Talent Management Strategies for a Global Marketplace

SSON News and Analysis
Posted: 07/09/2012

Historically, the large firms in western and industrialized nations were able to attract and leverage the top talent. Even when talent came from emerging markets, the individuals often received advanced education and training in the west, and stayed there to pursue business careers. But both the source of talent, as well as where it chose employment, began to change in the late 1980s and into the 1990s. First, waves of start-up firms, particularly in the high-tech market, began to lure talent – and through it gain competitive advantage – from larger more traditional businesses and the public sector.Change continued as emerging market talent, from places such as India and China, began to stay at home and grow their own markets’ businesses. Both these phenomena have challenged the earlier status quo.

Marketplace challenges
Western and industrialized nations face additional challenges today when it comes to finding and leveraging talent to remain competitive. First, workforces in many markets are aging and retiring, which results in lost talent and experience and thus forces a proportionally smaller number of younger workers to support these economies’ talent needs. Second, protectionist labor policies can limit access to talent from outside local markets. Third, educational systems in some industrialized nations – like the U.S. – are declining overall, or at least when it comes to serving the lower end of the socioeconomic scale, turning out new workers with often limited employment skills. Finally, despite much hand wringing over the demise of the western market blue collar worker, an increasing number of jobs in the "trades" go unfilled because of lack of qualified candidates. Clearly, business as usual for growing talent is not working in the West.

New markets gaining an edge
This situation is further complicated as the battle for talent continues to evolve. Increasingly, it is new markets and new market players that are gaining a talent edge. The quantity and quality of available business talent in emerging markets (e.g., India, China, Philippines, Vietnam, Central and South America) has grown significantly over the past 20 years. And this talent no longer necessarily flocks to western businesses for employment. While these individuals are frequently employed by firms that are industrialized nations’ supply or service chain partners, the organizations themselves are often becoming competitors, as well as business partners to legacy western firms.

Impact of globalization
The ongoing globalization of the world economy is fundamentally changing how businesses must define and execute talent strategies.

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Organizations must increasingly source talent from non-traditional markets and often through non-traditional means, such as gaining access to talent via outsourcing or offshore captive operations through leverage of global sourcing strategies.

Companies targeting the burgeoning Indian and Chinese markets, for example, will need to have next generation executive leadership who come directly from those markets.

While the need for local talent is nothing new, it is now more of an imperative not only due to the complexities of the world’s leading emerging markets but also because those markets are churning out many new competitors to traditional industrialized nation players. They are no longer a "farmsystem" for talent, but rather represent a new, competitive major league. While these trends are creating angst among many western business leaders, and they have caused a much higher degree of consternation among many western media, politicians, special interest groups and others in the anti-globalization camp. Several recent market research studies bear this out.

The Economist Intelligence Unit recently conducted a globalization market study (on EquaTerra’s behalf) in which more than 200 executives - over 90 percent of whom were from North America and Western Europe - were surveyed. When asked what the greatest challenge to their organization’s success would be over the next three years, the top response, as cited by 45 percent of those surveyed, was finding and retaining high quality talent (see Figure 1). It is important to note that in this study, 90 percent of respondents felt globalization was inevitable and 72 percent indicated it would have an overall positive effect on their organization. Respondents were clearly in the proglobalization camp, even if they recognized the challenges it created for their businesses.

In this same study, when queried on the greatest opportunity globalization created for their organizations, 61 percent of respondents indicated it creates opportunities to expand into new markets. This opportunity creates the dual challenge, however, of finding and employing the talent needed to support these market penetration efforts.

In most large businesses, the lead in addressing talent issues has often fallen to the human resources group. Given the strategic importance of talent and talent management, it is not something organizations should expect HR to tackle on its own. But the HR group must take a leading role in driving and enabling their organizations as a whole to respond to talent challenges and exploit talent opportunities.

The above was born out in a recent EquaTerra market study, conducted in conjunction with Human Resource Executive magazine, in which over 400 HR professionals were surveyed and interviewed on how well their HR operation performed as a strategic corporate asset, and what it needed to do to become more strategic. The study found that only 57 percent of respondents felt their organizations’ executives viewed HR as a strategic asset. Numerous respondents indicated that while HR as a discipline and set of activities was strategic, their own HR groups were themselves not. When asked what their HR groups could do to become more strategic, however, over 70 percent of respondents indicated they must become leaders in total talent management (See Figure 2). As would be expected, total talent management was also cited as the most strategic activity performed by the HR group (see Figure 3). Thus, while talent management is critical to organizations as a whole and a priority on executives’ agendas, it is also a means through which HR groups can play a more strategic role
in their business.

Improving talent and talent management capabilities must involve everyone in the organization. It starts at the top with recognition of the importance of talent management, the development of a corporate talent strategy, tangible support for its implementation, and, perhaps most importantly, recognition that "business as usual" for talent is no longer an option. All this requires a mental and cultural openness to support the attraction, acquisition and integration of talent from new and non-traditional markets. In many respects, the overall corporate culture and mindset must become more global to support global talent integration.

From an operational perspective, western businesses must continue to evolve the activities and services they perform internally and those they source externally from other organizations in order to support the growth and diversification of global talent.

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Globalization’s growth equates to the shift from vertical integration to horizontal specialization as a means of competitive differentiation. Businesses must continue to narrow and specialize to remain competitive, and recognize some activities are better performed by third-party specialists and often lend themselves to greater standardization, as opposed to customization. Possessing an internal HR or finance and accounting function that delivers exceptional payroll or accounts payable services is nice, but does little to provide competitive differentiation. Similarly, highly customized and complex back-office processes and systems create more problems than they solve, and at a higher cost. Success for western firms will increasingly come from innovation in product and service design and delivery, and less from directly owning and managing the bulk of a supply or service chain.

Optimizing external services
One area in which firms must achieve operational excellence is in the use of external services. The globalization of the talent market parallels the globalization of services delivery. Whether it’s from within the organization, through an offshore captive, via a third-party service provider or through a service or supply chain business partner, western firms must possess superior skills in designing, populating and managing their own service delivery networks.

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Here, sourcing (e.g., designing and populating) is as critical as managing and governing. It is with managing and governing, however, EquaTerra sees organizations having the most problems, particularly as service delivery networks diversify, include more third parties and become more global. Multisourced provider governance and management has become a key business discipline in which firms must excel to become or remain, market leaders.

Ongoing globalization creates many challenges for traditional western and industrialized nations’ businesses. They no longer have a lock on growing, attracting or retaining the top talent needed to compete. But the flip side to every challenge is an opportunity, and when it comes to talent, western businesses now have access to a significantly larger, more diverse and skilled talent pool than in the past. Leveraging this talent is not only critical to overcoming weaknesses in shrinking, aging and, too often, under-skilled local talent pools, but is also is an imperative to gain the skills and knowledge needed to penetrate and profit in emerging market economies. Western businesses – and nations – will be well-served to move beyond the philosophical debate over the good or evil of globalization and, instead, focus on how to address and exploit its realities.

Global talent management is a good place to start.

About the Author
Stan Lepeak leads EquaTerra research efforts focused on the following topics: business process and information technology (IT) outsourcing market trends and futures, performance and satisfaction levels; outsourcing and shared services execution and management best practices; business, IT and outsourcing service provider market trends, buying patterns and performance levels; the globalization of the business services and outsourcing markets; shared services and outsourcing management and governance processes, tools and best practices; vertical industry and geographic trends relative to the use of external business and IT services. Lepeak has followed the business and IT services and IT marketplaces for more than 20 years.


 

 

 

SSON News and Analysis
Posted: 07/09/2012

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