r igh , wr e? - building a better working world - ey · 4 | right people, wrong place? contritors...

R ight people, wrong place?Businesses with a strong match between their market opportunities and their workforce, perform better.

2 | Right people, wrong place?

The data capture and analy sis ..................................................................................... 5

E xecutiv e summary ................................................................................................... 6

1. U nderstanding talent-to-market alignment .......................................................... 8

• ere is significant opportunit to i pro e t e atc between w ere co panies locate t eir people ersus t e ar et opportunit b countr

• ere is notable ariation wit in and between sectors in co panies talent toar et align ent

2. The relationship between talent-to-market alignment and performance ............... 11

• ir s wit ig est talent to ar et align ent tend to ac ie e ig er perfor ance

• e producti it pa off fro ig er talent to ar et align ent aries b sector

• elations ip between talent to ar et align ent and re enue growt

• ir s wit ig est talent to ar et align ent tend to deli er ig er profits

• o panies increasing t eir talent to ar et align ent o er ti e tend to grow faster

3. Talent-to-market alignment by country ............................................................ 21

• ational econo ies containing co panies wit a ig er talent to ar et align ent tend to be ore producti e

• ignificant ariation across t e globe in ow well co panies align talent to ar ets

• fir s are best in class w en it co es to atc ing talent to ar et

4. S eniority and business function alignment ........................................................ 26

• igging deeper to understand if fir s a e t e rig t talent in t e rig t places

• ir s often a e a concentration of senior e ecuti es in legac locations

• lign ent between senior e ecuti es and ar et is related to perfor ance

• e functions are often underrepresented in crucial ar ets

• lign ent between sales and ar eting talent and ar et opportunit atters for perfor ance

e estions or leaders to onsider as the re e t on this resear h

• o panies• olic a ers• n estors and s are olders

Contents

3Right people, wrong place? |


Contributors

Charles D avislobal a ead nal st ttps www lin edin co in c arlessdda is

arles is an econo ist and deli ers researc on trends affecting clients ranging fro t e global econo ic outloo to t e i pact of disruption suc as a recent report on t e rise of t e gig econo and fort co ing researc on t e future of wor arles oined in 1 fro

ondon based econo ics consultanc t e entre for cono ics and usiness esearc w ere e was a irector and soug t after econo ic pundit

S abrina Fruehaufr lobal nsig ts ead in ed n

www lin edin co in sabrinafrue auf abrina as been partnering wit in ed n s largest and ost strategic clients globall focused

on pro iding solutions t at connect an enterprise s ob ecti es across talent ar eting sales and e plo ee de elop ent oti ated b in ed n s ision of creating econo ic opportunit for e er e ber of t e global wor force s e le erages in ed n s ric global data to deli er t e insig ts t at elp er clients ac ie e t eir goals fro in ed n s di erse products

D ennis L ay tonlobal eput eader s eople d isor er ices

www lin edin co in dennisla ton ennis is responsible for s offering de elop ent t oug t leaders ip client i pact

and con ening peer con ersations between people leaders around t e world e was for erl t e eader of c inse and o panies organi ation practice in t e reland and a leader of t e erfor ance ransfor ation ractice ennis as elped leading ec nolog

inancial er ices and ealt are co panies ac ie e easurable i pro e ent in t eir financial perfor ance and organi ational ealt


e followed a fi e step core et odolog using uni ue datasets de eloped b and based on aggregate profile data pro ided b in ed n

1 irst for eac subsector wit in t e sectors selected for anal sis we deri e t e ar et si e b countr of t at subsector based on s uni ue industr nowledge and supporting sources including uro onitor nternational; nternational; database; i etric; ; ; ; ;

orld an ; ; indi idual co pan filings

econd for eac subsector we co pile a list of t e a or co panies across t e globe t at co pete in t e subsector e si e of t is sa ple aries across subsectors depending on ow frag ented eac ar et is

ird we aggregate profile data pro ided b in ed n to deri e w at proportion of eac co pan s eadcount is located in eac countr around t e world oint entures and subsidiaries are consolidated into one parent entit

ourt for eac co pan we co pute t e correlation between t e proportion of t eir global eadcount in eac countr and t e relati e si e of eac countr in t e global subsector ar et

ift we test t e e planator power of t e correlation coefficients to e plain differences in co pan perfor ance using uni ariate regression anal sis

e abo e anal sis of in ed n data is based on t e distribution of all co pan eadcount b countr regardless of function or seniorit owe er in ed n data also allowed for a ore granular anal sis pecificall we were able to anal e t e distribution of co pan eadcount b

eniorit t e percentage distribution of co pan eadcount across countries for t ose onl wit a director

or abo e title; specificall t is co prises t ose wit t e ob titles director partner owner and

unction t e distribution of co pan eadcount across countries b four a or function groups

