Surviving the War for Talent in Asia: How Innovation Can Help

Right now, even as Western economies struggle, Asia is experiencing an unprecedented war for talent. Organizations are competing ever more aggressively to find the right people, motivate them, and retain their highest performers. There’s only one route to success in today’s Asian talent wars: innovation. In this book, one of IBM’s top Asia Pacific managers identifies powerful talent management innovations that are working in Asia right now for dozens of the region’s most forward-looking enterprises. Christina SS Ooi begins by revealing why Asian talent shortages are even worse than they appear. Next, she presents breakthrough solutions from industries ranging from IT to hospitality, manufacturing to telecommunications. Learn how winning companies are recruiting more effectively through partnerships and word-of-mouth...bringing innovation to onboarding and training...understanding the changing needs and diverse lifestyles of today’s Asian employees...shaping corporate culture and engaging their employees...developing great leaders and keeping them.

Reaching the Goal

How Managers Improve a Services

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Intelligent Mentoring

How IBM Creates Value through

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for Talent in Asia

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for Talent in Asia

How Innovation Can Help

Christina SS Ooi

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1 Employee retention—Asia 2 High technology industries—Employees—Supply and

demand—Asia 3 Brain drain—Asia 4 Technological innovations—Asia I Title

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2009021962

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these years Thanks, Mum and Dad, for standing by me throughout this

period, and for trusting me to bring my passion for writing to life You have

such great confidence in me! To my husband, Bert, thank you for being the

pillar of strength and encouragement in this journey And Xuan Xian and

Jia-Tern, hopefully Mummy has shown you the path to BELIEVE IN

YOURSELF and LIVE YOUR DREAM!

IBM Press Pearson plc Upper Saddle River, NJ • Boston • Indianapolis • San Francisc New York • Toronto • Montreal • London • Munich • Paris • Ma Cape Town • Sydney • Tokyo • Singapore • Mexico City

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xi

Chapter 1 ■ Asian Economic Growth 1

Japan 2 China 3 Hong Kong 5 Singapore 5 India 7 The Next Asian Tiger: Vietnam 8 The U.S Economic Slowdown 9

Chapter 2 ■ The Talent Shortage Challenge 13

The War for Talent 14 The Hiring Buzz 16 What Talents Are in Short Supply? 17 Where Is Talent in Short Supply? 20

Why Are the Right Talents Lacking? 22

Chapter 3 ■ Embracing Innovation 29

What Innovation Is and Is Not 30 Why Innovation? 31

Leadership in Innovation 32 Innovation Culture of Trust 36 Operational Innovation 38

d

Telecommunication Industries 87

Nanfang Lee Kum Kee Co Ltd., China 88 DiGi.com Berhad, Malaysia 97

Chapter 8 ■ Tested and Proven Innovation Ideas: Cross-Industry 103

Aditya Birla Group, India 104 Chapter 9 ■ The Asian Dilemma 119

Growing Local Talent and Local Leadership 120 Brain Drain and the Boomerang Effect 126

“The Asian Thing” 129 Chapter 10 ■ Innovate with “Find-Grow-Keep” 137

Talent Farming 138 Find the Talent 140 Grow the Talent 146 Keep the Talent 151 Challenges 158 Chapter 11 ■ Final Thoughts 163

Innovation as the Answer 164

This has been a year-long journey for me to write about how

innova-tion can help companies in Asia to survive the war for talent

Without the willing support of select companies that shared their tested

and proven experiences, beliefs, corporate values, and challenges in the

Asia Pacific region, I would not have completed this book My utmost

thanks goes to these companies and their dedicated management teams

I also want to express my sincere thanks and appreciation to the IBM

management team for their support and encouragement during this

writ-ing process My years of IBM management experience have provided

valu-able insight and professional expertise that helped shaped my perspective

for this book For that, I thank all my past and present IBM managers

I owe special appreciation to my colleague and executive sponsor, Eric

G Johnson, who graciously provided support for this book I also want

to acknowledge the invaluable advice provided by my colleagues who

reviewed my book proposal and each chapter of this book: Michael

Meaden, David Hodkinson, Rama Nathan, Nanette Roldan, and Andrew

Ewing; my deepest gratitude must go to all of you for your meticulous

reviews, kind patience, and precious time

And finally, I want to thank the IBM Press and the Pearson Education

team who worked with me to get this book published Special thanks to

two IBM Press Program Managers, Steven M Stansel and Ellice Uffer;

