One of the challenges of globalization is the fact that multinational organizations—most notably, energy and natural-resource companies—experience increasing pressure to become "local." Governments demand that they implement localization programs, and they themselves are coming to recognize the commercial benefits, which include a better understanding of local customers and business environments. Our analysis highlights the approaches that successful multinationals take to develop a high-quality local workforce and to select and groom local leaders in a variety of regions.

We conducted in-depth interviews with 25 leaders of local business units from 21 multinationals, active in more than 25 countries, to see how they attract, retain, and develop local talent. Our sample spanned five sectors (banking, consumer products, energy, health care, and minerals), as well as one private equity firm, a nongovernmental organization (NGO), and a government agency. Although few respondents believe that their organizations have fully solved the talent-management puzzle, the consensus is that a successful strategy must integrate the nurturing of local leaders with broader localization efforts, such as promoting education, building a supplier base, and improving the local business infrastructure.

Initiatives to develop talent within a country sometimes reflect legal obligations: production agreements between governments and natural-resource companies, for example,...