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.

Finding Opportunities in Emerging Markets

Among the biggest challenges facing investors today is generating growth while managing market volatility and low interest rates. Achieving these goals can be daunting, given the issues confronting economies around the globe in recent years. Investors who are looking for diversification and growth in this environment may want to consider adding emerging markets to their investment mix. In general, this asset class may make sense for investors who are willing to accept some risk, and who have an investment time horizon of five or more years. Here is what investors should know as they evaluate if emerging markets should have a role in their portfolio.

Nations on the rise

Countries with the “emerging market” label are still gaining a foothold in the global economy. Their publicly-traded debt and equity markets may be relatively young. They may represent countries of various sizes, from relatively small economies like Peru and the United Arab Emirates to some of the largest countries in the world such as China, India and Brazil.

In search of higher returns

Emerging market stocks have the potential to generate more rapid growth than stocks from developed markets, such as the U.S., Japan or Germany, which tends to attract investors focused on accumulating wealth. These markets typically experience more rapid economic development than established countries. This may lead to new industries, more jobs and a growing middle class of consumers. As a result, emerging market companies often have opportunities to expand businesses more rapidly. This potential offers a unique opportunity for investors who are focused on growth.

And they aren’t limited to stocks. Investors seeking diversification in a bond portfolio can also invest in emerging market debt. The benefits of doing so may vary, although in some cases, these bonds may pay higher yields than what investors are accustomed to receiving from more established bond issuers.

Investing in emerging markets can play an important role in more effectively diversifying a portfolio. The performance of these stocks and bonds often varies from that of developed markets around the globe. Having a well-diversified portfolio, which may include emerging markets, can help smooth out short-term investment performance.

Taking proper precautions

While recognizing the growth and diversification opportunities created by emerging markets, investors need to be prepared for another reality. These stocks and bonds can be subject to more fluctuation in value than other types of investments.

As a result of this added risk and potential volatility, it’s important that investors utilize emerging market investments in a prudent manner. For example, 2015 was a year when stock markets in the U.S. and other developed markets were relatively flat. By contrast, emerging market stocks as a whole declined in value by more than 14 percent (based on the MSCI Emerging Market Index), a good example of how unpredictable market performance can be in this part of the investment world.

This level of volatility is due to a variety of factors. One of them is that markets and economies in many of these countries are not well established. The regulatory environment can be unproven and subject to change. Companies may face more challenges building and maintaining business, while governments can sometimes encounter instability. These and other factors contribute to uncertainty surrounding emerging market investments.

Yet the opportunity is clear. Emerging markets may be positioned to provide significant growth in the global economy and investors focused on building wealth or increasing diversification may want to consider adding this asset class to their portfolio. But it bears repeating, for most people, these stocks and bonds should only represent a modest position in a portfolio given the volatile nature of these asset classes. Discuss the potential with your financial professional before you make any investment decisions.

What You Need to Know About Emerging Markets – Especially If You Are Not Good at Economics

Contrary to the belief of many HR people, Numbers Matter More Than Words. You may disagree but that’s the reality: in our today world, numbers speak louder than words. Just take a closer look at the current economic situation and you will find evidence of that.

At times where some governments are struggling with serious budget issues, investors and citizens are more interested in the numbers rather than beautiful rhetoric. And guess what? It’s the same within your company! Particularly in the C-suite room where they likes metrics.

–> Just because you work in the HR field doesn’t give you the excuse to be bad at Economics.

In order to be taken seriously, you have to see the world through the Economic and Financial Lens. Remember: Finance is the King anywhere on earth and the most important player on board. People who don’t understand Economics/Finance are people who don’t understand how the world and their companies work. And of course, you don’t want to be part of this category! As a credible HR Professional, your goal is to be seen as an effective Business Partner. This means being capable of talking numbers and economy confidently with your bosses and anyone else.

If you feel really uncomfortable with numbers and don’t want to spend a lot of time learning news terms and formulas, this article is a good starting point to enhance your understanding of our complex world. Written in a concise manner and with a minimum of economics jargon, it will give you the basics insights of economics that really matter – those that will help you understand why Emerging Markets are going to be more and more important in your day-to-day business activities. Here are what you need to know:

1. The term “Emerging Markets” was created in 1983 by Antoine van Agtmael – an international investment manager – to dispel the negative connotations associated with the previous term “Third Word”.

