Professional Documents
Culture Documents
* The survey upon which this report is based was designed and conducted by the Emerging Markets MNCs Challenge team in GRS Montevideo led by Magdalena Ramada and Christian Tondo. The report itself was written by Natalia Aranco, Federico Cabrera, Mara da Silva, Agustina de los Reyes, Juan Scasso, Karla Estavillo, Jessica Gerpe and Magdalena Ramada. John Bremen and Imran Qureshi acted as consulting members of the EM MNCs Challenge team during design and implementation stages and their help is hereby gratefully acknowledged.
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rest of the world were USD 13,487 million a year on average during the period 1990 to 2000. This figure more than tripled in the past 10 years, reaching USD 63,207 million in 2008. After a first stage of increased foreign presence via expansion of exports, Multilatinas mainly of Brazilian and Mexican origin started an aggressive internationalization strategy based on outward investments. These investments took place both in form of greenfields and M&A, although in the past five years acquisitions have been the preferred mode. In fact, after an industrial transition decade during the 1990s away from the import substitution models prevailing until the 1980s and towards an increasingly export-oriented industry Multilatinas were able to consolidate their strategy at a global level. Initially forced to look for new markets as a survivorship strategy due to increased competition with developed countries MNCs in their local markets, Multilatinas were then able to take a further step forward in their multinationalization by recognizing that they had a competitive advantage to serve those new markets not only through exports but through direct local presence. This started Multilatinas second phase of internationalization that focused on more than just seeking new markets. In contrast to Chinese and Indian MNCs, whose main motivations to invest abroad were the need for energy resources and increased competition in their local markets, Multilatinas saw this second stage of going global as a way of growing through the improvement of their risk profile and hence of their access to financial resources. Becoming global became a way of Multilatinas appearing more diversified in terms of risk and of having cheaper access to external financing. Still, accompanying this globalization process with higher levels of internal consolidation, better horizontal and vertical integration and strong governance mechanisms was also needed to start being perceived by international investors as stable players in the MNC arena. The year 2000 is seen as the major turning point for outward FDI and increased M&A activity among Multilatinas. Still, different stages can be recognized in the past 10 years of their internationalization process. Although increased M&A activity and outward investments were a constant factor of their globalization strategy, in the past five years and probably anticipating and weathering the financial crisis after the financial turmoil around 2002 in the region Multilatinas became less leveraged and their
improved capitalization is today key to making the best of opportunities arising from the current economic slowdown for those with healthy balance sheets. Indeed, Multilatinas appear to fulfill all necessary conditions to take advantage of the current economic environment for their global strategy. They followed the trend of other Latin American firms investing in training and innovation in organization and production processes rather than in new products during the crisis, as a way to cope with innovation risk and to reduce costs through increased efficiency. This combined with low leverage ratios position them favourably to be able to further grow in the medium term, outperforming those enterprises that are only now restructuring and balancing their budgets to deal with the consequences of the economic downturn. In the context of rapid internationalization, the way Multilatinas deal with talent and the extent to which their human resource strategies are aligned to their global positioning becomes key to understand how they further differentiate themselves from developed countries MNCs. Multilatinas recently increased role as contenders in the global war for talent, and their growth involving outbound acquisitions make this a perfect time to survey their human capital practices. The results suggest that Multilatinas have much fewer talent attraction and retention problems than Asia-Pacific multinationals. The fact that Latin America has a large and increasingly skilled talent pool makes their attraction and retention problems more similar to those of european and US counterparts than to those of their emerging markets peers. In fact, Multilatinas are mainly looking for talent in the local labour supply, even when recruiting technical staff, specialists and professionals. This supports the idea of an untapped skilled labour supply in Latin America 3, as well as the notion that Latin American talent is versatile, flexible and mobile across industries. Further, Multilatinas seem to adapt and develop the majority of their talent to their firms needs through in-house and on-the-job training, instead of looking for specialized talent within their industry or among their competitors workforce. This also implies that Multilatinas are not yet competing for talent at a global level given they are using the competitive advantage of knowing
3 See Lluberas, R. (2007), The untapped skilled labor of Latin America in Horizons A global view of Offshoring, Watson Wyatt Worldwide.