• ales or business de elop ent

• ar eting

• esearc de elop ent engineering product anage ent

• t er legal social ser ices ad in education finance edia and co unications ilitar ser ices ealt care arts and design accounting operations finance entrepreneurs ip prograpro ect anage ent support purc asing consulting real estate

s in t e core et odolog t e distribution of co pan seniorit and functions b countr was correlated against t e si e of subsector countr ar ets to deri e a correlation coefficient for eac co pan ese respecti e correlation coefficients were t en used as an e planator ariable in a uni ariate regression wit

easures of co pan perfor ance

The data capture and analy sis

collaborating wit in ed n we were pro ided wit aggregate public profile data fro its professional co unit of ore t an illion globall to gi e us a co pre ensi e iew of t e world at wor

t s ould be recogni ed t at anal ing t is data pro ides us wit an indicati e iew across organi ations industries and ar ets and t erefore t e deri ed coefficient s ould be considered as an esti ate onl and not a perfect ar et to wor force atc n organi ation wis ing to e a ine t eir true wor force to ar et coefficient s ould appl t e et odolog below to t eir actual wor force data


E xecutiv e summary

L inkedI n brought its unique insights on where professionals are based, including by business function and seniority


1 ere is considerable opportunit for co panies to i pro e align ent between t eir subsector ar et opportunit and w ere t e station t eir wor force an co panies

isalign t eir talent to legac ature ar et locations rat er t an countries w ere ore re enue and faster growt opportunities lie e si e of t e opportunit to i pro e align ent and pa off fro doing so aries b sector ere is significant ariation wit in and between sectors in co panies talent to ar et align ent t at is ow closel co panies allocate t eir talent to w ere t eir subsector ar et opportunities are e anal sis re eals notable differences in ow co panies distribute t eir senior e ecuti es sales

ar eting and researc talent around t e globe n an cases senior e ecuti es are disproportionatel concentrated in

o e ar ets

ir s wit t e closest atc between t eir geograp ical talent footprint and ar et opportunit tend to a e

ig er perfor ance easured b profit per e plo ee; re enue growt and profit le els e finding t at talent to ar et align ent is related to fir le el producti it is a powerful insig t suggesting t at fir s can

a e a or perfor ance i pro e ents b a ing a ore strategic approac to w ere t e put t e rig t people ir s t at poorl atc t eir wor force to t e global subsector

ar et are potentiall lea ing undreds of illions of dollars of opportunit on t e table or e a ple in t e p ar aceutical sector a edian co pan in our data set increasing t eir talent to ar et align ent b 1 corresponds to an increase in profit of illion e edian co pan o ing to best in class align ent would correspond to ig er profit of

1 illion

ational econo ies w ere co panies tend to a e a ig er talent to ar et align ent tend to be ore producti e is suggests t at if polic a ers can support co panies atte pts to globali e it will increase producti it and econo ic output

ere is significant ariation b countr in ow well co panies ead uartered t ere tend to align t eir wor force to t e ar et ir s ead uartered in t e tend to a e t e

closest atc between w ere t e place t eir talent and t e ar et opportunit in t eir subsector ere is scope for fir s ead uartered in urope and sia to i pro e t e atc between t eir wor force and t e ar ets t at will dri e future growt in top and botto line or e a ple if based fir s

ad a talent footprint to ar et align ent si ilar to based fir s it could potentiall be wort an additional billion in

e findings of t is researc i pl t at in addition to t in ing about t eir wor forces fro a cost opti i ation perspecti e t roug offs oring near s oring or rig t s oring co panies a e t e opportunit to re isit t eir re enue and growt opti i ation to create co petiti e ad antage t roug growt s oring

e researc suggests t at t ose businesses t at focus on growt s oring to ensure t at t e rig t e ecuti e ar eting and sales product de elop ent researc and ot er talent categories better atc t e global ar et opportunities will do a better ob of capturing s are in t ose ar ets

n a low growt en iron ent wit wage stag ation across an de eloped ar ets and an increasing concentration of opportunit and social obilit occurring alongside a rise in protectionist senti ents t is researc pro ides a clear econo ic i perati e for

ore trade and obilit of t e rig t people to t e rig t places rat er t an less

is wor illustrates t e power of co bining bot granular co pan data wit aggregate ar et and industr data ese pro ide t e necessar inputs to bot corporate strateg planning and an end to end talent strateg and anage ent approac t at is at t e core and clearl lin ed to corporate and business unit strateg planning

n a first of its ind collaboration between and in ed n we a e broug t toget er two proprietar sets of anal sis broug t its detailed iew of current and pro ected industr ar et perfor ance b geograp and in ed n pro ided its uni ue insig ts on w ere people are based including b business function and seniorit is co bined anal sis of co panies across 11 sectors is groundbrea ing because for t e first ti e it alidates and uantifies t e alue of a i i ing t e align ent between wor force location and ar et opportunit e findings fro t at anal sis include


