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Manufacturing to Asia: who willwin the emerging battle for talentbetween Dragons and Tigers?

Connie ZhengFaculty of Business and Informatics,

School of Management and Information Systems,Central Queensland University, Rockhampton, Australia

Claudine SoosaySchool of Management, University of South Australia, Adelaide,

Australia, and

Paul HylandSchool of Natural Systems Management, University of Queensland,

Rockhampton, Australia

Abstract

Purpose – The purpose of this study is to examine the issues relating to recruiting highly skilledmanagerial and professional staff experienced by multinational companies (MNCs) manufacturing insix Asian countries, namely Indonesia, Malaysia, Philippines, Singapore, Taiwan and Thailand.

Design/methodology/approach – Data collected from 529 MNCs were used to examine criticalhuman resource planning and recruitment concerns of companies operating in high growth “Dragon”and newly developed “Tiger” economies. The study examined the differences in recruitment practicesbetween manufacturing and service companies and the issues relating to how manufacturers maintainan adequate skills basis.

Findings – There appears a considerable extent of battle for talent among Dragon and Tigereconomies with the latter required to be more aggressive as they attempt to sustain growth.Manufacturing companies are experiencing a higher demand for more job-related managerial andtechnical capabilities whilst competing with service companies that are also in need for more talent. Tosucceed, manufacturing MNCs will need to adopt a strategic approach for recruitment and retention,and internal capability training to maintain their skilled employees in order to sustain competitiveadvantage.

Originality/value – The results shown in the paper provide manufacturing MNCs with insights intomanagerial and professional recruitment trend in Asia.

Keywords Manufacturing industries, Recruitment, Skills, Multinational companies, Asia

Paper type Research paper

IntroductionAs many major firms in developed economies look to off-shore their manufacturingoperations into the relatively low-cost economies in Asia, a critical issue that theyneed to consider is if they can recruit and retain the talent they need to runmanufacturing operations. Jack Welch, CEO of general electric once urged hisexecutives to develop and retain the top 10-20 per cent of managerial andprofessional staff. His idea was that “an organisation is only as strong as its toptalent” (Walker and LaRocco, 2002, p. 12). Bartlett and Ghoshal (2002) shared a

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Received June 2006Revised November 2006Accepted March 2007

Journal of Manufacturing TechnologyManagementVol. 19 No. 1, 2008pp. 52-72q Emerald Group Publishing Limited1741-038XDOI 10.1108/17410380810843453

similar view, they argue that organisations must take a strategic choice and makethe commitment to recruit, develop and retain the best of the best managers andprofessionals. This talent is able to drive the organisational performance forwardand help manufacturing operations to maintain a competitive edge in a turbulentbusiness world (Michaels et al., 2001; Bartlett and Ghoshal, 2002).

However, recruiting, developing and retaining the best of the best managers andprofessionals are not simple tasks. In rapidly developing economies in Asia, there is alimited talent pool. Manufacturers have to compete not only with one another but alsowith the rapidly growing service sectors for the best people. Many multinationalcorporations have been able to use expatriate employees to establish manufacturingoperations in Asia, but they are also faced with a very limited pool of talent that isprepared to move off-shore to advance their career. So is there an emerging battle fortalent in Asia or is there just a minor short lived skirmish?

Asia has over four billion people and represents a very unique dynamic businessenvironment with thousands of multinational companies (MNCs). Many economies inAsia have experienced continuous strong economic growth in recent years, with agrowth rate over twice the world average (ILO, 2005). The Asian dynamism has notonly been manifested by its rapid economic growth but also by its competitiveness inglobal markets for goods, services and investment (World Economic Forum, 2005; ILO,2005). For manufacturers to survive in such competitive and growing economies, theymust plan and prepare for growth and expansion. Above all, they must fight theemerging battle for talent, recruiting employees with non-imitable capabilities(Barney, 1991) as this is the only way that they can ensure the necessary innovationand growth in their manufacturing capacity (Bartlett and Ghoshal, 2002; Walker andLaRocco, 2002).

This emerging battle for talent in Asia can be intensified because of severe skilledlabour shortages, especially in manufacturing and this shortage has been exacerbatedby the growth in the service sector. The labour shortages across Asian countries suchas China, Japan, Korea, Malaysia, Singapore and Taiwan have been repeatedlyreported in the media. As a part of strategies to win the emerging talent battle, manymanufacturing companies often use attractive salary packages to lure managers andprofessionals from overseas or poach them from competitors (McShulskis, 1997;Frazee, 1998; Racz, 2000; Fuller, 2005; Boyd, 2006).

Intra-country skilled labour mobility in Asia has been quite extensive and this issupported by various governmental bodies. For example, Singapore’s EconomicDevelopment Board had once set out to attract 20,000 foreign professionals (Low, 1998).Such overseas recruitment practices have also been widely adopted by other Asiancountries such as Malaysia, Philippines, Taiwan, and Thailand (Gross and Lepage,2001). According to the World Migration Report (2005), international labour migrationfrom and within Asia has expanded rapidly as many countries require and acquirelabour from their neighbouring countries in order to maintain their economicexpansion. The problem with strategies such as these is that they only shift the skillsshortage problem from one manufacturing region to another. For instance, in Taiwanin 2000, inflow contract workers were mainly from Thailand (46 per cent), and overone-third from the Philippines and the rest from Indonesia. Malaysia also relies heavilyon foreign workers from neighbouring Indonesia, and Malaysia itself is the home ofmany foreign workers in Singapore (World Migration Report, 2005). High-skill

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shortages and international mobility in Asia have enabled career mobility of manyhigh-flying operations managers and professionals. Managers and professionals inChina are often looking for the best place with the best deal (Xu, 2005). This has createdan on-going challenge for MNCs to fight for attracting and retaining the best of the bestin the region (Bhasin and Low, 2002). It seems that the emerging battle for talentamong MNCs has been waged most brutally between the manufacturers operating inmore advanced economies, so-called “Dragons” and those in the newly developed“Tiger” economies. The battle would be even more escalated as the Tigers such asChina with its vast resources and abundant cheap labour have rapidly grown theirmanufacturing sector and marketed their capacity to developed economies, andstruggling manufacturers in Australia, Europe and North America have to move theirmanufacturing operations off-shore. There is a similar trend of some more developedAsian economies, e.g. Japan, Korea, Singapore and Taiwan to move theirmanufacturing operations off-shore.

