Global mobility: Talent management in a new world

By Jim Matthewman

The post-Lehman world has fundamentally changed how organisations and their employees will view business and career opportunities in future. Organisations need to drastically overhaul their expatriate policies and mobility programmes if they want to be on the crest of the recovery wave. In this article, we will describe the new agenda, emerging trends and the challenge to the existing mobility policies.

Less than two years ago, at the height of the economic boom, talent management was the Number One item on chief executives agendas. HR had the ear of the CEO and the attention of business leaders as international companies saw expanding order books and intoxicating business opportunities in emerging markets yet were reeling at critical skill shortages, stretched supply chains and huge communication challenges. Chief executives were asking the following key questions:

Where is our existing talent?
Have we got the right talent in terms of skill and capability for the future?
How can we find the right people to deploy or recruit in the high-growth, hot markets of China, Dubai, Germany, Eastern Europe and Russia?
Can we attract the so-called Generation Y to be our future engine room in the next five years?
Where are our high-potential employees and future leaders who are off our radar?

These questions led to a development of talent management processes which focused on reviewing not only the individual but also positions.
Organisations started to review mission- or business-critical roles, those 12 strategic or hard-to-fill jobs that, if left vacant or poorly filled for several months, would hurt the business in the future. These talent reviews, often led by the CEO, would also assess key people, typically those contributing well above other employees who, if they were to leave, would markedly reduce immediate revenues or threaten key relationships with customers or suppliers. If these high performers walk, business would walk with them – typically to competitors.
At the same time, the pressure to seek out new markets meant global talent deployment became a strategic workforce management process centred on identifying sources of new talent and the more selective use of international mobility to build and nurture key talent or tomorrow's leaders. Given that these new markets were typically in developing or emerging countries way beyond an organisation's domestic markets, these companies started to seek out a new breed of leader: one capable of dealing in a complex digital world, focused on the execution of strategy, able to deal with ambiguity, thinking and acting globally, and comfortable leading a workforce of diverse cultures.
These two factors – the pressure to seek out new markets and the need for a new breed of leader – led to clear talent flows, which saw many individuals being recruited not only in emerging markets for work in the traditionally more mature countries of North America and Old Europe but also in the fast-growing markets, such as those in the Middle East, Russia, China and India.
These pressures were so intense that, even where organisations claimed to have them, most expatriate policies were blown to pieces and many companies admitted that they were/are managing by exception.
All this led to a level of talent segmentation to ensure that groups of staff were identified and managed appropriately – each group with its own retention, relationship and development priorities, as illustrated in Figure 1.

Post-Lehman reality
Suddenly, in September 2008 everything changed with the collapse of Lehman Brothers and the ensuing financial crisis, the speed of which caught most companies off guard. Even in the autumn of 2008, most companies were still planning pay increases to match growth targets and sourcing plans to address business commitments and contracts signed earlier in the year. However, the severity of the global downturn has meant that talent management is no longer the Number One item on CEOs' agendas. Survival, cost containment and rapid rightsizing have become paramount, but this too requires effective talent management to ensure that the size, shape and skill base of the new organisation are fit for purpose. Workforces, too, are becoming increasingly global as a significant number of individuals with transferable skills and capabilities follow the money and pursue alternative career opportunities using the internet and networks to look for jobs outside their home location.

Yet the continuing globalisation of functions, such as supply-chain management, marketing, project management and shared service centres, requires firms to plan, source and manage their workforce from a global perspective. Rather than relying on traditional expatriates to staff overseas operations, companies today can draw on many sources of labour from around the world. The economic crisis is actually accelerating this need.
We see two new trends here. The focus of talent management has moved away from broad, companywide talent reviews to key talents and key roles – those that maximise revenue opportunities or protect customer relationships today. We are seeing the tactical deployment of staff from stagnant markets to countries where trade is still occurring. At the same time, redundancies plus salary freezes and bonus curbs are signalling the beginning of a talent flight from mature economies to emerging countries with more attractive income tax treatment. Head-hunters have reported a doubling of CVs of individuals seeking opportunities in the Middle East and ASEAN (Association of Southeast Asian Nations) countries.
Companies are experiencing new challenges in expatriate mobility. Some countries, notably the United States and France, have altered visa regulations to restrict the numbers of those who can enter, or stay in, their countries for work purposes. Some Middle Eastern countries have approved new legislation to ensure that state nationals cannot lose their jobs through restructuring. Key skill shortages – notably for engineers and project managers – still exist, and while recruitment may not currently be a priority, the issues will quickly reappear as organisations respond to post-recovery demand. After all, many of these contracts are already in place.
Increasingly, we are being asked to identify sources of critical occupational talent and advise how to encourage these groups to move from one country to another. For example, one transportation multinational needed experienced engineers in various locations, including Germany, Algeria and Argentina. While China has over 900,000 graduate engineers, only 10 percent can work in multinationals today. The analysis showed Slovakia, Romania, Lebanon, Egypt and Brazil to be strong sources of critical occupational talent.
More and more organisations will need to undertake such strategic workforce planning as they prepare for the recovery in 2010 and 2011.
Where exactly will we see the first signs of recovery and thus the talent demand? Our prediction is the cash-rich states of Qatar, Abu Dhabi and Saudi Arabia in the Middle East, China, certain ASEAN countries plus Brazil (tipped to become the "next Middle East"). We also sense that companies operating in these countries are less interested in globalisation than in regionalisation as they outgrow their respective domestic markets.

