The 15th Annual Global CEO Survey conducted by PricewaterhouseCoopers International (PWC) revealed that despite of all the economic uncertainties, business leaders still believe that the trend of global integration will stay on track, and maintain the commitment for doing business globally stronger than ever before.
The messages from more than 1250 respondents consistently reflect the main aim of business growth through sustaining mature markets and investing into emerging markets. To support the main direction of business expansion, CEOs name several areas of priority, with one of them being directly related to international human resources management. Specifically, CEOs stress the importance of focusing on the talent that they need to grow their businesses sustainably, and hence highlight strategies for managing talent as their top priority.
The PWC research indicates that the ‘talent crunch’ is a complex and frustrating challenge for everyone as it is being felt worldwide. CEOs identified skills shortages as a top threat for business expansion, and reported that these shortages impact talent-related costs, as well as constrain firms from pursuing market opportunities, doing business effectively, and meeting quality standards.
Given these unpleasant consequences, business leaders seem to be determined more than ever in making talent a strategic resource, implying the need for longer-term action plans that would serve also future staffing needs.
Practically, as part of their talent management efforts CEOs have started integrating HR with business planning activities at the highest company levels. The PWC data indicates that 79% of CEOs have HR representatives within their pool of direct reports. Apart from direct participation in business planning, CEOs are also seeking HR support in getting a better understanding of their investments in talent. Although indicators such as productivity and labor costs are quite common measures available to business leaders, they perceive this information as insufficient. In fact, while labor costs and productivity figures can indicate company performance against the business plan (e.g. labor cost budget) or against ones peers, they do not alert on any deeper talent management gaps. What is needed are measures that identify pivotal jobs, and that could evaluate employee engagement and team performance – the significant correlates of business results. For example, an analysis of employee engagement also indicates clearly related issues of retention and discretionary effort. The use of engagement studies can thus help to identify the areas of possible tangible improvements (such as communication within the department), and create the focus group of employees that are at risk of leaving.
Related to the question of employee engagement and retention, CEOs are also concerned with frequent job-hopping. Leaders strive to develop talent from within the organization, because external hires, while beneficial from a skills standpoint, create a loss in temporary productivity, time and money as a result of training and integrating the new employee into the company. However, developing the talent in each current employee also poses risks, as all the efforts and development resources may be lost if that employee decides to leave the company. The CEOs report that, independent of industries and regions, they fear losing high-potential middle managers the most. These managers are important because they are the closest to customers and execute strategic plans, while also serving as the future leaders with experience in the field. Overall, the trend of ‘growing their own’ talent is at the forefront, as most CEOs believe that their organizations have a role in upgrading and fostering skills of their employees, and 78% of companies report making direct investments in workforce development.
Another concern brought up by the respondents referred to moving talent across borders. The data indicate that CEOs would rather prefer local managers to run local business units. This can be explained by local managers having better access to local customers and local multinationals. Today, however, the reality is that more senior managers are transferred from headquarters abroad than the company leaders desire. The scarce talent in emerging markets as well as possible skill gaps might be the reason for why foreign managers remain so desirable. On the contrary, however, business leaders not only move experienced people from mature to newer markets, but also engage into reverse transfers, sending the top performers from emerging to developed markets to make them more ‘credentialised’. Related to this is the practice of inpatriating subsidiary managers to a company’s headquarters, a topic I have researched extensively and written about in previous blog posts.
All in all, the PWC report indicates that CEOs recognize that talent is vital to competitiveness at a time when global integration pushes towards international business growth and success depends substantially on the knowledge, skills and innovation capacity of employees.
Very thought provoking article. I recently read about the death of defined benefit plans. I wonder if loyalty and longevity were tied into having these type of plans. Very few companies now have these plans but if more had them would that decrease turnover, especially with 401(k) plans being so deficient in providing adequate retirement funds.
Yes, I definitely agree with everything pointed out on this article.. The talent crunch indeed is a global phenomenon that affects businesses worldwide.. Though I don’t think there will really be any real lack of good quality talents, knowing the amount of graduates you have every year, just a matter of being able to find the right person for the job..
Sebastian – Thanks for a thoughtful and comprehensive post.
I am glad to see the trend of moving HR out of the back-office to the table with the big kids. I think that can help with engagement.
But I have a deeper concern and that is the leaders themselves. I don’t think many of them truly believe they need to engage people.
I wrote a blog post on this that might interest you.
http://www.rickmaurer.com/wp/if-employee-engagement-is-such-a-good-idea-why-hasnt-it-caught-onif-employee-engagement-is-such-a-good-idea-why-hasnt-it-caught-on
Rick
To improve business performance, business expansion in right direction is very important and only a good business leader has this quality, that he/she can move business in right path and have ability to make new strategy for business.
I really agree on this whole article.It’s really hard to find the right person for a job. And for a business to succeed skillful leader is really needed.
In my point of view, talent is nothing you are born with.
Hard work and discipline can achieve everything!
genius is 99% perspiration and 1% inspiration
We have seen in the past decades the reality of job hopping. Talented employees usually do this; either they are pirated or decide to go to a greener pasture. the key point that should be addressed is how to retain or convince these talented people to stay loyal to their present employer. Incentives and room for more development? Just my two cents.
I agree with many of the comments – leaders need to take the need to develop talent seriously and HR needs to be of sufficient calibre to lead talent management programmes.
I agree in that it is vital to get the right people in the right jobs. Unfortunately many businesses do reach their true potential due to bad management. So it is key that the right talent is found and most of all encouraged.
It is true that talent is a part of succces. No doubt that the talented employee could enhance long-term loyalty to the company. And hence some organizations also follow KSAs: knowledge, skills and abilities.
No one is born with talent the working skill make him/her talented.As per my experience when i was join the company i don’t have knowledge about anything because the field where i work which is completely different from my study but still i’m good in it and made company profitable.
Totally agree with the article. I feel the need to hire a good leader for my company when I’m gone but not easy, have a good team is never easy.
This is really interesting take on the concept. I never thought of it that way. I came across this site recently which I think it will be a great use of new ideas and informations. Given these unpleasant consequences, business leaders seem to be determined more than ever in making talent a strategic resource, implying the need for longer-term action plans that would serve also future staffing needs.
I agree in that it is vital to get the right people in the right jobs. Unfortunately many businesses do reach their true potential due to bad management.
Leadership development is growing throughout the world and it is great to see many leaders helping encourage and support developing community leaders in under privileged communities.
Leadership is the way to grow the worlds economy and also bring failing communities out of poverty
Increased employee engagement can deliver incredible things, but it is key to remember that engagement is not something extra that is done to us. To be successful it has to be integrated into the entire way that the company works and supported from the top. It is not to delegated to HR, but owned by the top, and form part of the overall corporate culture.
In this way, the ‘job hopping’ will become less of an issue as the company will see overall employee turnover reduce.
There is far too little investment in shaping good leaders today.
My experience is that organisations lose talent mainly because the high potential managers become too good at their job. Consequently, they become too valuable in a role and find it difficult to move on within their organisation and take on new development opportunities. Out of frustration the high potential manager then decides to look at opportunities in other organisations.
Terry