News that HR consulting firm Mercer forged a deal with an executive search firm in Vietnam is a sign of the times.
U.S.-based firms that pitch talent-related services see strong growth in Asia even as evidence keeps pointing toward a downturn in the U.S. economy.
Mercer, a unit of professional services firm Marsh & McClennan Cos., said Thursday, March 14, that it signed an agreement with TalentNet of Vietnam to market and provide Mercer’s proprietary research, HR management tools and survey data.
Guo Xin, deputy region head of Mercer for the Asia-Pacific region, said the agreement with TalentNet further underscores Mercer’s ongoing commitment to expanding in Vietnam.
“With Vietnam experiencing such phenomenal growth in the past years, so too has demand for Mercer’s offerings, particularly with data-driven products and services from our Information Product Solutions (IPS) division,” Guo Xin said in a statement.
That was a much faster clip than the 21 percent growth overall in the firm’s executive recruitment fees. What’s more, those Asia-Pacific placements had a higher profit margin—21.5 percent—than Korn/Ferry’s executive recruiting gigs in North America, Europe and South America.
But how long will Asia be golden? A big question right now is whether China, Vietnam and other Asian countries can avoid catching America’s economic cold. There’s some thinking the slowdown at hand will be fairly global in nature .
If that’s the case, all the diversification in the world may not do much to help U.S.-based talent advisors weather a rough patch.
The U.S. economy lost 63,000 nonfarm payroll jobs in February, the largest monthly decline since March 2003. But the official unemployment rate actually fell slightly, from 4.9 percent to 4.8 percent. So is the job situation improving or worsening? And why the seemingly contradictory numbers?
The two sets of statistics come from different government surveys. But it’s not as if the payroll employment figure—which comes from a survey of business and government establishments—is somehow missing a big jump in employment captured in the unemployment rate, which comes from a survey of households. The household survey found a decrease of 255,000 employed individuals from January to February. But the unemployment rate edged down because the civilian labor force shrank by 450,000.
The civilian labor force is defined as the sum of employed and unemployed people. Sounds simple enough. But the “unemployed” category is a bit tricky: People only get counted as such if they had no employment during the reference week of the survey, they were available for work at that time and “they made specific efforts to find employment sometime during the four-week period ending with the reference week,” as the Labor Department puts it.
That means the unemployed tally excludes “discouraged workers.” They are defined as people who wanted and were available for work and had looked for a job sometime in the prior 12 months, but who hadn’t done so in the previous four weeks because they believed no jobs were available for them. There were 396,000 discouraged workers in February.
New York Times columnist David Leonhardt has an interesting column this week saying that the employment rate of Americans in their prime years, 25 to 54 years old, has been falling, even as the unemployment rate has been declining. That means one of two things, he says: Either a growing number of people have been choosing not to work purely by their own volition, or there’s been a rise in the number of folks who aren’t working and aren’t actively looking but would like to find a good job. The latter, he says, appears to be the better explanation.
“[T]hese nonemployed workers tend to be those who have been left behind by the economic changes of the last generation,” Leonhardt writes. “Their jobs have been replaced by technology or have gone overseas, and they can no longer find work that pays as well.”
In its study of the Chinese operations of more than 300 multinational corporations, Hay Group found that when Chinese employees are lured away from their current job, they not only get a promotion but pocket at least 40 percent more in base salary. This compares with averages of 24 percent and 21 percent in Singapore and Hong Kong, respectively.
The report also found that if employees move to a position that is two steps above their current role—a “Champagne” promotion—their base salary jumps by 91 percent. That compares with a 48 percent increase in Singapore.
On average, Hay Group says, Chinese senior managers are five years younger than their Asian counterparts, and the gap widens even more in comparison to the West.
In our report on China’s “Too Fast Track” in March 2007, we found that a rapidly growing economy combined with a dearth of leadership talent added up to many overly quick promotions.
Edward Tai, an executive with Hyatt International Hotels and Resorts, offered us a case in point. He told us that Hyatt often creates elaborate four-year plans to groom up-and-coming execs to head a department in China. But feverish competition for managerial talent means the plans can go awry.
