Winning Local Talent in Latin AmericaBy: Martin Salas
Published originally in Chronsult on 04/12/2014
In spite of the recent slowdown, the emerging markets across the world have developed a consistent pattern over the years. Local companies have become examples of good operational and financial results, international expansion, good organizational structures, swollen pride and, winners in getting the best local talent available. Latin America, particularly the Pacific Alliance trade bloc (1), is a good example of it.
For years, in Latin American countries, working for a well renowned global multinational represented the beginning of a golden professional path. Best college graduates would fight to get picked by the IBMs, P&Gs, BPs, Xerox, Citis and other great names in the global workplace. Being hired by those companies meant professional, financial and reputational success provided that one does not derail her career with misfortune.
That was an undisputed conventional belief. However the world landscape changed radically over the last ten years and, more dramatically in the labor talent market ever since the global financial crisis ignited in 2008. Shrunk forecasts, budget cuts, centralization of organizational structures and tainted brands were part of common reality of a number of large multinationals while trying to weather the storm of shrinking markets in the US and Europe.
However, that situation also made it clear that most of emerging markets were not getting smaller but otherwise, growing robustly, and so were their flagship local companies, backed up by an unwavering local demand, they started expanding their operations without the restrictions traditional large multinational companies were facing, many becoming multinational companies themselves (in Latin America, those organization are called multilatinas). Global companies had two choices: on one hand, betting on Latin America’s potential (hardly capitalized in the past) and its rising growth rates or being cautious due to the small market size. However, for Latin American newly rich companies, there was no doubt: the most obvious expansion targets were other Latin American countries and they would invest big time.
One example of the above-mentioned is Breca. This multi-country family-owned Peruvian conglomerate, invested for years in a variety of industries in Peru only, gaining -due to the vision and business acumen of the Brescia family patriarchs- a leading position in the Peruvian markets they competed. However, the strength of the Peruvian economy, the market or acquisition targets opportunities available in the neighbor countries and the availability of capital to invest merged nicely for Breca to expand its operations to other five countries in South America, including Brazil. In a matter of few years -five-some of its business units like the mining and fishing organizations acquired global heights and others, became multilatinas themselves.
This way, that new context created a much more competitive battle to attract talented professionals in those coveted markets. Or to be more precise, yesterday-little players were grown-ups now and started being perceived by new professionals in the region as extremely attractive ones. They could compare the shiny reality of these very successful organizations in their own neighborhood to the old great names associated to a big crisis now.
How to explain the reverse trend in company attractiveness? There are many factors but most of them come from 1) decision making centralization and 2) extreme cost cutting mode being exercise by global companies in the wake of the crisis. Both have affected a variety of other dimensions that combined with the much better organizational and financial conditions of the big local companies or multilatinas, have created a growing issue of local talent availability on the former. Not that either factor is new to the ups and downs of global companies, but what has particularly changed the talent landscape in the region is that local talent has more alternatives to choose from today.
Centralization has been a common strategy when the organizational structures have to get smaller. Many global multinational Latin American headquarters are now appendixes of a higher structure like Americas or Emerging Markets Divisions.
These organizational decisions became very popular around five or six years ago in order to become more cost-efficient and in some cases to have an aggregate unit to focus on a growing market (in the case of Emerging Markets Divisions. Nothing intrinsically wrong with it but without the right level of defined accountability, the new structure leads to substantial less autonomy for the Regional and countries management. Bad news always gets spread rapidly across the organization, and that reduced autonomy led talented local executive to join (or stay in, if already there) the local companies growing instead of being a small link in the chain of a big corporation. In the best scenario, talented new professionals would join the traditional global company for a while, get the knowledge (and becoming a more desirable professional commodity) and leave for the local competitor. This is particularly important if the talented professional has a real chance to be in the center of a growing company as it is happening now.
Cost cutting mode by itself is not unfamiliar to life in corporations everywhere but the one that came from the 2008 crisis had something particular: it occurred when emerging markets, and more precisely, Latin American countries were at their top (and continue that way very well afterwards). Professionally it was more rewarding to be part of organizations that were planning for growth and not planning for cuts. Comparison was not favorable to the latter more over if the growth of local companies came along with a sense of national pride and increasing national self-esteem.
