Human capital and talent has become paramount for organisational competitiveness. In the 1990s, organisations began to view the upper echelons of human capital as producing the most value based on their superior skills and education. This view resulted in more strategic ways of identifying and developing talent. McKinsey coined the term “War for Talent” in the late-1990s to capture companies’ increased competition for talent. In the last few years, practitioners like Josh Bersin from Bersin at Deloitte suggested that the war is over and “talent won” meaning that skilled employees are setting the tone and shaping how companies treat them.

Developments on a national level have been slower. Influential scholars have been highlighting the importance of human capital and talent for decades but only in the last decade have actions moved into concerted focus. The question now is not only what talent can do for a nation but also what a nation can do to foster talent. To that end, new measurements have emerged to measure national talent development.

Introducing the Global Talent Competitiveness Index (GTCI)

A recent initiative is the Global Talent Competitiveness Index (GTCI), a joint project by INSEAD, the Human Capital Leadership Institute and Adecco. It measures the entire talent eco-system; conceptualises and tracks vocational and global knowledge talent; and – most importantly – links talent to its output, thus measuring national ‘talent competitiveness’.

The inaugural GTCI report published in 2013 contains the profile and ranking of 103 countries on 48 different factors. These insights provide transparent and easily accessible metrics to track national talent and link it to competitiveness and skills. The 48 variables are arranged in six pillars tracking Enablers, Attract, Grow and Retain factors as well as Labour/Vocational and Global Knowledge skills (see Box below).

The index defines talent as both Labour/Vocational based on secondary education and training and as Global Knowledge talent based on tertiary education and training. And the two sides of input and output capture factors for talent development and talent performance. The input side tracks the talent eco-system along commonly assumed factors of talent development such as how to Grow, Attract and Retain talent, while also including the factors that enable talent through regulation, business and market opportunities. The output side of the GTCI measures both talents’ performance and impact through highlighting labour productivity, innovativeness and entrepreneurship. Together the input and output side provide the entire spectrum of talent from its eco-system to its performance. To achieve talent competitiveness both kinds of talent are needed in addition to creating the right environment through regulatory, market and business enablers and a sturdy supply chain of talent through attraction, growth and retention.

Policy makers and business leaders can use the index’ results in numerous ways. Access to the input and output scores helps understanding strengths and weaknesses of a country. The overall performance of one country in comparison with its peers in terms of population, income or region can be gauged by the ranks. If an organisation seeks to understand where to locate its next knowledge centre or manufacturing unit, examining selected variables assists in understanding a country’s performance in parameters relevant to this industry and objective.

Let’s take a look at the top performers and some key messages from the 2013 edition.

Virtuous cycles of national income and talent

The top-20 are dominated by European, high-income countries. Switzerland is in place number-one. The top 10 are populated by four Nordic countries (Denmark in third place, Sweden in fourth, Finland in eighth and Iceland in 10th) and two Benelux countries (Luxembourg in fifth and Netherlands in six place). The only high-ranking non-European countries are Singapore in second place and the US in ninth place. From Rank 11-20, three commonwealth countries (Canada in 11th, Australia in 15th and New Zealand in 17th place) and the United Arab Emirates (19th place) are the non-European countries. These are nevertheless high-income countries.

The relationship between talent competitiveness and national income appears to be that growth in high-income countries depends on innovation, leadership and highly technical skills. While high-income countries rely on talent, they also produce and foster talent. A virtuous cycle of talent development is created.

One of the key findings of the GTCI 2013 is that high-income countries dominate the global war for talent; they already built and set their virtuous cycle in motion. Poorer countries have more difficulties fostering talent competitiveness. Yet, some talent champions, such as Montenegro (26th place) and Malaysia (37th place), are emerging among middle-income countries. It appears that Global Knowledge skills are critically important for this. Over the next few years we will see further changes regarding which countries lead in the global war for talent and, more importantly, which countries built their  cycle of talent competitiveness. Understanding how Asian economies perform in the GTCI 2013 reveals more nuanced strategies to that end.

Positioning Asia

Asia includes the whole spectrum from high to low income countries. In the high-income group, the differences between Singapore, Japan and Korea will be discussed below. In the upper middle-income group, Thailand is remarkable, as it ranks lower than expected: it would need to make more investments in education to maintain its position. In the lower-income group, the Philippines are of particular interest. Underneath the contrasts between high-income leaders and middle-income followers lie a host of different strategies to achieve talent competitiveness.