1. U nderstanding talent-to-market alignment


ere is significant opportunit to i pro e t e atc between w ere co panies locate t eir people and t e ar et opportunit b countr

or eac co pan t e relati e subsector ar et si e b countr was co pared against t e uni ue outside in iew of w ere co panies locate t eir people fro in ed n aggregate profile data n si ple ter s t is anal sis re eals t e e tent to w ic fir s locate talent in t eir target ar et seg ents ile t e anal sis was all conducted at t e co pan le el ta ing a sector wide iew illustrates t e differences between t e relati e ar et si e of eac countr and t e relati e s are of global eadcount t at fir s in t at sector locate t ere ibit 1 an fir s tend to a e a concentration of talent in ead uarter countr or legac locations and a not a e ta en sufficient steps to build an appropriate presence in countries t at pro ide bot current and future re enue creating opportunities

E x hibit 1 . How the distribution of talent by country misaligns with the spread of market opportunity by country

Source: EY Knowledge analysis of LinkedIn member data and various industry sources on sector market size

an fir s tend to a e a concentration of talent in ead uarter countr or legac locations and a not a e ta en sufficient steps to build an appropriate presence in countries t at pro ide bot current and future re enue creating opportunities

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

United States

China Japan Germany Brazil United Kingdom

France Mexico Italy India Spain Canada Australia South Korea

Market opportunity by country as % share of global consumer products and retail market (CPR); compared with distribution of talent by country; CPR workforce in each country as % of global total; data for 2016

Across the consumer productsand retail (CPR) sector, CPRfirms are overrepresented in the US relative to the market size n markets like hina apan and

erman se tor ork or es are nder ei ht ompared to the relative

market opport nit

Total CPR % headcount by country CPR market share by country

| Right people, wrong place?

ere is notable ariation wit in and between sectors in co panies talent to ar et align ent

or eac of t e co panies in t e sa ple a single indicator of talent to ar et align ent was deri ed b co paring t e outside in iew of t e distribution of co pan talent based on

in ed n aggregate profile data to t e si e of t e ar et opportunit b countr for eac subsector t e co pan co petes in e talent to ar et align ent is deri ed using correlation anal sis suc t at fir s perfectl aligning talent to ar et would ac ie e a correlation score of +1 ose wit no relations ip between ar et opportunities and w ere t e locate t eir talent would score is anal sis re ealed substantial ariations wit in and between sectors in t pical co pan talent to ar et align ent ibit e edian co pan as a talent to ar et align ent of and could be lea ing alue creating opportunities untapped as a result ere is a notable ariance across subsectors in ow well fir s tend to align t eir wor force to t e ar et cross t e sectors anal ed fir s in t e edical de ices subsector tended to align t eir wor force closest to t e ar et opportunit w ile t ose in t e alco olic be erages subsector ad t e lowest talent to ar et align ent

t s ould be e p asi ed t at t is anal sis specificall finds a statisticall significant relations ip between a co pan s talent to ar et align ent and easures of perfor ance w en

ar et is defined b absolute ar et si e e generall did not find statisticall significant findings w en co pared onl to

ar et growt

E x hibit 2 . T here is significant variation within and between industries in terms of individual companies’ alignment between the workforce and the market

Source: EY Knowledge analysis of aggregate profile data provided by LinkedIn and various sources on sector market size

0.273

0.314

0.409

0.462

0.487

0.489

0.493

0.515

0.542

0.557

0.829

0.0 0.2 0.4 0.6 0.8 1.0

Alcoholic beverages

Banking

Non-alcoholic beverages

Automotive

Insurance

Food

Pharmaceuticals

Home and personal care

Consumer health

Apparel and footwear

Medical devices

Talent-to-market alignment

Average subsector talent to market alignment correlation coefficient (+1 implies perfect alignment) in 2016, n=659


2. The relationship between talent-to-market alignment and performance


ir s wit ig est talent to ar et align ent tend to ac ie e ig er perfor ance

nal sis of a sa ple of co panies re ealed a statisticall significant relations ip between talent to ar et align ent and arious easures of fir le el perfor ance cross t e sa ple t e ost aligned fir s t ose in t e top uartile of talent to ar et

align ent t picall ac ie ed producti it le els ore t an to appro i atel ig er t an t ose in t e botto uartile t e least aligned fir s ibit o put t is anot er wa co panies in t e top ig est uartile for talent to ar et align ent were 1 percent ore li el to a e producti it le els abo e t e

edian in t e sa ple of fir s ibit is correlation does not pro e t at t e relations ip is causal t at greater talent to

ar et align ent auto aticall translates into ore profit and producti it ere are clearl ultiple factors in ol ed in a fir s perfor ance results owe er t e findings indicate t at co panies pa ing careful attention to t eir global wor force strateg tend to be ore successful nterestingl t ere was a perfor ance relations ip between talent to ar et align ent and ar et opportunit in e er one of t e industr subsets we e a ined e cept alco olic be erages; we belie e t is is due to t e uni ue

eritage pro enance and ta issues associated wit t is industr

E x hibit 3 A. T alent-to-market alignment ex plains differences in financial performance


