Global Talent: The War Goes On

ETHOS Issue 05, Nov 2008

The term “war for talent” was coined by McKinsey & Company in 1997 as part of a research study on how companies manage leadership talent. The war for talent was deemed to be a strategic business challenge and a critical driver of corporate performance. Then, when the dot-com bubble burst and the economy cooled, many assumed the war for talent was over. However, the intense competition for talent persisted.

In today’s global economic environment, it is tempting to reach the same conclusion as was reached at the end of the dot-com era, but we believe that it will be the wrong conclusion to reach, yet again. In this article, we outline major findings from the research and highlight the fact that human resource (HR) and business leaders cannot take it easy—they will continue to face talent challenges, albeit of a newer shape and kind.

GLOBAL TALENT CHALLENGES

Research has confirmed that across the globe, significant demographic,
economic, socio-political, and technological changes are dramatically altering the
workforce and the world of work. Collectively, powerful global forces—such as changes in birth rates, retirement trends, technological advances, rising global competition, more liberal trade and migration policies—are radically altering the way we need to think about our workforce and manage our human capital.

Our research shows that the future of work and the next-generation workforce will be characterised by the following themes:

1. Workforce Diversity: From compliance to inclusion, managing a workforce that varies in age, gender, race, ehtnicity, nationality, religion, lifestyles and life paths is becoming a top priority.
2. Skills Shortages and Surpluses: An ageing workforce, less experienced and smaller younger generations, downsizing, declines in investment in training and education, and poor workforce and succession planning are some reasons contributing to skill shortages as well as surpluses.
3. Global Work and Workforce: Companies and jobs are being re-located across the globe. There is a proliferation of global nomads and student migrants. Electronic immigration is becoming more common, meaning that more workers are able to and are choosing to take jobs in other nations and work virtually.
4. Virtual Work and Workforce: Technology is re-defining the workday and workplace. Remote working and virtual teaming are on the rise. Workers are switching between work and non-work in new ways—for instance, working through their commutes, through their nights, or through their vacations, thanks to technological advancements in communications and IT.
5. Autonomous and Empowered Workers: Workers are focused on individual employability. They seek to be more powerful in the job market and more influential on the job.
6. Changing Employment Contracts and Disengaged Workers: Increased workloads and work hours, compensation cuts, intense productivity pressures and transactional relationships are some reasons for employee disengagement, calling employers to re-visit the overall employment deal.
7. Human Resource Costs and Return on Investment Pressures: The cost of human capital is increasing, while HR budgets are shrinking. Internal HR is under pressure to become a business partner and faces competition from HR consulting and outsourcing providers.

While some of the above global talent challenges, such as skills shortages and the rising cost of human capital are not new, other challenges such as workforce diversity, changing employment contracts and disengaged workers are becoming more prevalent than ever. In our view, organisations will have to take note of the unique effect these challenges will have on their respective efforts to hire and build organisational capability.

ASIAN TALENT CHALLENGES: COMING OF AGE

Asia is not immune to talent challenges. While the Asian region holds much promise for organisations as far as high growth is concerned, major factors are expected to shape the world of work in this region for years to come. Our research uncovered the top three challenges—capability, culture and contract—facing Asian businesses:

Capability

Demographic drivers such as age, education, gender and migration are contributing to Asia’s capability crisis and causing a tight labour market, especially for skilled professionals and critical talent. This is because across Asia, skills demand is outgrowing education supply; even in countries like India and China where one-third of the world population resides, skilled talent is in short supply because university graduates lack the level of skills needed by global corporations. This is exacerbated by the fact that the skill sets required by organisations are ever-changing and expand even in a rapidly shifting business environment.

Companies are also facing a severe crisis at the leadership level. The ability to develop future leaders is one key concern; our research pointed out that the greatest capability-building challenge is building leadership talent in their respective organisations. The other major issue pertains to the capability of current leaders. For instance, our research suggests that Asian managers tend to be technically sound but are short on communication and people management skills.

Culture

Our research reveals that a shift is occurring in the Asian business context as a result of changing values and culture. In traditional Asian business, a more autocratic rather than democratic, and more paternalistic rather than egalitarian, management style prevails. The emerging Asian workforce, however, is influenced by Western management styles, and tends to be dissatisfied with a more authoritarian style of management, preferring instead an open and independent approach.

As a result, employers are increasingly struggling to engage their Generation Y employees who are ever more mobile and willing to change jobs. According to our research, building an engaged workforce is a top talent management challenge for all respondents across Singapore, Shanghai, and Bangalore.

The critical theme for managing engangement in organisations is "Diversity". An increase in workforce diversity means that different groups of employees have widely differing expectations and aspirations. For example, high levels of remuneration, fast-paced growth and open communication are some of the things taken for granted by young employees who are entering the workforce during a time of relative plenty. Conversely, older employees, who constitute a significant proportion of the workforce, are more moderate in their expectations and continue to place value on employment aspects such as job stability and a culture of respect and seniority.

Contract

In Asia, the fundamental agreement of service-the "employment promise" or the "performance contract" between employer and employee-is dramatically changing, and a new employment relationship is evolving. The old deal was simple and universal: it valued experience and loyalty. The players were dependent and worked effectively in a command-and-control environment.

However, the new playing field values performance and customer orientation. Talented Asian workers have an unprecedented ambition for fast-track growth and the willingness to work for it. The players are more independent and desire greater empowerment, challenging work and flexibility.

Sustaining satisfaction is therefore a huge challenge. Employees demand genuine and compelling career opportunities as a means to remain employable and ensure professional growth. However, there is a compelling perception among employees that they lack opportunity. In fact, one in every two employees in Asia does not see a future with their current organisation; average employee tenure is low.

Given the current struggle to attract talent in Asia, many employers have no choice but to comply with employee demands for attractive reward packages. Pay is also being used as a retention mechanism, with organisations making counter-offers in order to retain the staff they need, which, in their view, is less costly than having to locate, attract and hire a qualified replacement.

EMERGING HUMAN CAPITAL IMPERATIVES

As part of our analysis of key workforce trends, we have identified human capital imperatives critical for future-focused organisations. These themes, appplicable globally, emerged through our extensive research and interviews with leading talent and thought leaders across the globe. Specifically, our research focused on three key questions:

1. How should companies and organisations today manage their human capital, from both strategic and operational standpoints? What are the talent priorities they must get right?
2. What are the most effective and innovative practices by leading companies in managing the talent challenge?
3. Looking out at the next five to nineteen years, what can be predicted about the future of work, and how organisations will be managing their workforce?

Emerging from our research, we believe that these represent a global perspective of the most pressing issues impacting future organisations and workforces around the world. We present the identified human capital imperatives under three categories:

Programmes

Organisations need to create high impact solutions for key talent programmes, which include:

• strategic sourcing;
• global talent management;
• customised rewards;
• high-value learning;
• and opportunities for growth.

People

Organisations need to develop high performance and engaging cultures by:

• developing leaders;
• cultivating sustainable relationships;
• building new manager capabilities;
• supporting work flexibility;
• and facilitating inclusive and unified work environments.

Performance

Organisations need to deploy strategic processes for managing the HR function. These include:

• practising evidence-based HR;
• creating an employee value proposition;
• engaging in continuous foresight and planning;
• managing corporate citizenship and stakeholder connections;
• and developing global HR capabilities.

CONCLUSION

The workforce is in the midst of an unstoppable and dramatic transformation. These changes will influence how the work is performed, where it is performed and what skills are required. To survive and be ahead of the competition, organisations will need to be aware of their talent challenges and have the right human capital strategies and practices in place.