Tuesday, September 24, 2013

Crucial People Issues vis-a-vis Emerging Markets

By 2025, more than half of the world’s population will have joined the consuming class, driving annual consumption in emerging markets to $30 trillion, from $12 trillion. Emerging markets could account for more than 70 percent of global economic growth during this period.
Reference:  Winning the $30 trillion decathlon: How to succeed in emerging markets.

For one, world population will continue to grow at a major rate.  For another, each person in each family has needs - from food and shelter, to schools and clothing, to resources and energy - and in business and economic parlance each one consumes.  Put one plus another, and we get growth in consumption that, purely by McKinsey's quantification, will be an even more staggering opportunity for companies around the world.

Enter, stage left:  Boston Consulting Group, with Playing to Win in Emerging Markets:

Awareness of opportunity is clearly there, as are ambition and expectation among multinationals to tap that opportunity.  Yet, this recent BCG study clearly echoes what McKinsey noted a year ago:
While executives recognize that winning in emerging markets is the key to long-term growth, many companies remain reluctant to commit resources and talent at scale.
A full year passed, and athletes have hardly shown up at the track and field for decathlon training and practice, never mind competition and performance.

Enter, stage right:  Booz & Co., The 2012 Chief Executive Study:

The good news, companies worldwide are more stable, and thus better able to succession-plan for leadership.  In their 13 years of running this study, Booz found the largest number of incoming CEOs (300).  But just 45% of them had any experience outside of their home countries, prompting Booz to wonder, quite amazingly, whether the global CEO was just a myth.   

So to say that there is a gap is an obvious thing.  But to understand why there seems to be such a wide and persistent gap is a challenging study.

Among the 13 capabilities for emerging markets, BCG found that People and Organization were a 'double-whammy' cluster:  Companies clearly rated these the most important, yet their performance in these areas visibly lags.  Reconciling this is a long-term business proposition, not a strategic or tactical quick fix.

Let's focus just on people and organization, in particular expatriate issues.

It's unreasonable to deploy only expatriates to run an overseas operation or to engage only local talent to lead and staff it.  So more than anything we're looking at some combination of both expatriates and locals.  What that combination ought to look like is a matter of purpose and aims for each multinational.

Individual Factors

Michael Dickman speaks to the different motivations of those who work abroad while sponsored by the company versus out of personal, independent initiative:  career and development for the former, adventure and exploration for the latter.

What he refers just  tacitly to is personality.

I am an extravert, and love meeting new people and visiting new places.  I moved from Chicago to Dubai as part of that second group Dickman speaks to, and in fact I had already built a good network of friends and colleagues in Dubai long before I moved there.  So I adapted easily, and without question relished the experience.

Another area to weigh is cognitive ability. How well a leader or staff can grasp more ambiguous, novel issues, navigate diverse cultural norms and languages, and forge personal and professional relationships matter a great deal.

Motivation, personality and ability are all individual factors that must be considered and assessed, before deploying any leader or staff abroad.  The fact is some are more suitable for an expatriate assignment than others, and fundamental task for an organization is determining who is who.

Interpersonal Factors

Well before I left Chicago, I attempted to secure company backing for such a move to the Middle East.  There was much back-and-forth in the executive committee of the consulting firm I worked for, and I could no longer wait for them to finalize a decision.  To their credit, they engaged me in conversation about such a move, and inquired about my family, even thought the firm simply didn't have enough knowledge, experience and resources to advise me adequately for an expatriate assignment.

My final point is that a move abroad is not just an individual event, but an interpersonal one.  There may be marriage, relationship or parenting to consider.  If not, there are often social networks, leisure activities, or  community service to account for.  Even in a perfectly strategized and planned business decision, with a fully knowledgeable and experienced HR organization to advise the leader or staff, the expatriate assignment can fail if these interpersonal factors are not part of strategy and plan.

In other words, companies are not just dealing with the individual working for them, but also with that individual's life concerns that they may hardly see, let alone know about.

I will address this more in a future article, but local talent have these issues as well.  I know that some of my former colleagues and clients in the Middle East were motivated neither by career development nor personal adventure, but rather by grade and salary increase.

Also, many Arab men and women were raised under very different gender norms, and while these were relatively progressive or liberal among my friends and colleagues, some women were hesitant to interact with men and were virtually unlikely to assume jobs that required travel or relocation.

I am certain that McKinsey, BCG and Booz are awareness of these expatriate issues, but I simply do not see them addressing these nearly enough.  Certainly, in reference to BCG's findings above, they're pivotal in attracting and developing talent, developing strong leaders, and ultimately building a capable local organization.

In the end, then, to say that these opportunities in emerging markets are exciting is an understatement.  So is the point that capturing these opportunities are easier said than done.  But if people issues are not fully accounted for, addressed, and reconciled, then winning that $30 trillion decathlon will remain a pipe dream

Thank you for reading, and let me know what you think!

Ron Villejo, PhD

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