The problem of local talent retention

So what’s the problem?

There is a constant struggle to retain local management talent in emerging markets. The high demand for the limited number of internationally capable local talent leads to a high turnover rate as they are lured away by offers from other companies. The short-term consequence of this is that the turnover rate continues to increase rapidly, creating negative impacts on the business. Furthermore, due to the need to constantly train new workers, tasks and projects take longer to complete and budgets are stretched.

Why does local talent want to work for us in the first place?

For local talent, the advantage of working for a MNC is that they often offer better working conditions than local organizations. Also, MNCs can offer the local talent an international work environment, the opportunity to practice foreign language skills as well as the possibility to work abroad. Local talent know that by working for a MNC, they can boost their CV and use it to obtain a job at a local company and climb the corporate ladder quicker than might normally be possible.

So why do they leave?

1. Local employees are sometimes overqualified for the positions they are given – the expatriate and headquarter office staff are given the jobs that require high technical expertise, while local workers are employed for simpler jobs, thereby leaving the local talent feeling unfulfilled with a lacking motivation to stay.
2. They move on to work for a local company once they feel they have gained enough from the MNC to get a job that is equivalent or better.
3. A competing MNC poaches them by offering more money and/or a better benefits package. Good local talent know their value and they will work for anybody who is willing to pay for it. Bonuses, longer-term incentives, free housing and meals, a mobile phone and a vehicle are becoming standard benefits.
4. They are ignored regarding top-management positions. Fundamental cultural differences in leadership styles can lead to the assumption that local leaders are not skilled or qualified enough in certain areas.
5. Inequalities in the workplace. The local talent is not given the same opportunities as expatriate or headquarter office staff (including foreign-born nationals). Employees from the culture where the head office is located are the first choice for executive positions and international assignments. Local workers find themselves hitting a glass ceiling for upward movement as expatriates are being brought in to fulfill positions, rather than promoting the local talent.
6. Culture conflicts when working in an MNC. Locals may desire to return to or be closer to their families, to foster and support community and family relationships, rather than to live away from friends and families in large, impersonal cities that typically host most MNCs. They may also discover after working in MNCs that they feel more comfortable working in a familiar, local organization, in which they share the same national culture and language.  
7. Cultural incompatibility in the workplace. Local staff can be offended by the behavior, attitude, and overall cultural insensitivity of the expatriates. Foreign-born nationals may be equally offensive to local employees, as they frequently adopt cultural habits from abroad, which may not be acceptable to locals.
8. Insufficient strategic, cultural training resources. Many, but not all, expatriates receive cultural and/or language training for their international assignments. Local workers on the other hand, do not usually receive any, even though they are also working with a foreign culture. They often struggle and may eventually leave because they have not been properly equipped to work in an international environment.

The root of the problem

While there is usually plenty of local talent with substantial capabilities, the issue is a lack of those who can readily adapt these skills to an international environment. Local talent who are qualified to work in international operations are in high demand and are therefore likely to alternate between companies in search of a greater reward. Rather than competing with other companies, trying to retain the highly qualified local workers, a better solution would be, to develop local workers’ international skills.

The role of HR in managing the problem of retaining local talent

Implementing a solution for the problem of local talent retention lies in the hands of the global HR professionals. They need to focus on the common goal of creating and managing a local team of people who can effectively contribute to the global business. HR needs to be strategic in servicing both the overall needs of the global organization and the specific needs of the local culture – they must determine the extent to which policies should be implemented worldwide or adapted to match local circumstances. To create an efficient and loyal team of local staff, HR must consider adapting policies in terms of recruitment, professional development and performance management, bearing in mind the ever-changing nature of international operations.

Special areas to consider when using local talent

Recruitment

• In certain markets, consider whether it is more appropriate to recruit young professionals from second-tier universities rather than from the top tier ones. Whereas top graduates will probably only work briefly at their first job on their ambitious journey to the top, second tier graduates are more likely to be loyal, longer-term employees. Graduate level work will satisfy them while they are in the process of being developed further.

• To recruit executives, companies should present attractive promotion policies. Good local talent will be interested in companies who specifically target local talent for development and eventual promotion.
• Employ the local talent to work at a level that is appropriate for each individual – do not promote them beyond their capabilities, but also, do not keep them at a level that stifles their abilities. This common sense is ‘natural’ at home but often forgotten in international operations.   

Development

• Communicate clearly with local staff regarding a professional development plan. While compensation is important, having access to a position of authority and the opportunity to advance one’s career can be far more important to local workers.
• Implement a development program that educates the local staff in areas that are beneficial for the company. Provide them with frequent coaching and feedback, emphasizing that the company has a significant interest in their career.
• Continuously measure the progress and satisfaction level of both the local and expatriate employees, thereby maintaining development as a high priority and calling attention to any cross-cultural clashes that may occur.

Training

• Provide cultural training. Training should include cultural background information in addition to coaching on communication styles and working practices of cultures present in the workplace. Do not assume that foreign-born nationals will automatically understand and cooperate with those from the local culture. Cultural knowledge and skills should be a requirement for all employees, including those in the headquarter office.

The solution – think global, work local

The goals for multinational HR departments worldwide* should be to consider HR as a strategic partner in the global business. They should aim to develop global leadership through cross-cultural assignments and training, and to foster the global mindset of all employees through training and development. Formal systems that improve worldwide communication should be applied to employees across all cultures and levels of authority.  

An investment in the development of local employees, can help to decrease the problem of retaining local talent; if an employee’s career and future are clearly being supported, he or she is not as prone to leave. Ideally, companies should have an international pool of capable people available to them, regardless of the office location. Local talent should not be overlooked regarding international job opportunities – the challenge is to get the right amount of the right people for the right job.

The key is to develop a policy that balances and controls a mix of local, expatriate and headquarter office employees that will meet the business need in an effective and cost-efficient manner. This requires a truly global perspective of HR across the business from a medium and long-term perspective. The organization that achieves this will find itself in a very advantageous position with regard to recruitment and retention of locals, and better equipped to take advantage of rapidly growing global markets.

* Taken from Harris, Brewster & Sparrow (2001). Research Report: Globalisation and HR. Chartered Institute of Personnel and Development (CIPD).

To get in touch with Amanda Martinez call +44(0) 20 8579 1980 or email at: research(at)global-excellence.com