. ?Gen Z is equally divided to financially secure: but is concerned about the stability of their employment and is less likely than other respondents to report being able to cover living expenses for more than two months if faced with job loss. Gen Z is also more likely to report that the pay they receive does not allow for a good quality of life. Some of these trends may be by virtue of age and experience in the workforce; young people early in their careers typically earn less than those with more experience. Young workers are also less likely to have partners and dependents to support, so they may have the flexibility to work multiple jobs or work in independent positions that those with families may avoid.

Many young people doubt they will ever hit key economic milestones. Optimistic explanations for these generational differences could be that young people enjoy their work and simply don’t want to retire, prefer to invest their capital in assets other than homes, or expect more geographic mobility than previous generations and want to maintain that flexibility without having a mortgage. It is also possible that people so far from both the typical age for retirement and home buying simply cannot envision themselves reaching these life phases. Another explanation may be that everyone feels this way in their youth, and had we surveyed previous generations when they were in the 18 to 24 age range, we may have seen similar results. It will be the work of our future research to parse which sentiments are most likely explained by respondents being in a particular life stage and which are unique to Gen Z when compared with other generations.

A more pessimistic interpretation may be that young people expect their current job instability and financial insecurity to continue as their lives progress. National statistics support the notion that home buying and retirement are increasingly distant goals: the median age of an American home buyer was 56 last year, up from 36 in 1981.?Student debt represents a barrier to home buying for many young people.?Most Americans—even those approaching retirement age—lack sufficient savings to retire.?Gen Z’s fear of never reaching traditional economic milestones may reflect greater pessimism and hopelessness than other generations have experienced.

GEN Z FINDS IT HARDER TO WORK WELL FOR PHYSICAL, MENTAL, AND PRACTICAL REASONS

The various factors had an impact on their ability to effectively perform their work. There are five factors that employed 18- to 24-year-olds cited as having a major impact compared with respondents of every other age group: a hostile work environment, mental health issues, access to transportation to and from work, physical issues, and an inability to share your full self at work. Some of these factors may have a compounding effect; we’ve previously reported on the?ties between toxic workplace behavior, inclusivity, mental health, and attrition.

Over a quarter of 18- to 24-year-olds say mental-health issues have a major impact on their ability to perform at work. A third of 18- to 24-year-olds report believing that their mental health has a negative impact on their future job prospects. This belief appears to decline with age: the proportion of respondents reporting this dropped by 5 to 6 % points for every ten years gained. A puzzling finding was that of all employed workers, the youngest cohort is the most likely to report physical-health issues having a major impact. One explanation could be that older workers who experience physical-health issues are more likely to not be working as a result.

Gen Z reports remarkably high rates of mental health struggles

There are large variations across race and ethnicity in each age category: Asian Americans aged 35 to 54 years old report rates of diagnosis and/or treatment at less than half the rate of their White counterparts. On the impact of the COVID-19 pandemic on mental well-being. In addition to Gen Z respondents reporting a less positive life outlook than older generations in that study, Gen Z respondents were also more than three times as likely as other generations to report seeking treatment for thinking about or planning suicide in the 12-month period spanning late 2019 to late 2020..

The higher percentage of young people reporting mental health challenges may be due to increased awareness of mental health, a greater willingness to seek help, or an environment ripe for creating or aggravating mental-health issues. US public advisory noted that while mental-health concerns among youth have been rising in recent years, the pandemic accelerated the problem: “The pandemic added to the pre-existing challenges that America’s youth faced. It disrupted the lives of children and adolescents, such as in-person schooling, in-person social opportunities with peers and mentors, access to health care and social services, food, housing, and the health of their caregivers.” Gen Z bears specific burdens due to their life stage, including emotional stress and grief from the pandemic and educational challenges from remote or interrupted learning. Those looking for jobs in the past few years have experienced something of a rollercoaster: youth unemployment reached an all-time high of 27.4% in April 2020 and has since settled at 8 percent in August 2022.?Even young people with the benefit of being college graduates have encountered difficulties finding jobs,?had their previously secured job offers rescinded?or were unable to apply to graduate school because of the timing of the lockdowns throughout the pandemic.

GEN Z WANTS MENTAL HEALTHCARE BUT WORRIES ABOUT PAYING FOR IT

Gen Z is more likely to report receiving treatment or diagnosis for a mental health condition but also the most likely to report being unable to afford mental health services. The stigma associated with mental and substance-use disorders?and a lack of family support may be a barrier to accessing mental- health care. In spite of its worries, Gen Z thinks the economic future is brighter than most other age groups do Despite reporting higher levels of job insecurity and financial instability and higher rates of emotional distress and obstacles to working effectively, Gen Z’s view of economic opportunity is more optimistic than that of Gen X and baby boomers, which is higher than every age cohort except for the one immediately above it. Not only that, Gen Z’s optimism decreased by only 1.6 percent over the last year, compared with 3 percent for all respondents on average. The only respondents who clearly feel far more positive than Gen Z are the ones aged 25 to 34. These slightly older young people, who have typically launched into their careers and have had more time to find their place in society, report the brightest look of all generations.

Worrying about of the young has been popular at least since the times of Aristotle and Socrates and likely long before that. Some of Gen Z’s reported distress will sound familiar to all who have lived through the apprehension and doubt of launching themselves into economic independence. However, the high rates of reported mental-health challenges and other major obstacles to effective work that emerged from this research invite reflection. Gen Z respondents report alarming levels of negativity about themselves, their confidence in the future, and their ability to find contentment in American life. While Gen Z is not the only generation facing mental health challenges, their rates of distress may give employers, educators, and public-health leaders pause. These stakeholders may want to consider the sentiment of this emerging generation as they plan for the future. Employers who want to win their fair share of talent from all age groups in the workforce can use these insights to target their support for this

HEAT WAVES, THE WAR IN UKRAINE, AND STIGMA: GEN Z’S PERSPECTIVES ON MENTAL HEALTH

Gen Z may have higher levels of perceived stigma compared with other generations, but they may be more accepting of people with mental illnesses. For all the emphasis?many societies place on youth, it’s a difficult time to be young. respondents cite a high level of distress due to climate change, while the rest list distress related to the war in Ukraine. More than a fourth said COVID-19 caused them high distress. Gen Z, however, appears to have a more nuanced framework around the stigma surrounding mental illness.?In Europe, Gen Z seems less inclined to stigmatize or discriminate against people with mental illness, even though they do stigmatize themselves. Negative attitudes around mental illnesses, aimed at oneself or others, can prevent people from discussing their mental health conditions. The personal, professional, and educational from a better understanding of specific challenges facing this generation and some potential paths to offer better support.

