Almost 60 percent of U.S. foreign-direct investment still flows to the United Kingdom, France, Germany and other major European nations, where U.S. firms have time-tested methods for recruiting new staff. Most of the direct investment in Asia still flows to the advanced nations of Japan, Singapore and Australia, where recruiting operations are well-established.
But 2006 marked a watershed in the amount of U.S. firms’ direct investment in China, India and a new tier of less-developed markets. As investment spreads geographically, recruiting functions must evaluate the approach to candidate attraction for each new market.
The investment boom in China and India is driving up wages and generating recruiting and retention problems for multinationals. Towers Perrin reports that 59 percent of employees in China and 63 percent in India are either actively looking for a new job or are open to offers. Massive hiring by both multinational and domestic firms is quickly draining the candidate pool for some skill sets.
India’s engineering schools produce about 400,000 graduates a year, but in 2007 the best 125,000 will snapped up by the five big IT companies—Infosys, Tata Consultancy Services, Wipro, Satyam and Cognizant—according to a report by the Hay Group. Smaller software firms recruit an additional 100,000, leaving a limited number for all other sectors. In recognition of the challenge that the skills shortage presents, Infosys recently moved its finance director into the top HR position.
Multinationals are now moving into China’s and India’s third-tier cities and turning to relatively untapped regions for fresh labor markets where employee retention is less troublesome and costs are lower. Intel’s 2006 move into Vietnam signaled the beginning of this trend, which is taking hold across Southeast Asia, Africa and Latin America. In Vietnam alone, foreign direct investment is set to double this year to $10 billion.
Although investment in Latin America is still limited by relatively high risk factors, call center investment is booming. In Central America, the number of call center agents will rise from 21,000 in 2006 to 40,000 by the end of 2007, according to the Zagada Institute. Nine call centers are already up and running in El Salvador, operated by companies such as Dell, GMC and Sykes. Datamonitor predicts that the number of call center agents working for outsourcing firms in Mexico will rise from 33,500 agents in 2006 to 80,000 by 2010. Argentina, Brazil, Chile and Mexico are also moving into IT outsourcing.
The emergence of new outsourcing markets continues within Europe's nearshore, with Ukraine hosting new IT facilities and Malta positioning itself as a location for multilingual call center services, according to Datamonitor. In Mongolia, new tax incentives for multinationals, proximity to both Russia and China and low labor costs provide strong inducements for multinationals expanding into Central Asia.
Instead of small procurement or marketing operations staffed by expatriates or local partners in the more remote locations, multinationals are setting up full-scale operations staffed by local nationals, with substantial recruiting required. Although the most effective candidate attraction models for these regions bear more similarity to the models for China and India than established Western models, recruiting in the new markets requires a fresh look at attraction drivers.
New recruiting markets
"Among the major multinationals, we see rapidly growing interest in locations beyond India and China, especially Vietnam, [the] Philippines and South Africa," says Pramod Khera, CEO of Aptech Ltd., a Mumbai, India-based IT training company. "Latin American locations such as Peru and Colombia and eastern European locations such as Ukraine are also drawing more interest."
In many ways, training firms such as Aptech and staffing firms like Manpower serve as leading indicators of trends in foreign direct investment because they must be operational in new locations before their client companies begin staffing there. Manpower’s revenue from emerging markets hit $136 million in 2006, up from just $15 million in 2003.
Aptech’s global expansion and its experience in recruiting staff for its new training centers bear out the new trend. From its base in India, Aptech moved into China seven years ago and now commands 32 percent of the market share for IT training there. In recent years, Aptech expanded its operations into Vietnam, Nigeria, Syria and other less developed markets. In 2006, the company added training centers in Russia, the Philippines, Malaysia, Mexico, Thailand and Turkey. In the first quarter of 2007, the company opened new centers in Mongolia, Iran, El Salvador, Kuwait, Dubai and Iran.