and using the untapped local talent first, but as such they pose a threat to developed countries MNCs trying to expand in Latin America, since they seem better prepared to find and to retain high skilled workers in these markets. Moreover, we find that there is a certain mismatch between employers and employees perception when it comes to base pay as the main reason for leaving an organization; here again in line with similar findings for Europe and the US. In addition, career development opportunities seem to matter more as a reason both to join and to leave than in other regions.
Finally, there is a belief that senior executives in Multilatinas have weathered so many economic crises that they have developed better tools to face them. Our results support this idea in terms of human capital practices since none of the interviewed firms sees attracting nor retaining senior executives as an issue; and the reported HR practices seem to have been more robust to the crisis than in other emerging regions in terms of employees retained. Still, when compared to the US, Multilatinas have more difficulty holding onto employees in all categories and they further declare that their HR strategy lags behind their peers from developed countries.
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Key findings
Worforce planning
When doing a formal analysis of their workforce, companies focus on local rather than on foreign aspects of the labour market. Multilatinas are mainly looking for talent in the local labour pool, including from other industries, even when recruiting technical staff, specialists and/or professionals. Multilatinas seem to adapt and develop the majority of their talent to their firms needs through in-house and on-the-job training, instead of looking for specialized talent globally within their industry or from competitors workforce. Nearly half of the companies interviewed made changes in their talent processes to adapt to the new staffing needs expected for the next five years. Most changes were among talent recruiting and selection processes. With regard to recently graduated and general employees, Multilatinas acknowledge fewer attraction problems than US multinationals. None of the interviewed firms sees attracting or retaining senior executives as an issue. The three main reasons for employees to leave the organization are base pay, career opportunities and promotion opportunities; both in Latin America and the US. Multilatinas have more difficulty retaining employees in all categories than US multinationals. There is a certain mismatch between employers and employees perception when it comes to base pay as a main reason for leaving an organization. Career development opportunities seem to matter more as a reason both to join and to leave, than in other emerging markets. Multilatinas have far fewer talent attraction and retention problems than Asia-Pacific multinationals. The fact that Latin America has a large and increasingly skilled talent pool renders firms attraction and retention problems more like those of their European and US counterparts than to those of their emerging markets peers. Multilatinas are not yet competing for talent at a global level, given they are using the competitive advantage of knowing and using the untapped local talent first.
Key terms
Talent: the supply of labour with one or more specific skills or abilities. Employee Value Proposition (EVP): collective array of programs that the organization offers in exchange for employment, including pay, benefits, perquisites, work environment, career opportunities, training. Total rewards: the complete set of monetary and non-monetary rewards offered to employees. Monetary rewards include base salary, short- and long-term incentives, cash recognition and group and healthcare and retirement benefits. Nonmonetary rewards include non-cash recognition, training and development, and work environment. Critical-skill employees: employees with the skills an organization needs to compete effectively. Top-performing employees: employees whose performance was rated by their supervisor in their most recent performance review to far exceed expectations or find itself in the top 10% of his or her working group. High-potential employees: employees who demonstrate high-level contributions, organizational values, potential to move up to an identified position within a given timeframe, and to assume greater responsibility.
Workforce planning
A large majority of firms (almost 85%) did some kind of analysis related to workforce planning. An affirmative answer indicates that there was an analysis of the mentioned variable for the next two to five years. The most common analysis is to determine how staffing needs will change in the near future; 60% of firms analyze this issue. In addition, more than half of the companies monitor the proportion of their employees eligible to retire in the near future. Some aspects, such as supply and demand of talent and the skill-set of workers are analyzed by around 40% of the companies but only with a local perspective. Only a small number of companies claimed to analyze the last three factors formally. Almost all of the companies that made a formal analysis about workforce planning have modified some of their HR processes to cope with the excess or shortage of talent. Nearly half of them (44%) changed their recruiting process to adapt it to new staffing needs. Among the modified processes were the selection process (40%), career management processes (36%), and training processes (36%). From the results obtained we conclude that Multilatinas that carry out a formal analysis of the workforce also have active roles in terms of workforce planning, as almost all of them took actions to modify at least one of their talent related processes.
