War for talent: time to re-armor RaymakersvdBruggen Author: Annick Beekmans [email protected] LinkedIn: nl.linkedin.com/in/annickbeekmans/ Introduction In the process of globalization organizations have started to participate in an increasingly dynamic and complex environment. In this expansion strategy-, financial systems-, production operations- and marketing departments have taken global approaches, but the human resource management (HRM) department has generally lacked behind (Suutari, 2003). Even though increasingly research is conducted in the area of International Human Resource Management (IHRM), the process of globalization still troubles the mind of HR professionals as ‘the competition for global managers is going to get tougher as time goes on’ (Suutari, Tornikoski, & Mäkelä, 2012). In order to develop a pool of internationally competent managers with global mindsets the function of Global Talent Management (GTM) is appearing in internationally operating companies. The trend of IHRM has gone through several phases. First, the focus was mainly on the functional side of internationalization in which personnel was expatriated mainly to facilitate in knowledge sharing in international diversification. As such, expatriation was used in terms of organizational development and coordinated primarily by the global mobility department. Since the 1990s the focus of international assignments shifted towards a personal development perspective, and the HR department of talent development got more involved (Mullaney, 2012). As technological and global developments went alongside assignments took an increasingly short-term shape. This development was mainly pushed by high expatriation costs and pulled by communication technologies (Brookfield Global Relocation Services, 2013). The shortterm assignments also provide opportunities for a steep learning curve in the development of a global mindset and international management skills. Concluding, international work experience is increasingly thought of as a basic requirement to reach high-level management (Brookfield Global Relocation Services, 2013). Global talent management includes all organizational activities for the purpose of attracting, selecting, developing, and retaining the best employees in the most strategic roles (those roles necessary to achieve organizational strategic priorities) on a global scale. Global talent management takes into account the differences in both organizations’ global strategic priorities as well as the differences across national contexts for how talent should be managed in the countries where they operate. (Scullion, Collings & Caligiuri, 2010: p106) In line with this development international consultancy firms are using expatriation more and more. Also, they research diverse areas of expatriation and advise their clients on these issues. Within this area a distinction is to be made between issues on global talent management and global mobility. The premier includes issues such as the attraction, selection, development, and retention of human capital on a global level, whereas the latter includes practical issues, such as tax compliance, legislation, and compensation and benefits. In this essay the focus will be on talent management, assessing how the labor market is effected by the process of globalization. To address this subject three areas of research will be discussed. First, the pressures of globalization on the labor market will be reviewed. Second, the organizational response to these pressures will be addressed. Lastly, the subject of global talent management will address how organizations respond to the new market needs and pressures. Within GTM the subjects attraction, selection, development, and retention of human resources are reviewed respectively. Globalization on the labor market During the 1990s, firms were confronted with a threatening structural shortage in high skilled employees leading to “the war on talent” 3 (Schuler, Jackson & Tarique, 2011; Kim & McLean, 2012). During this period three exogenous drivers emerged according to Tarique and Schuler, which made the war for talent go global: globalization, demographics and a demand-supply gap (2010). In the process of globalization, world trade has expanded due to large wage differentials. This in turn leads to increasing FDI between developed and developing countries. Alongside this development competition among firms is intensifying and multifaceted, the potential distribution market is expanding, and so is the potential labor market (Schuler et al., 2011). Demographics are differing strongly between the developed-, emerging-, and least developed countries. Whereas the developed world is coping with a retiring baby-boom generation, the emerging market population is expanding and getting younger. Those demographic variations need to be considered by multinationals to identify and target their sourcing-, as well as their customer-markets. (Schuler et al., 2011; Kim & McLean, 2012). In the labor market Schuler et al. (2011) explain the forecast of a demand-supply gap in knowledge workers with high motivation and sufficient soft skills. They argue that due to the economic crisis this gap is currently less apparent. However, once the economic situation will make a positive turnaround the gap might restrain economic recovery. As such it is important that firms strategically