Dragons and Tigers in AsiaDragons and Tigers represent the dynamic forces of power and cultural change.Recently, the Dragon or Tiger status is ascribed to growing economies especially in East,South and Southeast Asia. The term Tiger has become synonymous with nations thatachieve high growth by pursuing an export-driven trade strategy. In recent years, theSoutheast Asian nations of Indonesia, Malaysia, Philippines and Thailand have beenconsidered as Tigers. The East Asian Miracle identified eight countries that hadachieved “seemingly miraculous” rates of sustained growth over 25 years from 1965 to1990. The eight were Japan, The four Tigers (Hong Kong, South Korea, Singapore andTaiwan) and the newly industrialised economies (NIEs) or emerging Tigers (Indonesia,Malaysia, Thailand) (The World Bank, 1993). However, the Philippines was laterclassified as an “entigered” economy (Billington, 1997) and China as an emerging giantTiger economy (Weightman, 2005). Out of those eight countries initially mentioned byThe World Bank (1993), Japan, Singapore, South Korea and Taiwan have been describedas Dragon economies (Weightman, 2005), because they have developed more rapidlythan the other economies in Asia. Findlay et al. (1998), Bello and Rosenfeld (1992) haveseparated out Singapore and Taiwan from the other Asian countries and referred tothese two countries as Dragon economies because they have the highest pace ofeconomic growth in the world (Findlay et al., 1998). In our study, of eight Asian countries,we adopt Findlay et al.’s approach, and refer to Singapore and Taiwan as Dragoneconomies; and Indonesia, Malaysia, Philippines and Thailand as Tiger economies.

Winning the emerging war for talentThe concept of “war for talent” first appeared in the Hudson Institute’s Report (1986) thatpredicts major skill shortages in the USA. A 1999 McKinsey study found that mostemployers had difficulty recruiting “talent” resources as a result of the tight labourmarket (Jamrog, 2002). Tulgan (2001) subsequently called for dealing with this manpowerproblem using some non-conventional HR methods, believing that these methods couldaddress the world of high-job mobility and flexible staffing arrangements, especially inthe era of knowledge economy (Goldberg, 2002; Loane, 2004). Tulgan (2001, p. 38)advocated “having many, many ways to employ people” in order to meet the staffingneeds in the world of constant change. These “many ways” were not specifically linked to

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recruitment methods, but largely referred to recruiting different types of employees,including core and peripheral staff with fixed or non-fixed terms, the concepts similar tothose discussed by Atkinson and Meager (1986), Guest (1987) and Legge (1995) onnumerical, functional and temporal flexibility in staffing.

It was Bartlett and Ghoshal (2002) who later refined the talent war within theframework of linking strategic talent resource management to a firm’s businessstrategy. This is different to Tulgan (2001) who advocated winning the war for talent viaa market-driven employer-employee relationship known as “a free agent model” Bartlettand Ghoshal (2002) built their talent management model on the earlier HRM models (e.g.Barney’s (1991) “resource-based view” of the firm; Hamel and Prahalad’s (1994) “corecompetences model” and Kay’s (1995) “distinctive capabilities” framework). Theystressed the changing role of HR from administrators of various functions to builders ofhuman capital within organisation as a core source of competitive advantage (Bartlettand Ghoshal, 2002, p. 37). It is noted that organisations in the knowledge economy can nolonger be successful if they still focus on products and markets or compete for resourcesand competencies. Instead, organisations can only achieve sustainable development viacontinuous self-renewal while they compete for “talent and dreams” (Bartlett andGhoshal, 2002, p. 35). This notion of competing through talent has been furtherreinforced recently by a number of authors who addressed the new paradigm shift fromhuman resource management to talent management (Sears, 2003; Mucha, 2004; Frankand Taylor, 2004; Heinen and O’Neill, 2004; Boudreau and Ramstad, 2005; Gandz, 2006).These scholars emphasise talent management through strategic staffing, training,recruiting and retaining talent in order to achieve superior business outcomes.

The focus of the current research is on examining the issues relating to staffing planand recruitment in the context of MNCs manufacturing in Asia. A number of researchquestions are raised. First, what sort of talent are Dragons’ and Tigers’ manufacturersfighting for? “Talent” according to Sears (2003), are the individuals with knowledge,skills abilities and other capabilities at work. Talent in manufacturing operations,however, is more than the individual capabilities, they are the combination of theabilities of all employees who are able to contribute to the achievement of organisationalobjectives. For a manufacturing operation to be successful, it is critical to have the mosttalented employees working in the most important jobs (Fleenor, 2003, p. 798). It isacknowledged that better organisational performance can only be achieved with aconcerted effort made by all employees with different talents (Bartlett and Ghoshal,2002; Sears, 2003). However, highly skilled managers and professionals tend to act as adriving force to build effective teams in the manufacturing production line and are morelikely and able to get employees motivated to achieve better organisational outcomes interms of corporate morale, productivity and profits (Walker and LaRocco, 2002).Therefore, in this paper, “talent” is specifically referred to those highly trained andskilled managers and professionals who are the important cohorts of manufacturingperformance, and are more likely to motivate all employees and assist organisations toachieve business success (Michaels et al., 2001).

