As the period of unprecedented change continues across all markets, Bateman Collins are experiencing an ever-increasing demand for high performing talent in many jurisdictions. We examine what is driving these global talent trends.
The mid-year update from WESP (the World Economic Situation and Prospects) shows a continued improvement in the world economy with world gross product expected to reach 3.2% in 2018 and 2019, an upward revision from December 2017. This is due to an encouraging growth outlook within developed economies, investment conditions and wage growth.
However, the WESP report also highlights an increase in downside risks from potential trade conflicts, uncertain monetary policy adjustment, higher levels of debt and geopolitical tensions.
Globalisation and Talent Mobilisation
The war for talent is fierce and nowhere is it more pronounced than in the global economic centres where many global organisations have their headquarters and regional hubs. However, we are also seeing regional fragmentation and mobilisation of talent throughout the regions of Europe, Asia Pac and North America as large global firms relocate talent away from more expensive cities to cheaper alternative locations.
There remain significant global imbalances in employment and economic outlook. With global economic pressures combined with rapid development in technology, the most successful organisations will be those best able to mobilise talent rapidly on a global basis, to take advantage of digital transformation initiatives, whilst driving automation, standardisation, simplification & cost reduction.
Outsourcing, Offshoring and the growth of Nearshoring
One of the most successful ways in which firms have reduced cost has been to offshore services to more cost-effective locations. The top destinations have typically been in Asia with India, China, Malaysia and the Philippines being most favoured for their low labour costs, skills availability and local environmental factors. Second are Latin America with Brazil and Mexico featuring highly.
Competition for talent has increased at these traditional offshore locations, driven by rising people costs and low employee loyalty. This is reducing the benefit of these previously favoured locations. When combined with increasing customer demands for clear and transparent communication, nearshore locations are increasingly attractive. Poland, Romania and Bulgaria are now the favourite locations for European firms wanting a nearshore centre.
Has recruitment process outsourcing reached it apogee?
With increasing pressures on cost which in turn is driving automation, outsourcing, off-shoring or nearshoring, firms are looking to partner businesses to support them with innovative people strategy to meet these challenges.
Over the last 15 years to reduce costs, global organisations have chosen a cost-oriented recruitment model to hire talent, using Recruitment Process Outsourcing or RPO models. In the short term this has been beneficial for many firms, helping them reduce the cost per hire particularly for more junior positions. However, firms are now examining the long-term implications of this strategy. In many cases the longer-term implications are less clear and, in some cases, have had significant disadvantages. HR professionals and senior executives have recently highlighted areas of concern with their RPO model, including:
- High turnover resulting from imperfect hiring decisions. The importance of cultural assessment may be overlooked where HR or the business have delegated the HR / cultural assessment to RPO managers with less knowledge of the culture of the organisation.
- Line managers feel frustrated and disconnected with the intractability of the recruitment process, in some cases losing their preferred candidates to more agile recruitment models.
- High turnover across the RPO firms often means that line managers may work with 2 or 3 RPO managers during a single vacancy lifecycle.
- Candidates are regularly disengaged and frustrated by limited feedback mechanisms which in turn impacts the reputation of the hiring firm, at its worst resulting in candidates being unwilling to consider positions again within that organisation.
Many firms are re-examining and transforming these models for a more integrated and holistic approach to hiring.
Regional Talent Mobility and the impact of Brexit on Financial Services
Within Europe, Brexit has been an increasingly important factor for Financial Services firms. Any firms registered in the EEA can passport their services into any European country. As a result, many Global Financial Services firms chose London as their European Headquarters, enabling them to passport their services into the EEA whilst giving them access to high calibre talent within the London market. With Brexit, firms may lose these passporting rights. UK and European Regulators have demanded that firms make contingency plans for Brexit, the result being that firms are now implementing contingencies to move operations which service European customers back into European centres. Not only does this require organisations to relocate critical European operations and key personnel, they also must mobilise programmes to relocate customer data and legal agreements to a different jurisdiction or legal entity structure.
The location strategy for these firms are dependent on a number of factors but may be influenced by where they hold an existing bank license or regulatory relationships, where the firm has existing legal entities, business interests and teams already in position. Frankfurt, Paris and Dublin have been the main beneficiaries to date. The current estimates are that Frankfurt and Paris alone will create between 5000-8000 new jobs for financial services professionals over the next 2 years.
Frankfurt – JP Morgan, Morgan Stanley, Goldman Sachs, Nomura and Daiwa have all announced they will be relocating operations to a number of European cities with Frankfurt likely to be the main location for these operations. Goldman Sachs and JP Morgan have announced that a few senior positions will relocate to Frankfurt whilst Nomura have announced they are moving close to 100 staff to Frankfurt. UBS announced they will be moving their central risk management and support services to Frankfurt. Other German locations are also popular with Lloyds Banking Group moving roles to Berlin and Close Brothers to Essen.
Paris – The French government have worked hard and increased initiatives to attract firms relocating from London. HSBC announced the movement of 1000 staff to Paris whilst the European Banking Authority will move 200 employees to Paris. The Bank of America Merrill Lynch has also announced that it will relocate three senior Bankers to Paris including Sanaz Zaimi, Head of fixed income, currencies and commodities (FICC) sales who will become the Country Manager for France.
Dublin – Barclays are relocating 150 people to Dublin to increase its existing presence in the city to 350.
Amsterdam – RBS are relocating teams to the Netherlands where they hold an existing bank license and operations under their ABN Amro subsidiary.
Brussels – Lloyds of London are setting up a subsidiary in Brussels and current indications are that managing agencies will prefer to use the Lloyds Brussels subsidiary rather than create their own EU subsidiary.
Luxembourg – Luxembourg is rapidly becoming the location of choice for many Asset & Wealth Management firms with Blackstone, M&G, Jupiter Fund Management all expanding operations within the Duchy. The location is also popular with Insurers with American International Group (AIG), RSA, Tokio Marine, Liberty and Hiscox relocating some operations to Luxembourg.
Local Pressures for Executive Talent
The recently published Systemic Risk Survey published by the Bank of England shows that overall confidence in the stability of the UK Financial systems has increased, with high proportion (94%) of respondents either fairly confident, very confident or completely confident. Perhaps not surprisingly, UK political risk is the highest scoring risk factor (highlighted by 91% of respondents) with 80% of these referring directly to the impact of Brexit. Geopolitical risk and cyber risk were the second highest concern, both with 62%.
Despite this, the UK labour market has continued to perform strongly. In Q2 2018 the number of people in employment between 16 to 64 increased to 75.7%, increasing by 137,000 to 32.40 million in work. The unemployment rate has decreased to 4.2, down from 4.5 in 2017 and the lowest it has been since 1975.
Given these pressures, organisations are finding it difficult to hire senior and specialist talent in the UK market. Concerns over Brexit, a strong labour market and a reduction in net migration when compared to 2015-17 are all contributing factors. Furthermore, EU net migration has fallen over the last year, as fewer EU citizens are coming to the UK and the number leaving the UK increased.
Bateman Collins is a boutique Executive Search and Leadership Advisory Consultancy. Our mission is to introduce future leaders to progressive organisations. Our disruptive methodology has helped our clients acquire the best executive talent across the globe, whether into multinational corporations, mid-cap or start-up firms.