Half of North American CEOs tapping overseas talent: Deloitte survey

Half of North American CEOs tapping overseas talent: Deloitte survey


28 May, 2007
By Liam Lahey

Citing exceptional employees as the key to their success, fast-growth CEOs admit that finding, hiring and retaining qualified employees is their biggest operational challenge.
This, according to a newly released Deloitte survey, is a key reason why CEOs are tapping overseas markets for talent, a trend that will increase over the next five years. Deloitte's "2007 CEO Survey" petitioned the fastest growing companies in North America as ranked on Deloitte's 2006 Technology Fast 500. Also noteworthy, CEOs are shying away from doing business outside of North America.

Tech companies in particular are going overseas for talent for three key reasons, explained Jeffrey Alderton, principal, Human Capital Advisory Services for Deloitte Consulting in New Jersey.

First, availability of sheer number of educated talent in locations outside the U.S. Second is cost; third is 24-hour service.

"The U.S. cost of hiring workers at this point in time can often exceed that of the cost of hiring overseas. We're seeing a very highly educated, highly interested constituency outside the U.S. that is very motivated to enter the American business market," he said. "With shared services in India or Europe, for example, companies can have a 24-hour operation, simple due to the time change (no sleep time). This is a very motivating point for off-shoring."

When asked how the driving factors for overseas hires fare juxtaposed to the fact that North American firms are shying away from doing business overseas, Alderton said it surprised him.

"But I really think they are two separate issues. Because of the whole cost structure, high educational expectations, etc., American employees have to pay huge amounts of loans, so that adds to the cost structure of how people are getting hired," he said. "It's very different from the educational structure as it is in APAC and European communities where some of the outsourcing companies are based. It's a resource and cost issue that tech companies are going to APAC (including India), EMEA (especially Prague), and Latin America."

The survey was conducted during the first quarter of 2007 by Deloitte's Technology, Media & Telecommunications (TMT) Group.

High-quality employees are the biggest contributors to company growth for 67 per cent of the CEOs surveyed, consistent with 66 per cent last year, the report read. Finding, hiring and retaining qualified employees is the biggest operational challenge for 48 per cent of the CEOs, up from 41 per cent last year. To attract employees, 69 per cent are relying on equity compensation and stock options, down from 71 per cent last year. Fifty-one per cent offer flexible hours, up slightly from 49 per cent last year. Training programs and educational opportunities are offered by 38 per cent of the companies, up from 35 per cent last year, and 31 per cent provide a career path, up from 28 per cent last year.

"When it comes to talent, supply and demand are out of balance, making employees more like consumers," he said. "And like consumers, if employees with those in-demand skills sets are not receiving the satisfaction they seek from their workplace, they will find it elsewhere -- with the competition. This will put an even greater strain on employers for available talent."

But do individuals seeking employ regard themselves as akin to consumers?

"In the technology, media and telecom industry, I'm seeing the younger talent going to technology companies for the environment," Alderton remarked. "Many of these companies are producing products that younger talent is not going not to use uniquely, and they may be a consumer but not on a grand scale.

"I think they are picking and choosing new work places to bridge their personal life with their business acumen. I'm not convinced that they are looking at jobs as a consumer. The needs of the talent market right are about seamless integration of their personal and professional lives. The virtual workplace is the customization of their career. If that's what companies offer, that's where they're going. If the company offers a product discount, that's a bonus."

CEOs say their companies are turning to overseas talent, with 45 per cent of those surveyed said that they are currently off-shoring, and 55 per cent said they plan to offshore in the next five years. In five years, 30 per cent planned to have up to 10 per cent of their workers offshore; 27 per cent planned to have up to 20 per cent offshore; 19 per cent expected to have up to 30 per cent offshore; and 15 per cent expected to have up to 40 per cent offshore. Overall, 43 per cent of the CEOs said it was critical or very important to look overseas for talent. However, even in five years, CEOs envisioned the vast majority of the workforce would remain in North America.

"We see tech companies keeping the more technical and developmental resources off-shored with client-facing interaction staying in the U.S. for companies who do business only or primarily in the U.S.," he said. "The growing executive level may, in fact, remain here in the U.S., based on with whom they need to interface."

CEOs remain confident about company growth, with 82 per cent of those surveyed very or extremely confident. Virtually all (98 per cent) said they would be hiring over the next 12 months. Thirty-seven per cent said they would grow their workforce 26 per cent to 50 per cent over the next 12 months, up from 30 per cent last year. Half the CEOs would grow their headcount up to 25 per cent, the same as last year. Another 11 per cent intended to grow their headcount more than 50 per cent, down from 17 per cent last year.

Fifty-nine per cent of the CEOs surveyed believed they would continue growing organically, up from 55 per cent last year. Fifteen percent planned to acquire other companies, down from 17 per cent last year. Just seven per cent planned on merging with another company, up from six per cent.

Meanwhile, CEOs are far more concerned about government regulation and terrorism than access to capital. With 34 per cent of the CEOs surveyed said the biggest threat to success is excessive government regulation, followed by 19 per cent who said the biggest threat was increased competition from emerging powers like China and India; and 18 per cent cited terrorism. Only nine per cent were concerned about access to capital, and 10 per cent expressed concern about rising interest rates.

Twenty percent of the CEOs surveyed said that lower interest rates were needed to spur growth, up from eight per cent last year, while 18 per cent prescribed lower personal and corporate taxes, down from 31 per cent last year.

The Deloitte survey showed CEOs have chosen a variety of methods to protect their valuable intellectual property. The most popular of those surveyed (40 per cent) is to restrict distribution of products to markets with a strong reputation for protecting IP. They also build in IP protection to minimize theft (38 per cent), hire third-party specialists to advise them on IP protection (32 per cent), and train staff on measures to reduce IP theft (32 per cent).