On the roadAs organisations look to expand in emerging markets, they are increasingly faced with a dilemma. Should they compete for finance managers from the local talent pool? Or should they send somebody from the home office to work abroad? Each has its own set of unique challenges and benefits. CGMA road warriors offer their insights.
Four years ago, JCB had a problem. The British manufacturer of construction equipment was trying to capitalise on rampant growth in India, where a building boom had boosted demand for the kinds of excavators, loaders and cranes the company makes.
The market dynamics had helped JCB India become the parent company’s biggest foreign operation. Its team of engineers in India was strong, buoyed by the nation’s deep pool of talent in that field. But the recruitment of senior finance talent had proved difficult; the subsidiary was struggling to find its next assistant vice president of finance.
So the company, which prefers to hire locally, turned to a senior financial controller in its UK office. Mark Bevan, FCMA, CGMA (above), became the first foreign assignment in the India subsidiary’s finance function — and one of only a dozen amongst the subsidiary’s 5,000 employees. What he lacked in local knowledge he made up for with company knowledge, which is what the company needed at the time. “My knowledge transferability was high,” he said.
As companies expand into emerging markets, they face a choice: compete for finance managers from the local talent pool or send somebody from the home office to work abroad. Each has its own set of unique challenges and benefits. But organisations, for better or worse, often end up choosing candidates they think will take less time to adjust.
“They’re looking for high-performance candidates, and they expect this person to perform on day one,” not somebody who has a high potential and eventually could be a great employee, said David Wu, CPA, CGMA, general manager and managing director of executive search firm GMP Talent in Shanghai.
And therein lies the dilemma.
Competition for trained finance professionals in emerging markets is fierce. About one-third of employers reported difficulties in filling jobs in 2013, according to staffing agency Manpower. The problem was more acute in emerging markets: 51% of employers in Asia-Pacific and 68% of employers in Brazil reported talent shortages. Accounting and finance were among the five positions most difficult to fill worldwide. The top three reasons for the recruitment problems: lack of hard skills, lack of available applicants and lack of experience.
“Everybody is ramping up,” said Nilly Essaides, director of practitioner content development at the Association for Financial Professionals. Essaides regularly talks to CFOs, finance directors, treasurers and heads of financial planning and analysis at multinationals based in North America and Europe. They tell her that talent demands from multinationals’ new or growing overseas operations are tightening the already short supply of finance professionals in emerging markets.
That presents opportunities for people who want to raise their profile within an organisation — and for organisations that want to develop high-potential employees. Senior-level finance positions often require knowledge of the company and its culture, things that even the best local talent can lack.
Those who are sent on foreign assignments, however, often struggle with new languages and business cultures, which can cause misunderstandings, anxiety, delays and even family problems. The problems are magnified in emerging markets, where the failure rate of foreign assignments tends to be higher. Indeed, while only 5% of all foreign assignments fail, the failure rate is higher in countries such as China (27% failure rate), India (14%) and Russia (7%), according to research by Brookfield Global Relocation Services.
“Immediately able to help”
Mark Bevan’s is a success story. He had been with JCB for six years in various finance roles before he was sent to India. A lot of his early work included resolving intracompany issues. Having relationships within the company — understanding whom to contact for information or who needed to be involved in a decision — proved vital. He was also familiar with JCB systems and processes, having worked in service and manufacturing divisions.
“I was immediately able to help with communication, with understanding the JCB business in a financial context,” he said. “… Anybody locally recruited, and to some extent locally developed, wouldn’t have that knowledge.”
Once on the ground, he was able to help translate idiosyncrasies of Indian business and finance for his counterparts in the UK. Explaining the complexities of Indian banking regulations, for instance, was one way he was valuable early on. “It sounds like a simple, straightforward thing, but having somebody who understands both sides helps that education,” Bevan said.
Not every company has the resources or willingness to send an employee on a foreign assignment. Difficulties with taxes, social security and payroll compliance topped the list of foreign assignment problems, followed by security concerns, immigration issues, lack of suitable housing and costly compensation incentives, a 2013 EY survey found.
But faced with the choice of trying to recruit the perfect local candidate or sending a rising star from the home office, multinationals are increasingly choosing the foreign assignment. Of 600 companies worldwide polled by KPMG in 2013, 44% planned to use expatriates somewhat or considerably more in the next five years.
India was Bevan’s first foreign assignment after joining JCB about 11 years ago. The equipment manufacturer has been gradually expanding its Indian subsidiary for more than three decades. One of the main reasons he was selected for the role: He simply expressed the desire to go. “I asked if there were opportunities abroad with the company,” Bevan said, adding that he made clear that he was interested in career development and exposure to an emerging market.
