Developing Global Talent in the 21st
Century: Turning HR Upside Down
A Presentation for:
The University of MinnesotaRichard A. Swanson Lectureship
February 20, 2010
Delivered byErnest Gundling, Ph.D.
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Agenda
1. Predictable global mega-trends
2. The impact of these trends on the global business environment
3. Frame-shifting: common questions with new answers; turning HR upside down
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• What are the future global giants?
Frame-Shifting: The Move to “Global”
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Frame-Shifting: Future Global Giants?
1. Posco2. Doosan3. PetroRabigh4. Cosan5. Casas Bahia6. Gol Linhas Aereas
Inteligentes7. Mahindra & Mahindra8. Bharti Airtel9. ICICI Bank10.Mittal Steel11.Suzlon Energy
12.Haier
13.Baosteel
14.Wanxiang
15.Baidu
16.Tencent
17.Dangdang
18.BYD
19.Li & Fung
20.Hon Hai
21.Euroset
22.Wimm-Bill-Dann Foods
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Future Global Giants
• How many of these companies can your group identify?
– Country of origin
– Type of business
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Faces of Globalisation
1. Population growth
2. Shifts in GDP ratios
3. Transformation from rural to urban
Key growth markets will Key growth markets will become more global every yearbecome more global every year
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#1. Population Trends
Source: International Monetary Fund (IMF)
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Nine out of ten of the world’s children under the age of 15 currently live in developing countries.
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Total Population by Region1950, 1995, 2025, and 2050 (in millions) UN Medium Variant
Source: UN Population Division (1997): World Population Prospects, 1950-2050. The 1996 Edition. (Annex I and II)
Chart: G.K. Heilig, 1996, IIASA-LUC
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#2. Shift in GDP Ratios
Source: IMF; The Economist
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“An overwhelming proportion of the world’s GDP growth (until) 2050 – nearly 80 percent – will occur outside of Europe, the United States, and Canada.”
“By 2030… the developing world’s middle class alone will be larger than the total populations of Europe, Japan, and the United States combined.”
Jack A. Goldstone, “The New Population Bomb,”Foreign Affairs, January/February 2010.
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#2. Shift in GDP: Examples
• “SIA (Semiconductor Industry Association) expects PC sales in emerging markets to grow 19%, or more than double the growth rate in developed markets this year. Developing countries will account for over half of world-wide PC sales and about two-thirds of mobile phone sales…”
• “We expect that demand for consumer electronic products in these new markets will continue to outpace growth in developed markets…”
The Wall Street Journal, Tuesday, August 5, 2008
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Going Back to the Future
• China has been the world’s largest economy for 18 of the past 20 centuries
• 1500 -1800 India’s economy was second only to China’s
Source: Financial Times
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Impact of Financial Crisis on the BRICs
• Between 2002 and 2007, annual real GDP growth in the “BRIC”countries averaged 10.4% in China, 7.9% in India, 6.9% in Russia and 3.7% in Brazil.
• Recent estimates for economic growth in 2009 include: 8.2% in China, 5.5% in India, 1% in Russia, and 0% in Brazil (vs. -2.4% in U.S.)(Economist; December, 2009)
• By 2041, the combined BRIC economies are expected to outstrip the G6 (Germany, France, Italy, Japan, UK, and the USA)
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Scope of the New Economies
The sheer size of the economiesopening up in emerging markets(especially India and China) will shift the balance of business activity far more than the earlier rise of less populous economies like Japan and South Korea. --Economist
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Global Snapshot
• Free trade pacts being negotiated between ASEAN, India, China and Japan promise to create a pan-Asian market of over 3 billion people. India will be the first to sign the free trade agreement on February 26, 2009 (Deutsche Press, 2009).
• Southeast Asia is the fastest growing region with GDP forecast to increase by 143% between 1996 and 2010. Indonesia has grown 4.2% in 2009 (Asia Pacific Energy Research Center).
• For the first time in 40 years, the Latin America and Caribbean region will complete a 7-year cycle of average per-capita GDP growth of over 3% per year (ECLAC, 2008).
• In 2008, GDP growth rates in Eastern Europe were some of the strongest in the world: Belarus 8.1%, Romania 8%, Slovakia 7%, Georgia 6.7%, Bulgaria 6%. (CIA World Factbook).
• Poland was one of the few countries in the world that continued to have a positive growth rate (1.0%) in 2009. (Economist)
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Largest Economies in 2050
Source: Goldman Sachs, 2007
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Are There More BRICs Out There?
Korea
Turkey
MexicoIndonesia
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The Next 11?