IN MOST COUNTRIES, MORE GEN Z POOR AND WORSENING MENTAL HEALTH THAN THOSE IN OTHER GENERATIONS

Approximately one in five Gen Z respondents in Europe report poor or very poor mental health, which is more than any other generation, and five times more than baby boomers. In the?US Gen Z survey, one in four respondents reported being emotionally distressed. More female Gen Z respondents in Europe report poor mental health compared with their male counterparts.1Nearly one in four Gen Z respondents reported their mental health worsening over the past three years. This trend is also higher for Gen Z than for any other generation. Physical health is the only dimension in which Gen Z doesn’t report the highest proportion of poor or very poor health. A first-time moment of global and regional crises is contributing to the distress of Gen Z level of distress varies by country. Gen Z respondents are more likely to say that mental illness is the result of poor upbringing or of a character flaw. However, these negative perceptions of mental illness don’t seem to result in negative attitudes toward people in recovery from a mental illness: two in three Gen Z respondents would be willing to continue a relationship with a friend who is in recovery from a mental illness, and more than half say they would live with someone who is in recovery. While Gen Z respondents report high rates of self-stigma and social stigma, this may not inhibit their willingness to discuss their mental health with others or their acceptance of people with mental illnesses. Gen Z is the most comfortable talking with a friend about their mental health conditions. This indicates that employers may want to reflect on how younger workers perceive acceptance at work.

FACILITATE DIALOGUE ON MENTAL HEALTH AMONG GEN Z

?Gen Z student reports that their schools provide behavioral-health resources, but there is room to improve. Either the school doesn’t provide resources or they don’t know whether or which resources are available at school. Gen Z respondents report using more of their school’s digital behavioral-health resources such as telehealth and app-based resources. However, they also say those are less useful than mental-health online training and in-person resources such as peer support networks, workshops on coping with behavioral health issues, and counseling. As we?noted previously, many Gen Z survey respondents say that their first step in managing behavioral-health challenges is to go to social media for advice from others, follow therapists, or download relevant apps.?Globally, schools—in addition to employers, healthcare professionals, and parents—may wish to examine how technology can offer quicker access to reliable and meaningful support for Gen Z mental health.

EMPLOYERS ALSO HAVE A ROLE TO PLAY IN GEN Z MENTAL HEALTH

At?work, direct support?for the mental health needs of employees is increasingly important to Gen Z when considering an employer. Given that Gen Z is expected to make up about a third of the workforce by 2030,?it will be critical for organizations to consider these shifting expectations and the rising bar for providing mental health support. This will continue to be a factor of growing importance to recruitment and retention going forward.

GEN Z MENTAL HEALTH SHOULD BE A PRIORITY

In all ten countries, the survey shows those entering the adult stage of their lives are facing stressful personal and global events with trepidation but hope. Gen Z reflects the next cohort of future teachers, executives, advocates, and parents. It may fall to them one day to shape the path for the world they want to live in. But no one is alone: all stakeholders can benefit from recognizing what respondents are saying about their lives, and then consider concrete tactics that can offer immediate help. By highlighting valued tools, such as digital self-help or peer counselors, leaders can show they understand the importance Gen Z places on their mental health. All of us can be of service in the challenges that lay ahead.

ADDRESSING THE UNPRECEDENTED BEHAVIORAL-HEALTH CHALLENGES FACING GENERATION Z

Ultimately, no matter the age, mental health supports create meaningful differences for individuals and institutions. The McKinsey Health Institute shares a core belief that promotion, prevention, and early intervention to support mental health are key to adding years to life and life to years. MHI is an enduring, non-profit-generating global entity within McKinsey. MHI strives to catalyze actions across continents, sectors, and communities to achieve material improvements in health, empowering people to lead their best possible lives. MHI sees supporting youth mental health as essential to adding years to life and life to years. Mind the Gap’s first issue in 2023 is (somewhat fittingly) on the scariest of CV specters.

Gen Z is seeking ‘main-character energy’ in 2023—literally and figuratively

?Perhaps we need to move out of NPC (non-player character) status and harness the much-loved trend of “main-character energy” when planning your 2023. Consider this: we start a brand-new job. Our only introduction to coworkers is an email with our professional bio and that one cringeworthy headshot. The “tour” is a training packet that tells you where the online files live. And the water cooler is your own kitchen sink.

Most ?of Gen Z doesn’t trust eco-friendly claims

This week we’re talking greenwashing—and not the kind that involves sweeping endless pine needles out of our living room.

?Not so fast: Three realities busting the Gen Z attention-span myth

?Gen Z is infamous for having a short attention span. Young people do love an endless stream of content, and short-form video is king—many spend more than six hours a day watching—but it’s not true that Gen Z can?only?pay attention for eight seconds.

?Europe’s Gen Zers are compassionate about mental health—but not when it comes to their own

World Mental Health Day, but mental health struggles affect millions worldwide every day. Gen Z will stick around if given more internal opportunities. Gen Zers are too trusting with their data online. future. In 2019, a study estimated that a Gen Zer in the United States would spend a whopping $226,000 on rent in their lifetime—and that was before the gut punch of recent rent hikes. Ads for apparel are part of the ever-growing body of sponsored content that people consume daily alongside regular videos and social-media posts, and they are part of an influencer marketing economy that hit $16.4 billion this year.

