The document discusses the global challenges of talent management over the next decade as the talent landscape changes. It highlights the productivity advantages of top performers and differences in preferences between generations. It also examines talent issues in western countries facing a productivity gap and aging demographics as well as the large skilled talent pools emerging in developing countries like India and China.

1. Talent management:
transforming forces for
the next decade
May 12, 2010

2. MON-ZXT102-20100512-Talent management-EG
Talent matters!
Battlefield is expanding globally
Staying on top of a changing
talent landscape
McKinsey & Company | 1

3. MON-ZXT102-20100512-Talent management-EG
Top performing talent provides substantial productivity
advantages
Relative productivity of average and top performers
Percent
Low complexity jobs1 Medium complexity jobs2 High complexity jobs3
225
185
150 2x!
100 100 100
Average Top Average Top Average Top
performers performers performers performers performers performers
1 Fast-food restaurant front-line workers
2 Production workers in a high-tech factory
3 Investment Banking Associates
SOURCE: Harvard Business Review, Journal of Applied Psychology McKinsey & Company | 2

4. MON-ZXT102-20100512-Talent management-EG
Talent matters!
Battlefield is expanding globally
Staying on top of a changing
talent landscape
McKinsey & Company | 3

5. MON-ZXT102-20100512-Talent management-EG
Talent challenges
Forces in western ▪ Productivity gap
countries ▪ Challenging demographics
McKinsey & Company | 4

6. MON-ZXT102-20100512-Talent management-EG
A step-change in productivity is required
Contribution for every $1 of US GDP growth
1970s 2010s
80 70
30
20
Employment Labour Employment Labour
growth productivity growth productivity
growth 1 growth 1
1 As measured by GDP per worker
SOURCE: Global Insight; Bureau of Labor Statistics; Bureau of Economic Analysis; McKinsey Analysis McKinsey & Company | 5

7. MON-ZXT102-20100512-Talent management-EG
New kinds of jobs
For every 8 jobs gained in the last decade, we created 10 and lost 2
2
3 8
7
Complex Repetitive Manufacturing Total
judgment, transactions & production
interactions &
problem solving
SOURCE: McKinsey Global Institute McKinsey & Company | 6

8. MON-ZXT102-20100512-Talent management-EG
Aging population
National/federal government
Total labor force
Government’s older workforce
% of employees aged 50 years and above, 2005
0 10 20 30 40 50 60 70 80 90 100
Belgium
Sweden
Canada
United States
Hungary
Norway
Finland
Switzerland
France
United Kingdom
SOURCE: Organisation for Economic Co-operation and Development (OECD); Statistics Canada McKinsey & Company | 7

9. MON-ZXT102-20100512-Talent management-EG
Gen Y has significantly different preferences than the generations
that came before
War generation Baby boomers Generation X
▪ Born < 1945 ▪ Born 1945 - 64 ▪ Born 1965 - 80 Generation Y
▪ Shaped by: ▪ Shaped by: ▪ Shaped by: ▪ Born 1980 - 95
World War II, Great Cold and Vietnam Internet, diversity, ▪ Shaped by: information
Depression, etc. wars, declining trust unemployment, overflow, overzealous
in government and parental parents, globalization
divorce rates
Approaches career in chapters Sees flexibility as a prerequisite, will
of 2 - 3 years each – demands make trade-offs for better lifestyle
employability, not employment
Demands freedom and control,
Expects quick individual development particularly regarding own career
and early rewards
Wants job to be meaningful and
Extremely low barriers to separation to have positive effect on society
combined with high confidence
SOURCE: "Managing Generation Y," Carolyn Martin; SHRM; "Millenials Rising," Neil Howe; "Managing Generation Y,"
Advanced Management Journal," Susan Eisner; "Next Generation Talent Management," Hewitt Associates; McKinsey & Company | 8
"Preparing for the Workforce of Tomorrow," Hewitt Associates; Project team

