Latin America’s small and medium-sized enterprises: the...

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

An Economist Intelligence Unit report sponsored by SAP

Latin America’s small and medium-sized enterprises: the organisational 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


mall and medium-sized enterprises (SMEs) operating in Latin America face

major organisational challenges stemming from globalisation and shifting corporate paradigms.1 In a world of change, businesses frequently try to seize new export opportunities, compete with imports in liberalised markets, partner with large multina-tional firms or attract outside investors or buyers. In such an environment, companies with traditional personalised organisational hierarchies tied to a single owner or family will no longer be able to compete. In order to survive, therefore, firms that are locally owned, privately held and often family-run must develop modern, nimble and transparent management and business structures. It is not only local companies that face chal-lenges, however. Among subsidiaries and branches of multinational corporations, the issue is how to successfully transfer best practices, pioneered by their global parents, to their Latin American opera-tions and adapt them to distinctive local contexts. A major first step for both groups of companies will be to transition from a hierarchy centred on the owner-president or subsidiary president to a more elaborate, networked division of managerial respon-sibility involving clear separation and co-ordination of senior managerial roles in a modern corporate structure. How far firms go with this division and the extent to which they elevate the status of functional areas vary significantly across firms, particularly be-tween privately held and publicly traded businesses.

Companies can obtain assistance in their reorgani-sation in a variety of ways: through relationships with larger firms, business consultancies or the efforts of business associations and governments.

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.

S 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%

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.

4 © The Economist Intelligence Unit 2008


esponding to globalisation, firms in Latin America often seek to target new

export niches, move up the value chain to more sophisti-cated processes or compete with ever larger competitors in cut-throat domestic and international markets. Oth-ers, with a view towards maintaining independence from would-be foreign suitors, choose to move to less com-petitive niches or to shift their core competencies (for instance, moving from manufacturing a given product to becoming an importer/distributor for that product made by a larger foreign-branded firm). The survey conducted for this report indicated a surprising bright spot in their endeavours that may bode well for the future. When asked whether their re-spective companies had brought to market a successful innovation in the region, 76% of executives responded in the affirmative. When asked to identify the source of the innovation, 34% of these executives said that a local research team within Latin America was responsible—by far the largest single response. This is somewhat surprising at a time when many observers have lamented the lack of technological innovation and research and development (R&D) in Latin America, despite its growing role in the global economy. But the survey also illustrated the following challenges:l Whatever their precise competitive strategy or ownership trajectory and structure, SMEs face enor-mous internal organisational challenges as they try to embrace a culture of continuous learning. In fact, 42% of respondents to our survey identified changing the organisational culture as the single largest problem they face in the area of innovation. Executives also underlined getting teams to work together (34%) and transforming ideas into marketable goods/services (39%) as key challenges to innovation.l One-third of survey respondents said their greatest

challenge in managing their R&D activities effectively is to adapt innovations from outside Latin America to the local market. l When asked to describe how their organisation anal-yses strategic issues, a majority (51%) said there was no process (5%), claimed it was largely ad hoc (16%) or said it varied by business unit or year to year (30%). In order to respond to these organisational chal-lenges, firms must adopt practices pioneered in more established markets and adapt them to the particular conditions they face in Latin American countries. The bottom line of these practices is to improve the gen-eration, flow and practical utilisation of knowledge—knowledge about markets, products and processes.

Introduction

R 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%



raditionally, SMEs in Latin America have had a cumbersome management struc-

ture. In locally owned firms, family business cliques have often made for ad hoc decision-making that was mostly opaque to outsiders. Such problems do not disappear overnight even if the original owners of such firms are bought out or become minority stakehold-ers in the midst of increasing merger and acquisition (M&A) activity. For their part, early generations of multinationals, particularly in manufacturing, were often subject to overly rigid centralised control from the home office and relegated to the minor role of producing for small, protected local markets. Whatever their origin, many firms still operate under the weight of a legacy of substandard quality, management that is either too personalised or bureaucratic, and overwean-ing state protection that has in many cases given way to benign neglect by state agencies. As a result, lack of access to investment capital, technology know-how and commercial linkages are among the broader challenges facing established SMEs. This basic assessment is also the view held by the experts interviewed for this report: Carlos Lem-oine, president of the Centro Nacional de Consultoría consultancy in Bogotá, Colombia; Daniel Villavicencio, a consultant to the Mexican government’s Consejo Nacional de Ciencia y Tecnología (CONACYT, National Council of Science and Technology); and Silvia de Torres Carbonell, president of the Fundación Endeavor in Buenos Aires, Argentina. Dr Villavicencio elaborated further that “the conditions in which the economic opening has occurred in Latin America has dismantled many value chains, causing many local firms to become concentrated in very small niches in local markets, or to transform themselves [from manufacturers] into sellers of US or European products.” He refers, among

