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Latin America’s small and medium-sized enterprises: the human capital challenge

An Economist Intelligence Unit report sponsored by SAP

Latin America’s small and medium-sized enterprises: the human capital challenge is an Economist Intelli-gence Unit paper, sponsored by SAP. The Economist Intelligence Unit’s editorial team conducted the in-terviews, executed the survey and wrote the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. Kim Andreasson was the editor and project manager. Dr Scott B. Martin was the author of the report. Richard Zoehrer was responsible for layout and design.

Our research drew on two main initiatives. We con-ducted an online survey in November and December 2007 of 175 Latin American executives at small and medium-sized enterprises (SMEs) with global annual revenue of between US$100m and US$400m. To supplement the results, we also conducted in-depth interviews with experts in the region. Our thanks go out to all survey respondents and interviewees for their time and insights.

July 2008

Preface

© The Economist Intelligence Unit 2008 3


s Latin America becomes increas-ingly integrated into the global

economy, the region’s small and medium-sized enterprises (SMEs) face major competitive challenges in identifying, attracting and mobilising human capital.1 Traditionally, these companies, particularly those that are locally owned, have lacked large, pro-fessionally trained and specialised human resources departments and extensive internal training systems. Instead, they have relied heavily on low-cost, high-turnover labour. To be competitive, Latin American SMEs will need to transform themselves and meet the human capital challenge head on. Firms can do so in several ways: change internal policy, seek innovative collaborations with public-sector support institutions and business associations, or partner with supplier development programmes of large multinational firms. SMEs can then begin to treat human capital as a central competitive asset by rethinking and broadening traditional skill classifica-tions into more flexibly defined sets of worker capaci-ties known as “competencies”. To use the common catchphrase quoted by the one executive interviewed for this report, Latin American businesses can “put people first”. In the public sector, and often in col-laboration with business associations and interna-tional organisations, key reforms that hold promise are threefold: “demand-driven” training closely tied to a firm’s needs; modern skill certification systems based on broad competencies; and improved labour market “intermediation” services that connect job-seekers with firms seeking to fill particular needs.

In addition, as suppliers of goods or services that serve as key inputs within global supply chains, Latin American companies can work with large multination-al firms to acquire, absorb and develop key strategic innovations in recruitment and training practices.

Summary

About the reportThis report is based in part on the quantitative findings from an online

survey of 175 executives in Latin America conducted by the Economist

Intelligence Unit in November and December 2007. All respond-

ents were employed by firms with global annual revenue of between

US$100m and US$400m. For the purposes of this report, this universe

is defined as small and medium-sized enterprises (SMEs), even though

in some countries and by some definitions firms in this sample might be

labelled as “large”. The survey respondents represented a broad range

of industries and came from a wide spectrum of functions, with the ma-

jority from information technology (44%), finance (24%), and strategy

and business development (22%). (Respondents could choose up to

three functions.) Sixty percent of interviewees described themselves as

board members, C-level executives or vice-presidents. The quantitative

survey was supplemented with three qualitative interviews.1 For the purposes of this report, small and medium-sized enterprises are defined as any company with annual revenue of between US$100m and US$400m. National definitions based on turnover vary, and governments often refer instead to the size of a firm’s workforce in making classifications.

A What are your company's annual global revenues in US dollars?

US$100m-US$200m 46%

US$200m-US$300m 23%

US$300m-US$400m 31%

4 © The Economist Intelligence Unit 2008


s the skills and talents of their work-forces become more central to firms’

survival and success in an increasingly competitive marketplace, attracting and cultivating human capital2 is one of the major challenges facing SMEs in Latin America. Fully 57% of the executives surveyed for this report said that their firms had either specific work-force strategies driven by their overall business strate-gies or workforce strategies that were both driven by and helped to shape their business strategies. In a global environment, SMEs increasingly seek to export directly, compete with imports, or integrate into global supply chains as subcontrac-tors or service providers. This means that they must raise quality standards, improve on-time delivery, and make innovations in products and processes. In the words of Glauco Arbix, former president of the Institute for Applied Economic Research (IPEA) and general co-ordinator of the Strategic Unit advising the Brazilian president, Luis Inácio Lula da Silva, during his first term, “firms must develop a true counter-culture of innovation so as not to waste their potential for growth and competitiveness.” Yet locally owned SMEs’ traditional reliance on low-cost labour and personalised, paternalistic management of their workforces stand at odds with these goals. The survey conducted for this report illustrates the following challenges:

l When asked to identify the top innovation-related challenges faced by their firms, survey respondents identified both changing the organisational culture (42%) and improving teamwork (34%) as key obstacles.

