Forget about expatriates!
OK, now that I have your attention, let me give you a few reasons why I say this.
The use of expats on traditional assignments of 3-5 years started becoming popular in the 1940’s and ‘50s. They were used as top managers of manufacturing plants overseas for U.S. multinationals.
Although one of the stated objectives of assignments was for expat managers to find a local replacement, this in fact didn’t usually happen. More often than not, there was a steady rotation of expat managers in and out of these plants.
Yes, the game has changed
One local national administrative assistant to the expatriate General Manager at a manufacturing plant was asked how many managers she had had since joining the company. This company had existed in the country for 20 years and was by all accounts considered to be a mature operation.
She laughed and said, “In my 15 years with the company, I have had six managers — all from the United States.” This is a prime example of an operation that had matured but continued to have expatriate rotations.
Not to denigrate manufacturing, but management of a plant is relatively easy and very similar to managing a plant in the U.S. Sure a few cultural issues have to be addressed, but the expat usually has local managers reporting to him/her to assist with cultural transitions. And to make it easier, most expatriate’s interactions are internal within the company. He/she does not have to interact with the local population much unless in social situations.
Now given globalization, however, the game has changed.
New “hot’” markets
Companies have sales, marketing, customer service and design engineering operations overseas. And running these operations is much more difficult than running a plant. In addition, the majority of interaction here is external, with locals, which is more difficult for expatriates in unfamiliar business situations.
The emerging markets are the focus of U.S. companies now as a large revenue source. In many global companies they make up 50 percent of their revenues. Because of this, business models have changed to accommodate differences in these markets.
In high-growth markets — such as China, India and parts of Latin America – U.S. companies are now looking at locals to fill most jobs. It is important to note that while China and India are the “hot” markets now for U.S. companies’ revenues, the wave of “hot” emerging markets will gradually shift to include other regions such as Africa, South America and the Middle East.
New talent needs
So why are companies hiring locals to run operations in these countries instead of sending expats? According to a survey by Pricewaterhouse Coopers, 70 percent of companies over the next three (3) years plan to hire local talent versus 19 percent planning to use expatriate to fill talent needs.
Companies must have a deep understanding of how to market and sell in each market/country. They also need local engineers to find ways of customizing products to meet different market tastes. They must deliver localized products at the right price and with the right branding/marketing/sales strategies to customer markets all over the world. And to do that they need local nationals with “street savvy”.
Therefore, there is beginning to be a significant drop-off in the number of long-term expatriate assignments. In addition to the lack of “street savvy” in emerging markets, the cost of expats is prohibitive, there is a lack of long-term commitment to the host country and the continual revolving door of expats leads to a perceived lack of advancement by locals.
Globalization has shaken up U.S. executives’ thinking. They realize that their employees worldwide need to develop a more global mindset. They must think beyond the next few years and make investments in people by giving them international experience. Some of these employees will be the future C-suite of tomorrow.
Alternatives to expat assignments
As a result, new alternatives to the traditional expat assignment are being tested. Some of these new alternatives include:
- Commuter assignments — These assignments allow talent from nearby countries to commute from the home location to the host location. They spend Monday-Friday at the host location and weekends in their home location. Commuters are often viewed as talent on a business trip and paid in expense reimbursements or per diem. This is cheaper than having to provide cost-of-living differentials or other such benefits that would be paid for on a traditional long-term assignment.
- Project and/or developmental assignments – These assignments are viewed as a career rite of passage for younger professionals, either at the initiative of the employer eager to develop the global savvy and sophistication of its future leadership or in response to the increasingly international aspirations of young professionals (Gen Y/Millennial and younger) around the globe.
- Global virtual teams — Team members from different parts of the world work virtually to tackle and resolve company-wide issues. There is synergy with a global team that can’t be found when multiple teams try to solve the same problem while working in silo fashion from various business units. In addition it has been found that team members with diverse cultural backgrounds develop more innovative recommendations than traditional homogenous teams (from the same culture).
These are just a few alternatives. No one method is better than others, but each has a specific reason for use.
Companies need to rethink global talent requirements. By offering a more flexible strategy, companies can select the best alternative for each situation. By doing so, companies will be more successful doing business in emerging markets.
Welcome to the “new normal” of global talent management.