Overseas and offshore
Thomas Sloan, CPA, CGMA (left), has worked overseas for about ten years, including one year in the United Arab Emirates and four years in Angola. His most recent foreign assignment was from 2008 until 2012 in Brazil, where he was finance director at two offshore drilling companies.
Sloan has worked in the oil and gas industry since 1995, first for Amoco, then BP. He knew when he joined the oil and gas industry that foreign assignments would be a crucial part of his career, because drilling locations and often finance centres are overseas.
In 2007, he was recruited by Pride International, which had a finance centre in Macaé, a coastal city about two hours northeast of Rio de Janeiro.
“Pride International happened to be looking for someone to lead finance operations in Brazil,” Sloan said. “I got a call, went through a series of interviews, liked what I saw. They liked what they saw, and we decided to pursue it.”
Attracting and retaining qualified accountants in Macaé was one of the biggest challenges, Sloan said. There just weren’t enough of them, especially with experience in the oil industry. To entice somebody to leave the amenities and city life of Rio de Janeiro or Saó Paulo, where the Big Four have offices, and move to Macaé “was very difficult and costly,” Sloan said. “That’s why my assignment came to be. If [Pride] could’ve found a suitably qualified accountant in Brazil at the time, they would’ve hired that person over me.”
The best of both worlds
British drugmaker AstraZeneca recruited Jasmine Zhong, FCMA, CGMA (left), to help establish and build its Chinese operations.
Zhong was born and raised in China, studied in China and the US and was working for Deloitte in Atlanta when AstraZeneca recruited her in 2005.
She went to the US early in her career to pursue an MBA and to get more exposure to management and leadership, Zhong said. But the majority of her extended family is in China. She and her husband, who works in IT, also thought that China promised better career opportunities. So they returned to China.
Zhong has progressed well since then. In 2011, she advanced to her current position as vice president and CFO of the drugmaker’s business in China, where she oversees a full scope of finance functions of a business that generated $1.8 billion in revenue last year, including tax, purchasing, financial planning, business finance and financial controlling.
As a member of the senior leadership team, she plays a critical role in planning and executing the company’s growth and investment strategy.
Zhong represents the best of two worlds for recruiters. She is fluent in Chinese and English, at home in the ways and idiosyncrasies of Chinese culture and educated in Western business management and leadership styles.
People who fit that profile are in high demand and short supply. “They are cultural chameleons,” said Greg Scileppi, president of international staffing operations for Robert Half International. Those who have experience working for Western multinationals or are fluent in International Financial Reporting Standards and US generally accepted accounting principles are extremely prized.
But expectations are high, too. An AstraZeneca expat from corporate headquarters would have had a tougher time doing Zhong’s job in China.
Language and cultural competencies are essential to communicate with Chinese governmental agencies such as the tax agency or the commerce department. “You need to be able to have some direct interactions to understand the policies and framework,” she said.
The developing talent pool
The talent pool in China has improved considerably in the time Zhong has been back in the country. China’s economy expanded rapidly following 2001, the year China became a member of the World Trade Organization. That brought an increasing number of multinationals to the country, but also Western universities that established satellite campuses in Asia. With more opportunities to learn Western-style business management and leadership close to home, the domestic talent pool has gotten deeper and broader, Zhong said.
AstraZeneca’s China workforce reflects that, having a locally oriented workforce. “That being said, to find the right [finance talent for senior positions] is still not easy,” she said. “It’s still difficult to find a combination of strong technical skills and good people management, communication and leadership skills.”
Bevan, who has finished his assignment and is back in the UK, said the local finance professionals he dealt with in India were usually specialists in particular areas of accounting, such as tax, auditing or compliance. Bevan thinks his analytical skills, business knowledge, decision-making abilities and understanding of the whole business gave him an edge.
“I had a much broader approach to the way I work,” he said. “I don’t just work in finance. I work across the board.”
Foreign assignment: A family survival guide
A foreign assignment can be one of the most tumultuous developments a family encounters.
The company often expects long hours and big results from the expat, so the work-related stress level can be high. Meanwhile, the employee’s spouse and children often are trying to adjust to being away from family and friends in an unfamiliar culture with a language they don’t speak or understand.
Family concerns are the main reason candidates turn down foreign assignments, according to Brookfield Global Relocation Services. Almost two-thirds (65%) of assignees are married, and 43% are accompanied by children when they go, so plenty of workers do successfully take families on cross-border assignments.
Doug Bonthrone, FCMA, CGMA (left), a veteran of 14 years of foreign assignments who recently retired from a senior finance position with the Coca-Cola Co., reflected on assignments in South Africa, Egypt, Russia, Hong Kong and Germany. He and his wife, Fiona, shared the tips that helped keep their family strong while on assignment:
Get agreement from your partner before accepting the assignment. Some families agree to concentrate on one partner’s career for one foreign assignment or for a predetermined number of years, with the understanding that when that term is done, the family will focus on what’s best for the other person’s career. It’s important for these kinds of agreements to be made in advance. “You don’t want one partner resenting the other for having made the move,” Bonthrone said.