l When asked to characterise the market for quali-fied, high-potential employees, nearly two-thirds (63%) of executives complained of either an extreme shortage (10%) or limited supply (53%) of talent. When they were asked to identify the three largest workforce-related challenges facing their organisa-tions, the largest single response (30%) was the inability to attract qualified candidates. l Three of the other four most common responses to the same question pointed to recruitment and staff-ing problems: mismatch between employee skills and organisational priorities (27%), inability to retain key employees (26%), and inability to build an engaged, motivated workforce (22%).

Introduction

What would you say are the greatest innovation-related challenges facing your organisation over the next five years in Latin America? (Select up to three)

Changing the organisational culture

Transforming ideas into marketable goods/services

Identifying changes in customer behaviour or needs

Getting teams to work together better

Difficulty in predicting future trends

Containing development costs

Reducing time to market for an innovation

Identifying and collaborating with suppliers, subcontractors, or other external partners

Implementing the latest IT trends

Creating the proper incentives to maximise creativity among employees and external partners

Eliciting and using customer feedback

Other

Don’t know/Not applicable

35%

42%

39%

34%

19%

21%

17%

17%

16%

14%

2%

1%

24%

2 Human capital as referred to in this report can be thought of as the stock of work-relevant capacities, knowledge and skills embodied in indi-vidual workers and collectively in the workforce of any given society.

A



n an individual firm level, locally owned SMEs must emulate foreign

subsidiaries and affiliates of multinational firms in treating human capital as a central competitive asset if they are to attract and utilise the highest-potential employees. In the past, there is much evidence that SME owner-managers have tended to think of the labour force as simply a cost to be mini-mised, and to see lower wage costs as their main competitive advantage vis-à-vis larger competitors. Today, firms must “put people first, not just their clients,” says Silvio Eid, director-president of Grupo Unibeb, a Brazilian distribution company. One aspect of rethinking human capital is to follow the lead of successful larger companies and firms abroad in broadening traditional skills classifications into more flexibly defined sets of worker capacities known as “competencies”. This “broad-banding” of jobs into wider bundles of tasks and responsibilities becomes the basis for hiring, promotion, and performance-based evaluation and compensation. Simultaneously, firms can increase in-house in-vestments in recruitment, selection and training to try to identify, attract and cultivate the best avail-able personnel. According to Jacqueline Mazza of the Inter-American Development Bank (IDB), firms in most countries typically are assessed a payroll tax of 1-2% per year to support national training institutes. However, as employee retention rates improve and in-house promotion becomes a viable alternative to fill mid-level vacancies, some firms may experience long-term cost reductions. More broadly, notes Dr Arbix, now a professor of sociology at the prestigious Universidade de São Paulo, locally owned SMEs must overcome the

challenge of traditional “decision-making processes tied to innovation that made it an exceptional oc-currence, making them into systematic processes”. He believes that “without a vision of innovation as a constant, integral, and fundamentally co-oper-ative activity, the recruitment of new employees

Putting people first

O Firms can increase in-house investments in recruitment, selection and training to cultivate the best available personnel

Which approaches will your company focus on to drive Latin American growth over the next five years? (Select up to three)

