By DANIEL FRIEDMAN, JIM HEMERLING and JACQUELINE CHAPMAN
From The Boston Consulting Group, Inc.
Recruiting and retaining talent have always been a struggle for global companies. Today, the challenges are larger than ever. With demand rising and supply dwindling, companies are finding that the talent issue, especially in rapidly developing economies (RDEs), is one of their most critical challenges.
Three factors make the global marketplace for talent far more competitive than ever before. First, the rise of RDEs and the globalization of value chains have sharply ratcheted up demand. Companies are seeking the best locations for their operations, making decisions on the basis of cost, talent and proximity to markets. One global company projects the need to hire 20,000 employees in Asia over the next decade, which will strain its well-developed overseas human-resources (HR) engine.
Second, big demographic shifts in the West are dramatically tightening supply. Few companies have adequately prepared for the talent shortages that will be created by the retirement of the baby boomers. In the United States, 75 million people are approaching retirement, and only 30 million members of Generation X are available as successors. In the European Union, the working-age population is forecast to fall by 48 million, or 16 percent, by 2050.
Third, skilled workers are at a particular premium. Although RDEs have a bountiful supply of workers to take up the slack in unskilled jobs, they fall short when it comes to educated and skilled positions. Candidates for those jobs are increasingly difficult to find and keep because their relatively small numbers make the competition for them so intense.
Talent management needs to become a core activity on a par with corporate finance and strategic planning. Talent must be managed rigorously and globally -- across languages, cultures and time zones. Companies should be making plans that look out at least three to five years. At the same time, the systems and processes involved in managing talent must be sufficiently flexible to permit customization to local conditions and markets.
Based on our experience with global companies and interviews or surveys of close to 100 executives, we identify five key actions for success.
Create a new global model. Global companies need to reorient their organizations, operations and processes to reflect the new order of talent management, as Cisco Systems is doing by committing itself to basing 20 percent of its executives in India by 2010. Recruiting, leadership development and training need to be organized in a way that allows talent to develop in RDEs and other distant markets. As companies distribute their operations globally, they will also need to figure out how to assign decision rights and reorient decision-making processes to reflect the new order. As people -- and power -- move away from a single center, companies must revisit fundamental organization-design principles regarding the role of the center, the sizing and staffing of functions, and the coordination of activities across the enterprise.
Elevate global talent planning to an item on the CEO's agenda. Working in concert with HR, the CEO and other top executives should routinely address talent issues. The CEO of a 110,000-employee industrial-goods company, for example, recently became concerned that the company's talent pipeline was too small to support its anticipated growth in RDEs and its entry into service businesses. Subsequent analysis revealed that the company would have to increase by a factor of eight the number of executives hired in Brazil, Russia, India and China. Because senior managers recognized the importance of these hires to the company's success, they put their full weight behind a comprehensive talent-management program and an HR brand-awareness campaign in those markets.
Expand the hiring horizon. Many global companies rely largely on poaching talent from competitors when they enter new markets. But to meet future needs, they will have to start cultivating talent themselves. Among other things, they should be hiring ready-to-use graduates from top schools in local markets. They need to focus on hiring and training talented but untested recruits as well. Companies also should develop strong ties to less renowned schools to gain access to their best students.
Accelerate careers and create global leaders. To capture rapid growth in RDEs, global companies need to build high-performing management and leadership teams in a fraction of the time it takes to put them together in developed economies. To construct these local teams, companies must deploy a new leadership-development model and demonstrate that they offer meaningful leadership positions and promotion opportunities to recruits from RDEs. Money alone is often insufficient to keep the best employees, but a combination of compensation, career opportunities and a good working environment can go a long way toward retaining the best and brightest. International rotations are a key part of career and leadership development programs, offering high-potential candidates in RDEs the chance to be exposed to cultures and business practices in other parts of the world. Rotations also help feed the global talent pipeline.
Ensure that all leaders embrace the new global mindset. If companies are to grow quickly in local markets, they need strong local leaders with an entrepreneurial bent and a belief in the global values of the organization. This commitment needs to start at the top. At Air Liquide, an industrial goods company with headquarters in France, two of the top five performance indicators for the local leadership team in China pertain to talent. Every year, the senior leaders in China develop talent strategies and project talent needs for coming years. In 2007, they had already developed a plan for 2015. The company is investing heavily in talent today in order to be prepared for tomorrow.
For too long, companies have treated talent and strategy as separate spheres. Top executives have taken care of strategy and delegated talent to HR or to junior staff. That approach no longer works. Talent and strategy need to fit together like a hand in a glove, requiring senior executives to work closely with their HR staffs and local business-unit executives. Achieving a global talent advantage is hard, which explains why few companies do it successfully. But it is not an optional exercise.
Daniel Friedman is a partner in the Los Angeles office of The Boston Consulting Group. Jim Hemerling is a senior partner in the firm's San Francisco office and author of the new book, "Globality: Competing with Everyone from Everywhere for Everything" (Business Plus, June 2008). Jacqueline Chapman is a topic specialist in BCG's Los Angeles office.