What Makes a City Great? It’s All About The Talent

A recent report we authored identified a range of factors that make cities great—business activity, cultural experiences and political engagement, to name a few. But the biggest difference between the cities that outperformed and those that lagged was human capital.

People are what power great organizations and successful cities. For corporate leaders, the availability of talent is a key factor in determining which locations are worthy of investment. Yet, our analysis reveals a surprising trend: most cities are struggling to attract and retain high-quality human capital.

It’s a pressing issue that warrants the attention of CEOs and city planners alike. Cities that develop strategies for attracting and retaining talent stand to be the world’s next best places for corporate and foreign direct investment. Those that ignore the issue risk losing not just people, but economic opportunities.

Global talent hubs

Evaluating human capital goes well beyond simple population numbers. You have to look at multiple metrics, including residents with tertiary degrees, foreign-born populations, international students and schools, and university scores. The world’s best cities draw talent from around the globe, which is why the metrics prioritize diversity.

Perhaps as expected, New York has long led in the human capital realm. This year, Boston, Los Angeles, Chicago and San Francisco, as well as Tokyo, Beijing, Sydney and Singapore also performed well.

Noteworthy human capital scores are both a symptom and a cause of stellar performance in other areas. For example, the cities that outperform in human capital also rank highly in business activity. This is no coincidence, but part of the virtuous cycle created by high-quality employees and great talent. Each attracts the other.

The secret recipe?

Yet even as the cities mentioned above excel, they remain in the minority. The research shows that across the globe, most cities struggle to keep pace with top-ranked talent hubs when it comes to human capital—and that high-quality employees seem to head to many of the same places.

How exactly to attract and keep people can seem like a chicken-and-egg question. Cities need the great employment opportunities provided by global companies, and global companies want a talent pool before they locate in a city. The solution: create places that people love to live in.

In our report, the dimension “personal well-being” accounts for factors such as stability and security, healthcare accessibility and income equality. The correlation between the presence of talent and the well-being of a city’s residents is strong. For example, Dallas jumped 17 spots in the human capital rankings and nine spots in personal well-being between 2015 and 2018.

Lessons from China

While there are notable exceptions, U.S. cities as a cohort aren’t keeping pace with the rest of the world in terms of either personal well-being or human capital. On the other hand, Chinese cities have witnessed marked improvements in their human capital scores—the country claimed eight of the top 10 cities with the most improved talent scores. Hangzhou, for example, skyrocketed an astounding 52 spots in human capital rankings of our report.

Efforts by Chinese cities to improve their livability have played a significant role in attracting people. The work, however, is just beginning. The region’s urban leaders understand the importance of investing even more in the personal well-being of their residents if they want to retain talent and economic competitiveness in the future. The country’s population contraction only increases the urgency.

In response, many cities are taking a citizen-centric development approach that addresses both individuals and the health of the overall population. The initiatives encompass everything from leveraging technology for the benefit of the workforce to encouraging civic engagement to promoting diversity and inclusion. This is in addition to creating urban environments that are clean, walkable and offer an array of cultural and social activities such as restaurants, museums and festivals.

As Chinese cities embark on their transition, private-public partnerships between city governments and corporations will also come into play, ensuring that the development serves the talent needs of employers and addresses the concerns and desires of employees who are also residents.

The people factor

Whether you’re trying to build a vibrant city or a thriving company, people make the difference. Of course, CEOs consider existing human capital as they’re exploring potential investments in various regions. Moreover, supporting and informing cities as they develop strategies for improving human capital not only ensures that a robust talent pool stays that way, but also creates a pipeline for the future.

Read more: Talent Mobility Is A Business Issue You Shouldn’t Ignore

 

The authors would like to thank Mike Hales and Victor Cruz for their valuable contributions to this article.

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Andrés Mendoza Peña is a partner in A.T. Kearney's Strategy, Marketing and Sales Practice and is based in Chicago. He is involved in the development of the Global Cities Index, a key component of A.T. Kearney's core set of global indices. Nicole M. Dessibourg-Freer is a principal in A.T. Kearney's Consumer Industries and Retail Practice and a co-author of the 2019 Global Cities Index. She is based in Chicago.