and to three wonderful ladies from Pearson Education: Katherine Bull,

senior acquisitions editor, Songlin Qiu, development editor, and Julie

Anderson, project editor—all of whom provided so much guidance to

help me stay on track from start to finish, and who worked so patiently

with me every step of the way in this incredible journey I have indeed

learned a great deal from you

xiii

ptg

With more than two decades of corporate management experience,

Christina SS Ooi spent a majority of these years in various senior

management and leadership positions in IBM across the Asia Pacific

region It was during this time that she developed a strong interest and

passion in cross-country talent management As a hands-on people

man-ager and leader, she experienced the early struggles in Asia Pacific to

attract, motivate, and retain the best talent for her organization

In the early years of Christina’s professional life, she worked in both

advertising and law Even in her spare time now, she contributes research

articles to legal journals, especially in the area of mediation Her other

passions are creative photography and fiction writing Christina is a

cer-tified advocate and solicitor, having been admitted to the High Court of

Malaya, and is a member of the Malaysian Bar She holds two Master’s

degrees (MBA and Master of Laws) and two Bachelor degrees (Bachelor

of Laws and Bachelor of Arts) She is currently based in Asia

xv

ptg

■ The Next Asian Tiger: Vietnam 8

■ The U.S Economic Slowdown 9

Asia the world’s largest factory, the world’s largest office, shapes the

economic landscape of the world This is home This is Asia 1

1

Asian Economic Growth

1

Asia is transforming! Over the past three decades, Asia produced a

remarkable record of high and sustained economic growth The

coun-tries of this region are currently experiencing some of the strongest

eco-nomic growth in the world Relative ecoeco-nomic power is shifting from

the developed world to Asia, and this shift will likely endure for a long

time According to Asian Development Bank (ADB), sometime between

2020 and 2025, Asia’s share of the world’s total gross domestic product

(GDP) could rise to an estimated 40 percent

What drives this momentum? Why is the transformation so evident

now? In this chapter, we examine how all this started and what

sus-tains it

IntroductionWorld War II devastated Asia, seriously scarring many countries,

especially in East Asia With the collapse of imperialism and colonialism

after World War II, Asian countries began to address the social and

eco-nomic legacies of war as sovereign and autonomous entities

Circumstances demanded that governments address seemingly

intractable problems such as weak to no economic infrastructures,

extreme poverty, and underdeveloped market systems

The first Asian country to “recover” from World War II was Japan

Then emerged the “Asian Tigers,” a cluster of countries in East Asia,

fol-lowed by the Southeast Asian countries From Japan, to India, to

Vietnam, the economic prowess of Asia has elicited world attention

Each of these Asian countries has unique factors contributing to its

respective economic success This chapter examines a short economic

history of a few of these countries so that you can more fully understand

the talent shortage that currently threatens Asian economies

JapanThe story of Japan’s miraculous rise as the second largest economy in the

world after the United States began in the 1960s It took approximately 50

years for Japan to successfully double its living standards after the World War II

Japan’s membership to the World Bank and to the International Monetary

Fund (IMF) in 1952 helped to finance much of its infrastructure and

economic development Its sheer perseverance, determination, and dedication

in its post-war reconstruction efforts paid off handsomely Indeed that was

the “Made in Japan” era when Japan set the global standard of producing

quality products at a much lower cost than its western counterparts

For Japan to continue to command economic presence in Asia, it

can-not rest on its laurels It must continue with its plan to upgrade its

economy and relentlessly plan the “big brother” role for its Asian

coun-terparts It has to sustain its high economic boom that depends on

industrialization and heavy exports, coupled with high technology in

high-value-added industries, such as industrial robots, computers, and

semiconductors

At the same time, Japan has its fair share of challenges with rising

costs, an increasing aging population, and low fertility rate It is

pre-dicted that by 2020, its youth population (aged 20–34 years old) will

decrease by 31 percent.2 The eyes of the world are on Japan watching

how it deals with these challenges while working toward its economic

goals

ChinaAlthough Japan today remains the second largest economy in the

world after the United States, China has made significant economic

progress since its entry into the World Trade Organization (WTO) in

December 2001 For the past decade, China has dominated at low-cost

manufacturing So, it is no surprise that this Asian Tiger has often been

referred to as “the world’s largest factory or workshop.”

China’s economic advance started when President Deng Xiaoping led

China into free-market economies and opened its trade doors to the

world in 1997, practically shuttering its communist economics system

This daring and visionary move by President Deng changed China’s fate

and destiny He helped transform an emerging market into one of the

world’s most powerful economic players In fact, he set the stage for

China to become a global market leader And now, some predict that the

inevitable is imminent: China might soon overtake the United States as

the key driver of the global economy, a position the United States has

held since the end of World War II

If we take a closer look at the statistics, China, which accounts for

approximately one-fifth of the world’s population, is prepared for better

economic times China has already overtaken the United States as the

country with the world’s largest number of Internet users For the past

three years, China has also been the world’s largest exporter of

informa-tion and communicainforma-tions technology (ICT) It now has the same number