2023, a testing year: Will the macro-scenario range widen or narrow

?Volatility from macroeconomic?and geopolitical factors has dominated the business environment lately and tested management teams in ways that may once have seemed unimaginable. However, at the outset of 2023, energy prices are off their peaks, inflation is no longer accelerating, and economic growth appears to be holding up. These positive signs make it tempting to expect a narrower range of potential macro outcomes and, as in any new year, seek a fresh start. We see 2023 as a test of whether such a fresh start is now possible. With geopolitical tensions high, key supply–demand imbalances unresolved, and interest rates on an upward march, business leaders may be contemplating whether comparisons to the 1970s are appropriate or if the path forward will resemble more familiar business cycles. The big-picture question for leaders is: Will their companies ever return to a pre-pandemic-like world of 2 × 2 uncertainties, or has there been a permanent reset to a 3 × 3 world, where uncertainties are multiplied?

1.???To help leaders answer this question, It has developed a wide range of macroeconomic scenarios for 2023 and beyond. The scenarios consider favorable and not-so-favorable long-term outcomes and delineate the shorter-term choices that will largely determine which path the global economy could ultimately take. Leaders must decide which actions they should take regardless of how the environment plays out and what attuned risks they should pursue in a bid to move their companies boldly forward. Some might conclude that their business model and strategic moves would remain largely the same across the macro outcomes they consider plausible, while others may see different opportunities and risks. To put the scenarios into context, we begin with our views on the top issues of 2022: inflation and labor market dislocations. We believe it is important to lay out the facts on these topics, which have thus far avoided consensus, so leaders can create lasting solutions. We then share McKinsey’s new macroeconomic scenarios, focusing on the United States and the eurozone. We find that?the best leaders and companies navigating these volatile times?are both prudent about managing the downside and aggressive in pursuing the upside. We hope such leaders can use these scenarios to make practical decisions to reach their goals.

Understanding 2022’s economic headlines: Inflation and labor markets

Looking back one year, the world was facing numerous tests. In January 2022, the COVID-19 Omicron variant was spreading fast. Logistics teams continued to struggle with fractured supply chains amid record demand.?Commodity prices were up 30 percent, global container shipping rates nearly tenfold, and inland freight haul rates soared.?Labor market imbalances, most acute in the United States and the United Kingdom, boosted wages up to two times the pre-COVID-19 pace. Inflation was reaching what appeared at the time to be generational highs. Even so, there was hope that the worst pandemic repercussions were over. Then, in February, hope turned again to anxiety when Russia invaded Ukraine. Many businesses joined the?chorus of condemnation,?and the ensuing war ignited the worst?humanitarian crisis?in Europe since World War II, a global food and energy crisis,?and an acceleration of the?negative disruptions already underway.

The expectation to bring the highest inflation deduction in the mater in a generation

From March 2020 to November 2022, consumer prices rose nearly 16 percent in the United States, 15 percent in the eurozone and the United Kingdom, 16 percent in India, and 21 percent in Brazil.?These increases are two to three times greater than what would have been expected based on pre-COVID-19 outcomes. Even in Japan, which has been fighting deflationary pressures for decades Expectation of, prices in November 2022 were up 3.8 percent during the previous 12 months, the highest monthly inflation rate recorded in more than 40 years.

The ‘money printing

Many competing views have been offered about the current inflation’s origins and the reasons for its persistence, but we see the facts as much simpler than the debate suggests. (Money printing). Recent work by economists at the Brookings Institution and the Federal Reserve Bank of San Francisco provides a useful analytical framework to explain the origins of US consumer price inflation, which we adapt here.?In addition to nearly 2% normal annual inflation, the following three factors should be considered: The direct impact of commodity shocks and supply chain dislocations:?disruptions in oil, gas, and basic food markets, and supply–demand mismatches. The pass-through of businesses’ higher material costs:?commodity shocks and supply chain dislocations slowed production and raised business material costs.The pass-through of higher wage costs:?the shock to labor markets led to a doubling of wage growth as businesses competed for scarce workers to meet surging demand.

Inflation over the past three years demonstrates the above factors in action. In 2020, the economic collapse, unprecedented stimulus programs, and surprise V-shaped rebound left US inflation at about 2 percent. Then, in 2021, inflation initially picked up steam as pent-up demand from pandemic lockdowns bumped up against commodity market and supply chain dislocations, and businesses began raising prices. Energy prices were still elevated when concerns about a Russian invasion of Ukraine drove them even higher at the end of 2021, ultimately bringing US inflation close to 9 percent. In 2022, these factors were compounded by and eventually overtaken by demand-driven wage pressures, which became the dominant driver of inflation and inflation expectations rose.

If US inflation had increased each year along with 2.2 percent pre-pandemic annual expectations,?then by the end of September 2022, the?level?of prices would have been 6.2 percent higher. The total increase in the price level since January 2020 was 14.9 percent. Two-thirds of those extra 8.7 percentage points can be credited, either directly or indirectly, to commodity and supply chain shocks. The remaining third was largely the result of an increase and shift in the composition of demand that outstripped companies’ capacity to produce and the wage and price increases that followed. This demand was supported by stimulus programs, accumulated savings, and accommodative monetary policy.

The eurozone story starts in the same way, with inflation rising because of pandemic-era commodity and supply chain shocks. Unlike in the US, policymakers and business leaders in the eurozone were able to keep workers attached to their jobs through existing furlough programs and job subsidy channels that reduced labor market disruptions and wage inflation. However, the impact of the Ukraine invasion on eurozone inflation was far greater than in the United States, dramatically raising energy prices across the continent. Consequently, eurozone inflation has been almost exclusively caused by the continued direct impacts of energy supply shocks combined with the aftermath of supply chain disruptions, and the pass-through of these costs by businesses.

