How COVID-19 is changing companies’ traditional “divide and conquer” model

The end of the expat?

How COVID-19 is changing companies’ traditional “divide and conquer” model

Even though the world of business travel is currently drawing a lot of attention due to its COVID-induced hibernation, there is another, far more strategic element of developing an organization’s worldwide network which is also showing symptoms – the traditional expatriate model.

These symptoms, however, are less related to the pandemic (even though it is difficult to start an international assignment in the current situation) but could moreover be attributed to a larger development that is characteristic for a new phase of globalization.

Times have changed

Looking at the world today, especially the rise of China impressively underlines that the former “old world”/“new world” distinction is more than outdated. Besides having significant impact on everything ranging from geopolitics to FDI and trade, these developments are particularly visible when it comes to the global flows of leadership talent. Thus, also the classical idea of sending managers “to the East” has started to become a thing of the past.

To start with, becoming an accomplished business leader does not necessarily start with enrolling at a European or American university anymore. The growing presence of Chinese, Indian and Singaporean business schools amongst the usual suspects from the West in this year’s Financial Times Global MBA Ranking underlines this aspect. “Why go to LBS (London Business School) when you can study at NUS (National University of Singapore)?” Upon graduation, the “old world” continues to be challenged. “Why work at GAFA (Google, Amazon, Facebook or Apple) when you can join BAT (Baidu, Alibaba or Tencent)?”

What do we learn from this? Management knowledge (whether it has been gained in an auditorium or a company) does not need to be sent anywhere anymore – it is already everywhere.

Thus, translated into the context of international leadership excellence, the current crisis has shown that besides the said universal management hard skills, it is rather a deep understanding of local market characteristics and cultural specifics that makes the difference today.

The COVID-19 turmoil underlines that when headquarters have to concentrate on risk mitigation and firefighting at home, their leaders abroad have to think and act independently. In this context, in-depth market as well as cultural knowledge, going beyond simply setting up a distribution network somewhere, becomes key.

As a result, this also leaves its mark when it comes to the traditional expatriate model. For many years, organizations sent their “international problem solvers” for three to five-year stints around the globe (“our Asia expert also knows how to do South America”). Now comes the realization that the world has become simply too complex and decentralized to successfully sustain this model.

The expat – an endangered species?

It is nothing new that dispatching people around the world has always been a quite costly endeavor (salary packages, housing allowances, school and relocation fees and so on). Now, as local, well-educated talent has been catching up, this model is more and more losing its edge. Whereas a couple of years ago, management in foreign markets has been entirely brought in from “home”, the new normal are organizations with local staff (including Managing Directors and General Managers). This also makes sense from a company maturity level, as the early internationalization phase of simply setting up a foreign office and somehow securing headquarters’ on-the-ground distribution has developed into a steady state of running and developing independent subsidiaries.

Furthermore, it has also become more and more difficult to internally justify the pay gaps between domestic and expat staff, especially when they offer the same levels of education and experience and share one desk. If somebody is sent at all, local contracts are preferred to generous expat packages.

Additionally, important personal aspects come into play as well. Particularly in times of crisis (such as COVID-19), being far away from home may become a challenge. With closed borders and heavily restricted movement regulations, the appeal of “being out there” has taken an additional hit. Furthermore, having gained experience abroad – once a prerequisite to climb up the corporate ladder – has become less important in the recent past. Other skills, such as digital and agile savviness, have often taken this spot. Also, generational and value-related aspects play a role, with an increasing GenY and GenZ workforce less willing to sacrifice personal fulfillment for professional advancement and economic prosperity. Consequently, finding people that are willing to leave their known surroundings and take a step into the unknown (even if it is only temporary) has become more difficult.

Of course, the expat model will not disappear entirely, and in many cases, it will continue to be key to companies’ international strategies and success, but a shift is visible. This is in line with a world that is entering a less unilateral, Western-centric phase of globalization, adapting to multi-lateral, multi-centric new realities. Organizations and their leaders need to adapt.

Local talent needs a global culture

For organizations, this represents not only a challenge on the local recruitment level. Headquarters also have to learn what it means to hand over responsibility (and thus control) and consequently adapt their ways of communication. “International” companies, where the mere difficulty to communicate in English has been the main reason to follow suit with a costly and less and less efficient expat model, finally need to dust off their dictionaries.

This also applies to the recruitment of talent abroad. Local circumstances, developments and market dynamism have become too complex to employ a “headquarter nationality filter” at the beginning of any given talent funnel (both abroad and at home, by the way). Otherwise, the potential employee pool simply becomes too small. Especially for the SME sector, this is a bitter pill to swallow, as it often requires significant cultural adjustments at home.

In the future, it will become more and more difficult to manage truly international organizations if there is no common, supranational ground to do so. In-depth, cultural understanding and the ability to detect, adapt and embrace cultural differences will become key. This also entails the use of foreign language skills – despite the likes of Google Translate or DeepL – as the ability to fully grasp a culture different from your own can only be completed by mastering its language.

How Executive Search can help

Albeit being internationally active, most companies cannot rely on the corresponding, internal HR structures. Each market is different, subsequently requiring different approaches and profiles. Especially in the SME sector, finding talent abroad can thus be a very time and resource consuming endeavor. Also, if an ideal candidate fit is not ensured, increased staff turnover can be a result, further increasing costs and taking focus off the business. Thankfully, there are partners who – no matter how far away or experienced you are when it comes to your activities abroad – make sure that you find what your business needs. Relying on local experts to identify, assess, place and develop talent is key and enables you to focus on what matters most – both at home and abroad.

About Kienbaum

With 26 offices in 14 countries, Kienbaum is the ideal partner for the development of your organization’s full potential – not only in Germany and Europe, but all around the globe. Thanks to decades of international presence, Kienbaum offers you an unparalleled understanding of local markets. From Atlanta to Shanghai to Zurich, our transnational expertise is available across the most important economic centers and regions worldwide.

 

For further questions please contact us!

Felix Bischoff | E-Mail: felix.bischoff@kienbaum.de | Tel.: +49 221 801 72-534
Thomas Straessle | E-Mail: thomas.straessle@kienbaum.com | Tel.: +41 44 30642 34