of mobile phone users (500 million) as the whole of Europe.3By the year

2015, China’s research scientists and engineers might outnumber those

of any other country By the year 2020, it aims to annually spend a larger

share of its GDP on research and development (R&D) than the European

Union.4

With such dramatic and rapid rise in economic growth, comes a heavy

price—rapid urbanization For the world’s most populous country with

1.3 billion people, the statistics are staggering China’s cities are set to

add 325 million more people, including about 230 million migrants

Based on the current trend, the country’s urban population will reach

926 million by the year 2025 and top 1 billion by the year 2030

Let the data speak for itself: 221 of China’s cities will have more than

1 million residents (compared to Europe, which has 35 cities today) In

addition, 5 billion square meters of road will be paved, 170 mass-transit

systems could be built, and 40 billion square meters of floor space will

be built in 5 billion buildings (Of those new buildings, 50,000 could

be skyscrapers, the equivalent of ten New York Cities) And, by 2025,

the GDP will have multiplied by five times, and the urban economy will

generate more than 90 percent of China’s GDP.5

That is one mammoth record to match

The Fortune 500 multinational companies that currently operate in

China had been conducting business in China for a long time when they

first set foot in that country Further, since joining the WTO, China has

been flexible in its rules and procedures for foreign companies These

multinational companies have grown and expanded their businesses

from major cities to smaller towns or cities within China, reaching out

to serve the huge domestic markets, which comprise small- to

medium-sized businesses and middle-class consumers

Today, these multinational companies are reported to be more

prof-itable in China than their other operations in other parts of the world

China, too, benefits from these multinational companies: As these

com-panies transact with their local counterparts, a constant transfer occurs

of knowledge, global standards, best practices, and innovative ideas and

technologies With the lessons learned from these multinational

compa-nies, China appears ready to globalize its knowledge-based economy

Hong KongThe financial services hub of Asia is located at the south of mainland

China: Hong Kong This Asian Tiger that became one of the fastest

growing economies in the world, flourished well under the “One

Country, Two Systems” policy proposed by China’s President Deng

Xiaoping Although the socialist economic system in mainland China is

not practiced in Hong Kong, its previous capitalist systems and lifestyle

will remain unchanged for at least 50 years until the year 2047

This arrangement works well for Hong Kong as it continues to draw

resources, economic stability, and growth from mainland China After

all, Hong Kong’s GDP had at one time been one of the world’s most

impressive growth rates in the world Its strategy to adopt an

outward-looking policy with export-oriented industrialization paid off In fact,

Hong Kong led the path for the other Asian Tigers to follow with

simi-lar successes and achievement

For multinational companies that have businesses in mainland China,

Hong Kong remains a haven for skills and talent Rubbing off from

China’s economic growth, Hong Kong remains a popular destination for

westerners, both from cultural and economic perspectives After China

opened its trade doors to the world, job seekers who were looking for

global exposures and foreign assignments from Hong Kong started to

flock to China when huge job opportunities were created, especially by

multinational companies Many of these job seekers were sent on such

foreign assignments to China to start the China operations in major

cities, smaller cities, or towns with lucrative compensation packages

If China remains economically stable and continues to drive positive

growth, Hong Kong will almost be secured of a seat at China’s table if

Hong Kong maintains its competitive advantage as the talent hub.

China’s success will surely rub off on Hong Kong as Hong Kong’s

econ-omy largely relies on the services sector for higher labor earnings, and

employment prospects and opportunities

SingaporeSingapore better known for its capability to provide quality infra-

structure services more efficiently as an “efficient business city,”6 has

accomplished nothing more than sheer efficiency and competence

Singapore owes its great economic success story to the sharp and

fore-sighted leadership of its former minister mentor, Lee Kuan Yew

The former prime minister of Singapore said, “We learned from the

failed policies of countries such as India, Pakistan, Ghana, and Nigeria

Many new nations believed that the way to prosperity was state planning

of the economy with socialist states being seen as models But the

third-world leaders who had demolished old regimes did not take into account

that building a new order demanded different capabilities So my

strat-egy was to turn Singapore, a third-world island, into a first-class oasis,

by establishing up-to-date facilities in communications and

transporta-tion.”7

Lee Kuan Yew’s brilliant strategy paid off handsomely when

Singapore became a first-world country within a short period of time

with its unprecedented GDP of 12.7 percent from 1965 to 1973 If any

country has the sheer perseverance to push itself out of the doldrums of

global economic tsunamis, it would be Singapore It should be proud to

have remained resilient despite the global recession that hit in the early

1970s with the collapse of oil prices, and then the second global oil

cri-sis in the late 1970s Singapore escaped unscathed

Since then, Singapore’s economic performance has been a stellar one—

that is putting it mildly To enhance its competitive advantage, the

city-state embarked on a new strategy in innovation that took off in

2000 Emphasis has been on applied and technological innovations in

the manufacturing sector, entrepreneurial opportunities in the services

sector, and the “creative industries” specifically in the areas of

develop-ing individual creativity, skills, and talent.

Its focus has now borne fruits as evidenced by the latest economic

report released by the Singapore government In the second quarter of

2007, its GDP expanded by 8.6 percent year-on-year as compared to 6.4

percent in the previous quarter That means its economy grew by 7.6

percent in the first 6 months of 2007, with sectors such as financial

serv-ices that grew by 17 percent in the second quarter as compared to 14

percent in the first quarter, and construction, which also registered

double-digit growth

It looks like nothing can slow Singapore down It will certainly not

rest on its laurels Its quest to transform its economy into an Asian giant

will continue to see heavy diversified investments in various wide-ranging

industries by the Singapore government Further targeted drive is

evi-dent in the tourism, biotechnology, multimedia, retail and leisure,

and medical technology industries that will definitely spearhead its

human capital investment

As an illustration, two integrated resorts expected to generate 35,000

jobs are ready to boost Singapore’s economy.8 The Marina Bay Sands, a

business-focused integrated resort (IR) with extensive convention

facili-ties is scheduled to open in 2009 The second IR, Resorts World at

Sentosa Island, is expected to open in 2011 Singapore will also host

global events such as the world’s first Formula One night race and the

world’s first Youth Olympics Games Singapore has become yet another

talent hub with unmatched credentials and perks for skills in Asia.