How are multinationals responding?
Given the downturn, many companies are taking the opportunity to fundamentally review existing expatriate policies – not just from a cost perspective but from a wider holistic viewpoint. This starts with a review of overall global workforce strategy – the underlying business assumptions (what resources will be needed); what talent is available or needed (who); which locations (where) and what packages need to be put together to make this happen (how).
For successful international movement to take place, businesses need to have:

Common capabilities and skill sets that are easily transferable across countries/regions and cultures
A healthy pipeline of mobile talent that can be deployed throughout their operations
An employee proposition that encourages and facilitates mobility for key talent groups
Processes that ensure that skills and capabilities gained on assignment are utilised and developed further in subsequent assignments
Career planning that ensures that international movement results in positive career and reward outcomes
An organisational culture that values international mobility
Mobility costs that make good commercial sense

Mobility segmentation allows a company to gain a deeper understanding of the reasons why the business needs to move people around, how the business strategy is supported by the expatriate population and who should be a member of the mobile workforce.
Generally, mobility segmentation provides insights into the following:

The current expatriate population (helping to predict what the future population may look like based on company strategy)
Key talent management issues
Measures of success for assignments
Total reward to ensure alignment with mobility priorities and the promotion of appropriate behaviours
The governance and processes required to effectively manage the differing internationally mobile talent pools

These insights should help to minimise the attrition rate of key expatriate talent.
The four classic segments

Short-term expatriates: Employees sent on assignment for less than one year (excluding those who travel frequently on business).
Traditional expatriates: Employees on a traditional assignment for one to five years with the expectation of returning to their home country.
Long-term expatriates: Traditional expatriates on an assignment to a country for more than five years, the difference being that these long-term expatriates have not been localised to the host country plans and are not expected to move from country to country.
Global nomads: Employees who move from country to country on various consecutive assignments, without returning to their original home country. It is common for their contracts to be individually negotiated.

Traditional segmentation
Traditionally, companies have segmented their expatriate population by the length of the assignment with the aim of ensuring that benefits and processes match the duration. In recent years, however, companies have started segmenting “global nomads” due to their unique potential problems.

The four classic segments are defined in the box. Figure 2 below gives the average distribution of expatriates in 240 multinational companies. This type of segmentation provides valuable information for companies in understanding the duration of assignments and producing relevant policies to match. For example, most companies will have short-term, traditional and long-term assignment policies and a localisation policy.

However, international businesses are now questioning whether this approach is suitable for managing the future mobility challenge, in the following areas:

Catering for the increasing demands of a growing expatriate population that may have very different (personal and career) objectives when taking an assignment
Ensuring that a company’s limited resources are allocated most effectively, i.e. to those assignments delivering the highest returns to the business
Enabling effective workforce planning and talent management to take place
Managing the increasing attrition rates (typically over 45 percent) among growing expatriate populations

Organisations are therefore looking for a more relevant, flexible basis to match mobility to rapidly changing requirements.

Segmentation based on business need
Clearly, when considering the reasons for international mobility, the most important criterion for segmentation should be the business driver(s). The length of an assignment is still important but is a secondary consideration which is relevant in the context of setting policy rather than strategy.
More companies are now considering their strategic planning and tactical roll-out as part of building the framework for segmentation. This allows planning for the future and putting in place the rewards and processes that encourage behaviours that help achieve the business goals. Generally, the typical business drivers behind an assignment fall into four categories, as shown in the box.

Strategic need: The company requires an experienced and seasoned executive to move to a country to deal with a specific strategic assignment (for example, creating and sustaining a new market presence, building a factory, fixing a significant problem or creating a distribution network).
Skill need: The company requires someone with a defined skill set to assist with a specific activity in a host country (for example, installing machinery, training local staff or implementing and managing an ongoing project).
Development of key talent: The company has a relatively small number of emerging talents and “fast-track potentials” who need international experience to develop, test and prove their capabilities. Alternatively, there may be talented individuals who require skill development or experience in an area that is not available in their home country.
Employee development and opportunistic moves: The company allows an employee to move for the mutual benefit of the company and the individual or purely due to personal circumstances (for example, marriage and lifestyle).

Figure 3 illustrates how an expatriate population can be segmented into quadrants based on these key business drivers. Segmentation is not static and some individuals will move from one quadrant to another as their careers progress or the business purpose of their assignments changes.

Mapping a current expatriate population to this framework will provide an insight into how the population correlates to the strategy. For example, the percentages indicate the number of companies in the survey that responded positively to this area (see Figure 4). This simple exercise can help identify potential issues – for example, if expecting an increase in key talent development, how many potential candidates are there? How will this increase actually occur and who will fund it? Who are these candidates, how do you reward them and how do you retain them?