- Learn the cultural norms. The assignee and the family need to be taught basic cultural expectations. Is it appropriate to bow in a certain way when you meet someone in East Asia? Is a certain style of dress required, particularly in Middle Eastern societies? The company should help educate the employee, the employee’s partner and the children on important customs such as these.
- Embrace and enjoy the local flavour. Families that insulate themselves in all-expat neighbourhoods or housing miss an opportunity. Bonthrone enjoyed living in areas only partly occupied by expats so the family had some support from neighbours who had similar backgrounds, but they also could learn from neighbours who were native to where they were staying.
- Utilise expat-tailored schools. Despite a desire to assimilate, sending children to local schools can be a mistake, Bonthrone said. Because foreign assignments often last just a few years, by the time the children learn the language enough to succeed in school, they may be moving to another country with another language. Taking advantage of schools with curricula developed for expats makes more sense.
- Be patient. This is especially important for non-working partners on foreign assignment. It may take a while for them to get their bearings. A grocery shopping trip that might be finished in an hour at a US or British supermarket might take most of the day in a place where much smaller markets are the norm.
- Join a local expats’ club — and heed advice. When in Hong Kong, a friend at the American Women’s Association told the Bonthrones that they needed to hire an “amah” — a domestic housekeeper. They were reluctant but were persuaded when they learned it would be nearly impossible to find a baby-sitter if they didn’t hire an amah. “Don’t come in and impose your own norm,” Bonthrone said.
- Consider medical choices. Find a doctor and emergency services in advance. You don’t want to be trying to sort this out in a foreign language when there’s a panic.
Employer view: Six tips for a successful international assignment
Assignments to emerging economies can be particularly challenging. Indeed, research by Brookfield Global Relocation Services found that China, Brazil, India and Russia (the BRIC countries) are among the most challenging locations. Inability to adapt to the culture, family problems and quality-of-life concerns were common reasons for failure of foreign assignments to BRIC countries.
Housing, medical facilities and education options may be limited, power and water supply may be unreliable, transportation may be difficult, and cultural and language barriers may be significant.
To increase the likelihood that an assignment to an emerging market is successful, even with an expatriate who has family, Brookfield and its interviewees offer the following suggestions for employers:
1 Family: Family concerns account for more than one-third of foreign-assignment refusals, according to Brookfield. To make foreign assignments to challenging locations attractive, the oil and gas industry offers expats shorter-term stays, which allow for frequent home visits, or family housing in a city close enough that expats can visit their families on weekends. Companies that do not routinely assign employees to challenging overseas locations could provide boarding school options for assignees’ children and arrange volunteer activities and transportation for spouses. Extra cultural and language training can also help spouses or partners assimilate somewhat into the host culture (see “Foreign Assignment: A Family Survival Guide”).
2 Immigration: In emerging economies, immigration rules can change suddenly without notice, local practices may differ from national practices, and immigration officials may solicit bribes from companies. To deal with these challenges, companies should find knowledgeable local immigration partners and establish a relationship, allow enough time for requests to be processed and educate business units about work permit requirements and compliance issues. Companies should also clearly state their position concerning bribery and corruption.
3 Premiums and allowances: Companies generally offer foreign service and hardship premiums to assignees in developing countries. Some companies customise premiums and incentives to how difficult it is to live in a particular overseas location. That may even include free meals. Rest-and-relaxation leave is standard for assignees in developing countries. So are cost-of-living adjustments.
4 Housing: In locations where expatriate-style housing is limited or non-existent, companies may need to build their own housing compounds, especially for assignees with families, or shorten the duration of assignments to be able to offer less-sophisticated housing to assignees willing to leave family at home. Barracks-style housing may be sufficient for expatriates who are single. To improve the reliability of home maintenance and utility service in emerging markets, companies need to partner with local service providers to establish a good relationship.
5 Recruiting and retention: Establish individual career development and training plans that outline the strengths and personal ambitions of finance talent but also skills they may still need, such as better language competencies. Set up a peer interviewing process that includes the chief executive, especially to select new hires for senior finance positions. Set up a recruiting team of local people within HR as an internal network to identify job candidates and better understand candidates’ education, certificates and training.
6 Repatriation: Employees returning to a company after a couple of years away could find themselves with a new line manager, co-workers and IT systems. In fact, 16% of assignees left their companies within the first two years of returning home, according to EY. Therefore, planning the reintegration process is important to help them readjust. Repatriation discussions should occur at least six months in advance of the assignee’s return, Brookfield suggests.