With so much competition for skilled people and so much worker mobility, the best recipe for success is to build from within
Of all the resources for which everyone from everywhere will be competing in the years ahead, talent is the most precious—and may be the most difficult to come by. In the age of globality, the success of companies will be dependent on winning the contest for talent. Decision makers will have to think just as carefully about who will accomplish what needs to be done as they will about how to do it.
Even in China and India, where there is a seeming glut of workers, human resources is no longer a straightforward operational issue. The simple equation, "We need to hire X number of people at the following rate at such and such location," no longer works. As the rapidly developing economies continue to grow and the Western economies continue to age, the competition will only intensify. Winning this competition will require new strategies that don't always fit traditional molds.
Consider the talent contest as a series of challenges. The first challenge in the era of globalism is finding people. The second is aligning the talent with the work that needs to be done. The third, as they say in real estate, is location, location, location: having the right people in the right place at the right time. The fourth challenge is retention: avoiding high turnover rates and motivating people to stay with the company. And the final challenge is quality: making sure the available people have the necessary skills.
Battling High Attrition Rates
We have all seen the stats on the number of engineers and IT workers India is producing each year. But most people don't know that attrition rates in the outsourcing industry can often be as high as 50% per year. As a result of this constant churning, a tremendous number of people must be hired each year just to maintain current employment levels. India's IT and business-process outsourcing industries face severe shortages, especially in big growth centers like Bangalore and Pune, in spite of all these new graduates.
Location is another issue. Work is often available, but in places where there aren't enough qualified workers. The problem is particularly acute in Eastern Europe, which millions of skilled workers have abandoned for higher-paying jobs elsewhere, leaving companies with three options: increase wages (thus diminishing cost advantages), engage in massive and expensive recruiting efforts to attract African and Middle Eastern workers, or shut down operations. In "Detroit East," the huge auto-making cluster near Bratislava, Slovakia, the demand for workers is so intense that Peugeot Citroën (ENXTPA:UG) is now providing housing to entice workers from other parts of the country.
Quality, of course, is the biggest issue. People who appear to have the right credentials don't always have the necessary education, skills, or experience to do a particular job. Consider language. We've probably all called a customer service line at one time, which was answered by people in India who spoke English but weren't fluent in the way we needed them to be. Then there's the matter of education. India has 20 times as many higher-education institutions as the U.S.: some 80,000, compared with approximately 4,000 in America. But the Indian schools' quality varies so wildly that, according to Hewitt Associates, only a quarter of India's higher-education graduates are sufficiently hirable for IT and other high-end job without extensive in-house training.
What can managers do?
First, they should start thinking in terms of "growing" people. What this means is that your job isn't over when you locate and recruit somebody. In many ways, it is just beginning. To make these hires useful, companies need to provide training, education, mentoring, and motivation, so employees develop the necessary skills and the desire to stay with the company.
Consider how India's ICICI Bank, the country's second-largest, is doing this. With $79 billion in assets, 950 branches, and 42,000 employees, ICICI's demand for workers began to seriously exceed supply in 2003. Today, the company needs to hire some 15,000 to 20,000 new employees each year, a figure that would be even higher if it wasn't for ICICI's strategic approach to the talent contest.
According to K. Ramkumar, ICICI's chief human resources officer, the bank focuses on identifying people with "undeployed, nascent potential" and trains them to become high performers. To get there from here, ICICI has essentially created its own institution of higher education, which uses 2,500 instructors to teach employees online or at nine management institutes around India.
The concept of employee "learnability," meaning you hire somebody with potential (rather than credentials) and provide the necessary education and training, has been adopted by other leading Indian companies as well, including IT and business-process outsourcing giant Wipro and Tata Consultancy Services. When it comes to success, at least in the rapidly developing economies, it turns out that learnability is far more important than credentials. The same might be true in the developed world as well, but many companies in the developed world have lost the training potential to turn learnability into capability.
A second step, in addition to growing people, is to deploy your existing talent the way a military commander might deploy troops. Leading companies in rapidly developing economies typically deploy talent in ways very different from how U.S. and European multinationals do. India's Wipro builds its competitive advantage on the speed in which it trains and integrates new hires into its operation and its practice of moving people between projects so they are as fully utilized as possible.
A third thing managers must do is lead. One of the most important aspects of leadership in the rapidly developing economies is recognizing that everything is constantly changing. This means you need to throw away the old playbook. Whatever was committed to paper just six months ago is probably obsolete by now. Successfully meeting a company's talent needs requires managers who are prepared to jump on opportunities.
Top managers of the up-and-coming companies from the developing world that you're now competing with are often part entrepreneur and part team captain. They are able to do something most Western managers aren't experienced at doing: make it up as they go along.
While leadership means many things, it's clear that success in the global talent contest will require you to:
1. Think globally. Though your office may be in the U.S., consider every country and region where you do business or hope to do business (and even places where you may never do business) when you think about talent.
2. Put together strong local leadership teams to guide your progress. There cannot be a glass ceiling—real or perceived—for local managers. If there is, people will walk.
3. Balance local human resource needs with global standards. This may require tailoring employment packages to local markets to attract and keep top talent, rather than applying global policies for the sake of global consistency.
Competing with everyone from everywhere for everything means you're now competing for people as much as you are for anything else . How well you manage this talent contest could be the difference between success and failure.