2. Emerging markets account for 2/3 of the world’s population.

3. In 20 years the economies of these countries will surpass the combined economies of the developed countries.

4. BRICS stands for the fast growing economies of Brazil, Russia, India, China and South Africa. The acronym BRIC was first coined by Goldman Sachs economist Jim O’Neill in 2001 and in 2011 South Africa was officially admitted to the prestigious club.

5. The Next Eleven (N-11) is a group of emerging countries with the potential to rival the G8. This group includes Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam.

6. Goldman Sachs believe the N-11 countries combines may become larger than many of the G8 economies by 2050.

7. Over the past decade, emerging Asia’ real GDP growth rate jumped to an annual average of 7.9%, following by sub-Saharan Africa’s 5,7% and Latin America’s 3,3%

8. Africa is now one of the world’s fastest-growing regions. Over the ten years, six of the world’s ten fastest-growing economies were in sub-Saharan Africa.

9. Although Africa’s economy accounts for only 2% of world output, it will grow at average annual rate of 7% over the next 20 years (faster than China’s) according to Standard Chartered.

10. Emerging markets can be divided into three categories: 1. countries rich in human resources (China, India, Philippines), 2. countries rich in mineral (countries in Africa, Latin America or Russia), and 3. countries rich in financial resource (countries in the Middle-East).

11. The world’s top ten emerging markets according to their stock market value and their national debt are: Taiwan, Indonesia, Mexico, Poland, Brazil, India, Turkey, South Korea, China and Russia.

I hope this information will help you better understand the basics of Emerging Markets and will let you realize that you need to learn more about this topic if you want to be taken seriously by your boss. Don’t forget: as an HR Professional, it’s your personal reputation and credibility that will be called into question! So, if you are interested in taking this further, HRinEmergingMarkets.com is a really good way to get you started.

–> Any comments, questions or suggestions? Feel free to Ask Me Anything by sending me an email at eliseeokonda.loma@hrinemergingmarkets.com

I will be glad to answer you!

The Top 4 Challenges HR Professionals Are Facing in Emerging Markets

Much has been written about the rise of emerging markets and what they can offer in terms of talent pool. But not one emerging market is the same and one HR strategy may not fill all markets. In a changing environment, the HR strategies used to manage people in one country are sometimes ineffective in another and what worked in a country might not in another.

That is the reality many companies are currently facing in emerging markets because of a lack of preparation, anticipation and adequate talent strategies.

Generally speaking, there is no right or wrong HR management strategy. However, as an HR professional, you should be mindful of cultural differences and varying HR issues arising in the targeted country before trying to implement anything. Needless to say that developing an inadequate talent strategy in a BRICs country can be one of a most expensive mistakes for a company? Not only in terms of money, but also in terms of real and potential talent losses.

In order to avoid such error, you need to know what are the hottest HR issues, topics and trends in emerging markets that could be an obstacle to your company’s development? To help you in this task, below is a list of 4 critical HR challenges arising from some BRICs countries? Memorize them? You will gain time and efficiency?

HR challenge #1: Attracting and retaining talented workers

BRAZIL – One of Brazil’s biggest problems is a shortage of qualified labor. Companies operating in Brazil are demanding more skilled workers than the labor market currently offers? The shortage is especially pronounced for companies in need of technicians, engineers and English speaking managers. It is also becoming increasingly difficult to retain talented workers with 5-10 years experience because they tend to switch companies in order to advance their careers and get higher pay.

RUSSIA – Russia has a considerable intellectual capital composed of engineers, scientists and many other well-qualified people. Nevertheless, many companies reported that it is more and more difficult to find great people as the quality of staff as well as the level of education are continually decreasing. In fact, job candidates from Russia are well educated but often by universities that fail to give them practical skills? Besides, an increasing number of talented Russians have left the country to go to Israel and the USA. As a result, only 20% of Russian professionals are currently considered employable by companies.

