Research Shows Many Companies’ Office Locations Are Holding Them Back
November 30, 2017
When Amazon recently announced plans to build a second headquarters in a yet-to-be-determined location, it brought up an interesting question for talent leaders: As a global company today, where does it make the most sense to establish your workforce?
New research from a collaboration between LinkedIn and EY has found that companies can make major performance and productivity improvements by taking a more strategic approach to where they place their people.
We’ve published the findings in the report, “Right People, Wrong Place?”, which includes an analysis of 659 companies across 11 sectors. EY brought a detailed view of current and projected industry market performance by geography, and LinkedIn provided insights on talent supply by geography, broken down by business function and seniority.
Here’s a look at what we learned, and what it means for Human Resources and Talent Acquisition Executives:
Many companies are putting people in the wrong places
Most companies tend to locate most of their workforce either in their headquarters or in their more mature hub markets, rather than building up a significant presence in countries with future revenue opportunities. For example, consumer products and retail companies are overrepresented in the US compared with the size of the consumer products and retail market there. However, in China, Japan, Germany and Russia, consumer products and retail workforces are much smaller than the market opportunity.
By building out a significant presence in markets where companies anticipate future market demand and therefore more closely aligning market and talent development strategies, companies can more effectively and rapidly tailor their products, marketing, and sales efforts to the local markets.
Companies that have employees work in target markets are more successful
When a company’s workforce is located in areas of greatest market opportunity, our research found that financial outcomes improve. This is especially true when senior leadership is located in the right markets. In fact, we found that variations in productivity (measured by profit per employee) in several sectors, particularly business-to-consumer sectors with significant variation in local preferences and regulations, such as consumer health, food and beverage, and pharmaceuticals, were explained by how well a company’s market opportunities aligned with the location mix of employees.
And the impact of strong alignment between talent location and market demand was especially strong among senior leaders - those with titles of Director or higher. By placing senior leadership in priority growth markets, a company can adapt much more effectively.
The research also found that companies that increase talent-to-market alignment over time tend to grow faster and yield higher profitability per employee. Between 2013 and 2016, companies that ranked in the top 25% for improving the alignment between location of talent and location of market demand saw profit growth that averaged 7.8 percentage points higher than those in the lowest 25%.
So why aren’t more companies moving their talent to where the market demand is?
In short, recruiting and developing talent is hard - even more so in countries where a company is not yet well established and doesn’t yet have the instincts based on past experience or ready access to the data to make the right decisions.
There are a few companies that are taking bold leaps to shift their talent base to align to future market demand. One notable example is Google, which announced ambitious plans in early 2016 to build out a major engineering hub in Singapore to support its goal of reaching the next billion users - a departure from the approach that many other tech employers have taken in consolidating their engineering staff at headquarters with possible 1-2 satellite locations. And Google is ramping quickly - Google’s Singapore office currently shows 72 active job openings on LinkedIn.
But few companies today have the confidence to make the leap that Google did, as the hard costs and organizational drain caused by fragmenting your talent base into multiple locations can be significant - and the upside, while significant, can be challenging to capture without having a deeper level of intelligence about the market you are looking to enter.
What you can do to align your talent to your future market demand and secure your company’s growth path
For talent professionals, understanding the impact of aligning your workforce with market opportunity provides an important chance to serve as advisors to the business. This ties into a key shift we’re seeing in the industry - a focus on Talent intelligence, a new way to use data and insights to improve every step of the recruitment process.
Try these tips to start the conversation and get your company headed in the right direction:
Start with a clear picture of the talent supply and demand in markets that are growth priorities for your company. Instead of defaulting to sourcing talent in legacy markets, look at all your options as you expand your workforce. Have you overlooked markets with large pockets of the skilled workers you need? Or, on the other hand, is your company looking to move into markets that have fundamentally different talent dynamics than the ones you’ve been operating in? Recruiting in markets that are “hidden gems” could provide an opportunity to find the people you’re looking for at a lower cost, and with less competition. Check out how you can use Talent Pool reports to do this.
Get leadership buy-in and carefully plan the first few moves. Once you’re armed with data, paint a clear picture for executives of why alignment is important - and what it will take to achieve it. A common understanding upfront of what the talent dynamics are in the market you are looking to enter - and especially how you will source your first few critical senior, hard-to-fill-roles - will help refine and de-risk your hiring plan.
Fine tune your employer brand and recruitment messaging. Don’t assume that the brand you carry in your headquarters will translate to new markets without deliberate investment. With a clear idea of your top markets and the executive buy-in you need to pursue them, adapt your employment brand and candidate outreach to appeal to professionals in those markets. For example, do your website and your social channels spotlight employees in the markets you’ve decided to tap? Does your messaging highlight the things a data scientist in Atlanta would care about, or is it more tailored to someone working in Silicon Valley?
By taking a more strategic and data-driven approach to your talent footprint and adjusting recruiting efforts accordingly, your company can make major improvements that boost productivity and impact the bottom line.
About the report
The research in Right People, Wrong Place? is based on combined analysis of 659 companies across 11 sectors. A five step core methodology was followed using unique datasets on market size and company performance by industry sector developed by EY and also using aggregate profile data provided by LinkedIn on company workforce locations and distribution by self-reported seniority and function. You can download the complete report here.
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