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How well has the company managed the negative impact compared with other firms in the industry?
Substantially better than peer group Slightly better then peer group About the same as peers Slightly worse then peer group Substantially worse than peer group 2% 52% 16% 0% 0%
Frozen salaries
Increased salaries
9% 17% 17% 19% 17%
Critical-skill employees Top-performing employees High-potential employees Recent university graduates General employees
affecting employees compensation package, such as salary freezes and cutting bonus opportunities, were not so popular. Other companies chose to maintain their workforce, by reducing working hours (28%), granting sabbaticals (16%), reducing training opportunities (16%) or re-allocating staff across countries (16%). Most companies adjusted their employees base pay in a similar way for each group of employees. In most cases where the companies chose to freeze salaries, the measure was applied to all
groups of employees. For those freezing salaries in a differentiated way, recent graduates were the first choice, while high-potential employees were the last choice to be affected by the freeze. Some companies increased their salaries despite the economic crisis. The group which profited least from increased salaries were critical-skill employees, probably because they were already being paid well in alignment with their degree of specialization. As expected, high-potential employees were the last group considered for adjustments based on benchmarking and those most rewarded due to performance.
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Employers perceptions
Employers were asked their opinion about the impact of the previously mentioned measures on employees attitudes and perceptions. When asked about talent mobility, there is no clear perception of the effect of the economic crisis on employees mobility and hence on retention needs. Managers were equally divided between those who agree that market mobility will decrease and those who do not. In fact, 36% of the managers do not have a clear opinion about this statement and think that it is highly linked to an employees individual attributes. Interviewed managers said that the market is depressed, but that there is more mobility for exceptional cases, especially for top-performers and critical-skill talent. Some firms experienced the loss of top-performers who were then able to find other good job opportunities during the downturn.
In line with the previous comment, other managers mentioned that opportunities depend on characteristics such as age, expertise or educational background. When asked about the statement: Employees understand salary freeze and benefits cuts, more than half of companies (58%) find that employees fully understand pay freezes and benefits cuts given the economic downturn. Just 8% disagree with this statement, and 34% do not have a clear opinion about it. In the 34% of mixed responses, the most mentioned argument by managers is that they agree on the statement provided certain other conditions are given. They argued that employees comprehension of these types of measures depends on how they are communicated; on what the competition is doing; and on employees organizational rank. They believe that employees understand these measures if they are well
communicated and they see that there is consistency in these measures across the firm. Further they think that if these types of actions are taken by other companies in the market, employees are more likely to understand them. Other managers said that although most employees realize that cost reductions are necessary, there is usually a small group of employees that still claims against employers. Finally, they declared that employees at higher bands are more understanding. With respect to top-performers being demotivated by the measures taken during the crisis, more than 60% of managers agree on this, while 25% disagree on this statement, and 12% do not have a clear-cut opinion.
Despite the 53% believing employees understand pay freezes and benefits cuts, only 25% disagree on top-performers feeling demotivated by these measures. So, most managers believe that even while understanding the measures, these will have an important impact on employees performance. More than 60% of the companies find that the current economic crisis is a great opportunity to recruit top-performing and unskilled employees. There is a large overlapping of managers believing that their employees understand their own firms measures, but that their competitions employees dissatisfaction is a good opportunity to recruit talent. This shows that firms rather tend to take their employees understanding for granted, even when they seem to recognize that there is increased mobility within the talent supply.