INDIA – In spite of the huge talent pool available in India, companies have trouble recruiting qualified workers because the quality of talent is not as good as it could be. By looking closer at the workforce available, it is estimated that only 25% of Indian professionals possess the skills required by companies. Regarding to the skilled candidates, they are highly attractive, mobile and willing to switch industries in order to play different roles and increase their salary. As a consequence, HR teams waste a lot of money as well as time because of this flow of people entering and exiting companies? What is more, foreign companies operating in India have to compete not only with Indian companies but also with companies from Korea, Japan and Hong Kong who are poaching the best Indian talent. As the population of these three countries is becoming old very fast, many of companies from there are turning their attention to Indian workforce.

CHINA – Despite China’s population of more than 1.3 billion, companies are struggling to find and retain employees. Even though, million of university graduates enter China’s job market each year, only a small number of them are capable of working in a multinational environment. Reasons include lack of strong English language skills and none previous work experience. Moreover, only one-quarter of these graduated candidates live in a city or region where companies are located. As labor mobility is restricted by the government, few young talents are currently living in urban areas? Foreign companies operating in China face an additional problem that explains talent shortage: more and more graduates and senior executives are willing to work for national Chinese companies rather than foreign companies.

SOUTH AFRICA – It is estimated than 10% of companies operating in South Africa have had difficulties filling job positions in 2011. In comparison to other BRICs countries, this number is low. However, there is a real shortage of talented people particularly engineers, legal workers, technicians, teachers and finance & accounting workers. The main reason is that the South African people who do have or acquire these skills tend to migrate to other countries who will offer them better job opportunities. This brain-drain has a high impact on companies’ businesses and needs to be addressed now if the country does not want to face a bigger talent gap in the future.

HR challenge #2: Developing effective leaders

CHINA – Developing leaders is a tough task in any market, but in China HR teams have the difficulty to adapt their talent management strategies to the country’s unique business culture and values. Besides, Chinese potential candidates for leadership positions often lack international experience, innovation and an ability to assimilate into a Western company culture.

Due to their cultural background, they are not accustomed to taking risks and managing change. As a result, about one-quarter of Chinese leaders are weak in the skills most critical for success in their roles and more than one-half are inadequately prepared for their roles? There is another issue to take into consideration: working for a Chinese company seems to become the preferred career choice for Chinese executives as well as expatriates steeped in the market.

SOUTH AFRICA – It’s extremely difficult to fill senior and executive management positions with top quality leader. Many of the current leaders working in leading companies are close to retirement and there is a lack of suitable 40/50-year-old candidates with a strong managerial background to replace them. To overcome this critical situation, numerous companies promote young talent to positions of leadership and offer fast-tracking careers to keep the best of them. As these new young leaders do not have enough work experience and are not prepared to handle such responsibilities, the majority of them fails or underperforms. It is vital for the success of companies operating in South Africa to invest in leadership programs in order to develop a real talented generation of leaders.

HR challenge #3: Dealing with difficult Employment laws

BRAZIL – Brazilian labor code makes it hard to use expatriates in order to fill the shortage gap. The Ministery of Labor seeks to protect as much as possible the domestic labor market by limiting the hiring of foreign workers. As a result, trying to get work permits for foreign employees is a very difficult task for any HR team. When it is possible, the maximum duration granted for a temporary work permit is 1 to 2 years but the reality is that many foreign workers can only stay 90 days within the country? With regard to national Brazilian workers, the labor code is very pro-employee and provides extensive protection to the employee at the expense of the employer. Recently, President Dilma Rousseff approved a law ordering companies to pay overtime rates for after-hours work calls or emails. This regulation reflects an existing trend in Brazil’s courts: employees suing their bosses over out-of-office work.

RUSSIA – Russian labor code is extremely employee friendly and it is almost impossible to terminate an employee. However, it allows any employee – regardless of seniority or nationality – quit a job after only 2 weeks’ notice and go to work for a competitor immediately. Moreover, Russian labor laws apply to all nationalities, meaning foreign employees (including expatriates) have the same rights than Russian employees. This is a standard practice in some EU countries required by EU labour law.