Average company EBITDA/employee in 2016 by talent-to-market alignment quartile, n=659

$68,690

$72,965

$79,988

$94,743

$60,000

$65,000

$70,000

$75,000

$80,000

$85,000

$90,000

$95,000

$100,000

Bottom quartile 2nd quartile 3rd quartile Top quartile

EBIT

DA p

er e

mpl

oyee

, $

Talent-to-market alignment

1.4x

E x hibit 3 B: Firms in the top q uartile of talent-to-market alignment more likely to have higher productivity

Percentage likelihood of EBITDA/employee level being above sample median in each talent-to-market alignment quartile

43%

61%

Bottom quartile Top quartile

+18%


e producti it pa off fro ig er talent to ar et align ent aries b sector

e relations ip between align ent and perfor ance aries wit in and across industries and geograp ies ig er align ent is related to increased producti it captured b profit per e plo ee in t e non alco olic be erages; p ar aceuticals; o e and personal care; food; and consu er ealt sectors n t e p ar aceuticals and non alco olic be erages sectors t e t pical producti it of fir s wit t e ig est talent to ar et align ent was ore t an four ti es ig er t an t ose wit t e lowest align ent

ibits and

E x hibit 4 . T he difference in productivity between top and bottom of talent-to-market alignment varies by sector — as do pay offs from increasing alignment


ote alue of edian fir increasing align ent co putations based on appl ing relations ip to edian sector talent to ar et align ent and edian sector eadcount to deri e c ange in

Productivity (in EBITDA/employee) average of top quartile aligned firms as multiple of average productivity of lowest quartile aligned firms

0 1 2 3 4 5


Consumer ealt

Food

P armaceuticals

Non alco olic beverages

Value of median firm increasing talent to market alignment by 10%

Value of median firm increasing alignment to sector best in class

$62m $1.2bn

$77m $691m

$91m $1.8bn

$64m $195m

$50m $190m


E x hibit 5 . Comparing differences in talent-to-market alignment and productivity across sectors

$30,397

$53,206$65,892

$132,068

$0

$40,000

$80,000

$120,000

$160,000


Alignment between workforce and market


4.3x

Non-alcoholic beverages sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=62

$45,466

$76,156

$120,868

$184,361

$0

$40,000

$80,000

$120,000

$160,000

$200,000



4.1x

Pharmaceuticals sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=71

$63,496$71,723

$77,803

$137,397

$0

$40,000

$80,000

$120,000

$160,000


2.2x

Consumer health sector: average productivity (EBIDTA per employee) level by talent to market alignment quartile; n=69

$47,549$59,994

$68,360

$85,626

$0

$40,000

$80,000

$120,000



1.8x

Home and personal care sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=67


27%

69%


+42%


24%

67%


+43%


12%

72%


+60%


25%

65%


+40%


$30,397

$53,206$65,892

$132,068

$0

$40,000

$80,000

$120,000

$160,000




4.3x

Non-alcoholic beverages sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=62

$45,466

$76,156

$120,868

$184,361

$0

$40,000

$80,000

$120,000

$160,000

$200,000



4.1x

Pharmaceuticals sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=71

$63,496$71,723

$77,803

$137,397

$0

$40,000

$80,000

$120,000

$160,000


2.2x

Consumer health sector: average productivity (EBIDTA per employee) level by talent to market alignment quartile; n=69

$47,549$59,994

$68,360

$85,626

$0

$40,000

$80,000

$120,000



1.8x

Home and personal care sector: average productivity (EBITDA per employee) level by talent to market alignment quartile; n=67


27%

69%


+42%


24%

67%


+43%


12%

72%


+60%


25%

65%


+40%



elations ip between talent to ar et align ent and re enue growt

ere is a statisticall significant relations ip between talent toar et align ent and t e pace of recent re enue growt across

industries gain t is finding aries b industr in t e auto oti e sector t e ig est aligned fir s t picall ac ie ed re enue growt 1 percentage points ig er t an fir s wit t e lowest align ent

ile in t e apparel and footwear sector growt a ong t e ig est aligned fir s is percentage points ig er t an t e lowest aligned fir s ibit ere are s aller but still statisticall significant differences in growt perfor ance of t e ig est aligned fir s for t e insurance food and non alco olic be erages sectors ibit