• Goldman Sachs predicted the following countries to have the potential to join the world’s largest economies along with the BRICs:
TurkeyVietnamIndonesiaIranMexicoSouth KoreaBangladeshEgyptNigeriaPakistanPhilippines
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#3. Transformation from Rural to Urban Centers
Source: UN (2005)
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#3. Transformation from Rural to Urban Centers
Source: International Monetary Fund (IMF)
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Rural to Urban Shift
Source: Population Reference Bureauhttp://www.prb.org/images07/62.3_12UrbanPop.gif
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Rural to Urban Shift
"India has 10 of the 30 fastest-growing urban areas in the world and, based on current trends, it is estimated that a massive 700 million people will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and services.“
--Goldman Sachs, 2007
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Largest Cities in 1900 (in millions)
City, Country Population1. London, United Kingdom 6.52. New York, United States 4.23. Paris, France 3.34. Berlin, Germany 2.75. Chicago, United States 1.76. Vienna, Austria 1.67. Tokyo, Japan 1.58. St. Petersburg, Russia 1.49. Manchester, United Kingdom 1.410.Philadelphia, United States 1.4
City, Country Population1. London, United Kingdom 6.52. New York, United States 4.23. Paris, France 3.34. Berlin, Germany 2.75. Chicago, United States 1.76. Vienna, Austria 1.67. Tokyo, Japan 1.58. St. Petersburg, Russia 1.49. Manchester, United Kingdom 1.410.Philadelphia, United States 1.4
Source: Four Thousand Years of Urban Growth: An Historical Census by Tertius Chandler. 1987, St. David's University Press
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Largest Cities in 2015 (predicted - in millions)
Source: United Nations, Dept. of Public Information “Megacities” (2005)
City, Country Population1. Tokyo, Japan 35.52. Mumbai, India 21.93. Mexico City, Mexico 21.64. Sao Paulo, Brazil 20.55. New York City, USA 19.96. Delhi, India 18.67. Shanghai, China 17.28. Kolkata, India 17.09. Dhaka, Bangladesh 16.810. Jakarta, Indonesia 16.811. Lagos, Nigeria 16.112. Karachi, Pakistan 15.2
City, Country Population1. Tokyo, Japan 35.52. Mumbai, India 21.93. Mexico City, Mexico 21.64. Sao Paulo, Brazil 20.55. New York City, USA 19.96. Delhi, India 18.67. Shanghai, China 17.28. Kolkata, India 17.09. Dhaka, Bangladesh 16.810. Jakarta, Indonesia 16.811. Lagos, Nigeria 16.112. Karachi, Pakistan 15.2
Population figures are UN estimates and projections for "urban agglomerations“ (i.e., contiguous densely populated urban areas, not demarcated by administrative boundaries)
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Largest Cities in 2015 (predicted - in millions)
Source: United Nations, Dept. of Economic and Social Affairs, World Urbanization Prospects (2003)
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Chinese Greater Urban Areas (2007)
City / Municipality Population1. Chongqing Municipality 32.7
2. Shanghai Municipality 20.6
3. Beijing Municipality 15.9
4. Guangzhou Sub-provincial city 15.0
5. Shenzhen Sub-provincial city 13.3
6. Tianjin Municipality 11.5
7. Chengdu Sub-provincial city 11.3
8. Xi'an Sub-provincial city 10.5
9. Harbin Sub-provincial city 9.9
City / Municipality Population1. Chongqing Municipality 32.7
2. Shanghai Municipality 20.6
3. Beijing Municipality 15.9
4. Guangzhou Sub-provincial city 15.0
5. Shenzhen Sub-provincial city 13.3
6. Tianjin Municipality 11.5
7. Chengdu Sub-provincial city 11.3
8. Xi'an Sub-provincial city 10.5
9. Harbin Sub-provincial city 9.9
• A sub-provincial city is a prefecture-level city that is ruled by a province, but is administered independently in regard to economy and law.
• The municipality figure is the wider administrative area population, which includes suburban and rural areas. Source: National Bureau of Statistics of China: 2007
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So what does this mean for me?So what does this mean for me?
Faces of Globalization
From today forward we From today forward we will live in a working will live in a working world that is more global world that is more global every year.every year.
1. Population growth
2. GDP shifts
3. Rural Urban
1. Population growth
2. GDP shifts
3. Rural Urban
Embrace it together & become world class
OR
Get run over by it
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Related Environmental & Economic Trends
"Tragedies of the commons":
• Climate change• Energy supply issues• Deforestation• Water shortages• Species extinction• Fisheries depletion• Price rises & food
shortages• Migration pressures
Business impact / response?
••••••••
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So what does this mean for me?So what does this mean for me?
LeaderWhere are our new customers going to come from? Which marketshave the greatest growth potential?How do I recognize the best talent to ensure my company’s success in this new global environment?
Manager My workforce is changing and diversifying, how can I drive performance effectively within this environment in order to ensure continued productivity and good working relationships?
Individual Contributor
I don’t even have to leave my own office and I am impacted by diverse working styles of customers and employees.How do my skills fit into this new global environment? Will I have a job? Will I be able to grow within this organization?
Impacts at Every Level
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New Global Reality
“competing with everyone from everywhere for everything”
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Frame-Shifting: Five Questions with New Answers
1. Companies that matter
2. Model global leaders
3. Sources of innovation
4. Regional contrasts
5. Country & cultural profiles
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Question #1
What are the companies that matter?
