Talent management is proving a major struggle for multinationals working in emerging markets, according to a new global report.

The survey by professional services firm Ernst & Young, entitled Growing pains: Companies in rapid growth markets face talent challenges as they expand, found that only 20 per cent of business executives believe that their company manages talent effectively across all markets.

According to the report, which surveyed 810 executives from all major rapid growth markets such as China and India, multinationals doing business in these regions are facing several hurdles in building effective international management teams. These include issues with cultural differences, difficulties balancing local and global talent, trouble with retention and a lack of a leadership pipeline.

Most respondents lack confidence in their organisation’s ability to develop an effective global talent strategy. Only 28 per cent of respondents agree that their top management team has an international outlook on decision-making, while less than a third believe that management has sufficient work experience outside of their home country.

Crucial gaps in cultural knowledge are one of the largest problems, with 51 per cent of respondents saying that management lack insight into the local culture and ways of doing business, and 50 per cent believing there is deficient understanding of global markets at the top level. While recruiting locally could help managers to gain critical local insight, only 18 per cent say their company achieves the right balance between recruiting local talent and expatriate managers in emerging markets.

“The key challenge for these companies in the next decade will be to integrate talent strategies with global mobility strategies to form a top management team that has a mix of international expertise and local knowledge,” says Mike Cullen, Global Managing Partner, People, Ernst & Young.

The report also reveals that although investing time and money in developing staff internally is a priority, many companies have no choice but to fill the gaps by recruiting from their rivals, with 37 per cent saying they will attempt to secure talent from other organisations. And talent retention is also a challenge, with only 23 per cent of respondents agreeing that their company is good at retaining key global talent.

Cullen says that sensitivity to local markets is key if managers in multinationals are to get the best out of their teams. “In emerging markets, a new breed of manager is needed to transcend multiple geographies, balancing autonomy and centralisation, global and local,” he says.