IndiaNot too far away is India that is catching the world’s attention after

decades of slow growth and extreme poverty since its independence 61

years ago Having successfully implemented its economic reforms in

1991, India is now ready to take the world by storm If India can sustain

its healthy GDP growth over the next two decades, scores of India’s

poorest communities can be greatly eradicated To put things in context,

India’s real GDP averaged 8.6 percent over the last four years, with an

expected growth of 9 percent a year through 2012.9

Its robust economy has made India home to world-class companies

across major industries such as information technology (IT), automotive,

steel, telecommunications, manufacturing, and pharmaceuticals Today,

India’s executives feel optimistic about their country’s economic

per-formance and expectations for workforce hiring and employment

oppor-tunities

Consider the IT industry, for example Because of its high number of

IT workers, India has built a sophisticated human supply chain Its

secret recipe in a thriving IT environment is to merge people and

processes in an efficient manner Home to close to 1.6 million IT

employees,10 here lies the talent who write software for Western and

multinational companies, and manage and handle back-office operations

electronically for these companies Such is the advent of technological

progress that has invariably put India on the world’s technology map

The telecommunications sector is another Indian success story More

than half of its urban population either have mobile or fixed-line

tele-phone subscriptions Today, India is the fastest growing market in the

world for mobile subscriptions The pace of its technological growth and

advancement rapidly continues at dizzying heights Coupled with the

fact that it is a lucrative breeding ground for competitive skilled talent,

India has become an attractive destination for foreign investors to focus

on human capital investments for highly skilled resources

In its perseverance to globalize its economy, local Indian companies

have taken great strides to compete with their Western counterparts For

example, Wipro’s focus has been on certification and continuous

improvement to meet the highest internationally recognized standards

for software development Further, India today hosts R&D centers for

more than 100 multinational companies and is ranked as the sixth most

popular location in the world.11

The Tata Group, the country’s largest private enterprise, now

pro-duces the world’s cheapest car (priced at “1 lakh,” or 100,000 rupees,

equivalent to US$2,500 per car) When asked how he would position

India in a global economy, Ratan N Tata, the chairman of the Tata

Group, said, “If we plan our cards right as a country, we could be a

sup-plier of IT services and IT solutions to the world We could also be a

product development centre for pharmaceuticals We could be a very

good global R&D centre in biotechnology and in some of the emerging

technologies, such as nanotechnology, provided we really give them the

focus they would need.”12

The Next Asian Tiger: Vietnam

Vietnam, once widely anticipated as the next economic “Asian Tiger,”

is now emerging as a regional economic power Today, with more than 8

percent annual growth, this “new kid on the block” is one of Asia’s

fastest-growing countries after China The Vietnam War scarred the

country badly and left its economy nearly dead With its resilience, it

picked itself up and managed to revive itself from three decades of war

destruction

Vietnam has come a long way since its early doi moi days after the

country took on a vigorous drive to reform its economy In essence, the

reform efforts undertaken were directed at developing a multisector

market, and to reform its financial and legal systems, to create an

environment conducive for foreign direct investment (FDI) These

reforms resulted in a stable economy with rapid growth spurned by

large increases in international trade and heavy presence of

multina-tional companies in Vietnam The punch line is that Vietnam’s economic

structure has transformed from an agricultural-based country to one

dominated by the industrial and services industries

This new kid on the block has not sat on its laurels since Vietnamese

people are a dedicated lot who knows what real perseverance is They

know that the country needs to network with others in the region and

around the world to sustain its healthy and stable economy They

recog-nized that the country needed to gain entry as a full member of the

asso-ciation of Southeast Asian Nations (ASEAN), which occurred in 1995,

where it would demonstrate its commitment to economic cooperation

in the ASEAN region to the opening up of its economy and to trade

liberalization

Fueled with its desire to live up to its title of the “new Asian Tiger,”

Vietnam then signed a cooperation agreement with the European Union

on economic relations, commerce, and science and technology In recent

years, Vietnam joined the WTO and ended its 12-year communist rule

With a stable foundation now set, Vietnam focuses on its socioeconomic

development plans, including building and enhancing its human capital

to meet global and regional demands

Vietnam’s economic progress and prowess has been carefully watched

by its Western counterparts and multinational companies These

“observers” were encouraged when the ADB13 forecast Vietnam’s

eco-nomic growth to be 7 percent in 2008 and to rebound to 8.1 percent in

2009, as compared to 8.5 percent in 2007 In its annual publication, the

Asian Development Bank Outlook 2008, Vietnam revealed that its year

average inflation is forecast at 18.3 percent in 2008 but will slow to

10.2 percent in 2009

There are enough opportunities for everyone in Vietnam Because

doing business in China and India is slowly becoming more and more

expensive for multinational companies, Vietnam is commonly

consid-ered a viable alternative In fact, Vietnam’s current positive and

encour-aging economic performance has occurred at an opportune time when

FDI in infrastructure, industrialization, and human capital development

begins to take center stage

Indeed, the next Asian Tiger has arrived

The U.S Economic Slowdown

In April 2008, “The Great Depression” was flashed as the front-page

headline of the Independent, a British newspaper, joining the flurry of gloomy

news about the economic slowdown in the United States The tumultuous

economic growth in Asia has taken its toll on the U.S economy Sadly, Asia’s

continued stellar economic performance in terms of job opportunities,

inno-vation, and positive change has invariably added more doom and gloom to

the dismal U.S downturn

It seems lately the Americans awake to one bad news story after

another Food and healthcare costs continue to escalate; housing prices

and the Dow Jones Industrial Average drop, showing no sign of

recov-ery; bank loans and credit facilities become tighter and more stringent;