“Managers” and “Professionals” in this study are defined according to theinternational standard classification of occupation (ISCO-1968 and 1988, ILO, 1998,2000). Managers are persons in charge of a specific unit or function within the company,and “Professionals” classified as scientists, engineers, systems analysts; economists,


55

accountants, aircraft and shipping officers plus any professional and technical andrelated workers not classified above.

Having identified the areas of talent required in MNCs to improve theirperformance, the next question relates to the scale of talent that are needed by MNCs inthe region. What is the demand from MNCs for talent for operational advantage andfuture expansion? The third question is to what extent have Dragons and Tigersexperienced difficulty in recruiting and retaining talent?

Existing literature tends to speculate about the impact of skilled labour shortage onrecruitment. The argument is generally centered around that if there is a more severelabour shortage, the level of recruitment difficulty would increase (Perry, 2002;Gardner, 2002; Jamrog, 2004; Pollitt, 2004; Messmer, 2005; Fuller, 2005; Breitenstein,2005). However, there has been lack of empirical evidence on the extent to whichorganisations, such as MNCs operating in Dragon and Tiger economies haveexperienced talent recruitment difficulties. The evaluation of the extent to which MNCshave experienced difficulty in recruiting managers and professionals and examinationof the level of attrition rate for managers and professionals in both manufacturing andservice sectors will provide us with some indication of how short talent is in the region.

Lastly, if there is an issue of recruitment difficulty, can this issue be addressed withbetter recruitment methods? This leads to the fourth set of questions: What methodshave MNCs used in recruiting talent? Are there any significant differences in terms ofthe way Dragons and Tigers search for their talent?

To answer these questions, a survey was conducted in both Dragon and Tigereconomies, with 529 MNCs responding to the survey. In the next section, a snapshot onlabour market trends in Dragon and Tigers economies is displayed to provide a contextfor understanding the reasons behind the emerging battle for talent. This is followedby an outline of economic and employment structural changes in these countries thathave affected labour supply and demand, with a focus on addressing specifically theskill requirements of manufacturing MNCs. Educational attainment in the Dragon andTiger economies is also compared. We then introduced research methods used for thisstudy and discuss the results from data analysis. Some concluding remarks are madewith suggestions for adopting better methods to recruit and retain talent for MNCsmanufacturing in Asia.

Labour market trends in AsiaDespite strong economic growth in Asia after the Asian financial crisis in 1997, overalllabour market conditions remain largely unchanged since 1999 (ILO, 2005). The totallabour force participation rate fell slightly from nearly 70 per cent in 2000 to 68 per centin 2004 (Table I). The overall employment growth has not matched economic growth inAsia. Although total employment numbers have increased from 1.47 billion in 1999 to1.58 billion in 2004, representing an increase of employment rate of 1.6 per cent. This isminimal compared with a double-digit economic growth rate achieved by most Asiancountries for many years up to 1997, and in recent times, there has been at least anaverage of 6-7 per cent growth rate (ADB, 2005).

Table I shows the key indicators of labour market trends in Dragon and Tigereconomies. It can be seen that the employment growth rate in both Dragons and Tigersin most cases outgrew the annual labour force growth rate. This implies that certainjobs must have been filled by foreign workers. Indonesia and Philippines have had the

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56

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Table I.Key indicators of labour

market trends in Dragonsand Tigers


57

highest unemployment rates, indicating that these two economies may not have fullyrecovered from the Asian financial crisis compared to Thailand. However, bothcountries demonstrated a steady economic growth rate in the period of 2000-2004. Thefigure would imply that there is more severe structural unemployment in these twoeconomies than in other South-east countries. Structural unemployment is largelycaused by unskilled labour that cannot meet the standard of labour market demand(OECD, 1998; Zanko and Ngui, 2003).

There are two implications that can be drawn from this analysis of the labourmarket conditions in Dragons and Tigers. Firstly, rapid economic growth with largelyunchanged labour market conditions supports media speculation that there is a verytight labour market across the Southeast Asia. Firms would feel a pinch as the marketfavours suppliers, i.e. labour, especially those highly skilled managers andprofessionals who are able to bargain and negotiate their employment conditions.Secondly, paralleled with the employment growth, high-unemployment rate continuesin most of Southeast Asian countries (except Thailand). This might be due to economicrestructuring without proper manpower planning which tend to result in unskilled,untrained or redundant labour moving out of the traditional agriculture sector,however, having difficulty being absorbed into emerging and growing sectors, such asmanufacturing or service sectors. Therefore, in the next section, it is necessary toexamine the extent of economic restructuring in Dragon and Tiger economies.

Economic restructuringThe process of industrialisation since the 1970s has shaped the Asian economiclandscape. Feridhanusetyawan et al. (2001) assessed the impact of the industrialisationprocess on employment structure of the Asia Pacific Economic Cooperation (APEC)member economies. They concluded that structural changes result in skill shortages,yet this has been slightly compensated by extensive international-labour migration.Table II outlines the major shift from agricultural production to manufacturing andservice sectors, and the shift from manufacturing to services sectors among Dragonand Tiger economies. The Dragon economies are dominated by manufacturing andservices, with very low percentage of GDP attributable to agriculture. Both Singaporeand Taiwan have moved away from manufacturing industry and becomeservice-dominant economies, with over 65 per cent of GDP coming from services. Onthe contrary, the Tiger economies are dominated by agriculture and services. However,it is evident that all Tigers have also reduced substantially in agriculture employmentand moved into manufacturing for the past two decades, with over 40-45 per cent ofGDP attributable to manufacturing. Philippines is an exception, developing moretowards a service economy with 52.8 per cent of GDP coming from the service sector, amuch lower degree of industrialisation compared with those other Tiger economies.

