Follow-up on emerging markets: The war for talent

In this post I would like to return to the issue of talent management in emerging markets given that this is a very timely issue. Indeed, scarce local talent in emerging markets tops mobility challenges according to the recent Mercer HR & Mobility Challenges of Emerging Markets Survey. Echoing these findings, the latest article in McKinsey Quarterly, the business journal of McKinsey & Company, posits that ‘competition for talent in emerging markets is heating up’ which the authors attribute to two main reasons.

First, ‘talent in emerging economies is scarce, expensive, and hard to retain’. Emerging markets do not have enough local managers with the necessary set of skills, which makes the competition for existing talent quite intense. In addition to the interest of multinational companies, the competition for skilled managers is also driven by the fast development of ambitious local companies. For example, between 2006 and 2010 the number of local companies included in the top-ten ideal employers in China grew from 2 to 7. Second, managers from developed markets appear to be quite reluctant to move to emerging markets.

The McKinsey authors note that the experience, employed strategies and strengths of global organizations with regard to operating in developed markets seem to be coming under pressure when it comes to finding and retaining talents in emerging destinations. Stevens Sainte-Rose, HR director at Coca-Cola’s Eurasia Africa group, illustrates this point quite well in his address to the delegates of an Economist Talent Management Summit:

“We used to be able to take out the Coca-Cola wallet and outbid our competitors for the talent we wanted. And most of the time we can still do that; the power of our employer brand also helps to attract talent. But now [in emerging markets] there is no one to bid for. So you need to think about it differently, from a sustainability perspective.”

(Cited in PM journal article of 15.06.2012)

What Mr. Sainte-Rose refers to is that talent cannot be hired in emerging markets as easily as in developed ones, which requires more creative approaches to developing a talent strategy. On a similar note, when discussing the question of how to address these challenges, the McKinsey professionals suggest starting with aligning business and talent strategies towards the specificity of emerging markets.

Given the above challenges, there are two main areas of improvement: becoming more attractive to locals, and encouraging parent country nationals to venture abroad. First, it is important not only to make highly talented local people join the organization but also continue to stay. Naturally, the main advantage of global organizations over their local competitors is the opportunity to work in a multicultural context and also relocate abroad. However, being an executive in a global company requires a very different skill set compared to executive positions in the domestic market. Given the skill shortage in emerging markets, the logical solution would be to develop talent by preparing the best employees for future management roles. This notion is in line with the ‘creative approach’ suggested by Mr. Sainte-Rose of Coca-Cola, who said that the company started providing training for thousands of people in communities where future talent could potentially come from (PM journal article of 15.06.2012). Other good examples brought up in the McKinsey Quarterly article include German media corporation Bertelsmann that provides their high-potential employees in India with a possibility to apply for a Global Executive MBA program; Goldman Sachs that has designed a special program to tackle cultural and linguistic barriers; and beverage company Diageo that challenged the previous requirement for global managers to have working experience in developed markets, thereby unlocking the reserves of executives from developing markets for ‘going global’.

However, companies might be growing more rapidly than the internal pool of talent, which means that organizations often still need to hire externally. Here is where the competition with fast-growing local companies comes into play. The McKinsey authors argue that, historically, globally recognized companies were more attractive to potential employees than local competitors. Today, with local employers gaining more visibility and clout, global companies should enhance their employer brand. Although the basic ingredients of a good employer brand are quite universal (e.g. competitive compensation), the challenges for global corporations arise with the need to respond to diverse local needs. The authors suggest that local adaptation is often necessary, even though multinational companies have globally consistent principles and policies across borders. My own research suggests that flexibility in the design of HR practices is crucial not only for improving employer branding but also increasing employee retention in developing and emerging markets. For example, knowing about the strongly embedded family values in Asia, global organizations may try to promote their brands through building more relationships with their employees’ families (e.g. family day initiatives).

Even if a company has found a way to effectively recruit, develop and retain  local talent, it may still need some executives from its home market to support business expansion and create links between the HQ and subsidiaries. To that end, encouraging employees from the parent country to move abroad should be another aim for global employers. Indeed, the McKinsey authors argue that ‘global organizations’ growing need for managers willing to work for long stretches overseas is coinciding with a decrease in their willingness to go’. Several reasons cause this reluctance, such as difficult working conditions in emerging markets, remoteness of the new locations, unclear roles and responsibilities, dual-career problems, repatriation problems, cultural and language barriers, and so forth. These challenges call for well-structured international assignments that balance the company and assignee interests, and would include tailored pre-arrival programs as well as on-place support by corporate relocation or HR professionals. Moreover, the McKinsey authors argue that it is very important to ensure that new executives contribute strongly and avoid mistakes upon arrival to the new location. International assignees should be helped in familiarizing themselves with new markets while maintaining their connections and influence back home.

In sum, while current data and information from different sources provide guidelines and ideas on how to succeed in emerging markets, the global talent market is still in flux. However, the McKinsey authors are optimistic that as the world’s economy will continue shifting its focus to emerging markets, more best practices are likely to evolve.

Further reading:

Reiche, B. S. (2008). The configuration of employee retention practices in multinational corporations’ foreign subsidiaries. International Business Review, 17(6), 676-687.