As a measure of the true potential of the global economy, growth in the East is a pretty good yardstick. Investment opportunities are strong in the diverse range of 21 Pacific Rim economies that comprise the Asia-Pacific Economic Cooperation (APEC), as demonstrated at the December 2011 annual APEC CEO summit for which PwC was Knowledge Partner. In a survey PwC conducted at the event, CEOs and other business leaders from the critical region made one thing especially clear: The continued growth in Asia Pacific’s emerging economies over the next three to five years will generate billions in economic activity.1
The survey of more than 320 industry leaders in 26 countries revealed that more than half of respondents are very confident in revenue growth over the next three to five years; among those based in China, Hong Kong, and Chinese Taipei, the figure rises to 76 percent. But companies looking to expand their businesses in the burgeoning region should be mindful of what some who were surveyed see as the greatest obstacle to growth: a potential talent crisis.
While several issues pose a threat to slow growth—like political instability, corruption, and restrictions on labor mobility or immigration—talent concerns are a top priority. It’s a multi-faceted issue, though many of those surveyed indicate that they expect to face difficulty in recruiting employees under the age of 30, and they are afraid of losing a bulk of their workforce to retirement and undergoing high staff turnover for several years to come.
Sixty-five percent of global business leaders in both mature and fast-growing economies say that the threat of competitors recruiting the best potential candidates is a key challenge they expect to face in the next three to five years. Their second concern? The limited supply of skilled candidates from which to choose. In fact, about 85 percent state that a talent shortage will be a barrier to their organization’s growth within the APEC region in the coming years.
Most distinctively, high unemployment rates in a country do not mitigate concerns about locating quality candidates: Some US businesses specifically point out that they’re struggling to find candidates with the right managerial experience and high-level skills, particularly in the scientific and engineering professions. In the Asia-Pacific region, more employers in global surveys routinely report difficulties filling jobs, and China is currently dealing with critical shortages at the senior management and executive levels, according to the 2011 APEC report.
With growth of the working-age population projected to decline—in APEC countries, the growth rate drop in the next decade will be more than 50 percent from the previous 10 years2—the timing of such a decline in talent may be inevitable. But the problem is made worse by uneven educational systems that fall short of producing candidates with the right skills. Already, 29 percent of employers in fast-growing economies say they have difficulty forecasting available talent.
Still, expansion plans are ambitious. Even as labor costs rise in fast-growing economies, half of industry leaders in these markets expect to increase headcount by at least five percent over the next three to five years, escalating an already serious talent crunch.
How will businesses in fast-growing economies change their approach to talent to address these challenges? Many plan on refreshing their talent programs with more attractive benefit packages, increased wages, and more nonfinancial rewards. (See Figure.) Amping up salaries is on the radar of 90 percent of companies surveyed, pointing to a push for employee loyalty and incentive. To keep current employees competitive, ongoing training that develops their skill sets is also a savvy option.
Clearly, a combined effort of attracting worthy candidates and retaining them for long-term skill development is key; 45 percent of business leaders in both mature and fast-growing economies say that high staff turnover will be a challenge in the next several years.
CEOs in fast-growing economies are changing talent approaches on many fronts
1 APEC CEO Survey 2011, APEC: The future redefined.
2 PwC analysis based on various historical and forecast sources.