0Mercer

Trends

Economy and talentOutsourcing industry challenges

June 2011

1Mercer

Talent insights

Talent shortage in the northern hemisphere– Baby boomers retiring

Employability issue in the southern hemisphere– Only 25% of India is considered employable by MNCs

Forecasting of jobs in demand– Today’s high paying skill gets commoditized– Which skills will be in shortage ; e.g. R&D, web design– Highest talent shortage in BRIC countries: Mining, transportation,

manufacturing– Highest talent shortage in developed countries: Education, and healthcare

2Mercer

Global Forces Changing

2010 Managing Compensation and Benefits across Borders

3Mercer

General Demographic Trends

Falling birth rates

Increasing life expectancy

2010 Managing Compensation and Benefits across Borders

4Mercer

General Demographic Trends

Addition to the working age population by 2018 (Millions)

2010 Economic Trends - IBEF

Increasing Middle Class

5Mercer

Share of Population age 65 and olderExpected to double by 2050

2010 Managing Compensation and Benefits across Borders

Talent trends

7Mercer Source: Manpower 2010 Talent shortage survey

41% had difficulty filling vacancies

16

31

40

41

44

45

53

76

0 10 20 30 40 50 60 70 80

India

Global average

China

Asia Pacific

Taiwan

Hong Kong

Australia

Singapore

Japan

Talent shortages in AsiaDifficulty filling jobs by country

8Mercer

0%JP ID TW SG PH HK SK IN VN NZ CN TH AU MY

Turnover rates

Source: 2010 Global Compensation Planning Report

ID: Indonesia IN: India

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

5.4% 5.5% 5.8%6.4% 6.7%

7.3%

8.6% 8.6%9.2%

9.9% 10.2% 10.3%

13.1%

18.7%

9Mercer

The statistics are already impacting on recruitmentRecruitment has started… but not everywhere

10Mercer

Jobs – Tough to recruit and retain

Country Recruit Retain

Marketing Professional Sales Para ProfessionalAU Sales Professional Sales Professional

Marketing Management Marketing Professional

Sales Management Sales ProfessionalCN Marketing Management Marketing Management

Finance Management Finance Management

Sales Professional Sales ProfessionalHK Marketing Professional Marketing Professional

Sales Management Retail Para Professional

Sales - Management / Professional Sales Professional

Marketing - Management / Professional Marketing Management

- Finance Professional

Finance Management Marketing ManagementID Marketing Management Sales Management

Sales Management Sales Professional

Marketing Management Marketing Management

Finance Management Marketing Professional

Marketing Professional Sales Professional

Marketing Professional Sales Professional

Marketing Management Marketing Professional

Sales - Management / Professional Marketing Management

IN

JP

MY

Sales Management (10) and Marketing

Management (11) were the 2 most difficult to recruit jobs across

countries!!

Sales Management (10) and Marketing

Management (11) were the 2 most difficult to recruit jobs across

countries!!

Sales Professional (12) and Marketing

Professional (8) were the hardest to retain….

Sales Professional (12) and Marketing

Professional (8) were the hardest to retain….

Source: Mercer Total Remuneration Surveys, 2009

11Mercer Source: Mercer Total Remuneration Surveys, 2009

Country Premiums Below Market

Administration (-35.6%)AU Contact Centre (-29.4%)

Sales (-15.4%)

Corporate Affairs (9.4%) Administration (-26.6%)CN Finance & Accounting (6.6%) Contact Centre (-20.6%)

Marketing (5.9%) Quality (-12.2%)

Administration (11.6%) Sales (-9.3%)HK Finance & Accounting (3.3%) Supply & Logistics (-3.3%)

Human Resources (0.6%) Marketing (-3.1%)

Corporate Affairs (15.1%) Manufacturing (-14.8%)

Research & Development (10.1%) Sales (-13.3%)Finance & Accounting (9%) Administration (-5.9%)

Corporate Affairs (20%) Manufacturing (-6.6%)ID Finance & Accounting (10.7%) Administration (-3.9%)

Marketing (4.2%) Sales (-1.2%)

Corporate Affairs (10.9%) Marketing (-8.1%)

Quality (9.8%) Manufacturing (-4.1%)Human Resources (3.6%) Information Technology(-3.1%)

Corporate Affairs (4.3%) Sales (-5.9%)

Supply & Logistics (1.9%) Marketing (-5.8%)- Quality (-5.6%)

IN

JP

MY

Finance & Accounting (2.1%)

Finance and Accounting is one

of the most common functions

commanding a premium across

12 locations.

Finance and Accounting is one

of the most common functions

commanding a premium across

12 locations.

Sales was one of the functions to

be placed below market

across 10 countries!

Sales was one of the functions to

be placed below market

across 10 countries!

Only four markets indicated

Human Resources to be

enjoying a functional premium.

Only four markets indicated

Human Resources to be

enjoying a functional premium.

This was closely followed by

Marketing and Administration

across most countries..

This was closely followed by

Marketing and Administration

across most countries..

Functional premiums – Management staff categoryAnnual guaranteed cash

12Mercer

Ranking

Cost of living – Asia Pacific cities

118

100989696948986

797877777670686767

0

20

40

60

80

100

120

140M

umba

i

Man

ila

Dha

ka

Kua

la L

umpu

r

Ban

gkok

Wel

lingt

on

Col

ombo

Han

oi

Jaka

rta

Taip

ei

Seou

l

Hon

g K

ong

Sydn

ey

Shan

ghai

Bei

jing

Bas

e C

ity :

Sing

apor

e

Toky

o

Source: Mercer Cost of Living Calculator, Mar 2010

13Mercer

Quality of living – Asia Pacific cities

Source: Mercer Quality of Living Calculator, Mar 2010

50

60

62

6263

68

72

72

7984

85

87

9298

100

102

103

0 20 40 60 80 100 120

Islamabad

Hanoi

Mumbai

Colombo

Jakarta

Manila

Beijing

Bangkok

Shanghai

Taipei

Seoul

Kuala Lumpur

Hong Kong

Tokyo

Base City : Singapore

Wellington

Sydney

India trends

15Mercer

What do we hear in the market?