fear of unemployment sets in with current salaries just waiting to be

axed; and year-end bonuses might soon be unheard of And the list goes

on In short, the U.S economy is heading into the doldrums with little

prospect of any help anticipated at the end of the dreary road Worst of

all, this depressing situation could continue for the next two to three

years

The biggest area that has been hit is housing, which is everyone’s

biggest asset And Americans are no exception In fact, the U.S housing

market has been deteriorating for the past few years, and no one paid

attention Then the prices of houses continued to plunge at a fast pace,

as more and more houses become empty and unsold, with foreclosures by

banks at an all-time high

As an illustration, the two largest mortgage companies, Fannie Mae

and Freddie Mac, together hold about half of the country’s $12 trillion

in mortgage debts.14 With continuous tightening of credit by the

inter-national banks in the United States, this means that there will be few

creditworthy buyers who can qualify for new homes, resulting in a

slow-down in the construction industry Other sectors such as manufacturing

and retailing are also badly hit

Inevitably, this downward trend with fears of unemployment looming

in the near future has affected the already shrinking U.S consumer

spending, particularly in cars and luxury goods Retail sales are sliding

with lower and lower imports forecasted However, at the other end of

the scale, it is all bushy-tailed and bright-eyed for China Fueled by its

growing huge domestic demand, China’s retail spending is on the

upward trend for both locally produced products and imported ones

A growing concern is that Chinese imports in the United States will

take a hit on consumer spending Although these Chinese imports offer

cheaper alternatives with wider varieties to Americans who are

tighten-ing their belts, it might be a matter of time before the United States

cuts back on its imports, including cheaper Chinese imports When

demand is low triggered by austerity drives to cut back on spending,

even cheap Chinese goods might no longer be affordable The World

Bank estimates that if U.S consumption of Chinese goods falls by the

equivalent of 1 percent of GDP, this could knock 0.2 percent to 0.5

per-centage points off China’s GDP growth.15

However, with fears of a global recession imminent resulting from the

backlash of the extreme recession in the United States, the rest of the

world will not be spared Economic growth in Asia will likely slow over

the coming year As the saying goes, “When the U.S sneezes, the rest of

the world catches a cold.” At the time of this writing, it seems like it

will be a bad cold, one that might take longer than usual to recover

from

SummaryThe continuous and rapid economic growth in Asia, which shows no

sign of slowing down, directly and negatively impacts the U.S economy

Because the U.S domestic demand is shrinking, multinational

compa-nies, especially the U.S.-based ones, know that their survival largely

depends on international markets, particularly in Asia, which has an

undying thirst for natural resources, know-how, technology,

infrastruc-ture, and talent

Multinational companies know that they need to assimilate into the

multiple cultures across Asia, anticipating the discerning taste of Asian

consumers This is a tall order today because it is the only pragmatic

way for them to ensure sound returns on their Asian investment

For Asia’s home-grown businesses that traditionally have been passed

down for generations by their forefathers, it is important for the older

generation and forefathers to appreciate and understand that times have

changed and how things have changed The Asia today is no longer the

same as the Asia of yesterday Western cultures and influences have made

their significant impact into this part of the world through colonialism

and imperialism

To stay fiercely competitive in this age of globalization in a “flat

world,”16 these traditional Asian businesses need to compete against

multinational companies that have deeper pockets, more resources, and

advanced technology

Asian businesses need to accept the hard fact that the multinational

companies have already made their mark in Asia today with their

increased geographical and territorial coverage

Against this competitive economic backdrop lies one interesting

fac-tor that has become a key differentiafac-tor and a unique selling proposition

for the survival of businesses of the future That factor is something we

have all taken for granted for decades that is slowly becoming a scarce

commodity: talent.

Endnotes

1 “Asia,” Channel NewsAsia, broadcasting advertisement.

2 “New Economic Growth Strategy (Outline),” (Ministry of Economy, Trade and Industry,

Government of Japan) (June 2006).

3 “Briefing Technology in emerging economies—Of Internet cafes and power cuts,” The

Economist (February 9, 2008): 63.

4 “High-Tech Hopefuls,” The Economist (November 10, 2007) 4.

5 Jonathan Woetzel and Ors, “Preparing for China’s urban billion,” McKinsey Global

Institute (March 2008), www.mckinsey.com/mgi.

6 Kim-Song Tan and Sock-Yong Phang, “From Efficiency-Driven to Innovation-Driven

Economic Growth: Perspectives from Singapore,” World Bank Policy Research Working

Paper 3569 (April 2005) This paper was prepared for the East Asia Prospect Study

conducted in DECRG at the World Bank.

7 Interview with Lee Kuan Yew, Senior Minister and former Prime Minister of Singapore,

Harvard News (October 17, 2000).

8 http://www.economywatch.com/world_economy/singapore/.

9 Adil S Zainulbhai, “Securing India’s Place in the Global Economy,” The McKinsey

Quarterly, Special edition on “Building a better India,” (2007) 9-10.

10 “Gravity’s pull; Information technology in India (Is India’s technology boom slowing?),”

The Economist (December 15, 2007) 61.

11 “High-Tech Hopefuls,” The Economist (November 10, 2007) 4.

12 Ranjit V Pandit, “What’s next for Tata Group: An interview with its chairman,” The

McKinsey Quarterly (2005), Number 4, 66.

13 “ADB: Vietnam’s economic growth to decline,” Xinhua (April 2, 2008).

14 Jeffrey E Garten, “Yet Another Domino Falls,” Newsweek (July 28, 2008) 41.

15 “Briefing China’s economy—How fit is the panda?” The Economist (September 29, 2007)

72.

16 Thomas L Friedman, The World Is Flat (Farrar, Straus & Giroux, 2007).

Chapter Contents

■ The War for Talent 14

■ The Hiring Buzz 16

■ What Talents Are in Short Supply? 17

■ Where is Talent in Short Supply? 20

■ Why Are the Right Talents Lacking? 22

The talent shortage challenge is indeed intense in Asia with the

imbalance of supply and demand for the right talent The experience that

multinationals in Asia experience is akin to a highly competitive

envi-ronment commonly referred to as the “War for Talent.”

13

The Talent Shortage

Challenge

2

IntroductionThis chapter explains what the War for Talent means to companies

operating in Asia today We first look at the key factors that have

con-tributed to this shortage We then review which talents are in short

sup-ply and locations in Asia where such shortages are most prevalent

The War for TalentThe War for Talent does not seem to be waning On the contrary, Asia

