A recent Wharton article discusses how western companies are dealing with a global talent crunch.
Faced with an aging workforce and a growing demand for skilled workers
in emerging markets like China and India, companies in the West are
grappling with a talent crunch of unprecedented scope. According to
experts at Wharton and The Boston Consulting Group, firms are
increasingly questioning their workforce requirements and quality,
training and development, and wage levels. Responses include
over-hiring to meet future needs, upgrading training in concert with
universities and in-house corporate schools, and extracting greater
productivity through innovation.
Building and developing talent becomes more important than the common practice of poaching.
Hemerling says corporations, especially Western companies, have until
now "essentially relied on poaching from other companies" — escalating
talent costs in "a zero sum game." But that is changing, with companies
including Toyota and Motorola investing in training local talent in
India and China, respectively, he says. Motorola University China, for
instance, has 203 instructors who deliver 130 courses across subjects
including Six Sigma business improvement and supply chain management.
Toyota’s Technical Training Institute in Bidadi, near Bangalore, is
honing local talent to meet its needs with 21 permanent faculty members
who deliver a three-year training program, a strategy that also helps
build employee loyalty.
This is especially critical when you think about the quality, or range of quality, of universities.
For the most part, however, universities in China and India are not
keeping pace with the new demands, Hemerling says. "There is a huge
range in quality of engineers coming out of these universities, from
among the best in the world to others who [have] the equivalent of high
school science." The problem is not one of producing the required
number of engineers or other graduates, but "ensuring they have the
right set of skills."
Applying the lessons of supply chain management could be another solution.
Cappelli’s advice to all corporations grappling with talent challenges
is to borrow the supply-chain model from manufacturing — an approach
he advocates in his new book titled, Talent on Demand: Managing People in an Age of Uncertainty.
"The big problem companies face is uncertainty — not knowing what the
demand will be and what kind of talent you will need and how many
people you will need in different jobs. This is a problem supply chain
management has wrestled with for a while. The idea is to figure out how
to get the desired level of talent without taking huge risks in terms
of costs of recruiting, talent development, having excess employees and
not having enough employees, and how to minimize those costs."
Wharton and the Boston Consulting Group advocate "bulking up"… hiring large numbers of people since they are currently "cheap."
Although companies such as IBM, Cisco and Citigroup have bulked up
their Indian operations with large-scale hiring programs, Jim Andrew,
senior vice president at BCG and leader of its global innovation
practice, feels many Western companies are barely scratching the
surface of the opportunity to access talent in India and China. "Hiring
10 or 20 or even 50 people in India is not fully leveraging the talent
in those countries," he says. "Hiring 500 or 5,000 people begins to tap
into that talent." Many companies don’t understand the magnitude of
that opportunity "or what it takes to be an employer of choice for the
highest-performing talent in those countries."
But in the very next paragraph they note the pitfall of that strategy.
Western employers also have to come to terms with the fact that
wages will rise in India and China to levels where they may have to
rework their outsourcing math, says Cappelli. While the average worker
in India is still "incredibly cheap by world standards," U.S. employers
won’t want quite as many of those workers if they get uncomfortably
expensive. Cappelli warns that it would be wrong to assume that wages in India
will continue to be a tenth of what they are in the United States.
Which is exactly why employees should not be thought of in terms of "cheap" or "expensive"… but in terms of value.
Matt Barney says
The focus on the volumes of employees – Indian, Chinese, or otherwise, is a bit misguided. There are tradeoffs between the cost of talent acquisition, and quality. The quantity of employees needs to be considered one dimension – attributes that cannot be developed (e.g. traits, cognitive ability) should be assessed with good instrumentation; and effective learning and performance management can turn excellent raw talent into folks who can outperform volumes of mediocre talent