The Coming Fight for Executive TalentClaudio Fernández-Aráoz
Whether you can hear it or not, a time bomb is ticking in C-suites worldwide. Its shock waves will resonate for decades. The explosive: indisputable demographics. Surveys conducted by the firm I work for indicate that the number of managers in the right age bracket for leadership roles will drop by 30% in just six years. Factor in even modest growth rates, and the average corporation will be left with half the critical talent it needs by 2015.
There's no defusing this situation. Companies will have little choice but to identify internal talent at an earlier stage and develop prospects at a faster pace. Then comes the heightened competition for talent among companies—and most perilously for the West, among countries and regions.
Next year, Asia's contribution to global gross domestic product will be larger than that of the U.S. and the largest in the world. Its share has tripled in just three decades. On top of this, a wave of privatizations is approaching as governments try to shore up their balance sheets by selling state-owned concerns. The trend is global, but the impact in Asia will be huge, given the number and size of state-owned operations and the room for improvement in their management.
As economic power is redistributed, talent will follow it. I recently learned of a midsize global corporation that decided to move its entire leadership team from Europe to Singapore, ostensibly to "look through the Asian end of the telescope." To attempt such a shift may seem radical, but every single one of the company's eight highest-ranking executives signed on for the move, along with several of their key reports.
Many Asian nations have strong traditions of placing a high value on quality leadership. Some 2,500 years ago Confucius worried about "the dearth of talent." And Asian companies are becoming much more aggressive in their search for top-notch people. But the problem facing Western businesses—and nations—isn't simply that the battle over the best people is moving to the East. Asia is also where the best weapons for winning this war are being developed. The huge demand for skilled people in Asia is making it a hothouse of innovation in acquiring, developing, and retaining talent.
Tata Consultancy Services, for example, calculates a rate of return for each of the tens of thousands of info tech professionals it hires every year out of college. This allows it to arrive at an average rate of return for the schools from which it hires. The company even makes blanket offers to entire graduating classes at the universities that deliver the best employees. And it helps these schools develop courses for the students' final semester so they graduate pretrained for their future jobs.
Infosys Technologies (INFY) elected to build the largest corporate training center in the world in Mysore, India. It can handle 14,000 employees simultaneously and nicely complements its management training facility, which coaches 400 leadership candidates a year. Accenture (ACN) India has a sophisticated system for modeling future losses of critical professionals to rivals. The company calculates the value of retaining at-risk employees and acts preemptively—or not.
The developed world continues to offer superior education for knowledge workers and managers. But unappealing policies on executive compensation and immigration are leading to more and more graduating foreign students deciding to return home. On the other side of the planet, nations' arms are open wide, judging by their talent initiatives. China's "Thousand Talents Program" is a concerted effort to attract leading scientists (BW—Nov. 30), and Singapore is working to transform itself into a "career capital"—from a "host" of itinerant global talent to a "home."
The leaders of Western nations have a lot of red tape to cut if they hope to keep their countries competitive, and they'll need good people in government to help them do it. Adopting private-sector hiring and promotion practices would be a good start; so would rethinking compensation policies that set public-sector salaries at a fraction of what the highly competent can expect to earn in the private sector. Companies, meanwhile, should be tying the incentives and the performance reviews of executives to how well they serve their organizations' talent needs.
The global talent war is well under way, even though it's being ignored in many C-suites. But for those willing to face up to it—and fight—the reward can be the ultimate competitive advantage: having the best people in control.