By Melissa J. Anderson

A new report by Ernst & Young suggests that global companies may benefit by decentralizing their talent management operations. By giving more decision making power to individuals in specific regions, companies may be able to respond more nimbly to local talent needs.

Peter Matthews, Chair of Global Learning at Ernst & Young at the firm explained:

“Few companies have done enough to adapt their approach to meet the complexities of the current global economic and market environment. Companies looking for global growth will need to invest in developing an effective talent management strategy that successfully spans multiple geographies. They will need to change and flatten traditional organizational structures; encourage decentralized decision making; allow for a vast diversity of cultures, ages, backgrounds and geographical locations; and adopt new and more inclusive leadership styles.”

As the corporate marketplace becomes more global, the study shows, companies could benefit from utilizing local expertise more fully.

Leadership Challenges

The study of 660 senior executives revealed that high performing organizations were more likely to decentralize operations – including talent management – be gain a competitive edge. About half (49 percent) of high performing organizations are granting greater decision making power to direct reports (compared to only 35 percent of low performing companies).

Matthews said:

“The old hub-and-spoke model of a strong headquarters and a weak subsidiary that must look to the center for all key decisions is no longer suitable. The talent model then was built for a time when demand was predictable, workloads stable, markets and management competencies well-understood, and the upheavals caused by shifting demographics and technological advances still far in the future.”

Ernst & Young also found that even high performing organizations feel they have ground to make up. Less than half (45 percent) say they are investing effectively in talent management in order to meet financial targets. Just over a third (36 percent) of low performing organizations said they were investing in effective talent management.

Similarly, companies are concerned that they will be able to find leaders with a diversity of experience to meet the needs of tomorrow. Only 45 percent of high performers and 36 percent of low performers said they are working to meet this challenge of leadership development. Only 43 percent of high performers and 38 percent of low performers said they have created specific qualification metrics for developing leaders.

Soft Skills?

In the report, Bill Leisy, Global Talent Management Markets Leader for Ernst & Young points out the growing notion that talent is no longer a “soft skill.” He writes, “it has a positive and quantifiable connection to a company’s financial performance.”

The understanding of leadership in high performing organizations is beginning to encompass people and cultural skills, explains. “When looking for potential C-suite leaders, they are more likely to choose people who can lead successfully in an international business environment (47% vs. 37%) and who can effectively convey the values and culture of the organization (44% vs. 37%).”

Ernst & Young suggests that companies can meet the new demands of global leadership by blending global and local talent management. The report explains, “Rather than rely on a small group of highly paid expatriate workers, companies should embed mobility into their leadership and high-potential programs, creating a multidirectional flow of talent between and among developed and rapid-growth markets.”

Companies should also engage in the use of analytics to identify talent gaps and better understand the behavior of the workforce. Doing so can help companies be more strategic about how talent is managed both in the home office and abroad, and identify opportunities for leadership development around the world.

As Beth Brooke, Global Vice Chair of Public Policy at Ernst & Young writes along with Matthews in their opening letter to the report, “Building a talent management model to suit our volatile times will require jettisoning decades’ worth of traditional management wisdom.”

They add, “Only a ‘paradigm shift’ – a major shift in thinking and assumptions – can help tackle the global talent shortfall.”

By strategically engaging leaders on local, regional, and global levels companies can better approach the looming talent shortfall so many high and low performing organizations are anticipating.