During its 90th birthday celebrations last November, The Conference Board convened a panel of CEOs to discuss these challenges. They agreed that one of the most important tasks facing large companies today is how to build and retain a talented workforce while simultaneously coping with an increasingly globalised workforce.
Illustrating the massive rise in demand for workers in emerging economies, Nandan M Nilekani, CEO, president and managing director of Infosys, said: "The growth and the demand for talent are so great in India that, in order to hire somebody to come to work, you actually have to factor in that 20% of those hired won't show up. If they are supposed to start on a Monday, there's such a competition for technology talent that, by the prior Friday, they may have multiple other offers."
Global companies trying to build and retain competent and stable workforces in Asia are encountering newcomers who ‘company hop' to advance their careers and income, and taking knowledge with them when they leave. This is occurring in India and China. India's pool of graduates is 1.5 times that of China's, although China is playing catch-up as it opens many new universities in order to increase the number of graduates available. India is also expanding higher education.
The quality of the graduates emerging from new universities, though, is a big issue for multinationals. Only 3% of China's non-technical graduates are deemed employable by international companies. In India 25% of technical graduates and 10-15% of general graduates are considered employable in the offshore IT and outsourcing sectors.
Meanwhile foreign and domestic companies are competing for this limited pool of talent. Salaries are also moving up for business graduates and professionals. Indian salary growth is projected at 5.9% and China's 7.8% for 2007.
However, both countries have a vast surplus labour pool. In China, a Manpower survey of employers last year found that three quarters of posts were filled without difficulty. Positions that were hard to fill included production operators, highly skilled technicians and many positions in which English proficiency - still rare among Chinese graduates - was a necessity.
For IT companies, the best locations cited by US companies were Beijing, Shenzhen and Shanghai in terms of available skilled labour. Elsewhere talent was in shorter supply.
The problem in China is an ageing population, most of whom lack the education to make them suitable as employees for international companies. A very small proportion of over 40s in China have a degree. Among the younger, better-educated generation, there is a hunger for responsibility and position which makes them harder to retain as employees.
Because there is still a huge surplus of labour in China, wages remain low by international standards although they have risen by 9-14% a year over the past five years. Total labour compensation in cities can be from 1.3 to 2 times the salary, once social insurance is included.
Judith Banister, Conference Board director of global demographics, based in Beijing, said: "One of the main problems with China's educational system is that it emphasizes learning that requires memorization and in which an answer is clearly right or wrong. But companies also need people with creative writing and speaking skills, teamwork skills, practical and leadership abilities, which are not taught well in the great majority of China's universities."
That means in China multinationals need to put a lot more effort into talent development than they would in many other parts of the world, particularly in the soft skill areas of coaching, leadership and handling change.
Business leaders also pointed out that these new workers were potential new consumers of US goods. As Nilekani said: "When Indians and Chinese buy 10 million mobile phones, they are creating jobs in Motorola and Qualcomm. When Emirates buys 300 Boeing planes, they are creating jobs in Chicago and Seattle. Globalisation is really a two-way process and we are all benefiting from that."
However, unless the case was made more persuasively in the countries that were losing jobs to the emerging economies, there could be a backlash against the whole process. Nilekani warned: "Unless we are much better at putting the big picture together and showing people why it makes sense, there could be a rollback. We have seen that in history, such as after the First World War."
A View from the Top: The Challenge of Building a Global Workforce
The Conference Board
Review by Joe Gill