Economic structural changes affect the employment structure. There is a high levelof employment in the service sector for Dragon economies whilst more people are stillworking in the agricultural sector in the Tiger economies. Malaysia with 65 per cent ofworkforce in the service sector has closely followed the developmental path of theDragons and moved quickly into competing for labour in the sector. Anotherdistinctive feature as presented in Table II is that for the past decade, a largeproportion of reduction in the manufacturing sector from the Dragons, both in thepercentage of GDP and employment, might have been absorbed by the Tigers, that

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have indicated the proportional increase in their manufacturing sector. Interestingly,the percentage of GDP and employment in the service sector has both increased inDragon and Tiger economies. This implies that it is very likely Dragons and Tigershave to compete for the same talent in order to develop and sustain their serviceindustry now and in the future.

Both economic and employment structural changes require labour marketadjustment. Table III depicts the trends of such adjustment as the number ofmanagers and professionals have been employed more extensively to meet the demandfor structural change. The change in demand for managers and professionals is muchmore rapid in the Tiger economies than in the Dragon economies. This might be dueto more foreign investment directed by MNCs to Tiger economies for setting upmanufacturing and production lines, which would require more skilled labour tomanage new ventures.

Educational attainmentA nation’s skilled labour force is related to its educational attainment. Educationalattainment determines whether a nation can sufficiently supply skilled labour to meetthe demand for growth and expansion (Mitter and Bastos, 1999; OECD, 2004). Mitter

1987 1990 1995 2000 2004Countries GDP Empl’ GDP Empl’ GDP Empl’ GDP Empl’ GDP Empl’

DragonsSingapore

Agriculture 0.6 0.9 0.4 0.3 0.2 0.2 0.1 0.2 0.1 0.2Manufacture 33.9 26.8 32.7 29.0 33.7 23.8 34.5 20.8 33.7 16.4Services 65.5 72.3 67.0 70.7 66.1 76.1 65.4 79.0 66.2 78.1

TaiwanAgriculture 5.3 15.3 4.2 12.8 3.5 10.5 2.1 7.7 1.7 6.6Manufacture 46.7 35.6 41.2 32.2 36.4 27.2 32.5 28.1 29.5 27.4Services 48.0 49.2 54.6 54.9 60.1 62.2 65.4 64.1 68.7 66.1

TigersIndonesia

Agriculture 23.3 56.4 19.4 55.9 17.1 44.0 15.6 45.3 15.4 46.4Manufacture 36.3 8.6 39.1 10.8 41.8 13.4 45.9 13.5 43.7 13.2Services 40.4 36.7 41.5 33.3 41.1 42.6 38.5 41.2 40.9 40.4

MalaysiaAgriculture 19.7 30.8 15.0 26.0 12.7 20.0 8.4 16.7 9.1 14.8Manufacture 38.1 16.1 41.5 20.5 40.7 23.7 48.4 23.8 48.5 20.6Services 42.2 53.1 43.5 53.5 46.8 56.3 43.1 59.5 42.4 64.6

PhilippinesAgriculture 24.0 47.8 21.9 45.2 21.6 44.1 15.8 37.4 15.3 37.1Manufacture 34.4 10.6 34.5 10.3 32.1 10.4 32.3 10.4 31.8 9.8Services 41.6 41.6 43.6 44.5 46.3 45.6 52.0 52.1 52.8 53.1

ThailandAgriculture 15.7 64.4 12.5 64.0 9.5 52.0 9.0 48.8 9.9 42.3Manufacture 33.3 9.0 37.2 10.3 40.7 13.6 42.0 14.6 44.1 15.0Services 50.9 26.6 50.3 25.7 49.7 34.5 49.0 36.6 46.0 42.7

Source: ADB: key indicators 2005

Table II.Structural changes

per cent of GDP at currentprices and employment:

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and Bastos (1999, p. 157) state that “ . . . a well-educated and trained labour force iscrucial to social and economic wellbeing” of the nation. Strategically developingeducation and training systems and improving the quality of labour forcequalifications are required for sustaining national economic growth in the long-term(OECD, 2004). In terms of technological capability, a study covering 137 countries byLall and Urata (2003) found that educational attainment and research and development(R&D) have a significant positive impact on economic growth in East Asian economies.Hobday (1995) attributed rapid innovation in East Asia to a high level of R&Dactivities. Many manufacturing firms in Asia have been sending their graduates fordoctoral training in science and technology in the advanced countries such as USA,European and other Western countries. These workers trained overseas have madesignificant contributions to technology advancement and capability building inmanufacturing firms in China, South Korea and Taiwan (Zheng and Hu, 2006).

It seems that the higher educational attainment in terms of primary, secondary andtertiary education that a nation obtained, the more likely it would produce a higherskilled labour force. OECD (2003) shows a dramatic reduction of low-skilled labourworkers as a result of a rise in educational attainment and income in Taiwan between1987 and 2000. It is important to examine the level of educational attainment byDragons and Tigers to assess how capable these economies are in supplying managersand professionals required to meet the demand of structural changes as discussed inthe previous section.

Table IV provides some indication on the comparison of adult literacy rate forpopulation age 15 þ and the percentage of tertiary qualifications attained in theDragons and Tigers. The adult literacy rate is both quite high among the Dragon andTiger economies. The highest illiteracy rate appears in Indonesia (12.1 per cent),leading it to the lowest percentage in attaining tertiary qualifications. In the period of1993-2003, the Dragons have almost doubled their achievement in attaining tertiaryqualifications. However, in the Tiger economies, the change varies, with Malaysia and

Managers ProfessionalsCountries 1995 1999 2003 1995 1999 2003

DragonsSingapore 218 233 271.4 394 527 587.3Percentage of change 7 16 34 11Chinese Taipei 436 414 424 1,838 2,172 2,311Percentage of change 25 2 18 6TigersMalaysia 248 348 793.5 757 937 1750.2Percentage of change 40 128 24 87Philippines 421 662 3,646 1,428 1,763 2,234Percentage of change 57 451 23 27Thailand 717 914 2,361 1,596 2,015 2457Percentage of change 27 158 26 22

Notes: Singapore and Chinese Taipei uses ISCO-1988. 2003 data for Chinese Taipei is not available,replaced with 2002. Indonesia data not available, Malaysia, Philippines and Thailand use ISCO-1968for 1995, 1999 and ISCO-1988 for 2003Source: ILO Yearbook of labour statistics, 2004

Table III.Trends of changingemployment in differentoccupations, ’000, per cent

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Thailand showing more increase of tertiary qualifications attained, a slow increaseappeared in Indonesia and a decrease in tertiary qualifications attained by Philippines.

