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

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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.

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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.

Jacque Vilet, president of Vilet International, has more than 20 years’ experience in international human resources with major multinationals such as Intel, National Semiconductor, and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career. She has also been a speaker in the U.S., Asia, and Europe, and is a regular contributor to various HR and talent management publications. Contact her at jvilet@viletinternational.com.

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3 Comments on “Why Are Companies Hiring Overseas? They’re Going Where Revenues Are

  1. Very true growth in emerging markets of Africa, Asia, Middle East, Turkey etc has been exponential. Sadly however as VP of Talent for major Telecoms in these territories we don’t find many US citizens either culturally agile or sensitive and and although highly skilled not many multi lingual as many of the emerging markets require French, Spanish, Portuguese, Mandarin , Urdu etc.

  2. Jacque,

    To summarize, in a word, the reason for the focus on overseas: GROWTH. Developing markets, in particular, are the main source of growth for global enterprises. For example, look at companies like Colgate and Unilever, with the overwhelming majority of their business outside their headquarters country, and significant presence in many developing countries where growth is highest.

    You said in your article that companies are targeting emerging markets for revenue – “These include greater Asia, Eastern Europe, Southeast Asia, Latin America and even Africa. ” I would highlight that “even Africa” misses the mark.

    Africa is growing faster than any other continent right now. Innovation is happening in tech hubs in east Africa, not only in countries like Kenya (where IBM just opened a large research center) but also in places like Rwanda that is best known for the messy civil war years ago. Beer manufacturers are innovating with new ingredients such as cassava (see http://beerarmy.com/profiles/blogs/big-beer-goes-african), as they try and tap into the vast African market with affordable products using local ingredients. And it’s not just North American and European companies – companies from larger emerging markets, such as China, India and Brazil, are expanding rapidly into Africa as well.

    Most importantly, McKinsey, in their July 2011 report on Africa, estimates that by 2040, 20% of the world’s working age population will reside on the African continent. Since we know companies will not move people to jobs, that means the jobs will move to the people. If your company is not doing business in Africa yet, chances are they will be soon (or become irrelevant). This means, of course, that the focus must be on talent development on the continent.

    It’s true educational systems need improvement to bring them up to global standards, and some African countries have a myriad of challenges to address. But don’t be misled – there are many many talented people working in Africa today for multi-national companies, international organizations and NGOs, and there is fierce competition for this talent.

    Those companies that focus on Africa now will have a leg up in the future. Innovation is a constant in the region – see http://www.howwemadeitinafrica.com/ for some good insights into what is really happening in the business world of Africa.

    Market intelligence is key. Birches Group, a global partner of Aon Hewitt, has market data for every African market. Visiting http://www.birchesgroup.com for more information.

  3. Well thats all nice but these ‘revenues’ and emerging market changes certainly ARE NOT reflected in the salaries of the CEOs, the VPs and the Presidents of these companies who live in the USA the cabal of nepotistic practices that happens in the USA is a crime

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