This paper focuses on one of the most pressing issues facing CEOs today: talent management.
We explore what this means in the context of today’s shifting global economy, how the HR leadership role is changing, and the need for different approaches to talent management in fast growth markets.
As economic uncertainty persists, Klaus Schwab, Founder of the World Economic Forum asserts, “‘Talentism’ is the new capitalism. Talent is the fuel that drives the engine of the global economy.”
Exhibit 1 shows that managing talent is the CEO’s top priority, according to PWC’s Annual Global CEO Survey 2012. A majority of 78 percent of participating CEOs expect change in their strategies for managing talent, whilst 72 percent expect change in the organisational structure supporting it.
There are two key factors behind this focus on talent management: greater commercial complexity and evolving opportunities in different markets; and leadership change. Greg Coleman, Managing Director at Boyden’s New York office, says “The global demand for senior talent management executives remains robust, driven by increased changes in executive leadership occurring at the top of many organisations around the world. Invariably, when there is a change at the top, new and informed leaders move talent management to the top of their agenda.”
This is having a significant impact on the role of the HR leader and how this role is positioned within the organisation.
Ken Rich, Managing Director at Boyden New York comments, “The paradigm is shifting for how companies handle day-to-day operations. HR leaders are managing and organising different business units not solely as facilitators, but as strategic partners working with their functional peers leading finance, marketing, technology and risk to deliver corporate objectives.” A strategic HR leader is therefore a critical partner for the CEO in delivering the corporate strategy and must offer the right commercial background to operate at board level.
“Highly strategic and commercially astute HR Directors sit at Executive level, contributing to the development of business strategy and aligning and leading the people strategy that delivers it. The developing need for capacity and capability building across organisations in order to deliver on the strategic plan has contributed to the development of a new breed of HR Directors as well as areas of specialist skills across the HR function,” says Fay Voysey-Smit, Managing Partner of Boyden in South Africa. “Centres of expertise or excellence often drive the acquisition and development of skills as well as leadership capability development. In parallel, HR Business Partners deliver HR services into the organisation and Shared Service Centres enable transactional services.”
According to PWC’s global CEO study 2012, 40 percent of CEOs want to spend more time focusing on developing operations outside their home market.
The CEO therefore needs an HR leader with an understanding of talent management in different markets and also how executive mobility can deliver global growth objectives.
This is evident in the majority of Boyden’s search assignments. “For a growing number of companies, the assessment of a candidate’s experience or ability to work in overseas markets is now a central part of the evaluation process,” comments Lisa Gerhardt, Partner and Head of Boyden’s global HR Practice, based in London.
One of the main drivers of change is the increasing participation of fast growth markets in the global economy and the impact on competition.
Giles Chance, advisor to foreign companies and investors in China, author, and Visiting Professor, Guanghua Business School, Peking University, comments, “We now have different cultures in the world competing with each other and this is hugely positive from an economic and business point of view. The companies able to seize new opportunities are those that can operate successfully on a global, multicultural basis.”
For multinational companies, increasingly, this means replacing expatriate Westerners with senior local executives. But one of the biggest challenges for global HR leaders is that commercial developments in fast growth markets are not matched by advanced local expertise in HR planning and policies. Without expert local HR leaders, the acquisition and management of talent is a major stumbling block.
Lisa Gerhardt says that , “In many emerging markets talent shortages are the most commonly expressed challenges for all companies and demand for HR expertise is at a peak. Finding executives who are suited to an increasingly global environment is difficult, while few HR leaders have had the chance to develop a commercial mindset.”
Anthony Chow, former President of newegg.cn.com, and Ozzo Logistics in China, says, “We need to create a more consistent corporate environment where, for the individual, there are specific performance indicators; and for the company, more effective measurement of its investment in people. But structuring such programmes is hard for HR executives, most of whom have not had relevant exposure in their own careers.”
Executives in China who have had global careers – mostly Asian-based expatriates – are increasingly valuable in the evolving multicultural corporate environment. Anthony Chow says, “At Ozzo Logistics, we valued Asian expatriates’ cross-cultural understanding based on international exposure in a local context. They were able to communicate with our headquarters in the US, manage the local culture and head teams of local employees.”
The importance of talent management is driving a growing multiplicity of skills within the HR function. Most companies have outsourced transactional HR – using shared service areas for the on-boarding process, benefits processing, payroll and lower-level recruiting – freeing internal HR experts to concentrate on the delivery of the strategic agenda.
