Why Not To Avoid Going Global With The Resource

Key Points:

• Local talent models struggle to attract top talent in tied labor markets, pay hefty, and lack specialized skills. They struggle to promote diversity, inclusivity, creativity, and ideas in a stagnant workforce.

• Generation Z prioritizes meaning, remote work, learning, and job customization. Their distinct preferences force companies to rethink their talent strategy and go worldwide.

• Global teams offer specialized talents, innovation, scalability, and variety. Google and other giants have adopted global teams, and culturally different firms outperform their counterparts financially.

In today’s increasingly interconnected and globalized world, businesses can no longer afford to limit their talent strategies and human capital to just their headquarters or home country. To remain competitive, innovative, and able to nimbly respond to changing market conditions, organizations must consider workforce planning, recruiting, and staffing on a global scale. The traditional approach of relying solely on local talent is no longer sustainable or strategically sound.

Current Employers Facing Challenges With Local-Only Talent Models

Many organizations are finding their traditional approach of employing talent solely from the immediate geographic area to be increasingly problematic and limiting. This local-only model for staffing and recruitment curtails access to skills, experiences, and perspectives that may not exist in abundance locally. It also leaves companies vulnerable to local labor market conditions and demographic shifts that can create talent shortages.

Some of the specific challenges arising from a localized-only workforce strategy include:

1. Skyrocketing local compensation costs: With a limited local labor supply, companies often find themselves in intense bidding wars for local talent. This lack of candidate availability drives up salaries and compensation premiums.
2. Difficulty attracting top talent when the local labor pool is tight: Localized recruiting can be extremely difficult when unemployment rates are low. With fewer candidates to choose from, companies sacrifice quality and competitiveness.
3. Inability to find specialized, niche technical skills regionally: For leading-edge fields like artificial intelligence or biotech, limiting recruitment geographically means key skills gaps.
4. Lack of diversity in perspectives and experiences from a homogenous local talent pool: An insular workforce risks groupthink and echo chamber effects. Multinational firms, in particular, benefit from diversity.
5. Other micro factors amplifying the risks of a localized workforce strategy include:

– Complacency due to lack of competitiveness: A local-only approach can lead to complacency, as companies may not feel the need to innovate or improve their offerings.
– Job hopping with limited options: Employees in tight local labor markets may frequently switch jobs, leading to instability and decreased productivity.
– Salary inflation: With increased competition for local talent, companies may have to continuously increase salaries, affecting their bottom line.
– Lack of international experience: Operating solely within one region can limit employees’ exposure to global perspectives and best practices.
– Lack of influx of new ideas: A homogenous workforce may struggle to generate fresh ideas and innovative solutions.

At the macro level, a localized workforce concentrates operational risks, reduces redundancies, and hampers global competitiveness when rivals leverage worldwide talent access. Demographic trends also play a role, with aging workforces presenting challenges in some countries like Japan and Germany.

Understanding the Needs of Generation Z:

Not only are current localization challenges pressuring companies to reevaluate their talent strategies, but emerging trends in the workforce are necessitating a more dynamic, global approach. In particular, Generation Z, the cohort born between 1997 and 2012, is now the fastest-growing segment of employees. Numbering over 61 million just in the US (Pew Research), Gen Z brings a distinctly new set of priorities and expectations to the workplace. Businesses must adapt accordingly.

Some of the defining characteristics of the Gen Z workforce include:

1. An intense focus on finding meaning, purpose, and social impact through their work, rather than just a paycheck: They want to align personal values with employer brand values.
2. A strong preference for remote work and telecommuting, as well as reliance on digital communication methods like messaging and videoconferencing over face-to-face meetings.
3. Significant emphasis on constant learning, development, and career growth opportunities: More than other generations, Gen Z craves new challenges, skills acquisition, and frequent feedback.
4. Other micro factors shaping the Gen Z employment experience include:

• A desire for flexible schedules: Gen Z values the ability to balance work and personal life.
• Work-life balance: They prioritize a healthy work-life balance over traditional job security.
• Entrepreneurial side projects: Many Gen Z individuals engage in side projects and entrepreneurial activities alongside their primary jobs.
• Quick advancement and job changes: They are open to changing roles and companies frequently to advance their careers.
• Customized compensation: Gen Z employees value personalized benefits and compensation packages.
• Favoring diversity, transparency, and technology adoption in the workplace: They expect their employers to embrace diversity and use technology effectively.

