In the recently released report, FSG’s Events to Watch for 2017, we profiled what our analysts believe are the downside and upside scenarios that multinational companies should evaluate to ensure that strategic plans are resilient when the unexpected occurs. As a follow-up to our previous blogpost on our RIP Pax Americana event, another key disruptor multinationals should be tracking and developing contingency plans against is our Workforce Localization Crackdown event, which centers on how a growing backlash to globalization in developed markets, and slowing growth in emerging markets may lead to severe restrictions on labor mobility across markets.
The trend to nationalism in domestic politics and geopolitics manifests as increasing restrictions on hiring expatriates, temporary workers, and immigrants and higher quotas for local hiring, in both developed and developing countries. This would severely reshape and restrict the flexibility that global businesses have been accustomed to over the last few decades.
The impact on the global operations for multinationals would be highly problematic
- Higher premium on specialized skills – Access to talent with specialized skills will be more expensive, as cross-national mobility will be reduced
- More limited management mobility – Multinationals will confront greater difficulty to rotate management talent across borders, limiting the efficiency of their operations in many emerging markets
- Returnees to labor-exporting countries – Countries such as Mexico, the Philippines, and Pakistan will confront greater pressure resulting from a greater number of returnees and lower remittances
- Military spending boom – Former US allies divert government spending to defense and, in Asia and MENA, invest in independent nuclear deterrents
Incorporate workforce planning into strategic planning
FSG believes this downside scenario has a 20% likelihood in 2017. We believe multinationals need to be responding proactively to this risk by emphasizing workforce planning in regional strategic planning, as increasingly restrictionist immigration and labor force policies will create new pressures to change long-term staffing decisions by increasing the cost of internal mobility and complicate the hiring for specialized roles. Furthermore, increasing budgets for training local managers and technical staff, and for temporary rotations for specialized staff from other countries, should also be considered.
In the report, we provide in-depth scenarios, expected impact on business performance and operations, as well as recommended frameworks for contingency planning and effective market monitoring.
For existing Frontier Strategy Group clients, you can download a copy of the full report here. Not a current client? You can purchase a copy on FSG’s online store here.