Multinational Talent: Scarcity in the Midst of Plenty

Anil Gupta: When I think of the labor market in places like China and India, I think of it as scarcity in the midst of plenty--plenty because you have of, course, hundreds of millions of people in the labor pool, and over the last 20 years the labor pool in both China and India has been growing at one to one and a half percent per year.  The unemployment is not too high.  I mean, it's about nine and a half percent in India, but most of it is concentrated in, let's say, rural India, and in China it's about six and a half percent.  So it's . . . unemployment as such is not a problem, but the problem that really we have in places like China and India, it's really for experienced managerial talent, and in certain specialties, certain professions like accounting in China, IT professionals in India, because essentially this kind of talent cannot be scaled up very readily.  It's very sticky because you need experience to have seasoned managers.  You need college-level training or post-graduate training for IT professionals, for accounting professionals.

The scarcity of professional talent, that situation is actually becoming tougher for companies. Number one is that if you look at multinational companies, the Proctor & Gambles and the IBMs and the GEs operating in places like China and India, their involvement is becoming deeper and becoming wider.  So these countries are no longer just places for off-shoring, whether blue collar or white collar work.  They are becoming seriously important markets.

They are becoming places for research and development.  They're becoming places, particularly China, for raising capital.  And as a result of that the multinationals now need a deeper bench strength in places like China and India, and the bulk of that senior bench strength needs to be actually local nationals rather than expats.

At the same time, domestic companies in China and India are growing even faster than multinationals, and as the domestic companies become bigger they are also getting publicly listed, they are going global, which means that their need for professional managers is growing at a rate faster than GDP growth rate.  And so therefore, both multinationals as well as domestic champions within China and India, their need for professional managers is growing faster than the overall growth in the labor pool or the overall growth in GDP.  So that's what is causing this scarcity.

So what can companies do about it?  Number one, is kind of foundation level.  Your compensation will go up faster than per capita income growth rate, and you just have to keep up with the market.  So that's a foundation level, but that by itself is not enough.  

What companies have to do is, in some sense, look at how Silicon Valley manages its top talent. They would have employment contracts, they would have stock options that would vest over four years and so on, and so therefore, while you cannot be assured that people will stay with you for ten years, you can be reasonably sure through these golden handcuffs that people will stay with you for at least, let's say, three or four years.

A third thing is that the talent in China and India, they’re looking for training, they’re looking for career advancement, and multinational companies have certain advantages vis-à-vis the local companies because multinational companies typically have much better opportunity to give global assignments, assignments outside of the home country.  Second, multinational companies typically have a far longer history of being professionally managed than the domestic companies in China and India, and so therefore they are seen as far better training grounds.  

So it’s a challenge, and so in some sense you really have to accept the nature of this labor market for professional talent, which is skewed in favor, if you will, of the people rather than the employers.

Directed / Produced byJonathan Fowler & Elizabeth Rodd 

 

The scarcity of professional talent is a growing problem for companies around the world, says Anil Gupta, a leading expert on strategy and globalization.

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