Macro-level trends influencing Gen Z workers include coming of age in a digital-first world, gaining more racial/ethnic diversity, facing college affordability challenges, and exhibiting deep concerns regarding sustainability and climate change.

With their distinct desires around career pathing, communication modalities, and workplace culture, Gen Z employees compel businesses to reinvent their talent strategies. Adopting a global mindset is key to accessing this new generation.

The Mounting Costs and Burdens of Local-Only Workforce Models

The tightening local labor market and the emergence of Gen Z employees place tremendous cost and operational pressures on companies sticking with localized-only workforces. While adapting policies and cultures to better attract and retain these in-demand workers is necessary, doing so within a local-only construct often proves untenable.

Some examples of the mounting costs and burdens include:

1. Significant costs to enable more workplace flexibility around remote work options: Providing technology like laptops and collaboration software carries real costs.
2. Increased expenses to provide the continuous learning, training, and career development opportunities Gen Z employees expect: Tuition reimbursement, skills training, and mentorship require material investment.
3. More time investment is required of managers to provide frequent feedback and coaching to Gen Z workers: This distracts from strategic priorities.
4. Constant workplace technology upgrades to provide the sophisticated digital infrastructure Gen Z prefers can translate into millions in unnecessary capital expenditures.
5. Challenges with retention and productivity when Gen Z employees change roles or take on entrepreneurial side projects outside of work: More managerial oversight is needed.
6. Upward pressure on salaries and compensation costs to provide the customized, personalized benefits and incentives younger employees favor.

At a macro level, the unprecedented turnover and talent retention challenges, erosion of institutional knowledge, damage to the culture, and inability to meet growth goals brought about by short-tenured, hard-to-please Gen Z employees on a local-only basis prove costly.

The Risks of Ignoring Global Talent Pools:

Given the clear challenges and impracticalities of maintaining localized-only workforces in today’s climate, organizations that ignore global talent pools incur substantial strategic and operational risks:

1. Missing out on significant cost savings from hiring talent in lower-cost labor markets abroad: Global firms able to recruit skilled professionals in South Asia, Eastern Europe, Latin America, and Africa benefit from dramatic savings and regional market knowledge.
2. Sacrificing 24/7 productivity, operational continuity, and customer support by restricting hiring and staffing to a single geography: Globally dispersed teams allow for “follow the sun” workflows.
3. Heightened vulnerability to local talent shortages, demographic shifts, or regulatory changes that could suddenly constrain hiring: A global hiring capability provides crucial redundancy and flexibility.
4. Minimal diversity and inclusion gains, given insular, homogeneous workforces assembled solely from local labor markets: Leading firms understand diverse workforces are more innovative.
5. Recent research by Korn Ferry found that 98% of Fortune 1000 companies currently have unfilled jobs, with an average vacancy period of 58 days for skilled roles. With over 7 million job openings in the US as of October 2022 according to Bureau of Labor Statistics data, the risks of complacency around accessing global talent pools are clear.

Why Strategize with the Benefits of Global Resourcing and Remote Teams

Rather than sticking with legacy local-only approaches to human capital that are proving antiquated, companies can realize huge strategic advantages by embracing global teams and talent networks:

→ Wider access to specialized, niche skill sets on a global basis: Certain technical abilities may not exist locally but do reside in talent pools elsewhere where education emphasizes these fields. Global hiring reaches them.
→ Improved business continuity, risk mitigation, and operational resilience by building globally distributed teams: Local events like weather disruptions have minimal impact.
→ Greater innovation and creative thinking by integrating a diversity of perspectives, backgrounds, and approaches: Homogenous workforces often exhibit groupthink.
→ Ability to rapidly scale operations up or down, as growth and seasonal spikes require, by flexibly accessing worldwide talent: Local-only models lack elasticity.
→ Leading technology firms like Google, Amazon, Apple, and Microsoft have built geographically dispersed workforces, with Google reporting that 61% of its employees are now based outside the company’s Silicon Valley headquarters according to its 2020 Economic Impact Report. The ability to hire without geographic boundaries is a competitive differentiator.
→ Research also indicates culturally diverse companies are 35% more likely to outperform industry peers financially (McKinsey, 2018). The business case for global teams is compelling.

Keys to Successful Global Talent Management

Of course, significant challenges can arise in managing a globally distributed workforce. These include communication barriers, coordination complexity, virtual team management struggles, and employee engagement and inclusion issues.