What are innovative ways to manage increasing benefits

cost?

What are innovative ways to manage increasing benefits

cost?

How to balance between market competitiveness and maintaining cost?

How to balance between market competitiveness and maintaining cost?

With all the different local practices, how can we implement our global

strategy?

With all the different local practices, how can we implement our global

strategy?

How to control costs in a challenging year?

How to control costs in a challenging year?

How can benefits motivate and engage employees?

How can benefits motivate and engage employees?

16Mercer

16%

24%

38%

64%

66%

66%

0% 10% 20% 30% 40% 50% 60% 70%

% of respondents

Encourage more work-at-home

opportunities

Restrict travel

Convert more training to

online training

Increase use of alternate

meeting methods

Review PMS to differentiate

performers

Review rew ards and

recognition programs

Actions taken during 2010 to control the rising costs

Source: Mercer India Monitor 2010

17Mercer

3.2% 2.7% 2.9%2.5% 2.5% 2.7%

7.0% 7.2% 7.0%

9.0%10.0%

12.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Sala

ry in

crea

se p

erce

ntag

e

US Western Europe Asia Pacific India

2009 2010 2011

Salary increases across the globeOn Annual Guaranteed Cash

Source: 2010 July Mercer GCPR

18Mercer

Factors affecting salary increase

16%

39%

45%

46%

64%

78%

98%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percentage of respondents

Length of Service

Market Competitiveness

Inflation

Job Level

Position in Salary Range

Company Performance

Individual Performance

Source: IN TRS All Industries (Dec 2010)

19Mercer

Hiring IntentionsNext 3-12 months look positive

69.00%

55.00%

75.00%

85.00%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Recruiting in next 3 months Recruiting in next 12 months

2009 2010

Source: IN TRS All Industries (Dec 2009 & 2010)

20Mercer

Attrition TrendsReduced trends in 2010

BATB

5.7%

2.7%

4.5%

9.5%

7.3%

5.9%

14.8%13.5%

12.2%

14.9%

10.1%

8.4%

12.7%

8.1% 8.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Volu

ntar

y at

tritio

n pe

rcen

tage

Executives Management Professional –Sales

Professional –Non Sales

ParaProfessional –

White Collar

2008 2009 2010

20Mercer Source: IN TRS All Industries (Dec 2008,2009 & 2010)

21Mercer

Attrition TrendsIndustry wise

BATB

21Mercer

12.0% 11.9%10.9%

8.0%

15.2% 14.0%

8.0%

21.6%

7.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

26.0%

Vol

unta

ry A

ttriti

on p

erce

ntag

e

All Industry Consumer Asset Mgmt Chemical Pharma Auto Mfc ITeS Hitech

Source: Industry TRS 2010 & MIM 2010

Today’s Landscape for HR: Challenges and Opportunities

23Mercer

Workforce contradictions aboundSay good-bye to either/or choices

“We have talent surpluses in some areas … and talent shortages in other”

“We need to retain top talent … and have limited rewards”

“We want less hierarchy … and need more leadership opportunities”

“We seek diversity … and want the benefits of a unifying culture”

“We need to invest … and need to reduce costs”

“We want greater performance … and have fewer resources to drive it”

24Mercer

Global market research What are we hearing?

Talent management

will continue to grow as a top

priority

80% of respondents say “high priority”in next three to five years; up from 50% today

Leadership issues are top three talent priorities

75% of respondents say talent changes are imminent in the areas of succession, development, performance management, careers and employee engagement

And, respondents admit lack of confidence to effect change

Source: Mercer “Future of Talent Management Survey,” May 2010,

25Mercer

How the journey has been in India Outsourcing

2000 - 2005 2005 - 2008 2009 – 2011+

Scalability1. Understanding their talent

landscape, optimising available workforce capabilities, managing talent risks and avoiding skill shortages and leadership gaps

2. Sophisticated hiring engines created and sustained

Retention1. Double digit salary inflation,

and LTI plans

2. Faster career movements, onsite (USA) opportunities, better lifestyles

The industry has gone through 3 distinct themes in the last decade

Differentiation1. Adopting integrated, strategic

talent management approaches to scale up

2. Rationalizing Organization Structures, more detailed career paths

3. Differentiated compensation plans

26Mercer

Talent Management Themes

Scalability – Understanding their talent landscape, optimising available workforce capabilities,

managing talent risks and avoiding skill shortages and leadership gaps– Sophisticated hiring engines created and sustained– Setup complex systems and processes to drive and support scale

Retention– Double digit salary inflation, and LTI plans– Faster career movements, onsite (USA) opportunities, better lifestyles

Differentiation– Rationalizing organization structures, more detailed career paths, job levelling– Newer talent pools and alternate sources of talent– Differentiated compensation plans

Conclusions

28Mercer

Discussion

Managing costs – is this an imperative for HR managers or the Finance team?

Is pay for performance losing its sheen?

Internal vs external equity – is this still a recruitment battle or has it become a full fledged war in the boardroom?

Benefits of benefits – does the Gen y see this?

Employability – does this need to be corporate agenda, and how?

How will globalization affect your reward strategy?

www.mercer.com