other things, to the speed of the commercial open-ing in the last decades of the 20th century and the weakness of policies to support firms in making the transition to a much more competitive environment. In the Colombian context, Mr Lemoine cites “high non-wage payroll costs” and “disloyal competi-tion from the informal sector” as further problems, although they are by no means unique to that coun-

try. These problems would seem to be related to an obstacle that Ms Carbonell underlines in the case of Argentina, but which also has broader regional resonance—considerable regulatory hurdles in setting up and managing a business. Mr Lemoine points out that a major response of local firms in Colombia is to “seek alliances with larger firms in order to survive”. He cites examples as disparate as airlines, supermar-kets, pharmacies and insurance as sectors in which lo-cal firms have been displaced or local owners reduced to minority partners. But beyond the issue of whether local entre-preneurs survive are the larger challenges—facing established local firms, new foreign entrants and established foreign players alike—of how businesses reorganise themselves and their relationships with key outsiders. A major first step is adopting a more modern corporate structure in which a hierarchy centred on the owner-president or subsidiary president gives way

Challenges of reorganisation

TLack of access to investment capital, technology know-how and commercial linkages are among the broader challenges facing established SMEs.



to a more elaborate, networked division of managerial responsibility involving clear separation and co-ordination of senior managerial roles. In contemporary corporations, this typically involves a chief executive officer (CEO) in charge of overall strategy and (usu-ally) investor relations, a chief operating officer (COO) who manages day-to-day operations, a chief finan-cial officer (CFO) in charge of overseeing payments, accounts, payroll and revenue inflows, and a chief technology officer (CTO) who oversees research and product development.

Given their experience, branches or subsidiaries of multinationals may have the easiest time moving to this model and adopting these roles in their Latin American operations. Yet they still face the task of finding appropriate talent to fulfil what are ever-shift-ing roles, and adapting those roles to different local regulations and business norms. For their part, those SMEs that are now publicly traded (and that often have an overseas presence as well) have been pushed towards such modern man-agement structures by shareholders and the listing requirements of international and local exchange, among other factors. Yet local firms that remain privately held may still resist raising the functional importance of finance and R&D. They may choose instead—like the Alpina example in Colombia dis-cussed in the case study on page 7—simply to sepa-rate the chief executive and chief operating roles (which traditionally tended to be fused or blurred) without creating the new titles and bundles of once discrete functions implied by COOs and CTOs or their equivalents.

Regardless of how they structure their businesses, publicly traded local firms and privately held busi-nesses alike must join their multinational counterparts in beginning to recruit from outside their ranks and the close-knit personal business cliques that have traditionally predominated in the region—indeed, sometimes outside even their national borders. Our survey finds that, in fact, meaningful progress is being made towards greater reliance on an emerging market-place for executive talent—search firms or third-party vendors was the most common response to a ques-tion about the source of senior management talent

(49%, where respondents were asked to choose three from a list of ten). As recently as a decade ago, such a response would have been much less frequent. It is also somewhat telling that succession plan-ning (25%) still ranked sixth among the ten possible responses about sources of senior talent. It reveals the extent to which family ownership still prevails, but also what are in principle promising efforts to deal with the thorny issue of succession, which is typically the Achil-les heel of family-owned and operated firms.

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%

Local firms that remain privately held may still resist raising the functional importance of finance and R&D



But how can firms learn how best to reorganise, and who can assist them in the process? The answer again would seem to depend in part on the type of firm in question. Foreign subsidiaries may rely heavily on templates and best practices developed within their global parents, but they must still adapt them to local laws, customs and business environments. This may entail use of business consultancies that attempt to act as bridges between international experience and local adaptation. Nationally owned firms may have as much to learn by engaging such consultancies as their foreign counterparts. A second source may be the large multinationals that take minority stakes in local firms, are key buyers of their goods and services through subcontracting or outsourcing, or otherwise have key relationships with them. These large multinationals may demand or at least encourage local partners to reorganise along corporate lines with which they are already familiar in global practice. If they are suffi-ciently invested in these relationships, they may also provide specific guidance as to how to do so.

Whatever the immediate source of the advice, pres-sure and guidance, two other sets of actors can—and also should—play a key role in assisting firms indirectly or directly in obtaining assistance: business associations and governments. Such entities can pool resources and perhaps secure advice that is lower in cost and more tai-lored to the specifics of the sectors or regions in which their members operate. For example, as Mr Lemoine notes, business chambers in Colombia often play a key role in helping members to obtain advice about strate-gic, organisational and technical issues. Governments have in many ways contributed to competitive problems, whether through regulatory obstacles or “benign neglect” towards the organi-sational challenges faced by locally owned or based firms as they deal with the consequences of glo-balisation and rapid commercial opening resulting from national trade policies and international trade agreements. Yet they can also help firms to address these problems, particularly if they work with busi-ness associations or private consultancies and seek to

Alpina Productos Lácteos, a Colom-

bian maker of milk, yogurt, cheese and

other dairy products, is a good example

of a traditional locally owned firm that

has sought to modernise its management

structure and operations with apparent

market success, while remaining privately

held and sticking to a relatively simple

top corporate structure. The company,

originally founded by two Swiss émigrés in

the 1940s, operates factories in Colombia,

Ecuador and Venezuela. It currently sells

products in 20 additional markets based on

a recent export drive, including the United

States, Canada, Italy and Spain, as well as 16

other Latin American countries.

