global talent

GLOBAL TALENT

Global Talent Report 1

One of the impacts of globalisation has been anincreasingly borderless approach to labour and talent.Indeed, innovative companies that operate on a trulyglobal scale have started to reconfigure the way theydeal with their people – and how they achieve the finebalance between global leadership and local control.

Meanwhile, new rivals from emerging markets arequickly expanding, not only at home but also intodeveloped markets. In the process, they are acquiringnew ways of finding and tapping into skilled staff fromall corners of the world.

In this report, which is produced by UK Trade &Investment in co-operation with the EconomistIntelligence Unit, we review current trends in theglobalisation of talent and the associated implicationsfor companies worldwide.

Some of the trends emerging from this paper includethe following:

The flow of talent is evolving into a multidirectionalphenomenon, where corporate borders act as a moreimportant boundary than national borders. Already,major companies such as IBM have relocated keyoperations to emerging markets; it now runs its globalprocurement out of Shenzhen. Future changes maywell be fuelled by ongoing economic growth withinemerging markets. Indeed, in an online poll, 76 percent of respondents agreed that, in the wake of thecredit crisis, emerging markets now present the bestopportunity to build a career in the medium term.

Staff cuts may be necessary in the short term, buttalent pressures are unlikely to disappear. The currenteconomic downturn means that many companies,especially within developed markets, will probablyneed to cut back on staffing in the short andmedium term. But highly skilled workers in today’sglobalised environment will move to markets wherethe most opportunities open up. Longer term,companies are unlikely to face any less pressure fortalent than they do today, so HR bosses will need towork hard on their talent management strategies.

Emerging market champions have new ideas abouthow best to exploit talent. Rather than relyingprimarily on trusted expats to run overseasoperations, firms from Brazil, Russia, India and China(the so-called BRIC countries), as well as from otheremerging markets, are more willing to bring in localmanagers – whether in Europe, Latin America orelsewhere. Acquisitions in these markets simply addto the available talent pool.

Both individuals and companies are usingtechnology to support this globalisation of talent.Young professionals around the world are moreglobal in their outlook and want their employers tosupport their desire to work internationally. Theyalready tap into increasingly international networksof contacts, supported in part by online socialnetworking tools. Companies are also usingtechnology to help, for example by virtually linkingpromising executives in emerging markets with moreexperienced mentors elsewhere.

Expansion abroad still holds many challenges.Thinking globally but acting locally is not a newidea, but firms continue to struggle to find the rightbalance in choosing what to control centrally andwhat to let local operations handle. This is not theonly problem that has been around for a while:cultural adjustments are still as hard to make as ever,with little substitute for first-hand experience.

GLOBAL TALENT

As multinational companies recognise the growingimportance of emerging markets to their profitability,the question is how to identify and develop futureleaders when, in many of those markets, experience isin short supply and much of the workforce consists ofyoung people at an early stage in their careers. At IBM,the solution has been to roll out cross-bordermentoring programmes in which both mentor andmentee meet virtually.

“In the USA, if you became a new manager you couldgo down the hall and grab ten people who couldpotentially be a coach,” explains Kari Barbar, Head ofWorkforce and Diversity Programs at IBM. “But thegrowth markets are growing so fast that they don’thave these mentors and coaches.”

The idea behind the global mentoring programme,which is initially being rolled out in South Africa, is tocapitalise on the knowledge and experience of seniorIBM executives in the company’s US operations byhaving them mentor less-experienced employees – butat a distance. The programme works by establishing apattern of regular phone calls between mentor andmentee as well as via web-based technology. “Virtualmentoring enables us to reach more employees in morecountries, and it exposes people to many more cultures,”says Mary Ann Bopp, Manager of the mentoring schemeand a mentor in the South African programme.“Technology removes the lines that divide us.”

