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Talent thrives in developed, wealthy economies — GTI

GTI

JEDDAH – The US and the Nordic region are the stellar performers in both the 2011 and 2015  “Global Talent Index (GTI)” Report, Heidrick & Struggles said in its latest report with outlook to 2015.

In its capacity to produce and attract talent, the US is well ahead of other countries – and almost a full point (on the index’s 1-10 scale) ahead of its closest competitor. It places top of the 2011 index table and retains its pre-eminent position in 2015. The excellence of its universities is a major factor in this performance. Almost one in three universities that are ranked in the top 500 in the world are located in the US , which therefore consistently churns out graduates who are well-equipped with the intellectual rigor to prosper in a competitive knowledge economy.

Also contributing to American leadership in the index are the high quality of its workforce, in terms of its adaptability and innovation, and a meritocratic environment, relatively unimpeded by interventionist labor laws or wage regulation, that liberates talent and encourages it to flourish. The Nordic region is represented by four countries in the 2011 top 10, and an even more noteworthy four out of the top five in 2015, with Sweden climbing by three places to join Denmark, Finland and Norway. In this region as a whole, high government spending, as a percentage of GDP, is maintained throughout all stages of education right through to universities, explaining to a significant extent why it has outperformed so many prominent rivals in the developed world in the overall index. The linguistic and technical skills of its working population are also particularly strong. Sweden’s notable improvement in 2015, rising by three places in the rankings to fourth, owes much to a predicted relaxation of its labor laws, and the arrival of more flexible remuneration practices offering equitable reward for excellence in the workplace.

Comparing the rankings of 2011 and 2015, the top 10 remain relatively stable. However, one country – Canada – bursts into eighth position in 2015, rising by six places, the largest jump in the index. This improvement is propelled by the demographic growth rate of its working population, together with a prospective surge in employment and a marked improvement in technical skills, both resulting largely from the boom in the country’s oil industry.

In the next tier down, the UK and Netherlands fall by two and three places respectively, while Germany and France rise by those same margins. The Economist Intelligence Unit expects all four countries to undergo a decline in compulsory education standards. However the discrepancy in their results depended on substantial employment growth is expected in France and, especially, in Germany;  and  both of the latter will see a relaxation of labor laws, and Germany an easing of burdensome wage regulation – developments that will help the talent market to adapt more quickly to structural and cyclical changes in the economy. Bleak employment prospects in Greece and Venezuela contribute to a predictably sharp descent in both these countries in 2015, whereas the reverse is true in Chile and particularly in Turkey, where strong economic growth is projected over the coming years. Normal economic progress brings about some improvement in the absolute score in most countries, albeit generally negligible in a developed world facing a straitened fiscal environment. Greece and Venezuela are among only six countries whose absolute scores deteriorate in the five-year time frame.

The others are Spain, which will suffer a contraction in employment; Austria, which will be adversely affected by a decline in higher education spending; Azerbaijan, which is about to undergo a considerable decline in foreign trade and direct investment due to the completion of certain major oil and gas projects within an economy almost exclusively dominated by the energy industry; and Taiwan, which finds itself in the midst of a dramatic demographic slump. Of all countries in the index, China registers the largest score improvement in 2015, boosted by Beijing’s increasing willingness to embrace foreign workers, a change in approach triggered in part by the impending decline of young indigenous workers entering the labor market. Of the other BRIC nations, Brazil also shows significant progress to 2015, with employment growing quickly, expenditure on education rising and the language skills of the workforce improving. India’s own rapid rise in employment opportunities is offset by a continuing poor standard of mainstream education, ensuring that its overall performance remains relatively unaltered. Similarly, the overall improvement Russia might have garnered through economic growth is hampered by its continuing decline in population.

The size of the potential pool of able workers is of course important, but what matters more for the purposes of the index is whether this potential can be nurtured effectively, and whether conditions promote and safeguard economic opportunities for individuals.

The overall index therefore confirms what one might expect – talent flourishes in, and is drawn to, developed and wealthy economies with liberal, democratic political systems. Western Europe may be the weakest region in terms of demographic growth, but together with North America, it emerges comfortably in advance of developing regions in the index. Indeed, demographic trends favor the Middle East and Africa, but their overall performance consigns them to the bottom two places in the regional rankings. Those rankings remain unchanged in 2015, with the scores of all regions outside North America and Western Europe remaining below the global average. However, while a regional analysis can lead to useful broad conclusions, a deeper examination reveals that most individual regions show marked divisions, due to the varying stages of development of their constituent countries.

Asia’s performance is substantially boosted by some (although not all) of its developed countries such as Hong Kong, Singapore and Taiwan. Similarly, the Middle East is bolstered by Israel. All the countries of Northern and Central Europe fare better than Spain, Greece, Italy and Portugal. By some distance, Argentina and Chile emerge as the best performers in Latin America. The higher quality workforce in the countries of Eastern Europe ensures that the Czech Republic, Poland, Hungary and Slovakia outscore their counterparts in the former Soviet Union. A sizeable disparity separates the two African nations in the survey. South Africa’s relatively high spending on education as a proportion of its GDP reveals the intention to develop its talent potential, whereas Nigeria finds itself at or near the bottom of the index in both 2011 and 2015, despite rapid population growth.

An Economist Intelligence Unit report from 2010 revealed that companies are far more likely to send expatriates to Asia than to any other emerging region, with China by some distance the most likely country destination.4 While our executive survey on talent shows that a substantial minority throughout the world have reservations about the quality of recent hires or the prospects of acquiring the right people in the near future, it also confirms that Asia presents a particular challenge, with the supply of suitably qualified local workers simply unable to keep pace with the breakneck speed of economic growth. It is difficult to see how multinational companies will be able to avoid an increasingly expensive and disruptive fight for the best workers in the developing world – and in China in particular. The corporate world has in general understood that continually sending costly expatriates abroad is not ideal.

The Global Talent Index noted that the overall quality of the workforce still leaves much room for improvement. Second, demographic changes will precipitate a steep fall in the number of new entrants into the labor market. Third, growing local companies are now realistic competitors for trained talent. “Compared to five years ago, they are much more attractive to Chinese and Indian managers,” claims Professor Schuler, “perhaps even more attractive now than Western companies because their success can elicit feelings of national pride.”

Multinationals therefore face the unenviable prospect of investing large amounts of time and money on providing a sought-after practical business education, and then seeing others reap the benefit. As well as competing in an inflationary local pay market, there seems to be no end in sight for the current strategy of developing raw replacements and drafting in expatriates to train them and run operations. Global gripes may persist, particularly in relation to a perceived shortage of people equipped with the imagination to succeed amid the myriad challenges of top management, but supply of, and demand for, able employees appear roughly in step throughout most of the world.

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