Asian Leaders – Singapore, Japan, Korea

The case of Singapore reveals consistently high performance on all six pillars. Low lifelong learning and access to growth opportunities make Grow the lowest ranking area for Singapore. Retention is the second biggest issue due to a lack of adequate social protection. The recent introduction of the pioneer package, which recognises the first generation of newly-independent Singapore for their significant contributions to building the nation, seems to try to close this gap. Finally, Labour-Vocational skills are an area for improvement and cause the country’s population to be skewed towards tertiary educated knowledge workers. 

Japan and South Korea reveal the importance of external and internal openness as well as retention for talent development. Japan ranks lower than South Korea in terms of attracting talent, but ranks somewhat higher in retaining and enabling. At the same time, the comparison of South Korea and Japan to Singapore reveals that the biggest difference is the balance between Grow and Attract; Japan and South Korea have very low scores in external and internal openness, while Singapore’s is higher. A striking commonality among high-income leaders, of which Singapore is an example, is to be both internally and externally open, but also to focus on their talent growth. South Korea and Japan are runner-ups, but have some way to catch up. So how do middle-income countries fare in comparison to the leaders?

Philippines and Thailand

Moving down to the ranks in the 70s, the Philippines and Thailand appear markedly different: one an archipelago with a diverse population and long experience with colonisation; the other a firm component inside the landmass of SE Asia with a diverse yet linguistically homogeneous population. One is an upper-middle income country and another a lower-middle income. Despite these differences, both countries have similar strategies. Both have low formal education but comparable mediocre lifelong learning and access to growth opportunities, enabling residents to reskill.

For the remaining insights on both countries the differences are so marginal that they are similar. The Philippines are slightly ahead of Thailand in terms of Labour/Vocational and Global Knowledge skills. The Philippines appear more internally open, allowing women and those born with lower status to move up socially. This may be due to their higher diversity that fosters a basic degree of tolerance towards immigrants and minorities. Thailand in 2013 offered a good business landscape and external openness; how this will be in 2014 remains to be seen.

Vietnam and Indonesia

When we move into the 80s rank and look at Vietnam and Indonesia, strategies differ. Both are emerging economies with a developing but largely stable political environment. This is visible in their low Enablers score. Their populations are diverse, numerous and young and the two countries are said to have enormous economic potential. Like other emerging economies, they struggle with formal structures and consequentially their formal education systems are lagging. And this is where the similarities stop.

Each country has its own strengths. Looking at Attract factors, Vietnam attracts foreign direct investment and features high gender and social mobility. This enables external and internal resources to be used equally. Indonesia by contrast shows its strength only in external attraction and not the same balance between internal and external openness. This has an influence on the development of both countries through internal or external influx and diversity.

Beyond formal education, Indonesia appears to provide a good environment for continuous development through lifelong learning and access to growth opportunities such as cluster development and virtual networking. The two countries also differ in their strength in skills: Vietnam is high on Labour-Vocational skills and innovation under the Global Knowledge skills, while Indonesia thrives off entrepreneurship. The strategies behind similar rankings show the different paths that countries can take. And in this case, countries can be in the same position based on building their unique strengths.

Building a virtuous cycle of talent competitiveness

Will Thailand, Vietnam, Indonesia or Philippines compete with Singapore in the coming years in the top-20? This depends partly on how they address weaknesses and use their individual strengths. The GTCI top-20 achieve their positions through investments in formal education and decent Enablers including business and markets, and by balancing supply and demand to achieve a vibrant eco-system. In this environment, the economy is already competitive enough to invest, which leads to talent gains, further increasing its competitiveness.

Beyond investments, which poorer economies can ill-afford, the virtuous cycle of talent competitiveness can be build through lifelong learning, access to growth opportunities and fostering internal openness wherein cross-fertilisation and debate strives. It also depends on good governance frameworks, either by businesses or governments, which help building opportunities. The future and increasingly sophisticated measurement efforts will show further which countries are leaving destructive wars for talent behind to construct virtuous cycles of talent competitiveness.

This article was first published in HQ Asia (Print) Issue 08 (2014)