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Frame-Shifting: Future Global Giants?
1. Posco2. Doosan3. PetroRabigh4. Cosan5. Casas Bahia6. Gol Linhas Aereas
Inteligentes7. Mahindra & Mahindra8. Bharti Airtel9. ICICI Bank10.Mittal Steel11.Suzlon Energy
12.Haier
13.Baosteel
14.Wanxiang
15.Baidu
16.Tencent
17.Dangdang
18.BYD
19.Li & Fung
20.Hon Hai
21.Euroset
22.Wimm-Bill-Dann Foods
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Question #2
Who are the model corporate leaders?
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Frame-Shifting: “Jack Who?”
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Future Global Giants
• How many of these business leaders can your group identify?
– Country of origin
– Corporate affiliation
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Frame-Shifting: Other Global Leaders
Indra Nooyi, CEO Pepsico
Ratan Tata, CEO Tata Group
Mukesh Ambani, CEO Reliance
Liu Chuanzhi, Founder, Lenovo
Sheikh Ahmed bin Saeed Al-Maktoum, Chairman Emirates Air
Carlos Slim Helu, Telecom Tycoon
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Turning HR Upside Down
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New Global Reality
“competing with everyone from everywhere for everything”
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HR Disciplines (SHRM Categories): What’s Wrong with this Picture?
• Compensation
• Benefits• Employee Relations• Labor Relations
• Training & Development
• Organization Development
• Consulting
• Staffing
• Diversity
• Safety & Security
• Technology
• Business Leadership
• Ethics & Sustainability
• Global HR
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Human Resources:
“Global as an Add-on”
or
“Global from the Start”?
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Global as an “Add-On”: Typical Issues
• Leadership competencies
• Sustainability programs
• Management training
• Diversity initiatives
• Compensation systems
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Global from the Start
U.S. academic parochialism: Fewer than 1 percent of management journal articles focus on people from two or more cultures working together
“Among … international articles, almost every reported study (96%) found that culture had a significant impact on managerial styles and organizational success.”
“Rather than global management being a subset of traditional domestic management approaches, single-culture/domestic management is now recognized as a limited subset of global, cross-cultural management.”
Adler, Nancy, International Dimensions of Organizational Behavior. Cincinnati: South-Western, 2006
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Headquarters Imperatives
Limited LocalCapabilities
Strong VerbalPressure
IrrationalOpposition
ForcefulDecisionsCovert
Resistance
Frustration &Confrontation
Resignation &Withdrawal
Stalemate =Poor Business Results
(Where is everybody?)
The Foreign Capital Company Syndrome
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Global HR: Sample Cases
1. Compensation, Titles, Job Grades
2. Technology Transfer
3. Matrix Reporting
4. Team Decision-Making
5. Cross-Border M&A
6. IT Globalization
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Implications for HR / Talent Development
• Companies will need for their employees to have a global mindset:– Earlier in their careers– On a more regular daily basis– Working with virtual team members– With a diverse workforce at home as well as when
traveling abroad– When starting major projects– To build effective strategic plans– To understand the competition– To manage and lead effectively
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Definition of “Global” Company
• A Combination of:– Global Economies of Scale– Attention to Local Customer Needs, Particularly in Key
Growth Markets– Effective Exchange of Knowledge between Locations– Shift from “Mother-Ship” & “Baby Ship” to Network
Organization
• “Mental Matrix” to Enable Matrix Organizational Structures
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Globalization Stages: Definitions
Global / Transnational(60% / 40%)
Multinational
International (75% / 25%)
Domestic (90% / 10%)
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Executive Priorities
1. Growth
2. Cost Optimization
3. Talent Development
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The Business Case for “Global from the Start”
1. Where is the revenue coming from?Ratio of domestic vs. non-domestic revenue; there is a big difference between 60/40 and 40/60
What was the ratio 10 years ago? What will be the ratio 10 years from now?
2. Where are we making money?
Relative profitability of different regions
3. Where is the potential for future growth?
Comparative growth rates in different markets
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Turning HR Upside Down
Headquarters-Centric
Future-Centric:Shift the Emphasis to Talent
Development in Emerging Markets
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Many HR Departments Reflect Past Priorities
• Current State:
– Too many HR employees at headquarters; investment and resources centered there
– HR staff members in key emerging market locations have less experience and limited capabilities, tend to take on administrative rather than strategic roles
– Focus on the domestic market with global as an “Add-on” or afterthought; lack of knowledge about key markets abroad and their HR challenges
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HR Becomes a Model for the Future
• Recommended State:
– Invest in HR capability in emerging markets where the greatest talent development needs are
– Model global mindset and participation in every aspect of HR; real HR business partners in all major locations
– All major initiatives are “Global from the Start;”emphasize flexible and adaptable systems to better recruit and retain local employees