anticipate to this labor-supply gap. Adding to the three exogenous drivers Tarique and Schuler (2010) have also identified three forces leading to GTM which are internal to the firm. First, regiocentrism refers to the clustering of geographical areas or industries to improve needs targeting by customization. Second, international strategic alliances put pressure on IHRM to manage retention and performance of talent within the acquired firm. Third, dynamic competencies are increasingly valued in a knowledge workers’ personality and assumed to have a significant impact on companies’ success. Dynamic competencies are malleable over time and are believed to be trained during international experiences (Tarique & Schuler, 2010; Farndale, Scullion & Sparrow, 2010). As such these six driving forces, external and internal to the firm, have led to the development of the discipline of Global Talent Management. Organizational development In response to the developments described in the last section companies are designing global talent management strategies. Boston Consulting Group researchers Friedman, Hemerling, and Chapmann (2012) have defined five levers that should help create global competitive advantage through global talent management strategies. First, a global mindset must be embraced by the organization to reach a multi-centered instead of a west-centered operating model. When focusing on people management, a global mindset and origination of managers can reflect the organization’s multi-cultural customer and employee base, resulting in better cross-cultural operations (Gartside, Yang, Sloman & Cantrell, 2014). In this process the balance between global and local programs should be maintained to remain flexible in the development of human capital. Also, when operations are located, global talent sourcing can be localized. As such specific talent pools can be captured more effectively (Friedman, et al., 2012; Gartside, et al., 2014; Pettigrew & Srinivasan, 2012). The second lever to help create global advantage requires global talent planning to be elevated to the CEO’s agenda so that the talent needs can be integrated in an organizations’ strategic plan (Friedman, et al., 2012). A survey by Ernst & Young (2012) revealed that there is a disconnect between global mobility aspirations and day-to-day operations. Another strategic issue in global talent management is a lack of integration between the GTM and global mobility departments. Since not all companies have a clear GTM agenda there are often mismatches in expatriate selection which leads to premature repatriation, high turnover-rates, and higher costs (Ernst&Young, 2012). Third, organizations should expand their hiring horizon and do talent searches in non-traditional pools (Friedman, et al., 2012). For example, McKinsey (Pettigrew & 4 Srinivasan, 2012) explains an approach of a global technology company that went to local technology schools to find talent. Recruiting young potentials gives a lot of opportunities for in-house training and development. Accenture (Gartside, et al., 2014) approaches talent searches more through media by “deep web” searches where talent pools are located globally by uncovering previous work documents, references, etc. Once a talent pool has been located it is important to tailor employment offers to local conditions. Also the training and development programs should be designed with a local focus (Friedman, et al., 2012: p9,10; Pettigrew & Srinivasan, 2012). After identifying the global talent the fourth lever ‘create global leaders’ comes in. An efficient leadership team should be created through a combination of cross-cultural rotations and succession planning (Friedman, 2012). Pettigrew & Srinivasan (2012) argue that the bottleneck in the creation of leadership is the lack of growth opportunities. While companies identify local managers as a source of global talent, they fail to convince them to stay. To solve this issue companies should work with role models, or expatriates to eliminate the perceived glass ceiling. Lastly, the global mindset should be embedded in all leaders’ within an organization by making global values locally relevant and understandable (Friedman, 2012). To develop such a global view long-term expatriates can be used to deepen between-market understanding, to share expertise, and work on global issues. However, due to increased focus on cost reduction during the economic crisis long-term expatriation is used less. Also the global mobility processes are frequently too complicated for smaller organizations (Gartside, et al., 2014). Global Talent Management staffing Attraction When dealing with global talent attraction three major IHRM activities can be distinguished, employee value propositions, the attraction of talent globally, and local recruitment (Tarique & Schuler, 2010). By developing a strong employer reputation the potential talent pool that is willing to work at the organization increases in size. Organizations should revise their employee value proposition framework frequently in order to respond to labor trends. To address the other two IHRM activities of local and global attraction effectively, it is important to design an employer reputation strategy that attracts individuals who are aiming at an international career, as well as domestically focused talent. In the first case Tarique and