is experiencing one of its fiercest wars for talent, intensified by the U.S

economic slowdown and fueled by the explosive Asian economic boom

Surveys and statistics continuously and consistently echo the same

mes-sage: Managers and executives in Asia realize that the talent challenge

will continue to be their worst nightmare

The years ahead do not look promising With the shrinking pool of

skilled talent now in Asia, organizations will be forced to compete even

more aggressively to attract such talent, motivate them, and retain the

high performers It has now become increasingly difficult to attract the

right talent, let alone retain them Competition is intensified as

organi-zations go for the same talent The only way for managers and executives

in Asia to tackle the onslaught of the talent shortage challenges is

through innovation

The executives surveyed in a 2008 McKinsey survey1 identified

increasing competition for talent as the trend that is likeliest to affect

their companies over the next five years With increasing investments by

multinational companies in low-wage locations such as China, it is no

surprise that these multinational companies resort to poaching from

each other due to scarcity of good quality talent—people who are high

performers who possess the right skills, attributes, and experience in a

global working environment

Some of these multinational companies are global manufacturers that

have operations in emerging markets such as in China, India, and

Southeast Asian countries Their hiring requirements are often more

sophisticated than local companies in Asia Approximately one-quarter

of the executives from these manufacturing companies across these

emerging markets said it was “very difficult” to hire skilled workers in

these locations, whereas one-third said it was “somewhat difficult.”2

But why is this happening now? What is causing such a dwindling

pool of skilled talent in Asia? If we take a minute to look around us, it

would soon be obvious to us that talent availability is something that

has been taken for granted for a long time Managers and executives in

Asia assume that skilled talent will grow with the times as more and

more people make it to tertiary education in this part of the world That

is indeed true But when it comes to the crux of the matter, we are not

talking about the millions of new university graduates each year who

seek employment We are talking about the right skills and right talent

that fit the hiring requirements of organizations It is a matter of

quan-tity versus quality of talent

Many view that it is ironic that emerging markets such as China and

India, the world’s most populous countries, now face an acute talent

shortage But put that thought in the right context: China and India do

face a shortage of the right talent As Asian economies continue to strive

and deliver stellar performance, the Asian talent pool has not kept up

with the surge of demand in highly sophisticated skills If the talent

shortage problem is left unattended through the years, the talent crunch

occurs

Asia has not anticipated the pace at which its own economy is

boom-ing No one has also anticipated the imbalance between the supply and

demand of the right talent for the Asian economy to continue to prosper.

Worst of all, Asia has been too dependent on its Western counterparts to

supply the right talent through overseas assignments of Western talent

to Asia In short, Asia has been too reliant on talent imports versus

growing its own talent

The issue of talent imports is complicated more by the wide

diversifi-cation of the Asian cultures, which are both complex and varied As the

Asian economy surges forward, what “sells” in Asia is the insight into

the discerning taste and lifestyles of the new and modern Asians, which

have been greatly influenced by colonialism and imperialism Mostly,

these talent imports are no longer competitive and sufficient to meet the

sophisticated hiring requirements for the Asian businesses They now

lack the wide cultural experience and local market insights The huge

geographical span of Asia, covering the length and breadth of the

north-ern and southnorth-ern hemispheres, is another disadvantage

The worst fears are that the War for Talent that started in the 1990s

will not stop rearing its ugly head in Asia in the near future This can be

a nail-biting experience with managers and executives sitting at the

edge of their seats, watching in horror as their headhunted talent is

lured away under their noses Inevitably, the War for Talent can have

only winners and losers It is as simple as that

Winners will spare no mercy to fight for the right talent It is indeed a

sur-vival test Losers, on the other hand, must concede defeat and retreat in agony

and disappointment Ultimately, losers who fail to obtain the right talent

must face the consequences of poor organization performance due to the

cas-cading effect of hiring the wrong talent Many experienced executives and

managers agree that there is a positive and direct correlation between hiring

the right talent and the performance of organizations.

This warfare cannot end until Asia wakes up to be less dependent on

the economic forces and on its Western counterparts This war will

con-tinue to persist and hit on employers who are weak and who lack the

survival instinct Employers in Asia must act quickly to avoid the talent

shortage problem for a protracted period of time

The Hiring Buzz

The buzz words in Asia today are workforce hiring Amid rapid

eco-nomic growth in Asia and a declining U.S economy, there are positive

sentiments in Asia on increased hiring, and investment plans on skills

training and development It was suggested that despite the U.S

eco-nomic slowdown, the hiring confidence in Asia remains buoyant and

strong, especially in China and India

Companies in Asia today are optimistic about their hiring plans But

why wouldn’t they be? When its economy is growing at breakneck

speed, and shows no sign of slowing down, it is obvious that businesses

in Asia will definitely grow and expand, both in domestic and

interna-tional markets Job opportunities will be abundant New jobs will be

created and added to existing business units, and job prospects will be

rosy Then there is the plan to expand beyond the shores of Asia to take

advantage of new market opportunities across the globe Many of these

companies aim to set their footprints in the global markets and to

trans-form their companies to become global

Positive and encouraging views and feedback were felt from

executives around the world on the hiring buzz and outlook.3 In a

2007 survey, the outlook remained bullish and upbeat on hiring,

espe-cially in developing countries in Asia where companies planned to

increase their investment in recruitment and training Executives in

Asia Pacific comprised the highest percentage of respondents (at nearly

50 percent) who would expect the size of their companies’ workforce to

increase over the next six months

This same sentiment was held consistent in the 2008 survey, where

human capital remained the type of investment that was the likeliest to

benefit from an increase in investment over the next six months Close

to 40 percent of the executives said that they would increase their

investment in this area Sadly, capital investments and investments in

R&D will not remain as a top priority

Asia should also look at increasing its foreign workforce hiring as it

strug-gles to fight the acute talent shortage It is a case of scraping the bottom of

the barrel for the right talent, and importing the right talent seems to be the

right solution With the U.S economy slowing down, perhaps it is an

oppor-tune time to increase talent imports from its Western counterparts, especially

the C-level executives and middle management

Invariably, many multinational companies look to beefing up overseas

assignments for their employees from their United States and the United

Kingdom (UK) offices to Asia Indeed, to keep the costs down, perhaps,

some of the overseas assignment perks might need to be curtailed and

removed Alternatively, relocating their high performers from the

United States and the UK to Asia with attractive “local-plus”

compensa-tion packages (wages and benefits are above what the locals would

receive) might perhaps be a viable and cost-effective solution

With Asia now abuzz with its hiring plans, this is a good problem for

both Asia and its Western counterparts A win-win solution seems to be

in the works However, it is easier said than done Set against a

dwin-dling pool of the right talent, with increasing demands for the right

tal-ent, and fighting a fierce competition for the same right taltal-ent, Asia is

still very dependent on the supply of the right talent in the West.