With the HR function central to delivering the business strategy, the number of specialist areas has multiplied, encompassing learning and organisational development, professional qualification, training, health and safety in addition to compensation and benefits and other centres of expertise delivering HR services to different business units.
“A lot of change is happening in HR and large parts of the function are being outsourced. However, it is important that the talent management function sits firmly in-house,” says Lisa Gerhardt, Partner in Boyden’s London office and global HR Practice Leader.
“We have closed a higher number of assignments for heads of talent management and also heads of resourcing, which is becoming an important specialist area relating to skills shortages,” continues Gerhardt. “Resourcing is changing and innovating rapidly because of the need to restructure the talent management and resourcing process within organisations, to attract highly skilled workers, integrate new workers and develop employees to meet current and future business objectives. The advances in social media and the availability of information regarding a global candidate population is also impacting the way multinationals approach talent”.
Global mobility within talent management covers two main areas:
Organisations in mature markets have long focused on executives’ global development. For example, Isabelle Minneci, Head of HR at L’Oreal UK says, “When we talk about careers here, we mean international careers. We have a formalised programme called ‘Transition to’ and if we think someone has potential we make things happen.” Minnecci herself has held nine roles in 16 years at L’Oreal, including that of social mobility project manager in France, and head of worldwide communications.
In fast growth markets, where there is so much opportunity and so much demand, development and retention are both major challenges for the HR leader.
Executives in these markets display a thirst for professional development and are vulnerable to being poached. For instance, still in the Chinese psyche is the paternalistic element of being ‘looked after’ by the government in durable, long-term businesses that provide a strong career path and career longevity. Clinton Dines, former President, BHP Billiton China, now Chairman of Caledonia Asia, comments, “Multinationals need to create an environment [in their Chinese subsidiaries] that offers longer-term security and an infrastructure geared to professional development”.
In Russia, the use of performance indicators in professional development is particularly important in an environment where spiralling salaries are prompting widespread use of performance-related bonuses. Tatiana Kozhevnikova, HR Director at X5 Retail Group says, “The business looks to HR for increased productivity, improved operational excellence and the development of KPIs to support performance-related reward”.
In other markets such as India – where career progression and a sense of being valued by the company are essential to personal pride – professional development is key to retention, and often achieved through knowledge transfer.
Shifts in growth opportunities are driving the transfer of knowledge between fast growth and mature markets. Organisations are moving executives into different markets and business units to expand the business in a tough global economy.
The increasing movement among executives across different types of organisations, industries, regions, occupations and competency areas is reflected in the growth of cross-border commerce and investment. Global integration is therefore expected to continue, with an increase in free international trade and cross-border capital flows.
“In Africa HR leaders are increasingly challenged to integrate their organsiations across the Region,” Fay Voysey-Smit explains. “There is also increased pressure for knowledge transfer and local skills development. As multinationals make greater investments in the sub-Continent, strategic HR leaders remain critical to realising opportunities in Africa in the face of a challenging global economy. Sound leadership skills become crucial in managing culturally diverse teams across large and geographically-dispersed areas”.
Knowledge transfer is usually sourced from mature markets to fast growth markets.
In Brazil, knowledge transfer has worked the other way round. Productivity levels are so high in the automotive industry that executives have been moved to mature markets to share their expertise in achieving efficiencies on the production line.
Across Latin America, a symbiotic relationship between multinationals and regional multi-latinas is helping to develop growth prospects across the region. HR leaders who have experience from both types of organisation are at a distinct advantage.
According to Luz Solaegui, HR Director of GE Real Estate in Mexico, multi-latinas need to learn “processes and procedures, and how to be an effective, expanding institution,” while “multinationals can learn how to do things easier, faster and in a less complicated fashion. They can also benefit from not being so formalised, and having quicker and more incisive, decision-making processes .”
In the face of economic challenges and opportunities in different continents, global talent management and mobility will remain the priority for the CEO and their HR partner.
Fay Voysey-Smit comments, “Global mobility – and the management of it – is increasingly important at this stage in global economic development. In emerging markets, such as Africa, the skills shortage is widely seen as one of the major risks to economic development.”
The next challenge for the HR leader will be to help the CEO drive innovation through talent management and resourcing, as on-going shifts in the global economy, technological advance, and demographic change present new opportunities for growth.