In addition, monthly interactive briefing calls with C-level IBM executives cover topics such as strategy,financial modelling, developments in certain industriesand new IT trends such as cloud computing. “Thesebriefings enriched the conversations I had with mymentee and encouraged us to cover a lot of ground,”says Ms Bopp. As well as being able to bring to thementoring relationship her experience of working in HR,Ms Bopp’s background in accounting helped, too. “Notonly did my mentee want leadership and managementadvice, but he also wanted to better understand thebusiness,” she says. “I could help him develop businessacumen and understand the financial implications ofthe decisions he was making.”

Moreover, it is not only the mentees who benefit fromthe programme. Bringing senior US executives intocontact with junior colleagues based overseas helps tospread valuable knowledge of how business is conductedin emerging markets without having to send executiveson expensive familiarisation trips. “This programme is agreat learning experience for the mentors as well,” saysMs Bopp. “I quickly grew to appreciate what it would belike to manage a team in another country – especiallyone like South Africa, with enormous growth coupledwith infrastructure challenges.”

One challenge for those running the programme –which is being expanded into other emerging marketsnext year – is making the right matches and ensuringthat the relationships continue to thrive. To do so, IBMconducts periodic surveys of mentors and mentees aswell as a final survey when the programme period is up.And the company has found that many of therelationships continue beyond the programme. “I stillcheck in with my mentee at least once a quarter,”confirms Ms Bopp.


In July 2006 a group of American college graduatesarrived in Mysore. They were not visiting the southernIndian city to see the famous Hindu temples. The 126graduates were the first batch of hires from USuniversities made by Infosys, the Indian technologyservices giant. Their arrival in India for the start of asix-month training programme was also one of agrowing number of signs of a new era in theglobalisation of talent.

Talk of “global talent” once referred to the westernexecutives from Europe and the USA sent overseas toestablish representative offices in new markets or tomanage the factories in their firm’s supply chain. Today, however, this largely one-way flow of talent hasbecome a multidirectional movement in which nationalborders are no longer barriers to recruitment anddeployment of skilled workers.

“We spend a lot of time looking at different countriesto try to understand what the talent pool in eachmarket is,” says Kari Barbar, Head of Workforce andDiversity Programs at IBM. “One country may be goodat having a call centre, while another might not havethe infrastructure to support it and would require toomuch investment.”

Several factors have contributed to this borderlessapproach to talent. Not only has the rapid growth ofemerging market companies – frequently outside theirown national boundaries – fuelled an appetite for talentin new parts of the world, but also many of thesecompanies have in recent years snapped up establishedUS and European brands, giving them access to newpools of labour within their expanded organisations.

Meanwhile, the move of established global companiesinto new forms of business and new markets gives themaccess to labour and skills. As Siemens, the Germanelectronics and electrical engineering company, expandsits renewable energy business, its operations in Denmark– a leader in alternative energy models—provide a basefrom which to tap into local skills and knowledge aboutthese forms of energy.

For Vodafone, the UK-based mobile telecoms company,the convergence of mobile, broadband and internettechnologies is driving a need to look globally for skills.Acquisitions of companies such as New Zealand’s ihug,a telecoms and internet company, and the Spanish andItalian assets of Tele2, the fixed-line telecoms andbroadband services provider, has allowed it to boost itsskill base in new areas of communications technology.

At the same time, companies from mature economiesare relying more heavily on newly industrialisedcountries to fuel continued growth. As the economicdownturn in Europe and the USA worsens, this trendwill accelerate as private sector attention focuses onregions such as the Middle East, China and India, wheregrowth rates, while slowing, still look healthy comparedto those of countries such as the USA and UK.

“Talent flows to where the money is and the businessis,” says Keith Dugdale, Director of Global Recruitmentat KPMG. “And what we’ll certainly see in the next 18months when the recession bites in the USA and UK isa net outflow of talent from those countries toemerging markets.”