Developing new products and services

Entering new alliances or partnerships

Penetrating new geographic markets

Improving core products/services

Building closer relationships with customers

Accelerating M&A activity

Investing in human resources

Becoming a cost leader

Creating better internal controls and risk management

Reshaping the organisation’s culture

Investing more in brand-building

Investing in IT

Outsourcing and offshoring more

Other


47%

46%

35%

15%

25%

18%

12%

12%

9%

12%

4%

3%

1%

9%

27%



will constantly bear the weight of the past. A firm that wants to grow needs people who look to the future.” The key dimensions of the greater openness to employee initiatives he advocates are far from traditional hierarchies: “diversity”, “autonomy” and “networks of co-operation”. The widely used catchphrase “putting people first” referred to frequently by Mr Eid and others dates back to the subtitle of an influential 1997 book by Jeffrey Pfeffer, a Harvard Business School professor.3 A basic and easily overlooked aspect of the concept is deceptively simple—making sure that recruitment and initial hire training are closely

informed by the shifting needs of the firm’s work process as it responds to competitors, buyers and clients. For foreign subsidiaries and affiliates of multinational companies that constitute a share of the region’s SMEs, the challenge is to disseminate best practices pioneered by their global parents and competitors in core markets and home countries. They will then need to adapt them to local regula-tory contexts and business cultures that may be new or unfamiliar. For locally owned SMEs trying to survive and thrive in a new competitive environ-ment, such as Grupo Unibeb, the challenge is to benchmark such best practices in their respective global industries and find ways of adapting them to the local context.

s the needs of SMEs in Latin America have changed with globalisation

and flexible work processes, public-sector institu-tions have been as much part of the problem as part of the solution. Meanwhile, the imperative of more innovative public-private collaborations in train-ing has become manifest. Dr Mazza of IDB notes that public training institutes in Latin America have traditionally been “supply-driven”—they supply skills to the marketplace. They train, for example, a set number of carpenters or mechanics per year, regardless of how many the market may demand or what particular skill sets are most in need at any given moment within each trade. Traditionally pub-lic training institutes, such as that of Colombia, only monitored training course completion rates—not

the job placement rates of graduates. The problems of a supply-driven, government-run training model are compounded by widely noted defi-ciencies in Latin America’s elementary and secondary education school system as well as poor “school-to-work transitions,” notes Dr Mazza. While educational reforms are beginning to address the former, reforms in labour market institutions—including interfaces between government, employers and business associations—must start to tackle the latter. One promising collaborative private-public response promoted by the IDB and increasingly in use in some countries is to move towards “demand-driven training”. In Mexico, for example, PACE (Programme to Support Training and Employment, in English)—its largest training programme—has

Collaborative public-private responses: demand-driven training

A

3 Jeffrey Pfeffer, The Human Equation: Building Profits by Putting PeopleFirst, Harvard Business School Press, Cambridge, MA, December 1997.



Grupo Unibeb, a distribution company

in the São Paulo metro region, has 600

employees and an annual turnover of

US$234.5m. Concerned in part that its

major client, American Beverage (Ambev),

might seek to bring some of its distribu-

tion network in-house, Grupo Unibeb

has begun to diversify into distribution of

prepaid telephone cards and Kraft food

products. The diversification has entailed

not just a net gain of 200 new employees

in the last three to four years, but also “a

big investment in people and processes to

create a learning organisation,” confirms

Silvio Eid, the firm’s director-president.

Despite some talk of “putting the client

first, around here our philosophy is to put

people first,” he underlines.

In the process of recruiting and training

its workforce, Unibeb must overcome the

deficiencies of the public school system

and a training system more geared to

manufacturing than services, notes Mr Eid

and the firm’s director of sales and person-

nel, Ricardo Philipp. For recruitment and

training, “public agencies tend to be more

useful for small firms than for us,” explains

Mr Eid. There are plenty of candidates for

jobs, but the “problem is finding the right

people”. About 10% of applicants sending

résumés receive interviews, and a small

percentage of those interviewed and sub-

jected to maths and verbal tests are then

hired on a three-month provisional basis.

In-house, on-the-job training is then

conducted to teach such new hires

the company’s processes and to tailor

their maths and verbal skills to Unibeb’s

demands. The firm also has agreements

with universities to provide night school

education at a discount of up to 50% for

employees, as it encourages them to obtain

educational credentials and perhaps move

up to supervisory and even managerial

positions. Internal promotions are the

preferred means to fill vacancies.

