Demographic trends in emerging markets will shift the supply of global talent so significantly this decade that companies doing business abroad will have to reconsider their hiring strategies, according to research by a consortium of international consulting firms and multinational companies.
By 2021, countries such as India, Indonesia and Brazil, where people 25 and younger make up the largest population group, will have a surplus of college-educated, skilled workers. China will have a larger talent pool than the U.S. And countries with aging populations, such as Japan, Germany, Australia and the US, will face a talent deficit.
Consulting firms Oxford Economics and Towers Watson based their projections on a survey of 352 human resources professionals, demographic modelling, and in-depth interviews with HR executives from multinational companies across a range of sectors.
“In the past, you didn’t have the supply of talent in emerging markets,” said Louis Celi, president of Oxford Economics in the US. “Now that education is increasing, wealth is increasing, the supply is shifting.”
This shift goes hand in hand with a wholesale transformation of the global marketplace, which has been under way for about a decade. Technological advances require new employee skill sets, the rise of middle class consumers in emerging countries is changing the demand for goods and services and entrepreneurship in emerging countries is heightening competition.
More than 80% of the human resources professionals polled for Global Talent 2021 said their companies have gone through or are going through an overhaul of their business strategies to realign them to the transforming global marketplace.
Some of the companies that participated in the research are further ahead than others.
Take, for example, Cummins, a US-based engine manufacturer that generates about half of its sales outside the US and is one of the largest engine makers in China and India. In 2003, Cummins started a research and technology centre in Pune, India, and three years later, opened its first technical research and development centre in China.
As the company is opening plants in fast-growing markets such as Brazil and Turkey, Paul Wright, Cummins’ global diversity special projects manager, said he is recruiting talent to fill the new jobs and standardising job categories across geographies.
“HR is at the centre of planning now,” Wright said in the report. “We’re trying to make it easier to identify and move talent around the world as we need it and to help offer people development opportunities.”
The projected talent deficit in the northern hemisphere could turn the southern hemisphere into a major source of technical talent a decade from now, the report suggested, which could lead to more centres of innovation and product development springing up in previously unheralded regions.
Businesses and governments in developed markets should take these developments as early warning signs, Celi said. “If emerging countries are in a stronger position than traditional markets, if your supply [of talent] is not keeping up with demand, then you’re no longer competitive.”
Towers Watson suggested that companies in developed markets:
Reposition their employee skill sets. Over the next five to ten years, companies will need employees who can develop new forms of digital expression and e-commerce marketing, can think outside the box and prepare for multiple scenarios, can work collaboratively and can better manage people from diverse cultural backgrounds.
Use more sophisticated analytical tools to manage talent. Workplace analysis, for example, can provide insight into upcoming talent gaps due to retirements. Data-based scenario playing can be used to manage risks and different alternatives to the current talent strategy.
Segment employees into groups to understand differences and potential gaps in skill sets. Talent segmentation also helps HR executives appreciate generational differences, work-life challenges and cultural attributes that can affect motivation.
Optimise talent by deciding where to invest and where to cut. This helps executives to determine where investments will have the biggest impact.
Embrace and manage risk rather than trying to avoid it. Companies have to weigh the potential benefits and costs of certain risks, such as outsourcing business that is less critical or dealing with the challenges of a workforce that is culturally diverse and located in different countries.
Additional CGMA Magazine resources:
“Poor talent management hinders companies’ growth, innovation”: Inadequate talent management is hindering the competitiveness and financial performance of businesses, a new CGMA report suggests.
“Execs battle skills gap in hiring despite high unemployment”: Executives report difficulty finding qualified workers despite high jobless rates. Recruiting workers for positions as varied as engineers, accountants and tugboat workers is a problem. Hire-and-train employee development and new educational initiatives may provide solutions.
“Talent pipeline draining growth: Connecting human capital to the growth agenda”: Global executives are becoming increasingly aware of the importance of human capital and talent development but a lack of effective management in this area hinders growth, competitiveness, financial performance and innovation.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.