In summary, it is clear that rapid economic growth in Asia required more skilledlabour. Yet the labour force growth rate is unable to catch up with the employmentgrowth in both Dragons and Tigers. Economic structural changes associated with theindustrialisation process in Asia require different kinds of skills, and a shift of labourfrom the agricultural sector to the manufacturing and service sectors demandscorresponding managerial and professional capabilities to drive the change. However,various evidence discussed above suggest that there will be insufficient supply ofneeded managerial and professional skills, especially in the Tiger economies, and thusskill migration across these economies might be quite rampant. For MNCs operating inDragon and Tiger economies, it is inevitable that they would experience difficultyobtaining skilled labour. The emerging battle among MNCs between Dragons andTigers could be more brutal than ever before, given the analysis of labour market trendsand key indicators presented so far. The empirical data presented next will provide moreinsights into the level of severity of this talent battle between Dragons and Tigers.

Research methodsTo assess the level of recruitment difficulty and methods used by MNCs to mitigate thesituation, data collected from a survey in two Dragon (Singapore and Taiwan) and fourTiger (Indonesia, Malaysia, Philippines and Thailand) economies during March-May2001 were used. The survey responses are presented in Table V. The survey wascompleted by executives, including chief executive officers, financial controllers andhuman resource managers who were believed to be more competent in providing abetter assessment of the extent to which their companies have experienced difficulty inrecruiting talent.

The data used to assess the level of difficulty experienced by MNCs and recruitmentmethods adopted are generally dichotomous and the variables coded are largelycategorical. Hence, non-parametric statistical analysis tools are used (Siegel andCastellan, 1988; Pallant, 2001). Gravetter and Wallnau (2000) suggest using the x 2 testfor independence to determine whether two categorical variables are related. Itcompares the frequency of cases found in the various categories of one variable across

Percentage withtertiary

qualifications ChangeEconomies Adult literacy rate 15 þ (per cent) 1993 2003 Percentage

DragonsSingapore 95.0 39 57.8 18.8Taiwan 96.9 48 72.5 24.5TigersIndonesia 87.9 11 16 5.0Malaysia 88.7 11 29 18.0Philippines 92.6 35 30 25.0Thailand 92.6 21 38 17.0

Source: Singapore is based on 2005 figure, the rest is 2003 figure from UNESCO 2000-2004

Table IV.Educational attainment:

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the different categories of another variable (Pallant, 2001, p. 256). For example, aremanufacturing MNCs in the Dragon economies more likely than manufacturing MNCsin the Tiger economies to experience talent recruitment difficulty? Since, we collectedthe perceptions of managers on their talent recruitment difficulties and methods usedto recruit talent, we used 2 £ 2 tables to describe the relationship between thevariables. This will generate a correlation coefficient (x 2 value) to indicate the strengthof the relationship. Yates’ correction for correlation continuity is believed to provide abetter estimation of x 2 value as it helps to correct or compensate some overestimationmade by the respondents (Gravetter and Wallnau, 2000; Pallant, 2001). Hence, thismeasurement was used. The results are presented next.

Results and analysesSpecific abilities and capabilitiesManagers in the survey listed capabilities such as management, interpersonal,planning, use of new technology, self-management, multiskilling, teamwork andjob-related technical skill. Table VI shows that most companies surveyed (over80 per cent) indicated the need to improve management capabilities for managers andprofessionals in order to improve company performance. The analysis shows that theneed to improve management skills for both managers and professionals was moreprominent in MNCs in the Tiger economies than in the Dragons (x 2 ¼ 3.588, p , 0.05).Many managers and professionals in the Tiger economies would have low skill levelscompared with those in the Dragon economies. This might have been related todifferent tertiary education and vocational training often offered more in the Dragoneconomies than in the Tigers. Hence, there is a stronger need for improvedmanagement skills in Tiger economies.

Within the Tiger economies, there is a significant difference of managerial skillsrequirement between manufacturing companies and service companies (x 2 ¼ 2.791,p , 0.05). The analysis shows that the manufacturing MNCs in the Tiger economiesdemanded more managerial capabilities than the service MNCs. But for Dragoneconomies, there is no significant difference of improving managerial capabilitiesbetween manufacturing and services. This does not mean that companies in theDragons do not require managerial skill improvement. In fact, when we runthe comparison of managerial skill improvement between manufacturing and service

Manufacture Service No of companies surveyedEconomies No. Percentage cent No. Percentage No.

DragonsSingapore 44 39.6 67 60.4 111Taiwan 45 45 55 55 100Sub-total 89 42.2 122 57.8 211TigersIndonesia 26 42.6 35 57.4 61Malaysia 34 34 66 66 100Philippines 50 61.7 31 38.3 81Thailand 49 64.5 27 35.4 76Sub-total 159 50 159 50 318Total 248 46.9 281 53.1 529

Table V.Survey profile

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sectors across two economies, management skills are more sought after in themanufacturing companies than in the service companies (x 2 ¼ 4.178, p , 0.01).The data shows a similar pattern for planning skills (x 2 ¼ 10.691, p , 0.01). Thisimplies that in the process of industrialisation and globalisation, the managers andprofessionals with management and planning capabilities are in high demand, buteven more so in the manufacturing sector operating in the Tiger economies.