Figure 9. Employers perceptions regarding the effects of the economic crisis on talent attraction
The current economic environment is a great opportunity to recruit top-performing and unskilled employees
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Employers perceptions
Companies that agree that employees understand salary freeze and benefits cuts also agree that top-performers are demotivated by these measures in 57% of the cases. This seems contradictory, especially if employees are believed to understand that these actions were not related to their individual performance. Overall, more than half of managers thinking that employees understand these measures still anticipate a decline in top-performers performance due to demotivation. On the other hand, and as expected, all those employers who do not think that employees understand the measures, also agree top-performers will be demotivated. Of those employers who think that employees are not going anywhere in the crisis, 62% also think that the current economic environment is a great opportunity to hire, which seems to be a contradiction. In fact, if labour market mobility is seen as low, it should also be thought that recruiting new talent is difficult.
There seems to be a tendency among managers to see more understanding for measures taken during the downturn among their own employees than among those of the competition. In addition, some firms think that they can take advantage of the current situation: as the labour demand is low, employees who are looking for another job when leaving a sinking ship may accept a lower salary than in normal times, representing a great opportunity for firms which can afford new hires. On the other hand, if firms think that employees are moving, it is reasonable that they feel this is a good opportunity to hire this is consistent with the 83% overlap between those two answers.
Disagree
36% 13% 0%
Disagree
38% 44% 0%
On the contrary, another 44% think that it is now more difficult to retain talent. The strongest argument for this is that employees with outstanding performance may find other opportunities in the market during crisis times. This belief is consistent with managers seeing their employees demotivated by salary freezes and benefits cuts. Only 12% of the companies think they can benefit from the crisis in terms of the retention of employees. The main reason mentioned is that there are fewer opportunities in the market and this can reduce turnover.
More than half of the interviewed managers think that the attraction of talent will not be affected by the crisis. The rest of the opinions are divided between 20% that think it will be positively affected and 28% that it will be negatively affected by the current economic environment. Some of the most mentioned arguments for negative effects are higher competition in the labour market and bad publicity for companies that had to freeze salaries, cut benefits, or fire employees. On the other hand, the main reasons for positive effects are the increase of (potential and actual) labour supply and the
Not affected
40% 54% 29%
Negatively affected
60% 23% 71%
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No
21% 12% 50%
No
27% 0% 17%
No
50% 11% 0%
availability of more qualified workers looking for new opportunities With respect to the interaction of the economic crisis effects on talent attraction and on talent retention, 60% of the companies that think the effects on talent attraction are positive also think that the effects on talent retention are negative. Although at first sight this seems to be contradictory it may be evidence that: The reasons employees consider when joining an organization are different from the reasons they take into account when deciding to stay in that firm. Firms take advantage of the crisis to change the profile of their employees. Firms may be positively biased when believing employees understand their measures and while focusing on finding new talent they fail to see the needs of existing staff. Of the 28% of the firms that were negatively affected in their talent attraction, 71% were also
negatively affected on talent retention, showing that almost 20% of companies faced difficulties to maintain and to attract new talent. Seventy nine percent of the employers who think that employees understand the reasons behind salary freeze and benefits cuts also acknowledge having talent-retention problems. This depicts a mismatch between the way employers believe these measures were understood by their employees and their employees actual reaction. It further supports the fact that firms seem positively biased towards believing their employees understand their measures and failing to see their actual needs. On the other hand, it also may imply that firms retention problems are not related to measures affecting salaries or benefits. The perception that top-performers will be demotivated by the measures taken in the economic downturn is reinforced, with 73% of the employers agreeing with this statement also declaring retention problems.
On the other hand, 83% of those who think top-performing employees will not be demotivated also have retention problems, which could be implying: A wrong perception from employers of top-performers motivation. A tendency to believe that measures are well communicated and understood and will not affect the workforces performance. Myopia or lack of a global overview that sees both retention and talent performance from only a single perspective. That retention problems are of a more structural nature and go beyond the specific actions taken during the crisis. Among those firms which agree that employees mobility is not an issue in the current economic environment, 50% declared retention problems. This again shows that there is a mismatch between the way employers perceive the labour market environment and the problems they are facing in their own firms. During the economic crisis, Multilatinas focused on retaining employees with remarkable features, such as top-performers (88%), critical-skills (80%) and engaged employees (76%). Furthermore, they
said that they stopped hiring during the economic crisis. This decision coincides with the focus declared by managers on retention rather than attraction. Attraction of recent university graduates was a priority for 44% of the companies, and attraction of critical-skills employees for only 36%. Few companies declare using the current economic situation to replace high-earning employees with cheaper talent, or older employees with younger talent.