The status of ?the US labor market

In March and April 2020, pandemic-related shutdowns caused US private-sector companies to shutter their doors en- masse, eliminating more than 21 million jobs. Adjusted for the size of the economy, this level of job loss was only surpassed during the Great Depression. US workers and businesses are still dealing with the consequences nearly three years later. One of the most visible outcomes—from the point of view of employers—has been the difficulty of hiring. In the first ten months of 2022, the unemployment rate averaged 3.7 percent and total private-sector job openings averaged 10.1 million per month. Compare those figures with several points in 2019 and early 2020, when unemployment rates were similar but total private-sector job openings averaged 6.4 million per month.

Many analysts focus on the fact that fewer people joined the labor force than expected, a deficit estimated to be about 1.6 million. Lower participation has indeed contributed to labor market tightness but doesn’t explain why there are 3.7 million additional monthly job openings. A deeper analysis of age brackets, job types, and employee behavior reveals three additional causes. First, the US population is aging quickly, so part of the decline in labor participation is due to entirely normal retirement behavior. The 16- to 64-year-old group increased by 1.5 million people between January and November; however, in the same period, 3.5 million baby boomers reached age 65. In any typical year, 80 percent of those turning 65 retire and about 26 percent of those aged 16 to 64 don’t join the labor force. Normal behavior patterns would thus explain why, within these age cohorts, 2.8 million people retired and 400,000 others did not work.

Second, there is evidence of a lasting job–skills mismatch in the wake of the “layoff” of 2020. Workers did not simply re-up with their same jobs when the pandemic subsided. Instead, shifts in demand across industries and geographies occurred and workers moved, lost or gained skills, or took new and different jobs. We estimate that in 2022, it took an average of 40 percent longer for an employer to fill a vacancy than it did in 2019. By November 2022, the differential recovery of employment across industries had changed the mix of jobs, as workers found employment in growing sectors. The persistence of excess vacancies demonstrates that the mismatch of skills and geographies continues. The third reason for scarce labor is due to?more workers reevaluating what they want?from a job—and from life. Employees are leaving traditional employment for temporary, gig, or part-time roles, or are starting their own businesses. Some are quitting because of life demands—they need to care for children or elders. Health problems for many persist. Some workers are ready for a break and feel confident they will find another job when they want one.

There is evidence of a lasting job–skills mismatch in the wake of the “layoff” of 2020. Workers did not simply re-up with their same jobs when the pandemic subsided. None of these three factors will be easily or quickly resolved. But they are knowable and business leaders can change their approach to?the talent equation.

Scenarios for what could happen next

When the pandemic struck, the primary sources of uncertainty for individuals, businesses, and governments were?the impact of the virus’s spread and the effectiveness of responses. Other concerns just had to wait. When Russia invaded Ukraine, uncertainty regarding the duration and?scale of the disruption, sanctions, and policy responses?was the focus.

The ‘cusp’ of the economic scenario framework

Today, a complex and varied set of forces is?potentially introducing a new era, with multiple sources of risk, opportunity, and potential transformation. Leaders must weigh how the world order, technology, demographics, energy and resources, and capital will evolve and affect their businesses (see sidebar

The first dimension is?the state of long-term structural balance and international cooperation. This dimension captures how well the supply of materials and manufactured goods, and the people, data, and capital they require, can satisfy global demand at affordable prices. It is strongly influenced by local regulations that determine supply responses as well as by the institutions and frameworks that govern diplomatic relations and international exchange. A key example of an issue within this dimension is how effectively the world can establish the regulations and relationships required to deliver an affordable energy transition. The second dimension is?the short-term level of financial support and the state of monetary policy. This dimension captures how well government spending and market-based incentives are targeted. It also captures how central banks affect the availability of credit and overall financial conditions. It is strongly influenced by national political dynamics. A key example of an issue within this dimension is how effectively current moves by central banks can rein in inflationary pressures. The first dimension is?the state of long-term structural balance and international cooperation.?The second dimension is?the short-term level of financial support and the state of monetary policy. How these two dimensions vary and interact shapes choices made by individuals, businesses, and not-for-profits (including nongovernmental organizations [NGOs] and universities) to spend, invest, and pursue innovative solutions. The interplay between dimensions will largely determine the range of macroeconomic outcomes including how fast productivity, wages, and profits might grow; how labor force participation could rise or fall; how much consumers may spend and businesses invest; what heights inflation may reach; and how affordable the energy transition could be.

The following two scenarios labeled A1 and C2, depict the range of outcomes that CEOs and their executive teams will most likely need to consider entering 2023. A third scenario, C3, portrays a sobering downside reminiscent of the economic experience of the 1970s A recent tally of economic forecasts shows a wide range of GDP growth estimates for 2023, from a low of –1.4 percent to a high of 1.2 percent in the United States, and –0.8 to 0.8 percent in the eurozone.?The scenarios illustrate this range and include additional downside risks that should be considered.

The A1 scenario: ‘Soft landing,’ accelerating into prosperity with target inflation

In the A1 scenario, individuals, businesses, and governments renew their commitments to accelerating global cooperation. Societies commit to absorbing the costs of ensuring resilience, reliable access to critical sectors, the vitality of local economies and communities, and promoting regulations that expand affordable supply. The conflict in Ukraine and other international tensions escalate no further and perhaps even begin to wind down. Economic policymakers in the eurozone and the United States create incentives to boost public- and private-sector investments that help resolve near-term energy supply–demand imbalances. Coordinated actions by central banks steer 2023 without a recession. Inflation begins returning to central bankers’ 2% targets and real GDP growth accelerates to nearly 3% as growth returns. The commitment to global cooperation and effective economic-policy choices together makes long-term incentives for investment and innovation and delivers strong productivity growth and supply expansion. This helps counter the demographic headwinds of aging societies and enables an affordable energy transition. Post-2025, a sense of shared prosperity emerges as the US economy delivers more than 3% annual real GDP growth, the eurozone maintains growth well above 2%, and the income from this growth benefits stakeholders across society.

