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The Far East is the new Wild West

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The supply and demand of talent in Asia is changing the way the world works, says Brent Tignor, HR manager APAC at Stepan.   

Singapore – There is no better way to describe the acquisition of leadership talent in Asia – particularly in emerging markets such as China, India, Indonesia and Vietnam – than the headline of this column. Why? It’s simple economics: Supply and demand.

The requirement for highly skilled, bilingual or multilingual candidates, particularly at the manager and executive levels, far exceeds the supply in most functions and industries.

The talent pool

The lifeblood of the Asian economy is foreign investment which continues to expand at a rapid pace. However, this brings with it some unique challenges as a foreign company attempts to grow its business, and chief among those is finding the right talent to lead its growth efforts.

There are several reasons why this is so difficult, despite the fact the region contains two thirds of the world’s population.First and foremost, when a company is growing in an emerging country it is critical that not only does its new employees need to have the specific technical expertise for many of the roles, it’s also necessary many of them speak English to a proficiency level where they are able to discuss complex business concepts. Those two requirements naturally narrow the relevant candidate pool dramatically.

Another reality is the mutual fit of a local candidate in a foreign MNC. In China, for example, research shows a clear trend of candidates preferring to work for a state-owned enterprise (SOE). There are multiple reasons why this is the case, including the fact the SOEs have enhanced their offerings in the area of employee development and compensation, negating a prior advantage of an MNC. Research also suggests Chinese talent has become less tolerant of the 24/7 demands of a western MNC with the significant time zone differential and a reputation for poor work-life balance.

While this trend may not exist to the same degree in every country, local companies across Asia are interested in finding the best leadership talent, and are fully capable of being a worthy competitor for talent. When you consider these factors it is not a surprise that recent research from the Corporate Executive Board suggests leaders in Asia are almost twice as likely as other regions to have been contacted by a recruiter in the past three months.

It’s complicated

One of the most challenging aspects of recruiting talent in emerging markets is in the area of compensation.

This is the area that requires the most agility on the part of HR and business leaders because it’s so dynamic. The influences of inflation and the supply-demand talent gap have driven salaries up in most of these countries by 50% to 60% in just the past fi ve years alone. The days of Asia being a “cheap place to do business” are long gone, especially in the area of leadership talent. This is a particularly difficult pill to swallow for MNCs based in more mature and stagnant economies.

Unless someone has spent significant management time in an emerging region, it’s very hard for them to understand how a sales director in Asia can demand a higher salary than an average salary associated with the same title in a western country.

In these types of situations, we as HR business partners must play the role of an educator with a focus on data. However, what makes this area even more challenging is the inherent limitations of market data for emerging markets – data we often lean so heavily upon as though it’s the source of all flawless truth.

In emerging markets, there are three primary drivers of a candidate’s compensation level: Experience, language skills and capability. Unlike mature markets, these compensation drivers can have a massive impact on a candidate’s pay with a possible differential of 100% to 300%, depending on the country. The complication with market data is it can incorporate experience, but it can’t include a reliable assessment of language or capability.

Therefore, two of the three key drivers of true market value are being diluted by candidates who do not possess these skills.

It’s important to use market data as just one data point, but accept and focus on leveraging the real-life market data of the short-list of candidates that actually fi ts the specific required profile. During aggressive business growth in emerging countries, companies must look at human capital as any other ROI Investment decision.

HR leaders must also be agile enough to adapt to business needs to get the right talent on board and keep them.

Image: Shutterstock

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