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Technical/professional
Note: the category Other specific skills includes employees with industry-specific skills that cannot be considered as technical or professional staff.
Technical/professional
Recruitment and selection decisions are in the hands of a local recruitment team in 72% of cases. In the other 28% these decisions are taken by individual managers, who mostly act in conjunction with a recruiting team, either global or local. In 56% of the cases recruiting and selection decisions are based on global criteria, which are applied by either a local or a global team. Almost 8% of the companies apply ad hoc criteria and claimed not to have a specific process for recruiting and selection. In these cases decisions are taken by local recruiting teams, either alone or combined with a manager.
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Retention of talent
When firms were asked about retention of talent, 76% of the companies declared difficulties holding onto high-potential workers, while 72% have problems retaining top-performers and 68% retaining critical-skill employees. The majority of employers declared having moderate problems in retaining employees in these three above mentioned groups, while only a few of them considered retention here a major problem. Keeping recent university graduates as well as general employees is a problem for more than half of the interviewed firms, but the difficulty is lower than for other categories. Of the interviewed companies, 80% declared experiencing difficulties retaining one or more of the following groups of employees: high-potential, top-performing and critical-skill employees. Companies that freeze salaries had problems holding onto employees in at least one of these groups in 86% of cases. Retention problems also appeared in companies that increased salaries, but to a less extent (60%). Finally, 85% also experienced retention problems despite adjusting salaries through competitive benchmarking or external comparison. Almost all companies (88%) declared lagging behind their peers from developed countries in at least one of the components of their HR strategy. Performance assessment of talents and offering career development opportunities were the most mentioned areas in which companies think that they lag behind peers from developed countries. Of the interviewed Multilatinas 24% also find it difficult to link performance to pay and to develop a total rewards philosophy. Almost 90% think that they are competitive in terms of the compensation offered. Finally, the leadership skill of executive talent is not seen as an area for development by 80% of the firms. Although only 12% of firms believe that they lag behind their developed countries peers regarding the level of compensation offered, 60% of the managers said that employees leave the firm due to base pay. On the one hand, this could reflect
40
50
60
70
Percentage 80 76
High-potential employees Top-performing employees 72 Critical-skills employees 68 Recent university graduates 52 General employees 52
Figure 25. Retention problems and salary adjustments in high-potential, top-performing and critical-skills employees
Retention problems Yes
Freeze salaries 86% 60% 85%
No
14% 40% 15%
a mismatch between employers and employees perceptions about the competitiveness of the remuneration package. On the other hand, it may evidence a situation in which Multilatinas are losing their employees to local firms and not to developed countries multinationals. Regarding other reasons for leaving the firm, 52% of managers mentioned the lack of career development opportunities and almost 40% felt that lack of promotion opportunities is also an important reason for employees to leave the organization. Several factors mentioned as reasons for leaving a company were also declared as the main reasons for joining, such as career development opportunities, base pay and nature of work. This apparent inconsistency could be reflecting a high level of competition for talent in the labour market. It also seems to confirm the tendency of taking
own employees for granted while focusing efforts on attracting new talent. Further, it displays a better external marketing of the firms practices than internal communication. Of the interviewed companies, 60% say that base pay is mentioned by their employees when leaving the organization. It is remarkable that this reason is mentioned to a greater extent in companies that adjusted their salaries or even made general salary increases, 62% and 80% respectively, than in companies that freeze salaries (43%). One explanation for this apparent paradox may be rooted in conditions before the crisis. Some companies paying below market averages may have had to raise base remuneration in an attempt to keep staff. Judging by the answers, these companies have not been entirely successful.