The C2 scenario: Deep recession, long-term growth limitations, and significant regime change in inflation management

In the C2 scenario, individuals, businesses, and governments determine that the costs of global cooperation outweigh the benefits. Interregional flows stagnate amid disagreement over new rules to address the effect of outsourcing on local economies, the vulnerabilities of concentrated dependence on raw materials, and the system’s lack of resilience. The conflict in Ukraine continues to reinforce these vulnerabilities. Amid this more difficult international environment, central banks in the eurozone and the United States move more aggressively against inflation, tipping these economies into recession in 2023. Despite the purposeful slowdown, inflation comes down only gradually, forcing central banks to abandon their 2 percent targets to avoid a prolonged downturn. Inflation persists at 3.5 percent or higher while growth in the short term recovers to about 2 percent in the United States and the eurozone.

The combination of stagnating global economic cooperation and more restrictive economic-policy choices creates poor long-term incentives and slows the rates of investment and innovation. This weakens productivity growth and makes it harder to produce the technology required for an affordable energy transition. In this scenario, investment in energy technology and renewables is insufficient to scale new technologies, creating more reliance on fossil fuels, so global oil prices reach $130 a barrel. Slow growth after 2025 makes it harder to deliver on the promise of inclusivity. The US economy experiences only about 1.7 percent annual real GDP growth, while growth in the eurozone is stuck below 1%.

Embracing uncertainty, embedding resilience, and enabling growth

Management teams can thrive rather than merely survive in this volatile environment by building both resilience and boldness in their organizations. Leaders who are both prudent and bold hone their organizational performance edges in three ways: by being sharper on insights, deepening their commitment, and accelerating their execution. Business leaders can use scenarios to sharpen insights by analyzing longer-term success factors before zeroing in on the near term. The new scenarios show a wide range of potential GDP growth rates for 2025–30, and leaders need to understand whether alternative growth outcomes require a fundamental change in where and how they choose to compete. Consider two real-world examples, the first of which highlights a company for which strategy hinges on macroeconomic outcomes, and the second which demonstrates the opposite.

A container shipping terminal operator is emerging from the pandemic surge in container volumes, which produced never-before-seen operational challenges along with record profits. This record volume won’t continue, but there is a fundamental question about whether the terminal operator will see a permanent increase in volume momentum relative to the slowdown experienced since the financial crisis. How volumes are expected to play out will be critical to determining a strategy for 2023 and beyond. A polyethylene manufacturer faces the prospects of an accelerating energy transition, carbon taxes becoming a reality, and increasing consumer demand for green products. How strong that demand will be is certainly a question, but the real strategic challenge is that the fundamental technologies to compete in this new world are still on the R&D bench. The critical question is whether the executive team and their stakeholders have real conviction that green plastics are the future.

Individual industry growth matters and will be influenced by overall GDP, but the moves a company chooses to make and how it responds to trends make the biggest difference to performance.?These scenarios can help provide the foresight that can improve the odds of success. Working with these scenarios can also help executive teams build shared conviction about their operating and competitive environment and, consequently, act more decisively when it’s time to commit, be bold, and accelerate execution; or hold back, remain agile, and preserve optionality. We believe that the effort to build commitment and resilience around scenarios and scale execution should be planned in a separate effort that reports directly to the CEO and by design avoids disrupting current operations. This?plan-ahead team?must also evaluate what new infrastructure and people may be needed to execute against multiple scenarios in existing business processes recognizing that key capabilities (for example, financial planning and analysis) may require additional resourcing. With the right prioritization, leadership commitment, and shifts in organizational incentives in place, the new plan-ahead initiatives can be executed with confidence and speed. Strategic courage in an age of volatility

?ON THE CUSP OF A NEW ERA

Planning for 2023: How US-based businesses can succeed when capital and talent are constrained. The year 2010 saw the Alpha generation come to life, replacing generation Z. Growing up in a digital environment, with all knowledge just a click away, will not only affect their experiences but will define the way they interact with their peers. Here we tell you about their characteristics, the impact of digital on their development, and which technologies will define them.

Platform play: Cheaper, faster, better

Enterprise resource planning upgrades can be expensive and complex—and unavoidable. A product and platform approach can manage costs and improve outcomes. Upgrading an enterprise resource planning (ERP) system?is one of the biggest and most expensive decisions IT leaders will make. It can often cost as much as $500 million, last several years, and determine important elements of the business operating model for the next decade.

Before jumping into that decision, CIOs could benefit from understanding how tech companies approach changes to their system landscape. These tech companies value speed, flexibility, and scale to create value for the business. That means they make technology decisions that maximize freedom and independence for their developers by reducing system dependencies and complexities. As we laid out in our article “The platform play,” digital-native companies deliver that independence by organizing their tech around modular products and platforms that run as a service.1?This approach enables teams to make the best decisions for the product or platform they manage. Contrast that approach with what happens at many incumbents, which labor under enterprise-wide systems where complex dependencies make independent decision-making virtually impossible. Consider the case of a large pharma company that used a single ERP system to provide distribution and warehousing despite the fact that distribution was a strong competitive advantage and needed to be flexible and responsive, while warehouse management was a basic commodity. The tight coupling between these two business domains in the ERP system meant that the changes needed in distribution were limited by system dependencies with warehouse management. This reality is a significant contributor to the accumulated?technical debt. It doesn’t need to be that way. By focusing ERP upgrade efforts on the modules?within?the system rather than on the entire system and by understanding what matters for driving business value, CIOs can reduce dependencies, spend less, get more, cut back risk, and do it faster.

From ERP-centered thinking to a modern platform organization

The first lesson to learn from digital natives is that they set strategy first and design their platform architecture second. With the strategy clear (for example, increase the number of new customers and reduce customer churn), they follow a relentless logic in identifying “products,” such as customer journeys (buy the product, find a store, get info on a product), that can drive the strategy. With those in place, they then identify the platforms (such as user authentication and product comparison) needed to deliver those products. For each of those platforms, companies then set up a team that is in charge of the platform’s outcome and performance and will ultimately also decide if it uses functionality that already exists in the ERP system. This product and platform approach underscores two clear principles: first, treat the ERP system as a sum of capabilities rather than a monolithic stack, and second, the product drives the decision about what parts of the ERP system to use, not the other way around.