E x hibit 6 . D ifference in revenue growth between highest aligned and lowest aligned firms varies by sector

E x hibit 7 . Firms with higher talent-to-market alignment across these sectors tended to achieve higher revenue growth

0% 2% 4% 6% 8% 10% 12% 14% 16%


Insurance

Food

Apparel and footwear

Automotive

Difference in average revenue growth among highest quartile talent-to-market aligned firms and lowest quartile aligned firms by sector, percentage points

–1.0%–0.4%

5.8%

8.2%

–1%0%1%2%3%4%5%6%7%8%9%



–4.3%

9.6%

7.5%

9.8%

–6%

–4%

–2%

0%

2%

4%

6%

8%

10%



Apparel and footwear sector: average company revenue growth (2012–16) by talent-to-market alignment quartile; n=67

Automotive sector: average company revenue growth (2012–16) by talent-to-market alignment quartile; n=32

14.1 percentage point difference





ir s wit ig est talent to ar et align ent tend to deli er ig er profits

ere is a statisticall significant relations ip between talent to ar et align ent and profit le els suc t at fir s wit t e ig est talent to ar et align ent tend to deli er

ig er profits is relations ip aries b sector; in t e ban ing sector fir s in t e ig est uartile of talent to ar et align ent deli er profit le els t at are ti es ig er t an t e lowest

uartile aligned fir s n t e non alco olic be erages sector t e sa e differential is 1 ti es see ibit e nature of t e relations ips between talent to ar et align ent and profit aries b sectors as s own in ibit

E x hibit 8 . Highest aligned firms deliver higher profits but multiple varies by sector

0 5 10 15 20 25 30

Banking

Food


Pharmaceuticals


Consumer health

Average company profit (EBITDA) level of firms in highest quartile of talent-to-market alignment compared with lowest aligned firms by sector, 2016



e nature of t e relations ips between talent to ar et align ent and profit aries b sectors

E x hibit 9 . R elationship between higher alignment and profitability varies by sector


Alignment between workforce and market Alignment between workforce and market


Banking sector profit in 1 a erage le el b talent to ar et align ent uartile; n 1

Food sector profit in 1 a erage le el b talent to ar et align ent uartile; n

Non-alcoholic beverages sector profit in 1 a erage le el b talent to ar et align ent uartile; n

Consumer health sector profit in 1 a erage le el b talent to ar et align ent uartile; n

$273

$2,142

$4,681

$6,890

25x

otto uartile nd uartile 3rd uartile op uartile

1

3

5

7

8

$692

$1,262

$1,983

$4,614

7x


1

3

5

$385

$1,701

$3,050

$5,546

14x


1

3

5

$2,254

$4,321$4,762

$8,107

1


3.6x



o panies increasing t eir talent to ar et align ent o er ti e tend to grow faster

e finding t at fir s wit a ig er talent to ar et align ent tend to a e ig er profits could si pl be iewed as s owing t at t e biggest co panies are ost international and ost profitable

owe er t e data indicates t at fir s t at increase t eir align ent o er ti e are ore li el to increase t eir profitabilit see ibit 1 ir s in t e top uartile of c anges in talent to ar et align ent between 1 and 1 ac ie ed profit growt t at was percentage points ig er t an t ose in t e lowest uartile of c anges in align ent

E x hibit 1 0 . Companies that increased their match most achieved higher profit growth

–1.2%

3.8%

4.8%

6.6%

–2%

–1%

0%

1%

2%

3%

4%

5%

6%


Change in talent to market alignment from 2013 to 2016

7%

Average company EBITDA growth (2012–16) viewed by changes in talent-to-market alignment, n=659



E x hibit 1 1 . R elationship between changing talent-to-market alignment over time and profit growth by sector


Change in alignment between workforce and market




Banking sector: average company EBITDA growth (2012–16) by quartile of change in talent-to-market alignment, n=146

I nsurance sector: average company EBITDA growth (2012–16) by quartile of change in talent-to-market alignment, n=70

–5.8%

–0.6%

0.8%

5.6%

–9.1%

10.1%8.8%

19.8%

–6%

–4%

–2%

0%

2%

4%

6%



–10%

–5%

0%

5%

10%

15%

20%


Pharmaceutical sector: average company EBITDA growth (2012-16) by quartile of change in talent-to-market alignment, n=71

–4.3%

3.7%

9.3% 9.7%14 percentage point difference

–6%

–4%

–2%

0%

2%

4%

6%

8%

10%

12%

ere is particular significance for ban ing insurance and p ar aceutical fir s n t e ban ing sector fir s wit t e ig est i pro e ent in talent to ar et align ent ac ie ed profit growt on a erage 11 percentage points ig er t an t ose wit t e lowest i pro e ent or decline in talent to ar et align ent n t e insurance sector t ose in t e top uartile of i pro ed align ent ac ie ed profit growt t at was percentage points ig er t an t ose wit t e lowest i pro e ent in align ent ibit 11