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The results in Figure 29 seem in line with what was expected since most managers who agreed that employees understand salary freeze (64%) state that base pay is not one of the top reasons for employees leaving the organization. Additionally, all the managers interviewed who do not believe employees understand salary freezes, acknowledged that base pay is one of the main reasons employees decide to leave the organization. The retention problems declared by firms that believe their employees understand the measures they have undertaken seem thus to stem from reasons beyond pay. Sixty seven percent of those who assent that top-performing employees are demotivated by
freezes and benefits cuts state that one of the main reasons for employees leaving is base pay. The same percentage state that employees are not demotivated by these measures and did not consider base pay as one of the main reasons for them leaving. These outcomes are also in conformity with our expectations since employers who state one of the main reasons for employees resigning is salary base, would be likely to agree that freezes or benefits cuts demotivate employees. The consistency among the results discussed further supports the idea that most of the 83% of
Figure 28. Interaction of salary measures and base pay as reason for leaving the firm
Base pay among the three top reasons for leaving the organization Yes
Freeze salaries 43% 80% 62%
No
57% 20% 38%
Figure 29. Base pay as reason for leaving the firm and employers perception regarding the effects of salary measures (understanding)
Base pay among the three top reasons for leaving the organization Yes
Agree 36% 87% 100%
No
64% 13% 0%
Figure 30. Base pay as reason for leaving the firm and employers perception regarding the effects of salary measures (motivation)
Base pay among the three top reasons for leaving the organization
Yes Agree 67% 67% 33% No 33% 33% 67%
Figure 31. Base pay as reason for leaving the firm and employers perception regarding the effects of salary measures (mobility)
Base pay among the three top reasons for leaving the organization
Base pay Agree 62% 67% 50% No base pay 38% 33% 50%
firms that disagree with that statement but still have retention problems are not necessarily failing on the compensation side. Of those managers who say that employees are not going anywhere, 62% also say that one of the main reasons for them leaving is base pay. At the same time, half of those who disagree with this affirmation also maintain that base pay is one of the main reasons for employees departing. This suggests that although base pay is an important reason for employees quitting the organization, the decision to stay or leave is driven by factors other than pay. Actions frequently taken by companies to reduce turnover are related to the flexibility given to the employee, and not to base pay or career opportunities. This shows a discrepancy between the actions taken by the companies and the reasons why they consider employees leave. At the same time, such a discrepancy is understandable given these types of measure have less impact on the cost side and are easier to implement than pay adjustments during economic downturn. Even though most firms did not take any actions to reduce turnover in the past two years, certain measures were mentioned by approximately 20%
of the interviewed companies, such as introduction of more flexible work schedules, more choices in benefits, as well as implementation of off-cycle pay increases.
Strengths in HR strategy
When it comes to identifying the companys strengths in terms of HR, work climate is identified as a major plus by most firms. In second place, they mention points related to personal growth opportunities, such as career development, training and promotion. Companies said that employees, besides considering the nature of the work, are interested in their own development and preferably on a fast path. Managers also referred to some characteristics of the firm, such as the employers reputation, longterm stability, the complexity of the company generally also related to firm size and the prospect of facing challenging tasks as positive aspects for retaining talent. Finally, they also highlighted their remuneration package, including salary, compensation levels and benefits offered to their employees as a further strength.
