So many companies believe that the only way their new overseas operation can be successful is if they send over one of their experienced managers as an Expat.
At the very least, this is a significant cost — and often can be sufficient to eliminate the savings otherwise achieved by setting up in a lower cost economy.
Sometimes, the fact that no-one wants to be relocated can call a halt to a company’s expansion plan.
Other businesses may go ahead, but insist on having one of their own nationals, which means hiring a new person.
As you’ve probably already gathered, I’m sceptical about the need for expat managers. Certainly, they bring experience and knowledge. But that doesn’t necessarily mean that they will be good at training new staff or make good managers when they’re left on their own in a new foreign office.
Expats are expensive
You’ll be paying your country’s salaries and benefits, plus an overseas premium, always adjusted upwards according to some index or other. You probably also need to pay for high quality accommodation, family travel back home, even private schooling. For example, a 2016 study found that although the cost of living in Bangkok (just taking an example) is 46% less than the UK, expat managers who would earn £80K in the UK cost £125K. A local executive with similar qualifications and experience costs less than £50K.
The costs of expats can be so high that they alone can torpedo an international expansion business plan — especially for a smaller company.
There’s also a high risk that the person who’ll volunteer to be relocated won’t actually be the best person for the job. That’s especially true if they’re not fluent in the language of the country and don’t have a high level of empathy with its culture.
And if it’s a new hire, they won’t have absorbed the culture of your business either.
What’s the alternative to an expat manager?
Whichever country you’re expanding to is certain to have many well qualified, highly skilled people who would really value getting a great job with your company.
A locally hired manager will prove an asset in every way, and demonstrate a level of loyalty you’ll struggle to find in your own people in your own country. I’m speaking from experience — I’ve hired and worked with dozens and hardly ever had a disappointment.
You just pay local salaries — and you’ll be able to afford to be top of the range, just think of the savings compared to an expat!
Bring them over for training, send one or two of your own people over for a week or two at a time for the first few months, and I predict you’ll be so happy you’ll completely forget you ever thought of having an expat manager
Sometimes the only answer is to include an expat manager; but in most cases, with proper planning, recruitment and training, it’s unnecessary.
If you’d like to discuss expat managers v. local hires, or any other aspect of international expansion, Oliver Dowson and his team offer growinternational.org subscribers free initial consultations – please get in touch via our contact page
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