Although the prospect of global economic slowdownmay provide a temporary respite from the labour crunchin developed markets, long-term demographic trendswill contribute to reshape the world’s talent pool. Withbirth rates falling and baby boomers retiring in westernEurope as well as in countries such as Russia, Japan,Australia and New Zealand, companies will need to lookto new regions such as Latin America, Africa and Asiato supply their need for workers.

2 Global Talent Report

A NEW ERA CASE STUDY IBM’s cross-border mentoring

While shifts in the corporate and demographiclandscape are creating a need for more globalworkforces, another factor contributing to the change isthe entry of a new generation of employees into thetalent market: Generation Y.

Gen Y workers tend to be far more global in their outlookthan previous generations. KPMG's Director of GlobalRecruitment, Keith Dugdale cites the example of aconversation he had with a Singapore-educated Indianstudent at a conference in Dubai. The student expressed adesire to work in the UK or the USA. “I asked her how shewould find out about those opportunities,” he explains.“She said: ‘I’ll just get on my network in the UK, USA andChina and ask people what they think of KPMG.' It’sstaggering, and it’s truly global.”

And if younger people are able to draw on animpressive international network in their job searches,they also have high expectations of the kind of globalcareer moves potential employers can offer them.“They’ve often travelled, studied or worked abroad, andone of the things they want most in their early careersis international opportunities,” says Mr Dugdale.


As they become global organisations, companies fromthe BRIC countries and other emerging markets arechanging the way talent is managed in overseasmarkets. And the new companies have been reluctant toadopt the traditional expatriate model long deployed bywestern multinationals.

Instead, many are turning to the talent available in themarkets in which they have invested, as China’s Haierhas done in the USA where, rather than sending inChinese executives to run its operations, the whitegoods maker relies on local managers.

“In Asia, there’s a lot of focus from companies on howto become global and they’re not so much interested inhow US companies did it,” explains Brian Wilkerson,Head of Workforce and Diversity Programs. “They’retrying to create their own model.”

Emerging multinationals are not only, like Infosys,recruiting employees from mature markets: they are alsobenefiting from access to new pools of skilledexecutives in the companies they have acquired. Cemex,the Mexico-based cement maker that has boughtcompanies in Latin America as well as in Spain, the UKand Australia, retains key talent from the firms itacquires, using a well-developed system through whichpost-merger integration teams are sent to work withnewly purchased companies.

However, strategies vary across emerging economies.“The management of Korean companies has been veryinsular, and they’ve paid a very big price for that,” saysKannan Ramaswamy, a Management Professor atThunderbird School of Global Management. “Whereas,for some reason, the Chinese have been open-mindedin allowing western talent to come and help them out.”

While newly emerging multinationals build theiroverseas workforces, at home these companies are alsoproving a powerful presence in the employment arena.Overseas firms operating in countries such as India orBrazil have found that they are no longer the onlyoption for skilled job seekers. Many local multinationalsare starting to provide the kind of internationaldevelopment opportunities, salaries and benefits thatappeal to ambitious job candidates who might oncehave only considered working for a foreign company.

In turn, as firms from mature economies look toemerging markets for future growth, they are battlingto win talent in those markets. “It’s suddenly become aglobal market,” says Nandita Gurjar, Head of HR atInfosys. “Companies from across the world are hiringfrom the pool of talent in China and India, so nolonger do we face competition just from the domesticmarket, but now it’s more from the global market.”

One indication of this was the relocation by IBM of itsglobal procurement operations to Shenzhen in 2006,accompanied by the company’s Chief ProcurementOfficer, John Paterson. The shift to southern Chinarepresented the first time the headquarters of acorporate-wide IBM business unit had been movedoutside the USA.

As well as helping to build relationships with newsuppliers, the move was, according to Mr Paterson atthe time of the announcement, “about making efficientand effective use of skills everywhere in the world”.

At the same time, companies in countries where skillsshortages are growing, are seeking to hire from outsidetheir own borders. In Russia – where a sharp fall inbirth rates is expected to have a negative impact on theeconomy in the coming years – companies are lookingoverseas to fill some of their employment gaps,particularly in the energy and natural resources sector.In a recent Economist Intelligence Unit report, 75 percent of respondents in that sector said that they werelikely to hire staff from abroad.