Unibeb conducts its own recruitment

and selection with no assistance from

outside firms or agencies. The 10-12% annual

turnover rate, which includes both dismiss-

als and resignations, is “relatively low by the

standards of Brazil and the industry,” accord-

ing to Mr Eid. Yet it still contributes to making

applicant screening a constant undertaking. n

moved from “classroom-only” vocational training programmes to “short-term traineeships” involv-ing three-month stays with firms that apply to take them on. Workers are given both on-the-job training provided by the employer as well as government-provided or managed training in basic competencies through school-based instruction at night or on the weekend—a so-called “mixed training” model, explains Dr Mazza. Under the PACE programme, participating firms—which range from small to large in size but are pri-marily medium to small—agree to hire at least 80% of trainees to jobs. Crucially, retention rates and

wages of former trainees are periodically measured against those of a control group in order to monitor the programme’s effectiveness. The results thus far have been stellar, argues Dr Mazza. “Demand-driven” training programmes such as PACE can help SMEs to find hard-to-locate qualified personnel who adjust smoothly to workplace life. They also allow cash-strapped firms to subsidise their in-house training initiatives and to comple-ment these efforts with publicly provided or man-aged core competency training tailored more closely to marketplace needs.

Meeting the human capital challenge in Brazil



Competency certification

nother, parallel response on the part of public and public-private busi-

ness support institutions in some countries involves competency-based skill certification. Such schemes codify the shifting requirements for successful work in any given industry or type of work and verify the extent to which they are met by individual workers. These requirements (often set by the International Standards Organisation—ISO) are a combination of “hard” technical skills and related “soft” core

competencies, in areas such as verbal and written expression, numeracy, perhaps computer literacy, problem-solving and “people skills”. Some combina-tion of individual firms, firm associations, vocational schools, manpower companies, specialised auditors, public agencies and labour unions may be accredited and formally authorised to certify workers in particu-lar sets of competencies. Defining skills broadly, as competencies, ensures that workers will be more adaptable to changing mar-ketplace needs instead of being trapped within what might be quickly obsolete technical knowledge bases. Providing multiple venues and agents of certification can help to enhance the “portability” of individual workers’ skills across employers and even sectors of the economy, thus enhancing their “employability”.

Importantly, competency certification can also help to lower transaction costs for those employers that recruit job candidates. In Argentina, for instance, competency-based certification systems have been developed with some success in several sectors including printing, metalworking, automotive and textiles. This has oc-curred through innovative partnerships involving the Ministry of Labour and Social Security, the sectoral training institutes of these sectors, and the Inter-American Center for Research and Documentation on Vocational Training, based in Montevideo, Uruguay. The IDB, meanwhile, helped fund these efforts.

A What do you see as the primary workforce-related issues facing your organisation in Latin America? (Select up to three)

Inability to attract qualified candidates

Difficulty in modifying other work arrangements due to local labour regulations

Employee skills not aligned with current organisational priorities

Inability to retain key employees

Inability to build an engaged/motivated workforce

Difficulty modifying staffing levels due to local labour regulations

Inability to rapidly develop skills to address current/future business needs

Inability to collaborate/share knowledge across the organisation

Lack of leadership capability

Lack of IT knowledge

Labour costs higher than competitors

Unable to adapt global HR practices to local contexts

Unable to redeploy/realign resources against new opportunities

Other


30%

27%

27%

19%

22%

19%

17%

14%

11%

12%

6%

5%

2%

8%

26%

Defining skills broadly, as competencies, ensures that workers will be more adaptable to changing marketplace needs instead of being trapped within what might be quickly obsolete technical knowledge bases



Large multinational corporations

(MNCs) that operate global supply chains

can also play a role in “mentoring” their

small, medium and large enterprise partners

in Latin America, whether they are locally

owned or the local affiliates of multina-

tionals. Mentoring linkages can be created

through distribution relationships or occur

through subcontracting, outsourcing, joint

ventures or other ownership ties.

As MNCs move to produce more goods

and services for increasingly buoyant local

markets (as in the automotive or chemicals

sectors), or to continue to use Latin Ameri-

can countries as export hubs (as in garment

and electronics), locally based supply opera-

tions play an increasingly important role in

providing key inputs for complex global

supply chains. Through supplier development

programmes, MNCs may provide guidance

or direct training to SME managers and

employees so that they can meet the quality

standards, product specifications and delivery

schedules of global brands. This is particularly

important for locally owned SMEs, which,

unlike their foreign-owned counterparts,

may not be familiar with sourcing practices

or have established relationships with global

brands. Public enterprise support institu-

tions, as well as business associations at the

regional and sectoral level and specialised

business consultancies at the regional or

sectoral level, can also play an important role

in providing funding or technical assistance to

local firms during such undertakings.

