The expatriate manager is a declining species

“Executive expatriates are expensive, as many multinational firms have learned. Moving a manager to a factory or corporate office in Dubai, Russia, or India can be a costly experience after providing relocation dollars, tax equalization, and housing allowances. For that reason and others, Western and non-Western companies competing in emerging markets are dramatically reducing the number of Western executives they retain on full-fledged expatriate packages, replacing them with local nationals, third-country nationals (executives who live in the region but not in either the home or host country), and returning nationals, says Peter Felix, president of the New York-based Association of Executive Search Consultants (AESC). According to recent surveys by AESC of hiring activities in China, India, Brazil, the Middle East, and Russia, only 12 percent of senior executives in those markets are expats, compared with 56 percent 10 years ago. ”

Strategy+Business (July 29th 2008)

Once upon a recent time, the expatriate manager was de rigueur in emerging markets. Given the skills gap that obtained in less sophisticated environments, multinational companies had no choice but to fly in a squadron of upper and middle-level managers to take charge. Indeed, even large local companies felt they had to headed up by fly-in leaders.

This naturally caused many an issue. As indicated in this week’s excerpt, the cost of paying relocation allowances, school fees, holiday trips etc becomes prohibitive, when often the rationale for being in an emerging locale was to reduce costs. The survey referred to above found that on average an expatriate manager was likely to be two or three times more expensive than a local one.

Another was lack of continuity: multinational company leaders were often rotated around the corporation’s many locations, much like diplomats, doing two- or three-year stints. That often left large companies unable to develop clear and consistent long-term strategies. I have observed many a multinational in Kenya reinventing its priorities every three years ago when the boss changed and the new one flying in imposed his own whims and preferences.

Even more serious is the uncomfortable but undeniable fact that many expatriate managers can be like fish out of water when thrown into a different working environment. The qualifications may be right and the experience solid, but those things alone do not guarantee success. It takes time to understand local cultures, nuances of discourse and hidden meanings. These thing remain a mystery to transient managers who are often seen fulminating against local behaviour patterns. There is now a growing tendency to look for “returning talent” – managers who can combine global education and experience with native knowledge. Indeed, this is a key battlefront in the war for talent in Kenya today.

This is not to say that every manager should work in her own country and stay there. In today’s globalised economy, talent needs to move to where it can make the most impact. Nissan-Renault is now run by a Brazilian from Paris, and our own Zain, a Middle-Eastern company, is led in Kenya by a Paraguayan. We have to leave the old prejudices behind, and recruit leaders who are ‘fit for purpose’ – in all dimensions.

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