A good and reasonable balance between supply and demand for the

right talent must be achieved to satisfy the ever-growing business

demands in the Asian marketplace and to avoid the perils of poor

busi-ness performance due to lack of the right talent, at all costs.

What Talents Are in Short Supply?

It is interesting to explore the types of talent that have a high

demand in Asia yet are lacking today The general sentiment is that

multinationals in Asia need professionals and managers who come in a

good package; they must possess both hot skills (such as subject matter

expertise) and soft skills to compete with formidable global players in

the competitive business world Inevitably, there must be an effective

balance of these skills

Professional

Professional groups in Asia today have become a rare commodity as it

faces the wrath of a dwindling pool of good professional talent when it is

most needed to spearhead Asia’s economic growth as Asia settles in as an

economic powerhouse Not only is the number getting smaller by the

day, the quality has also deteriorated from the perspective of

interna-tional standards, practices and norms, financial regulations, and

corpo-rate governance The worst affected groups are engineers, accountants,

medical doctors, scientists, software specialists, airline pilots, and

busi-ness managers

Like they say, “Seeing is believing.” Statistics reveal how critical the

problem has become Only 10 percent of professional engineers in China

and 25 percent of those in India compete in multinational companies,

according to the shocking results from a survey conducted by McKinsey

Global Institute.4 Approximately 1.2 million engineers and scientists

graduate from universities in China and India every year.5Although this

is an impressive record that tripled the number of graduates ten years

ago, many of them are not suitable to be hired by multinational

compa-nies; they do not make the cut

Managerial

Managerial skills are hard to come by these days in Asia Set against

the backdrop of fast-paced economic progress and transformation, it is

inevitable that there is now an increased need for highly talented people

with managerial and leadership skills, including those with

interna-tional experience, expertise, and exposure Those who possess skills in

interacting well with local workers, and who can adapt to the local work

cultures, are in great demand

Senior management (C-level executives and business unit leaders) and

middle management skills are also hard to find Because of the influx of

foreign companies, global manufacturers and multinational companies

who continuously expand their operations in Asia, the need for such

tal-ent is at an all-time high For companies in China and India, although

the problem is less significant in India, which have been less successful

in hiring such managerial skills into their organizations, the acute

short-age of manshort-agerial talent seems a major roadblock to their

competitive-ness in the global marketplace

The chilling fact is that Chinese companies lag far behind in their

supply of managerial talent It is envisioned that in the next 10 to 15

years they will need 75,000 leaders who can work effectively in global

environments; today they have only 3,000 to 5,000 leaders.6

Command of the English Language

The lack of this skill is most prevalent in countries where the English

language is not the mother tongue or where the education system does

not focus on mastering this language China is one such country where

the fluency level of English is relatively low compared to its other Asian

counterparts such as India, Singapore, and Hong Kong, which also

expe-rience the same pace of economic growth as China

We have seen that the number of university graduates in China is on

the rise Unfortunately, the majority of these graduates will not be

“employable” by multinational companies or foreign companies that

have a major presence in China The key reason cited for not accepting

these graduates is that they possess poor command of the English

lan-guage, both in written and spoken competency levels

Today, if Chinese talent continues to have low fluency levels in

English, or if there is an acute shortage of talent with a good command

of the English language, this can hamper those Chinese workers from

gaining job opportunities to manage international projects and from

gaining a competitive edge on their closest competitors in

common-wealth countries, such as India, Singapore, or Hong Kong

Other Skills

There are also other skills that seem to be lacking in Asian talent

One of the more evident areas is in IT Although many graduate from

Asian universities every year, they are quickly lapped by the vibrant

nature of this sector The advent of IT is the driving force to spearhead

the economic progress and transformation of Asia’s growth Essentially,

in the case of IT skills, the current supply simply is insufficient to meet

the increasing demand for such talent According to The National

Association of Software and Services Companies (NASSCOM),7 it is

forecasted that there could be a shortage of 500,000 IT professionals by

the year 2010 in India

The other talent shortage is in the area of practical skills such as

team-work, taking on responsibilities, and communication These are soft

skills that young graduates must learn quickly in a working

environ-ment Perhaps it is the stricter international standards—the practices

and norms set by foreign companies and multinational companies that

have dictated the acceptable employable levels Therefore, current levels

no longer are acceptable, and few people possess these higher standards

Another reason might be the nature of the Asian education system

that emphasizes “learning by rote,” or memorizing styles of teaching

and learning There is little emphasis and focus on encouraging

expressions of opinions and ideas, practical experience, public

speak-ing, creative writspeak-ing, teamwork, interpersonal skills, and leadership

skills that are the necessary fundamentals in today’s modern business

world In some of the local Asian organizations, training and

develop-ment programs do little to focus on across-cultural fit for

interper-sonal skills, teamwork, remote management, and flexible working

hours

As Asian companies open up their doors to hiring the right talent that

might originate from countries outside Asia or outside their home

coun-tries, it is imperative that the right talent possess excellent soft skills

besides being professionals or managers or subject matter experts The

right talent must therefore have the right balance of both hot skills and

soft skills

Where Is Talent in Short Supply?