In joint ventures or other business ties

that are increasingly common among firms

that remain at least partially in local hands,

the contribution of the foreign partner is of-

ten as much in the form of technology and

know-how as it is in capital and market link-

ages. Such firms can make rapid strides as

they meld their knowledge of local markets

and regulations with the introduction of

best practices pioneered by a foreign strate-

gic partner. Much the same is true of SMEs

that become key or sole local distributors

of a global brand’s product (in some cases

after giving up competing directly with it).

Under the cost and quality demands of

foreign partners, but also with advice or

technical assistance, Latin American SMEs

can make important competitive strides in

human capital management. n

Multinationals and their local partners

nother promising public-private response to the recruitment and

selection challenges facing SMEs entails strength-ening labour market intermediation services. Labour market “intermediaries”, whether public, private or mixed, help to match potential workers possessing particular skills and competencies with job opportu-nities in particular firms. They help connect “supply” and “demand” for labour. Examples of intermediary services are job placement assistance for the young or unemployed, outplacement services for those be-

ing laid off, interview coaching, résumé writing and job search assistance. Traditionally, intermediation services have been weak or non-existent in Latin America, and received little input from employers beyond job advertise-ments. Where intermediation has been offered, it has often been weakly integrated with training, which is conducted by different agencies. Drawing on the experience of some OECD countries, efforts to integrate services into single agencies, or to con-tract them out wholly or partially to private service

Connecting job-seekers and firms

A



s confirmed by the survey, Latin American SMEs face challenges in

recruiting, attracting and developing human capi-tal. These challenges disproportionally affect locally owned firms with limited size and professionalisa-tion of their administrative staff, and a traditional reliance on personalised human resource manage-

ment and low-cost, high-turnover staffing. Placing these challenges in the broader context, “the survey respondents underline that businesses must develop a new culture of stimulating innovation,” empha-sises Dr Arbix of the Universidade de São Paulo. Some innovative and promising responses to these challenges are beginning to emerge, although much more is needed. At the level of individual en-terprises, a shift in a firm’s strategy to “put people first” is one welcome approach. This involves treat-ing the workforce as a key competitive asset, hiring

and deploying workers within broader, competency-based categories, and investing more resources in the recruitment and use of high-potential employees. More broadly, it involves transforming decision-making processes to elicit greater initia-tive, autonomy and co-operation among employees within the organisation. At the level of public-sector business support institutions and public-private collaborative efforts, key emerging reforms are demand-driven train-ing programmes done in partnership with firms, competency-based skill certification schemes and enhanced labour market intermediation services. Taken together and individually, such reforms may help to shorten periods of unemployment, enhance school-to-work transitions, and raise employment rates in vulnerable parts of the population, such as youth and women. From the standpoint of SMEs, the reforms may help to foster greater public support for a more committed, capable and enterprising work-force prepared to meet the challenges of a highly competitive global market.

Conclusion

At the level of individual enterprises, a shift in a firm’s strategy to “put people first” is one welcome approach

A

providers, can thus provide one promising approach to reform. Another innovative reform strategy is to develop a more user-friendly approach to make comprehen-sive information available about training and inter-mediation services through a single point of access.

For example, one of the objectives of the second phase of the PACE programme in Mexico, supported by the IDB, is to develop a web-based one-stop in-formation portal that will aggregate information on vacancies, employment placement services, train-ing, job fairs and workshops.


Appendix Latin America’s small and medium-sized enterprises: the human capital challenge

Appendix: Survey results In November and December 2007 the Economist Intelligence Unit conducted an online survey of 175 Latin American executives at small and medium-sized enterprises (SMEs) with global annual revenue of between US$100m and US$400m.Our sincere thanks go to all those who took part in the survey. Please note that not all answers add up to 100%, because of rounding or because respondents were able to provide multiple answers to some questions.

