Managing Director & Senior Partner
With much of the developed world mired in slow growth and fiscal austerity, many companies find the strong economies and rising incomes of certain emerging markets quite attractive. But there’s a catch: talent is increasingly difficult to find and hold onto in such countries as Brazil, Russia, India, and China (BRIC). And the talent shortage will only worsen over the next decades as multinationals pursue their localization strategies and locally based challengers continue their ambitious expansion.
The shortage applies up and down the ranks of employees, though the challenge for employers takes a slightly different shape in each group:
Companies competing in emerging markets—whether they are multinational or locally based—will, therefore, need to raise their investment in talent management, treating human capital with the same rigor as a capital asset investment in order to overcome some common challenges. (See Exhibit 1.)
These challenges, while complex, can be addressed with a holistic talent strategy that accommodates regional variations but also maintains an enterprise-wide view. Five aspects of talent strategy merit immediate attention from executives in emerging markets.
To attract a broader group of qualified potential employees, companies can look in unconventional places and at alternative groups of candidates. These include decent universities in small cities, expatriates who have studied or worked abroad and are open to returning to their native country, retirees seeking part-time work, immigrants from other countries, candidates from other industries (Indian companies are looking in the defense and government sectors), and young mothers reentering the corporate world. Tata has a career transition program that targets Indian housewives who want to return to paid employment. Diversification also involves taking talented employees from within the organization and giving them several months of specialized training, as Infosys does in India and Neusoft does in China.
Reshaping the talent pool will also require some leaders to change long-standing habits, such as the natural tendency to seek out “ready now” talent rather than viewing recruits as assets to be developed over the long term.
A well-designed process for onboarding new employees and starting their career development early on can help cut in half the level of undesired turnover during the first year of employment. Companies have to invest more in education at all levels of the enterprise—in both hard and soft skills and in both on-the-job and classroom settings.
Greater productivity does more than just improve the cost structure: it also helps companies manage their talent needs and enriches individual jobs. Reducing the number of people who must be recruited every year hinges on making the current workforce more engaged, more productive, and better organized. Companies can accomplish this through appropriate organization reviews that aim for fewer structures, leaner processes, and performance-based HR systems.
Other types of initiatives may be required to address region-specific issues. In Russia, we have observed a fair amount of arbitrary, unpredictable decision making by middle managers. This tends to corrode engagement levels among employees and stifle productivity. The key to breaking ingrained habits is to develop a meritocracy with clear decision rights and a strong performance-management system based on explicit objectives, feedback, and metrics that link compensation to performance.
Building the base of middle-management talent internally has direct economic returns (through lower spending on recruitment) and enhances a company’s value proposition. In high-growth markets, companies have six or seven years at most to develop a generation of leaders, not a decade or more.
Manager development can be accelerated by identifying high-potential employees early on and overinvesting in them through accelerated job rotation, opportunities for project leadership, and a variety of assignments. In a country with a short history of international profit-making enterprises, managers would benefit from significant investment in strategic thinking, effective coaching, and collaborative work with a diverse group of employees.
No major company would dream of launching a product without a detailed plan, resources allocated for product distribution, and a marketing campaign. Likewise, talent management should be professionalized along several dimensions. (See Exhibit 2.)
People Planning. An important first step is to systematically assess the company’s workforce-capacity risk for a particular region and then put a strategic plan in place to manage that risk in three areas. The first is strategic workforce planning, which involves projecting current resources and future supply and demand at the job family level to identify the potential gaps as well as the productivity challenges that the company will face. Subsequent actions in recruiting, reorganizing, and outsourcing choices should proceed on the basis of the analysis.
The second area, talent pool planning, focuses on future middle and senior leaders for the company. This requires careful engineering of desired and undesired attrition, career lattices that are more flexible than career ladders, and accelerated progression for promising employees, which is particularly important in high-scarcity markets.
A succession heat map is the third key planning component. Companies must identify the risks for pivotal positions and the internal and external sources from which those positions can be filled. Signals of weak engagement in pivotal roles can be monitored through employee surveys, regular dialogue with supervisors, and even postings on relevant blogs and social-media platforms.
Employer Value Proposition. Once the strategic plan is in place, there is a marketing challenge: defining the company’s brand and value proposition as an employer and marketing that brand through the appropriate channels to target talent segments. This could involve many of the tools familiar to marketers but foreign to many HR managers, including focus groups, voice-of-the-customer surveys, and creative use of social-media platforms to reach the target segments in their favorite channels.
Integrated Talent Infrastructure and Processes. Identifying, recruiting, and developing talent takes time and money—and the bill can easily range from half to all of a year’s salary for certain positions. That’s why it is essential to build consistent and optimized companywide processes for career reviews, performance and compensation management, and learning and development.
Talent on Each Executive’s Agenda. Social media allow recruits and employees to quickly learn about and comment on the day-to-day reality of management and career prospects inside a company. Delivering on the company’s brand promise to employees thus becomes the responsibility of all executives rather than a process owned only by HR. Indeed, the time dedicated to talent management by senior leaders exceeds 10 percent—25 days a year—in the best-performing companies.
The push into emerging markets requires a mix of employees and skill sets that are different from those needed in the past. At the same time, competition for talent is intensifying among local companies and multinationals pursuing localization strategies. These trends put a premium on both attracting and building talent through a coherent professionalized approach—one that puts to rest excessive reliance on poaching and serendipity.