Taking the step toward a product and platform operating model is significant and requires a mindset shift for most IT organizations. Traditionally, companies have been focused on buying ERP solutions and managing the vendor and the system integrator to do the customizations. While this is still good enough for areas where one relies mostly on standard processes, it is not sufficient for areas where companies require something tailored to their needs. Most ERP vendors understand this and have themselves started to push for more modularity and a lean core. In the meantime, legacy IT has typically addressed the issue by building on top of the ERP system, leading to significant complexity in managing any changes. The implication of this shift is that IT will need to be more?hands-on in managing its ERP systems. This means developing deep engineering skills, actively managing system complexities and dependencies, and working closely with the business to ensure changes generate business value.

Determine what parts of the ERP system add value

With clarity around the strategy and a focus on a product and platform operating model, the next crucial step is to determine which elements of the ERP system directly support the business’s strategy. At a high level, this value analysis divides the functions and capabilities within the ERP system into two buckets: In one bucket are the segregating elements that deliver value to the business. For a retailer that wants to provide the fastest delivery, for example, that would mean prioritizing fulfillment and logistics capabilities. In many cases, those capabilities are delivered through microservices and are fully independent of the ERP system.

In the other bucket are commodity functions that are not core to driving competitive advantage. In many cases, these functions include legal or property management. The ERP advantages in providing stability, tracking, and capabilities-management functionality are sufficient. If industry standards are applied, the company is often benefiting from the innovations of the vendor and creates value without deviation from the standard. Any customizations created by IT need to contribute enough value to offset the work needed to maintain them. The result of this sorting exercise is a capability map of differentiating and non-differentiating ERP capabilities and how they are organized. While most of the classifications can be made at the highest level, there are some areas that have to be split up even further. As shown in the interactive, for example, the majority of assortment management is considered a commodity function, but demand forecasting is where this company wants to differentiate itself from its competition.

A well-designed capability map will also help to determine which cluster of modules needs to be upgraded based on value to the business. This view provides a powerful counterbalance to the prevailing norm where the vendors, rather than the business, define the boundaries of functionality and modernization needs. This situation is often reflected in the fact that, in many incumbent companies, even non-IT stakeholders talk about the “ERP vendor X” upgrade project rather than the “finance” or the “supply chain” modernization project.

Focus on lowering cost and risk for upgrades to the low-value parts of the system

For the first bucket, differentiating ERP elements, CIOs should push for immediate upgrades. But for the second bucket, non-differentiating ERP elements, they should sequence upgrades thoughtfully to manage cost and risk. In this way, upgrading is transformed from a single multiyear project into a series of smaller software projects that each last a couple of months. This scope reduction lowers the risk (small project = small risk) and puts off spend that can be better allocated to transformation programs that drive value quickly. It is found that IT can capture these advantages by taking three steps to reduce the complexity of the monolithic ERP setup.

1. Decouple unnecessary connections

Replacing core systems can be a daunting task because of the variety of connections to other applications. Some of these connections help perform standard functions, follow all the architecture guidelines from the vendor, and are easy to maintain. These connections are doing the jobs they were designed for and should not be touched. However, there are often many connections between parts of the system that are either workarounds or ad hoc solutions that are in place for a wide variety of reasons, such as a developer’s decision that it was easier to directly access a database by creating something bespoke rather than using a modular interface. The sheer volume and uniqueness of these connections make any modernization effort complex and time-consuming.

To reduce this complexity, the first step is to create a new layer between the core system and the applications it connects to. This is often called a fa?ade. All new connections will go to this fa?ade layer via APIs that access data from the ERP system. In this way, myriad connections are decoupled from the core system. This provides the big advantage of being able to make changes within the system, such as implementing modular architecture facets, without affecting all the connecting applications. The fa?ade can be developed in less than a year. It doesn’t need to be 100 percent perfect; it just needs to be functional. But developers won’t use even a good fa?ade unless there is effective governance to enforce its usage. One way to do that is to make it easy by, for example, allowing product teams to access core features without going through lengthy approval mechanisms and waiting for someone in the core team to build an individual interface. In addition to such “carrots,” “sticks”—such as penalties for those who do not follow the new protocols—may also be necessary.

2. Extract the customization

Most core systems have been customized to death, from complex reporting functions to bespoke access protocols. Each customization needs to be migrated—and often remediated in some way—to the new environment, which can be risky because of the corresponding complexity. To address this issue, companies need to build a digital platform (generally in the cloud) that can be accessed through microservices. The number and function of digital platforms can vary; some companies, for example, will create one platform for customer-facing functions, one for the supply chain, and one for the ERP system itself. The platform becomes the place to which customized functions can be moved and where new code is developed. It’s important to assess which customizations are most important. This process inevitably uncovers many customizations that are no longer needed and can be removed, thus simplifying the upgrade.

3. Shrink the core

Once customizations have been removed from the core, it’s necessary to start to shrink the core itself to its most necessary functionality. This is essentially a disaggregation process that removes the many intricate connections that are often built into large systems. In this way, developers and engineers can then replace or improve a specific functionality without affecting other parts of the system. This process generally includes cleaning up the code base as well, making it easier to understand and, therefore, to fix or replace.

As noted earlier, this disaggregation process does not need to touch those functional domains, such as accounting or controlling, that perform standard operations within the ERP system. Only those functions that are often part of a tightly coupled core for no functional reason, such as warehouse management, demand forecasting, or transportation, are candidates to reside outside of the core ERP system. ERP upgrades are massive, complex, and necessary, especially as business pressures increase and cloud and ERP providers roll out new software and services. By taking a product and platform approach, however, companies can prioritize upgrades that create value and de-risk the upgrades that don’t. In this way, companies can better manage costs and improve outcomes.