In which of the following Latin American countries is your organisation active? (Select all that apply) Mexico

Argentina

Chile

Brazil

Colombia

Peru

Venezuela

Costa Rica

Dominican Republic

Uruguay

Ecuador

Bolivia

Guatemala

Panama

Puerto Rico

El Salvador

Honduras

Nicaragua

Haiti

31%

49%

34%

30%

18%

27%

15%

13%

13%

11%

11%

10%

10%

10%

8%

6%

5%

2%

28%

What is your primary industry? Manufacturing

Energy and natural resources

Financial services

Consumer goods

IT and technology

Entertainment, media and publishing

Construction and real estate

Agriculture and agribusiness

Chemicals

Healthcare, pharmaceuticals and biotechnology

Logistics and distribution

Telecommunications

Education

Government/Public sector

Retailing

Professional services

Automotive

Transportation, travel and tourism

Aerospace/Defence

10%

18%

11%

8%

5%

6%

4%

4%

4%

4%

4%

3%

3%

3%

2%

1%

1%

1%

8%



What are your company's annual global revenues in US dollars?

US$100m-US$200m 46%

US$200m-US$300m 23%

US$300m-US$400m 31%

What are your main functional roles? (Select up to three) IT

Finance

Strategy and business development

Customer service

General management

Marketing and sales

Operations and production

Information and research

R&D

Risk

Human resources

Supply-chain management

Legal

Procurement

Other

22%

44%

50%

25%

12.5%

6+%

24%

20%

15%

18%

13%

12%

7%

6%

6%

3%

3%

2%

19%

Which of the following best describes your title? Board member

CEO/President/Managing director

CFO/Treasurer/Comptroller

CIO/Technology director

Other C-level executive

SVP/VP/Director

Head of Business Unit

Head of Department

Manager

Other

9%

1%

30%

15%

7.5%

4-%

10%

19%

6%

18%

4%

26%

4%

3%

What would you say are the greatest innovation-related challenges facing your organisation over the next five years in Latin America? (Select up to three)

Changing the organisational culture

Transforming ideas into marketable goods/services

Identifying changes in customer behaviour or needs

Getting teams to work together better

Difficulty in predicting future trends

Containing development costs

Reducing time to market for an innovation

Identifying and collaborating with suppliers, subcontractors, or other external partners

Implementing the latest IT trends

Creating the proper incentives to maximise creativity among employees and external partners

Eliciting and using customer feedback

Other


35%

42%

39%

34%

19%

21%

17%

17%

16%

14%

2%

1%

24%



Which of the following statements best describes your firm’s most successful innovation brought to market within the last five years?

Developed by a local research team within Latin America 34%

Developed by a global team of researchers from Latin America and other countries 19%

Our operations have yet to develop a successful innovation for the Latin American market 17%

Acquired an existing product within Latin America and improved it 13%

Developed by a research team located outside Latin America 10%

Don’t know 6%

Other 1%

What are the main reasons why proposed innovations for Latin America are denied funding? (Select up to three)

Insufficient return on investment

Insufficient profitability

Insufficient absolute levels of profit (eg, something can be highly profitable in percentage terms but does not generate sufficient total profit to affect overall firm performance)

Insufficient growth

Concerns about protecting intellectual property

Innovation threatened to cannibalise existing product

Innovation inconsistent with organisational strategy or capabilities

Latin America not deemed to have a sufficiently high return as a market

Lack of customer references

Other


35%

31%

23%

22%

22%

21%

20%

5%

17%

7%

23%

What is the typical time period within which the management in your company requires an innovation to be cash flow-positive following commercial launch?