To staff its training centers in the less developed markets, Aptech recruits locally and brings in trainers from India as needed. Khera reports that locations such as El Salvador and Mongolia provide a solid education system for engineers and provide high-quality IT candidates, but Aptech must still train them on the newest technologies to upgrade their skills.
With Aptech’s global growth in staffing up 12.3 percent over 2006, the company is constantly recruiting. Aptech’s in-house function employs 16 recruiters, divided into IT and non-IT teams. Based on the required profile for employees for the new centers, Aptech’s recruiters source through job portals and postings, existing databases, networking and community sites, institute and skills-related sites, mass mailers and print ads. Aptech also uses campus recruiting and job fairs and taps outside recruitment firms when necessary.
Recruiting the training faculty for each center is governed by a process designed to ensure that uniform standards are maintained in candidate selection and new hires adhere to the norms set by the global parent. Managers at each center review résumés and conduct interviews.
Candidates who are short-listed by the center undergo online aptitude tests, with the results reported to the central office in Mumbai. Managers there conduct telephone interviews or videoconferences with applicants and forward their recommendations back to the center.
Candidates are screened based on skills, education, experience, relocation preferences and communication capabilities. Testing includes aptitude, functional and language tests, psychometric tests and an additional assessment of candidates’ potential to grow and their awareness of the industry and technology. Finalists take technical-skills tests with fixed minimum score requirements.
In the new locations now drawing heavy U.S. direct investment, recruiters must refocus job offerings to meet the interests of local nationals. New survey data from Towers Perrin confirm a fundamental difference in the primary concerns of the top job candidates in the advanced nations and those in the developing regions. The key to effective recruiting on a global basis is to tailor job offerings to meet the needs and interests of candidates in local markets.
Candidates in the developing regions do not share the same concerns that recruiters encounter in the U.S. markets, where pay and benefits remain the key attraction drivers. Pay remains the top issue for candidates in the U.S. under the age of 55, when benefits become the primary concern, according to the Towers Perrin data. In the advanced nations of Europe, challenging work and work/life balance are the two most important factors in attracting employees, followed by pay. Career opportunities rank fourth.
In the developing markets, however, career advancement opportunities and learning and development opportunities often hold the top spots as the key factors in attracting employees, with pay ranking second or third. In Brazil, for example, career advancement ranks first, followed by learning opportunities and then pay. In Mexico, career advancement ranks first, followed by pay and learning opportunities. In China, leaning opportunities rank first, followed by pay and career advancement.
The key challenge for Aptech in staffing its own operations is recruiting and retaining employees who place a high value on career opportunities and learning and development. "All companies suffer from high attrition in the markets where we are located, so we look specifically for candidates who see training as a career opportunity," Khera notes.
Aptech’s recruiters focus on finding candidates who have both the communication skills necessary for a trainer and knowledge of technology.
"We find people with a good technology background and provide them with training, but the risk of them leaving is high, so we motivate them to stay by providing them with the opportunity for ongoing training in the latest technologies," Khera says. "These incentives are important to them."
In India, retention is particularly difficult. The Towers Perrin survey reports that 28 percent of employees in India are actively job hunting. Wages in the IT and business process outsourcing centers are rising 10 percent to 20 percent annually. For top computer engineers, annual increases in first-tier cities are running 30 percent.
Aptech redoubles its retention efforts at its Indian centers. "We try to bind employees with a written agreement that they must reimburse us for training if they leave the organization," Khera says. "It looks good on paper, but it’s not very effective. Legally, it is very difficult to enforce, so it really only enforces a sense of moral obligation."
Aptech also offers its trainers the opportunity to move into management and charts out a career plan for them.
"We are much better equipped to hold on to our trainers than our client companies, which view in-house training as a core activity and cannot offer trainers as much of a career opportunity," Khera notes.
Companies expanding their operations in China and India or moving into relatively untapped sites in Asia and Latin America may have to mimic Aptech’s emphasis on career development and ongoing training as the key attraction drivers for recruiting the best candidates.