3. Talent-to-market alignment by country


ational econo ies t at a e co panies wit a ig er talent to ar et align ent tend to be ore producti e

ollowing a lost decade for producti it growt after t e global financial crisis polic a ers attention as focused on understanding w at dri es differences in producti it perfor ance

range of e idence suggests t at fir s t at focus on e ports ac ie e stronger producti it outco es t an do esticall focused fir s 1 e talent to ar et align ent anal sis supports t e lin between a better e ternal focus and producti it ir s wit a

ig er talent to ar et align ent ac ie e stronger producti it perfor ance n fact t ere is e idence t at econo ies wit

ead uartered fir s t at a e a ig er talent to ar et align ent ac ie e ig er o erall producti it ibit 1 ountries in t e top uartile for t eir co panies talent to ar et align ent tend to ac ie e producti it easured b per e plo ee 1 ti es

ig er t an t ose countries wit co panies in t e botto uartile of align ent ere is significant alue and ulti atel ualit of life at sta e if co panies were as well aligned as fir s it could potentiall be wort around billion to t eir national econo

E x hibit 1 2 : Countries producing companies with highest talent-to-market alignment tend to achieve higher productivity

1 large a ount of literature as e plored t e differential producti it of e porting fir s ersus do esticall focused fir s and foreign owned fir s; for e a ple w wang 1 roducti it and t e e port ar et fir le el anal sis; ir a reenawa and neller

oes porting ncrease roducti it icroecono etric nal sis of atc ed ir s e iew of nternational cono ics 1 – ; a good eta anal sis agner ports and

roducti it ur e of t e idence fro ir le el ata orld cono –

Av erage match between talent and market by company headquarter country

Economies that produce companies with a higher match between their talentand the global market are more likely to achieve high productivity

I f U K companies were as well aligned as U S could be worth $900 billion to the economy

CroatiaCzech Republic

Slovenia

Hungary

Finland

Chile

ColombiaPeru

Greece

Norway

New Zealand

South Africa

PhilippinesIndonesia

Portugal

Turkey

Malaysia

United Arab Emirates

Qatar

Thailand

Austria

India

Brazil

DenmarkNetherlands

Singapore

Spain

Italy

Sweden

Mexico

Australia

FranceHong Kong

Israel

Belgium

Taiwan

Germany

South Korea

United Kingdom

Canada

Switzerland

China

Japan

Sri Lanka

Ireland

United States

y = 76,674x + 46,732R² = 0.1823

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

–0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Coun

try

prod

uctiv

ity, G

DP/e

mpl

oyee

; 201

6

Saudi Arabia



ere is a significant ariation across t e globe in ow well co panies align talent to ar ets

e anal sis re ealed si able ariations in talent to ar et align ent a ong co panies ead uartered in different parts of t e world cross t e co panies in t e sa ple fir s

ead uartered in ort erica tend to ac ie e a considerabl ig er talent to ar et align ent t an fir s ead uartered in

t e sia acific region and urope ibit 1 otabl apanese fir s were close to t e global a erage w ile fir s in urope ac ie ed a talent to ar et align ent around alf t e le el of t ose in ort erica ir s ead uartered in e erging ar et locations li e entral and out erica ndia and frica ad t e largest scope to i pro e t eir talent to ar et align ent

E x hibit 1 3 : Firms headq uartered in North America tend to have a higher talent-to-market alignment

0.77

0.55

0.46

0.36

0.29

0.13

0.060.03

0.000.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

North America

Japan Global average

Asia Pacific Europe Central and South America

India Middle East Africa

Average match between talent location and market by company headquarter country, grouped into regions; correlation coefficient between –1 and +1



fir s are best in class w en it co es to atc ing talent to ar et

ere is consistent e idence t at fir s ac ie e t e closest atc between t e proportional allocation of talent to a countr

and t at countr s significance in t e global subsector ar et ibit 1 o panies ead uartered in reland also tend to

ac ie e a ig le el of atc between t e countr location of t eir talent and w ere t e ar et is b countr otabl co panies

ead uartered in continental urope and across sia acific tend to ac ie e a lower atc between talent and ar et opportunit


E x hibit 1 4 : Companies headq uartered in the U S tend to achieve a higher match between talent and the market

Average match between talent and market by company headquarter country, n=659

Perfect alignment implies an alignment score of +1 where companies have the largest concentration of talent in the largest markets and vice versa. Companies with a perfectly negativ e alignment would have the smallest proportion of talent in the largest markets and vice versa.