10. MON-ZXT102-20100512-Talent management-EG
The next generation is expecting a different offering from employers
Graduate expectations of future place of work1
Percent of those surveyed2
Interesting work content 93
Recognition of own performance 86
Work/life balance 82
Development opportunities for own personality 81
Opportunities for further education 81
Independent work 80
Compatibility of career and family 79
Job security 73
Responsibility/management position 55
International contacts 53
High income 42
High regard/prestige of profession or position 27
1 Survey “Young Elite” of 1,072 students about to finish their degrees
2 Persons surveyed who regarded the respective aspect as being “very important” or “important”
SOURCE: Psephos; Manager Magazine; McKinsey McKinsey & Company | 9

11. MON-ZXT102-20100512-Talent management-EG
Talent challenges
Forces in western ▪ Productivity gap
countries ▪ Challenging demographics
▪ Need for top quartile talent
Forces in developing
▪ Will demand for talent be countries
greater than on commodities?
McKinsey & Company | 10

12. MON-ZXT102-20100512-Talent management-EG
Old Shanghai (c. 1990)
McKinsey & Company | 11
Source: skylander.net

13. MON-ZXT102-20100512-Talent management-EG
Shanghai today
McKinsey & Company | 12
Source: photos4travel.com

14. MON-ZXT102-20100512-Talent management-EG
Old Shenzhen (c. 1980)
McKinsey & Company | 13

15. MON-ZXT102-20100512-Talent management-EG
Shenzhen today
McKinsey & Company | 14

16. MON-ZXT102-20100512-Talent management-EG
China alone will build “one Canada” in the next 10 years
Between 2010 and 2020, As a comparison, Canada
China plans to build… has…
30,000 km of new rail track 46,688 km of rail track1
97 new airports 26 commercial airports2
35,000 km of new expressway 38,047 km of expressway3
100 m TEU4 of container Canada handled 4.6 m TEU4
capacity in 2008
1 Does not include parallel trackage
2 Canada's National Airport System (NAS) consists of 26 airports. In total, the country has 322 certified airports
3 Physical extent of Canada's National Highway System (NHS)
4 Twenty-foot container equivalent unit
Source : “China Infrastructure Opportunities”, McKinsey, 2009; Transport Canada 2008 Report, American Association of Port Authority; Company
McKinsey & | 15
McKinsey analysis

17. MON-ZXT102-20100512-Talent management-EG
Asia returning to its natural “half share” of the world economy
Share of total world GDP (1 AD–2009 AD)
GDP share, percentage Industrial
revolution
French
Fall of Marco Polo's Discovery and US Oil
Roman Empire trips to Asia of America revolutions crisis
100
Rest
80 of world
60
Europe
Rest
40 of Asia
Japan
20
China
India
0
1 500 1000 1500 2009
McKinsey & Company | 16

18. MON-ZXT102-20100512-Talent management-EG
Talent management is an important global challenge
Finding talent is a key management challenge globally…
Most significant managerial challenge over next 5 years
Finding talent 31
China 40
Greater competitive 22
intensity India 38
Increasing size
19
of company Other Asia 35
Increasing number
11
of markets served North America 31
Growing number
of regulations 5 Europe 28
SOURCE: McKinsey Global Forces Executive Opinion survey; Next Generation Talent research McKinsey & Company | 17

19. MON-ZXT102-20100512-Talent management-EG
Emerging markets provide access to large skilled talent pools
Number of young academic professionals
Thousands
33,110
50% of
talent from devel-
oping countries is
from India and
China
15,052
Developing1 Developed2
1 Argentina, Brazil, Bulgaria, Chile, China, Croatia, Colombia, Czech Republic, Estonia, Hungary, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Philippines,
Poland, Russia, Romania, Slovakia, Slovenia, South Africa, Thailand, Turkey, Ukraine, Venezuela, Vietnam
2 Australia, Canada, Germany, Ireland, Japan, South Korea, UK, US
SOURCE: Global Forces work; McKinsey Global Institute McKinsey & Company | 18

