Will 2025 be a feast or famine for companies in Indonesia?
That will depend on the kinds of talent management strategies that they implement now.
Find out more about the risks and challenges of business sustainability in Indonesia.
Haygroup Help Wanted: Averting The Talent Famine Oct2012
1. Help wanted:
Averting the
talent famine
Understanding the underlying risks and challenges of talent
11 | 2012
management in Indonesia. >>
2.
3. Contents
Potential, people and performance 2
Retiring in the prime of life 7
Leadership, development and succession 12
Akan Datang: A talent apocalypse or an economic miracle? 15
5. Talent famine
The intention is to narrow the income gap, As with all ambitious visions, there are
reduce unemployment and boost economic many challenges that Indonesia has to
growth across the regions. The Indonesian overcome. One of the biggest challenges
government hopes that by accelerating and that we foresee is the severe talent shortage,
expanding infrastructural development, it which will only get worse in the years
can attract global investments and create ahead, if nothing is done now.
high value-added jobs for the people.
High value-added jobs are essential to With the abundance of natural resources
developing human capital and higher underwriting Indonesia’s ambitious vision
GDP per capita. This, in turn, will boost for 2025, the economic potential is real and
domestic demand, create a vibrant economy attainable. However, it has become apparent
and generate the momentum of growth that the supply of local skilled workforce
that Indonesia needs to bypass the middle- will not be able to keep up with the
income trap. Indonesia is determined to increasing demand required to transform
avoid the economic stagnation typically Indonesia into the world’s sixth largest
faced by emerging economies following the economy.
initial growth spurt.
7. Figure 3
Hiring hits a snag (Source: Indonesia Skills Report, World Bank, May 2010, pp xiv)
Difficulties in filling vacancies by sector
Manufacturing
Director 84%
Professional 69%
Administrative 11%
Sales 29%
Production 29%
Unskilled 0.86%
Non-educational services
Director 78%
Professional 56%
Administrative 14%
Sales 25%
Production 23%
Unskilled 6.6%
Percentage indicating “very difficult” and “rather difficult”
Difficulties in filling vacancies by export orientation
Non-exporter
Director 79%
Professional 60%
Administrative 11%
Sales 26%
Production 25%
Unskilled 4.2%
Exporter
Director 85%
Professional 70%
Administrative 16%
Sales 36%
Production 39%
Unskilled 1.9%
Percentage indicating “very difficult” and “rather difficult”
9. Retiring in the prime of life
Fifty-five is the new marker for middle age according to a recent UK
survey5. It is also Indonesia’s current retirement age, when private
employees can start to collect pension from Jamsostek, the social
security provident fund.
Notwithstanding the obvious loss of national With the mean age of senior and middle
productivity when the workforce retires at managers hovering above 42, more than half
its prime, a Hay Group research revealed of the leadership team will be gone by 2025
an alarming trend. The early retirement age (Figure 4). The leadership vacuum will not
will have severe consequences on leadership be easily filled, given the shortage of skilled
succession and the strapped talent market. managers and professionals.
Figure 4
Average age of employees
(Source: Hay Group PayNet Indonesia, 2012)
60
48
48
47
47
46
50
45
43
42
40
36
38
38
Average age (years)
37
40
35
35
35
35
34
28
30
20
10
0
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Clerical/production Junior management Middle management Senior management
5
Middle age ‘doesn’t start till 55’ - but you’re old by the time you hit 69, says Britons, MailOnline, 18 September 2012.
(http://www.dailymail.co.uk/health/article-2205081/Middle-age-starts-55-youre-old-timeyou-hit-69-say-Britons.
html#ixzz29M3eb2Ln)
13. Accelerated talent Most companies like to measure the success of leadership development
development: programs by the number of training hours and skills enhancement achieved.
Future Stars While managers will acquire new knowledge for personal development, such
indicators do not guarantee that the company will have an experienced bench
of leaders who can generate sustainable wealth and growth.
Consider the case of a Fortune 500 conglomerate in China. The Chairman was troubled. The majority of the
board members would be retiring within five years. Yet, the next generation of managers was not ready to step
up to top leadership roles. On top of that, the company had been working to integrate operations among its
subsidiaries to generate economy of scale. This would be impossible without strong and determined leadership.