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Performance
Global criteria
4 Watson Wyatt Worldwide and WorldatWork (2009), Global Strategic Rewards Survey 2008/2009.
Great extent
39% 20% 13% 8% 27% 21% 11% 8% 22% 14% 9% 8% 2% 5% 3% 0% 2% 2% 0% 4%
Moderate extent
43% 51% 55% 52% 47% 45% 42% 36% 49% 47% 41% 40% 19% 16% 17% 8% 44% 25% 23% 12%
Slight extent
16% 26% 21% 8% 22% 29% 29% 16% 23% 31% 32% 20% 32% 43% 46% 16% 43% 54% 63% 24%
Not at all
2% 3% 11% 32% 4% 5% 18% 40% 6% 8% 18% 32% 47% 36% 34% 76% 11% 19% 14% 60%
Critical-skill employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Topperforming employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Highpotential employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Europe, Middle East and Africa United States Latin America Asia-Pacific
General employees
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Employer reputation
Base pay
36 35 37 46
Nature of work
32 22 14 17
Organization culture
20 34 26 24
Promotion opportunities
20 7 9 5
Job security
16 5 15 17
In relation to developing economies, companies in Asia-Pacific are experiencing problems attracting employees to a greater extent than those in Latin America. While 87% of firms in Asia-Pacific report having talent attraction problems of a slight to moderate extent, only 36% of firms do so in Latin America. Even among groups such as recent graduates, twice as many businesses admit to having difficulties in Asia-Pacific than in Latin America. With respect to the attraction of critical-skill employees in both regions, around 60% of firms admit to slight to moderate attraction problems.
notably, receive up to treble the proportion of mentions in Latin America than other regions. In terms of base pay as an attraction factor, Multilatinas seem to think more similarly to their peers in developed countries than to Asia-Pacific MNCs. For the latter base pay is mentioned as the most important determinant of attraction and while almost 50% mention it in Asia-Pacific firms, it is only cited by around 35% of firms on average in the other regions. Furthermore, job security is shared as an important factor by Multilatinas, European and Asia-Pacific MNCs, while US MNCs do not mention it often enough as a reason making them attractive to talent. The reverse happens with healthcare benefits and organizational culture, which matter a lot more to US firms than to MNCs in other parts of the world. In fact, while incentive pay, healthcare benefits and the firms products or services matter to around 20% of firms as attraction reasons in the US, less than 10% of Multilatinas see these factors as important. In the case of healthcare benefits this could be due to the fact that in Latin America contributions to the healthcare system are usually mandatory and hence, they are not considered an additional benefit in the compensation package. On the contrary, flexibility, promotion opportunities and job security are mentioned more than twice as often by Latin American firms than US MNCs as reasons for attraction.
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retention problems affect critical-skill and topperforming employees. Latin America seems to have the least pressing retention difficulties, particularly for top-performing and critical-skill employees. Here too, the proportion of firms that declared no problems in retaining employees is always larger in Latin America than in the other regions for all groups of employees. Even though Asia-Pacific companies are more likely to experience greater problems than Latin American peers attracting recent university graduates, this difference mitigates when considering difficulties of retention, where in both regions less than 5% of firms say they have problems. Altogether the proportion of firms declaring great or moderate difficulties in retaining critical-skill, top-performing and high-potential employees is 1.5 times larger in Asia-Pacific than in Latin America.
Retention problems
In all four regions firms have greater attraction than retention problems. The most important
Great extent
28% 6% 7% 8% 21% 7% 3% 4% 16% 8% 1% 4% 3% 6% 2% 4% 2% 2% 2% 0%
Moderate extent
47% 44% 41% 36% 44% 33% 38% 40% 48% 33% 41% 40% 21% 14% 15% 16% 42% 12% 17% 20%
Slight extent
21% 37% 41% 24% 29% 46% 46% 28% 30% 45% 46% 32% 38% 49% 51% 32% 47% 57% 57% 32%
Not at all
4% 13% 11% 32% 6% 14% 13% 28% 6% 14% 12% 24% 38% 31% 32% 48% 9% 29% 24% 48%
Critical-skill employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Topperforming employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Highpotential employees
Europe, Middle East and Africa United States Latin America Asia-Pacific
Europe, Middle East and Africa United States Latin America Asia-Pacific
General employees
Base pay
60 44 45 51
Promotion opportunity
40 43 33 26
Nature of work
20 9 13 22
Relationship with supervisor/manager 20
35 25 30
Stress
12 10 13 15
Work/life balance 12
30 23 22
Physical work environment 8 1 5
3
Job security 8 5 4 3 Incentive pay opportunity 8 10 5 10
Latin America
United States
Asia-Paci c
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other parts of the world. This has two alternative interpretations. On one hand, it can be regarded as a further indicator of mature and effective management, as well as healthy organization structures. On the other, it can be argued that in developed countries multinationals, as basic needs like salary and job security are covered, other factors such as work/life balance and the relationship with managers gain more importance. It has to be noted that, according to our results, although base pay is considered to be only the fourth-ranked reason for joining the company, it is the most important reason mentioned by employees for leaving. This again highlights a mismatch in perceptions or lack of clear communication between employers and employees with respect to their dissatisfaction. It can also be interpreted as a mismatch between the entry-level salary and the exit salary, indicating less-than-expected growth and/or a slow salary adjustment process. Finally, Multilatinas and US MNCs assign a similar importance to promotion opportunities as a reason for employees leaving, weighing double in the score from Asia-Pacific. Conversely, with respect to the physical work environment, US and Asia-Pacific firms see it as less important, whereas Multilatinas mention it twice as much; here being more similar to their European counterparts.