The salient seven Gen Z trends to watch in 2023 and beyond.

Driven by digital. Gen Z doesn't know a time when the internet didn't exist, is Nostalgic for the 2000s, and distrusts of government and other organizations. Embracing diversity and social justice. Emerging buying power. Influencing the workplace. Rising mental health concerns. Gen Z or generation Z years — those born between 1997 and 2012 — will surely tell you that most of them are no longer kids if you ask them. Today, Gen Z adults are waking social media users and harbingers of the latest trends that often define today’s culture. As they make for quite a critical demographic spread, it is essential to understand the top Gen Z trends of 2023 that can shape the upcoming times. Falling within the age group of 26 and 11 years in 2023, this is the youngest generation to have a direct impact on the workplace. As more than half of the generation enters the full-fledged workforce, Gen Zers have been influential in shaping work-life balance more than any other previous generations.

Often called the activist generation, Gen Z is quite instrumental in raising voices to champion mental health concerns, raise awareness about climate change and social justice as well as educate people about sustainability and the fast fashion movement— things that can be deemed to be the top Gen Z trends of?2023. Nearly every aspect of Gen Z's life is heavily influenced by technology and easy access to information on the internet. More than any other generation, Gen Zers have easy reach to a cell phone and even the oldest members of this up-and-coming group are aware of the top trends on social media, are concerned about their digital image, and make a big part of today’s gig economy. Therefore, since generation Z includes a vast swath of life ranging from middle school goers to young parents, it is imperative to take into account their needs and requirements in the year ahead. It won’t be much of an exaggeration to say that one of the top Gen Z trends is ‘be your own boss.’ With some of the oldest Gen Zers foraying into the workspace, it is estimated that they will occupy nearly 27 percent of the global workforce by 2025.

Per a?Forbes?report, though this generation is the first fully digital generation, 90 percent yearns for human interaction when it comes to maintaining sanity at work. As there is a rise in the gig economy — a creator economy marked by freelancing and short-term contractual work — Gen Z workers are all for work-life balance. About 40 percent of Gen Zers prioritize work-life over anything else. A?Finances Online?report suggests that Gen Z employees find it hard to adjust to work post the COVID-19 pandemic. About 33 percent say that working remotely has affected their quality of life and they want perks, benefits, and appropriate tools to be more efficient at work.

Sustainability and ethical lifestyle

A survey conducted by?Instagram and WSGN, where 1200 Gen Zers were interviewed, revealed a great deal about the top Gen Z trends of 2023 and called these people one of the most ethically conscious generations entering this new year. Gen Z consumers are particular about opting for ethical and?sustainable brands. Opposing the fast fashion movement which leaves landfills stuffed with heaps of fabric wastage, more than half of the survey respondents plan to go for DIY clothes in 2023. Gen Zers prefer to use their purchasing power as a means to champion the sustainability cause. From buying makeup products from ethically conscious brands to purchasing clothes intended for long-term wear, Gen Z is willing to walk the extra mile and pay extra for eco-friendly products and reduce the impact on the environment.

Climate change concerns

It is hard to miss the raging news, where two Gen Zers threw tomato soup at a Van Gogh painting in the National Gallery in London. The two, aged 20 and 21, belong to the Just Stop Oil activist group which raised the fact that due to soaring gas prices and adverse climatic changes, British people would not be able to heat a can of soup in the near future. Climate change and asking people to take a strong stand in the matter is one of the top Gen Z trends of 2023. Climate change?seeps into various aspects of the lives of these young people. Since more than thirty percent of the Gen Z population is of voting age, they want to see an active change that benefits future generations and the planet. When it comes to lifestyle choices too, an impact of climate change is observed. The Instagram and WSGN survey found that two out of three respondents prefer buying beauty products that incorporate sun protection to protect themselves from damaging rays and invest in skincare routines that help during hotter temperatures.

Activist generation with global interests

One of the top Gen Z?trends of 2023?is taking to activism and embracing global interests. As per a Pew Research Center report, Gen Zers are the most ethnically diverse generation and 48 percent belong to racial or ethnic minorities.

With Maxwell Frost becoming the first Gen G member of the US Congress, it can be deduced that this generation wants leaders of their age who can well represent the youth. This generation also cares deeply about social justice and disability rights, and the new survey by Instagram shows that Gen Zers are likely to follow?influencers?with any kind of intellectual or physical disability. Another top Gen Z trend is to advocate for inclusivity and speak openly about the LGBTQ+ community. Social media has made reaching out to a large audience quite easy and hence spreading the word about racial inclusion and gender-fluid concepts have been on the rise. There is no denying that all that is happening around us has a direct impact on mental health. From news of sexual assaults and climate change to mass shootings and immigration — it can get overwhelming for a person and Gen Zers seem to feel the wrath of it like no one else.

Rising mental health concerns seem to be another top Gen Z trend that is likely to get even more accentuated in the coming year. Generation Z often complains of mental health issues and considers it to be a major factor in disrupting the work environment and efficiency and it also reflects on their?physical health. Plus, the prolonged period of isolation during the pandemic and excessive use of technology has also taken a toll. However, it is also good to note that Gen Zers do not shy away from asking for help related to these issues. This generation has also been instrumental in removing taboos and stigmas associated with it at large and has sought help in times of need.

Community Connect

Gen Z has a particular incline towards in-person experiences and therefore it has a deep craving for community activities. The Instagram-WSGN survey found that about one-third of respondents wish to step out of their homes and meet their favorite content creators at conventions and meet-and-greet sessions. For a generation that spent a crucial chunk of their formative years in isolation, breaking the mould and stepping out has never been so pronounced ever before. Interestingly, about 68 percent of the respondents also share that they would like to participate in a rave in 2023.