Other skills and capabilities are also required to a certain degree (Table VI).However, only moderate differences exist when comparing between Tiger and Dragoneconomies. In terms of interpersonal skill requirement among MNCs in manufacturingand service sectors, there is a slightly higher demand of such skill improvement amongmanufacturing companies than service companies (x 2 ¼ 2.375, p , 0.1), againespecially more so for those companies operating in the Tiger economies than in theDragon economies (x 2 ¼ 3.456, p , 0.05). The requirement for capabilityimprovement in teamwork is also stronger in manufacturing MNCs (x 2 ¼ 2.425,p , 0.1) operating in Tiger economies (x 2 ¼ 1.729, p , 0.1). In terms of use of newtechnology and self-management, there is no significant indicator of differences amongTiger and Dragon economies. Nevertheless, among MNCs in the Tiger economies, therequirement for improving the capability to use new technology is significantlystronger in manufacturing sectors with x 2 valued at 4.871 ( p , 0.01).

The analysis also shows a greater requirement for improving job-related technicalskill for managers and professionals, especially among manufacturing companiesoperating in the Dragon economies (x 2 ¼ 10.420, p , 0.01). There is a lesser degreeamong manufacturing companies in the Tiger economies (x 2 ¼ 4.859, p , 0.05). This

Tigers (N ¼ 318) Dragons (N ¼ 211)Percentage of MNCs indicated Manufacture Service Manufacture Service

Specific abilities and capabilities requiredManagement 90.8 83.8 80.5 80.7Interpersonal 85.3 76.4 76.0 76.8Planning 90.2 79.2 70.0 70.1New technology 84.7 73.7 79.7 70.4Self-management 71.6 68.0 62.9 71.6Multi-skilling 75.5 56.9 60.3 63.5Teamwork 70.8 61.5 65.3 55.2Job-related technical skill 76.2 63.6 80.3 56.3Demand for more managers and professionalsPast 50.3 47.8 51.7 37.7Future 37.7 47.2 43.8 34.4Experienced recruitment difficultPast 59.1 50.3 59.6 45.1Future 50.9 46.5 58.4 49.2Recruitment methods usedMedia 87.2 82.9 88.9 86.0Word of mouth 34.5 56.8 25.9 44.4Private agent 54.1 54.1 78.0 66.7Internal transfer 21.6 17.1 29.5 41.1Internet 35.1 30.8 51.3 51.6Others 12.2 13.7 20.0 20.0

Table VI.Data analysis results:

comparison of Tigers andDragons


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demonstrates that even with high-level tertiary graduates in the Dragons economies,job-related technical skills may not have been well taught in tertiary institutions tomeet the manufacturing sector requirements. It might be entirely up to MNCs to trainthese specific skills. Often these firm-specific managerial and professional capabilitiesare harder to obtain, because they reside only in experienced employees who have beentrained within the firm for a substantial period of time (Castanias and Helfat, 1991; Luoand Peng, 1999). Another speculation might be that there is a need for educationalinstitutions to work with industry to provide sufficient job-related technical skills. It isnoted that over 80 per cent of companies surveyed in the Dragon economies respondedto the need to improve job-related technical skills for their managers and professionals.This figure is much higher for the Tigers economies, besides all higher indicators of therequirement for capabilities improvement for other areas in the Tigers economies(Table VI).

In summary, there appears a greater need for manufacturing MNCs operating inDragons and Tigers to recruit more qualified managers and professionals with particularcapabilities in management, planning and job-specific technical skills. These skills are inhigh demand by companies across all economies. Managers and professionals with othercapabilities, such as interpersonal skill, use of new technology, self-management,multiskilling and teamwork are also sought after by manufacturing companiesespecially in the Tiger economies. Over 70 per cent of the manufacturing companiessurveyed indicated the need to improve managers and professionals’ capabilities in theseareas in order to enhance their company performance.

Scale of demand for managerial and professional talentIf a large proportion of companies indicate their need to improve managerial andprofessional capabilities, it is likely that internal labour market of MNCs do not havesufficient supply of these capabilities. So it is highly likely that companies will have toturn to the external labour market to seek this cohort of talent both for existingoperations and future expansion in Asia.

It is shown in Table VI that the percentage of companies intending to acquire moremanagers and professionals is much less than those intending to improve theircapabilities. It seems that the supply of managers and professionals is not the issue, asdemonstrated in Table III as the appointments of managers and professionalsespecially in the Tiger economies have increased quite dramatically from 1995-2003period. However, MNCs might be more concerned with the quality of managerial andprofessional supply.

Our data show that over 50 per cent of companies surveyed both in Tiger andDragon economies required more managers and professionals in the past for themanufacturing sector, and 37-47 per cent of companies indicate the need to have moremanagers and professionals in the service sector. The demand for managers andprofessionals for existing operations statistically shows no difference between Tigersand Dragons. However, for future expansion, there is a moderate indication that servicecompanies will require more managers and professionals than manufacturingcompanies (x 2 ¼ 4.401, p , 0.05). This can be related to a strong growth of serviceindustry in both Tigers and Dragons that require more managers and professionals inthe sector. Overall, there is slightly more demand for managers and professionals for

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both manufacturing and service companies in the Tigers than in Dragons (x 2 ¼ 2.523,p , 0.1).

A company’s decision to recruit externally for managers and professionals can beinfluenced by several factors (Russo et al., 1995). First, is there a sufficient supply ofskills equal to or higher than that of internal employees? Without sufficient supply ofskills externally, it might be better to train up internal employees. Secondly, is acompany willing to hire externally less qualified staff and train them up? Sometimes,certain skills may not be available because they are job-related or firm specific, but thepersonnel recruited can be taught. Thirdly, are there many competitors out there torecruit similar skills? This can increase the problem for companies if they cannot meetthe salary demand of those highly skilled managers and professionals. From acost-benefit analysis perspective, it might be better for companies to start an internalvacancy chain to promote lower position managers and professionals or to reallocatetasks within the personnel instead of external recruitment to fill up the vacancies(Russo et al., 1995). From our earlier analysis, it is possible that a very tight labourmarket exists in Asia, and many MNCs are competing for talent. This has posedrecruitment difficulties for MNCs. Therefore, our data shows that a relatively lowpercentage of companies are opting to recruit managers and professionals externally inthe past and in the future. Training and development of internal staff might be a moresensible approach if this also increases retention rates. We now turn to examine theextent of recruitment difficulties experienced by MNCs and evaluate the level ofattrition rate for managers and professionals to determine whether MNCs are capableof recruiting and retaining talent in Asia.

