Global Talent Shortage Worries Multinationals More Than Revolution or Recession
June 4, 2012 — A majority of executives of multinational corporations cite a growing global shortage of talent as a factor that could limit their entry into both developed and emerging markets more so than economic weakness or even political instability, according to a report by AXA Group and MetLife Inc.'s MAXIS Global Benefits Network (GBN).
40% of the multinationals surveyed say they intend to expand their operations in both developed and emerging markets, including but not limited to the so-called BRIC emerging markets encompassing Brazil, Russia, India and China. The findings of the study, sponsored by MAXIS GBN, are based on an Economist Intelligence Unit (EIU) survey of more than 350 executives from multinational companies. The macroeconomic-focused research covers findings gathered from various industry sectors and locations, both in mature and developing countries. The report seeks to outline the international development strategies multinationals are employing to achieve successful growth at a global scale. The research also looks at challenges to growth.
"Far and away the biggest challenge for multinational corporations is finding the talent in local markets to expand their business," said Maria Morris, executive vice president, Global Employee Benefits, MetLife, and MAXIS executive board member. "The war for talent is alive and being fought on a global scale."
As multinationals are expanding globally, so will their workforces. Of the largest multinationals surveyed (those with more than $10 billion U.S. in annual revenue), close to one-fifth expect to have more than 85% of their total workforce outside their home country in the next five years. This figure represents nearly double the current figure.
In addition, the difficulty of simply attracting and retaining talent in nonhome markets is clear in the survey findings. Nearly two-thirds (66%) of respondents say talent shortages are likely to affect their bottom line in the next five years. The focus on talent shortages and hiring challenges is highest amongst technology, professional services, health-care, pharmaceuticals and biotechnology companies.
Both HR and business executives agree that employee benefits are critical in efforts to move talent among geographies in which they operate. 90% say employee benefits are a key lever in the battle for local talent. In addition, benefits rank second only to salary in importance for their globalization strategies.
Given that the global talent shortage is the No. 1 issue for multinationals, the survey finds that there is still work to be done to align the gap in perceptions among human resources and their business counterparts about assessing local talent in markets and the company's readiness for expansion.
HR representatives are far more likely than business executives to say their firms are proactive in assessing the talent portion of market entry/expansion. Among business executives (excluding the HR function), 61% say their firms evaluate talent management issues (e.g., acquisition and retention of functional capabilities or other expertise) only after they have identified markets for entry/expansion, or don't see talent as an important globalization issue at all. By contrast, 63% of HR executives say talent is considered when markets are being identified.
"Clearly, the new expansion aims of multinational companies require the development and retention of their talent," said Didier Weckner, CEO, AXA Group Life Business, and chairman of MAXIS GBN. "This is a key objective for human resources executives."
1 in 4 companies plan to enter new markets in the next five years.
Foreign markets are outpacing home markets as a source of future revenue for many multinationals. Nearly 1 in 3 multinationals expect more than 70% of their revenue to be generated from nonhome markets in five years.
Brazil, China, India and the United States are top choices for companies looking to sell products.
Vietnam, South Africa and sub-Saharan Africa are considered as being the "single biggest opportunity" for those seeking to source products or components.
A majority of companies believe that employee benefits boost worker loyalty and productivity.
A total of 366 senior executives from around the world were surveyed in March 2012. More than one-half are C-level executives (54%). Responses came from a wide range of regions: 33% are headquartered in North America, 22% in Asia-Pacific, 34% in Western Europe, 10% in Latin America and 3% in the rest of the world.