Financial literacy

Listed among the top Gen Z trends of 2023, is finding new ways to gain?financial stability. The survey conducted by the social media platform shows that about 64 percent of Gen Zers plan to bank on monetizing social media content as well as get into a side hustle. This means there is a different trend emerging in consumer behavior among young people. Gen Z is not afraid to experiment, and they realize that there can be various other ways to earn handsomely besides a regular 40-hour-a-week job. On top of that, with soaring interest in reels, creating social media content is also fun and engaging, which can pool in good amounts. This should also come as one of the biggest takeaways for future employers who would eventually have to tap into the potential of Gen Z for their companies.

Music, food, and dating

?2023 is going to be a year of global assimilation in terms of?food?choices and music. With a sharp interest in?Korean drama, music, and food as well as Japanese music and an overall interest in non-English content, it is safe to say that one of the top Gen Z trends of 2023 is already here. This is the time that K-pop bands like BTS, TWICE, and BLACKPINK are getting the spotlight for surpassing global charts. Never has regional food — Korean, Japanese, Indian, and other Asian cuisines — received such global appreciation. About 68 percent of Gen Z survey respondents reveal that they would like to diversify their taste buds and broaden their taste in music too. When it comes to dating, many feel more comfortable talking via text than in person. Wondering what would be their first message. Memes get mixed reviews. Gen Zers are more likely to use social media platforms like Instagram for online dating instead of swiping on dating apps.

CONCLUSION

Entire industries and businesses will rise and fall in the wake of Gen Z. Yet few industries or organizations seem to be ready for it. Gen Z will soon surpass Millennials as the most populous generation on earth, with more than one-third of the world’s population counting themselves as Gen Zers. In the US, Gen Z constitutes more than a quarter of the population and, by 2020, will be the most diverse generation in the nation’s history. As Gen Zers are about to step onto the world stage, the impact of their entry will be swift and profound, its effects rippling through the workplace, retail consumption, technology, politics, and culture. Radically different than Millennials, this generation has an entirely unique perspective on careers and how to define success in life and in the workforce. To better understand the challenges facing this rising workforce and their impact on employers and the workplace, to focus on the key events that helped shape Gen Z; dive into their individual behaviors, attitudes, and preferences; and separate the myths and stereotypes from reality. Before Gen Z salary is the most important factor in deciding on a job, Gen Z values salary less than every other generation: If given the choice of accepting a better-paying but boring job versus work that was more interesting but didn’t pay as well, Gen Z was fairly evenly split over the choice. To win the hearts of Gen Z, companies and employers will need to highlight their efforts to be good global citizens. And actions speak louder than words: Companies must demonstrate their commitment to a broader set of societal challenges such as sustainability, climate change, and hunger.?Diversity matters to them through many dimensions, not just isolated to race and gender but also related to identity and orientation. The new norms evolved produced by these forces of change present us with complex questions to consider, including the ethics around human-machine collaboration, how to plan for 50-60 year careers, and how we unleash organizations through a continuum of talent sources.

The future of work will call for a return of the Renaissance figure: a person with many talents, interests, and areas of knowledge. It will require a fusion of four key work skills: Digital tools and technology skills, Comfort with analytics and data, Business management skills, and Design and creative skills. Gen Z will have the ability to demand greater personalization in how they move along their career journey. For organizations to attract and retain the best and brightest of the generation, it will require a different mindset. To attract Gen Z, employers must be ready to adopt a speed of evolution that matches the external environment. That means developing robust training and leadership programs, with a real and tangible focus on diversity. Develop the profile of a great employee, establish internal apprenticeship programs, or hire smart, talented people and then match them with a role once inside the organization. Consider partnering at the university level to adopt top female talent to attract more women candidates for tech roles. Create latticed career paths and multiple work formats. Set up internal marketplaces to match projects with needed skill sets. Leverage the expertise of Gen X, Gen Y, and Boomers to help mentor Gen Z into strong leaders. Consider the charm of the industry we are in and the reputation of our company and plan accordingly. Spend five minutes on Twitter these days, and you’ll likely find someone accusing a member of Gen-Z of being “too woke.” But say what you will about the way many “Zoomers” chose to express their politics online, they are willing to back it up in their choices when it comes to the job market.??

A telling article in the?NY Times?describes the “Techlash” on college campuses, detailing the exertion that many with the tech sector had in attracting Gen-Z talent in the recruitment process.?Just a few years ago, an offer from a tech company was considered something of a “Golden ticket” for Millennial job seekers, promising high salaries and over-the-top office culture and benefits. In contrast, many members of Gen-Z seem to be put off by negative perceptions of the tech industry and the growing concern about the ethics of certain practices within the tech world.?While these sentiments are being expressed openly by certain members of Gen-Z in the workforce, they seem to reflect a broader shift in the way people view the technology sector. A Pew Research study found that the percentage of Americans who felt that the Tech industry had a positive impact on society?dropped substantially?from 71% in 2015 to 50% in 2019.?For some members of Gen-Z, the desire to evaluate companies based on a set of moral standards seems to extend beyond preferences in the workplace and impact the consumer choices of Gen-Z as well. A survey found that?51% of Gen-Z consumers?would ensure that a brand was aligned with their own values before making a purchase. DEI, are increasingly relevant in the world of work, and these issues are particularly important to members of Gen-Z representing the most?racially and ethnically diverse?generation in U.S. history. This no doubt contributes to the expectation among members of Gen-Z that their workplaces reflect not only their values but also the diversity among their peers. According to a recent study,?67% of Gen-Z workers?reported having witnessed discrimination or bias based on race, ethnicity color gender. The most important is ongoing learning to keep up to date and overcome the negative impact due to disruptive technology. Gen Z can learn the skills they need to be workplace ready with?Forage virtual experience programs. The upskill statistic as per LinkedIn survey shows Gen Z spends 12% more of their time on LinkedIn Learning and building their?hard skills?compared to the average person, Gen prefers mobile learning more than any other generation 76% of Gen Zers see upskilling as a key to their career advancement.,

We are dreaming of a bright future, it is not Utopian thinking.