Over the past decade, many Asia Pacific organisations have been steadily blazing a trail to global leadership. In 2018, the total value of global M&A deals reached close to USD 4 trillion, with Asia Pacific contributing almost USD 1.4 trillion largely through M&A transactions forged by Japan, China and India.1 A majority of these activities are outbound investments in the industrial and manufacturing sectors of developed countries such as the US, UK and Germany.
On one hand, these acquisitions have helped to reap advanced technological capabilities in Asia Pacific, as well as further opened economic opportunities in new markets around the world. But on the other hand, rapid growth has also brought in a host of talent and reward challenges. Many of these are due to unfamiliarity with the employment policies and labour market dynamics of the new locales, and the lack of a global policy for post-merger integration. Nonetheless, there is increasing pressure on merging organisations to generate synergies and alignment.
For most HR functions involved in Asia Pacific outbound M&As, there are three key areas of concern:
Willis Towers Watson has been working closely with several emerging global leaders from the Asia Pacific region. Our research and experience zeroed in on six key areas for effective global talent management:
Organisations that are challenged by the increasing operational costs of an expatriate programme, need to align their overseas talent supply with the business strategy. For many Chinese enterprises, two primary factors influenced their talent management decisions as they globalised their operations: expatriate cost in the ratio of profit, and supply of local employees in overseas markets (see figure 1).
Among other economic factors, globalisation across Asia Pacific appears to be driving the intense competition for senior talent, especially at the top management level. Pay level (in terms of median Total Guaranteed Compensation) for top management roles in Asia Pacific has rapidly caught up with that in the United States, whereas relative pay at professional and support levels has remained flat. In Asia Pacific, guaranteed pay for top management increased at an average of 7.4% from last year, compared to a 2.2% increase among professional-level employees in most industries. In 11 out of 13 major markets in Asia Pacific, the pay gap between senior and junior levels has further widened over the past two years. Smaller gaps are seen in Australia, where the guaranteed pay at top management is 4.6 times that for a professional, followed by Japan (4.7x) and South Korea (5.0x). On the other end, larger gaps are found in Indonesia (19.2x), Thailand (15.1x) and Vietnam (16.6x).2
A globally consistent strategy for talent management would help to create a consistent job architecture, and support the design of an appropriate rewards strategy that is fair to local employees and expatriates at all job levels for an expanding organisation. Willis Towers Watson has helped many clients to create a cost-effective Total Rewards structure that is carefully balanced and relevant across multiple locations. Alongside this diagnosis, we also help to confirm market positioning, assess compensation and benefit competitiveness and conduct pay-mix analysis in a specific market in order to determine its effectiveness.
It is important to assess the characteristics and expectations of a potential assignee. Self-motivated employees with consistently high performance and productivity levels tend to be strong candidtates for working abroad. But they must also be prepared for the cultural and environmental differences that will surely meet them in new locations. Employers must also consider the personal arrangements of their talent. Family circumstances can often derail overseas assignments. There must be a comprehensive pre-assignment assessment to determine an employee's suitability for long-term placement abroad, as well as an economic assessment of their projected cost of living in the assignment location. Despite the significant compensation packages for international talent in Asia Pacific, relative buying power – plus income tax, local social security and cost-of-living indices – remains lower than that of most western countries. These findings continue to support the common understanding that living in Asia Pacific is increasingly expensive.2
Willis Towers Watson uses adult learning principles to help organisations design a ‘business driven training’ that can accelerate the training and development of overseas talent. Before being sent abroad, employees undergo a learning and development programme to build mandatory skills in communication, leadership, management, cultural relations, among others.
While this approach can increase the employee’s preparedness to carry out business objectives whilst managing personal expectations, it is still critical to establish an evaluation process to track and measure ROI. A first evaluation must measure the individual’s career development while on assignment, and a second evaluation would measure their post-assignment performance after returning to their home country.
Willis Towers Watson uses a global competency model to help organisations effectively select the right talent for their business expansion strategy. Before deciding on a crucial and costly placement, it is vital to assess their skills and potential to solve problems, influence others, adapt to change and deliver results. This information can also help to offer an appropriate talent value proposition to incentivise employees placed into what is often a high-pressure assignment.
In creating a talent pool that can help organisations ‘go global’, employers must understand that the ‘DNA’ of international talent has three dimensions:
Globalisation efforts have a higher chance of success when placed on the shoulders of talent that have this ‘DNA’.
Organisations must learn from the local cultures in which they are planting new roots, in order to ensure effective cultural integration. This is not to say that the culture of the parent company must take a backseat. However, it is important that parent companies acknowledge and learn the local culture and practices, as well as the core values and competencies in each location. Allow subsidiaries to determine how they can help to drive the business objectives of the parent company.
As many Asia Pacific multinationals move full speed towards globalisation, there are a number of HR management challenges to be prepared for. Together we can help you grow and prosper.
Willis Towers Watson’s 2018/19 Global 50 Remuneration Planning Report provides a snapshot of the local economy, reward environment, and remuneration practices for 60 major markets worldwide. This comprehensive global compensation and benefit planning tool is a helpful starting point for companies operating in diverse markets and multicultural legislative environments.
Sources:
1 Asia M&A clocks second best on record, strength to persist despite trade troubles
2 Willis Towers Watson 2018/19 Global 50 Remuneration Planning Report
