Published on November 20, 2019
1. Balancing Local and Expatriate Workers in a Developing Market DR. EHSAN BAYAT
2. Balancing Local and Expatriate Workers in a Developing Market Entrepreneurs establishing new ventures in developing communities face several challenges, from handling cross-cultural negotiations to developing a skilled workforce. The latter process can be especially complicated because of the tension between hiring local people and bringing in expatriates to lead operations. Locals can help with communication across cultural lines and offer invaluable insight into the local market, while expatriates often have more experience and expertise. Often, the option that makes the most sense is to hire a mixture of both, but the exact ratio will depend on the company's needs, budget, and expectations for expansion.
3. The Argument for Hiring Expatriates to Work Abroad Expatriates can provide the expertise a new enterprise needs to establish itself and expand. Generally, expatriates will have a deep understanding of corporate aims and practices and can train local employees. Most companies will need to send at least a couple of expatriates to help with this training, or the new operation could collapse on itself. This expertise is one of the most important things to consider when hiring for a new operation in a developing community, especially if the local area has a limited talent pool, which is often the case in regions where literacy rates are low. While virtually every place is home to intelligent people who can be trained, people with the required skillsets may not be immediately available. The number of expatriates needed to run an operation depends on the nature of the company. For example, setting up a new manufacturing facility demands a great deal of expertise from the very beginning. This deep knowledge is especially crucial if the new operation must conform to the standards of another market, as is the case for companies manufacturing goods for export. Other enterprises may not need the same level of expertise upfront, or they may need local expertise to adapt a company’s product for the local marketplace.
4. The Cons Associated with Importing a Workforce While importing a workforce brings knowledge and expertise to an enterprise, it also is extremely expensive. Companies need to cover travel expenses, relocation allowances, visas, and taxes when sending workers abroad; most companies also have to offer higher pay to convince people to move abroad for a significant amount of time. For these reasons, expatriate employees can cost two to five times more than local employees. Furthermore, studies have shown that expatriate workers have high burnouts rates. Up to 25 percent of workers sent abroad go home early because of the stress caused by language barriers, isolation in unfamiliar communities, or cultural differences that are difficult to overcome. The legal issues involved with importing workers also complicates the picture. Companies have been barred from operating in some countries because they did not respect these nations' laws regarding expatriate employees. It's necessary to understand labor regulations in the target country and keep current with changes, but doing so requires a significant amount of time and effort.
5. How Locals Can Benefit an International Business Hiring locals can help a great deal when establishing a business in a developing country. These employees allow companies to understand the local culture by providing an insider’s view. This perspective is priceless when companies are trying to launch a product in the local market. Even if the product isn't intended for the local market, local employees can help companies navigate cultural, legal, and regulatory differences with greater ease and avoid loss of productivity. Local employees can also assist with language barriers and facilitate connections to local resources. Generally, companies will need to invest considerable time in identifying talent in a new community, but locals may be more able to forge beneficial relationships in the area. The other benefit is that locals often cost much less than expatriates because companies do not have to pay relocation costs. Even when companies offer competitive salaries in the local market, this is often far less expensive than paying the same employee in the home market. Moreover, there is inherent value in diversity and bringing new points of view to a company.
6. The Challenges of Hiring Locals The big downside of hiring locals when launching a business in a developing region is the typically limited pool of qualified candidates. However, this isn't true everywhere—companies should spend time evaluating the local job market and candidates' skills and qualifications before making assumptions. If no qualified local candidates can be found, the company can train its workforce. This can be an effective option. Employees are often loyal to a company when they receive training, especially those who are just starting their career. In addition, many people who lack formal educational credentials or job experience are nevertheless quick learners. Of course, the downside to building a workforce through training is that it requires spending more time and money upfront. The other problem that companies can encounter when they hire locally is a cultural one. While local employees often serve as liaisons with the local culture, these individuals may not understand the motives and norms of an organization from a foreign culture. People typically hold onto the values of their country of origin, and local workers may not connect to a company and its mission in the same way as expatriates from the company's home culture. However, this problem isn't impossible to solve. Companies simply need to be prepared to do some work in cultural translation when hiring locals.