–0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Finland

Norway

Czech Republic

Greece

South Africa

Indonesia

Turkey

Austria

India

Brazil

Denmark

Netherlands

Singapore

Spain

Italy

Israel

Sweden

Mexico

Australia

France

Hong Kong

Belgium

Germany

Taiwan

United Kingdom

South Korea

Switzerland

Global mean

Canada

China

Japan

Ireland

United States



4. S eniority and business function alignment


igging deeper to understand if fir s a e t e right talent in t e rig t places

ir s often a e a concentration of senior e ecuti es in legac locations

e aggregate profile data pro ided b in ed n enabled us to obser e if t ere are aterial differences in t e distribution of senior e ecuti es and talent b ob functions b co pan across t e globe co pared wit t e distribution of a total co pan wor force

roug t is researc it was possible to anal e w et er co panies a e t e rig t talent in t e rig t ar ets rat er t an si pl pro ide a ig le el iew across all functions and seniorities of talent

an co panies tend to a e talent in legac locations owe er as t e global econo e ol es and faster growing ar ets e erge to a i i e growt opportunities co panies need to ensure t e a e t e rig t talent in locations wit increasing re enue generating opportunities ata for fir s across t e consu er products and retail sector s ow t at t e proportion of directors and abo e in t e sector are disproportionatel positioned in ature ar ets li e t e nited tates t e nited ingdo and rance ibit 1

E x hibit 1 5 : D istribution of senior talent versus relative siz e of market opportunity by country

Total CPR % headcount by county CPR directors and above % by country CPR market share by country

0%

35%

30%

25%

20%

15%

10%

5%

40%

45%

United States

China Japan Germany Brazil France Mexico Italy India Spain Canada Australia South Korea

United Kingdom

Market opportunity by country; % share of global consumer products and retail market compared withdistribution of talent by country workforce and directors in each country as % of global total; data for 2016



lign ent between senior e ecuti es and ar et is related to perfor ance

nal sis of t e talent to ar et align ent a ong e ecuti es onl t at is all t ose t at self reported on public in ed n profiles as a director or abo e re ealed ore significant relations ips wit

easures of perfor ance e strengt of align ent of directors and abo e to ar et opportunities e plained t e ariations in producti it captured b profit per e plo ee in t e consu er

ealt ; food; non alco olic be erages; and p ar aceuticals sectors ibit 1 e anal sis does not re eal w et er t ese senior

e ecuti es are sourced locall or on assign ent but strongl indicates t e i portance for perfor ance of a ing t e rig t senior talent in t e rig t ar ets

E x hibit 1 6 : R elationship between alignment of senior ex ecutives to market opportunity and performance by sector

$29,724

$47,983

$83,492

$128,048

4.3x

$59,688$75,513

$97,196

$120,3862x

$0

$40,000

$80,000

$120,000

$160,000


$0

$40,000

$80,000

$120,000

$160,000



Alignment between workforce and market Alignment between workforce and market


Consumer health sector: average productivity (EBITDA per employee 2016) level by directors and above talent-to-market alignment quartile n=69

Non-alcoholic beverages sector: average productivity (EBIDTA per employee 2016) level by directors and above talent-to-market alignment quartile; n=60

Pharmaceutical sector: average productivity (EBITDA per employee 2016) level by directors and above talent-to-market alignment quartile; n=68

Food sector: average productivity (EBITDA per employee 2016) level by directors and above talent-to-market alignment quartile; n=88

$35,228 $35,931

$77,863

$106,806

3x

Bottom quartile 2nd quartile 3rd quartile Top quartile$0

$40,000

$80,000

$120,000

$48,741

$81,630

$123,737

$183,072

3.8x

Bottom quartile 2nd quartile 3rd quartile Top quartile$0

$40,000

$80,000

$120,000

$160,000

$200,000



e functions are often underrepresented in crucial ar ets

e in ed n aggregate profile data allowed us to anal e for eac co pan and in aggregate across eac subsector ow t e wor force in business functions suc as sales ar eting and researc including product de elop ent is distributed across t e globe s wit t e senior e ecuti e talent anal sis in an cases e functions are concentrated in legac locations or co pan ead uarter ar ets is suggests t at t ere is a notable

talent to ar et isalign ent ibit 1

E x hibit 1 7 : Business functions are often concentrated in legacy locations

Total CPR % headcount by country CPR sales % headcount by country CPR marketing % headcount by country

CPR research % headcount by country CPR market share by country

United States

China Japan Germany Brazil France Mexico Italy India Spain Canada Australia South Korea

United Kingdom

0%

35%

30%

25%

20%

15%

10%

5%

40%

45% Market opportunity by country; % share of global consumer products and retail market compared with distribution of talent by country; workforce and business functions in each country as % of global total; data for 2016