This approach is turning expatriate policies upside down. It stops a company from needing to offer a one-size-fits-all approach to each assignee. Why does a company need to pay the same package/allowances to “volunteers”, the vast majority of “operational global nomads” and the few strategic movers and shakers? In one case, the original base of over 4,000 expatriates was quickly broken down into only 40 or so “strategic movers”, some 2,500 “global nomads”, 750 “developmental movers” and about 250 “volunteers”. Applying a segmentation approach to their respective packages produced a saving of approximately US$25 million!

Latitude vs. longitude mobility
The emerging markets are predominantly found in an ellipse across the globe – neatly fitting into the tropics. With the rise of the global nomad moving from assignment A to assignments B, C, D and E in a period of 10 to 15 years, the characteristics of this animal are changing. Organisations are finding that expatriates are less likely to be US or European employees being flown out and then flown back again.
Increasingly, the global nomad is a mid-level professional from a country within the latitudinal ellipse with a desire and mindset for change, travel and multicultural experience or a Generation X or Y professional from a country/region such as Canada, Australasia and the Nordic countries for whom this “nomadic” life results in little desire to return home from an assignment. From a business perspective, this has significant implications as the commercial culture in this band of emerging countries is primarily driven from a network of personal trust and social skills. Generation Y – those born after 1980 – with its global mindset, digitally enabled internet world and desire for international experience will supply ideal candidates for the new mobile workforce, provided that organisations can tap into its enthusiasm and energy via a new group of suitably inspired leaders.
As a result, expatriate packages need to break out of the traditional “longitudinal” policy mindset and address the daunting challenge of moving individuals between ASEAN, Indian, Arab and Latin American countries.

Cost containment
In the current climate, there is huge pressure on expatriate administrators to find potential savings, although, in practice, this is quite hard to do unless the company embarks on a major overhaul, as described above.
What most companies seem to be focusing on is ensuring that costs are controlled, i.e. not being allowed to rise automatically, and better-value services are received from existing providers or suppliers. For example, if we take the area of medical provision, companies are looking at issues of “over-buying”, where the temptation to lump all expatriates together into a single expatriate global plan is failing to recognise that certain groups, such as rotation workers, rarely call on these international provisions, while others are successfully curbing insurers’ assumptions around so-called “medical inflation”. Other areas requiring attention include compulsory medical insurance – a requirement in some Middle Eastern countries and now in the Netherlands, Germany and Switzerland. One area often overlooked is the continuation of cover and treatment at the end of assignments, where companies can find themselves seriously at risk.
For most companies, however, the most difficult issue has been trying to maintain consistent policy when currency fluctuations in the present crisis have meant significant swings in the indices. Expatriates are unlikely to protest if the movement favours certain allowances but are the first to complain when these run against them. To address this, more organisations are reviewing their COLA* arrangements twice a year to at least give themselves the chance of correction and communication.

Taking ownership
In many organisations the largest issues are related to effective communication and taking ownership. Firstly, today’s expatriates have more savvy and are better informed via websites, cost-of-living reports and informal networks with colleagues. Most HR/international assignment functions are failing to communicate policy or overall package components, leading to significant “noise” and excessive discontent and dissatisfaction.
Traditionally, there was no function within organisations whose sole purpose was to manage expatriates; typically, this would fall into either the HR or the finance functions, depending on the organisation. It is now more likely that a multinational will have a mobility function to manage the expatriate in terms of process. However, many companies are finding it a challenge to effectively link and align the various elements required for the efficient management of the mobile workforce, as responsibility for the component parts often resides in different parts of the business.
Effective mobility management requires co-operation between the business unit leaders, talent management, compensation and benefits, process and communication, third-party providers (including outsourcing) and, of course, the employee and his/her family. The growth in the number of expatriates has resulted in pressure being brought to bear on all aspects of international mobility management.
Figure 5 shows the ideal state where all the elements of global mobility management are co-ordinated through pragmatic and flexible policies and processes.

Optimising the return on investment
Optimising the return on investment (ROI) is critical to the success of any business. This is no different in the case of international movement. Experience has shown that an expatriate programme with approximately 400 expatriates will cost a company between US$30 million and US$50 million, depending on the benefits that are being provided. Given this significant investment of money, time and resources, it is surprising that more companies do not actively measure and track the success of their mobility programmes, and the majority are unable to assess the ROI for individual international placements.

In conclusion
We have an increasingly global mobile workforce with a new global mindset. Organisations need to review expatriate policies and use segmentation to offer different and multiple approaches. The rise of the global nomad, combined with lateral versus longitudinal mobility, requires better data plus flexible programmes. Workforce attitudes have changed, partly driven by the different demographic and generational mix, but multinational leaders must change too if they are going to be successful in the new, post-Lehman world.

*Cost of living allowances

About the author

Jim Matthewman is a Mercer worldwide partner specialising in global workforce strategies and talent management. Based in Dubai, he can be reached at +971 4344 6263 or jim.matthewman@mercer.com.
To discuss the executive compensation issues further, you may also contact Mattias Klefback, Information Product Solutions Centre of Excellence Executive Remuneration Leader EMEA. Located in Stockholm, he can be reached at +46 8 505 308 41 or mattias.klefback@mercer.com.