Geographical HRO Growth: The NelsonHall HRO Confidence Index Says…

Earlier this week my colleague Linda Merritt wrote about the over-arching tune and tone of optimism and anticipated growth in the HRO industry, per the results of NelsonHall’s just-released HRO Confidence Index.  Today, let’s talk about geographical growth.

When asked about expected changes in 2010 HRO revenues by geography, year-on-year relative to 2009, the HRO providers that participated in this most recent HRO Confidence Index see increased growth in both mature and emerging economies in Asia Pacific and Latin America, expect maintenance of the growth experienced at the end of 2009 in the U.S. and U.K., and anticipate higher growth in major continental economies including France, Germany, Benelux and the Nordics.

Specifically – on a scale of 1 to 5, with 5 meaning a strong increase and 1 meaning a strong decrease – the geographical ratings were: 

Focusing specifically on the Asia Pacific market here (as it’s an emerging market for HRO) – and especially relative to RPO growth – data points made by Dr. Chris Chan (Chairman of the MBA Program at Hong Kong University), at the recent HRO Summit in Singapore support our HRO Confidence Index findings. For example, Dr. Chan stated:

• At 11.9 percent sustained year-over-year growth, China and Hong Kong have the world’s fastest growing economy

• The Indian economy has grown from $32 billion in the 1980’s to more than $1 trillion today

• 64 percent of Chinese, 50 percent of Hong Kong-based and 54 percent of Singaporean businesses expect to increase hiring in 2010

And it is clear that RPO activity is actually taking place and not just being talked about in Asia Pacific in 2010, with recent contracts being won by Hays, Kenexa, Manpower and Accenture.

However, hiring increase requirements in Asia Pacific come with a significant challenge, as noted on June 7, 2010 by Manpower Chairman Jeff Joerres at the World Economic Forum on East Asia summit in Vietnam. According to Mr. Joerres, talent shortages in Asia Pacific are 10 percent higher than the global average, led by Japan with 76 percent of companies struggling to source talent, attributable to an aging workforce and lack of immigration. On the one hand – as pointed out by Mr. Joerres – young people need to be encouraged to learn in-demand skills for jobs including technicians, engineers and skilled trades. On the other hand, this represents an opportunity for learning outsourcing providers to help re-train existing workers, and an opportunity for RPO providers to help source requisite talent via their rich local job banks and talent pools in other geographies, as well as develop innovative sourcing strategies. 

One thing I find very interesting is that the talent shortage problems currently faced by Asia Pacific organizations will soon need to be addressed in the U.S. and parts of Europe. Four or five years ago there was great fear that the boomers retiring and leaving the workforce would result in a severe talent dearth. While the recession has stemmed that fear, when the economy picks up and net worth restores, that exodus will begin and the talent shortage will become a reality. How should companies address this challenge? You know my answer.

In my next blog, a focus on industry growth per the most recent NelsonHall HRO Confidence Index.

Gary Bragar, Lead HRO Analyst, NelsonHall

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