Expatriates Vs Locals: 19 Reasons to Rethink Your Talent Strategy in Emerging Markets

Getting the right people in the right jobs in the right places at the right times and at the right cost” is the goal of any HR department whole around the world.

As an HR professional, you know that most of the time, it’s difficult to reach that goal for many different reasons – internal or external to the company. The first of them is the ability or not to attract the best talent with the necessary skills required for the job. In a time where the global war for talent is intensifying, your HR team is certainly struggling to fill some positions and lacks of adequate talent management strategies to overcome this tough situation. Don’t stress, you are not alone.

Most of the companies operating in the global arena have discovered that finding and recruiting qualified employees for their overseas markets is one of their biggest challenges so far. For HR professionals working in emerging markets, this shortage of talent is even more problematic as it concerns technical positions and middle/top management positions. Indeed, some countries like India, China, and Brazil are desperate for managerial talent. In Africa, the situation is even more extreme.

As a result, companies are recruiting expatriates possessing skills that are lacking locally. For example, about 9% of the world’s expatriates are currently operating in Africa and it is estimated that there will be a 75% increase in the use of expatriates over the next three years. But is it the best strategy? I don’t think so.

Using expatriates is undoubtedly understandable but it’s definitely not the best solution. Here are some reasons:

1. Expatriates are too expensive. They cost 3 or 4 times as much as the employment of a local. Moving an employee to the factory or corporate office in Russia, India or Dubai can be a costly experience after covering relocation, housing and education allowance. For example, raising a child in China from birth to college costs at least US$ 31,500 and might be as high as US$ 157,400.

2. They command high salaries. For example, expatriates working in Russia are often afforded high salaries: a third of them make more than US$ 250,000 a year.

3. 25% of expatriates have to be called home early because they burn out. Why? Their responsibilities in emerging markets are often larger than they are used to have before, so they work long hours to fulfill the home country expectations. As a consequence, they are likely to feel stressed, anxious and their productivity falls.

4. Another 30% to 50% don’t manage to reach the company expectations because they underperform. That leads to tremendous losses for the company, low staff morale and a decline in local goodwill. This underperformance increases the turnover of expatriates and adds to the bill.

5. Inability for the expatriate’s family to adjust in the new environment. For example – while progress has been made – the treatment and expectations of women are very different to those of men in the Middle East. In other emerging markets, most of the time, expatriates have problems with spouse and children. Because of family unhappiness, 50% of expatriates’ marriages fail.

6. Lack of the local knowledge and cultural awareness. Expatriates have to deal with a lot of intercultural challenges including an unfamiliar language and limited knowledge of the new business protocol. Many researches have shown that expatriates are notoriously bad at adapting to local culture and most expatriates failure are caused by lack of international culture competencies.
A survey conducted by the official English newspaper of the UAE Ministry of Interior (a monthly for non-Arabic speaker in the UAE and in the Middle East), reveals that 72% of the 2,000 expatriates questioned lack of knowledge of UAE local customs and traditions. In order to change this situation, the British Ambassador to the UAE are working with tour operators, local schools and other organizations to run a global campaign called “Know Before You Go”. The aim is to help British expatriates understand the norms, values and beliefs of the society they are in.

7. Expatriates with a short-term assignment (under 3 years) tend to focus on the next career rather than on the actual job.

8. Around 20 to 25% of repatriated employees resign within 12 months from their company after repatriation. The main reason is that repatriate employees don’t want to return to their “old job”. They expect that they are going to return to a job with new challenges and career opportunities. Unfortunately, it’s not always the case.

On the contrary, hiring locals as much as possible has many advantages that your HR team have to take into consideration. Below are listed 9 of them:

1. They are cheaper.

2. Locals have the language and country culture in their blood. Relationships are critical for doing business in the majority of emerging markets. That’s why, having a deep understanding of local culture and being able to speak the language country are key factors success. It is important to note that in China, almost all contracts are written in Chinese characters.

3. As they know the local market, they can better spot emerging trends and anticipate implementation problems. In some emerging marketplaces such as Brazil, it is complex to do business because of laws and government regulatory agencies. Having locals with strong knowledge of the business practices as well as contacts is immeasurably helpful.

4. They know how to motivate local national staff. Locals have a cultural, emotional and language fluency. As a result, they can better understand the intrinsic motivation of employees.

5. Even though the demand for qualified locals outstrips supply, the number of qualified locals available is increasing every year thanks to a better management education, foreign study programs, the establishments of business schools as well as partnerships between schools and companies.

6. Compared to expatriates, locals have less marital or educational issues.

7. More and more locals know English. The number of Chinese currently learning English is higher than the entire British population. In Russia, many people speak English as it is often taught beginning in the third grade.

8. Having locals working within the company gives the opportunity to project a local company image.

9. Are generally highly educated, especially in many former Communist countries. Russia’s educational system has produced nearly 100% literacy. Although there is a small decline in the quality of the Russian education system, the country still has the highest capacity to supply skilled workers. In China, a large numbers of university graduates with theoretical concepts are available. Companies can invest in training to develop their practical skills and help them to meet the company’s standards.

—-> If you cannot find enough local workers to fill your vacancies, my suggestion is to hire returnees. They are people who have spent time living, studying or working abroad and who are willing to return to live and work in their home countries. They are very attractive for mainly two reasons:

1. They do not require the costly packages offered to most expatriates

2. And they have the advantage of possessing bilingual and bicultural abilities.

In other worlds, they might be the best solution ever!

So, if your HR team relies too heavily on expatriates that means your company’s talent management system is not working! And it’s time to change it.

Instead of simply filling open positions, you should look for local workers or returnees who know the local market and business culture. Put some money in training as well as career development programs and they could become the best regional or global managers/leaders/executives you will have. By investing in locals whereas expatriates, your company will also gain the reputation for developing local people and as a result, will be far more likely to attract and retain the best local talents.

So start thinking global and hiring local.