Less than 2 years 36%

2 to 3 years 33%

3 to 4 years 9%

4 to 5 years 9%

More than 5 years 4%

Don’t know/not applicable 8%

Other 1%

Which of the following revenue drivers are most important in helping your organisation decide whether to invest in new ideas in Latin America? (Select up to three)

Entering new markets

Expanding the range of complementary products around a basic offer/model

Increasing share in existing markets and countries

Adding new value to a current product (eg, camera phone)

Entering a new Latin American country

Raising the price of a current product

Introducing an entirely new product category (eg, iPod)

Other


54%

53%

32%

17%

17%

1%

4%

41%

30%



For your organisation, what is the greatest challenge in effectively managing R&D activities? (Select up to three)

Understanding market needs and working with customers (identify, test and refine) to translate those into the right products or services

Getting research, development, manufacturing, business units, and marketing teams to work together to time the creation of new products with development cycles

Adapting innovations from outside Latin America so we can exploit the market more effectively

Establishing and maintaining quality control and testing to ensure products are market-ready

Controlling product development costs

Automating manual processes and activities

Assessing the performance of key areas in the product development process

Finding tools to measure return on product development spending

None of the above; there are no significant challenges for my organisation

None of the above; we don’t manage R&D within the organisation

43%

38%

23%

28%

20%

17%

4%

11%

8%

33%

Which of the following statements best describes the process your organisation uses to analyse strategic issues?

We have no process 5%

Largely ad hoc 16%

Consensus-driven 25%

Varies by business unit, or year-to-year 30%

Rigorous and disciplined in the local office 7%

Rigorous and disciplined by a global initiative 14%

Other 1%

Don’t know/Not applicable 2%

How effective is strategic planning for Latin America at driving strategic decisions at your organisation?

Very effective 9%

Effective 54%

Neutral (neither effective nor ineffective) 29%

Somewhat ineffective 4%

Totally ineffective 1%

Don’t know 2%

In your opinion, what are the main issues to consider in developing an effective Latin American strategy? (Select up to three)

Remaining aware of, and responsive to, variations in customer demand

Balancing centralised with localised decision-making

Maximising the value of local market knowledge

Organising and training employees to function well with long-distance business relationships and multiple hand-offs

Complying with multiple regulatory regimes

Cross-cultural communications with customers, employees, partners, and regulators

Creating a unified view of our global operations and performance

Reducing time-to-market for product/service innovations

Investing in IT

Containing costs where they are incurred

Other

49%

34%

32%

28%

30%

18%

16%

14%

16%

1%

31%



How would you describe today’s market for qualified, high-potential employees within Latin America?

What do you expect to see in five years?

Extreme shortage of talent 10%

Limited supply of talent 53%

Good supply of talent 37%

Extreme shortage of talent 10%

Limited supply of talent 37%

Good supply of talent 53%

Which approaches will your company focus on to drive Latin American growth over the next five years? (Select up to three)

Developing new products and services

Entering new alliances or partnerships

Penetrating new geographic markets

Improving core products/services

Building closer relationships with customers

Accelerating M&A activity

Investing in human resources

Becoming a cost leader

Creating better internal controls and risk management

Reshaping the organisation’s culture

Investing more in brand-building

Investing in IT

Outsourcing and offshoring more

Other


47%

46%

35%

15%

25%

18%

12%

12%

9%

12%

4%

3%

1%

9%

27%



How would you characterise the ability of your organisation to meet its demand for IT talent within your Latin American operation?

How would you expect to characterise that ability in five years?

We’re unable to meet our demand 9%

We’re barely able to meet our demand 38%

We’re able to meet our demand 43%

We can hire more than we need 10%

We’re unable to meet our demand 4%

We’re barely able to meet our demand 23%

We’re able to meet our demand 51%

We can hire more than we need 22%

What do you see as the primary workforce-related issues facing your organisation in Latin America? (Select up to three)

Inability to attract qualified candidates

Difficulty in modifying other work arrangements due to local labour regulations

Employee skills not aligned with current organisational priorities

Inability to retain key employees

Inability to build an engaged/motivated workforce

Difficulty modifying staffing levels due to local labour regulations

Inability to rapidly develop skills to address current/future business needs

Inability to collaborate/share knowledge across the organisation

Lack of leadership capability

Lack of IT knowledge

Labour costs higher than competitors

Unable to adapt global HR practices to local contexts

Unable to redeploy/realign resources against new opportunities

Other


30%

27%

27%

19%

22%

19%

17%

14%

11%

12%

6%

5%

2%

8%

26%

Which of the following best describes the relationship between your organisation’s business strategy and its workforce strategy in Latin America?