Across all business functions, CPR firms are overrepresented in the US relative to the market size


lign ent between sales and ar eting talent and ar et opportunit atters for perfor ance

e i pact on perfor ance of t e align ent between w ere functions are located would be e pected to ar fro sector to sector for intuiti e reasons or e a ple a ing local ar eting capabilities in eac ar et ig t be i portant in a ariet of sectors fro ban ing to insurance to non alco olic be erages w ile a ing a locali ed researc and product de elop ent tea

ig t atter ore in sectors w ere tailoring t e t pe of product is particularl i portant li e in t e arious subsectors wit in t e fast o ing consu er goods space e anal sis underta en found t at c anges in align ent of t e ar eting wor force to ar et were related to recent growt perfor ance in t e insurance and auto oti e sectors i ilarl anal ing talent to

ar et align ent for t e sales and business de elop ent function re ealed t at c anges in align ent were related to producti it perfor ance in t e apparel and footwear; food; non alco olic; and p ar aceutical sectors


5. K ey questions for leaders to consider as the re e t on this resear h


e findings of t is researc i pl t at in addition to t in ing about t eir wor forces fro a cost opti i ation perspecti e t roug offs oring near s oring or rig t s oring co panies a e t e opportunit to re isit t eir re enue and growt opti i ation to create co petiti e ad antage t roug growt s oring

e researc suggests t at t ose businesses t at focus on growts oring to ensure t at t e rig t e ecuti e ar eting and sales product de elop ent researc and ot er talent categories better

atc t e global ar et opportunities will do a better ob of capturing s are in t ose ar ets

n a low growt en iron ent wit wage stag ation across an de eloped ar ets and an increasing concentration of opportunit and social obilit occurring alongside a rise in protectionist senti ents t is researc pro ides a clear econo ic i perati e for

ore trade and obilit of t e rig t people to t e rig t places rat er t an less

is wor illustrates t e power of co bining bot granular co pan data suc as t at pro ided b in ed n wit aggregate ar et and industr data suc as t at broug t b ese pro ide t e necessar inputs to bot corporate strateg planning and an end toend talent strateg and anage ent approac t at is at t e core and clearl lin ed to corporate and business unit strateg planning

e would t erefore suggest t at as t e re ect on t is researc different sta e olders as t e sel es t e following uestions

Companies1 oes our co pan treat our talent footprint relati e to

ar et opportunit as a source of co petiti e ad antage at t e core of t e suite agenda

o suite e ecuti es and business leaders understand t e alue opportunit at sta e

ow often does our co pan re iew t e s ifts in global ar et opportunit and ow is t at lin ed to an end to end

talent strateg and anage ent approac

oes our co pan s end to end talent strateg and anage ent approac also include furt er refine ents suc

as sub subsector s ifts role t pes seniorit auto ation offs oring wage arbitrage opportunities and di ersit considerations

oes our co pan s end to end talent strateg ta e into account t e i portance of a ing international talent rotate t roug t e o e office succession planning engage ent and perfor ance anage ent lin ages

o owns sponsors t e topic of obile talent in our organi ation s it iewed as strategic or ad oc oes it connect to and act in response to a larger end to end talent strateg and anage ent approac

Policy makers1 oes national polic regulation support t e i portance of

enabling do estic co panies to reac and be successful in ot er geograp ies

at barriers e ist in ter s of furt er encouraging a better talent footprint ar et opportunit align ent

s t ere a s ared iew a ong polic a ers around t e i portance of t e alue and opportunit in national co panies better participating w ere t e ar et opportunit is

I nvestors and shareholders1 s t ere untapped opportunit in a ing in est ents a e a

better and earlier atc to global opportunities

s our in est ent strateg to reac global ar et opportunities and econo ies of scale and scope focused

ore t roug indi idual co panies wit a global footprint or a portfolio of ar et specific co panies

s part of t is oint researc industr geograp and co pan specific insig ts and reports are a ailable

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About E Y ’ s People Adv isory S erv icess t e world continues to be i pacted b globali ation de ograp ics

tec nolog inno ation and regulation organi ations are under pressure to adapt uic l and build agile people cultures t at respond to t ese disrupti e forces eople d isor er ices belie es a better wor ing world is elping our clients arness t eir people agenda t e rig t people wit t e rig t capabilities in t e rig t place for t e rig t cost doing t e rig t t ings

e wor globall and collaborate to bring ou professional tea s to address co ple issues relating to organi ation transfor ation end to end e plo ee life c cles effecti e talent deplo ent and obilit gaining alue fro e ol ing and irtual wor forces and t e c anging role of

in support of business strateg ur professionals as better uestions and wor wit clients to create olistic inno ati e answers t at deli er

ualit results

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genc 1 1 1

one

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