According to Mr Lemoine of the Cen-

tro Nacional de Consultoría in Bogotá, the

firm received advice in financial manage-

ment, export finance and other areas

from Colombian consulting firms when it

moved to expand exports in recent years.

The current president (aka CEO) is Julian

Jaramillo Escobar, who was recruited

in 2005 because of his financial sector

background. (The firm does not list a CFO

or CTO on its website or other com-

pany documents, only a “president” and a

“managing director”.) In 2007 Alpina took

over an Ecuadorian dairy company and the

Ecuadorian assets of a Dutch firm. In ad-

dition, it has since announced its intention

to acquire a US yogurt maker in order to

set up production to serve the Latino and

Colombian populations in the Tri-State

New York area. n

A family firm modernises management to go global



operate in a “market-friendly” fashion. Latin American governments have turned against the historical policies of subsidies and protection for particular firms or sectors they frequently used in the decards until the 1980s, notes Wilson Peres, director of the Joint Industrial and Technological Develop-ment Unit of the United Nations Economic Commis-sion for Latin America and the Caribbean (CEPAL in Spanish, ECLAC in English) and the United Nations Industrial Development Organisation (UNIDO). Yet the region is experiencing the “slow comeback of industrial policy,” he writes in The slow comeback of industrial policies in Latin America and the Caribbean.2 It is occurring, underlines Mr Peres, in a new guise that seeks to be much more attuned to the needs of global competition (“competitiveness policy”) and entails a much lighter state touch. The trend is still tentative, and quite uneven across countries. Programmes that seek to promote technological development and organisational and technical train-ing for firms are one form of competitiveness policy, although much more work remains to be done. Dr Villavicencio, a consultant at Mexico’s CONACYT who also teaches sociology at the Universidad Autónoma Metropolitana (UAM)-Xochimilco, cites a number of examples in Mexico of programmes that assist firms along these lines. Some of the programmes he cites, such as the TechBA, or Technology Business Accelera-tor, target very small, mostly start-up, firms outside the range of our survey. In fact, state policy often,

and for understandable reasons, targets smaller firms. In this sense, intermediate size may often mean the worst of both worlds. Yet some of the other business promotion pro-grammes in Mexico cited by Mr Villavicencio—such as the Ministry of the Economy’s Fund for Micro, Small, and Medium-Size Enterprises (PYME Fondo), set up in

2004—provide services to firms that have up to 250 employees in manufacturing or 100 in commerce and services. Some of the medium-sized firms represented in our sample would be eligible, in principle, for such assistance. Much the same can be said of eligibility criteria for policies that assist firms elsewhere in the region—some are limited by size of firm, while others are based on other criteria, such as presence in a par-ticular region, cluster or sector of economic activity, potential for job creation and the like. In the final analysis, what matters most is that firms receive guidance and training that is anchored in international best practices, yet tailored to their needs while still being cost-effective. What works interna-tionally frequently needs to be moulded carefully to fit the circumstances and capacity to absorb rapid change of established local businesses.

In fact, state policy often, and for understandable reasons, targets smaller firms. In this sense, intermediate size may often mean the worst of both worlds.

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%

2 Wilson Peres, “The slow comeback of industrial policies in LatinAmerica and the Caribbean,” CEPAL Review 88 (April 2006), 67-83.



s confirmed by the survey, the organisational culture in Latin

American SMEs is often deficient. As a result, they face a major set of organisational challenges with a clear common denominator—how to adapt interna-tional best practices in management and corporate structure to local contexts. One key challenge is how to restructure senior management so as to allow for more agile decision-making. When firms reorgan-ise, they must seek guidance from one of a variety of sources—home offices, business consultancies, larger firms with which they are closely connected, business associations or governments. The key will be to learn how to tailor guidance and assistance based on global best practices to a particular firm’s needs, and to create the capacity to absorb rapid change. The pace is likely to vary considerably across types of firms, particularly depending on the degree to which their ownership structure subjects them to investor or regulatory

pressures to conform rapidly to what are perceived to be international standards. All firms operating in the region, however, face these pressures to one degree or another, and modifying and modernising their decision-making and organisational structures is crucial to meeting competitive challenges.

Conclusion

One key challenge is how to restructure senior management so as to allow for more agile decision-making

A


Appendix Latin America’s small and medium-sized enterprises: the organisational 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%


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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