Why Are Companies Hiring Overseas? They’re Going Where Revenues Are

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Mar 14, 2013

So, your company is hiring overseas — who, where, why, and so what?

Let’s look at each of these and see if we can’t come up with answers.

Why are companies so focused on overseas?

There is a major reason companies needs to hire overseas. I’m not talking about “offshoring” because of cost or availability of key skills, “outsourcing” or any other kind of “shoring/sourcing.”

The reason I’m referring to is not talked about much because hiring employees anywhere outside the U.S. is an emotionally charged issue.

OK, why? Consumer demand has dropped in the developed countries — U.S., Europe and Japan. They used to be huge consumer markets, and the vast majority of U.S. company revenues came from them. Now they are mature, and both consumer demand and revenues have dropped.

Companies now target “emerging markets” for revenues. These include greater Asia, Eastern Europe, Southeast Asia, Latin America and even Africa. These are the “hot” markets. They have middle classes (as defined by the World Bank) with money and insatiable appetites for spending. And they are growing exponentially. According to The Economist, Western multinationals expect to find 70 percent of their future growth there.

Even today, 50 percent of the revenues for companies in the S&P 500 in the last couple of years has come from outside the U.S.

So the answer to the question “Why are companies going overseas?” — it’s because of new markets, new customers and revenues.

 Who do companies hire overseas?

Because of the differences and complexities of local markets — sometimes even differences within the same country — educated and professional local nationals are being hired. Fact: Companies need more employees in growing markets (overseas) than in mature markets (U.S.)

U.S. expatriates are not suitable because they don’t know local markets. Customers in local markets require “high touch” — salespeople, marketing people and design engineers who can market, sell and tailor/customize products to serve different market needs. And employees can’t do high touch sitting in the U.S.

So the answer to the question “Who do companies hire?” — it’s local nationals

Where do companies find talent?

The fact is companies hire talent where they need it — not where they can find it.

There seems to be a belief today that companies hire talent anywhere they can find it.

Dr. John Sullivan says: “Find the very best performers in every individual country around the world and let them work remotely in their home countries.”

That may be true when you hire in the U.S. but it’s not a logical strategy overseas. It suggests that companies hire in a “willy-nilly” fashion.

For example, a company might find critical programmers with a very unique programming language in Bolivia, Latvia, Uganda and Nepal. So they hire them. Multiply that by hiring in multiple countries for many other hard-to-find skills. A company could end up with 500 employees working in 150 countries — each country with one or two employees each working from home!

That’s nuts! I’m exaggerating to make a point. Hope you get it. Besides it’s just not going to happen due to tax, legal and other complications.

If companies have regional offices or major “hubs” overseas then employees can be hired or relocated there, but that would be the only logical exception in my mind.

So the answer to the question “Where do they find the talent?” — it’s where they need it, not in ones and twos.

So what? Why should you care?

Think about it: If 70 percent of companies’ growth is overseas — and that requires hiring overseas then — who’s going to do it?

Business Unit managers? Division managers? Do they hire by themselves in the U.S? No, HR is involved. So HR needs to be involved in overseas hiring.

HR can focus exclusively on U.S. hiring all it wants to, but if management needs talent in far-flung places overseas, they will get it. And management will have been done a great disservice if they have to do the hiring by themselves.

Today the C-suite needs a global picture of their workforce and all the talent issues involved in each country. Just as they need to know marketing issues, technical issues and financial issues globally — they need to understand all the hiring issues as well. And HR needs to supply this information.

Even if you have an HR function in each country that takes care of local hiring, corporate HR needs to act in an “oversight” role. They need to ensure that each country is not “hiring amok,” but hiring in places where employees are really needed to help achieve the business strategy.

Going where the revenues are

The facts are simple; companies go where the revenues are. Talent supply doesn’t drive where a business locates. Business drives where talent needs to be. No matter what country.

For those lucky souls in corporate HR that get involved in global hiring … it’s not for the faint-hearted. Join the club.

Global business is not for faint-hearted CEOs either.

And that’s the truth.