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strategy and business
Published: July 29, 2008

 
 

The Decline of the Expat Executive

S+B: How should global companies operating in emerging markets manage the transition between management teams made up primarily of expatriates and teams that favor locals?
FELIX: This is the ultimate question. Companies that are fully committed to globalization have come to realize that there is real danger in imposing the culture of their country of origin on a worldwide organization. If a U.S. company, for example, is seen as reserving top executive slots for Americans, it will affect the company's success. Global corporations are recognizing that they have to organize themselves in a way that will allow multicultural executives to come up through the system and reach top jobs. We’re seeing some evidence of that — the chairman and CEO of Sony Corporation was born in the U.K. and is now a U.S. citizen; a Brazilian-born executive based in Paris is running Nissan Motor Company; the chairman and former CEO of French cosmetics company L’Oreal is British. So there has been a big shift in the thinking of major multinational corporations. They’re realizing that power can’t stay just in their home market.

S+B: Are Western multinationals losing talent to emerging market competitors?
FELIX: They are losing some people, so they’re putting new emphasis on talent management and their recruitment propositions. Many corporations are doing serious soul searching, particularly if their own recruitment propositions have been materially harmed by negligence. For example, if a U.S. company has laid off a lot of people or management has had problems back in the States, this could upset the ability of a corporation to recruit local nationals overseas. For that reason, companies are trying to clean up their reputations abroad even as they try to hire new talent.

In this war for talent, you have to be well-equipped to fight. If you’re not well-equipped, you’re going to lose people.

S+B: Aside from compensation, what other factors influence this new breed of executives with regard to what companies they want to work for?
FELIX:
It’s not just companies that are competing for talent; it’s also countries. We did a survey recently, asking our database of 45,000 global executives, “If you were to consider an overseas assignment, where would you prefer to go?” There was a high preference for China, the next preference was for India, and the lowest preference by far was Russia.

How well these big emerging markets compete for talent will depend on what perception people have of their national companies. Do I want to work in India for an Indian company? Do I want to work in Russia for a Russian company? Do I want to work in another market for one of those companies? Or do I want to work for a global company in one of these markets?

Companies will have to develop more attractive promotion policies to recruit executives. With the notable exceptions of Nissan and Sony, the Japanese, who have 20 years or more of experience operating overseas, have never gotten this issue quite right. When it came to integrating senior non-Japanese into the corporation, there was a glass ceiling; non-Japanese were never likely to make it to the top because of a very insular culture. Frankly, I would predict that’s going to be a challenge for some of the emerging multinationals. They’re going to have to put together recruitment propositions that are attractive to the most talented executives.

Author Profile:


William J. Holstein is a contributing editor of strategy+business. A veteran business journalist and author, he is based in New York. For more of his work, visit www.williamholstein.com.
 
 
 
 
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Resources

  1. Expatriate Senior Executives an Endangered Species, Say Headhunters in Emerging Markets,” press release, Association of Executive Search Consultants, May 30, 2008: Results of a global survey of trends in executive recruitment. 
  2. András Gábor, et al., “Winning the Talent War in Eastern Europe: Challenges Facing the Consumer Goods Sector,” Spencer Stuart white paper, March 2008: Analyzes executive recruitment in the consumer goods sector in Poland, Czech Republic, Slovakia, and Hungary.
  3. Avdesh Mittal, “Executive Stripes (PDF),” Heidrick & Struggles, 2008: Describes the difficulties of recruiting and retaining Indian executives.
  4. The Leadership Crisis: New Survey on the Best Companies for Leaders,” press release, HayGroup, December 12, 2007: Describes the study, conducted with Chief Executive magazine, which makes the case that demand for new leaders from economies such as China and India will intensify the global talent shortage for skilled executives.