Conclusions
Latin Americas strong fundamentals have enabled the region, as well as its growing MNCs, to better weather the crisis than North America, Europe and even Asia. Nevertheless, it seems that Multilatinas and their success in coping with the crisis are still not included in most discussions on multinationals as global economic agents. This report examines how Multilatinas reacted to the economic crisis in terms of their HR strategies and it was able to find remarkable results. Unlike Asian MNCs, Multilatinas face fewer talent attraction-retention issues and are currently able to capitalize on the regions strong level of local talent. This, combined with low levels of leverage, made it possible for Multilatinas to effectively weather and even grow during the crisis. Our survey interviewed the HR managers of 25 MNCs in Brazil, Chile, Mexico and Uruguay. Besides looking at the way in which they reacted to the financial crisis, we also focused on how Multilatinas differ from their counterparts in other regions of the world in terms of their HR strategies. Latin Americas large and increasingly skilled talent pool makes attraction-retention problems in Multilatinas more similar to those of their European and US counterparts than those of emerging markets peers. Multilatinas are mainly lookingfor talent in the local labour supply even when recruiting technical staff and professionals. In addition, Latin American MNCs adapt and develop the majority of their talent to their needs through inhouse and on-the-job training, instead of looking for specialized talent within their industry or from competitors. In other words, they are not yet competing for talent at a global level, but their strengths in the HR arena combined with their future growth strategies will change that soon enough, since they could be better prepared to find and to retain high-skilled workers in emerging markets. Finally, our results seem to confirm the idea of senior executives in Multilatinas having weathered so many economic crises that they are currently better positioned to face them. Indeed, none of the interviewed firms sees either attracting or retaining senior executives as an issue. Half of the interviewed companies made salary adjustments based on performance and external benchmarking and most judge themselves to have managed the crisis better than other firms in their industries. This matches the conclusion that during the crisis, talent retention was prioritized ahead of attraction. The reported HR practices further seem to have been more robust here during the crisis than in Asia in terms of employee retention. When compared to the US, however, Multilatinas have more difficulty holding onto employees in all categories and only have less trouble attracting employees when it comes to new graduates. On the other hand, they still feel that their HR strategy lags behind their US and European peers, although our hard data points to firms in all three regions having a similar degree of centralization regarding HR management as well as global recruitment and selection decisions criteria. Overall, our study points to Multilatinas as a powerful competitive force in the future, who will continue to aggressively expand into other markets. In fact, Multilatinas seem to have all the ingredients needed to take advantage of the current economic environment for their global strategy. By investing in training and innovation in organizational and productive processes rather than new products during the crisis, Multilatinas have prospered with in-house generated talent. This combined with low leverage ratios position them favourably to be able to further grow in the medium term, outperforming those enterprises that are only now restructuring and balancing their budgets to deal with the consequences of the economic downturn.
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