20. MON-ZXT102-20100512-Talent management-EG
However, not all graduates are created equal
Percent of candidates considered suitable for hire1
Of 100 graduates with the correct degree, how many could you employ if you had demand
for all?
Engineer Finance/accounting Generalist
Hungary 50 50 30
Central
and Czech Republic 50 40 20
Eastern
Poland 50 30 15
Europe
Russia 10 20 10
Malaysia 35 25 20
India 25 15 10
Asia
Philippines 20 30 25
China 10 15 3
Mexico2 20 25 11
Latin
America Brazil 13 13 8
1 Suitability rates empirically based on 83 interviews with human-resources (HR) professionals working in countries shown
2 Mexico is the only country where interview results were adjusted – to 20% (from 42%) for engineers and to 25% (from 35%) for finance/accounting employees – since
interview base was thinner and risk of misunderstandings high
SOURCE: Interviews with HR managers, HR agencies, and heads of global-resourcing centers; McKinsey Global Institute analysis McKinsey & Company | 19

21. MON-ZXT102-20100512-Talent management-EG
Professional supply in China is fragmented
Suitable supply of university graduates will be barely enough to meet demand of large
MNCs in China
Thousands; 2003-08
Total supply of Chinese
15,730
university graduates1
University graduates not suitable
14,530
to work in MNCs
Total suitable supply of Chinese
1,200
university graduates
Demand for additional university
750
graduates from large MNCs in China2
Fragmentations
Oversupply of suitable graduates 450 reduces remaining
suitable graduates
Not accessible graduates due to by 86%
385
fragmentation/immobility3
Less than 0.5% of
Oversupply of suitable and total graduates are
65
accessible graduates suitable and acces-
sible to MNCs
1 All university courses except doctors
2 Enterprises with revenue over $604,000 in 2002 and employment of >1,000 FTEs; excluding employment in Hongkong-/Macao-/Taiwan- owned enterprises
3 Assuming strong growth of accessibility from currently 51% to 83% in 2008 (India’s current level)
SOURCE: McKinsey Global Institute labor supply database McKinsey & Company | 20

22. MON-ZXT102-20100512-Talent management-EG
In which country is this located?
1. U.S.
2. India
3. China
4. Mexico
5. Germany
McKinsey & Company | 21

23. MON-ZXT102-20100512-Talent management-EG
Question no. 2: aircraft engine?
In which country was this engine designed?
1. U.S.
2. India
3. China
4. Mexico
5. Germany
McKinsey & Company | 22

24. MON-ZXT102-20100512-Talent management-EG
Talent matters!
Battlefield is expanding globally
Staying on top of a changing
talent landscape
McKinsey & Company | 23

25. MON-ZXT102-20100512-Talent management-EG
An integrated approach to talent management
Improving the talent management system
6 2
1 Strengthening Attracting and
HR capabilities deploying the
right people
7
5
Creating a 3
Engaging talent culture Evaluating
and and
connecting recognizing
employees performance
4
Growing and
developing leaders
McKinsey & Company | 24

26. MON-ZXT102-20100512-Talent management-EG
1 Leading companies tailor talent strategy to their context
1
Design
component Central questions Possible strategic design choices
How are the requisite capabilities Grow your own Hire in
Recruit and obtained?
integrate
How are job candidates selected? Potential Job fit
How does talent get deployed? Structured moves Open market
What level of career guidance Guided
Self-managed
should be provided? development
Deploy, review What types of behaviors get KKR Individual Team/group
and develop rewarded?
To what extent do we differentiate
performance? Egalitarian Meritocratic
What are the boundaries for
under-achievement? Perform or go Grow or go
How do we keep talent connected Formal Informal
Engage and to one another?
connect Tangible
How do we energize our talent? Meaning
benefits
McKinsey & Company | 25

27. MON-ZXT102-20100512-Talent management-EG
1 Four categories of benefits determine whether the best talent joins
1
and stays
Great leaders
▪ Employees’ opinion of
senior management
▪ Employees’ relationship
with boss
Great job
Great company
Employee ▪ Work content
▪ Culture and values ▪ Development
▪ Reputation satisfaction
and opportunities
▪ Advancement ▪ Job security
▪ Lifestyle retention
▪ Impact on society ▪ Freedom and autonomy
▪ Coaching and feedback
Attractive compensation
▪ Compensation
– Base pay
– Short-term incentive
– Long-term wealth
creation
SOURCE: McKinsey War for Talent survey McKinsey & Company | 26