It is no surprise that the aggressive economic growth in Asia has

started to feed on good skills and talent at a much faster pace, the

conse-quence of which the right talent is diminishing at an equally fast pace It

is by far the biggest headache faced by multinational companies today in

Asia and especially in China and South-East Asia.8

There is no denying that “the world’s largest factory” today is mired

by severe talent shortage This seems to be a recurring nightmare that

still plagues China because it cannot find sufficient people with the

right kind of skills There are many potential skilled workers in China

with the number of university graduates increasing year after year

But the question is, “Do they have the right skill set from offices to

factories?” Sadly, the answer is no Why? Because the demand for skills

has reached a sophisticated level so that what is available today is

insuf-ficient to meet these demands In fact, the talent shortage in China has

reached a critical point It needs 1.1 billion workers by the year 2020 to

operate effectively and efficiently.9

To the man on the street, this is an unusual problem How can a

coun-try that has a huge population be constantly suffering from acute talent

shortage? More interesting, to the man on the street, how did this

prob-lem begin in the first place? What is causing this probprob-lem to remain

unresolved? Let’s take a moment to reflect upon possible factors that

attribute to this problem

First, let us examine China’s population Its strict One-Child law has

resulted in a low birth rate among young people of marriageable age On

the other hand, its population is aging rapidly Further, many of the

Chinese people, especially the baby boomers, did not receive a good

edu-cation and had to work in the communal farms in their younger days of

extreme poverty These people certainly do not make the mark to be

employed by multinational companies in their expanded operations in

China

Even among its young university graduates, few qualify to be

employed by these multinational companies The entry bar and

stan-dards are high This “looming shortage of home-grown talent”10has

seri-ous implications for multinational companies and local companies in

China that have plans to serve its fast-growing domestic markets and to

expand beyond China

The common view is that the shortage of talent with local market

insight or regional experience in China is the reason why most

compa-nies fail to find the right talent to fill the key job roles Their only

option is to search for the right Chinese talent outside of China, and they

have since ventured into Europe, the United States, and other locations

in Asia

In China there is fierce competition between the major cities and the

smaller cities The smaller cities are obviously less attractive to young

university graduates, as more and more of them are attracted by the

brighter lights in bigger cities Smaller cities will also continue to face

continuous challenges of attracting young talent

India is in the same situation as China Similar sentiments are shared

by its managers and executives Low availability of the right talent from

its fairly young population of 1.1 billion seems to be equally

mind-boggling They know that what matters most is quality and not quantity

But their hands are tied when it comes to finding the suitable talent in

the midst of economic boom in India

Let’s consider the IT industry as an example It is one of the hottest

industries, and India delivers outstanding performance According to

NASSCOM, India’s export of IT services (excluding back-office services)

grew by 36 percent in the previous fiscal year that ended in March 2007

to reach US$18 billion, and employed 560,000 people One of its most

successful local giants, Tata Consulting Services, employs more than

100,000 people, having added 12,000 in the recent quarter Together

with the other two local giants, Wipro and Infosys, these Big Three have

major international clients such as General Motors, United Biscuits,

Skandia, and British Telecom

This is the recurring nightmare for India: Where can India find the

required skilled talent if it continues to gain footprints and access to

international clients in global markets? And so the quest for skilled

tal-ent continues

Why Are the Right Talents Lacking?

It is amazing how economic growth in Asia has started to chew up the

right skills at such an alarming speed that Asia has not responded

promptly to meet such high and sophisticated demands in the emerging

and developing economies Sadly, schools and universities across Asia

have not developed the right skills in line with the ever-increasing high

demands for such talent

Let’s take a close look at why such a talent crunch is happening in

Asia, both from the availability of the right talent and from the skill sets

and competencies Essentially, the cause of the acute talent shortage can

be attributed to various factors, ranging from demographic movements,

to global resourcing, the advent of globalization, talent mobility, and

brain drain

Global Resourcing

Global resourcing is defined as “the process a company goes through

to decide which of its activities could be performed anywhere in the

world, where to locate them, and who will do them.” Offshoring is then

defined as “services which are performed in another country outside the

markets where they are sold.”11 Driven by the high cost of doing

busi-nesses in developed countries, organizations typically move these

serv-ices to developing low-wage markets

In fact, offshoring is a phenomenon that involves the movement or

relocation of jobs from one location to another, usually outside of their

home locations For example, jobs have been moved across borders from

high-cost countries to low-cost countries or within the same country

from a more expensive city to a less expensive one Today offshoring is

made much more convenient with improved information and

communi-cation technologies

The global opportunities for offshoring and outsourcing are immense,

per-haps worth US$56 billion a year by the year 2015.12 China, India, and

Southeast Asian countries remain popular offshoring locations due to their

lower wages and less-restrictive labor markets For these low-wage markets

to capture all of that, they need to seriously think of how to develop the right

talent with the right level of quality and sophistication

Although there is a continuous flow of university graduates in these

low-wage countries, only a handful will be absorbed into the

employ-ment of multinational companies that have offshoring facilities in these

countries For example, in addition to facing stiffer competition from

these multinational companies for the right talent, China must cater to

the high demands from local Chinese companies that serve the growing

domestic markets

These include nonoffshoring companies that comprise foreign joint

ventures and other multinational companies that focus on the domestic

markets Then China also has the manufacturing export companies that

also fight for a piece of the talent pie Against this fierce competitive

battlefield, it is little wonder that the talent shortage problem is more

acute in China than in other offshoring locations such as India and the

Philippines

At the end of the day, the supply and demand of the right talent must

be balanced efficiently Looking at how things are progressing on the

talent management front, it does point to the glaring fact that in some

locations demand has exceeded supply to a critical level, whereas in

other locations the problem is definitely heading toward the same fate