Growing Importance of Talent Management
At the beginning of the twentieth century, firms started to realize that international markets could provide an additional source of competitive advantage. By competing in both domestic and international markets, these multinational corporations (MNCs) could expect greater results, keeping shareholders content. Because of this trend to globalization, talent management is gaining mainstream acceptance worldwide as a key management area, thus adding new knowledge and innovation in the field of human resource management. With growing private-sector competition, the issue of identifying, attracting, developing and retaining talented individuals has become essential for sustainable corporate growth in the competitive and volatile markets. With human talent a resource not easily replicated by competitors, attracting and retaining talented people is becoming increasingly difficult due to specific demographical and psychological trends. Recent economic crises and globalization make the problem even more urgent today. Among arguments for the āstrongā globalization thesis are increasing global competition, dominance of the new global economic system and the rapidly increasing number of multinational enterprises which operate not only in their home market but also in foreign countries, grabbing market share. This inevitably carries consequences for the talent management strategies of MNCs, including issues such as cross-border knowledge sharing, managing global virtual teams and much more.
Much discussion focuses on a range of factors associated with the growing importance of talent management. First, the shortages of managerial and professional talent have emerged as the key human resource challenge facing the majority of companies in both developed and emerging markets. Another very important issue is that the growth of emerging markets has resulted in further demand for special competencies to operate effectively in culturally complex and geographically distant markets. It has sometimes been argued that companies are frequently unable to identify their most talented employees, especially in an international context. 1
Talent management is definitely not a new topic for discussion among analysts of different spheres (management, sociology, human resources, business and psychology); nevertheless, itās still a subject for hot debate and even more so now than ten years ago. Since 2000, the number of academic articles on the topic has grown dramatically. As the lack of managers with exceptional knowledge and abilities widens, researchers are deepening their investigation of global talent management. There is also scope for comparative studies to analyze how talent management practices are implemented in different national contexts. 2, 3, 4 Moreover, market internationalization requires versatile, nimble companies capable of evolving new forms of organizational culture to allow them to become transnational. The approaches which MNCs choose for managing their employees on local and international scales are more and more crucial to the success of their strategies as they become multinational while implementing their globalization strategies. Firms from emerging markets are developing into strong rivals and have changed the competitive landscape in the international business arena, yet they still require better managerial practices.
The globalized world imposes its strategic character on talent management practices within MNCs nowadays. Yet many studies on international human resource management cover questions of developing international management systems within developed-country MNCs rather than paying attention to strategic globalization implications for emerging MNCs. Nowhere have MNCs been asleep. Both developed and emerging MNCs grew healthily throughout the 1980s, the 1990s and in the past decade. MNCs now have diversified operational activities in a large number of countries. 5 This internationalization has forced companies to restructure their operational activities into diverse transnational forms of management organization. The question now is how emerging markets affect the rise of new MNCs and what innovative competitive advantages such companies should create to compete globally. More and more often, the low-cost manufacturing or service advantage is proving short-lived.
The Rise of Emerging Economies and Evidence for Talent Management in Emerging Market Firms
āWe aspire to be more than just a leading personal technology company, but to be a company that is known, admired and respected around the world,ā said Lenovo. 6 Beyond the shift to knowledge-based economies, another feature of globalization is a move from a global economy cantered on North America, Europe and Japan towards a multipolar world. Among the new centres of the global economy are four continent-size countries with a decisive demographic weight and sustained economic growth, namely Brazil, Russia, India and China (BRIC). The growing role played by these four national economies in international commerce (of goodsand services, people and capital) led to the formulation of the BRIC acronym in 2001.Goldman Sachs chief economist Jim OāNeill, in a paper entitledāBuilding Better Global Economic BRIC 7 ā designed the quartet of these four emerging nations (in terms of area, population or potential market). In 2003 Goldman Sachs prepared a report, āDreaming with BRICs: the path to 2050ā, in which the rising importance of newly developing BRIC economies was emphasized.
In parallel to the four BRIC markets, emerging markets are countries or markets that are not well established economically and financially but are making progress in that direction. Emerging MNCs originate from such emerging markets and excel and achieve highly effective results using creativity to face traditional problems for these economies. Even today, although the BRIC and emerging markets concepts have become mainstream, most of the research and discussion on companies in emerging markets relates to inbound expansion by developed-country MNCs into emerging economies. Yet the Fortune 500 ranking demonstrates the rise of emerging market MNCs, a rise that in fact far exceeds the growth rate of developed-country MNCs.
It is claimed that within the next 15 years approximately 70 % of the worldwide GDP will be produced by emerging markets. 8 Such rapid development means that developed countries are expected to be surpassed by countries with emerging economies. Moreover, emerging market competition is increasing faster than anticipated, and not only among BRIC countries. Recently emerging market firms become competitive by integrated innovative technological processes or customizing value chains pioneered by developed countries. These and other factors (e.g. access to natural resources) are considered to be important in the emerging market firmsā success. But nowadays it is crucial to create additional competitive advantage in order to be able to retain and further develop market leadership. In this case, cultural and talent issues are among their most serious concerns.
Beyond that, the bulk of the world population is living in developing countries, implying that developing countries present significant potentialities: significant consumption demand; an important supply of different resources (both natural and human) to industrialized nations; competitors to developed countries with lower labour costs; strategic regional centres for corporate expansion; production sites; and capital sources and uses, for example, from private creditors such as international banks, foreign direct investments (FDI), and foreign official governmental assistance. 9 For the past 20 years these markets have developed, thanks to reduced government economic regulations aimed at boosting economic growth and the development of trade activities. Eased foreign investment restrictions and reduced income tax rates in India, lowered trade tariffs and systematized tax and trade laws in China, elimination of non-tariff trade barriers in Brazil, reduced foreign exchange controls in South Korea and privatized public companies in Argentina are all examples of such growth-inducing governmental economic policies. These markets also offer great opportunity in terms of the potential talent pool. Such a palette of benefits has fostered emerging MNCs.
When expanding beyond their home borders, MNCs have to give serious thought to their organization of labour and production. Corporations worldwide are impacted by ten global mega-trends relating to the sustainability of the environment (climate change, water scarcity, ecosystem decline), of economic inputs (energy and fuel, wealth, material resources scarcity) and of social concerns (population growth, urbanization, food security). Emerging MNCs also face some additional challenges: unestablished reputations due to their country of origin, knowledge gaps with respect to developed-country MNCs, poor image in terms of corporate social responsibility and sometimes controversial political relations and agendas in developed markets (e.g. China and human rights). Moreover, emerging MNCs can find it challenging to balance globalization and local tasks, recruitment and retention of employees, various cross-border financial and legal issues and host economy impact.
Emerging markets now are engaged in a changing global labour market context. Nowadays around 80 % of the labour force worldwide is employed in developing and emerging markets. 10 Companies from emerging economies need to manage large numbers of workers properly, with a constant view to competitive advantage. This requirement underlines the importance of talent management among emerging market firms. 11, 12 Several important pillars of talent management for emerging MNCs have been recently identified. 13 The first is a demand for competencies and the ability of leaders and managers to contribute significantly to the successful implementation of business goals, international strategies and organizational development; the second is the fact...