28. MON-ZXT102-20100512-Talent management-EG
2 BMW – targeting older workers to make more productive
2
70 small changes to the line implemented at a cost of €20,0001
Flexible
Flexible Vertically
magnifying Vertically
magnifying adjustable
lens adjustable
lens tables
tables Stretching
Stretching
exercises
exercises
Weight-
Weight- Specially
adapted Specially
adapted designed
designed
footwear chairs
footwear chairs Wood flooring
7% y-o-y prod improvements
Lower absenteism
Follow-up projects in Germany, Austria, and US with similar results
1 Total cost €40,000 including worker time
SOURCE: Harvard Business Review; March 2010 McKinsey & Company | 27

29. MON-ZXT102-20100512-Talent management-EG
ALTERNATE
2 What gen-Y is looking for and how employers are responding
2
% of employers responding to surveys
What employers perceive Gen-Y … and what the 15% who report they
expects… have accommodated Gen-Y have done
To be paid more More flexi-time options 57
74
More recognition
More flexible schedules 33
61 programs
Access to state-of-the
To be promoted within 26
art technology
a year 56
Increased 26
To have difficulty taking compensation
direction 55
Access to educational 24
More vacation and programs
personal time 50
Pay for cell phones,
20
bberries
Access to state-of-the
37
art technology Telecommuting options 18
More vacation time 11
SOURCE: McKinsey McKinsey & Company | 28

30. MON-ZXT102-20100512-Talent management-EG
2 Multinationals tailor their value propositions to compete against
2
local business in China
Criteria that have enabled
Multinationals that have
multinationals to
adapted their value
differentiate themselves
proposition
versus local companies
Autonomous work environments
Real decision making
Additional learning opportunities
Career development
Housing incentives
Educational benefits
SOURCE: McKinsey quarterly, 2008 Volume 1 McKinsey & Company | 29

31. MON-ZXT102-20100512-Talent management-EG
3 Leading companies spend significant time in top talent reviews
3
Average time per
Company Description candidate Frequency
▪ Session C review of ▪ ~ 5 -10 mins ▪ Once annually
Top 200 per BU over
1-3 days
▪ Discussion of Top 350 ▪ ~ 5 -10 mins ▪ Twice annually
officers in a 3- to 5-day
offsite of the Board
▪ Discussion of Top 30 ▪ ~ 15 mins ▪ Once annually
in one day
▪ Discussion of top ▪ ~ 15 mins ▪ Once annually
global talent subject of ▪ Similar ~quarterly
dedicated Top Team reviews in functions
meeting (~2-3 days) and BUs going
deeper into
organization
The key to a successful discussion is the thorough preparation
The key to a successful discussion is the thorough preparation
by the meeting participants (i.e., senior executives, not HR)
by the meeting participants (i.e., senior executives, not HR)
McKinsey & Company | 30

32. MON-ZXT102-20100512-Talent management-EG
Companies are aggressively investing in building their
4
4
capabilities, but is it money well spent? Over-invested
Under invested
Examples of big spenders include …
100 100
Spends $1 billion Spends $500 -
Leadership 16
annually on $700 million 29
employee learning annually on Industry 15
employee training Knowledge 26
programs Functional 40
Knowledge 19
Management 15 15
Other 11 14
Contribution Focus of
Spends Spends $2.3 to corporate capability
approximately billion annually performance building
$600 million training and on- initiatives
annually on boarding new
employee learning employees
“ Training is like advertising – you spend a “
“
lot on it knowing that only half is effective
because you don’t know which half!
SOURCE: McKinsey survey, January 2010 McKinsey & Company | 31

33. MON-ZXT102-20100512-Talent management-EG
Talent management challenges
Is talent management strategy as embedded as business and
financial strategy?
Are you tapping into non traditional talent pools and who are
vs.
you competing against?
Is your employee value proposition as tailored as possible to
key segments (age, gender, diversity) and do you have 5
“compelling” stories?
To what extent are you accelerating the development of high
performers and how are you retaining them?
SOURCE: McKinsey McKinsey & Company | 32