Schuler (2010) argue that the focus should be on attracting the best people at all times, instead of a person-position match approach. By attracting employees that are aiming at an international career the high number of premature repatriations (11% at some companies) can be reduced, especially on the increasing amount of emerging market assignments (Ernst&Young, 2012). However, Schuler et al. (2011) argue that local attraction can also be meaningful when one recognizes the multiple facets of talent. As such, talent attraction should be tailored to the function level and region to prevent the overlooking of certain talent pools. (Cerdin & Brewster, 2014). A last means of attracting talent are mergers and acquisitions and recruitment of rivals. Both are however very costly processes with the latter possibly leading to salary inflation (Ernst&Young, 2012). Concluding, the searching scope should be on the vital many without distinguishing in specific functions or locations, but an optimal attraction strategy needs local adjustments. Selection During the selection of potential global managers one should take into account predictors on expatriation willingness and performance. It is important to be aware of their willingness to prevent early repatriation and failed assignments. Several traits and skills have been related to expatriation willingness and performance. Research by Mol (2007) found several predictors of willingness to expatriate. Variance was explained primarily by bio data like number of friends abroad, language ability, and foreign living experience. 5 The predicting ability of expatriate specific variables like cultural flexibility, cultural sensitivity and tolerance for ambiguity were also supported. Core self-evaluations and the five factor dimensions also explained variance in willingness to expatriate. The big five factors extraversion, emotional stability, agreeableness, and conscientiousness also have predictive validity on expatriate performance. Other performance predictors were cultural sensitivity and local language ability (Mol, 2007). Development With the increasing the importance of HRD (human resource development) expatriation is increasingly used to develop global management skills (Kim & McLean, 2012). In cross-cultural training programs four elements are generally included: awareness of cultural differences, a focus on ways attitudes are shaped, factual information on cultures, and cross-cultural skills like language, nonverbal communication, cultural stress management, and adjustment skills. Apart from cross-cultural understanding and skills Marquardt, Berger and Loan (2004) researched the development of global competencies amongst global talent and distinguished six competencies that global employees should obtain. First of all, employees with a high cognitive ability tend to reach a global mindset faster due to their higher cultural self-awareness (1). Other competences include global perspectives (2), tolerance for ambiguity and differences (3), and cultural flexibility (4). The two competences language (5), and strong communication skills (6) relate more to practical global skills. There are different ways argued to enhance these skills through training and development programs. Some scholars believe the focus should be on practical skills, because the selected employee already obtains cognitive skills to deal with cross-cultural situations and can elaborate this skill on-thejob. Other scholars argue that previous to an international assignment the employee should go through an acculturation program to familiarize with the cultural milieu (Kim & McLean, 2012). Which developmental program is chosen depends on the purpose of the expatriate assignment. Organizations that use expatriation in order to enlarge commitment and retention of talented employees are more likely to focus on skill development. Some organizations however assign employees that can benefit most from an international assignment and try to get employees out of their comfort zone to develop themselves in areas they otherwise would not (Tarique & Schuler, 2010). In this case an acculturation preparation might be more appropriate and coordination is more intensive due to the larger company risk. The alignment of strategy and process is crucial to effective talent management. The internal pipeline of talent management and the necessary skills and capabilities together with future talent planning is only handled well in respectively 27% and 20% of the companies (Ernst&Young, 2012). Concluding, a lot of knowledge, skills, and abilities have been proven to correlate with expatriation. Depending on the HRD strategy of an organization individuals with global talent, or individuals in need of a larger learning curve are selected and should be prepared accordingly. Tarique and Schuler (2010) mention that the development of a global mindset and cross-cultural skills is an integral part of the culture of organizations that excel in talent management. For other companies however, the alignment of strategy, selection, and preparation should be structured and coordinated as this is still a weak point in talent management. In this area much can be won on HR analytics to gain organizational support and increase the strategic function of the human resource department. Related to expatriation HR analytics are faring extremely low, with