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Gain the Edge in the Knowledge Race

August 1, 1996
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During the last century, nothing has alternately stoked or stunted the economic growth of corporations and entire countries more than coal, oil and gasoline. Wars have erupted over these industrial commodities, and fortunes of vast corporate empires have soared and crashed based on their ability to obtain fuel at a reasonable price. That has been the accepted nature of things in the 20th century, the so-called Industrial Age. But as the world embraces the next millennium, it's apparent that a radically different type of fuel will power the global workplace: knowledge. And finding workers who have the skill and expertise to drive innovation and product development is rapidly emerging as the next great human resources challenge. Nowhere is this trend more obvious than at companies competing for a limited pool of scientists, engineers and mathematicians—those who drive today's nascent technological revolution.

Of course, when there's a shortage there's turmoil—whether it's food, gasoline or knowledge. To survive—and flourish—the engine demands a steady and ongoing supply of fuel. But tracking down the brainpower to navigate the emerging Information Age is no simple challenge. For one thing, organizational structures have changed radically over the last decade. As Rob Norton, vice president of employee relations in the International Pharmaceuticals Group of Pfizer Inc. puts it: "The modern organization has been delayered. You don't have the traditional hierarchy and labor pipeline that existed in the past. You have to look beyond your borders to find the needed brainpower, especially if you're a global organization." Another issue: the recognition that human resources, like natural resources, are scattered all over the globe. "No nation has a monopoly on talent," he adds.

Indeed, many companies have come to realize they would soon suffer from a deadly form of intellectual anorexia if they depended solely on a steady diet of American workers. Regardless of the industry and the need—engineering, computer programming, pharmaceuticals, biotechnology—the Chevrons, Microsofts, Pfizers and Amgens of the world have an insatiable and ongoing appetite for knowledge and talent, which directly translates into better products and profits. "Today, business is conducted globally and it's unreasonable to think that the labor and human resources side of the issue would be handled any differently," says Ernie Glickman, a managing partner at Boston-based Harbridge House, a division of Coopers and Lybrand LLP specializing in change management. "Companies are in search of the best talent they can find, regardless of where that person is from."

Wanted: knowledge workers.
Trek across the Silicon Valley or the Ohio Valley and you'll find one American company after another hiring foreigners in greater numbers than ever before. Software producers like Oracle and Sybase are employing programmers from India. Semiconductor and hardware companies such as Texas Instruments and Hewlett-Packard are grabbing engineers from Taiwan and Korea. And chemical companies and pharmaceuticals—from Eastman Chemical to Pfizer—are mining for chemists, biologists and physicists. A report from the Center for Immigration Studies, based in Washington, D.C., found that 11.7% of America's scientists and engineers in 1990 were foreign-born—a number that has undoubtedly risen over the last six years. And the pipeline shows no signs of slowing.

The influx of legal immigrants hasn't gone unnoticed. In fact, earlier this year a noisy debate erupted over the merits of American companies hiring so many foreigners. Critics argued that some companies use lax visa rules to exploit cheap labor—an act that steals jobs away from Americans. Corporate representatives replied that such a critical shortage of scientists and engineers exists that they can't fill all open positions hiring only American citizens. Amid all the controversy, Congress considered imposing drastic limits to current immigration policy. Wyoming Senator Alan Simpson even went so far as to introduce a bill that would've reduced the number of employment visas from 140,000 to 75,000 a year. It would've also curtailed the length of stay allowed under such visas. A slew of politicians, including former presidential candidate Pat Buchanan, Labor Secretary Robert Reich and Senator Ted Kennedy, initially jumped onto the anti-immigration bandwagon. Only after a fierce lobbying battle did Congress decide to back off and retain the status quo.

The political chest-beating highlights one clear fact: As business becomes increasingly global, the role of educated foreign labor is growing in importance—particularly in the high-technology arena. At many U.S. companies, between 1% and 5% of the workforce is foreign-born, and the numbers are rising. "Many global corporations realize they can use their geographical spread to feed the organization. They're also able to create crossfunctional and virtual work teams and use today's technology to maximum advantage," Norton explains.

Recruitment roads lead abroad.
In many respects, Applied Materials is the archetypal global company of the 1990s. The $3.1 billion Santa Clara, California, firm—the world's largest producer of semiconductor manufacturing systems—has enjoyed sales growth of nearly 40% a year for the better part of the decade and has posted an annual gain of 188% in Asia over the same period. And it appears to be poised for equally impressive growth to the year 2000 and beyond—as the Information Age hits full stride and the world's demand for semiconductors continues to swell. Such global presence—65% of the firm's revenue comes from overseas—means that Applied Materials is faced with the challenge of hiring approximately 300 new employees every month.

