ChapmanCG on Vietnam – Continued Development Brings New Talent Challenges

Vietnam’s rapid development and growing footprint in the South East Asian business ecosystem, is providing organisations with ever-evolving talent challenges. Here we take a look at some key, current market observations made during ChapmanCG’s ongoing work with HR leaders across Vietnam.

Multinationals and local organisations face slightly different challenges

When we compare multinationals in Vietnam to local Vietnamese organisations, it is evident on a macro level, that the level of maturity of strategic HR leadership capability within MNCs is beyond that of most local organisations. There is still a significant leadership capability gap when assessing the robustness of strategic talent initiatives in most local organisations and there are a number of reasons for this: during the establishment and growth period of their businesses in Vietnam, multinational organisations have largely been able to leverage existing international frameworks, scalability of HR tech, operational infrastructure and leadership expertise from regional HR leaders and HR business partners. These have provided them with a more fit-for-purpose HR function from the outset that can evolve with the business as it continues to develop in country. Like all HR leaders operating in multinational organisations across South East Asian geographies, Vietnamese HR leaders are required to navigate the tussle between the alignment of corporate HR strategies and the demands of local cultural norms and workplace nuances. It is generally a very different story however for local Vietnamese conglomerates, who, over recent years have experienced a period of rapid growth – during which the level of historic investment in HR has been restricted to must have and day-to-day operations. As such, by the time there is the demand or desire for a more strategic HR direction, the talent challenges far outweigh the capability or bandwidth of their HR leadership and their teams.

Still a lot of work to do

Neither MNCs nor Vietnamese organisations looking to invest in HR in Vietnam have it easy. According to the IMF’s 2019 figures, Vietnam’s GDP growth slowed in 2019 to 6.5% from a 10 year high of 7.1% in 2018, however the World Bank ranks it 11th out of 12 countries in the region on the overall quality of human resources. So, whilst Vietnam remains one of the strongest growth economies internationally, HR is still on the whole not equipped to combat future challenges and continued development also gives rise to new talent challenges.

A concentration of talent

The historical ‘brain drain’ of top Vietnamese managerial talent to APAC and US hubs is something that has impacted the development of HR capability, leaving Vietnam light on experienced leaders relative to demand. Furthermore, the centralisation of top talent in Ho Chi Minh City and Hanoi provides another challenge moving forwards as the rest of the country continues to develop. The established city infrastructure, access to top educational institutions, volume of jobs and higher average salaries that these two established business cities provide, are now proving to be a significant obstacle to the next phase of development across the country when it comes to the attraction and availability of talent.

Quảng Ngãi, located south of DaNang, has for example, seen significant investment from a number of multinationals in the manufacturing and industrial sectors, attracted by cheaper greenfield land and operational costs, however there is a distinct lack of available skilled workers and leadership talent in these emerging regional geographies. Companies investing in such areas have faced a significant strategic talent attraction challenge in enticing individuals out of the higher paying, more established business centres to these developing regional geographies. The centralisation of available talent is an interesting one as there is no doubt that the major hubs will remain the market drivers, though we need to remain cognisant of the new challenges facing these organisations as they invest in greenfield areas or are setting up secondary locations across the country.

What’s next?

The need for the robust ‘future-proofing’ of talent strategies will be vital as Vietnam continues to develop internally whilst facing ongoing competition for international business from other regional South East Asian geographies.

Organisations will need to take a proactive approach with regards to tackling these talent challenges and this means looking inwards as well as outwards. For those organisations still lacking strategic HR leadership capability; it begins with business leaders understanding the importance of investing in quality HR leadership. MNCs already established in Vietnam, have the responsibility to leverage their regional models to up-skill and develop their Vietnam HR country managers and their teams through increased exposure and collaboration with experienced international colleagues.

For those organisations that still haven’t invested in developing a strategic, business partnering HR resource in Vietnam, they must do so or risk becoming a casualty of an increasingly competitive talent market. On this front, attracting internationally experienced Vietnamese talent back to Vietnam is an important catalyst for the continued development of leadership capability and knowledge transfer. Organisations that are able to identify, engage and attract these individuals will gain themselves a significant competitive advantage and this is being made a more feasible option as salary benchmarks for leaders and the footprint of leadership positions in Vietnam continue to increase, making domestic roles more attractive for international Vietnamese talent.  Inwardly, HR leaders in Vietnam will be increasingly compelled to drive the continuous innovation of their talent agenda and there must be a move away from a reliance on short-term, compensation-centric retention strategies, with focus being brought upon the development of local talent long term. Such retention strategies need to be built upon core elements that include continuous skills development, retraining and increased internal mobility. Externally, organisations need to partner with educational institutions to ensure tertiary education options align with projected future market requirements as the availability of talent with appropriate skillsets, aligned with the demands of the future workplace, continues to be an area of concern.

For those organisations locating their operations in secondary geographies outside of Ho Chi Minh City and Hanoi there is likely to remain and ongoing challenge around attracting top talent outside of those main centres. Investing in quality, strategic HR leadership capability to drive innovative strategies will no doubt prove key in navigating some of those barriers.