Globalization and new strategies for growth

Good people are hard to find

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Areas of talent shortages

Compared to this time 12 months ago, in which markets are you currently experiencing most difficulty in the following dimensions of talent management?

Increasing complexity of international supply chains

Source: Globalization Index 2011

Note:Base = 992; scores shown = percentage of respondents; numbers may not add up to 100 because of rounding

Effectiveness of talent management

How would you rate the effectiveness of your organization at managing the following aspects of talent management?

Increasing complexity of international supply chains

Source: Globalization Index 2011

Note:Total base = 992; ratings on scale of 1 to 5 where 1 = very effective and 5 = not at all effective; scores shown = percentage of respondents rating 4 or 5 (gray) vs. 1 or 2 (yellow)


In the Eurozone and North America, companies are continuing to shed jobs in order to retain competitiveness.

This is contributing to high unemployment figures of more than 10% in the Eurozone and 8% in the US. By contrast, the story in major rapid-growth markets is one of wage inflation and labor shortfalls.

There is a common thread running across all markets: companies everywhere find it increasingly difficult to match skilled professionals with available positions.

It is estimated that India will face a talent gap of 5 million workers in the coming year.

"It's the same problem whether you are in India, Belgium or Japan: a shortage and mismatch of key skills," says Jeff Joerres, Chairman and Chief Executive Officer of ManpowerGroup. "According to our research, one in three employers globally is currently experiencing difficulties filling positions due to a lack of available talent, which is higher than at any point since 2007."

Shortages are likely to get worse as demographic outlooks become less favorable in many markets in the long term. "We're going to be short of people with the right competencies in many, many countries," says Ben Noteboom, CEO of the employment services firm Randstad. "In Europe, for example, our research suggests that there will be a potential employment gap of around 15% of total labor demand by 2050, which is equivalent to 32 million people."

Talent bottlenecks are particularly acute in large rapid-growth markets, notwithstanding their huge talent pools.

For example, a report from the Confederation of Indian Industry estimates that India will face a talent gap of 5 million workers in the coming year. These findings resonate with our survey respondents. They say that they are much more likely to find difficulties with recruiting and retaining senior managers in rapid-growth markets than they are in developed ones.
 

Areas of talent
shortages

For multinationals, increased levels of competition for talent from local players compound the problem. In the past, Chinese professionals would have regarded experience in developed markets as essential to their career development, and this would have steered them toward working for a Western firm.

Increasingly professionals recognize that the best opportunities lie close to home, in the local market. This, combined with patriotic sentiment, makes domestic companies an increasingly attractive proposition.

 

Response: embrace bold approaches
to talent management

1. Put the best talent in the most promising markets.

Despite recognizing the importance of rapid-growth markets from a growth perspective, many companies have been slow to send their top talent to these markets. "Too many companies dispatch people who are 'good enough' to lead emerging markets when what they need to do is put in place people who are globally best-in-class and whom they can really trust," says Braeken.

"If anything, you need better operators in these markets than you do in the developed world because things are changing so quickly and competition is becoming more intense."

Companies also need to future-proof their talent in these markets, which means putting in place managers who will have the skills and authority to lead the larger markets of tomorrow. "I would argue that your leadership team voice should be representative of the size of tomorrow, because that's the only way that you will be able to grow the business in line with your ambitions," says Tyagarajan.

 

2. Promote managers in line with the pace of the market

In rapid-growth markets employee churn can be 20% or greater and salaries are rising at a similar rate. Companies need to consider what will make them stand out as an attractive employer.

Noteboom advises companies to invest heavily in training and promote internally to show employees that they have significant opportunities if they stay with the company. "We have a rule that 80% of promotions have to come from within the company and we track that very carefully," he explains. "By doing this, you build a quality company because you create loyalty and you retain people who know and understand your business."

In rapid-growth markets, the speed with which the company promotes managers may need to be quicker to reflect the pace of change of the business environment.

"You should have the courage to promote people sooner than you would do in a more mature market," says Noteboom. "By adding smart enough people with lots of potential and maybe a little bit less experience, you will still be successful and outgrow the competition."

Ravi Kant, Vice Chairman of Tata Motors, agrees with this approach: "We try to pick people out that we regard as high potential and give them a level of responsibility that may be beyond their years while at the same time giving them the support they need," he says. "This has brought about a surge of interest among younger people to take on more challenges, and in every case this makes those individuals better managers."

3. Revamp the expatriate model.

In some markets, companies are forming enhanced relationships and alternative dispute resolution mechanisms with tax administrations. Although approaches vary, a common thread is that there is a channel for taxpayers to interact with administrations and resolve issues or disputes without resorting to litigation.

Weinberger recommends having "adequate, easily accessible documentation that can be provided when challenged, as well as a transparent relationship with authorities so that issues can be addressed early rather than waiting for an audit or controversy further down the road."


Effectiveness of
talent management