Workforce strategy is driven by the overall business strategy 40%

Workforce strategy is not formally documented 22%

Workforce strategy is developed independently from the overall business strategy 18%

Workforce strategy is both driven by, and provides input into, the overall business strategy 17%




How well does your organisation perform the following workforce management activities? Rate each of the following on a scale of 1 to 5, where 1=Very effective and 5=Not at all effective

Forecast daily/weekly labour requirements

Identify available staff with appropriate skills and capabilities

Identify long-term trends in the supply and demand for labour

Incorporate employee preferences into the scheduling process

Integrate employee scheduling with other workforce-related systems, such as time and attendance, skill tracking, learning management

Modify staffing based on changes in business conditions (eg, seasonal demand,new products, new location openings, mergers and acquisitions)

Prevent conflicts and otherwise manage employee relations

Align internal resource skills with external consulting services

Align internal resource needs with external consulting services

1 Very effective 2 3

18%18% 23%

4 5 Not at all effective Don’t know

10050

2512.5

31% 11% 8% 8%

18% 25% 28% 22% 5%2

8% 21% 36% 18% 14% 3

9% 24% 34% 15% 12% 7%

13% 25% 29% 16% 10% 6%

16% 26% 27% 20% 9% 3

16% 27% 29% 16% 8% 3

13% 28% 31% 17% 6% 3

9% 23% 29% 25% 12% 3

What elements has your organisation integrated into its compliance methodology? (Select all that apply) Business processes and controls

Performance management and reporting

Data and identity management

Learning management

Risk-driven allocation of compliance resources


47%

69%

70

35

17.5

9-

55%

41%

8%

41%

In your organisation, which of the following are the most critical sources for identifying senior management talent for your Latin American operations?(Select up to three)

Search firms or third party vendors

Referrals from existing employees

Lateral hires from our competitors

Campus recruiting (eg, undergrad, grad, MBA)

Internal job postings (eg, talent in the organisation)

Succession planning

Leveraging existing relationships with influential contacts

Networking through company alumni

Talent imported from outside Latin America

Other

30%

49%

48%

28%

21%

25%

17%

10%

1%

26%

Please indicate whether you agree or disagree with the following statements regarding your organisation’s compliance function.

Persuasively demonstrates to senior management that compliance risks are under control

Anticipates future compliance issues

Justifies its expenditures with evidence of compliance activities effectiveness

Integrates tightly with daily activities of line personnel in business functions

We do not have a compliance function for Latin America

Agree

65% 23%

Disagree Don’t know

10050

2512.5

12%

77% 13% 10%

64% 24% 12%

71% 20% 9%

28% 65% 8%



Which of the following statements best describes how your organisation’s IT investments made in the last five years have helped it fulfill regulatory requirements?

Addressed real needs and brought control to systems that had grown on an ad hoc basis 41%

Enabled the organisation to make business changes that are useful but not required immediately 26%

We have not undertaken significant IT investments in the past three years 15%

Distracted from more immediate, pressing IT security or other business concerns 14%

Don’t know 4%

Which of the following digital inclusion challenges in Latin America do you think technology organisations can help to address over the next five years? (Select all that apply)

Education access-divide

Telecommunication access-divide

Rural-urban divide

Income divide

Language and content access-divide

Lack of access to people with disability

Lack of charity giving

Gender access-divide

Education access-divide

40%

61%

70

35

17.5

9-

51%

39%

30%

15%

14%

1%

33%

Which of the following best describes your organisation’s progress in developing processes to measure and manage the effectiveness of compliance?

We haven't yet started to develop processes 7%

We have just begun to develop processes 20%

We are well into the development effort but have major components yet to complete 37%

We are close to completion 17%

We have fully developed processes to measure and manage the effectiveness of our compliance efforts 15%


LONDON26 Red Lion SquareLondon WC1R 4HQUnited KingdomTel: (44.20) 7576 8000Fax: (44.20) 7576 8476E-mail: [email protected]

NEW YORK111 West 57th StreetNew York NY 10019United StatesTel: (1.212) 554 0600Fax: (1.212) 586 1181/2E-mail: [email protected]

HONG KONG60/F, Central Plaza18 Harbour RoadWanchai Hong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]

While every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.

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