“By the second year, we do not think he is quite ready,” Tai said. “But the other hotel chains, or other places, thinking he is from a Hyatt or a Grand Hyatt, say, ‘He’s ready,’ and give him double the pay and then bring him over.”
Hay Group recommends that companies develop long-term pay-for-performance programs. Multinational firms “must stop the current ‘Pay now, worry later’ compensation programs,” Hay Group’s Sean Joo said in a statement.
We found in our research that some major multinationals were attempting to solve the immature-manager puzzle through a focus on employee development and careful attention to corporate culture.
Have you heard of companies in China handling this issue wisely—or unwisely? I’d like to hear your thoughts. E-mail me at efrauenheim@workforce.com or leave a comment below.
Here’s one explanation why software firm SAP has become one of the world’s leading technology companies over the years: it is a great place to work.
SAP recently was named Germany’s best workplace in the category of companies with more than 5,000 employees by the Great Place to Work Institute Germany. The award marks the fourth consecutive year the Walldorf, Germany-based firm has taken top honors in the contest. SAP, which is one of the biggest sellers of HR software in the world, also was honored as one of the 25 best companies to work for in Japan this year.
If there remain doubters that a positive work climate corresponds to sound business results, consider a recent study from a University of Pennsylvania researcher. Finance professor Alex Edmans found that companies cited as good places to work earn stock returns that are more than double those of the overall market. In particular, companies on Fortune magazine’s annual list of the 100 Best Companies to Work for in America between 1998 and 2005 returned 14 percent per year, compared to 6 percent a year for the overall market.
Part of SAP’s software success involves learning from its own experience. In an interview a couple years ago, SAP HR head Claus Heinrich told me his operation acts as a lab for the firm. Heinrich has pushed SAP software product managers to include features ranging from a 360-degree feedback process to online pay stubs.
Another key, it seems, is treating its talent as a top priority. As long as SAP keeps winning prizes as a great place to work, I wouldn’t bet against it remaining in the top echelon of the tech world.
Signs keep pointing to a global economic slowdown. But big companies are poised to do a better job of managing their talent during tough times than they were in recessions past.
The latest gloomy news came Friday from research group the Organization for Economic Co-operation and Development. The OECD said a measure of leading economic indicators suggests that a slowdown in economic activity lies ahead in the OECD area, which primarily consists of developed nations. China isn’t a member country, but the OECD said data points to a potential downturn there. Continued expansion is ahead in Brazil, India and Russia, the OECD said.
Those bright spots in the forecast aren’t the only good news, though. There’s evidence companies have grown smarter about handling their workforces amid shrinking sales. The mass layoffs of the ’80s and ’90s and of the dot-com bust may have saved money in the short run, but those sweeping cuts probably cost firms a good many excellent workers able to create value in the long term. And companies seem to get that. Recruiting and retaining the right talent has become a priority for executives. What’s more, there’s a growing sense that layoffs can backfire for individual firms and erode the quality and even the mental health of the American workforce.
Ideally, companies constantly are taking stock of their talent and offering volunteer separation packages to workers who don’t fit, says Wayne Cascio, a management professor at the University of Colorado who has studied corporate restructurings. Cascio expects to see some involuntary layoffs ahead, but he thinks companies will make more targeted job cuts based on employee assessments.
“They’re really going to do everything in their power to retain pivotal employees,” he says.
Software systems for employee performance management and succession planning should help. Large firms have been investing in these applications in recent years partly to identify and groom key employees in case of talent shortages. The same software tools should be able to help firms pick out the people to preserve amid any job cuts. For example, the products make it easy to compare employee performance and potential ratings. Decades ago, with annual reviews stored in file cabinets, such talent analysis was harder to do.
“Corporate America should have a lot more data than they had last time they did layoffs,” says Rick Fletcher, president of technology consulting firm HRchitect.
What do you think? Do you expect firms to take a wiser approach to the workforce should times get tougher? E-mail me at efrauenheim@workforce.com.
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