China

Five things emerging economies can do to attract the best talent

Students attend a graduation ceremony at Fudan University in Shanghai, China June 23, 2017. REUTERS/Aly Song - RC19CFDDFF20

Image: REUTERS/Aly Song

Mauro F. Guillén
Zandman Professor of International Management, The Wharton School, University of Pennsylvania, USA
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Emerging market companies need talent to be competitive in the global marketplace. They have made much progress in attracting it. Barely a decade ago, most young, bright graduates in China and India preferred to work for Western companies. These companies paid better and offered more opportunities for professional growth and advancement.

That was then. Now emerging market companies can attract some of the best talent, locally and globally. In 2016, Alibaba launched a Global Leadership Academy to offer young, aspiring managers from the US and Europe a 16-month stint at its corporate headquarters. It has already poached executives from well-established technology and financial services companies. Dr. Reddy, an Indian pharmaceutical multinational, consistently wins awards in the US for being a great employer.

Fortune magazine’s latest list of the 25 Best Companies to Work For includes Natura of Brazil, Belcorp of Peru, and Falabella of Chile. These companies have dedicated themselves to attracting and nurturing talent for years.

However, challenges remain. The allure of working for a Western company is still deeply ingrained in the hearts and minds of university graduates and mid-career managers in emerging markets. Many still believe that compensation levels, bonuses and promotions are more attractive than at local firms. For aspiring managers with an essentially technical skillset, this assumption is correct.

But circumstances are different for those with so-called softer managerial skills. These include the ability to negotiate or work effectively in multicultural teams, complementing a core financial or marketing knowledge. As the service sector grows throughout Asia, the Middle East and Latin America, demand for talent in healthcare, the creative industries, and professional services will soar.

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Consider South Korea, which has already made the transition from being predominantly a manufacturing hub to a more diversified service-driven economy. It has created more than four million highly-qualified service jobs in the past decade. As China undergoes a similar transition, it will require at least 40 million educated professionals in the 25 largest cities alone. In the Indian economy, which is far less dependent on manufacturing for growth, demand for this type of talent is even greater.

China has the advantage of a vibrant university system that churns out the largest number of graduates of any country in the world. But it lacks the dynamism of India’s younger population, which seems to have an almost unlimited supply of technical graduates across a number of critical fields. Brazil and Mexico are also starting to reel from smaller young age cohorts.

Competition for talent in China will be acute. This is likely to lead the country’s emerging, rapidly-growing firms to redouble their efforts at attracting talent, including from abroad. Emerging Chinese multinationals report having less trouble attracting talent for their international operations than for positions in China. To a large extent, this is due to the unpleasant living conditions in the country’s major cities. The air quality and traffic congestion deter many foreigners from considering a move. While Indian companies have more qualified locals available to them as potential hires, they will also face challenges in the future when attracting foreigners to work in India.

Future strategies for talent development in emerging markets must address at least five key areas:

- Allocating resources to education, not just in technical fields but also in soft skills

- Ensuring that employment conditions and career prospects at the largest emerging market multinationals continue to improve, so that working for them is at least as attractive as working for a Western firm

- Attracting talent from other countries to positions both in the home country and around the world

- Making life in the largest cities of the emerging world more pleasant, convenient and affordable

- Ensuring that local firms do not have to pay a premium for talent. In the long-term, this would undermine the competitiveness of both companies and the economy

Companies in emerging markets cannot win the competition for talent by themselves. A country’s physical infrastructure, education and quality of life are key factors. Only collaboration with governments, from the local to national level, will achieve the outcome these companies need.

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