NEW MANAGEMENT MODELS EMERGE

Speaking the language

If executives, particularly younger ones, arebecoming more adept at moving from market tomarket, it is also true that cultural adjustmentsremain hard to make. And it is not only workinghours or business practices that may be different.Some of the changes to which globally mobilebusinesspeople must adapt are more subtle.

One example is the “code switching” that takesplace when people move from one language toanother. “Human beings use tone of voice, thedegree of eye contact and gesture to build trustwith each other,” explains Sunita Singh Maclaren,founder of World Wise, a consultancy that offersadvice, information and training for companiesentering new markets. This all changes, she explains,when they start speaking another language.

Pre-departure briefings, language training andinduction courses on arrival can help, as cantechnologies that connect people in differentmarkets virtually via phone, email, instantmessaging and video conferencing. However, Ms Singh Maclaren argues that there is nosubstitute for first-hand experience of newmarkets. “Senior executives say that they go toChina three times a year. But they go to thesame hotels, eat in the fancy restaurants andsit in the boardroom – and have zero idea ofwhat’s happening in smaller communities.”

“Everyone is looking for the CliffsNotes [studentstudy guides] version of globalisation, but humansocieties are incredibly complex,” Ms SinghMaclaren adds. “There really is no shortcut –companies need to have programmes that helpleaders delve deeply into the cultural metaphorsby which people define themselves. Andconverting that to business capital requires a lotof on-the-ground work.”

If the management and development of the workforceis becoming more geographically dispersed in globalcompanies, so is the profile of their leaders. When theBrazilian firm, Coteminas, merged with Springs of theUSA to form Springs Global, the textile homefurnishings company retained its American brandprofile. However, its Chairman and Chief Executive,Josué Christiano Gomes da Silva, is Brazilian.

“The leaders of global companies have historically beenfrom the UK and USA, and soon it’s going to be China,Brazil, India or Russia,” says Mr Dugdale. “And thatreflects the realities of the changed world.”

Even so, while the talent world may have changed tobecome increasingly borderless, companies must alsocontend with the fact that labour regulations remainlocal, and can vary widely.

While the UK has a flexible labour market, and the USA,with its entrepreneurial spirit, tolerates employmentuncertainty relatively well, European countries – notablyItaly, Belgium and France – tend to be more rigid, bothin terms of labour legislation and working culture.

When in 2006 France – known for its burdensomelabour regulations – attempted to reduce youthunemployment by introducing flexible contracts forthose under 26 years of age, the Government wasforced to back down after a series of demonstrationsand strikes.

At the same time, governments have responded indifferent ways to global labour flows. While within theEuropean Union, states must open their markets tomembers, they have yet to decide whether to maintainrestrictions on workers from new EU states. In addition,as global recession sparks rising unemployment, thequestion for companies is to what extent governmentsaround the world will maintain open borders when itcomes to labour.

Taking research to the researchers

As the number of engineering graduates falls inthe home markets of many European and USmultinationals, many companies are establishingresearch and development capabilities incountries such as India and China, where asteady supply of young engineers flows out ofuniversities every year. Among those to tap intothis rich vein of emerging market talent arecompanies such as General Electric, DowChemical and Microsoft.

GE Global Research now has some 3,000researchers across the world, many of whom arebased in facilities outside the USA, such as theJohn F. Welch Technology Centre in Bangalore,India, and a research centre in Shanghai, China.

For Dow Chemical, India has become animportant market in which to establish researchcentres. It has established an engineering centrein Chennai, a service centre in Mumbai staffed bymore than 500 employees and, most recently, aresearch and development centre in Pune, to becompleted by January 2009 and staffed withscientists, about 80 per cent of whom will comefrom the region.

