Talent Shortages Threaten Growth in Emerging Markets

Emerging-market firms are struggling to find employees with the right skill-sets claims a new paper by the Economist Intelligence Unit and sponsored by SAP. The report says that four-fifths of executives in emerging markets expect recruitment and retention of employees to become more difficult over the next three years.

While unskilled labour is in abundant supply in most emerging markets, firms looking for skilled employees find the talent pool increasingly dry. Even though countries such as India, China and Russia have world-class universities, executives complain that the skills new graduates bring with them are not always what firms are looking for. In fact, half of the executives surveyed see a growing gap between the skills domestic universities provide and the skills companies need.

For those with the right skills, it is a sellerÃ's market, and graduates are increasingly able to drive a hard bargain with potential employers.

When firms in emerging markets struggle to find the talent they need locally, the first place they will look to fill the vacancy will be western Europe (36%) followed by North America (31%), suggesting that, for those jobs at the top, emerging-market firms are able to offer salaries, benefits and opportunities that are comparable with their developed-market counterparts.

"Wage inflation is a real concern for companies in emerging economies," says Robin Bew, Editorial Director at the Economist Intelligence Unit. "Fighting this fire can be a distraction from developing longer term strategies to deal with the skills shortages. Training and development needs to be moved higher up the corporate agenda."

Other key findings of the report include the following:

• Soft skills are the most sought after, but the hardest to find. While IT and engineering skills are undoubtedly important in many emerging markets, it is the ability to manage change, to think strategically and to communicate effectively that are the most sought after skills. It is these skills, however, that are in shortest supply.
• While the supply of talent remains low, salaries will continue to rise. Most survey respondents fear that an inability to meet salary expectations will be the greatest obstacle to finding and keeping staff.
• Many emerging-market firms fear losing their talent to companies abroad. The survey panel cited this as the second most likely cause of talent shortages over the next three years. In Russia, this is the primary concern with 47% of the sample believing that migration of talent overseas will be the biggest cause of talent shortfalls.
• A strong brand is a powerful magnet for potential employees. Companies need to carefully consider the image they project and be clear about what it is they stand for. Nurturing loyalty to the companyÃ's brand and values will become an increasingly important factor in firmsÃ' ability to attract and retain employees.

The report is available free to download at www.eiu.com/sponsor/SAP/talent

Posted to the site on 19th May 2008