Going back to Breca, they grew overseas through acquisitions. While all acquisitions always bring some level of cultural disruptions, Breca was wise enough to rely on local talent to keep the local flavor that provides an edge in the local markets. Beyond the commercial effects of that decision and that is not part of this analysis, the underlying effect with its talent attraction strategy was twofold: for the Peruvian/local talent market the message was ‘we now play in the big Latin America league, we have operations in several countries and we are global in some business making the organization more attractive to the local Peruvian talent’; on the other hand, they told the new countries operations talent: ‘we know you, we are from the same Region and trust your knowledge: we don’t come with rigid corporate -meaning centralized- set of policies (yet)’, making them more appealing to both the new talent in the market and that talent that feels held back in multinational subsidiaries.
So, is it anything traditional global companies can do to start winning battles in this particular scenario? Here are some strategies that may be already in place but in any event, should be reinforced in order to look even more attractive.
Emphasize on location flexibility. It would allow talented professionals to perform their roles based in their own countries if they want. That scenario has a double effect as it provides a message of commitment to the individuals while conveys a message to the local organization that it is possible to climb the organizational ladder and being able to work from the home country. Clearly this applies to regional or even global roles. Companies sometimes create a sort of a coordination position to make it look regional and more appealing to high potential individuals. However the real drive for the creation for those positions should be business need. By implementing this strategy and many have already, the international talent that a traditional corporation has, would be more willing to go back to their home country or region with the sense they are reducing their responsibility. Mobility should be an important aspect of truly global executives but having the option to have them perform that role from home country will have a great impact.
Diversity. This aspect is becoming an important factor in Latin America. Mature global multinational organizations have well defined diversity support programs that are friendlier than those of the majority of multilatinas. For talented women, it will be more appealing to join an organization that will be more understanding of their issues that local companies. That is a huge advantage that mature multinationals have over the new multilatinas where the diversity programs are in the process to mature. Along this strategy, we can include flexible time, working from home policies that are also very attractive to professionals looking for more work/life balance.
Corporate mindset. Corporate culture may be played either as an appealing factor or as an alienating one in the Latin American labor landscape. But at entry and middle management level professional attraction, it may well being a factor in favor of mature multinational organizations. Global multinationals need to compete mostly with state-owned companies or family-owned firms (a big chunk of the largest companies in the region) whose cultures in many cases are not quite people-oriented or too entrepreneurial to be attractive for new professionals in the long term. Multilatinas have the challenge to establish well defined set of policies and best practices particularly in talent management while growing at an accelerated pace. The excitement around the growth and short-term flexibility may be caught up with expectations of clear paths for career development, rewards for talent, organized structure to compete at the big leagues. That situation may be played by global subsidiaries as an advantage when enticing new talent however traditional global companies need to hurry up as the local new multinationals are catching up particularly in the talent management arena.
In this dimension, local organizations with international presence like Breca are doing great efforts to spread common cultural and operational principles across the countries they have operations. For example, the shareholders quickly realized that defining a common culture as a cornerstone of its talent management strategy would be critical in the long term success of the talent battle. While following a path of traditional multinational organizations, the definition and application of the common culture, the implementation of a robust talent management model (as part of a broader ‘Breca Operational Model” to be implemented across industries and countries) would provide that sense of commonality and the “Breca way” but always trying to keep in mind the right level of autonomy and flexibility that the countries need not to felt just a tiny link in the chain. While still in a process of consolidation, these first steps on the right direction, is setting this conglomerate apart from more short term approaches that are also common in similar circumstances across the region.
Finally, an improved decision making process including speed and the right portion of customization when it comes to decisions related to local country staff. Frequently, they come down to compensation issues (but there are other on the commercial side we are not covering here). Today, markets in Latin America are hot and so is the demand for great professionals. Due to market conditions and supply and demand the salaries have skyrocketed and headquarters executives always have issues to approve of compensation packages that are as high as theirs and in some cases bigger. If they don’t approve, local companies would as they understand and live the issues in a more direct way.
None of the above mentioned aspects are new but they have to be put together and be presented in a compelling way as, otherwise, the withdrawal of fresh blood in the pipeline will continue favoring the local companies versus the mature multinational preventing them to take advantage of the market boom and the profits that come along with them. One additional thought to mull over, do multilatinas have the same issue when growing, expanding to other countries and getting mature? That is, matter of another analysis.
(1) Pacific Alliance Trade Bloc: bloc of four Latin America countries (Colombia, Chile, Mexico, Peru) that supports economic models based on free trade and free markets. (2) Breca: formerly known as the Brescia Group, is a multi-industry conglomerate with presence in Brazil, Chile, Ecuador, Panama and Peru. Before the sale of its Wielding Business Units in 2013, its operations include Colombia and Venezuela. Currently being managed by the third family generation representatives.