Category Archives: Talent

How Will McKinsey’s Five Reshaping Forces Affect Your Global Supply Chain? Part II

Our last post overviewed a recent article in the McKinsey Quarterly that discussed the “five forces reshaping the global economy” that every executive has to grapple with, which left the reader with as many questions as answers. This post will attempt to shed some light in the directions the answers may lie.

The following are the forces that were identified:

  1. Growth and Risk Management in Emerging MarketsMultinationals will have to get in on the ground, attract local management talent, and let the local management talent craft an appropriate strategy for the local market. The multinationals that don’t do this will likely miss out on most of the growth opportunities that are available as the current economic climate, coupled with declining population growth, will significantly limit growth opportunities in developed markets. As a result, your supply chain leaders will be working considerably with local talent in analyzing product costs and sourcing for remote developments.
  2. Labor Productivity and Talent ManagementMultinationals will have to look to developed countries for R&D talent, engineering capability, and innovation and focus on grooming talent in emerging markets to manage the new breed of talent available to them. In addition, management will have to double down on new technology, process innovation, and alternative delivery models to maintain productivity levels with a decreasing workforce in developed economies. Sourcing teams will continue to become global. At first, the team leaders will be in the developed world, and the supporting analysts, with the technical and mathematical skills, will be in emerging markets. (A couple of big consultancies are already very successfully applying this model today.) As time goes on, your leaders will move to emerging markets (following IBM’s example), and the leaders of tomorrow will be just as likely to be in Shanghai as Chicago or London.
  3. Global Flows of Goods, Information, and CapitalMultinationals will have to learn how to maximize efficiencies in existing trade flows as current global economic conditions will likely slow down the introduction of new channels and opportunities. They will need to adopt trade management software to automate manual processes, decision optimization to optimize carrier and route selection, and “spend” analysis to analyze trade data to identify emerging trade patterns that they can take advantage of. Your supply chain will increasingly see solutions developed by Asian multi-nationals, like Algorhythm and Zycus, implemented by local consulting powerhouses, like InfoSys and Wipro.
  4. Natural Resource ManagementCompanies will have to design new products with resource and environmental management in mind, or risk incurring additional costs, and bad press, in the future. Even if the up-front costs are higher, decisions not to use more environmentally friendly materials and processes will have to be very carefully considered. In addition, identifying the effects of forthcoming regulations in India and China will become a top priority.
  5. The Increasing Role of GovernmentsCompanies will have to continually analyze the potential impact of major government programs on the economy and GDP and determine the best markets in which to pursue not only new product introductions (NPI) but new product development (NPD).

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How Will McKinsey’s Five Reshaping Forces Affect Your Global Supply Chain? Part I

A recent article in the McKinsey Quarterly, that summarized some of their global survey results, tackled the “five forces reshaping the global economy” as executives are still grappling with how to seize the opportunities of an interlinked world economy. It provides some good information and insight, but leaves one with as many questions as it provides answers. This post will summarize the five reshaping forces and the next post will attempt to shed some light in the directions the answers may lie.

The following are the forces that were identified:

  1. Growth and Risk Management in Emerging MarketsEmerging markets and their young and growing populations will not only raise consumption, but will also become the major contributors to the global talent and innovation pools. However, most multinational executives in developed economies still aren’t betting on significant revenues from emerging markets for at least the next five years.
  2. Labor Productivity and Talent ManagementDeclining birth rates and greying workforces in developed economies are impeding growth, mandating the need for major gains in productivity just to maintain stability. Developed economies are already projecting significant talent shortfalls in management, R&D, and strategy.
  3. Global Flows of Goods, Information, and CapitalThe relatively free flow of goods and capital in recent years drove globalization to unprecedented heights, but the economic downturn and global financial crises appear to be preventing further growth. Most executives do not expect more than moderate increases in the short term.
  4. Natural Resource ManagementIncreasing constraints on supply or usage of natural resources continues to affect companies’ bottom lines in the developed world. A significant number of executives, 25% on average and 45% in energy and manufacturing, expect this trend to have a negative effect on profits.
  5. The Increasing Role of GovernmentsExecutives in North America and Europe are haunted by the perception of crippling public debt levels created by the government and expect that the net impact on GDP growth in their home markets will be negative.

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Is the West Going to Lose the Talent War?

I have to say that I’m worried after reading “grow, grow, grow” in the special report on innovation and emerging markets in the April 17th edition of The Economist. Near the end of the article we are told, point blank, that the best companies in emerging markets treat “talent” as a supply chain that needs to be relentlessly managed, not an isolated problem that can be solved on a piecemeal basis and that firms invest heavily in creating “educational ecosystems”.