The usual approach of career development, on-the-job training and mentorship would take time. The Chairman
needed an urgent solution to deal with the situation before it became a crisis. Hay Group designed an
accelerated 18-month senior executive development program.
A customized leadership model established the norms for successful leadership performance over the next five
years. Key competencies, such as pursuing market leadership and achieving greater productivity, were identified.
The outward behaviors and traits were clearly defined to assess the level of performance of the managers.
The program successfully calibrated and cultivated the managers. One of the managers eventually went on to
lead a global beer brand. How had the program equipped the manager with skills and confidence for such a
heavy responsibility?
The program first assessed the manager’s strengths and weaknesses, as well as his potential, to meet the
expectations and challenges of the new roles. He was put through an international business school education,
stretched business assignments, and personal coaching by the Chairman. All the training and learning
opportunities were targeted at preparing him for his future role.
The program also considered the manager’s response and ability to work with his colleagues on actual business
cases – to ensure the manager possessed the right attitude and aptitude. The rest of the senior leadership was
constantly assessing and providing feedback on the manager’s performance. The stringent process assured the
objectivity and quality of the final promotion decision.
The graduates from this “Future Star” program are about 45 years of age and usually end up holding top jobs in
the conglomerate’s diverse portfolio. So far, nearly 40 top executives have graduated from this program.
The chief concern with most companies on a whim. Rather than submitting
is that adopting a coaching approach in a to circumstances, a leading Chinese
tight labor market is risky business when conglomerate consulted us to design
others are taking the convenient shortcut an accelerated program for leadership
of talent poaching. We believe that the risk succession (see box story above).
of not training is even higher: what if these
undeveloped talent stay on? The result was a robust talent grooming
process which enables the company
China faced a similar situation in the mid- to identify the right talent to fill its
2000’s. Talent management was a nightmare management bench.
with employees job-hopping, seemingly
15. Pay for performance
A key contributor to the intense talent This appears to be the path that Indonesia is
competition in Indonesia is its low labor heading towards according to Hay Group’s
cost. The talent auction will continue until PayNet database. There is a sharp mismatch
salaries rise beyond productivity levels. If between remuneration and performance.
Indonesia fails to develop its human capital Companies are not using their salary
sufficiently to match the target productivity budgets as a weapon to drive performance.
level by 2025, it will fall into the middle-
income trap it is trying so hard to avoid.
Figure 7
Leadership best practices (Source: Hay Group Best Companies for Leadership survey, 2011)
Global Top 20 Asia Top 10 Rest of Asia Indonesia
100
95
95
95
87
90
84
80
74
70
70
58
60
56
55
52
51
50
43
40
39
40
36
30
20
10
0
Senior leaders personally Leaders work hard to Introduced an on boarding Balanced mix of local and
spend time actively connect people with program to help new international talent in
developing others projects that are personally parents return to the senior leadership positions
meaningful to them workplace
17. Akan Datang7: A talent apocalypse or
an economic miracle?
The success of MP3EI will not just be in creating a more productive
workforce and greater national innovation. Indonesia has a real
opportunity to create a highly skilled middle class of professionals
and managers who are able to drive fiscal growth, achieve human
capital targets and ultimately sustain Indonesia’s economy
beyond 2025.
All this is contingent on the government The flip side does not look so good. If
and companies working together to solve Indonesia succumbs to a weak talent market
the upcoming talent apocalypse. Not and fails to develop its human capital
only must the retirement age be adjusted sufficiently, it will have to resort to foreign
upwards, the workforce needs to be talent to sustain its economic growth. This
equipped with technical, management and leadership-outsourcing model will displace
English language skills. the local talent pool and slow the human
capital progress. Without a stable talent
Within companies, transformation must development environment to groom local
also occur. Companies must focus on capabilities, there will be huge skill gaps
developing a sustainable pipeline of local and salary discrepancy. This will ultimately
talent, enabling them to succeed with the lead to social inequality and a stagnated
necessary skills and authority and rewarding economy.
the right kinds of behavior. With the
pending mandatory retirement of a large Whichever the case may be, the countdown
part of its middle and senior management, has already begun.
steps must be taken now to capture
institutional knowledge, groom the next-in-
line and formulate a post-retirement hiring
strategy.
7
Bahasa Indonesia meaning “coming soon”.
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