That's an enviable situation, to be sure. But, these days, it also presents more than a few headaches for leading high-technology companies like Applied Materials. How does HR at these companies find managers and top executives who understand the nuances of doing business in such places as Taiwan, Korea, Singapore and China? How do they locate people who know the language and understand the culture? And, on a more immediate level, how do they satisfy an insatiable appetite for engineers and scientists when a company is growing so quickly? In this case, all roads point abroad. Applied Materials has found that it must hire foreign nationals to fill positions that might otherwise remain open for weeks or months. Indeed, the skills and knowledge required to design and engineer semiconductor manufacturing equipment are so great, the company simply can't find enough qualified applicants in the United States.

Ditto for Texas Instruments (TI), which also typifies the modern global corporation. Over the last two decades, foreign scientists and engineers have obtained hundreds of patents and ascended to the uppermost reaches of the company. Two decades ago, Pallab Chatterjee was a young Ph.D. candidate at the University of Illinois, Urbana-Champaign. Today, the 45-year-old electrical engineer holds 30 patents, is a senior fellow and president of the firm's calculator and personal notebook group. Likewise, Keh-Shew Lu, 49, came to the United States more than 20 years ago from his native Taiwan, earned a doctorate degree at Lubbock-based Texas-Tech and has ascended to the presidency of TI Asia. Argues Steve Leven, a senior vice president of human resources at TI's Semiconductor Group in Dallas: "These individuals provide expertise and knowledge that strengthen the American corporation. They're also able to bring an understanding of business, culture and language that allows a company to compete successfully overseas."

Enhance your competitive advantage.
At company after company, the story is much the same. More than 50% of Applied Material's senior management team is foreign-born, including the company's president and several top executives. At Emeryville, California-based Sybase, a leading database software company, approximately 2% of the overall workforce is foreign-born. "The large number of foreign nationals being hired today is simply a reflection of the labor pool. When it comes to the sciences, 40% to 60% of a graduating class from the typical American university is foreign-born. So, you have to accept the fact that you're either going to have to employ lesser talent by not hiring foreigners or move operations to where you can hire the people you need," says Michael Engelhardt, vice president of external affairs for Sybase.

A recent report from the Cato Institute, a Washington, D.C.-based "free market" think tank, supports Engelhardt's view that the American workplace is highly dependent on educated workers from abroad. It found that unemployment rates in the United States currently hover around 1% for computer programmers and about 1.7% for engineers. Moreover, it concluded that foreigners aren't undercutting their American counterparts in wages nor are they stealing jobs away. When the report's author, policy analyst Stuart Anderson, examined Department of Labor data for 230,000 visas, he discovered only 418 instances (or less than 1%) of foreigners being paid less than the prevailing wage. "This is an issue clouded in misinformation. Unfortunately, legal and illegal immigration have been lumped into the same pot," he argues.

People make a company.
The bottom line is that in today's global, high-tech economy, there's less concern than ever before about political boundaries and nationalities. Knowledge workers ultimately migrate to where the best opportunities exist, while companies migrate toward definable labor pools. Companies that stand on the sidelines and adhere to conventional wisdom risk being trampled. Today, the ultimate winner is the company that can create a software program faster and better, or develop and market the next generation pharmaceutical drug or networking hardware before competitors stampede into the market. In a free global economy, the strength of entire nations is predicated on the intellectual acumen of workers—and what skills and capabilities they're able to bring to companies. "People are what make a company a dominant player," asserts Engelhardt.

Of course, such change extracts an incredibly high toll. As gaps in pay and experience shrink worldwide, knowledge workers increasingly find themselves competing on more equal footing than ever before. Almost predictably, fears and age-old prejudices bubble to the surface, and governments attempt to restrict the flow of immigrants in the zeal to protect domestic interests. That doesn't change the reality of the new workplace, or the fact that global economics are far more powerful than any company or government can control or legislate. "This is only the beginning of an enormous shift into a global economy," says Glickman. "If American firms are going to compete successfully in the years ahead, they must look for the best talent that's available and have managers and top executives with global experience and knowledge. There's no place for parochialism in today's world."

Personnel Journal, August 1996, Vol. 75, No. 8, pp. 52-56.

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