Recruitment difficulty and retention issueTable VI indicates that a considerable number of companies both in the Tiger andDragon economies experienced some difficulty in recruiting managerial andprofessional staff in the past and anticipate the same in the future. The values of x 2

indicate that there is no significant difference among all firms surveyed, eithermanufacturing or service companies. However, when comparing those companies inthe Tiger and Dragon economies, the Dragons expect to have a moderately higherdifficulty in recruiting managers and professionals in the future than the Tigers(x 2 ¼ 3.752, p , 0.05). This is possible as the Dragon economies may have shiftedtheir manufacturing operation, together with their managers and professionals asexpatriates to less developed economies, e.g. the Tiger economies, as skills andknowledge of systems and processes of manufacturing MNCs may not be readilyavailable in the Tiger economies (Barber and Pittaway, 2000). With a limited pool oftalent, it is likely that in the future, companies operating in the Dragon economieswould experience more difficulty in recruiting managers and professionals both intheir manufacturing and service sectors than those in the Tiger economies.

The attrition rates for managers and professionals are also compared. The attritionrate is measured by the number of employees left in the past year against the totalnumber of employees. Table VII indicates that the attrition rate is generally muchhigher for professional staff than for managers. Professionals with qualifications andskills have higher employment options in the labour market. The attrition rate forprofessionals is especially high in Dragon economies (up to 23 per cent in Singapore for


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instance). The attrition rate for managers is also relatively higher in the Dragoneconomies than in the Tiger economies, implying a shortage of managers.

The service sector has experienced higher attrition rates for both managers andprofessionals. This may be explained in two dimensions. One is that the service sectorhas developed rapidly in both Tiger and Dragon economies. Employment growth couldbe stronger in this sector as discussed earlier, which led to more new jobs, allowingmanagers and professionals to “shuffle” moving from one job to another. Secondly,unlike tasks performed in the manufacturing sector, which could be quite demarcated,skills in service sector might be easily transferable. Hence, it is easier for managers andprofessionals to opt for other jobs when better working conditions were offered.

Recruitment methodsRecruitment activities and channels used by companies can be classified in severalways (Marsden and Campbell, 1990). One type of classification focuses on thedistinction between active and passive recruitment. In the case of passive recruitment,the organisation waits until an applicant gets in touch with them, such as unsolicitedapplications. For example, today many organisations have web sites that containinformation for people seeking jobs. In the case of active recruitment, employersactually go in search of potential candidates. They may do so by commissioningrecruitment agencies to find candidates, or by searching in databases on the internetwhere job seekers have posted their curriculum vitae.

Another classification is based on the distinction between formal and informalrecruitment. A type of formal recruitment is posting job advertisements in the mediasuch as newspapers, magazines or TV/radio (Taylor, 1994). Informal recruitmentmethods may involve the use of some intermediary between the employer and thepotential employee. An example of informal recruitment is using the employer’snetwork of contacts or “word of mouth” (Lasserre, 1991; Chen, 1995). This networkcould include the personal networks of the existing workforce as well as otheremployers, people working in the same business or employers in the vicinity (Marsdenand Campbell, 1990, p. 60).

Organisations often combine various recruitment methods when they have difficultiesfinding suitable employees. The greater the perceived difficulties, the more likelihood that

Occupation Managers Professionals Total managers þ professional

EconomyTigers 7.2 10.3 8.6Dragons 10.1 22.3 16.0All economiesIndonesia 9.6 11.7 10.9Malaysia 7.4 9.6 8.5Philippines 7.4 11.4 9.6Thailand 4.6 9.0 5.6Singapore 9.4 22.6 17.1Taiwan 10.8 21.9 14.9SectorManufacturing 6.4 12.3 9.7Non-manufacturing 10.2 16.9 13.2

Table VII.Attrition rate formanagers andprofessional – meanpercentage

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organisations will take a series of coordinated measures to recruit employees, and the lesslikely they will sit back and wait or follow lengthy, formal procedures. Consequently,it is more likely that they will apply active and informal recruitment methods. In addition,the use of recruitment methods by organisations may also be influenced by the tightness ofthe labour marketaswellasthecompositionof theexistingworkforce (Henkensetal., 2005).

Recruitment methods used might be different according to industry and firm size(Scott et al., 1989; Barber et al., 1999). For instance, in the services and traditionalmanufacturing sectors, informal methods are preferred, but in the high-technologysector, formal methods are used widely. Larger organisations tend to use more formalrecruitment methods. According to Henkens et al. (2005) study, most organisations stillmainly use traditional and formal recruitment methods, such as media advertisement.

Our data suggest, that various recruitment methods have been adopted by MNCsoperating in Tiger and Dragon economies, with one method being more predominantthan the others. Similar to Henkens et al. (2005) finding, most of the companies used themedia as the main method to recruit managers and professionals (Table VI). There isno statistically difference among manufacturing and services companies in both typesof economies in terms of their recruitment methods.

In term of using “word of mouth” both types of economies demonstrate a significantuse of this informal recruitment method, suggesting that a tight labour market resultsin greater recruitment difficulty, which leads to a higher use of informal recruitmentmethod (Henkens et al., 2005). This method was more commonly used in servicecompanies than in manufacturing companies (x 2 ¼ 13.965, p , 0.01).