However, with deliberate effort and strategy, multinational firms can create cohesion and effectively leverage worldwide human capital.

Best practices include:

1. Thoughtful role distribution between local and remote team members based on function, maximizing productivity: Design teams to enable seamless collaboration.
2. Extensive cross-cultural training and education to foster mutual understanding, as well as inclusion initiatives like global employee resource groups and networking.
3. Flexible policies concerning remote work options, asynchronous collaboration, and localization/translation of communications to facilitate coordination across time zones.
4. Heavy investment in tools and technologies enabling easy communication, documentation, and team bonding between far-flung employees: Virtual water coolers matter.
5. Performance management and evaluation based on clear, metrics-driven goal setting versus subjective ratings more vulnerable to bias: Set unified expectations.
6. Microsoft’s experience managing a geographically dispersed workforce of over 163,000 people provides lessons in making localization work: The company emphasizes virtual bonding activities, globally connected intranets, leadership modeling of remote inclusion, and data-based performance management.

Getting global team dynamics right certainly presents hurdles. However, the alternatives of low employee engagement, lack of innovation, and operational rigidities warrant the effort to maximize worldwide human capital strategies.

Global Talent Access: A Recession Resilience Strategy

A potential objection to expanding workforce strategies to access global talent networks is that localization provides stability, especially during economic downturns. However, quite the opposite is true. By diversifying their talent supply chain globally, companies can actually reduce risks and build critical agility to navigate recessions.

Consider some of the micro benefits:

• Mitigate local labor impacts by backfilling with remote talent: If US unemployment rises, access to growing Southeast Asia hiring markets ensures continuity.
• Lower breakeven points through reduced fixed costs and flexible headcount worldwide, improving cost structure resilience.
• Quickly replicate proven delivery models globally amid market uncertainty: Localized models limit nimbleness.
• Gain skills access without paying premium local market rates or enduring training lags: Immediately apply global competencies.
• Shift portions of operations between global locales to optimize costs and infrastructure in real time while maintaining talent access and customer service.
• At the macro level, global talent and outsourcing provide vital workforce elasticity when business headwinds arise, as well as expanded access to skilled, motivated emerging market talent.
• Research by Gartner found that the 2008 recession spurred increased outsourcing and offshoring by companies seeking to reduce fixed costs and gain flexibility. Oxford Economics reported that 46% of executives say global remote teams provide an edge in downturns.

Far from adding risk, global human capital strategies can provide the versatility, cost controls, and resilience to not just survive but potentially gain ground on distressed rivals when recessions hit.

Outsourcing Success Factors for Managers

Beyond direct-hire remote teams, outsourcing various functions also provides companies with workforce agility and global skill sets. But to maximize the benefits for strategic leaders as well as frontline managers, key steps must be taken:

→ Focus outsourcing on truly non-core functions to provide managers capacity to devote energy to critical priorities and decisions that shape the business: Outsource peripheral activities.
→ Ensure thorough due diligence selection processes for vetting vendor partners with proven best-in-class capabilities versus purely chasing cost savings: Prioritize quality.
→ Structure contracts to enable flexible scaling up or down as business needs change, and retain termination or substitution rights if performance issues emerge: Don’t get locked in.
→ Invest upfront in change management and cross-training programs for impacted employees as outsourcing shifts roles from in-house employees to external partners.
→ Build shared services frameworks when possible so business units or groups can tap into centralized in-house outsourcing when beneficial while consolidating knowledge.
→ Focus on total cost of ownership including management costs versus upfront savings, and require transparent SLAs from vendors with performance-based compensation models.
→ Most critically, managers should see outsourcing as a talent strategy that grants them the freedom to focus on the 20% of issues driving 80% of results for the business: Outsourcing non-essential tasks provides the capacity to think strategically, lead people, and guide the organization to success.

The Imperative of Global Human Capital

Given the risks and inflexibilities of legacy localized-only workforce models, combined with the strategic opportunities of worldwide talent access, businesses must actively pursue global human capital strategies. Firms that fail to make this shift will steadily lose competitiveness and advantage as leading rivals leverage global workforce dynamics.

The localized status quo is no longer sustainable. Only by connecting to worldwide human capital will companies gain the diversity, knowledge, productivity, risk mitigation, and cost competitiveness to survive and grow amid the challenges ahead. Global workforce capabilities separate future industry leaders from the disrupted and also-rans clinging to legacy models. The time to expand horizons and talent networks is now.