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Hiring Locally vs. Transferring Expats

Posted by: The ADP Team on 24 April 2017 in Multinational and Globalisation

When your business expands into a new location or international market, creating the right team is a critical ingredient for success. There’s on-going debate amongst business and HR leaders about whether you gain more know-how by transferring expatriates from your existing operations into the new market, or if you’re better served hiring local employees. The truth is much depends upon your organisation’s goals and needs when it comes to expanding into the new market.

An expat employee on secondment typically carries a deep understanding of your organisation’s products, policies, systems, workplace culture and strategy. This could help him or her get the required support from colleagues at headquarters to navigate any challenges more confidently and rapidly.

The main advantage local hires provide is a deep knowledge of the target market including the culture, government regulations and prevailing work styles. “The most important reason to go with locals is that they’re local,” says Radius Worldwide’s  Larry Harding. “They speak the language, they understand host-country business customs, and if you’ve hired well, they come with strong local networks and personal connections.”

So what key factors should you consider when making your decision?

The high cost of expat expertise 

In general, transferring an expat is also more expensive and will cost your organisation two to three times what the same employee would cost back home, according to the Harvard Business Review. You’ll need to pay a higher salary to convince the expat to work abroad, and HR will have to manage time-consuming immigration and tax-related issues. You’ll need to provide the expat with training in a foreign language and some basic cross-cultural skills. You may need to pay for the expat’s housing and maybe for some moving costs for the employee and any family. You may even, depending on the market you’re expanding into, be forced to pay personal security/safety costs to protect them.

All of this comes with the risk of not seeing the return on your investment. Expats may find themselves burning out because of culture shock and the stress related to being away from home and family.

Of course, the available talent pool in the locale to which you’re expanding is relevant in deciding whether to send an expat or hire locally. For some positions, you simply may not be able to access local talent, which makes the expat option more attractive despite the higher associated costs and burnout risks.

Local hire’s steep learning curve

Unlike the expat employee, local employees have no experience working inside your organisation. They will need time to adapt to your procedures and operating routines, from IT systems to reporting structures, communication styles and workplace culture. In the book A Culture Turned, the authors contend that UGRs – or unwritten ground rules are the unspoken, expected patterns of behavior that really constitutes an organisation’s culture, and these don’t necessarily reflect what’s communicated in corporate vision, mission and value statements.

In addition, the local hire may confront significant language and cultural barriers when interacting with headquarters. The company would need to support and train the local hire to adapt to working and communicating effectively within your organisation.

Taking advantage of technology to gain knowledge

Businesses can also leverage rapid advancements in technology to gain ‘local expertise’ in an economical manner. For example, one of the key considerations for any organisation moving into a new country is managing new payroll and regulatory requirements. Ian Sparrow, Vice President of Global Payroll, Multinational Clients at  ADP said in an interview with the Global Payroll Management Institute that in 2014, there were 20,000 regulatory changes affecting employers across the world – but the number of changes jumped to 50,000 in 2015. Many employers need guidance to navigate this level of complexity and Everest Group Analyst say that ADP’s global payroll solution “has gone one step further than other service providers”.

In essence, there is no definitive one-size-fits-all solution to the complicated issue of global staffing. But if you understand your organisation’s goals and the pros and cons for each hiring option, you’ll be in a position to make the best choice for your organisation – and leverage cutting edge technology to your benefit.

Written by: Connect@ADP Team


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TAGS: Global business expansion hiring locally versus transferring expats international business expansion market adaptation staffing strategy