There is a largeproportion ofMNCs (54-78 per cent) indicating theuse ofprivate agentsto recruit their talent. MNCs operating in the Dragon economies tend to use this methodmore frequently than those in the Tiger economies (x 2 ¼ 6.581, p , 0.01). Within thoseoperating in the Dragon economies, the manufacturing companies used more privateagents to recruit managers and professionals than the services companies (x 2 ¼ 9.148,p , 0.01). It is believed that private executive recruitment agents may be morewidespread and easily accessible in Dragon economies than in the Tiger economies.

Internal managerial and professional staff transfer was more significant in theDragon economies than in the Tiger economies (x 2 ¼ 11.440, p , 0.01). The servicecompanies within Dragon economies were more likely to use internal transfer ofmanagers and professionals than manufacturing companies (x 2 ¼ 13.624, p , 0.01).The rapid development of the service sector in the Dragon economies may requireMNCs to transfer skills from their headquarters to compensate for the skills deficiencyin the host country (Athanassiou and Nigh, 2000).

More companies in the Dragon economies use internet to recruit managers andprofessionals (x 2 ¼ 9.380, p , 0.01), indicating some more innovative recruitmentmethods being used by more advanced economies to attract talents all over the region.There is no statistical difference in the use of internet as a recruitment method betweenmanufacturing and services companies.

In summary, most companies surveyed tend to use formal recruitment methods (e.g.media). However, there is apparent evidence of using informal recruitment methodsuch as “word of mouth”. This implies a greater need to be flexible in recruitment whenthe labour market is tight and talent is in high demand. It is also witnessed that someinnovative recruitment methods, such as www and internet have been used to attracttalent.


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Discussion and conclusionThe empirical evidence demonstrated in the above analysis suggests that there are nosignificant differences in terms of staffing plan and demands for more managerial andprofessional skills across Tiger and Dragon economies and between manufacturing andservice MNCs. In addition, the set of skill requirements for improving firm performanceis also not dissimilar among two groups. The implication is that more severe battle fortalent and skills will occur in the foreseeable future. This is especially challenging formanufacturing companies. Because manufacturers must be able to attract and recruitboth professional and managerial talent in the developing and developed economies ofAsia to ensure that they can operate effectively and grow their capacity. In particular,the capabilities needed to manage a dynamic manufacturing operation in Asia requirethe appropriate skills to ensure that the systems and process in place are managedeffectively and efficiently, and this simply requires high level of skills.

Yet most MNCs surveyed in this study are experiencing difficulties in recruitingand retaining key skilled workforce. The significant results indicate thatmanufacturing companies in the Tiger economies especially struggle to attract andretain managerial and professional staff. One explanation could be that manufacturingMNCs, when undergoing through the major recovery from the Asian financial crisis,might choose to consolidate their operation in Asia, hence were more reluctant to take amore innovative or proactive recruitment strategy. Therefore, the current data whichwere collected not long after the recovery period show the sign of more severerecruitment difficulty in procuring managerial and professional staff amongmanufacturing firms in the Tiger economies.

However, in the past five years, it is witnessed that a rapid and dynamic growth inthe manufacturing sector occurred across many Tiger economies (from a spectacularexample of China to the least growing country such as Philippines) (ADB, 2005). Thereappears an emerging unmet demand for managerial and professional skills to meetthe challenge of managing the growing sector. Increasingly, manufacturing firms inthe Tiger economies have to compete with the manufacturers in the Dragon economiesfor key skills.

As the manufacturing sector grows in the Tiger economies, and more developedeconomies from the East and West outsource manufacturing to Tiger economies, theshortage of professionals and managers will increase and the competition for thistalent will also increase. As argued in this research, the situation will be exacerbated inboth Tiger and Dragon economies.

Some companies in this study have already recognised that simply recruiting talentdoes not build internal capacity and they need to develop managerial capabilitieswithin their own organisations (with a relatively lower level of demand for externalrecruitment). The need for the improved skills will increase as manufacturers moveinto more complex operations in Asia. No longer is Asia a source of cheap labour forsimple manufacturing processes. It is rapidly moving up the value chain into complexproducts. The manufacture of complex products requires highly skilled employees andengineers who are largely in short supply. In addition, it is observed that many firms,especially in the Dragon economies, have started using some more strategic andinnovative recruitment methods in recruiting talents in the region. This again poses asignificant challenge to manufacturers in the Tiger economies who are behind theDragon economies in terms of resources and access. Whilst this issue seems more

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daunting on manufacturing at the present, it may spread to the service sector as thesector grows to support manufacturing in the Tiger economies.

Currently both the Tiger and Dragon economies are growing dynamically and muchof this growth is sustained through strategies such as low-cost products and servicesand access to a cheap supply of labour. This growth is not sustainable if manufacturersare unable to further source the talent they require to manage complex operations. Atthe time of this survey, manufacturing MNCs dealt with the issue of recruitmentdifficulty by attracting expatriate managers and professional teams via internaltransfer or “poaching” from competitors both in developed and less-developedeconomies. This influx of talent management is definitely not sustainable. Firms, bothlocal and MNCs in Tiger and Dragon economies will be required to search for astrategic approach to acquire and develop talent internally to combat the skill shortagerampant in the Asian-labour market.

In general, with rapid economic development, it appears manufacturing businessesin Tiger economies will need to be more aggressive in the battle for talent in order tocompete with more advanced economies, such as Dragons, to sustain growth.

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Further reading

Atkinson, J. and Meager, N. (1994), Running to Stand Still: the Small Firm in the Labour Market:Employment in the Small Firm and the Labour Market, Routledge, London.

Perry, P.M. (2001), “Retaining your Asian talent”, Research Technology Management, Vol. 44No. 6, pp. 56-8.

Corresponding authorConnie Zheng can be contacted at: [email protected]

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