While the first thing we do is slash the training budget every time money gets tight, companies in eastern emerging countries dispatch managers to give speeches at Universities. For example, GE has charged its top ten managers in China with cultivating relations with a particular university where they can spot bright youngsters and treat them to campus tours and scholarships (that will grow the brand and attract these future superstars).

While we expect unreasonable exceptional performance for a meager base salary and verbally lash out at anyone who doesn’t exceed her performance metrics by at least 10%, eastern emerging companies celebrate good performers. Haier prominently displays photographs of good performing managers, celebrates outstanding innovators in public ceremonies, and names new products and business innovations after their creators.

While we still assign undue praise to the University you attended instead of the degree you earned, your GPA, or, more importantly, what you actually learned, Infosys has adopted the mantra of “no caste, no creed, only merit” for its modern campus in Mysore. Furthermore, to ensure its employees had a better chance of not only climbing the ladder but becoming a millionaire than if they worked for a foreign multinational, Infosys was one of the first Indian companies to issue stock options.

And while we are the first to walk our best talent out the door every time the market dips, even though we just told them they were our most valuable asset the day before (as we, obviously, lied through our teeth), companies in emerging countries, who are experiencing much more rapid turnover than we need to deal with, will stick by their talent through thick and thin — cutting staff is the absolute last resort, not the first.

All told, it looks to me like we’re going to lose the talent war, which means that we’re also going to lose the innovation war, which we were supposed to win by outsourcing all of the manufacturing and back office to focus on our “core strengths” which, apparently, is middle management, junior art directorship and telephone cleaning, as that’s all we will be able to do if we don’t start focussing on talent, the true producer of innovation.

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Emerging Markets Will Disrupt Your Home Markets

An article in the special report on innovation and emerging markets in the April 17th edition of The Economist on the power to disrupt made some very good points on why things will move faster and further this time with emerging markets that deserve to be repeated and discussed because they will, ultimately, disrupt your home markets and the supply chains that serve them.

  1. Senior Management Talent Markets are LiquidGreat management talent can not come from anywhere, but can go to anywhere. And chances are that where ever they go, they’ll have access to highly developed capital markets for merger, acquisition, and expansion.
  2. Emerging Markets are Already Larger Than You ThinkThe emerging-market export machine has engines in almost every industry. ArcelorMittal in Luxembourg is the world’s biggest steel company, Infosys and TCS in India are among the world’s biggest IT companies, Haier in China is the fourth largest manufacturer of home appliances, and ZTE in China is a top-ten mobile handset manufacturer expected to soon be a top-five.
  3. Emerging Markets Offer VolumeDue to the slim profit margins in emerging markets, emerging market companies are obsessed with volume and ways to expand their footprint.
  4. Emerging Markets are Sources of Growth and InnovationNo longer the sweatshops of the world, emerging markets often offer more potential customers and innovation opportunities than home markets.

If you don’t keep a watchful eye out, the end result could be that your top talent defects to a competitor in an emerging market, which aggressively goes after your market share and wins because the innovative new offerings, which can produced more economically using frugal processes and economies of scale, cost less, which will become of increasingly greater importance to the cash-strapped developed economies suffering from stagnating growth.

To maintain your lead, you’ll have to recruit senior talent from emerging talents to revolutionize your supply chain, merge with emerging market companies in local markets, find ways to support even larger volumes at lower costs, and look for innovation the last place you’d expect it.

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Training is an Imperative … Just Do It

A recent article on Industry Week on “the training imperative” noted that, despite the record high unemployment rates, many U.S. manufacturers are having difficulty finding the right people with the right skills to fill a variety of positions. It’s not so much a skills shortage as it is a skills gap — and there’s looming concern that the gap will grow as baby boomers begin to retire. (Now, if they’d also stated that this situation holds true throughout the supply chain, Charles would be doing the river dance right now, because it does. And only a few of us seem to be willing to acknowledge this.)

Why is this the case? The article offers a couple of explanations, noting that what was considered adequate 15 years ago would be nowhere near adequate today and, due to the outsourcing of low-skilled jobs to low-labor-cost countries, the remaining jobs require a much higher skill level, and the average has gone up in terms of the amount of training needed per employee.

But the reality is that this shouldn’t be a problem. Whereas training programs were few and far between in the past, we now have private training and certification programs; more and more colleges and universities instituting new certificate, diploma, and degrees in manufacturing and supply chain every term; a number of online programs that teach basic theory and skills; and, in manufacturing, a number of e-training providers are now providing simulation technology that will teach people how to operate a piece of machinery or fix a machine without actually having to practice on a multi-million dollar piece of equipment. (This is becoming especially common in the Oil & Gas sector.) All you have to do is commit to the programs and your people will get where they need to be. Companies just need to be part of the solution and not part of the problem.

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