Terms such as ‘outsourcing‘ and ‘offshoring’ have become buzzwords in the past decade, but if you went back 200 years, you would find the British East India Company doing something very similar, just without the IT focus and with bigger moustaches.
Just as the tide changed for the East India Company, so it has for multinationals in Asia.
Just a few years ago it seemed unthinkable that countries like India and China, which were (and still are) churning out graduates in incredible volumes, would run short of talent. But the StepStone Total Talent Report 2008, carried out by the Economist Intelligence Unit (EIU), recently concluded that “the idea of Asia as low-cost utopia with an abundance of labour is long-gone”.
The EIU interviewed almost 400 executives from multi-national companies about how they managed talent both in their home territories and in emerging markets.
It found executives struggling to deal with wage demands from staff in Asia and these employees more than willing to defect to other companies – sometimes within days of starting a job.
The Robert Walters Global Salary Survey 2008 adds weight to this trend. It found that basic salaries of IT staff increased between 20% and 30% in Hong Kong last year. This resulted in companies giving counter-offers raised by more than 30% when critical staff took jobs at rivals.
Simon Brittain, managing partner of Kiddy and Partners, a consultancy that helps organisations source talent across Asia, believes a wind of change is blowing through the Asian business environment.
“What we’re seeing is a shift from an employer’s to an employee’s market,” he says. “People are much more aware of what they could be getting out a relationship with an employer.”
Brittain has found that talented Asian employees are often in a position to accept two or three jobs.
“They stay for a few days and if they don’t like it they go to their second choice,” he says. “It’s a supply and demand thing there are so many jobs out there and the pay is escalating so quickly.”
Robert Rigby-Hall, senior vice president of HR at business information provider Lexis Nexis, says the maxim in Asia is “the war for talent is over… and the talent won”.
“[Staff is Asia] are more demanding than most other countries I know because they know that they’re in demand and many seem to have a clear plan about their careers,” says Rigby-Hall. “In China, there is the added complication of middle managers seeing a growing wealthy class and wanting the same for themselves.”
The labour market in China has also changed. A year ago the buzz was all about companies going public, but this trend has passed, says Guy Dru Drury, the CBI’s chief representative in Beijing.
“Now it’s all about HR – this is the most pressing issue, particularly if you are expanding,” he says. “I have two staff and what I do for them is a microcosm of what companies such as Unilever or [global mining company] BHP are up to. I give them intensive business training, foreign language studies, as well as full healthcare.”
Neil Cowieson, former director of HR development in Asia for HSBC and now director of HR consultancy Human Scope in Hong Kong, believes the mood is illustrated by the number of new guides in Asian bookshops about how to increase individual capital worth.
“Rather than your human capital being owned by a company, it is about asking what you will get from a job that will increase your value to another employer,” he says.
As a result, companies are becoming more creative to keep staff and in some cases go to extremes. Cowieson heard of two rival companies in India that had clubbed together to offer a co-employment experience, allowing staff to move easily between them, since they were doing it so often already.
“It used to be that once that you’d left [a company] the door was closed,” he says. “Now, companies are seeing a fair proportion [of former staff] find the grass isn’t greener so they are keeping an active alumni and inviting them to dinners and events, saying: ‘Any time you want to come back the door is open’.”
This is one clever piece of talent management in an environment that desperately needs it, but seems unwilling to accept it.
That said, the StepStone report showed an unwillingness among the companies surveyed to adapt to the changing circumstances. Despite demand outweighing supply (88% agreed recruiting and retaining talented employees was getting tougher), half the respondents (52%) said they thought candidates were asking for too much money, and only one in four (24%) said they planned to offer higher starting salaries in the future.
StepStone chief executive Colin Tenwick thinks Western companies have been caught out by an “almost imperial” presumption that talented people would want to work for Western companies.
“They are not recognising that to invest and grow they need to compete in the local market,” he explains. “There is a misunderstanding that there is an abundance of labour wanting to work for Western brands. Now there are many high quality Eastern companies that people want to work for.”
According to Lynda Gratton, professor of management practice at London Business School, rising multinationals in India and China are able to compete with Western firms because they can offer their employees greater mobility.
“If you join [business solutions company] Tata Consultancy Services in India as an Indian you’re just as likely to be sent outside of India as if you joined from the UK,” she said. “So there’s massive globalisation of the talent pools and of the competition for talent.”
Employers who are unwilling to confront these challenges are in for a rough ride, as it is clear that ignoring Asia and its markets is not an option.
A recent report by PricewaterhouseCoopers (PwC) predicted real economic growth in China between now and 2050 will average 6.8% annually, with 9.8% growth in Vietnam and 8.5% in India. By way of comparison, the UK is currently experiencing around 3% growth.
This is not lost on business leaders – the proportion respondents to the StepStone survey that thought Asia offered the best returns in the future was three times the number of the nearest competitor, the US.
Investing in IT in Vietnam rather than more mainstream destinations such as India or Korea has already reaped dividends for Harvey Nash.
“In Vietnam labour costs are much lower as they haven’t developed the same consumer society as in India and they have a 79% literacy rate and 83% of students study science,” he explains.
The PwC report also highlights African countries such as Nigeria as growth areas, but Smith said they would not replace Asia in the near future.
“The work ethic in Asia is very different to Africa and there is not trust in Nigeria, for instance, as everyone gets the scam e-mails,” he says. “There’s also a stability issue governments in Asia are much more stable and that’s what investors want.”
It seems now that companies that have gorged themselves on the well of cheap talent in Asia are beginning to find it drying up.
Those that want to prosper now need to abandon that well and start thinking about laying a talent pipeline instead.
Technology firm Infosys recently turned the traditional concept of Asian recruitment on its head by becoming the first Indian IT firm to recruit in the UK.
Nandita Gurjar, vice-president and group HR director at Infosys, says this was all about sourcing talent from where it is most effective.
“The nature of our services have matured from traditional IT services to high-end services like engineering, research and development and consulting, which has led us to hire expertise and talent from those industries and geographies,” he says.
“Also, as Infosys grows its global footprint, it was felt hiring locally would make us embedded in the countries and communities where we operate – creating a multicultural outlook is part of our effort to truly leverage the power of globalisation.”
Infosys is also recruiting from overseas locations like US and China, to prove just what a challenge Western companies are now facing from Eastern rivals. Recently it recruited around 126 graduates from US universities as a part of its Global Talent Program.