the return on investment (ROI) of expatriation only measured by 7% of the questioned companies in the Brookfield Global Relocation Survey (2014). Concluding, there are six competencies that global employees should obtain. The HR development strategy that is used to develop these competences should be aligned with the purposes of expatriation. It is important those 6 HR practices are aligned with the overall firm strategy. To manage this however, HR should position itself stronger in the strategic field. In GTM this could be done by calculating the ROI. A business-focused theoretical model of measuring expatriate ROI has been developed by McNulty and Tharenou (2004). The implementation of HR analytics should also provide a clearer HR strategy by goal setting. Retention After all the effort put into the development of global talent the next challenge is to retain the talent inside the company. An important issue after an international assignment in the light of development is the repatriation process, which is generally lacking behind on the other facets in the expatriation process. Adding to this problem is the general lack of career planning after repatriation, as it happens often that there is no suitable job available when the employee returns (Bolino, 2007). When going on expatriation the general idea is that it will help in ones’ career advancement, the opposite is however more often true. This results in a frustrating process of repatriation in which the internationally developed competences are undervalued by the employer. Due to the decrease in autonomy and responsibility the employee gets demotivated and feels underemployed (Bolino, 2007; Bossard & Peterson, 2005; Suutari, Tornikoski & Mäkelä, 2012). Ernst&Young and other accountancy firms are dealing with expatriate turnover rates between 15 and 20 percent (Schuler et al., 2011). In a survey by Ernst&Young the importance of culturally dependent incentives is mentioned as a potential solution for retention. In the survey only 17% of the participants strongly agree that business strategies are well aligned with an individuals’ performance objectives. Companies should realize that what might galvanize employees in one culture can turn them off elsewhere, emphasizing the importance of cultural alignment (Ernst&Young, 2012). Successful retention strategy after repatriation in the light of global talent management is still an under exposed area of research. Much is to win here by aligning strategy with HR to create essential career development plans and incentive systems to improve the return on investment of human capital. Conclusion The war for talent has gone increasingly global. The external drivers, globalization, demographics, and a demand supply gap have increased industry pressures. Simultaneously the internal developments of regiocentrism, international alliances, and a focus on dynamic individual competences have expanded organizational perspectives to a global level. Under these pressures the function of global talent management emerged trying to attract, select, develop, and retain young potentials on a global level. In the development of the GTM field there are some continuous issues of influence. First, there has to be a stable bridge between local and global processes to ensure the presence of global opportunities while tailoring systems to local levels. Second, cost reduction pressures stimulate to look for new opportunities other than long-term expatriation. As such, global virtual team work and flexpatriation (global commuters) are emerging means to global management development. Third, the willingness to expatriate is unstable with currently less employees from developed markets willing to go abroad. At the same time the emerging markets are in search of talent and trying hard to retain their local potentials. A fourth issue is the lack of HR analytics which results in less support and recognition of strategic importance of GTM. By measuring return on investment of global development programs their efficiency can be improved by uncovering bottlenecks and opportunities. Fifth, organizations have to become aware of the type of global mindsets they want to develop and how they want to reach these goals. The most obvious threat of global talent management is the issue of turnover intentions and talent loss. This area is still underexposed and gives a lot of space for improvement within GTM. 7 With the development on emerging markets, and an improving economic situation the war on talent is going to get tougher. As such the global talent management department needs to re-armor, by exploring non-traditional talent pools. It needs to redefine its angle of attack to capture and retain its talent. And finally the global talent management department needs to find allies within the strategic and global mobility departments to win the war on talent. Author: Annick Beekmans RaymakersvdBruggen [email protected] LinkedIn: nl.linkedin.com/in/annickbeekmans/ 8 References Bolino, M. C. (2007). Expatriate assignments and intra-organizational career success: Implications for individuals and organizations. Journal of International Business Studies, 38(5), 819-835. Bossard, A. B., & Peterson, R. B. (2005). The repatriate experience as seen by american expatriates. Journal of World Business, 40(1), 9-28. 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