Meanwhile, Microsoft has been capitalising ontechnical talent pools in China and India.Employing about 50 scientists and support staffin Bangalore, Microsoft Research India wasestablished in 2005, while in Beijing thecompany’s Asia-Pacific research arm employsmore than 350 researchers and engineers.

While locating such centres in emerging marketshelps companies to find new sources of talentedtechnicians and scientists, Sunita SinghMaclaren, founder of World Wise, believes thiscan also help them learn about unfamiliarmarkets. “Companies should think about it interms of capturing local intelligence to build awhole new portfolio brand for differentconsumers,” she says.


If companies can agree on the need to embrace aborderless talent model, they face difficult questionsabout how to manage their global workforce, the mostimportant being whether to manage it from thestrategic centre of their organisations or to devolveresponsibility to local business units.

The answer for many companies is “both”. At Vodafone,only the top 60 to 70 roles in the company arereviewed at a “Global Development Board” each year,while regional CEOs are responsible for successionplanning and deciding how they want to develop anddeploy talent during the year.

Yet the balance is often hard to strike. Infosys handsover much of its talent management to local leaders.“But we struggle with it all the time,” admits Ms Gurjar.“How centralised or decentralised should we be andwhat should be controlled and what should be let go?”

Infosys is not alone in facing this dilemma, accordingto Mr Wilkerson of Watson Wyatt Worldwide. “Over thepast year I’ve seen a lot of companies challenging theglobal structures that they have,” he says. “In manycases resourcing levels are being set at a higher level,while the strategies of how you recruit them andmanage them are pretty decentralised.”

Also being overturned is the old pattern of employeedevelopment whereby companies bring high-performingemployees to training centres for instruction in theirhome countries.

The opening in October, for example, of a new facilityin Bangalore, India, brought to three the number ofcentres in Cisco’s Global Talent AccelerationProgramme, a scheme designed to foster the nextgeneration of local engineering and sales talent inglobal markets. The company has similar facilities inJordan and South Africa.


A GLOCAL APPROACH TOMANAGEMENT


CONCLUSION

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The Economist Intelligence UnitThe Economist Intelligence Unit is the businessinformation arm of The Economist Group, publisher ofThe Economist. Through our global network of 700analysts, we continuously assess and forecast political,economic and business conditions in nearly 200 countries.As the world's leading provider of country intelligence, wehelp executives make better business decisions byproviding timely, reliable and impartial analysis onworldwide market trends and business strategies.

As powerful multinationals have emerged fromdeveloping countries and companies in matureeconomies look to new markets to expand theirbusinesses, companies need to consider:

1. an increasingly global approach to their talentmanagement strategies, whether that means hiringfrom regions not previously seen as sources ofemployees or establishing training and researchcentres abroad,

2. the need to provide the kind of international careeropportunities that will attract ambitious youngexecutives who expect to be globally mobile,

3. new models of talent management in which the rightbalance needs to be struck between control from thecorporate heart of the company and devolution ofresponsibility to local business units, and

4. a long-term approach to talent management that takesaccount of the fact that global demographic shifts willcontinue to fuel competition for skilled employees.

As recession starts to affect many countries the growingnumber of job losses is what is hitting the headlines.However, while the current round of lay-offs may providea temporary easing of the talent crunch, long-termpopulation shifts, patterns of migration, changingemployee expectations and continued growth inemerging markets point to a world in which companiesneed to cross a growing number of cultural and nationalboundaries to build and maintain the workforcesessential to their profitability.

While every effort has been taken to verify the accuracy of thisinformation, neither the Economist Intelligence Unit Ltd nor UK Trade & Investment (including its parent Departments: theDepartment for Business, Enterprise & Regulatory Reform, and theForeign & Commonwealth Office) can accept any responsibility orliability for reliance by any person on this report, or any of theinformation, opinions or conclusions set out in the report.

Published January 2009 by UK Trade & Investment© Crown Copyright URN URN 09/596

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