HR challenge #4: Managing the career expectations of Gen Y

INDIA – The Gen Y is writing the new code in Indian workforce. Mature enough to play crucial roles in companies, they can, however, be a nightmare for HR teams as they are more inclined to leave companies than any previous generation. Apart from the attraction and retention of Indian Gen Y, the biggest challenges today are communicating with them and offering them a rapid career evolution. In fact, the typical Gen Y Indian worker wants success to come to him/her fast and money faster.

As most of India’s high-potential workers (around 64%) and middle managers (around 55%) are Gen Y, the future of India – as well as companies operating there – rests on its ability to engage this generation.

CHINA – Chinese Gen Y makes up about 50% of the current China’s workforce. Raised to succeed, they are more educated, talented and ambitious than the previous generations. As a result, their demands, values and behaviour at work are different from those of their parents. For example, their expectations for rapid advancement and career mobility are high and they place great emphasis on salary. If your company cannot offer them an exciting career path, they will move to another company in order to have a better career opportunity and increase their remuneration as well. Being promoted is the greatest motivational factor in their career. Unfortunately, it is not always possible. So it is imperative that HR teams find new ways to motivate them.

Of course, as a global HR professional, you will never be asked to resolve ALL these issues alone! However, your company deeply relies on your HR team to anticipate any people risks that can affect its development? By having a clear vision of the issues facing by other HR teams in emerging markets, you will not only improve your global HR knowledge but also be aware of the HR differences and similarities between these different countries in terms of HR challenges. As a result, you will be able to suggest better ideas and solutions to your HR team. Developing a global mindset will also help you become an integral part of the leadership team searching ways to reduce people risks in emerging markets.

Remember what Ulrich says “Modern HR must take on many roles to demonstrate competence and effectiveness”. And I am quite sure that – like any HR professional – your goal is to be better at what you do and demonstrate people that you can be a strategic business partner.

Create Opportunities By Exporting Used Cars To Emerging Markets

Remarketing in Central and Eastern European countries

I would like to dedicate this article on used car sales in Central and Eastern European (CEE) countries. These markets are very interesting for many pre-owned car sellers and for fleet owners. Why? That I will try to explain in this article.

An important factor for fleet managers who want to sell their vehicles on the used car market is the residual value. I expect that most of you know that residual values are mainly driven by supply and demand. Determining the residual values, on the other hand is a little more complicated. The difficulty partly lies in the fact that the demand for second hand cars is hard to predict while it depends on various macro- and microeconomic factors.

What are those factors? Here are some examples:

– Are consumers able and willing to buy used cars?
– How big is the supply of used cars? Do the cars meet consumer standards on models, price and quality?
– Are there appropriate routes to the market? Are there a cost efficient means of transport and can these means carry large volumes?

Predicting residual values and sales in CEE countries

And predicting residual values is even more tricky in emerging markets. In Western European markets new car parks are quite stable and sell large volumes of cars every year. This means that there is a regular flow of cars to the used market.

The emerging markets, on the other hand, have much smaller sales volumes of cars and even a slight fluctuation in volume can have a large impact on residual values and conversely on remarketing opportunities.

In the current situation, the size of the new car market in CEE countries is not large enough to create a strong used car market. Therefore, many used car traders are looking to import used vehicles. And that’s where we come in. However, developing these opportunities can hold some problems.

Developing opportunities in emerging CEE markets

To accelerate the growth of the used car markets in CEE countries, and ultimately enhance the acceptability of our second hand vehicles and their realistic prices. But we collectively, as car traders, need to abate some of their concerns. There are a few ways we can help improve communication. Here are some examples:

– Supporting used car price guides within the markets and building confidence in these figures
– Creating press and PR programmes that describe used cars as having excellent value for money.
– Emphasizing how the used car industry is becoming more professional.

Starting export to emerging markets

Used car traders and fleet owners who are looking to grab the opportunities that lie in CEE countries, definitely consider using the help of an intermediate. And I am not just saying that as an employee of a European used car auction company.

Venturing into new markets takes time, effort and therefore money. When you use an international platform to sell your used vehicles, you don’t have to bother with extensive market research. All the groundwork has been done for you: building partnerships, studying the market, legislation, prices,… This saves you a lot of time.

If you prefer flying solo, than please remember that knowledge is key! Educate yourself with all factors mentioned above. And develop a brilliant strategy to acquire clients.